Early Peak Season, High Freight Rates, & 5 Factors Shaping Ocean Freight Shipping 2024 https://www.universalcargo.com Freight Forwarding Company Mon, 03 Jun 2024 10:57:06 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.9 https://www.universalcargo.com/wp-content/uploads/favicon-32x32.png Early Peak Season, High Freight Rates, & 5 Factors Shaping Ocean Freight Shipping 2024 https://www.universalcargo.com 32 32 Early Peak Season, High Freight Rates, & 5 Factors Shaping Ocean Freight Shipping 2024 https://www.universalcargo.com/early-peak-season-high-freight-rates-ocean-freight-outlook-2024/ https://www.universalcargo.com/early-peak-season-high-freight-rates-ocean-freight-outlook-2024/#respond Sat, 25 May 2024 22:58:41 +0000 https://www.universalcargo.com/?p=12673 It's not unprecedented, but we're looking at an early peak season for international shipping this year. Analyzing wide industry reporting, the demand side of ocean freight has picked up in April and May in a similar way to how it normally increases in June through September. Anecdotally, Universal Cargo's own internal numbers support the larger reporting on demand, as our shipment numbers increased by about 30% in April and another 8% in May.

This surge in demand combined with current constraints on cargo has caused ocean freight spot rates to really increase, with some shipping reporters describing rates as skyrocketing. It's not totally unsimilar to what we saw with freight rates during the pandemic's shipping boom and the initial Houthi attacks in the Red Sea. But are we looking at a spike in freight rates or will they remain high for a longer period of time?

Let's look at five factors affecting international shipping right now and see if we can make projections.

Check it out in Universal Cargo's blog.

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It’s not unprecedented, but we’re looking at an early peak season for international shipping this year. Analyzing wide industry reporting, the demand side of ocean freight has picked up in April and May in a similar way to how it normally increases in June through September. Anecdotally, Universal Cargo’s own internal numbers support the larger reporting on demand, as our shipment numbers increased by about 30% in April and another 8% in May.

This surge in demand combined with current constraints on cargo has caused ocean freight spot rates to really increase, with some shipping reporters describing rates as skyrocketing. It’s not totally unsimilar to what we saw with freight rates during the pandemic’s shipping boom and the initial Houthi attacks in the Red Sea. But are we looking at a spike in freight rates or will they remain high for a longer period of time?

Let’s look at five factors affecting international shipping right now and see if we can make projections.

1. Capacity Shortages

The Iran-backed Houthi attacks in the Red Sea and Gulf of Aiden have not ceased. In fact, reports say the Houthi rebels are only widening their range of attacks. That means a continuation of round-Africa services, which strains vessel capacity, even helping to create some capacity shortages. Unfortunately, there is still no end in sight to the Houthi attacks and vessel diversions.

Meanwhile, port congestion is slowing things at Asian and Western Mediterranean shipping hubs. The surge in demand exacerbates this issue, leading to longer waiting times for vessels. That further constrains capacity for ocean freight around the world, impacting webs of supply chains.

2. Carriers Adjust to Manage Capacity

Perhaps ocean freight carriers have more foresight than they’re given credit for. Leading up to this point in time, there has been an influx of ships and capacity into the industry. It was originally believed all that increase was going to create overcapacity in the ocean freight industry and possibly cause carriers to fall back into an unfavorable position where unhealthily low freight rates would force them to suffer high losses.

Instead, that capacity was greatly needed when drought caused constraints on ships crossing the Panama Canal and Houthi attacks forced carriers to divert around Africa instead of going through the Suez Canal.

Maybe there was luck involved with the arrival of that capacity, but carriers are also taking other strategies right now to manage capacity more effectively.

For example, ocean freight carriers are adjusting transpacific allocations. They’re reducing allocations to non-vessel-operating common carriers (NVOCCs) for fixed-rate bookings while also adjusting services.

For some specifics on the latter, here’s a quick list RS Logistics emailed to Universal Cargo of the Ocean Alliance’s revision of transpacific services and port rotations:

  • HTW service (Asia to North America West Coast): Tacoma port call dropped, new rotation includes nine port calls starting with Yantian.
  • HTW service will be operated by Evergreen (HTW), while CMA CGM (GEX), COSCO (AAS3), OOCL (PCS2) and ONE (CP4) will be slot charterers.
  • There will be eight vessels deployed on the service, with an average vessel capacity of 13,000 TEU.
  • The revised port rotation of the service will be as follows (9 port calls): Yantian – Los Angeles – Oakland – Kaohsiung – Port Klang – Cai Mep – Taipei – Kaohsiung – Yantian.
  • ECX1/AWE4 service (Asia to North America East Coast): Adds Laem Chabang and Cai Mep, drops Cristobal, revised rotation includes nine port calls starting with Charleston.
  • ECX1/AWE4 service will be operated by OOCL (ECX1) and COSCO (AWE4), while CMA CGM (SAX) and Evergreen (SAX) will be slot charterers.
  • There will be thirteen vessels deployed on the service, with an average vessel capacity of 13,500 TEU.
  • The revised port rotation of the service will be as follows (9 port calls): Charleston – Laem Chabang – Cai Mep – Hong Kong – Xiamen – Shanghai – New York – Savannah – Charleston.
  • The changes aim to optimize service efficiency and address congestion issues.

Unfortunately, those aren’t the only kind of strategies ocean freight carriers are utilizing right now…

3. Carriers Implementing GRIs

Ocean freight carriers obviously want to make money and do what they can to increase and sustain higher freight rates for a healthy bottom line. As already mentioned, we’re seeing very high freights right now.

Lori Ann LaRocco, whose articles I’ve often quoted in Universal Cargo’s blog, wrote an excellent article this week about soaring freight rates for CNBC. One of its most eye-popping moments is:

A new round of general rate increases set for June 1 has Orient Star Group characterizing the additional $1,000 charge as carriers getting a bit “greedy” under the sudden increased demand.

MSC, the world’s largest ocean freight company, announced new rates of $8,000 to $10,000 for 40-foot containers to the U.S. West Coast, valid from May 15-May 31.

Wan Hai has said it will charge a premium for “space protection.”

Freight rate rises in April and May have been significant and sudden, catching many shippers by surprise, and there seem to be more to come. Shippers should brace themselves for an average general rate increase (GRI) of $1,000 across all carriers in the first week of June.

The additional “space protection” fees is something shippers should feel wary about. With capacity constraints and rising rates, shippers may also face limited booking options. That’s a situation some carriers appear ready to take advantage of.

4. Early Peak Season

I opened this post on the topic of the peak season starting a bit early this year. Here is a little more data to the point.

The National Retail Federation (NRF) projects that U.S. monthly ocean imports will surpass two million TEUs in May, peaking at 2.1 million in August. Often, the peak season peaks in September or October.

There are a number of factors to explain why shippers are importing a little earlier this year. Delays because of the Suez Canal/Red Sea diversions that we’ve previously discussed are among them, but there are other factors too…

5. USMX and ILA Strike Threat at East & Gulf Coast Ports

We’ve dedicated several blog posts to the ILA strike threat:

In that last one, and as a strategy we’ve suggested before, we included the tactic of shipping early to avoid the potential port disruption that could happen when the ILA’s contract expires September 30th.

Both the United States Maritime Alliance (USMX) and the International Longshoremen’s Association (ILA) have shown commitment to avoiding port disruption during contract negotiations since the terrible port disruption that happened on the other side of the country during the 2014-15 ILWU contract negotiations. However, the threat of strike that the ILA has made regarding the negotiations for this next contract makes shippers rightfully nervous.

Failed or stalled negotiations could hamper East and Gulf Coast ports’ ability to handle cargo during a time when peak season is typically still going strong. With the early start to peak season, it may also slow earlier, making October, when the current ILA contract is expired, slower than normal. Perhaps that slowing may come even earlier, as the NRF projects imports to peak in August. However, a peak in August could still mean strong numbers for September.

Conclusion

In summary, international shipping, for U.S. shippers in particular, faces several challenges. Big increases in demand and freight rates early in the peak season could mean a weaker-than-normal end to the peak season. Shippers should absolutely expect freight rates to remain high in June. And if NRF’s projections are correct, in July and August too. Even with the early demand surge to the peak season and without NRF’s August peak projection, it would be surprising for July and August not to maintain peak season demand we’re now seeing.

September, on the other hand, will be interesting to watch. Many shippers may be trying to complete their shipments before September for fear of disruption from the ILA negotiations. However, there may be a last minute surge just before the master contract for the East and Gulf Coast dockworkers expires. There’s a possibility of downturn in September, but I believe that if the peak season fizzles out early, it will be with lower than normal importing activity in October.

Despite a high level of economic uncertainty, to put it nicely, retailers are still expecting fairly high spending from consumers. That may sustain demand beyond August and through the entirety of the typical peak season months. However, I expect a market share surge of imports, and probably exports too, for West Coast ports, dropping East and Gulf Coasts’ share, in October and probably November. September could see that market share adjustment too.

My best hypothesis for freight rates is that they’ll somewhat settle at these high rates for these next couple months, at least, but start coming down a little bit by October. Big drops are more likely in the last couple months of the year. However, if the ILA strikes, another freight rate surge could easily ensue, starting in October and carrying into the last two months of the year.

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Shipper Alert! Biden Hikes Tariffs on $18 Billion Worth of Imports from China https://www.universalcargo.com/shipper-alert-biden-hikes-tariffs-on-18-billion-worth-of-imports-from-china/ https://www.universalcargo.com/shipper-alert-biden-hikes-tariffs-on-18-billion-worth-of-imports-from-china/#respond Fri, 17 May 2024 17:30:01 +0000 https://www.universalcargo.com/?p=12663 The Biden Administration took a page out of the Trump Administration handbook this week as it announced big tariff hikes on imports from China. Regular readers of Universal Cargo's blog won't be surprised by this. President Biden threatened such tariff hikes a month ago, and I predicted here that he likely would follow through on the threat.

Find out the details and a couple solutions for businesses that import from China by reading the full post in Universal Cargo's blog.

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The Biden Administration took a page out of the Trump Administration handbook this week as it announced big tariff hikes on imports from China. Regular readers of Universal Cargo’s blog won’t be surprised by this. President Biden threatened such tariff hikes a month ago, and I predicted here that he likely would follow through on the threat.

Tariff hikes on China

Rebecca Picciotto reported the details in a CNBC article:

Starting this year, President Joe Biden will quadruple tariffs on imported Chinese electric vehicles, from 25% to 100%. The import tax on Chinese solar cells will double, from 25% to 50%. And tariffs on some Chinese steel and aluminum imports will increase more than three-fold, from 7.5% today up to 25%.

The president also directed U.S. Trade Representative Katherine Tai to more than triple the tariff rates on lithium-ion batteries for EVs and lithium batteries meant for other uses. Starting in 2025, tariffs on imported Chinese semiconductors will jump from 25% to 50%.

First-time tariffs will be imposed on Chinese imports of medical needles and syringes, as well as massive ship-to-shore cranes, the White House said in a fact sheet. Chinese rubber medical gloves and some respirators and face masks will also be hit with higher tariff rates.

Picciotti’s article is worth reading, as she gets into the political stakes for President Biden versus President Trump in the upcoming election, concerns about China overproducing clean energy products like solar panels and electric cars and then dumping them in the U.S. and other markets, and President Biden’s insistence that the tariff hikes won’t cause even more inflation despite what economic analysts say.

Of course, our focus here is on shipping.

President Trump’s trade war with China had a serious impact on U.S. shippers who import from China. Interestingly, hiked tariffs on China was seemingly the only Trump Administration policy that the Biden Administration did not try to reverse immediately upon entering office. Now, the Biden Administration adds even more hikes.

Solutions for Shippers Who Can’t Afford the Tariff Hikes

There will be businesses that will need to strategize how to handle these tariff hikes on Chinese goods.

In 2018, we gave two solutions to the problem when the Trump Administration was raising tariffs on imports from China.

Exemptions?

The first was an exclusion request. However, back then there was a Section 301 tariff exclusion process that some shippers were able to utilize to protect them from the increased cost of importing from China. There will undoubtedly be some exemptions on the hikes the Biden Administration is making.

In fact, Bloomberg has already published an article on exemptions for key solar manufacturing equipment.

Exemption announcements and processes for applying to these will be worth watching, but…

Alternate Sourcing

For most, there won’t likely be exemptions on Chinese goods they currently import that fall within the range of those getting increased tariffs. That brings us to the second solution option.

That option is to change sourcing. Importing from other countries or manufacturing domestically may be much better options than continuing to import from China. When President Trump raised tariffs on China, many shippers went with such a choice. U.S. manufacturing saw increases, though there were other Trump Administration policies that played into this too.

Domestic sourcing is absolutely an option worth looking into. And Universal Cargo can even help arrange domestic trucking, as well as all of businesses’ international shipping needs.

When seeking alternate sourcing from other countries to import from, many shippers who import from China focus their search to other Asian countries to replace China. There may be great options with importing from Japan, Malaysia, South Korea, Taiwan, and others, but shippers shouldn’t overlook options around the globe, including Europe, South and Central America, and even our direct neighbors, Canada and Mexico.

There may be good options in places that surprise shippers. And, of course, Universal Cargo is happy to serve your business, handling your importing and exporting around the world.

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Whoa! Video of Explosion to Free Cargo Ship from Collapse Francis Key Bridge https://www.universalcargo.com/whoa-video-of-explosion-to-free-cargo-ship-from-collapse-francis-key-bridge/ https://www.universalcargo.com/whoa-video-of-explosion-to-free-cargo-ship-from-collapse-francis-key-bridge/#respond Tue, 14 May 2024 11:26:10 +0000 https://www.universalcargo.com/?p=12653 Yesterday, the U.S. Army Corps of Engineers (USACE), Baltimore used explosives on the part of the collapsed Francis Key Bridge that's been holding the giant container ship Dali trapped for over a month and a half. The Dali hit the bridge in March, and a fatal collapse ensued.

Engineers have been working to regain ship access to the Port of Baltimore, which was lost because of the collapse. Yesterday's controlled explosions were a big step in fully opening the waterway to the port. Plus, some cool videos of the explosion were posted.

My favorite such video was Tweeted on X by the USACE Baltimore itself.

Check it and more out in Universal Cargo's blog.

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Yesterday, the U.S. Army Corps of Engineers (USACE), Baltimore used explosives on the part of the collapsed Francis Key Bridge that’s been holding the giant container ship Dali trapped for over a month and a half. The Dali hit the bridge in March, and a fatal collapse ensued.

Engineers have been working to regain ship access to the Port of Baltimore, which was lost because of the collapse. Yesterday’s controlled explosions were a big step in fully opening the waterway to the port. Plus, some cool videos of the explosion were posted.

My favorite such video was Tweeted on X by the USACE Baltimore itself:

The Port of Baltimore also tweeted a cool video of the explosion, along with still frame pictures of it.

Finally, CBS posted a nice video of the explosion on Youtube. I marked it where the explosion is about to happened because most of the ten-minute video doesn’t contain the action.

YouTube Video

The mayor of Baltimore, Brandon Scott, called the explosion an “important milestone” in clearing the channel.

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Shipping Alert! Delays on Imports from Asia & Freight Rate Increase Conditions https://www.universalcargo.com/shipping-alert-delays-on-imports-from-asia-freight-rate-increase-conditions/ https://www.universalcargo.com/shipping-alert-delays-on-imports-from-asia-freight-rate-increase-conditions/#respond Thu, 09 May 2024 19:34:21 +0000 https://www.universalcargo.com/?p=12647 If you're importing from Asia right now, there's a high chance you're experiencing or about to experience delays in getting your cargo. It's likely an increase in shipping costs is hitting this month too, not only in costly delays but also an increase in freight rates.

Two weeks ago, some major carriers issued warnings of bad weather causing delays of up to a week for vessels at key Asian ports. For many importers, that means cargo that was supposed to arrive at U.S. ports this week has not.

The Journal of Commerce (JOC) actually issued an email warning on Tuesday about the bad weather causing week-long delays. While it seems that email alert was issued more to promote the JOC's library of shipping charts, they are a useful tool and show congestion as still a concern in Asia. At the Port of Ningbo, congestion spiked in late April and has been coming down in the weeks since. However, the Port of Shanghai has congestion still rising right now, despite a couple weeks passing since the bad weather really slowed the Asian ports.

Keep reading in Universal Cargo's blog.

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If you’re importing from Asia right now, there’s a high chance you’re experiencing or about to experience delays in getting your cargo. It’s likely an increase in shipping costs is hitting this month too, not only in costly delays but also an increase in freight rates.

Bad Weather at Asian Ports

Two weeks ago, some major carriers issued warnings of bad weather causing delays of up to a week for vessels at key Asian ports. For many importers, that means cargo that was supposed to arrive at U.S. ports this week has not.

The Journal of Commerce (JOC) actually issued an email warning on Tuesday about the bad weather causing week-long delays. While it seems that email alert was issued more to promote the JOC’s library of shipping charts, they are a useful tool and show congestion as still a concern in Asia. At the Port of Ningbo, congestion spiked in late April and has been coming down in the weeks since. However, the Port of Shanghai has congestion still rising right now, despite a couple weeks passing since the bad weather really slowed the Asian ports.

It was April 26th when Keith Wallis reported the following in the Journal of Commerce:

Bad weather and resulting congestion at ports in Asia are causing vessel delays of up to a week at key gateways in the region, carriers say. 

Hapag-Lloyd said fog is the main problem at ports in China, including Shanghai and Ningbo, while torrential rain and poor visibility were issues in Malaysia and Singapore. An index measuring wait times in harbor, produced by Portcast, shows congestion in Ningbo began rising mid-April.

The adverse conditions meant vessels could not berth even as more ships arrived at anchorage, leading to vessel bunching that exacerbated port congestion. Yard congestion in Singapore also contributed to the delays there, Hapag-Lloyd said in an advisory Thursday. 

The delays come on top of the extra 10- to 14-day transit carriers face due to diverting vessels around southern Africa to avoid the risk of attack in the Red Sea region. 

One of the worst-affected facilities is the Shanghai East Container Terminal, where there are delays of up to seven days, Maersk said in an advisory this week. Other terminals in Shanghai are seeing delays of up to three days, while Ningbo and Qingdao in eastern and northern China are reporting similar delays, Maersk added. 

Hapag-Lloyd said vessels are having to wait up to 80 hours to berth at Port Klang and 72 hours in Singapore. 

Ocean Network Express (ONE) confirmed that some ships operating trans-Pacific and intra-Asia services are having sailing schedules disrupted by the bad weather and port congestion. 

Highlighting the delays, ONE sailing schedules show the 10,000-TEU Seaspan Bellweather, operating the Asia-Latin America Express 3 service, was two days late at Ningbo. That lengthened to three days when the vessel berthed at Shanghai and then five days when the vessel arrived at the next call, Qingdao, this week. ONE attributed the delays to berth congestion at all three ports. 

Vessel delays at major shipping gateways often ripple through supply chains around the world. We will see how much that happens with these current shipping delays out of Asia.

Conditions for Freight Rate Increases

General retailer overstock – caused by the shipping boom followed by struggling economies and high inflation – finally dwindled enough to bring global shipping up to more normal levels, similar to before the pandemic, than we’ve been seeing. That has eaten into the international shipping industry’s excess capacity that was helping it handle the longer routes necessitated by Iran-backed Houthi attacks in the Red Sea and Gulf of Aden. While there’s been a capacity injection in India to U.S. trade routes, many major trade routes, like Asia to U.S. routes, have seen capacity tighten.

That tightened capacity helped create congestion at the ports. However, it was the tighter capacity for shipping goods from Asia paired with bad weather, seen in heavy fog in some ports and heavy rain in others, that really caused the congestion. Pairing that congestion with the tighter capacity, you’re looking at the type of situation that tends to put upward pressure on freight rates. After freight rates came down a little in April, there’s a good chance we’ll be seeing increases here in May.

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“Conversations” with AI about International Shipping https://www.universalcargo.com/conversations-with-ai-about-international-shipping/ https://www.universalcargo.com/conversations-with-ai-about-international-shipping/#respond Wed, 08 May 2024 01:25:46 +0000 https://www.universalcargo.com/?p=12645 A couple weeks ago, I posted an article about what AI "thinks" about international shipping. It contained a "conversation" I had with AI, where I asked it questions about international shipping. After sharing each question and answer, I gave my thoughts about what AI said. It was interesting to see the way AI answered questions pertaining to the international shipping industry, and the post seemed to garner a little extra attention from readers, probably because of the current fascination there is with AI.

Thus, back by popular demand, is another "conversation" with AI about international shipping. Perhaps, I'll make this a semi-regular thing. But, perhaps, that's what the machines want. Perhaps, I'll just get bored with this AI fad and never do another one of these again. But, perhaps, that's what the machines want, so we'll forget about them as they're working behind the scenes, taking over...

Whatever the case may be, I'll do a similar structure today to last time: question from me, answer from AI, and my thoughts on the answer.

Q1: Ocean freights rates from India to the U.S. fell this month (May, 2024) due largely to capacity. Are there other major trade lanes right now that are doing similarly or where ocean freight rates are behaving very differently for U.S shippers?

Find out what AI says in Universal Cargo's blog.

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A couple weeks ago, I posted an article about what AI “thinks” about international shipping. It contained a “conversation” I had with AI, where I asked it questions about international shipping. After sharing each question and answer, I gave my thoughts about what AI said. It was interesting to see the way AI answered questions pertaining to the international shipping industry, and the post seemed to garner a little extra attention from readers, probably because of the current fascination there is with AI.

Thus, back by popular demand, is another “conversation” with AI about international shipping. Perhaps, I’ll make this a semi-regular thing. But, perhaps, that’s what the machines want. Perhaps, I’ll just get bored with this AI fad and never do another one of these again. But, perhaps, that’s what the machines want, so we’ll forget about them as they’re working behind the scenes, taking over…

Whatever the case may be, I’ll do a similar structure today to last time: question from me, answer from AI, and my thoughts on the answer.

Q1: Ocean freights rates from India to the U.S. fell this month (May, 2024) due largely to capacity. Are there other major trade lanes right now that are doing similarly or where ocean freight rates are behaving very differently for U.S shippers?

AI:

Certainly! Let’s take a look at the current state of ocean freight rates on some major trade lanes. Here’s what I found:

  1. Asia to U.S. West Coast:
    • The Freightos Baltic Index (FBX01 Weekly) shows that rates increased by 6% to $3,095 per FEU (forty-foot equivalent unit) for shipping from Asia to the U.S. West Coast1.
    • Despite this increase, prices remain well above normal levels.
  2. Asia to U.S. East Coast:
  3. Asia to Northern Europe:
  4. Asia to Mediterranean:
  5. Intra-Asia Feeder Services:
  6. Capacity Adjustments and Effective Capacity Growth:
    • The ocean container market has settled into a new routine, avoiding the Red Sea due to Houthi attacks.
    • While significant backlogs and congestion have dissipated, adjustments continue to cause moderate disruptions.
    • Some West Mediterranean ports now serve as transshipment hubs for East Mediterranean-bound containers, leading to congestion.
    • Terminals in Colombo, Sri Lanka, are also facing backlogs due to increased volumes for transshipment to the Middle East.
    • Carriers are operating more vessels than usual on service loops that normally use the Suez Canal, but fewer than normal weekly Asia-Europe sailings are actually departing.
    • These factors contribute to nominal fleet growth but only moderate effective capacity growth, resulting in still-elevated freight rates1.
  7. Outlook:
  8. Transpacific Contract Rates:
  9. Ocean Delays and Cost Increases:

In summary, ocean freight rates remain elevated on several trade lanes, and capacity adjustments continue to impact the market. U.S. shippers should closely monitor these developments as they plan their shipments. If you have any specific routes or additional questions, feel free to ask! 😊🚢🌎

My Thoughts

It is impressive that in a matter of seconds, AI creates a mini-essay on the topic of ocean freight rates. It is very bullet-point heavy, so essay may still be a strong word, even when modified by mini.

I tried to be very specific in the question, as that seems to be best when dealing with AI. While I asked it about routes and freight rates speecifically for U.S. shippers, AI went broader than that. I also asked it about freight rates right now, referencing the behavior of a specific trade lane this month, and AI again went broader with its answer. However, the answer does give a feel for general freight rate trends happening currently and this year compared to last year.

AI does give its sources, which I like. However, I should really say source, as it is pretty much exclusively relied on Freightos for its answer to my question. Nothing wrong with Freightos, but I would have rather seen AI pull from multiple sources. A single source could be anomalous, misleading, or even plain wrong. I suppose which sources AI decides are reliable depends upon its coders for criteria to judge websites and which search engines, like Google, that it relies upon when searching. Ah, what am I worried about. The internet is completely reliable when it comes to information, right?

Nevertheless, let’s bring up this single source issue with AI:

Q2: If you broaden your sources for information and data to as many as you can beyond Freightos, do you come to different conclusions than you reached when answering my question?

AI:

Certainly! While my initial response was based on information from the Freightos Baltic Index (FBX), I can broaden my sources to provide a more comprehensive view. Keep in mind that real-time data can fluctuate, but here are some additional insights from various industry reports and news sources:

  1. Drewry World Container Index (WCI):
    • The WCI tracks container freight rates across major trade routes. As of May 2024, it indicates that rates have stabilized but remain elevated compared to historical averages.
    • This aligns with the information I provided earlier.
  2. Alphaliner:
    • Alphaliner, a shipping industry analytics firm, reports that carriers have been adjusting capacity to manage demand and maintain rates.
    • While some routes experience congestion due to capacity constraints, others have seen smoother operations.
  3. Journal of Commerce (JOC):
    • The JOC reports that carriers are implementing peak-season surcharges to offset rising costs and maintain profitability.
    • Shippers are advised to secure bookings well in advance to avoid capacity shortages.
  4. Supply Chain Dive:
    • Supply Chain Dive highlights that ocean carriers are benefiting from strong demand and limited capacity.
    • The situation is expected to persist throughout 2024, impacting rates.
  5. Global Trade Magazine:
    • Global Trade Magazine notes that shippers are exploring alternative routes and modes of transportation to mitigate high ocean freight costs.
    • Some are turning to rail and air freight for urgent shipments.

In summary, while the specific numbers may vary slightly across different sources, the overall picture remains consistent: ocean freight rates are elevated due to capacity constraints and strong demand. U.S. shippers should closely monitor market developments and consider alternative strategies to manage costs effectively. If you have any further questions or need additional information, feel free to ask! 😊🚢🌎

My Thoughts

“Certainly” wasn’t the best word choice for AI to use in starting its answer. That would mean it definitely come to a different conclusions than AI gave when just relying on Freightos. It’s clear AI used “certainly” in communicating that it can and would broaden its sources to provide a more comprehensive view. AI’s first answer also started with “Certainly!” Clearly, it’s a regular way AI is programmed to begin responses.

The answer AI gave when sharing information from these different sources seems generalized to an extreme level. The JOC publishes tons of articles on international shipping. Among them is one about freight rates dropping sharply in India to U.S. lanes because of carriers injecting capacity into it. That article is part of what inspired my initial question to AI. However, the only mention of capacity that AI makes when it comes to the JOC is possible capacity shortages.

In fact, throughout the sources, AI tends to bring up capacity in terms of it being limited. It seems as though AI was either specifically looking for that or looking for similar word usages of capacity throughout the sources.

Overcapacity was a concern for the international shipping industry as 2024 approached. However, the Iran-backed Houthi attacks forced carriers to reroute cargo and use more ships to move the same amount of goods. The overcapacity became a blessing in creating the space to do that. I have previously written in Universal Cargo’s blog about carriers or industry experts saying that has brought current capacity close to its limit. AI gives little detail of the situation and none of the nuance.

The generality of AI’s summaries, while sounding good, make them just steps away from useless. However…

There is a general trend that can still be pulled from AI here. Still, from its answers and selective pulling of data, I would have little faith in trusting AI’s overall accuracy.

To Be Continued

Because AI gives decently sized answers, this post has already grown rather long after only two questions and answers. Thus, I’ll continue this conversation in the next post in Universal Cargo’s blog, unless a shipping news story pops up that needs to be covered first. In that case, I’ll still post the rest of the conversation with AI, but you’ll have to wait a little longer for part II.

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How to Prepare for Potential ILA Port Disruption https://www.universalcargo.com/how-to-prepare-for-potential-ila-port-disruption/ https://www.universalcargo.com/how-to-prepare-for-potential-ila-port-disruption/#respond Thu, 02 May 2024 23:35:31 +0000 https://www.universalcargo.com/?p=12638 The last post was about how nobody knows anything about what will happen with the International Longshoremen's Association (ILA) contract negotiations, with its potential to highly disrupt shipping through East and Gulf Coast ports. I ended the post with a promise to make today's blog about how shippers should prepare their imports and exports with the ILA situation in mind. Now, I keep that promise.

Some may ask, "If nobody knows anything about what will happen, how can shippers possibly plan?" People asking that were probably never in Boy Scouts. If you were, you know the Boy Scout motto: be prepared. That should also be the shipper's motto.

As things in the future look more and more murky, businesspeople who import and export goods need to be more and more like good and loyal scouts. They must be prepared for whatever situation comes. and the good news about the potential ILA strike that the union's president threatened is shippers actually know a very possible outcome before it happens.

Get all the tips on preparing and protecting your business, imports, and exports by reading the full post in Universal Cargo's blog.

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The last post was about how nobody knows anything about what will happen with the International Longshoremen’s Association (ILA) contract negotiations, with its potential to highly disrupt shipping through East and Gulf Coast ports. I ended the post with a promise to make today’s blog about how shippers should prepare their imports and exports with the ILA situation in mind. Now, I keep that promise.

Some may ask, “If nobody knows anything about what will happen, how can shippers possibly plan?” People asking that were probably never in Boy Scouts. If you were, you know the Boy Scout motto: be prepared. That should also be the shipper’s motto.

As things in the future look more and more murky, businesspeople who import and export goods need to be more and more like good and loyal scouts. They must be prepared for whatever situation comes. and the good news about the potential ILA strike that the union’s president threatened is shippers actually know a very possible outcome before it happens.

So many disruptions to international shipping happen suddenly, with little to no warning: attacks in the Red Sea deterring use of the Suez Canal, a container ship hitting and collapsing the Francis Scott Key Bridge and shutting down the Port of Baltimore, a drought limiting ships traversing the Panama Canal, a devastating earthquake in Taiwan disrupting production, a tragic explosions in Tianjin disrupting one of China’s major ports, a megaship turning sideways and blocking the Suez Canal… Those were just the first ones to come to mind. The list could go on.

The point is having warning of a potential disruption is a luxury. Similarly, shippers had warning of potential port disruption at West Coast ports last year and successfully guarded themselves from port disruption caused by labor action during the International Longshore & Warehouse Union (ILWU) contract negotiations. Shippers prepared with strategies that were suggested right here in Universal Cargo’s blog. Should shippers use those same strategies now that a similar threat looms on the country’s opposite coast?

Let’s take a look at them…

Should Shippers Divert Goods from the East and Gulf Coasts to the West Coast?

Diverting goods from the West Coast to the East Coast was an effective strategy for avoiding disruptions that occurred from ILWU labor action. If the ILA does strike after their September 30th contract expiration, shippers who’ve already diverted their cargo to the West Coast will be very glad they did.

The whole point of the “Nobody knows anything” William Goldman quote is there’s no way to know if such a strike will happen. However, we’ve yet to see much progress to feel confident that a new contract will be reached by the time that date gets here. Whether shippers decide to divert or not, they should look into the option.

Knowing all the details for cargo diversion, including best estimated time, cost, routing, and necessary logistics partners for the time period starting in October will be crucial if the need to divert actually arises. Even doing a test shipment before then is not a bad idea.

Ideally, shippers shouldn’t have shipments scheduled to go through the East and Gulf Coast ports in early October, if they can avoid it, before having a better gauge on the likelihood of a strike.

That brings us to the next strategy…

Ship Early

The timing of the potential ILA strike is poor, to say the least. It’s right during international shipping’s peak season. Many importers have goods arriving for the Christmas shopping season as October hits. If you normally import heavily in October, try to move that up to July and August, which are also in the peak season range.

Ideally, businesses have already been analyzing adjustments to their peak season shipments with the possibility of ILA port disruption in mind. If you haven’t, it’s time to get on that. You could just plan on shipping as normal, but you’re taking on a large risk if you do so.

Consider Alternate Sourcing

It’s easy for a business to become complacent when it comes to sourcing. Most people do a majority of their shopping at the same stores. It’s easy and comfortable to shop in the same place. That doesn’t mean it’s the best option. Similarly, many businesses find a supplier or manufacturer and simply stick with it rather than consider alternates that may be superior.

Comfort and ease come into play with sourcing, and I don’t want to discount those things. Knowing your supplier or manufacturer has provided you with the products you need in the past makes you feel confident it will continue to do so in the future. And there’s something to be said about loyalty too. However, alternate sourcing may help avoid potential disruptions like the possible ILA strike while still providing equal or better quality goods.

Additionally, just because a business has always imported its goods doesn’t mean domestic sourcing is impossible either. It’s an option worth exploring along with sourcing from places that are more convenient for shipping through ports on different coasts or borders. Universal Cargo can help you with domestic shipping as well as your importing and exporting needs.

More Strategies…

The three ways shippers avoided disruption on the West Coast provide solid strategy for avoiding potential port disruption on the East Coast. However, I don’t want to merely rehash those already covered strategies, so here are a few more things to help, not only the ILA situation but any international shipping disruptive events…

Early Planning and Communication

The earlier you plan and communicate options for potential disruptions, the better your business will be at handling unfortunate situations for importing and exporting. Shippers should actively engage with suppliers, partners, and customers. Through this communication and engagement, shippers can put up-to-date continuity plans in place. Efficient communication systems are essential to be flexible and adaptable during difficult moments in the already volatile world of international shipping.

With continuity comes contingency. Or maybe it’s really the other way around. Always seek and prepare contingency options that have been shared with key team members and partners. Perhaps they come from those key team members and partners. They are what will have you prepared when the really unexpected disruptions happen.

Stay Informed and Monitor Shipping News

You’re reading Universal Cargo’s blog, so you likely already do this. But it’s worth reiterating that knowledge can make all the difference. We’re keeping an eye on the ILA negotiation situation and writing about it in this blog. We also talk about other issues and news items that affect shippers.

Other places to look to stay informed on what’s happening in international shipping include the Journal of Commerce (JOC), FreightWaves, TheLoadstar, and Hellenic Shipping News, to name a handful.

Specifically with ILA negotiations, you can watch announcements made by the ILA and United States Maritime Alliance (USMX) on social media and their websites.

In particular, watch for dates like the September 30th contract expiration or the May 17th deadline ILA President Harold Daggett gave for local negotiations.

Advocacy and Engagement

There are ways shippers can actually take action or lend support to the quick resolution of disruptive contract conflicts between dockworker unions and employers at the ports.

Shippers can collaborate with industry associations that advocate for timely contract agreements and stability at the ports. Such organizations include the National Retail Federation (NRF) and the American Apparel & Footwear Association (AAFA). And there are many more.

I’ve covered letters to U.S. presidents and politicians that have come from such organizations – often the combination of many such organizations. Adding your business to these shows politicians more voter support behind taking action to protect movement through the ports. Currently, politicians on both sides of the aisle have been working on changing laws in order to benefit shippers and supply chains to protect the U.S. economy. There may not be a better time to advocate for the protection of supply chains to local and federal politicians.

Shot List and Storyboard Approach

Since this basically two-part blog series started with a film industry quote, let’s end it by coming back to a film-anology strategy.

  1. Shot List: Create a detailed shot list for your shipping operations. In film, a shot list breaks down each scene into each individual shot the crew must execute and capture on camera to be edited together to tell the story for the audience. A shipping shot list will break down each part of your supply chain into the individual tasks that must be accomplished to get goods all the way from their sourcing to your business and then your customers. This shot list should include specifics such as the type of cargo, handling requirements, and any special considerations (e.g., hazardous materials).
  2. Storyboard: Think of the shipping process as a storyboard. Visualize each step, from loading at the origin to unloading at the destination. Consider potential bottlenecks, delays, and alternative routes. Figure out the story of the journey of your goods as well as alternate routes and paths your goods could take in order for you to storyboard a better story for your business.

Conclusion

We don’t know what will happen with the ILA contract negotiations, but shippers can be ready for any disruptions that may come from it. Taking the time to plan and prepare is key. Of course, if you have good shipping partners, they may be able to help do a lot of this planning and preparing for you.

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No One Knows What Will Happen with ILA Port Disruption https://www.universalcargo.com/no-one-knows-what-will-happen-with-ila-port-disruption/ https://www.universalcargo.com/no-one-knows-what-will-happen-with-ila-port-disruption/#respond Tue, 30 Apr 2024 23:24:13 +0000 https://www.universalcargo.com/?p=12633 "Nobody knows anything." If I were Joe Biden, I'd make up a story about my father or grandpop telling me that when I was a kid as we all discussed blue collar issues around the dinner table. But it's actually a famous quote from William Goldman, screenwriter of Butch Cassidy and the Sundance Kid and The Princess Bride. He was talking about the film industry and what movies will be successful. However, he could have been talking about the current situation with the International Longshoremen's Association (ILA) contract extension and if it will cause disruption at East and Gulf Coast ports.

There's a dichotomy of opinions on what will happen.

On one side, there are people who think the ILA will reach an agreement with the United States Maritime Alliance (USMX) with little drama before the current contract expires. Shippers would love that. It would mean no port disruption, no costly cargo delays.

On the other end, there are those who think there's little chance of that happening. There are too many warning signs that the two sides won't reach a deal by the contract expiration deadline. Those of this opinion think the ILA strike threatened by the union's president, should no deal be reached by the September expiration, is likely. That's a shipper's nightmare. Resulting port shutdowns all up and down the East and Gulf Coast ports would be incredibly damaging, not only for shippers, but the U.S. economy as a whole. Such a scenario could easily cost the economy billions of dollars per day.

What do those closest to the situation think?

Find out by reading the full post in Universal Cargo's blog.

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“Nobody knows anything.” If I were Joe Biden, I’d make up a story about my father or grandpop telling me that when I was a kid as we all discussed blue collar issues around the dinner table. But it’s actually a famous quote from William Goldman, screenwriter of Butch Cassidy and the Sundance Kid and The Princess Bride. He was talking about the film industry and what movies will be successful. However, he could have been talking about the current situation with the International Longshoremen’s Association (ILA) contract extension and if it will cause disruption at East and Gulf Coast ports.

There’s a dichotomy of opinions on what will happen.

On one side, there are people who think the ILA will reach an agreement with the United States Maritime Alliance (USMX) with little drama before the current contract expires. Shippers would love that. It would mean no port disruption, no costly cargo delays.

On the other end, there are those who think there’s little chance of that happening. There are too many warning signs that the two sides won’t reach a deal by the contract expiration deadline. Those of this opinion think the ILA strike threatened by the union’s president, should no deal be reached by the September expiration, is likely. That’s a shipper’s nightmare. Resulting port shutdowns all up and down the East and Gulf Coast ports would be incredibly damaging, not only for shippers, but the U.S. economy as a whole. Such a scenario could easily cost the economy billions of dollars per day.

What do those closest to the situation think?

AI generated ILA Strike Image
AI generated ILA Strike Image

Mixed Opinions from Management Sources on Strike Threat

Of course, we already knew the cost of a strike at East and Gulf Coast ports would be high. And the risk certainly exists. But how likely is it? That’s where nobody knows anything because even those involved have a wide gap between opinions on the situation. In the Journal of Commerce, Peter Tirschwell reported on divided management opinions about the likelihood of an ILA strike:

Beneficial cargo owners (BCOs) [as well as small to medium importers and exporters] can take comfort in the view of some management sources contacted recently by the Journal of Commerce who believe there is sincere interest on both sides to reach a deal ahead of the contract expiration, and that a deal will likely get done without disruption. Carriers who are rarely assertive at the bargaining table with longshore labor over many years are likely to cut a lucrative deal for labor and call it a day, others believe. Some carriers say they are seeing some diversions to the West Coast ahead of potential labor disruption, but not a lot.  

“We feel labor will get a new contract and a [wage] increase but not do anything to give a reason to shippers to consider diverting cargo,” said the head of logistics for a household goods retailer. “We have always felt that East Coast labor is more commercially minded.”  

But the sanguine view is not unanimous. Some management sources remain in wait-and-see mode, withholding opinion until the union reveals its latest wage increase demands upon resumption of “big table” — or coastwide — discussions that will occur once local agreements are either wrapped up in the coming weeks or unresolved issues are kicked up to the big table. Some of those local contracts are already concluded, while others are still being negotiated or encountering difficulties, sources say. 

Some observers see warning signs. Specifically, they relate to wage increase demands by the union that might be too high for ocean carriers who dominate the United States Maritime Alliance (USMX) management group to accept. 

Wage Demands Biggest Warning Sign?

There are many points to be negotiated when it comes to a new ILA contract. Particularly, there’s a giant fight to be had over automation. ILA President Harold Daggett went so far as to call these contract negotiations the most challenging in the union’s history. And it has a long history; the ILA was first founded in 1892. So why are wage increases the biggest warning sign that ILA contract talks could be on their way to port disruption? Because the union won’t touch any of the many other contract issues, including automation, until wages are worked out. That’s according to Daggett back in November:

“I want wages done first,” Dagget said, “and then we’ll sit down and negotiate the contract.”

Thus, it’s no surprise that, in his JOC article, Tirschwell focuses in on wages when it comes to warning signs that ILA talks could turn disruptive. Tirschwell wrote all about the ILA’s negative reaction to the recent International Longshore & Warehouse Union (ILWU) contract extension, in which the dockworkers union on the West Coast received a $70 million bonus and a 32% pay increase for its workers:

… Daggett expressed dissatisfaction with that result, which he sees as having been forced on the ILWU by the Biden administration in its attempt to avert further disruption and economic and political problems.  

“When the ILWU was going through talks, you’d think he would have picked on the foreign companies out there that are setting up automation and getting rid of American jobs, but he didn’t do that,” Daggett told a meeting of ILA locals in Nashville in November, as reported by the Journal of Commerce. “He went after the ILWU, telling them to get this contract signed.”   

The implication is clear: Whereas the ILWU allowed Biden’s representative, acting Labor Secretary Julie Su, to facilitate a deal and quash further disruption at West Coast ports, Daggett will be less receptive to pressure from Washington, and according to sources, has said as much privately.  

It’s not just privately Daggett has shunned Washington pressure. Heck, it’s not even just pressure. He’s shunned all mediation from the administration of “the most pro-union president in history,” as President Biden still calls himself. In November, when Daggett warned ILA members to prepare for the loss of income from a strike in September, he said publicly, “We will not be interested in Biden sending us a mediator if negotiations are not going well.”

Because of the union’s wage demands, negotiations have not started well. There were early contract extension talks between the ILA and USMX that reportedly broke down specifically because of ILA’s wage increase demands. The enormous pay increases the ILWU got clearly don’t seem good enough for the ILA, and the ILA seems unwilling to bend on the issue.

That doesn’t bode well for negotiation completion before contract expiration. However…

We Should Know More in a Couple Weeks

Daggett did give clearance for local ILA negotiations, as referenced in a Tirschwell quote above. Local negotiations are a precursor to the larger, Coasts-wide negotiations. Daggett gave these local negotiations a mid-May deadline on getting done.

Recapping Tirschwell above, some of these negotiations have had success while others are hitting difficulties. In a couple weeks, if the results of the local negotiations are predominantly positive, the outlook on the overall contract negotiations should be more optimistic. That leaves the inverse as also true. If there are several major issues arising from the local negotiations, the overall outlook should turn more pessimistic.

In our next post, we’ll talk about how shippers should be preparing future imports and exports with the ILA situation in mind.

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What Does AI “Think” About International Shipping? https://www.universalcargo.com/what-does-ai-think-about-international-shipping/ https://www.universalcargo.com/what-does-ai-think-about-international-shipping/#respond Thu, 25 Apr 2024 22:02:04 +0000 https://www.universalcargo.com/?p=12626 For today's blog, I thought we'd do something a little bit different. The artificial intelligence (AI) craze has hit. Despite all those warnings we got from movies in the 80's and 90's, everyone seems to be investing in, using, or at least curious about AI.

The biggest fads with AI are talking to it and asking it to create pictures. And, of course, AI is talking back and generating pictures. At the risk of AI taking over the world and eliminating or enslaving the human race, we'll join the fad today and find out what AI "thinks" about international shipping.

Using Microsoft's AI, I'll ask it some questions about international shipping, freight rates, and so on and post its answers below. Then I'll add a quick thought or two I have about what it says. I may even have AI generate some international shipping images to add to this post.

Now, let's have some fun with our future machine overlords...

Check it out in Universal Cargo's blog.

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For today’s blog, I thought we’d do something a little bit different. The artificial intelligence (AI) craze has hit. Despite all those warnings we got from movies in the 80’s and 90’s, everyone seems to be investing in, using, or at least curious about AI.

The biggest fads with AI are talking to it and asking it to create pictures. And, of course, AI is talking back and generating pictures. At the risk of AI taking over the world and eliminating or enslaving the human race, we’ll join the fad today and find out what AI “thinks” about international shipping.

Using Microsoft’s AI, I’ll ask it some questions about international shipping, freight rates, and so on and post its answers below. Then I’ll add a quick thought or two I have about what it says. I may even have AI generate some international shipping images to add to this post.

Now, let’s have some fun with our future machine overlords…

QUESTION 1: What do you think about international shipping?

AI thinking about international shipping

International shipping is a fascinating and intricate domain that connects people, businesses, and cultures across the globe. Let’s delve into the essentials:

  1. Shipping Services and Rates:
  2. How It Works:
  3. Customs Documents:
    • Commercial Invoice: This essential document details the contents, value, and purpose of your shipment. Properly filling it out ensures smooth customs clearance.
    • Other forms may be needed based on the destination country.
  4. Who Pays Duties and Taxes?:
    • Duties, taxes, and fees are typically the responsibility of the recipient. However, it’s essential to clarify this with your shipping provider and understand the regulations of the specific country.

In summary, international shipping opens up a world of possibilities, enabling businesses to expand globally and individuals to connect across borders. Whether you’re sending a care package or fulfilling commercial orders, understanding the process ensures successful and efficient shipping experiences. 🌎📦

My Thoughts

A very general answer to a very general question. Definitely more for someone sending a parcel internationally than a shipper importing or exporting goods, particularly by the container load. I may have to get more creative and specific with what I ask. I’m a little surprised it chose commercial invoice as the document to talk about rather than the Bill of Lading. In fact…

QUESTION 2: Why did you choose to highlight the commercial invoice instead of the bill of lading?

Ah, an astute observation! Let’s delve into the distinction between the commercial invoice and the bill of lading in the context of international shipping:

  1. Commercial Invoice:
    • Purpose: The commercial invoice serves as a crucial document for customs clearance. It provides detailed information about the shipment’s contents, their value, and the purpose of the shipment.
    • Contents: It includes essential details such as the sender’s and recipient’s information, a description of the goods, their quantity, unit price, total value, and any applicable taxes or fees.
    • Significance: Customs authorities use the commercial invoice to assess duties and taxes, verify compliance with regulations, and facilitate the smooth movement of goods across borders.
  2. Bill of Lading (BOL):
    • Purpose: The bill of lading is primarily a transportation document. It serves as evidence that the carrier (shipping company) has received the goods and has agreed to transport them to the specified destination.
    • Contents: The BOL contains details such as the shipper’s and consignee’s names, the origin and destination ports, the type of goods, and any special handling instructions.
    • Significance: The BOL plays a critical role in tracking the shipment during transit. It also acts as a receipt for the goods and provides legal proof of the contract between the shipper, carrier, and recipient.

In summary, while the commercial invoice focuses on the goods’ details and customs compliance, the bill of lading emphasizes the logistics and transportation aspects. Both documents are essential for successful international shipping, but they serve distinct purposes. 🌐📦

My Thoughts

Starting with a compliment, AI? Trying to lull us in with good manners before you take over the world. Reminds me of a classic word of wisdom… No. Actually…

QUESTION 3: Why don’t you give me a piece of wisdom for guarding against the cunning strategy of an enemy using charm and grace to achieve his sinister goals, like you’re doing, AI?

AI generated image of machines ruling world
AI generated image of machines ruling the world.

“Beware the adversary who wields compliments like a dagger, for their honeyed words may cloak a blade that cuts deeper than any sword.”

My Thoughts

I knew it. AI is coming for us! Actually, in half seriousness, it may be coming for jobs like mine. It did write clearly and quickly about the basics of a commercial invoice and BOL in international shipping. Of course, it is only writing basics. Can AI do an deeper analysis of something? Freight rates, perhaps?

QUESTION 4: Can you analyze what ocean freight rates are doing right now and how they will likely behave for the rest of the year?

Certainly! Ocean freight rates have been quite dynamic recently. Let’s take a closer look:

In summary, while rates may remain volatile, carriers are actively managing capacity and aiming for stability. Keep an eye on market developments as the year progresses12.

My Thoughts

Interesting. AI pulls data from Statistica’s Global Container Freight Index. Analysis is a strong word. This is shallow, and I haven’t double checked it to make sure AI didn’t make any mistakes or alterations to the data. There was a climb in freight rates at the end of 2023/beginning of 2024 that was more than gradual after the attacks in the Red Sea started, however…

If someone wanted to investigate freight rates and their behavior as well try to anticipate future behavior, AI does give good points at which that person could begin his or her investigation. I don’t think I’d fully trust AI in data retrieval as it seems to gather information available online, and that could lead to a mixture of good and bad information.

Ultimately, I could see how AI could be a useful tool here. I guess the last thing I want to know is if AI has heard of us…

QUESTION 4: What do you know about Universal Cargo?

AI generated image with cargo ships, planes, and a box of variously flagged shipping containers titled "thoughts on international shipping"
  1. About Universal Cargo:
    • Established in 1985: Universal Cargo has been in the logistics industry for over 30 years.
    • Freight Forwarder and Ocean Transportation Intermediary: They efficiently handle ocean and air freight, as well as inland distribution.
    • Specialization: Universal Cargo specializes in inbound cargo from Asia to the United States. They also manage export needs and air freight shipments.
  2. Services Offered:
    • Ocean Freight: They efficiently handle both Full Container Load (FCL) and Less than Container Load (LCL) shipments for imports and exports.
    • Air Freight: Universal Cargo manages air freight services for both inbound and outbound shipments.
    • Warehousing & Distribution: They offer comprehensive warehousing solutions.
    • Express4Air: A specialized service for expedited air cargo2.
  3. Tracking Services:
  4. Dedicated Staff:
  5. Additional Services:

Intriguingly, Universal Cargo also produces informational videos that cover international shipping news in a fun and fast format. Their series, Universal Shipping News, keeps shippers informed about the latest developments in the industry2.

In summary, Universal Cargo is your trusted logistics partner for seamless international shipping. Whether you’re moving goods across oceans or handling air freight, they’ve got you covered! 🌐🚢🌎

My Thoughts

Well, AI basically put together a written commercial about us by pulling information from throughout our website. There are a number of fake Universal Cargo knock-off, even scam, companies out there. I’m glad AI recognized us as the real Universal Cargo and didn’t get taken in by any of those others.

Conclusion

AI does seem like a useful tool, but it’s answering questions by grabbing information off the internet. The risk of inaccuracy with that seem high. It certainly doesn’t have the insights of an expert or even of any un-artificially thinking human. I don’t think it’s ready to take over my job, let alone the world yet. But I don’t trust it, Sarah Connor.

It does, however, generate some nice images that I’ll use in this post. That couldn’t lead to machine domination, right?

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Why Biden Will Likely Follow Through on His Threat to Triple Tariffs on Chinese Steel and Aluminum https://www.universalcargo.com/why-biden-will-likely-follow-through-on-his-threat-to-triple-tariffs-on-chinese-steel-and-aluminum/ https://www.universalcargo.com/why-biden-will-likely-follow-through-on-his-threat-to-triple-tariffs-on-chinese-steel-and-aluminum/#respond Fri, 19 Apr 2024 00:52:36 +0000 https://www.universalcargo.com/?p=12607 In a speech, yesterday, to union workers in Pennsylvania, President Biden called for U.S. trade representative Katherine Tai to consider tripling tariffs on Chinese steel and aluminum if her ongoing investigation into China's trade practices confirms them to be anti-competitive. And that doesn't seem like much of an if.

It's clear that the president has already assumed the outcome of Tai's investigation as Biden had already said in the speech, "...China's steel companies don't need to worry about making a profit because the Chinese government subsidized them so heavily. They're not competing. They're cheating." Then he reemphasized, "They're cheating."

The speech made it sound more like the Biden Administration is about to triple tariffs on Chinese steel and aluminum rather than it's considering the idea.

Especially in an election year, it can be hard to take anything President Biden says in a speech as something that's actually real. However, when it comes to these tariffs on China, it's a very real possibility they'll happen. Here's why...

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In a speech, yesterday, to union workers in Pennsylvania, President Biden called for U.S. trade representative Katherine Tai to consider tripling tariffs on Chinese steel and aluminum if her ongoing investigation into China’s trade practices confirms them to be anti-competitive. And that doesn’t seem like much of an if.

It’s clear that the president has already assumed the outcome of Tai’s investigation as Biden had already said in the speech, “…China’s steel companies don’t need to worry about making a profit because the Chinese government subsidized them so heavily. They’re not competing. They’re cheating.” Then he reemphasized, “They’re cheating.”

The speech, shared below, made it sound more like the Biden Administration is about to triple tariffs on Chinese steel and aluminum rather than it’s considering the idea.

YouTube Video

Especially in an election year, it can be hard to take anything President Biden says in a speech as something that’s actually real. However, when it comes to these tariffs on China, it’s a very real possibility they’ll happen. Here’s why…

Why Biden’s Tariff Increase on China Is Actually Likely

When Biden came into office, he and his administration seemed on a mission to reverse or end all Trump era policies. This included ending the effective “Remain in Mexico” policy, ceasing construction of the Southern border wall, rejoining the Paris Climate Agreement, revoking the Keystone XL Pipeline permit, halting new oil and gas leasing on federal land, calling for corporate tax hikes to more than reverse tax cuts of the former president, increasing or reinstating federal regulations where Trump deregulated, and on, and on…

BUT…

President Biden did not cut President Trump’s tariffs on China.

For a year and a half, Trump heavily escalated tariffs on China until he got a Phase 1 Trade Agreement from the country. Unfortunately, the trade deal was quickly overshadowed and basically negated when COVID-19 spread from Wuhan to the rest of the world. There have been COVID-related exemptions, but those tariffs on Chinese goods stayed right in place, even after Biden took office.

To many, that seemed strange because Democrats, including Biden, criticized Trump’s tariffs on China. But Biden went from, in 2020, telling NPR regarding the tariffs “we’re going after China in the wrong way” to his administration defending the tariffs as “a significant piece of leverage” in 2022.

Clearly, the Biden Administration likes the tariffs so much that even its hatred of Trump and its policy of derision toward everything the former president did isn’t enough to abandon the tariffs. And now Biden wants to take this controversial policy of Trump even further? They must have really strong feelings for these tariffs in the Biden Administration.

That paired with Biden already concluding China is engaging in anti-competitive trade practices would probably be enough to say there’s a good chance the Biden Administration implements this tripling of tariffs on Chinese steel and aluminum, but there’s more…

Politically, Biden Needs to Show Strength Against China

Politically, President Biden needs to show strength against China as evidence of himself and his family receiving money from China hurts his re-election bid.

In the following video, Representative Byron Donalds walks through bank statements and check copies showing a paper trail of money from a Chinese account tied to the Chinese Communist Party to an account controlled by the president’s son Hunter Biden with a portion of the money getting withdrawn and then going to Joe Biden himself, before he was president:

YouTube Video

The last thing President Biden can afford, politically, is the appearance that he and his family gaining money from China has affected his policies as president pertaining to China. Especially if it looked like he was going soft on China.

Of course, it could affect his policy on China in the opposite direction. It might make him hold or present stronger policies or stances against China, such as tariffs on Chinese goods and materials or calling China “xenophobic” as he did in his speech yesterday.

The political need to show himself strong against China, especially when showing strength in general has not been his strong suit, ups the odds of him increasing these tariffs on China from a good chance to likely.

7.5% Tariffs to 25%?

Outlets have been reporting that Biden is calling for tariffs on Chinese steel and aluminum to rise from their current 7.5% to 25%. That would actually be a bit more than tripling the tariffs. The 25% number doesn’t appear in the speech or the White House release covering the call to triple the tariffs. However, I suppose that does seem like the nicest number to round 22.5% up to, if that exact tripling of 7.5 didn’t seem round enough.

7.5% isn’t actually the exact tariff on all aluminum and steel imports from China we’re talking about here. In its release, the White House states that’s the current average tariff on “certain steel and aluminum products” under Section 301. It’s implied that those products are all from China and the certain ones Biden is calling to triple, but I’m not sure exactly how the media landed the exact amount of 25% for the percentage to which those tariffs are increased.

Tariff Hike Good or Bad?

Critics of the tariff hike argue that it will only increase the bad inflation the U.S. has suffered under the Biden Administration while the Biden Administration argues it will protect U.S. jobs.

I had ambivalence about the tariff hikes Trump implemented. However, he had a clear goal of getting a trade deal to protect the U.S. and her businesses from China’s unfair trade practices and tackle our trade deficit with China. I don’t see a similar clear goal from the Biden Administration; however, further exposing anti-competitive practices of China and protecting U.S. companies from dumping is a good thing.

U.S. importers of such goods from China would obviously suffer major cost increases that might make them second guess importing them from China. U.S. exporters might suffer retaliatory tariffs.

Joey Garrison reported in a USA Today article, “Imports of steel from China account for only about 0.6% of total U.S. steel demand, according to a senior Biden administration official.” Their argument there is that it’s such a low percentage that it won’t further increase inflation. By that logic, the argument could be flipped to say that this move also wouldn’t do much to protect American either. That would make the move little more than political posturing.

Conclusion

There’s a high chance of the Biden Administration following through on the president’s threat to triple tariffs on steel and aluminum goods from China. For shippers who import or export steel goods to or from China, this would be a big deal. Potentially, the move could lead to more than just a single retaliatory action from China, and reignite the trade war we saw during the Trump era. However, it could amount to little more than political posturing, even if it did happen.

The odds are the move wouldn’t make a huge impact on inflation or U.S. job protection. A small amount on both is possible, but a statistically negligible impact is more likely.

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Anti-Israel Protestors Disrupt Ports, Including Oakland, & International Supply Chains https://www.universalcargo.com/anti-israel-protestors-disrupt-ports-including-oakland-international-supply-chains/ https://www.universalcargo.com/anti-israel-protestors-disrupt-ports-including-oakland-international-supply-chains/#respond Wed, 17 Apr 2024 03:33:30 +0000 https://www.universalcargo.com/?p=12600 Anti-Israel protests essentially shut down the Port of Oakland yesterday, and that’s only the tip of the iceberg. Such protests have taken aim at ports around the world, to varying degrees of disruption. The protests are much wider in scope than just taking aim at ports; however, Zim, a major and Israeli international cargo shipping […]

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Anti-Israel protests essentially shut down the Port of Oakland yesterday, and that’s only the tip of the iceberg. Such protests have taken aim at ports around the world, to varying degrees of disruption. The protests are much wider in scope than just taking aim at ports; however, Zim, a major and Israeli international cargo shipping company, has been a prime target of such protestors.

Bill Mongelluzzo reported on the situation at the Port of Oakland in a Journal of Commerce (JOC) article:

The Port of Oakland’s four container terminals were closed for Monday’s day shift as a precautionary move after demonstrators protesting the war in Gaza threatened to march into the port area. 

Oakland International Container Terminal (OICT) — the port’s largest container facility — said it would remain closed for Monday’s evening shift as well. It was not immediately known if the other three terminals would follow suit and shut for the second shift. 

In multiple coordinated demonstrations, protestors shut down lanes of the major freeway I-880 in Oakland as well as the southbound side of the Golden Gate Bridge, among other traffic disruption, on Monday morning. It took several hours to get freeway lanes reopened and 12 of the protestors were arrested, according to an MSN article by Dave Pehling.

Mongelluzzo gave more on the Port of Oakland disruption in his JOC article and included information about a similarly timed demonstration at the Ports of New York and New Jersey that were, thankfully, not so disruptive:

With threats coming from demonstrators late last week that they would also descend on the port Monday, OICT, TraPac, EverPort and Matson terminals did not open for the day shift, according to a port spokesperson. 

On the East Coast, pro-Palestinian demonstrators conducted a drive-by caravan at the Port of New York and New Jersey in Elizabeth, NJ, but did not disrupt operations. The protestors, in a statement, said they were targeting in particular Israel-based carrier Zim Integrated Shipping Services and its CEO Eli Glickman. 

Additional Anti-Israel Protests & Action Disrupting International Shipping

After Hamas attacked Israel on October 7th, 2023 – killing over a 1,200 people, largely civilians, including babies and children; raping and mutilating women; and taking over 240 people hostage, with 100 believed to still be alive in captivity – many have chosen to side with these terrorists against Israel. Most notably for international shipping has been Iran-backed Houthi Rebels attacking ships in the Red Sea and Gulf of Aiden with any, and often outdated, connection to Israel or her allies.

It’s not surprising Iran bankrolls the Houthi attacks. Iran also backed the Hamas attacks on Israel and often uses such proxies for its aggressions. The only real surprise with Iran is that in contrast with its cowardly proxy attacks on Israel and her allies, including U.S troops in the Middle East, it actually attacked Israel directly just days ago. Overall, the country’s actions have not only been politically tumultuous, giving the world more war and violence, but highly disruptive to international shipping.

Anti-Israel protestors, on the other hand, have created many small disruptions to international shipping with demonstrations strategically targeting ports and terminals, among other things. Such demonstrations are small compared to something like attacks on container ships trying to traverse the Suez Canal, but cumulatively they are growing in their impact. Here are several, but certainly not all, notable anti-Israel incidents that have negatively impacted shipping:

Nationwide Protests, United States:

  • Date: April 15-16, 2024
  • Event: Pro-Palestinian demonstrators blocked roadways in Illinois, California, New York, and the Pacific Northwest.
  • Impact: Major airports, including JFK and LAX, were temporarily shut down on top of the ocean port in Oakland that we already talked about. Bridges like the Golden Gate and Brooklyn were also affected.

Port Botany, Sydney, Australia

  • Date: Ongoing
  • Impact: Anti-Israel activists have disrupted operations at Port Botany, calling for a ceasefire in Gaza. Police have charged 23 protesters for their involvement in the demonstration.
  • Source: ABC News

Metro Vancouver Container Port (Deltaport), Canada

  • Date: April 15, 2024
  • Impact: Anti-Israel protesters blocked access to the Deltaport terminal, causing disruptions to truckers attempting to reach the facility. The terminal operator, GCT Canada, expressed concern over safety and operational challenges.
  • Source: CBC News

New York and Los Angeles Airports, United States

  • Date: December 27, 2023
  • Event: Anti-Israel protesters briefly blocked entrance roads to airports in New York and Los Angeles.
  • Impact: Traffic was snarled, affecting holiday travel. Some travelers had to set off on foot to bypass the jammed roadways.
  • Source: AP News.

Port of Oakland, United States

  • Date: November 3, 2023
  • Impact: Demonstrators demanding a Gaza ceasefire delayed a U.S. military supply ship departing from the Port of Oakland. They physically locked themselves to the vessel and disrupted operations.
  • Source: MSN

Port of Tacoma, United States

  • Date: November 6, 2023
  • Impact: Hundreds of anti-Israel protesters swarmed the Port of Tacoma, aiming to block an Israel-bound ship. The entrance was effectively blocked, forcing drivers to turn around.
  • Source: KOMO News

Other Global Protests

  • Worldwide Coordination: Demonstrations are being coordinated globally, aiming to block major choke points in the global economy and create significant economic impact.

As tensions persist, these protests underscore the interconnectedness of global trade and geopolitical conflicts. Shippers know that ports, often overlooked, play a pivotal role in shaping economies, and protestors have obviously recognized they can become powerful platforms for demonstrations.

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What the Freight? Examining Current Freight Rate Trends https://www.universalcargo.com/what-the-freight-examining-current-freight-rates/ https://www.universalcargo.com/what-the-freight-examining-current-freight-rates/#respond Fri, 12 Apr 2024 02:40:59 +0000 https://www.universalcargo.com/?p=12593 When it comes to freight rates, the international shipping industry has always been a volatile ride. Imagine going up and down the waves of choppy waters in a small boat. Freight rates tend to rise and fall in a similar fashion on waves of greatly varying height, width, and separation in the international shipping market. Many factors can create waves in the market...

The pandemic brought a wave of unprecedented size. One might even call it a tsunami. Largely spurred by lockdowns and stimuli checks, a shipping boom larger than the ports could handle pushed freight rates up and up and up. Of course, the unnatural nature of the boom followed by struggling economy and high inflation finally brought the back half of the wave where freight rates came falling back to sea level. But other events created new waves...

Russian-Ukraine war, wave; Panama Canal drought, wave... and the waves are of various size and impact... attacks in the Red Sea and Gulf of Aiden stopping use of the Suez Canal, big wave; Francis Scott Key Bridge collapse by the Port of Baltimore, small wave...

Those are just some of the splashier events that have affected ocean freight rates. Ultimately, what does it all add up to? What's happening with freight rates now?

Find out by reading the full post in Universal Cargo's blog.

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When it comes to freight rates, the international shipping industry has always been a volatile ride. Imagine going up and down the waves of choppy waters in a small boat. Freight rates tend to rise and fall in a similar fashion on waves of greatly varying height, width, and separation in the international shipping market. Many factors can create waves in the market…

The pandemic brought a wave of unprecedented size. One might even call it a tsunami. Largely spurred by lockdowns and stimuli checks, a shipping boom larger than the ports could handle pushed freight rates up and up and up. Of course, the unnatural nature of the boom followed by struggling economy and high inflation finally brought the back half of the wave where freight rates came falling back to sea level. But other events created new waves…

Russian-Ukraine war, wave; Panama Canal drought, wave… and the waves are of various size and impact… attacks in the Red Sea and Gulf of Aiden stopping use of the Suez Canal, big wave; Francis Scott Key Bridge collapse by the Port of Baltimore, small wave…

Those are just some of the splashier events that have affected ocean freight rates. Ultimately, what does it all add up to? What’s happening with freight rates now?

Let’s find out by embarking on a voyage through the tumultuous seas of ocean freight rate indices. These indices can serve as compasses for global trade, guiding shippers, carriers, and economists alike through freight rate trends, helping them to plan for the future.

Each major ocean freight index out there is a little different from the others in how it gathers and aggregates its data. Some may use only the base rates of shipping a container over a shipping route while others may factor in varying amounts of additional fees and costs involved. While this gives different numbers to each index, the rising and falling trends tend to be similar between the indices.

While examining freight rates trends today, we’ll focus mainly on two sources: the Drewry World Container Index (WCI) and the Statista Global Container Freight Rate Index. However, I also looked at other indices, including those from Freightos and Xeneta.

shipper riding container ship on a freight rate index

Drewry World Container Index (WCI)

The Drewry WCI is a composite index that tracks 40-foot ocean container freight rates on eight major routes connecting the US, Europe, and Asia. It’s assessed by Drewry Maritime Research and primarily serves as a benchmark for spot rates across these crucial trade lanes.

Broad Numbers from Drewry WCI

The Drewry WCI revealed a couple interesting things when looking at it from a broad lens:

  • As of the latest update, the composite index stands at $2,836 per 40-foot container—a 3% decrease from the week before but about 100% higher than the average pre-pandemic rates of 2019 (which hovered around $1,420).
  • However, when compared with the same week last year, it has surged by 66%. That means freight rates had returned much of the way to pre-pandemic rates by this time last year.
  • The increase of the year-to-date average is rather remarkable at $3,372 per 40-foot container. This surpasses the 10-year average rate of $2,706 (which was inflated by the exceptional 2020-22 Covid shipping boom period). The attacks in the Red Sea and Gulf of Aiden are the biggest factor in the resurgence of freight rates this year.

Route-Specific Insights

Let’s look at specific routes:

  • Shanghai to Rotterdam, Shanghai to Los Angeles, and Shanghai to New York: Rates dropped by 3% to $3,078, $3,704, and $4,894 per 40ft box, respectively.
  • Rotterdam to Shanghai and New York to Rotterdam: Rates declined by 2% to $794 and $622 per feu, respectively.
  • Rotterdam to New York: Rates fell by 1% or $17 to $2,244 per 40ft box.
  • Los Angeles to Shanghai: Rates remained stable at the previous week’s level.

Spot Freight Rate Expectations:

Drewry anticipates a minor decrease in spot freight rates in the coming week.

Statista Global Container Freight Rate Index

This index provides a broader perspective on container freight rates. Here’s a glimpse:

  • From January 12, 2023 to March 14, 2024, the global container freight rate index fluctuated in U.S. dollars per 40-foot container.
  • While the exact value varies over time, it reflects the ebb and flow of supply, demand, and market dynamics.

The container freight rates have been on a rollercoaster ride, influenced by a myriad of factors. Here’s a closer look:

  1. Low Point in October 2023:
    • On the 26th of October 2023, the global freight rate plummeted to a mere $1,342 per 40-foot container. This was the lowest level recorded since before the pandemic policies-caused shipping boom.
  2. Resurgent Rates:
    • In February 2024, freight rates reached a high of over $3,900 per 40-foot container—a staggering increase of almost 300% from a few months earlier and around a 100% increase compared to pre-pandemic rates in 2019.
    • This surge was driven by a number of supply chain disruptions, but chief among them were the Iran-backed, anti-Israel (and her allies) Houthi attacks on ships in the Red Sea and Gulf of Aiden.
  3. March 2024 Dip:
    • In March 2024, the freight rate began to decreased from the February peak.
    • However, rates remain significantly elevated compared to historical averages.

Air Cargo and Ocean Freight Interplay

  • Disruptions in ocean freight, driven by events like the Red Sea crisis, continue to impact global trade. Some volumes are shifting from sea to air. For example, out of India to the U.S., air demand increased, though that demand is easing somewhat.
  • Freightos Air Index rates out of South Asia have been climbing, especially to North America. Prices have surged 95% since mid-December, reaching $5.40/kg—the highest level since late 2022.

Conclusion

Paying attention to freight indices, especially over time, helps navigate the waters of international shipping.

Ocean freight rates had been generally dropping after the pandemic response-induced shipping boom and supply chain crisis. However, after the Iran-backed Houthi attacks began in the Red Sea and Gulf of Aiden, freight rates spiked.

Since the industry was flush with capacity, carriers were able to handle the additional ships it took to move the same amount of cargo around the world with the longer trips down and around Africa. Thus, freight rates began dropping again, but they still remain elevated.

The collapse of the Francis Scott Key Bridge created disruption on the U.S. East Coast, but has been mild in its impact on freight rates overall. It seems to have have lessened the decreasing rates a little, even making some hold stable for a week or so, but the downward pressure on freight rates appear to be enough for freight rates to keep coming down, at least a little bit, in the upcoming weeks.

Of course, new events could create unexpected challenges for the international shipping industry at any time, but trends in freight rates help keep shippers prepared for the future. It also helps to monitor known potential perils for the international shipping industry like the ILA’s strike threat, which would shut down ports all along the East and Gulf Coasts.

As always, we keep an eye on the various things impacting international shipping and talk about them here in Universal Cargo’s blog.

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Panama Canal Update – Watershed https://www.universalcargo.com/panama-canal-update-watershed/ https://www.universalcargo.com/panama-canal-update-watershed/#respond Tue, 09 Apr 2024 19:37:46 +0000 https://www.universalcargo.com/?p=12583 While we've made mention of its status in some articles, we haven't done a full update on the Panama Canal situation since a February post. That post was a much needed moment of good news for shippers, who were seeing major disruption at both of international shipping's most important canals.

The good news in February was more rainfall than expected allowed loosening of restrictions on the number of ships that could cross the Panama Canal. Things were not back to normal, but there was significant improvement, and carriers were beginning to bring services back to traversing the canal.

Did good fortune at the Panama Canal continue in March? Indeed, it did....

Find out more by reading the full post in Universal Cargo's blog.

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While we’ve made mention of its status in some articles, we haven’t done a full update on the Panama Canal situation since a February post. That post was a much needed moment of good news for shippers, who were seeing major disruption at both of international shipping’s most important canals.

The good news in February was more rainfall than expected allowed loosening of restrictions on the number of ships that could cross the Panama Canal. Things were not back to normal, but there was significant improvement, and carriers were beginning to bring services back to traversing the canal.

Panama Canal with rushing water and container ship.

Did good fortune at the Panama Canal continue in March? Indeed, it did….

Continued Increase in Daily Ship Transits

In a March 8th advisory, the Panama Canal Authority announced an increase in the number of daily slots in the Panamax Locks, citing the “present and projected level of Gatun Lake” as the basis for the decision. The lake’s low levels because of drought is what caused the Panama Canal Authority to restrict the number of ships that could transit the canal in the first place. Ultimately, rainfall would have to be the solution.

Keith Wallis, in a Journal of Commerce (JOC) article on Friday, cited “heavy rain in the canal watershed” as the cause of the improvement of actual and projected water levels for Gatun Lake. And that made a bad pun percolate in my brain. Since the pun was so bad and in no way funny, I decided to make it absolutely repugnant by doubling down and writing, water shed from the sky caused a watershed in the watershed. If I was any kind of good editor, I’d delete that now rather than make my reader suffer. However, since we’ve gotten a turning point at the Panama Canal that reduces shippers’ suffering, I’ll add more suffering here in the name of balance. Or maybe in the name of global warming <ahem> climate change. That’s always a good excuse for bad decisions that cause suffering.

Back to the Panama Canal….

By March 25th, the number of ships allowed through the Panama Canal per day was up to 27. That’s still down from the 36 to 38 average number of ships that traverse the canal per day under normal circumstances. However, we’ve continued to go in a positive direction for the number of ships allowed through the canal, and services from carriers continue to return….

More Resumed Services by Carriers

Wallis’s JOC article was actually about Maersk resuming transits through the Panama Canal in May for its Ocean-Americas (OC1) service. Wallis writes:

Maersk said it had been “closely monitoring” the introduction of additional transit slots by the ACP in recent weeks before deciding to shift back to using the canal on its OC1 service. The first northbound canal transit will be by the Maersk Inverness about May 17, while the initial southbound transit will be made by the Spirit of Auckland around May 20. 

See how nicely he writes? Not a sign of a pun anywhere as Wallis continues:

Maersk Cargo Ship
Maersk Cargo Ship pic: Maersk Line

The OC1 service “will return to its pre-existing rotation that was in place prior to the current two-loop setup established with the Panama Rail connection,” Maersk said. The use of the rail link “will be phased out by the end of May,” the carrier added.

Maersk confirmed the new rotation of the single-loop OC1 service via the canal would include calls at Philadelphia, Charleston, Balboa, Melbourne, Port Chalmers (New Zealand), Tauranga, Manzanillo, Cristobal and Cartagena.

Carriers have already been bringing back services that transit the Panama Canal. In the February post mentioned above, I included reporting from Wallis about the THE Alliance and Ocean Network Express (ONE) restoring transits through the canal. Wallis adds more such transit return info as he continues the article I already quoted above:

Maersk has been using the canal for its other services, a carrier spokesperson said. 

Hapag-Lloyd and Ocean Network Express confirmed transits through the Panama Canal have been fully restored on their three Asia-US East Coast trans-Pacific services operated under THE Alliance network. That follows a partial shift back to canal transits at the beginning of this year after vessels were diverted via the Cape of Good Hope when drought-related vessel restrictions were at their toughest.

Conclusion

The Panama Canal situation continues to improve. Services continue to return. Not all news, even international shipping news, in the world is bad.

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Redirected Ships, Temporary Channels to Port of Baltimore, & Extended Operations at Alternate Ports – Bridge Collapse Updates https://www.universalcargo.com/redirected-ships-temporary-channels-to-port-of-baltimore-extended-operations-at-alternate-ports-bridge-collapse-updates/ https://www.universalcargo.com/redirected-ships-temporary-channels-to-port-of-baltimore-extended-operations-at-alternate-ports-bridge-collapse-updates/#respond Thu, 04 Apr 2024 23:47:13 +0000 https://www.universalcargo.com/?p=12577 What's been happening with shipping on the East Coast since the tragic collapse of the Francis Scott Key Bridge? I'm glad you asked. Let's get into the updates...

There were close to 100 ships either headed for or scheduled for voyages that would call on the Port of Baltimore with more than 2,000 loads to be delivered there combined. The Port of Baltimore's closure to ships disrupted all of that. Hundreds of loads have already been rerouted. Diversion of the remaining loads is still being worked out. Jasmina Ovcina Mandra reports specific numbers – as of Tuesday, April 2nd – in a World Cargo News article:

"According to FourKites, the Dutch-based real-time supply chain visibility platform, as of March 29, 92 vessels with over 2,000 loads were either en route or had upcoming voyages into or out of the Port of Baltimore.

"Of these loads, more than 1,400 are still slated for Baltimore but will now need to be rerouted due to the closure of the waterway. Already, over 600 loads have been redirected, with Savannah receiving the highest volume at 264 loads, followed by Norfolk with 181 loads, and New York with 70 loads."

Find out more by reading the full post in Universal Cargo's blog.

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What’s been happening with shipping on the East Coast since the tragic collapse of the Francis Scott Key Bridge? I’m glad you asked. Let’s get into the updates…

Cargo Rerouting

Francis Scott Key Bridge collapse

There were close to 100 ships either headed for or scheduled for voyages that would call on the Port of Baltimore with more than 2,000 loads to be delivered there combined. The Port of Baltimore’s closure to ships disrupted all of that. Hundreds of loads have already been rerouted. Diversion of the remaining loads is still being worked out. Jasmina Ovcina Mandra reports specific numbers – as of Tuesday, April 2nd – in a World Cargo News article:

According to FourKites, the Dutch-based real-time supply chain visibility platform, as of March 29, 92 vessels with over 2,000 loads were either en route or had upcoming voyages into or out of the Port of Baltimore.

Of these loads, more than 1,400 are still slated for Baltimore but will now need to be rerouted due to the closure of the waterway. Already, over 600 loads have been redirected, with Savannah receiving the highest volume at 264 loads, followed by Norfolk with 181 loads, and New York with 70 loads.

Additional destinations include Port Everglades, Newark, Boston and Santos.

By all reports, the other East Coast ports are able to absorb the cargo that would normally be headed for the Port of Baltimore. Mandra specifically makes mention of the Port of New York and New Jersey, which ships that call on the Port of Baltimore often also call upon. However, just because the other ports are able to absorb the cargo movement, it doesn’t mean there is no delay.

While there are rumblings of larger delays, Mandra reports diversions are averaging an extended estimated delivery time of five days on imported goods. As we’ve talked about many times in the past, serious disruptions at one international shipping hub tends to ripple across supply chains around the world, impacting many others. In just one area where that can be seen, as ships that were routed to go through the Port of Baltimore are diverted, when they show up to other ports on their routes is affected and that can further impact the availability of ships for additional services.

There are plenty of complicating factors for carriers as they figure out and schedule ship and cargo diversions from the Port of Baltimore. However, it may be even more complicated for export cargo that has already arrived at the port. That cargo has to either wait for the port to open up in order to be exported out or it has to be picked up from the port and taken to another one in order to be shipped out. For many goods scheduled for export, the delays could easily stretch into weeks, and hard choices will have to be made about which cargo is prioritized.

Ports Expanding Hours to Handle Rerouted Cargo

Ships are already arriving in East Coast ports with diverted cargo, and plenty more will be coming. To accommodate, ports are extending hours to handle the cargo increase.

Peter Angell reported details on diverted cargo, adjusted services to handle it, and expanded port hours in a Journal of Commerce (JOC) article:

Most of the diverted ships are likely to call Port Newark Container Terminal (PNCT), which handles most of the Mediterranean Shipping Co. vessels calling New York-New Jersey. In response, PNCT is keeping its truck gates open until 6 pm, rather than closing at 4 pm, as of April 1. Starting April 6, PNCT will also open Saturdays from 7 am to 3 pm for an indeterminate period. 

APM Terminals Port Elizabeth is also handling freight that would normally land in Baltimore. It received the 10,062-TEU Maersk Yukon and 8,238-TEU MSC Everest VIII on Thursday, both of which had been scheduled to call Baltimore over the next two weeks. 

Next Tuesday, CSX Transportation is expected to start a daily north-south service from the New York-New Jersey port and its Kearny, NJ, intermodal terminal to Baltimore. According to people familiar with the operation, CSX will be running trains of approximately 6,000 feet that will be able to bring about 150 import containers to Baltimore’s Seagirt marine terminal for local pick-up and match back empties for the return trip. 

The Port of Virginia said another diverted vessel, Evergreen Marine’s 14,354-TEU Triton, discharged an additional 1,103 containers that were originally bound for Baltimore during its regular call at the Virginia International Gateway terminal. The first of those containers was picked up on Friday. MSC is also diverting three of its vessels to Norfolk over the next week. 

Similar to PNCT, Virginia is extending its gate hours, opening at 5 am instead of 6 am, Harris said. He also noted that about 80 Maryland-based trucking companies have recently registered to work at the port. 

Temporary Channels to the Port of Baltimore & Reopening Timeline

Meanwhile, the unified command that has been assigned with responding to the Key Bridge collapse, which blocked off the waterway to the Port of Baltimore, has been creating alternate channels to the port. Two such channels have now been completed. A third is underway.

The initial channel was only 11 feet deep. That is not deep enough to accommodate the ships major carriers use to call upon the port. The second is a little deeper at 15 feet, but it is still nowhere near deep enough to open the port to the kinds of ships we’re used to seeing call.

Michelle Del Rey reports in the Independent on the third channel being made, a fourth that will be permanent, and a timeline that has now been given for the reopening of the port:

A third [channel], which officials say will be 35-feet deep and 280-feet wide, will open at the end of April. The fourth channel will be permanent and would allow for ships as big as the “Dali” to navigate themselves in and out of the harbour. The “Dali” crew members still remain stuck on board the ship.

The “Dali” she mentions is the massive container ship that crashed into the Key Bridge, collapsing it.

Here is the timeline Del Rey reported from a press release that put out just today:

In a press release issued on Thursday, officials announced a timeline from when they expect the Port of Baltimore to be fully reopened to commercial shipping traffic.

Currently, officials have created two temporary channels with depths of 11 and 15 feet. A third channel is expected to be completed by the end of the month.

According to the release, the passageway will be 280-feet wide and 35-feet deep. The permanent 700-foot wide, 50-foot deep channel will reopen by the end of May, officials estimate.

That means we’re looking at basically two months of the Port of Baltimore being effectively closed. Hopefully, things will go to plan and that timeline estimate won’t underestimate the time it takes to get the permanent channel completed and the Port of Baltimore able to receive ships normally again.

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Biden Admin Announces 2-Man Crew Requirement on Freight Trains, Which Unions Wanted but Failed to Get in Contract Negotiations https://www.universalcargo.com/biden-admin-announces-2-man-crew-requirement-on-freight-trains-which-unions-wanted-but-failed-to-get-in-contract-negotiations/ https://www.universalcargo.com/biden-admin-announces-2-man-crew-requirement-on-freight-trains-which-unions-wanted-but-failed-to-get-in-contract-negotiations/#respond Tue, 02 Apr 2024 22:36:19 +0000 https://www.universalcargo.com/?p=12574 Today (Tuesday, April 2nd), the Biden Administration announced a new rule that increases the minimum crew size to two on every train for all large freight railroads. That doesn't mean every train required to have two crew members is a large train. The law treats freight rail companies differently based on company size, specifically targeting large rail companies, as made clear by the U.S. Department of Transportation's own announcement of the new rule:

... the final rule contains some differences from the initial notice of proposed rulemaking in how it treats freight railroads, especially Class II and III freight railroads. In limited cases, the rule permits exceptions for smaller railroads to continue or initiate certain one-person train crew operations by notifying FRA and complying with new federal safety standards.

Classes are based on railroads' annual revenue; Class I is the highest revenue category.

Still, the Biden Administration argues the rule change is based on safety....

Learn more by reading the full post in Universal Cargo's blog.

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Today (Tuesday, April 2nd), the Biden Administration announced a new rule that increases the minimum crew size to two on every train for all large freight railroads. That doesn’t mean every train required to have two crew members is a large train. The law treats freight rail companies differently based on company size, specifically targeting large rail companies, as made clear by the U.S. Department of Transportation’s own announcement of the new rule:

… the final rule contains some differences from the initial notice of proposed rulemaking in how it treats freight railroads, especially Class II and III freight railroads. In limited cases, the rule permits exceptions for smaller railroads to continue or initiate certain one-person train crew operations by notifying FRA and complying with new federal safety standards.

Classes are based on railroads’ annual revenue; Class I is the highest revenue category.

Still, the Biden Administration argues the rule change is based on safety….

Improved Safety Or Unjustified Regulation

The Department of Transportation began its, yes redundant, “Final Rule on Train Crew Size Safety Requirements to Improve Rail Safety” announcement with the following:

Today, as part of the Biden-Harris Administration’s ongoing efforts to strengthen rail safety and hold railroads accountable, Secretary Pete Buttigieg announced that the U.S. Department of Transportation’s Federal Railroad Administration (FRA) has issued a final rule establishing minimum safety requirements for the size of train crews….

“Common sense tells us that large freight trains, some of which can be over three miles long, should have at least two crew members on board – and now there’s a federal regulation in place to ensure trains are safely staffed,” said U.S. Transportation Secretary Pete Buttigieg.

Unfortunately, when politicians appeal to “common sense” for new regulation or law changes, it often means there’s a lack of data to support it. The Association of American Railroads (AAR) argues that’s the case when it comes to this rule:

Today, the Federal Railroad Administration released a final rule titled the “Train Crew Size Safety Requirement,” despite the lack of evidence connecting crew size to rail safety. The FRA abandoned a similar rule in 2019 after failing to identify evidence to justify a safety need.

“FRA is doubling down on an unfounded and unnecessary regulation that has no proven connection to rail safety,” said AAR President and CEO Ian Jefferies. “Instead of prioritizing data-backed solutions to build a safer future for rail, FRA is looking to the past and upending the collective bargaining process.”

AAR goes on to point out data of improved rail safety it claims is due to extensive employee training and private investments in technology and infrastructure:

Rail carriers prioritize data-driven safety improvements through extensive employee training and private investments in technology and infrastructure. These actions have driven tangible results: the casualty rate for Class I railroad employees has dropped by 63% since 2000—reaching an all-time low in 2023—and the overall train accident rate is down 27% since 2000 and 6% since 2022. Each year, railroads devote billions to enhance their infrastructure, deploy safety technologies and invest in their employees to help the industry deliver safely and reliably into the future.

It was, however, a train derailment in February of last year that raised the heat on rail safety, turning it into a hot button topic. A Norfolk Southern-operated train crashed, spilling toxic chemicals that polluted soil, water, and air in Ohio. Even so, that accident doesn’t really help justify this law change. The train was not operated by a one-man crew, so the two-man minimum would have made no difference. Nevertheless, the derailment has been cited many times in connection with getting this final rule in place.

So, perhaps, there’s a better explanation for the Biden Administration putting this law on the books….

Union Appeasement?

Two-man minimum crews has been a negotiating point for rail worker unions for a long time. Now, they no longer need to negotiate for it, though they can’t use it for leverage in negotiations to get other asks like higher wages or increased benefits either. President Biden has claimed to be the most union-friendly president in history, but he sign a bill forcing the rail unions to take a deal, which didn’t give them the two-man crew minimum, a couple years ago. Maybe he’s trying to make it up to those voting union members in a big election year where he’s losing in the polls.

Rail workers nearly went on a large-scale strike in 2022, which would have massively disrupted, if not halted, supply chains across the nation. The issue of two-man minimum crews was one that increased the likelihood of the strike happening. Congress and the Biden Administration managed to kick the can down the road on the strike until after the 2022 midterm elections, but eventually passed a bill forcing the unions to accept a contract that several rejected by member votes. A rail strike would have been a massive blow to the U.S. economy, which was already struggling under the Biden administration.

Money for Freight & Intercity Passenger Rail Infrastructure

In related news, the Biden Administration announced the FRA is making available $2.4 billion in grant money for freight and intercity rail infrastructure modernization.

SupplyChainBrain reports:

The money will come from the Consolidated Rail Infrastructure and Safety Improvements (CRISI) program, which funds bridge, track, and grade crossing improvements, expanded passenger rail corridors, short line rail transportation in rural communities, rail industry workforce development, and zero or low emissions locomotives.

The grant money announced on March 29 is part of the largest ever funding round for the program, building on the $1.4 billion in CRISI grants handed out in 2023.

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International Shipping News Roundup: Bridge Collapse Update, Russia & China Deal with Houthis, Pirates, & OSRA 2.0 https://www.universalcargo.com/international-shipping-news-roundup-bridge-collapse-update-russia-china-deal-with-houthis-pirates-osra-2-0/ https://www.universalcargo.com/international-shipping-news-roundup-bridge-collapse-update-russia-china-deal-with-houthis-pirates-osra-2-0/#respond Thu, 28 Mar 2024 23:21:05 +0000 https://www.universalcargo.com/?p=12571 There’s a lot happening in international shipping right now. Rather than make shippers scramble from news site to news site to see what all is going on, we’ve rounded up the top stories to give them to you in one place: here in Universal Cargo’s blog. No reason to waste time, let’s get into the […]

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There’s a lot happening in international shipping right now. Rather than make shippers scramble from news site to news site to see what all is going on, we’ve rounded up the top stories to give them to you in one place: here in Universal Cargo’s blog.

No reason to waste time, let’s get into the news…

Baltimore Francis Scott Key Bridge Collapse Updates

international shipping news

The worst part of the Francis Scott Key Bridge collapse is the loss of lives. As we talked about in Tuesday’s post, a search was underway for six people who fell into the water. Two people were initially rescued. NBC News reported yesterday that the remains of two who were killed were recovered. The remaining four are presumed dead, and the recovery mission has ended as “it is no longer safe for divers to navigate or operate around the debris and concrete in the port” and “responding officers have ‘exhausted all search efforts’ to recover the victims.”

The Port of Baltimore remains closed to ships indefinitely as there are no clear answers to how long it will take to clear the debris in the Patapsco River. The debris blocks much of the channel leading to Baltimore’s harbor. That means carriers and shippers are diverting ships and cargo to other ports on the East Coast. Large disruptions like this tend to ripple throughout international shipping supply chains. There will likely be at least some surge in freight rates for international shipping going to, from, or through the East Coast. And its possible that surge will go wider than that.

Baltimore and Maryland’s economies will take significant hits from the port closure. Noi Mahoney writes about that in a FreightWaves article titled “Port of Baltimore’s indefinite closure deals blow to city, state economy.” Other headlines emphasize the possibility that the bridge collapse could cost billions in economic costs. Time will tell just how costly this tragedy is.

Russia and China Make Deal with Houthi Rebels

The Iran-backed Houthi rebels continue to attack ships in the Red Sea and Gulf of Aden. This is effectively keeping most of international shipping away from the Suez Canal. Well, apparently that won’t be as much of a problem for Russia and China as it is for almost everyone else. Sam Dagher and Mohammed Hatem reported in a Reuters article that the Houthis have agreed to grant Russia and China safe passage.

What is Russia and China giving the Houthis in return? That’s rather vague, but it seemingly amounts to some kind of political support.

Dagher and Hatem weren’t able to give specifics because they are unclear. The most specific thing they were able to write is that the political support might be before the United Nations Security Council.

Speaking of security, the Houthis have made attacks on ships they mistakenly thought to be connected to Israel or the United States, apparently because of outdated information. Russia and China will need to make extra clear which ships belong to them in order to ensure they are not mistakenly fired upon.

Meanwhile, the Biden Administration has been leading strikes against the Houthis in direct response to the rebels’ attacks on ships. Operation Prosperity Guardian – as the administration named the strikes that are in coalition with other nations – though chiefly the United Kingdom, have been so far unsuccessful in slowing, let alone stopping, Houthi attacks on ships.

Somali Pirates Are Back

The Houthi attacks have created a distraction, allowing Somali pirates to return to the scene, attacking and boarding ships and taking their captains and crew captive. Somali pirates were a serious problem about a decade ago, but over the last ten years, international navies seemed to have quelled their threat to shipping routes, crews, and the importing and exporting industry.

International navy forces have reduced their operations off the Somali coast largely because of the nearby Houthi attacks and perhaps overconfidence in their success of making the Somali piracy go dormant. Now, the piracy threat is back and in force.

Giulia Paravicini, Jonathan Saul and Abdiqani Hassan report in a Reuters article:

More than 20 attempted hijackings since November have driven up prices for armed security guards and insurance coverage and raised the spectre of possible ransom payments, according to five industry representatives.

Yes, those costs are yet another upward pressure to factor into the freight rate market.

House Passes “OSRA 2.0”

We’re still only beginning to see the effects the Ocean Shipping Reform Act of 2022 (OSRA) is and will have on U.S. maritime as well as broader international shipping. In fact, we’re still creating installments of our Decoding OSRA blog series, where we go through the bill section by section. However, since reforming supply chain and international shipping laws is one of seemingly only a few things Democrats and Republicans can agree on, they keep introducing more legislation on the industry.

Michael Angell reported in the Journal of Commerce (JOC) last week that the House of Representatives “approved further amendments to federal maritime law that include enhanced oversight of China-based carriers and freight exchanges, along with establishing new committees to study ports and liner services.”

The bill is called the Ocean Shipping Reform Implementation Act; however, it is being hailed as “OSRA 2.0.”

The main target of OSRA 2.0 is unfair shipping practices from China. The bill reportedly establishes more committees and has widespread support from shipper groups, according to Angell. Of course, you can be sure we here at Universal Cargo will be looking more into the shipping law changes the new bill makes, should the Senate approve it, as I expect it will.

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Container Ship Crashes into Baltimore Bridge and Collapses It – 6 People Missing in Water, Port of Baltimore Closed https://www.universalcargo.com/container-ship-crashes-into-baltimore-bridge-and-collapses-it-6-people-missing-in-water/ https://www.universalcargo.com/container-ship-crashes-into-baltimore-bridge-and-collapses-it-6-people-missing-in-water/#respond Tue, 26 Mar 2024 20:23:31 +0000 https://www.universalcargo.com/?p=12564 Early this morning, a container ship called the Dali left the Port of Baltimore for Sri Lanka, but things went horribly wrong. About a half hour later, the ship lost power and crashed into the Francis Scott Key Bridge. The ship damaged the support pillar it struck so badly the entire structural integrity of the […]

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Early this morning, a container ship called the Dali left the Port of Baltimore for Sri Lanka, but things went horribly wrong. About a half hour later, the ship lost power and crashed into the Francis Scott Key Bridge. The ship damaged the support pillar it struck so badly the entire structural integrity of the bridge was destroyed. The bridge collapsed into the Patapsco River. A rescue mission is underway to find people who were plunged into the water with it.

The Key Bridge collapse was caught on camera:

YouTube Video

Matt Mathers, Tom Watling, and Martha McHardy reported in the Independent that a mayday call from the ship after it lost power saved lives:

It is still unclear what caused the accident at this time, but Maryland Governor Wes Moore said that the ship made a mayday call just ahead of the accident. Some crew aboard the ship told authorities they lost power moments beforehand.

The call gave people on the bridge enough time to prevent cars from continuing on the bridge, saving lives.

It sounds like things could have been much worse, but people still ended up in the water. The Independent article continues:

… eight individuals are believed to have fallen in the water. Two individuals were rescued and one is currently in the hospital.

Reporting from various outlets says those individuals had been on the bridge in their cars, Ariana Baio, in another article from the Independent, reported those individuals plunged into the water are believed to be construction workers.

Collapse Shuts Down the Port of Baltimore

Francis Scott Key Bridge collapse

On the international shipping side of things, the collapsed bridge cuts off ship access to and from the Port of Baltimore, thus, forcing the port closed, at least to ship traffic.

Joe Antoshak and John Kingston reported in a FreightWaves article:

The Port of Baltimore announced at approximately 8 a.m. Eastern that it was closed for inbound and outbound vessel traffic. It did say that truck operations at terminals inside the port would continue.

But the bridge collapse effectively sets up a wall between the port and Chesapeake Bay. There does not appear to be any other inbound or outbound way between the port and shipping lanes, raising the question of how long this key terminal will be closed.

Trucking shipping containers of goods away from the port will likely be a mess of congestion, which will also be a problem for commuters. Here’s a taste of the logistical complications from the FreightWaves article:

The Maryland Transportation Authority is advising against the use of Interstate 695, a key route for Baltimore’s commuters and freight movement, following the collapse. The bridge plays a vital role in commercial shipping access to the Port of Baltimore, a major hub for autos, light trucks and various bulk goods. It is the easternmost way of getting across the Port of Baltimore. 

Alternate routes for trucks that bypass the Key bridge are a tunnel on Interstate 895 under the Baltimore Harbor, a tunnel on Interstate 95 under the harbor, or Interstate 695 on the west side of Baltimore. The bridge is part of Interstate 695, the Baltimore Loop, on the east side of the city. 

The Maryland Transportation Authority on its X feed, noted that vehicles transporting hazardous materials may not use either the I-95 (Fort McHenry) or I-895 (Baltimore Harbor) tunnels. To get around Baltimore, they will need to use I-695 on the western side of the city.

Additionally, MDTA said on X that vehicles in excess of 13 feet, 6 inches in height or 8 feet in width are prohibited from using the Baltimore Harbor Tunnel on I-895. For the Fort McHenry Tunnel, which is part of I-95 through the heart of Baltimore, the limits are 14 feet 6 inches in height and 11 feet in width.

Paul Wiedefeld, Maryland’s transportation secretary, said the water where the bridge was struck is about 50 feet deep, complicating search-and-rescue operations. The U.S. Coast Guard and dive teams are currently searching for survivors, with Baltimore’s fire chief noting the additional challenges posed by the water’s current.

The Port of Baltimore is a major U.S. port; Harry Fletcher pulled some data in an Indy100 article about the devastating accident to show how much cargo moves through it:

Last year was a record year for the port itself in terms of cargo. As Transport Topics reports, the Port of Baltimore’s public marine terminals hit a record high for receiving 11.6 million tons of general cargo in the fiscal year of 2023 – up from a high of 11 million tons in 2019.

Details About the Ship

As mentioned above, the name of the ship that hit the Key Bridge is the Dali. It’s owned by Grace Ocean Private Ltd, operated by Synergy Group, but chartered by Maersk. Baio reported in her Independent article:

The vessel was chartered by Maersk to carry Maersk’s customer’s cargo from Baltimore to Colombo in a nearly month-long journey, according to a statement from the company.

All the crew members, including the two pilots, have been accounted for and there are no reports of any injuries onboard, according to the Synergy Group.

Maersk said none of its crew or personnel were on board the vessel when the incident occurred.

There were, however, 4,900 shipping containers onboard, according to the FreightWaves article. The importance of cargo insurance now comes into play as the process of assessing the damage and loss of goods begins.

Of course, the most important part of this whole story is the lives of the people who fell into the Patapsco River. Thank God it wasn’t even worse with the loss of lives to the crew or the motorists who were kept off the bridge because of the mayday call.

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Will Peak Season Come Early This Year? https://www.universalcargo.com/will-peak-season-come-early-this-year/ https://www.universalcargo.com/will-peak-season-come-early-this-year/#respond Thu, 21 Mar 2024 23:40:54 +0000 https://www.universalcargo.com/?p=12562 CEO of Hapag-Lloyd Rolf Habben Jansen told CNBC that he thinks international shipping’s peak season is going to come early this year. Lori Ann LaRocco reported: “I would also expect that peak season is going to start a little bit early,” Hansen said. “I also expect that there’ll be quite a number of people who […]

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CEO of Hapag-Lloyd Rolf Habben Jansen told CNBC that he thinks international shipping’s peak season is going to come early this year. Lori Ann LaRocco reported:

“I would also expect that peak season is going to start a little bit early,” Hansen said. “I also expect that there’ll be quite a number of people who tried to bring in their goods somewhere between June and August.”

What makes him think so? While she might fall just short of explicitly stating it, LaRocco clearly implies shippers planning ahead for the threat of an International Longshoremen’s Association (ILA) strike plays into Jansen’s thinking by placing this right before his quote about an early peak season:

… Hansen said U.S. shippers, including most notably retailers, are planning ahead this year for peak shipping season ahead of potential East Coast and Gulf ports strikes, in line with what logistics decision makers told CNBC at one of the world’s largest maritime/logistics conferences TPM, held in California last week.

cargo ship internationa shipping

Early Peak Season

Jansen should be absolutely right about shippers importing early to beat the risk of disruption from a possible ILA strike. Importing and exporting early was one of the ways we suggested shippers protect themselves from ILWU port disruption, along with diverting cargo from the West Coast to the East Coast and looking into alternate sourcing options. Those same strategies, which worked for many shippers to avoid expensive delays from labor action during the dragged out ILWU contract negotiations, will likely be utilized by shippers to avoid port shutdowns on the East and Gulf Coast ports should the ILA strike. Of course, the West to East Coast diversions would be in reverse.

When it comes to shipping early, shippers planning to ship during the peak season wouldn’t even need to ship that early – or even early at all for some. The ILA has threatened to strike in October, which is fairly late in the peak season, after their contract expires at the end of September. Of course, they would want to give themselves buffer time to ensure their cargo isn’t still sitting at the East Coast ports when the strike happens – if the strike happens.

Many shippers probably only needing to move shipments up a little is likely why Jansen said “a little bit early” when talking about when he thinks the peak season will start.

Overstock Finally Depleted

There is another interesting factor at play. Retailers have been dealing with the problem of the aftermath of artificial demand. The economy has been far from booming under the Biden Administration. After government issued stimuli checks ran out and the surge of spending brought an end to bloated demand, retailers ended up overstocked. Slower economy meant a long period of retailers needing fewer imports. For the international shipping industry, the drop in demand brought freight rates way down along with major reduction in revenue and profit. Thought the Red Sea Crisis, along with Panama Canal restrictions to a lesser extent, pushed freight rates back up. Now, there’s reason to think demand will improve.

Retailers overstock seems to finally be reaching an end. Last year’s peak season was seriously dampened by the overstock. But now, with stocks appearing to at last be depleted, ordering increases seem like they’ll be happening before peak season gets here. That gives ocean carriers like Hapag-Lloyd an improved outlook for the remainder of the year. LaRocco quoted Jansen as saying the following:

“We also see that inventories are depleted in many cases and so far we’ve seen a good recovery after Chinese New Year,” Jansen said. “So we’ve been fairly happy with that.”

That certainly doesn’t mean we’re about to see another big shipping boom. It does, however, look like shipping demand will be healthier in the lead-up to the peak season, unlike what we saw last year. If restocking is done during this time, with the economy where it is, the peak season itself might be a mild one.

Freight Rate Outlook

When it comes to a freight rates outlook for the rest of the year, expectations should be that they’ll be healthy for carriers, which means probably higher than shippers would like. There doesn’t appear to be an ending soon to the Iran-backed Houthi attacks on ships in the Gulf of Aden and Red Sea. That pushes freight rates up.

Healthier demand now and into the peak season also bolsters rates.

However, if the peak season does indeed begin early, it would likely end early too. In that case, we could see freight rates drop significantly in the last two to three months of the year unless the ILA does indeed strike. The disruption of the strike would put upward pressure on freight rates while significantly increasing cargo traffic through the West Coast ports.

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We Have to Talk About the ILA Strike Threat https://www.universalcargo.com/we-have-to-talk-about-the-ila-strike-threat/ https://www.universalcargo.com/we-have-to-talk-about-the-ila-strike-threat/#respond Wed, 20 Mar 2024 01:53:14 +0000 https://www.universalcargo.com/?p=12559 Time is ticking...

All the way back in November, the International Longshoremen's Association (ILA) warned its members to prepare for a strike in October of this year. ILA's contract, which covers dockworkers all along the East and Gulf Coasts, expires at the end of September. The ILA's president, Harold Daggett, made it pretty clear that if the union's contract demands aren't reached by then, dockworkers will go on strike. “We will be in the streets,” Daggett said, obviously referring to picketing instead of working.

Tick, tick, tick, tick, tick, tick...

Such a strike would likely cost the U.S. economy billions of dollars per day. Six of our country's ten busiest ports are covered by the ILA contract as well as three of the busiest five. A study from almost a decade ago found that a strike from the International Longshore & Warehouse Union (ILWU) on the West Coast, which has the remaining four of the top ten busiest ports and two of the top five would cost the the economy $2.5 billion per day. A decade's worth of inflation, particularly over the last few years, means a strike now would likely be significantly more costly in terms of dollar value, no matter which side of the country it's on.

Tick, tick, tick, tick, tick...

When the ILA made its strike threat, we had about a year for the ILA and United States Maritime Alliance (USMX), representing the East and Gulf Coast employers, to come together on contract issues. Now that time has been approximately cut in half, shippers have to start considering strategies to protect themselves and their businesses from an ILA strike shutting down East and Gulf Coast ports in the fall. Shippers who did similarly, diverting cargo from West Coast ports when ILWU contract negotiations threatened disruption, were proven prudent when ILWU labor action did indeed hurt port operations in 2022 and '23. But that disruption would be very mild compared to a full-fledged ILA strike.

Keep reading in Universal Cargo's blog.

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Time is ticking…

truckers strike Port of Los Angeles Long Beach

All the way back in November, the International Longshoremen’s Association (ILA) warned its members to prepare for a strike in October of this year. ILA’s contract, which covers dockworkers all along the East and Gulf Coasts, expires at the end of September. The ILA’s president, Harold Daggett, made it pretty clear that if the union’s contract demands aren’t reached by then, dockworkers will go on strike. “We will be in the streets,” Daggett said, obviously referring to picketing instead of working.

Tick, tick, tick, tick, tick, tick…

Such a strike would likely cost the U.S. economy billions of dollars per day. Six of our country’s ten busiest ports are covered by the ILA contract as well as three of the busiest five. A study from almost a decade ago found that a strike from the International Longshore & Warehouse Union (ILWU) on the West Coast, which has the remaining four of the top ten busiest ports and two of the top five would cost the the economy $2.5 billion per day. A decade’s worth of inflation, particularly over the last few years, means a strike now would likely be significantly more costly in terms of dollar value, no matter which side of the country it’s on.

Tick, tick, tick, tick, tick…

When the ILA made its strike threat, we had about a year for the ILA and United States Maritime Alliance (USMX), representing the East and Gulf Coast employers, to come together on contract issues. Now that time has been approximately cut in half, shippers have to start considering strategies to protect themselves and their businesses from an ILA strike shutting down East and Gulf Coast ports in the fall. Shippers who did similarly, diverting cargo from West Coast ports when ILWU contract negotiations threatened disruption, were proven prudent when ILWU labor action did indeed hurt port operations in 2022 and ’23. But that disruption would be very mild compared to a full-fledged ILA strike.

Tick, tick, tick, tick…

The ILA and USMX did start very early negotiations in February of last year. Unfortunately, those talks fell completely apart, reportedly due to wage increase demands.

However, that is not the only sticking point these negotiations have. The ILA is drawing hard lines on automation. The union sees automation as an existential threat while the ports see it as necessary in order to keep up with the ever-increasing amount of goods global trade demands be moved through their terminals. Lagging automation compared to its utilization at the other ports around the world, in large part due to union opposition, makes U.S. ports able to move fewer shipping containers per hour and played a factor in congestion and supply chain disruption in the post-COVID shipping boom/supply chain crisis.

Tick, tick, tick…

When negotiations do finally start up again, even if they once again sink, the ILA has said it does not want any mediation from the White House. “We will not be interested in Biden sending us a mediator if negotiations are not going well,” Daggett said back in November. And that’s with a man in the Oval Office who said he would be “the most pro-union president in history.” Maybe Daggett was just taking the advice Politico reported President Obama gave to not “underestimate Joe’s ability to fuck things up.” However, it sounds more like the union is not interested in bending on its demands and would rather strike than enter mediation.

Tick, tick, tick…

First, we simply need to see the parties back at the negotiating table. Has there been any movement in that direction? Yes, actually. Last month, Michael Angell reported in the Journal of Commerce that Daggett sent a letter to ILA’s local chapters, finally telling them to resume negotiations with their respective port employers. He’d discontinued all such negotiations back in March of last year until this notice. Angell reported that Daggett also gave a hard end date to these local negotiations:

Now the locals have until May 17 to complete those local negotiations, the letter said, adding the date “is a firm deadline and will not be extended.”

After that, there’ll be little more than four months for the ILA and USMX to work out a master contract before the strike of which Daggett warned would begin.

Tick, tick…

That means we’ll be paying careful attention to developments with the ILA at East and West Coast ports, giving updates on developments here in Universal Cargo’s blog, so you shippers can be more informed when planning and making decisions.

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Missing Florida Mom Found Locked in Shipping Container – Universal Bizargo https://www.universalcargo.com/missing-florida-mom-found-locked-in-shipping-container-universal-bizargo/ https://www.universalcargo.com/missing-florida-mom-found-locked-in-shipping-container-universal-bizargo/#respond Wed, 13 Mar 2024 00:58:05 +0000 https://www.universalcargo.com/?p=12548 A boy waits for his mother to pick him up. But she doesn't show. She doesn't call. No one can get a hold of her. The woman is reported missing, and the police investigate. Nothing. There's no sign of her. Then, after she's been missing for about three days, the story takes a weird turn. Off a busy road, next to a gas station, there's banging heard from inside a shipping container on the property of a lawn mowing company. The banging from inside the shipping container's door is loud enough to get the attention of a worker. When he opens the door, to his surprise, there's a woman inside: the missing mom, Marlene Lopez.

Keep reading in Universal Cargo's blog.

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A boy waits for his mother to pick him up. But she doesn’t show. She doesn’t call. No one can get a hold of her. The woman is reported missing, and the police investigate. Nothing. There’s no sign of her. Then, after she’s been missing for about three days, the story takes a weird turn. Off a busy road, next to a gas station, there’s banging heard from inside a shipping container on the property of a lawn mowing company. The banging from inside the shipping container’s door is loud enough to get the attention of a worker. When he opens the door, to his surprise, there’s a woman inside: the missing mom, Marlene Lopez.

Welcome back to Universal Bizargo.

Universal Bizargo shipping container
Universal Bizargo shipping container

Actually, only those who’ve read Universal Cargo’s blog for a long, long time are likely to have ever even heard of Universal Bizargo, let alone be welcomed back to it. It’s been seven years since we’ve published a post in our old Universal Bizargo series, in which we would share weird stories related to the international shipping industry.

Previous ones include a few about people found in shipping containers. There was a hungover man found in one, a woman who traveled the world in a shipping container, four apparently refugee men found in one, and we even once shared a story before Universal Bizargo was a thing about a cute little kitten stowaway found in a shipping container.

However, this mom found in a shipping container probably tops all those others for weirdness. That’s because there are questions around how Marlene Lopez got there. Stranger still, she didn’t even seem that upset about it when leaving the scene.

Though Lopez appeared to be okay, authorities had her taken to a hospital and checked out, with dehydration seemingly the biggest concern. As a cameraman filmed her walking to the ambulance, a reporter asked her what happened. She replied almost nonchalantly, “I don’t know. I was in one place and I––found in another.”

While she didn’t seem delirious, maybe the woman was in some kind of shock or mentally confused state. She had been locked in a shipping container for days, after all. But how did she get in there without knowing how? Did someone drug her or knock her out and put her in there or did she wander in unconsciously? Reportedly, she was dehydrated but not injured. Was she lying about not knowing what happened?

How about we shift to an easier to answer question and come back to how she got in the shipping container. Why was it locked?

The answer here seems clear. The shipping container is used for storing lawn mowers by the lawn mowing company. By his own account, the owner, Tyler Sonnenberg, locked the container on Tuesday afternoon. Putting myself in his shoes, I can imagine locking up a container of equipment, as I’d be accustomed to doing at work, without suspecting a person is hidden in the shadows inside.

“She’s been missing for three days, so some–something else is going on,” Sonnenberg said on a local TV news report. “There’s something more to the story.” And it might just be the things Sonnenberg said off camera that reveal the truth.

In the original article I read on the story, Martha McHardy reported that Sonnenberg told WKMG, the local TV station, that he’d seen Lopez walking around the area on Monday. Monday, by the way, was the same day she was reported missing. McHardy included in her article that Sonnenberg said he didn’t hear any noise coming from the shipping container on Wednesday, the day after he’d locked it. Watching the TV news spot, which I’ve included below, there’s more Sonnenberg had to say that McHardy didn’t include in her article.

Sonnenberg told to the TV reporter he thinks Lopez walked into the container herself and then passed out. The reporter then uses the language “he claims” about Sonnenberg telling her he saw a pipe and lighter inside the shipping container after Lopez left.

Drug use could explain either the woman not remembering how she got inside the shipping container turned storage unit or not wanting to tell how she ended up there. The “claim” language regarding Sonnenberg saying there was a lighter and pipe might imply that the reporter got no confirmation of the paraphernalia from the police or visual confirmation for herself. Then again…

Maybe the police didn’t find a lighter and pipe. Maybe they wouldn’t disclose that information if they had. Perhaps the reporter and WKMG are being extra cautious with language to avoid any possible defamation of Lopez. Who knows, maybe there’s even more to this bizarre story than any of us would likely guess. Luckily, it didn’t turn into a tragedy where a boy’s missing mother was never seen again. And if there is a drug problem involved, hopefully waking up in a locked shipping container will be a literal wake up call for a mother getting clean for both her own and her son’s safety.

Sonnenberg told the reporter he’s not at fault for locking the woman in the shipping container, she shouldn’t have been trespassing, and he’s now considering pressing charges. So there may be more twists to come in this Universal Bizargo story.

YouTube Video

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Houthi Attack on Ship Kills 3 – Ocean Shipping Balanced “at Maximum Capacity” and Vulnerable https://www.universalcargo.com/houthi-attack-on-ship-kills-3-ocean-shipping-balanced-at-maximum-capacity-and-vulnerable/ https://www.universalcargo.com/houthi-attack-on-ship-kills-3-ocean-shipping-balanced-at-maximum-capacity-and-vulnerable/#respond Fri, 08 Mar 2024 03:16:18 +0000 https://www.universalcargo.com/?p=12545 The situation in the Gulf of Aden and Red Sea, forcing ocean freight carriers to route ships away from the Suez Canal, got worse yesterday (Wednesday, March 6th). Antisemitic, Iran-backed Houthi rebels killed three crewmen in a missile attack on yet another merchant ship. It’s amazing that these were the first crew people to die […]

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The situation in the Gulf of Aden and Red Sea, forcing ocean freight carriers to route ships away from the Suez Canal, got worse yesterday (Wednesday, March 6th). Antisemitic, Iran-backed Houthi rebels killed three crewmen in a missile attack on yet another merchant ship. It’s amazing that these were the first crew people to die in the months of these terrorist attacks on ships attempting to traverse the Red Sea and Gulf of Aden.

map of Africa Suez Canal vs Cape Route
Map of Africa by mapswire with Suez Canal and Cape Route markings added.

Here are details on the attack from Tom Spender, Joshua Cheetham & Frank Gardner reporting in the BBC:

Three crew members have been killed in a Houthi missile strike on a cargo ship off southern Yemen, its owners and the US say – the first deaths caused by the group’s attacks on merchant vessels.

The Barbados-flagged True Confidence was abandoned after Wednesday’s attack, which inflicted significant damage.

Two of the sailors who died were Filipinos and the other was Vietnamese.

The Houthis say their attacks are in support of the Palestinians in the war between Israel and Hamas in Gaza.

The US military’s Central Command (Centcom) condemned the Houthis’ “reckless attacks”, which it said had “disrupted global trade and taken the lives of international seafarers”.

It seems likely the deaths will further ramp up U.S. and British responses to the Houthi attacks. We’ve already seen air raids in Yemen, targeting Houthi locations. Bombings on Houthi targets have clearly not stopped these terrorist attacks. It’s impossible to know how much of an impact military responses have had at all on the Houthi rebels, especially with the large bankroll Iran has to keep supplying the terrorists.

What is clear is that this situation is not over. Ships need to continue avoiding the area. And there’s no clear end in sight.

Ocean Shipping Balanced But at Capacity and Vulnerable

As we’ve blogged about before in regards to ocean freight carriers having to divert away from the Red Sea, including the use of routes down and around Africa, ocean shipping takes more ships to handle the same amount of cargo and services. Fortunately, carriers came into this situation with overcapacity. Previously, we’d blogged about all the new ships and increases in capacity hitting the waters of international shipping as a potentially bad thing for carriers. It turned into a blessing.

The overcapacity had the potential to put serious downward pressure on freight rates. In fact, it was even starting to do so, but attacks in the Red Sea, especially since they were paired with a drought disrupting the Panama Canal, made the additional ships and capacity a needed commodity.

Unfortunately for shippers, who were finally getting some freight rate relief, freight rates spiked with the violent disruption at the Suez Canal and decrease of traffic that could get through the Panama Canal. However, carriers were able to balance ocean shipping with all the capacity they have available. Improvement at the Panama Canal has helped too. Freight rates have actually come back down a little, though they are still significantly higher than before all this mess started.

Bill Mongelluzzo wrote about this in a Journal of Commerce (JOC) article published today. The article mostly says things I’ve already been writing in recent posts and reiterating in today’s of Universal Cargo’s blog, but then something new caught my attention. Mongelluzzo’s quoted the following from industry analyst and CEO of Vespucci Maritime, Lars Jensen:

“We are at maximum capacity right now.”

All of that previously-seeming overcapacity is apparently in use now. All of it? We’re at maximum capacity? That makes ocean freight shipping, and supply chains across the world, particularly vulnerable to another disruptive event. But Jensen takes it even further than that:

“Another major problem could launch us into pandemic-like problems.”

Is that hyperbole? I hope so because things shipping disruptions and freight rates got out of control after the pandemic hit.

To be clear, I’m sure Jensen is strictly talking in the sense of shipping/supply chain disruption and not including all the other problems that came with the pandemic (and the general poor response to it) when he says “pandemic-like problems.” Similarly, earlier in the article, he was quoted around the topic of the Red Sea disruption as saying, “This is a challenge. It’s not a crisis.” Clearly, he was talking about the international shipping industry having to avoid the region and the industry’s ability to handle that rather than the issues of terrorism and war as being a challenge, not a crisis. So there’s no reason to think he’d be talking about anything larger in scope than the “supply chain crisis” in isolation that came after the pandemic hit.

Even so, that was an incredible amount of disruption. That an industry expert would say we’re one major problem away from a repeat of it is a concerning statement. Unfortunately, “major problem” is rather vague. Is he talking a major event such as China invading Taiwan? That’s a possibility that has been feared for a while and would have enormous ramifications beyond what anyone would likely be able to fully predict. Could a major problem be smaller in scope than another international conflict, such as an ILA strike at U.S. East and Gulf Coast ports? Would a ship getting stuck and completely blocking the Panama Canal for a week be big enough to consider a major problem?

There’s no way to know exactly what the next problem to hit the international shipping industry will be. We do know there’s unpredictability in the very nature of ocean shipping, and while international ocean shipping is balanced right now, it is particularly vulnerable. I would, however, be leery about saying we’re one problem away from falling into “pandemic-like problems.”

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Decoding OSRA: Section 17. Federal Maritime Commission Activities https://www.universalcargo.com/decoding-osra-section-17-federal-maritime-commission-activities/ https://www.universalcargo.com/decoding-osra-section-17-federal-maritime-commission-activities/#respond Tue, 05 Mar 2024 23:09:06 +0000 https://www.universalcargo.com/?p=12540 Even though the Ocean Shipping Reform Act of 2022 (OSRA) was passed a couple years ago, I keep saying in these introductions that we're just beginning to see the legislation's results. Case in point, only last week, the Federal Maritime Commission issued its "final" rules for detention and demurrage billing, which it was given authority to do by OSRA. Just how OSRA changed U.S. maritime law and the ways that affects businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping is very much worth continued examination. At Universal Cargo, we want to help shippers know how law changes affect their businesses.

So, what exactly does OSRA say and do? This blog series goes through it section by section, so you can learn the answers.

Find out about Section 17 of OSRA by reading the full post in Universal Cargo's blog.

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Introduction

Even though the Ocean Shipping Reform Act of 2022 (OSRA) was passed a couple years ago, I keep saying in these introductions that we’re just beginning to see the legislation’s results. Case in point, only last week, the Federal Maritime Commission issued its “final” rules for detention and demurrage billing, which it was given authority to do by OSRA. Just how OSRA changed U.S. maritime law and the ways that affects businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping is very much worth continued examination. At Universal Cargo, we want to help shippers know how law changes affect their businesses.

So, what exactly does OSRA say and do? This blog series goes through it section by section, so you can learn the answers.

Decoding OSRA

If you’re new to this series, we give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments and/or additions; and consider what the changes mean for U.S. importers and exporters.

Previously covered in this series:

Now let’s move forward with Section 17 of OSRA.

Quick Overview

Section 17 of OSRA does not amend Title 46 of the U.S. code as so many of the preceding sections have done. Rather, Section 17 adds additional legislation to U.S. maritime law that increases the size of the Federal Maritime Commission (FMC), mandating specific offices it must have and the existence of a submission page for the public to submit various issues and comments to the appropriate offices.

This section adds instruction for how the FMC is to comply with Section 41301 of Title 46, which pertains to individuals submitting complaints and claims to the FMC regarding alleged violations of maritime law that Title 46 lays out.

Section 16 Text

SEC. 17. <<NOTE: 46 USC 41301 note prec.>>  FEDERAL MARITIME 
                      COMMISSION ACTIVITIES.

    (a) Public Submissions to Commission.--The Federal Maritime 
Commission shall--
            (1) <<NOTE: Website.>>  establish on the public website of 
        the Commission a webpage that allows for the submission of 
        comments, complaints, concerns, reports of noncompliance, 
        requests for investigation, and requests for alternative dispute 
        resolution; and
            (2) direct each submission under the link established under 
        paragraph (1) to the appropriate component office of the 
        Commission.

    (b) Authorization of Office of Consumer Affairs and Dispute 
Resolution Services.--The Commission shall maintain an Office of 
Consumer Affairs and Dispute Resolution Services to provide 
nonadjudicative ombuds assistance, mediation, facilitation, and 
arbitration to resolve challenges and disputes involving cargo 
shipments, household good shipments, and cruises subject to the 
jurisdiction of the Commission.
    (c) Enhancing Capacity for Investigations.--
            (1) In general. – <<NOTE: Deadline.>> Pursuant to section 
        41302 of title 46, United States Code, not later than 18 months 
        after the date of enactment of this Act, the Chairperson of the 
        Commission shall staff within the Bureau of Enforcement, the 
        Bureau of Certification and Licensing, the Office of the 
        Managing Director, the Office of Consumer Affairs and Dispute 
        Resolution Services, and the Bureau of Trade Analysis not fewer 
        than 7 total positions to assist in investigations and 
        oversight, in addition to the positions within the Bureau of 
        Enforcement, the Bureau of Certification and Licensing, the 
        Office of the Managing Director, the Office of Consumer Affairs 
        and Dispute Resolution Services, and the Bureau of Trade 
        Analysis on that date of enactment.
            (2) Duties.--The additional staff appointed under paragraph 
        (1) shall provide support--
                    (A) to Area Representatives of the Bureau of 
                Enforcement;
                    (B) to attorneys of the Bureau of Enforcement in 
                enforcing the laws and regulations subject to the 
                jurisdiction of the Commission;
                    (C) for the alternative dispute resolution services 
                of the Commission; or
                    (D) for the review of agreements and activities 
                subject to the authority of the Commission.

Original Title 46 Text

While Section 17 of OSRA doesn’t exactly amend Section 41301 of Title 46, it does pertain to it. Therefore, I’ve included the section here for context.

§41301. Complaints

(a) In General.—A person may file with the Federal Maritime Commission a sworn complaint alleging a violation of this part, except section 41307(b)(1). If the complaint is filed within 3 years after the claim accrues, the complainant may seek reparations for an injury to the complainant caused by the violation.

(b) Notice and Response.—The Commission shall provide a copy of the complaint to the person named in the complaint. Within a reasonable time specified by the Commission, the person shall satisfy the complaint or answer it in writing.

(c) If Complaint Not Satisfied.—If the complaint is not satisfied, the Commission shall investigate the complaint in an appropriate manner and make an appropriate order.

Amended Text

N/A.

Paragraph (a) Observations

Paragraph (a) of Section 17 seems straightforward. It has two subparagraphs. The first requires the FMC to set up a page on its website for people to submit their sworn complaints of alleged violations that Title 46’s Section 41301 allows. It also expands complaints to “comments, complaints, concerns, reports of noncompliance, requests for investigation, and requests for alternative dispute resolution.”

This fits with general trends of OSRA. The lawmakers appear to be particularly concerned with protecting U.S. shippers and encouraging them to report unfair or illegal practices they face in the international shipping industry.

The second subparagraph mandates the FMC send submitted complaints (etc.) to the appropriate offices within the commission, which brings us to…

Paragraph (b) Observations

Paragraph (b) instructs the FMC to have an Office of Consumer Affairs and Dispute Resolution Services. The services it is to offer are “nonadjudicative ombuds assistance, mediation, facilitation, and arbitration to resolve challenges and disputes involving cargo shipments, household good shipments, and cruises subject to the jurisdiction of the Commission.

Ombuds is a less-than-common term. Ombuds has to do with investigating, reporting on, and settling disputes or complaints. The broadness of the term makes services listed after it a bit redundant; however, they do spell out the purpose of the office’s services better for the common reader. If you go to the website of the FMC’s new Office of Consumer Affairs and Dispute Resolution Services, it states that its “mission is to ensure a competitive and reliable international ocean transportation supply system that supports the U.S. economy and protects the public from unfair and deceptive practices.”

One thing here that is interesting, and probably good, is that this office of the FMC is not to act as the judge over complaints or disputes brought before it (nonadjudicative). The language of paragraph (b) leaves room for the courts to make legal judgments while the Office of Consumer Affairs and Dispute Resolution Services can help resolve disputes before they reach the courts.

That doesn’t mean investigations included in the scope of the services of this office couldn’t be used in litigation or even judgments Title 46, with all of its OSRA updates, may grant the FMC to make. Speaking of investigations, we come to…

Paragraph (c) Observations

Paragraph (c), with its two subparagraphs, adds additional positions within the FMC that are specifically meant to increase the commission’s capacity for investigating complaints, allegations, and agreements under the FMC’s jurisdiction.

You can read the specifics laid out concerning whom these new positions report to and what details are given concerning their duties as well as I can. There are no profound observations I have here. Obviously, this increase of employees within the FMC requires funding. Often, bigger government within an industry has expensive results for that industry. However, funding the enforcement of law is an important part of protecting those within that industry, along with its consumers, from unfair and illegal practices. The latter would seem to be the goal in increasing the FMC’s staff here. There have been complaints in the past that the FMC didn’t have the investigative resources to seriously handle all the complaints and problems before it.

Conclusion

Section 17 continues a trend within OSRA of increasing the size and power of the FMC with a goal of protecting those withing the international shipping industry and, you could probably say, the nation’s supply chain as a whole. Specifically, Section 17 increases the size of the FMC, requiring the existence of an office or branch within it and an increase of employees for investigative purposes. All of this, of course, requires more money, though that money is not specifically addressed here.

It’s still early to see how successful the increase in the size, power, and budget of the FMC is and will be at improving the international shipping industry for shippers and the industry’s stakeholders. Hopefully, data over the next several years will help give insight into that. But I wouldn’t expect that data to come without spin from politicians and probably from those within the industry as well.

If you noticed something in Section 17 of OSRA that you think deserves more attention, please let us know in the comments section below. Perhaps you have a take on it that I didn’t consider or disagree with an observation I’ve made. We’d love to hear from you.

Stay tuned for when Decoding OSRA continues, looking at Section 18….

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Full Text of FMC’s New/Final Demurrage and Detention Billing Requirements https://www.universalcargo.com/full-text-of-fmcs-new-final-demurrage-and-detention-billing-requirements/ https://www.universalcargo.com/full-text-of-fmcs-new-final-demurrage-and-detention-billing-requirements/#respond Fri, 01 Mar 2024 03:31:46 +0000 https://www.universalcargo.com/?p=12508 Earlier this week, on the 26th of February, the Federal Maritime Commission issued its final rules for demurrage and detention billing as set up for it to create by the Ocean Shipping Reform Act of 2022.

In this Universal Cargo blog post is the full text of the FMC's Demurrage and Detention Billing Requirements.

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Earlier this week, on the 26th of February, the Federal Maritime Commission (FMC)issued its final rules for demurrage and detention billing.

The Ocean Shipping Reform Act of 2022 gave the FMC authority to create these rules, which have been much anticipated, with the hopes that they would continue the trend of protecting against unfair detention and demurrage fees, which have long been controversial in the international shipping industry.

Without any further adieu, below is the full text of the FMC’s Demurrage and Detention Billing Requirements.

Demurrage and Detention Billing Requirements

(Full Text)

AGENCY:

Federal Maritime Commission.

ACTION:

Final rule.

SUMMARY:

In accordance with the Ocean Shipping Reform Act of 2022, the Federal Maritime Commission (the Commission or FMC) is issuing regulations governing demurrage and detention billing requirements. This final rule requires common carriers and marine terminal operators to include specific minimum information on demurrage and detention invoices, outlines certain detention and demurrage billing practices, such as determination of which parties may appropriately be billed for demurrage or detention charges, and sets timeframes for issuing invoices, disputing charges with the billing party, and resolving such disputes. It adopts with changes the notice of proposed rulemaking published on October 14, 2022. Substantive changes allow consignees to be billed and clarify the timeframe for non-vessel-operating common carriers passing through demurrage and detention charges to issue their own invoices. Non-substantive changes improve clarity and remove drafting errors.

DATES:

This final rule is effective on May 28, 2024, except for instruction 2 adding § 541.6, and instruction 3 adding § 541.99, which are delayed. The Commission will publish a document in the Federal Register announcing the effective date of these amendments.

ADDRESSES:

To view background documents or comments received, you may use the Federal eRulemaking Portal at www.regulations.gov under Docket No. FMC–2022–0066.

FOR FURTHER INFORMATION CONTACT:

David Eng, Secretary; Phone: (202) 523–5725; Email: secretary@fmc.gov.

SUPPLEMENTARY INFORMATION:

I. Background

As rising cargo volumes have increasingly put pressure on common carriers, port and terminal performance, demurrage and detention charges have for a variety of reasons substantially increased. For example, over a two-year period between 2020 and 2022, nine of the largest carriers serving the U.S. liner trades individually charged a total of approximately $8.9 billion in demurrage and detention charges and collected roughly $6.9 billion.[1] On July 28, 2021, Commissioner Rebecca F. Dye, the Fact Finding Officer for Fact Finding Investigation No. 29, International Ocean Transportation Supply Chain Engagement (Fact Finding No. 29), recommended, among other things, that the Commission “[i]ssue an [Advance Notice of Proposed Rulemaking (ANPRM)] seeking industry input on whether the Commission should require common carriers [2] and marine terminal operators [3] to include certain minimum information on or with demurrage and detention billings and adhere to certain practices regarding the timing of demurrage and detention billings.” [4] The Fact Finding Officer expressed concern about certain demurrage and detention billing practices and a need to ensure that it is clear to shippers “what is being billed by whom” so that they can understand the charges.[5] The Commission voted to move forward with this Fact Finding 29 recommendation on September 15, 2021.[6] 

On February 15, 2022, the Commission issued an ANPRM to request industry views on potential demurrage and detention billing requirements.[7] Specifically, the Commission requested comments on:

    - Whether a proposed regulation on demurrage and detention billing practices should apply to non-vessel-operating common carriers (NVOCCs) as well as vessel-operating common carriers (VOCCs);

• Whether the regulations should differ based on whether the billing party is an NVOCC or a VOCC; [8] 

• Whether the proposed regulations on demurrage and detention billings should apply to marine terminal operators (MTOs); [9] 

• What information should be required in demurrage and detention invoices; [10] 

• Whether bills should include information on how the billing party calculated demurrage and detention charges.[11] For example, the Commission requested comments on whether it should require the billing party to include the following information:

○ Identifying clear and concise container availability dates in addition to vessel arrival dates for import shipments; and,

○ For export shipments, the earliest return dates (and any modifications to those dates) as well as the availability of return locations and appointments, where applicable; [12] and

• Whether the bills should include information on any events (e.g.,container unavailability, lack of return locations, appointments, or other force-majeure reasons) that would justify stopping the clock on charges.[13] 

In the ANPRM, the Commission stated that it was considering whether it should require common carriers and MTOs to adhere to certain practices regarding the timing of demurrage and detention billings. The Commission sought comments on whether it should require billing parties to issue demurrage or detention invoices within 60 days after the charges stopped accruing.[14] The Commission stated that the Uniform Intermodal Interchange Agreement (UIIA) [15] currently stipulates that invoices be issued within 60 days and asked whether the 60-day timeframe was effective in addressing concerns raised by billed parties, or whether a longer or shorter time period would be more appropriate.[16] In addition, the Commission requested comments on whether it should regulate the timeframe for refunds and, if so, what would be an appropriate timeframe.[17] 

On June 16, 2022, after the Commission issued the ANPRM and received comments, the Ocean Shipping Reform Act of 2022 (OSRA 2022) was enacted into law.[18] In OSRA 2022, Congress amended various statutory provisions contained in part A of subtitle IV of title 46, U.S. Code. Specifically, OSRA 2022 prohibits common carriers from issuing an invoice for demurrage or detention charges unless the invoice includes specific information to show that the charges comply with part 545 of title 46, Code of Federal Regulations and applicable provisions and regulations.[19] OSRA 2022 then lists the minimum information that common carriers must include in a demurrage or detention invoice:

– date that container is made available;

– the port of discharge;

– the container number or numbers;

– for exported shipments, the earliest return date;

– the allowed free time in days;

– the start date of free time;

– the end date of free time;

– the applicable detention or demurrage rule on which the daily rate is based;

– the applicable rate or rates per the applicable rule;

– the total amount due;

– the email, telephone number, or other appropriate contact information for questions or requests for mitigation of fees;

– a statement that the charges are consistent with any of Federal Maritime Commission rules with respect to detention and demurrage; and

– a statement that the common carrier's performance did not cause or contribute to the underlying invoiced charges.[20] 

Failure to include the required information on a demurrage or detention invoice eliminates any obligation of the billed party to pay the applicable charge.[21] In addition, OSRA 2022 authorizes the Commission to revise the minimum information that common carriers must include on demurrage or detention invoices in future rulemakings.

OSRA 2022 additionally requires the Commission to initiate a rulemaking further defining prohibited practices by common carriers, marine terminal operators, shippers, and OTIs regarding the assessment of demurrage or detention charges.[22] OSRA 2022 provides that such rulemaking must “only seek to further clarify reasonable rules and practices related to the assessment of detention and demurrage charges to address the issues identified in the final rule published on May 18, 2020, entitled `Interpretive Rule on Demurrage and Detention Under the Shipping Act' (or successor rule)[.]” [23] Specifically, the Commission's rulemaking must clarify “which parties may be appropriately billed for any demurrage, detention, or other similar per container charges.” [24] 

On October 14, 2022, the Commission published a notice of proposed rulemaking (NPRM) that would require common carriers and marine terminal operators to include specific minimum information on demurrage and detention invoices and outlined certain billing practices relevant to appropriate timeframes for issuing invoices, disputing charges with the billing party, and resolving such disputes.[25] The proposed rule addressed considerations identified in the Ocean Shipping Reform Act of 2022. The proposed rule sought comment on the adoption of minimum information that common carriers must include in a demurrage or detention invoice; the addition to this list of information that must be included in or with a demurrage or detention invoice; a proposed definition of prohibited practices clarifying which parties may be appropriately billed for demurrage or detention charges; and billing practices that billing parties must follow when invoicing for demurrage or detention charges.

II. Comments

In response to the NPRM published October 14, 2022, the Commission received 191 comments from interested parties. All major groups of interested persons were represented in the comments: vessel-operating common carriers (VOCCs), non-vessel-operating common carriers (NVOCCs), marine terminal operators (MTOs), motor carriers, beneficial cargo owners (BCOs), ocean transportation intermediaries (OTIs), third party logistics providers, customs brokers, bi-partisan groups of the U.S. House of Representatives, another Federal agency, and the National Shipping Advisory Committee (the Commission's federal advisory committee). Comments were submitted by individuals, large and small companies, and by national trade associations. All comments submitted on the NPRM are available at https://www.regulations.gov/​docket/​FMC-2022-0066/​comments.

About 75 percent of commenters supported the rule, about 15 percent questioned the rule, and 10 percent did not specify. Motor carriers overwhelmingly support the entire rule. BCOs mostly support the rule but some object to prohibiting others from being billed. NVOCCs and OTIs generally supported the rule, but with many objecting to the inclusion of NVOCCs. VOCCs overwhelmingly questioned or did not support the rule. Nearly all VOCCs questioned the rule prohibiting billing other parties and the timing of billing requirements. About half of VOCCs questioned the required information from the ANPRM that the Commission added to the information specifically required by OSRA 2022. MTOs overwhelmingly questioned the rule, with most arguing these regulations should not apply to MTOs.

The top three issues addressed by commenters were: (1) concerns with the prohibition on billing other parties that are not contractually connected, (2) concerns with additional information the Commission proposed to require in addition to the OSRA 2022 mandated information, and (3) concerns with the time periods for billing.

These comments are addressed in the discussion that follows.

III. Discussion of Comments

A. § 541.1 Purpose

Issue: Two commenters requested that “minimum” be added to the second sentence before “procedures” to mirror the use of “minimum” before “information” in the first sentence.[26] 

FMC response: FMC declines to make the proposed change. Neither commenter provided sufficient justification as to why such a change would provide additional clarity. The Commission has drafted § 541.1 to reflect the language of OSRA 2022.

B. § 541.2 Scope and Applicability

1. Regulation of MTO Demurrage and Detention Billing Practices

(a) FMC's Authority To Regulate

Issue: MTOs and MTO trade associations argued that MTOs should not fall within the scope of the rule.

MTOs offered many reasons why they should not be subject to the proposed regulations. The majority presented their interpretation of the effect that the legislative process leading to the enactment of OSRA 2022 should have, which they believe demonstrates that Congress intended to prohibit inclusion of MTOs in this rulemaking. MTOs pointed first to how Congress amended 46 U.S.C. 41104, which applies to common carriers, not MTOs.[27] MTOs argued that Congress deliberately chose not to amend 46 U.S.C. 41106 when it added invoicing requirements to 46 U.S.C. 41104, so that invoicing requirements would only apply to carriers, not to MTOs.[28] The National Association of Waterfront Employers (NAWE) and the Port of NY/NJ Sustainable Services Agreement (PONYNJSSA) also argued that Congress's choice not to add invoicing requirements to 46 U.S.C. 41102, which applies to both MTOs and carriers, precludes the Commission from including MTOs in the scope of this regulation.[29] Most commonly, these commenters pointed out that Congress, and specifically the House of Representative's version of OSRA 2021, originally included MTOs in the invoicing requirements.[30] The MTOs argue that Congress, late in the process, chose to exempt MTOs from compliance with demurrage and detention requirements in the enacted version of OSRA 2022.[31] Two members of Congress, Congressman Jake Auchincloss and Congressman Brian Babin, wrote jointly [August 17th Congressional Letter] to make this argument, and stated that including MTOs within the scope of the regulation would threaten stability and cargo fluidity at United States ports.[32] 

NAWE also argued that the Commission cannot enforce 46 U.S.C. 41102(c) here without contravening the Commission's Interpretive Rule at 46 CFR 545.4(b). NAWE stated that the Commission's Interpretive Rule requires that an impermissible “practice” occur on a “normal, customary, and continuing basis,” while the proposed rule would penalize any isolated invoice omission. NAWE argued that taking action in a case alleging a single shipment violation is an implicit repeal of the agency's Interpretive Rule at § 545.4 without public notice and comment.

Other members of Congress submitted comments on the proposed rule as well, but in support of the inclusion of MTOs in this rule.[33] A letter from these members of Congress [January 2nd Congressional Letter] stated that since authoring OSRA 2022, they became aware that MTOs are invoicing their own demurrage and detention charges separate from VOCC charges. They pointed out that this invoicing practice directly contradicts the statements of NAWE to Congress during the drafting of OSRA 2022.[34] The letter stated that they support applying any demurrage and detention invoicing requirements that apply to VOCCs to MTOs as well, with reasonable exceptions for demurrage charges set by public port tariffs and where MTOs are acting only as a collections agent.[35] 

FMC response: The Commission has the statutory authority to apply this rule to MTOs and declines to exclude them from the duties and responsibilities of issuing accurate demurrage and detention invoices. Commenters raised two major arguments against the Commission's proposed inclusion in the regulations of MTOs. Commenters argued that the Commission did not have authority to apply the regulations to MTOs [36] and that it should not apply regulations to MTOs for a variety of reasons addressed below individually.[37] The Commission has clear statutory authority to regulate MTOs under section 41102(c). There is also a clear need, based on the record of this rulemaking, for these regulations to address MTOs demurrage and detention invoices sent to entities other than VOCCs.

Section 41102(c) of Title 46 prohibits common carriers, MTOs, and ocean transportation intermediaries from failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with the receiving, handling, storing, or delivering property. The Commission has authority under 46 U.S.C. 46105(a) to prescribe regulations to carry out its duties and powers. The Commission has repeatedly explained that the issue of detention and demurrage charges falls within the prohibitions of 46 U.S.C. 41102(c).[38] Further, the plain language of 46 U.S.C. 41102(c) describes exactly the type of conduct this rule intends to regulate. This section prohibits an MTO from “failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving . . . [or] storing property.” This rule issued pursuant to the Commission's power to issue regulations [39] to define these prohibitions, as well as those found in OSRA 2022, interprets what constitutes just and reasonable practices on invoicing and charges related to the use of marine terminal space or shipping containers. The Commission concludes that this rule will help ensure that MTOs' demurrage and detention billing practices are just and reasonable pursuant to section 41102.

Arguments that the Commission lacks this authority because Congress chose to place detailed invoicing requirements in a section that only applies to carriers, or because Congress removed requirements that would expressly apply to MTOs during the statutory drafting process, do not address the Commission's pre-existing and continuing legal authority to issue demurrage and detention invoicing regulations that apply to MTOs even before OSRA 2022. The actual statutory text of 46 U.S.C. 41102(c) and Congress's direction to use 46 U.S.C. 41102(c) to define prohibited demurrage and detention practices for marine terminal operators is clear and does not necessitate resorting to the incomplete history of the legislative drafting process of OSRA 2022.[40] Moreover, Congress explicitly included in OSRA 2022 the direction that the Commission initiate a rulemaking to further define prohibited practices by MTOs, among others, under 46 U.S.C. 41102(c) regarding the assessment of detention and demurrage.[41] Thus, in OSRA 2022, Congress amplified the Commission's existing authority to issue regulations that govern the issuance of demurrage and detention invoices in section 41102(c) and added to that authority a mandate to further define prohibited practices. The identification of MTOs within section 7(b), entitled “Common Carriers,” does not support the view that Congress intended to limit the scope of its directive to the Commission to ensuring that invoices are accurate. Instead, the plain language of the statute shows an intent by Congress to address in a targeted manner the failures of the current invoicing process. Such a targeted approach requires ensuring that MTOs, as well as VOCCs and NVOCCs, issue accurate invoices.

The need to include MTOs in this rule is supported by the comments. Excluding MTOs from this rule is likely to create a regulatory loophole, significantly affecting the ability of the rule to effect change in the current invoicing process. The comments support a finding that MTOs are invoicing for their own demurrage and detention charges.[42] Common carriers, the usual contractual party, could simply have MTOs issue their demurrage and detention invoices to avoid the necessary invoicing requirements this rule puts into place, and invoices coming from MTOs would not be required to comply with either Congress's instructions at 46 U.S.C. 41104(d) or these regulations. Billed parties would receive a significant portion of invoices from MTOs with whatever information MTOs chose to provide, which may not include the critical information a billed party needs to ensure the bill is accurate. The MTO as the billing party would not be subject to the dispute resolution processes contained in these rules. Not including MTOs in the scope of this rule would meaningfully reduce the effectiveness of the rule and perpetuate current problematic invoicing practices. The Commission finds, as supported by the comments, that finalizing a rule that excluded MTOs would undermine Congress's intent as expressed through the plain language of OSRA 2022.[43] 

The August 17th Congressional Letter and other commenters argued that it was not Congress's intent that these rules apply to MTOs.[44] The August 17th Congressional Letter urged the removal of MTOs from the rulemaking's substantive requirements because the legislative history shows that Congress intended to remove MTOs from demurrage and detention invoicing requirements and such requirements could potentially increase port congestion.[45] However, as noted above, the legislative history of OSRA 2022 cannot be read to prohibit agency action to address an issue the legislation itself identifies as in need of resolution.

Further, the January 2nd Congressional Letter urged the Commission to ensure the inclusion of MTOs in the Commission's final rule. Congressmen Garamendi, Johnson, Costa, Valado, Thompson, and Panetta wrote the January 2nd Congressional Letter.[46] The January 2nd Congressional Letter reported that comments submitted to Congress by NAWE in 2021 stated that MTOs do not invoice their own charges for detention and demurrage separate from those charged by ocean common carriers. Since then, the signatories of the January 2nd Congressional Letter state they have received reports of MTOs invoicing their own demurrage and detention charges separate from those of ocean common carriers. The January 2nd Congressional Letter concluded that all requirements in the final rule for invoicing demurrage and detention that cover ocean common carriers should apply to MTOs. The Commission finds the argument from the January 2nd Congressional Letter persuasive and consistent with the comments indicating that MTO invoicing is prevalent. It is critical to include MTOs in the final rule to ensure meaningful change to existing industry practice creating inefficiencies and confusion.

With respect to the specific information required in invoices, Congress and the President have already spoken on what they believe to be reasonable demurrage and detention invoicing requirements for billing parties, as evidenced by what they required of common carriers at 46 U.S.C. 41104(d). The Commission believes that these elements are appropriate to require in a demurrage and detention invoice sent to a billed party, regardless of whether the invoices come from an MTO or a common carrier, because these elements are mandated by Congress and supported by past agency investigation and review.[47] The need for consistency in demurrage and detention invoicing further supports requiring MTOs to comply with this rule, because billed parties should be able to expect a standardized set of information in a demurrage or detention invoice,[48] regardless of whether it comes from a carrier or an MTO.[49] 

Requiring standardized practices from MTOs also addresses the confusion raised in comments about what actual role MTOs play in invoicing for demurrage and detention. Some MTOs told Congress that they do not issue their own demurrage and detention invoices separate from carriers.[50] Some MTOs have told the Commission that they do not send traditional demurrage and detention invoices, but instead issue “demurrage receipts” or “disclose charges.” [51] One MTO contended to the Commission that it does not send demurrage and detention invoices to BCOs or truckers, and that it is VOCCs who charge BCOs demurrage and detention; but the same MTO also said that MTOs sometimes collect demurrage and detention on behalf of VOCCs.[52] Other MTOs said that they do send demurrage and detention invoices.[53] Yet, even if these MTOs agreed that they do send demurrage and detention invoices, they disagreed with the idea that these invoices should be subject to the same regulation as other billing parties.

These inconsistent statements by MTOs highlight the need for clear rules governing all demurrage and detention billing parties so that billed parties receive accurate information to facilitate faster payment and dispute resolution. Allowing MTOs to escape the basic requirements of this rule by artfully styling their demurrage and detention invoices as “receipts” or “disclosures” would undermine the statute, frustrate the Commission's expressed intention to simplify and clarify demurrage and detention invoicing for billed parties, and leave in place the confusing status quo that spurred Congress to pass OSRA 2022.

Further, the logic of the MTO argument against regulation is not persuasive. If, as some MTOs claim, they do not invoice shippers, BCOs, and truckers for demurrage and detention, the rule would not affect their practices in any event. If MTOs do send invoices, however, they should abide by the same rules as any other billing party. If they do have contractual privity, they should be able to obtain any information necessary to issue a compliant invoice through that contract. If MTOs do not have the information required to issue invoices consistent with these rules, they should not send invoices. If they still need to send these invoices, they should obtain all of the required information like any other billing party. If they cannot obtain that information and they still wish to collect a charge, they should forward the invoice to a billing party with whom they have a contractual relationship and that can comply with this rule, and collect the demurrage and detention charge after providing the billing party accurate information about the charge.

Some commenters further challenged the Commission's authority to regulate MTOs pursuant to 46 U.S.C. 41102. NAWE argued that the Commission lacks authority to regulate MTO invoicing through the general legal authority to regulate unjust and unfair practices at 46 U.S.C. 41102(c). NAWE argued that a more specific statutory provision controls over a more general provision, and that when two statutes cannot be harmonized, the later in time statute controls over the earlier. NAWE contended that 46 U.S.C. 41102(c) and OSRA 2022 can be harmonized, by simply omitting MTOs from the proposed rule. If, however, the authorities cannot be harmonized, it contends, the Commission must follow OSRA 2022 as it is the more specific and later-in-time statute.

As previously noted, the Commission has explained that it interprets 46 U.S.C. 41102(c) as governing the invoicing of demurrage and detention. Nothing in OSRA 2022 prohibited the Commission from regulating MTO demurrage and detention invoicing. Therefore, the Commission disagrees with NAWE's argument that the statutes cannot be harmonized.

(b) Burden on MTOs To Comply With the Rule and Security Concerns

Issue: MTOs argued that applying these rules to MTOs would force them to expend significant resources to overhaul their websites and create additional security measures.[54]

FMC response: MTOs did not submit estimates of or proposals for what work would be needed, or would cost, to modify their systems to comply with this rule. One MTO explained they have already invested significant resources to modify their system to incorporate the information from carriers required by OSRA 2022. This certainly suggests it is reasonable to expect MTOs to modify their systems to comply with this rule. It is not clear why MTOs could do this for their VOCC customers' invoices but not their own invoices.[55]

(c) Changes to Current MTO Practices

Issue: MTOs argued that this rule would upend settled practices and increase confusion and congestion at ports.[56] 

FMC response: Current billing practices and the lack of transparency in those practices have raised concerns about whether current practices allow for a competitive and reliable American freight delivery system.[57] The changes to current practices this rule requires are meant to change the settled practices that do not ensure accuracy, clarity, and visibility of charges. This rule seeks to improve upon existing practices that do not provide adequate information for the efficient invoicing of charges. Further, these changes provide clarity on how billed parties access the dispute resolution process. Requiring targeted information may ultimately lead to fewer disputed bills and therefore streamline the demurrage and detention billing process. As discussed further in this preamble, the Commission is delaying implementation of the rule by 90 days. The Commission believes that this is sufficient time to allow MTOs and other regulated parties to make the necessary changes to their business operations in order to comply with the rule.

(d) Impacts on Common Law Lien Rights

Issue: MTOs argued that the rule would force MTOs to waive their common law lien rights. MTOs said they would have to choose between: (1) releasing cargo without demurrage or detention charges being paid (waiving their lien rights), or (2) refunding any collected charges if the invoice does not comply with this final rule.[58] 

FMC response: This rule does not impact traditional cargo lien rights. This rule allows MTOs to make their own business decisions about whether or not they require demurrage and detention charges to be paid prior to releasing cargo. Contrary to the commenters' assertions, releasing cargo without payment of demurrage and detention charges does not automatically waive cargo lien rights. Cargo liens are lost upon delivery only if the cargo is delivered unconditionally.[59] It is well established law that a lien can survive delivery if the parties have contracted for such and the release has been conditioned.[60] In some circumstances releasing cargo conditionally might potentially carry additional administrative burden and risk, but it may be advantageous to a particular MTO in other circumstances. Alternatively, MTOs can require demurrage and detention charges be paid prior to releasing cargo. This option carries its own risks, however. As the commenter stated, if an MTO collects demurrage and detention charges and then those charges are later successfully contested by the billed party, the MTO must refund the incorrect charges. Under this rule, billed parties have 30 calendar days from the date the invoice is issued to contest demurrage and detention charges. This, however, should serve as an incentive for the invoices to be correct when issued. MTOs assert that issuing correct invoices will be difficult to impossible for them to do under the new rule because they do not know the end date of free time. The Commission is not convinced by this argument. MTOs have not presented evidence to the Commission that such information is unattainable by MTOs, only that they do not presently have it. The information needed to calculate this charge is knowable in advance of the release of cargo; it can be pulled from the bill of lading, tariff, terminal schedule, or other relevant transportation documents MTOs already have access to and billing formulas created that allow accurate invoices to be created quickly and accurately once an availability date is known (and projected outward for each day cargo pick-up is delayed).

(e) Impact on the Commission's Interpretive Rule Codified at 46 CFR 545.4

Issue: Commenters argued that the Commission's proposed rule amounts to an implicit repeal of the Commission's Interpretive Rule at 46 CFR 545.4 and therefore that the Commission's action violated the Administrative Procedure Act (APA).

FMC response: The Commission has solicited public comment in both an ANPRM and NPRM about whether the scope of this rule should cover MTO invoicing. The Commission stated unequivocally in the NPRM that MTOs would be subject to this rule. MTOs have had repeated and public notice that the Commission was considering this option, so the Commission disagrees with concerns that the rule lacked adequate time for public notice and comment. Any argument about what parts of the Interpretive Rule at 46 CFR 545.4 remains in force is inherently an argument about that guidance and not about whether the Commission's instant rule complies with the APA.

Some commenters argue the rule is inconsistent with the Interpretive Rule at 46 CFR 545.4. The Commission finds that OSRA 2022 specifically required the Commission to issue rules under 46 U.S.C. 41102(c) that further define the prohibited practices by common carriers, marine terminal operators, and shippers, regarding the assessment of detention or demurrage charges. The plain language of this directive and the plain language of 41104(d) do not require evidence of multiple violations. This view is further supported by 46 U.S.C. 41104(f) which functions to void an invoice if a single required element is not included, not when the complainant can show multiple instances of such behavior.[61] Thus, in the narrow context of demurrage and detention invoices issued by MTOs and common carriers, the Commission concludes that Congress dictated that evidence of a single violation is sufficient. To the extent that the commenters argue this narrowing by Congress repeals the Commission's entire Interpretive Rule codified at 46 CFR 545.4, the Commission disagrees.

(f) MTOs Collecting Demurrage and Detention on Behalf of Other Parties

Issue: Several MTOs have raised questions about how the rule does, and should, apply to them when they are collecting demurrage and detention charges on behalf of VOCCs, NVOCCs, and BCOs. For example, Maher Terminals said that the definition of “billing party” in the proposed rule does not clarify the identity of the billing party when an MTO bills and collects on behalf of a VOCC. (The rule would define “billing party” as “the ocean common carrier, marine terminal operator, or non-vessel-operating common carrier who issues a demurrage or detention invoice.”) Maher Terminals proposed a revision to the definition that would have made clear that when an MTO bills on behalf of a VOCC/NVOCC/BCO that the VOCC/NVOCC/BCO is the billing party.

FMC response: In the scenario described above, it is assumed that the MTO would be acting as an agent of the VOCC/NVOCC/BCO. Whether an MTO must comply with the rule in this case depends upon the contractual duties of the MTO as an agent. Traditional rules of agency remain applicable under the Shipping Act.[62] According to the Restatement (Third) Of Agency § 1.01 (2006): “As defined by the common law, the concept of agency posits a consensual relationship in which one person, to one degree or another or respect or another, acts as a representative of or otherwise acts on behalf of another person with power to affect the legal rights and duties of the other person. . . .” The principal has a right to control the actions of the agent, but “a principal's failure to exercise the right of control does not eliminate it.” Restatement (Third) Of Agency § 1.01 (2006). The Restatement also notes that an enforceable contract, written or oral, does not need to exist for there to be a principal-agent relationship. Restatement (Third) Of Agency § 1.01 (2006).

While the circumstances of each case must be known to make any particular determination as to whether an agency relationship exists, it is fair to assume, based on the Restatement's description of agency that the majority of instances where MTOs collect demurrage and detention charges on behalf of another party likely create an agency relationship. Thus, except to the extent that a principal VOCC or NVOCC has not delegated their obligations under 46 U.S.C. 41104, the agent-MTO must assume those obligations when acting to collect demurrage and detention charges. Of course, the exact principal-agent relationship is open to negotiation between the principal and agent. An agent is free to negotiate the specific acts they will or will not undertake on behalf of the principal. It is possible that in a particular MTO-principal demurrage and detention billing relationship that the MTO is responsible for providing all of the invoice elements in 46 U.S.C. 41104(d)(2) while in another MTO-principal demurrage and detention billing relationship that the MTO complies with only certain elements of 46 U.S.C. 41104(d)(2) and that the invoice must be sent back to the principal for completion of the other elements before the invoice is issued to the billed party.

2. 46 U.S.C. 41104(e), NVOCC Safe Harbor

Issue: One commenter said that the proposed rule did “not address the safe harbor provision provided to NVOCCs at 46 U.S.C. 41104(e), which exempts NVOCCs from the demurrage and detention invoice requirements and, importantly, liability for any invoice inaccuracies when the NVOCC passes through an underlying ocean common carrier's invoice.” [63] The commenter requested that the rule be modified “to ensure NVOCCs remain exempt from the demurrage and detention requirements when passing through the charges or invoice.”

FMC response: The commenter misinterprets the language of 46 U.S.C. 41104(e). The statute does not exempt NVOCCs from the demurrage and detention invoice requirements of 46 U.S.C. 41104(d)(2). It merely shifts responsibility for refunds or penalties under 46 U.S.C. 41104(d)(1) in the certain, specified scenario from the NVOCC to the ocean common carrier. The safe harbor provision is most applicable in a situation where an NVOCC receives an invoice from a VOCC and passes it on to its customers. In order for the safe harbor provision to apply, however, OSRA 2022 requires the Commission to make a finding that the non-vessel-operating common carrier is not otherwise responsible for the charge. The Commission declines to make a general finding as part of this rulemaking that all NVOCCs are “not otherwise responsible” for errors in invoices they pass through. Rather, this is a fact-based analysis that the Commission undertakes on a case-by-case basis. If the Commission finds in a particular matter that a violation of 46 U.S.C. 41104(d)(1) has occurred and also has made the relevant finding under 46 U.S.C. 41104(e) that the NVOCC is not otherwise liable, only then is the safe harbor provision applicable.

As discussed in the NPRM, there are important reasons for requiring NVOCCs to comply with detention and demurrage invoicing requirements: invoices that a BCO receives from an NVOCC may be their only notice of detention and demurrage charges and because of its contractual relationship with the BCO an NVOCC is often the only party in this transaction able to inform BCOs as to the nature of these charges.[64] The intent of this rulemaking is to ensure that the person receiving the bill understands the charges regardless of who the billing party is.

C. § 541.3 Definitions

1. “Billing Dispute”

Issue: One commenter raised two concerns about the proposed definition of “billing dispute.” [65] First, the commenter was concerned that under the proposed definition, an MTO may not know when a “mere billing inquiry is tantamount to a `disagreement' with respect to a specific invoice.” Second, the commenter was concerned that the word “raised” does not “provide adequate guidance in this context as it suggests that a disagreement is being broached for discussion purposes rather than being clearly conveyed to the billing party as a disagreement.”

FMC response: The Commission has removed the term “billing dispute” from § 541.3 in the final rule. “Billing dispute” does not need to be defined because it is not a term used in §§ 541.4–541.99, in either the NPRM or final rule. “Dispute” is used in § 541.6(d), but only in the paragraph header and does not require further definition.

2. “Billed Party” and “Billing Party”

(a) Responsibility for Payment

Issue: One commenter requested that the definition of “billed party” be amended by replacing “is responsible for the payment of any incurred demurrage or detention charge” with “has contracted with the billing party for the ocean carriage or storage of good.” [66] They were concerned that the language “responsible for the payment” “reads as a legal conclusion” and did not comport with the Commission's goal that demurrage and detention invoices be billed to persons having a contractual relationship with the billing party for the carriage or storage of goods. Another commenter requested that the Commission amend the definition of “billed party” to include motor carriers that control containers to account for situations where VOCCs enter directly into written contracts with motor carriers that use containers in the transportation of goods.[67] 

FMC response: The Commission declines to make the requested changes. With respect to the first comment, the definition of “billed party” is simply to clarify the rights and responsibilities of the party receiving the bill. It is a fact-based definition centered on who the party is to whom the billing party issues the invoice. The definition is not the basis of an assessment of whether the billed party properly received the invoice, which is governed by § 541.4. Nothing in this rule prohibits third parties from receiving copies of invoices or voluntarily paying demurrage or detention charges on behalf of the shipper/consignee.

In regard to the second comment, there seems to be a misunderstanding on the commenter's part about the rule's applicability. As discussed in the NPRM, a primary purpose of this rule is to stop demurrage and detention invoices from being sent to parties who did not negotiate contract terms with the billing party. That concern is not present where a motor carrier has directly contracted with a VOCC. Nothing in this rule, either in the proposed or final version, prohibits a VOCC from issuing a demurrage or detention invoice to a motor carrier when a contractual relationship exists between the VOCC and the motor carrier for the motor carrier to provide carriage or storage of goods to the VOCC. The definition of “billed party” is intentionally broad to capture any party to whom a detention or demurrage invoice is issued. When a VOCC issues a detention or demurrage invoice to a motor carrier, the VOCC must comply with the requirements of part 541. The Commission has jurisdiction over common carriers, marine terminal operators (MTOs), and ocean transportation intermediaries (OTIs), including over through transportation. Without knowing the particulars of the hypothetical, in this situation, presumably the FMC's jurisdiction, and thus this rule, would apply only to cargo moved inland under a through bill of lading and contracts between a VOCC. A motor carrier not based on a through bill of lading would likely be outside the scope of this rule.

(b) Billing Party's Control of Assets

Issue: One commenter was concerned that the Commission's proposed definition of “billing party” “is missing the requirement that the entity issuing the invoice has the right to do so” and “[t]he regulations should recognize that there is a distinction between a billing party in control of the assets and one that is not, i.e., a non-vessel operating common carrier (NVOCC).” [68] The commenter suggested that the definition be amended to read as follows: Billing party means the ocean common carrier, marine terminal operator, or non-vessel operating common carrier who issues a demurrage or detention invoice because they control the equipment and terminal space or are passing through the charges for collection.

FMC response: The Commission declines to make the requested change. In this final rule, the Commission has added a 30-day period to § 541.7 for NVOCCs to issue an invoice when they pass through demurrage and detention charges. This is an acknowledgement that NVOCCs are not always in control of the assets and often receive an invoice from a VOCC. For more information, see Timeframes for NVOCCs in the discussion of comments regarding § 541.7.

(c) Who is a person?

Issue: Two comments expressed concern that the proposed definitions of “billed party” and “billing party” included the term “person” but did not provide further clarification on what “person” means for purposes of the rule.[69] The commenters recommended either adding a cross reference to § 515.2(n) in the definitions or defining “person” in § 541.3 consistent § 515.2(n).

FMC response: The Commission agrees that identifying a definition for the term “person” can be helpful. It has added a definition of “person” to § 541.3 that aligns with § 515.2(n).

(d) Consignees

The Commission specifically sought comments on the NPRM as to whether it would be appropriate to allow common carriers to bill consignees named on the bill of lading as an alternative to the shipper.[70] In response to commenters' support for including consignees as a party to whom an invoice can be properly billed, the Commission has revised the rule to incorporate this change. As part of this change, the Commission has added a definition of “consignee” to § 541.3 in this final rule. For a full analysis of comments concerning allowing consignees to be billed, see the discussion of consignees under § 541.4 concerning properly issued invoices.


(e) NVOCCs

Issue: One NVOCC commenter had concerns that the terms “billed party” and “billing party” “do not clearly separate the position of the NVOCC,” who, the commenter noted, can be both the billed party (when billed by the VOCC), and the billing party (when billing the BCO) on the same shipment.[71]

FMC response: The Commission acknowledges that there are circumstances when an NVOCC is both a billed party and a billing party on the same shipment. As explained in more detail below in the response to § 541.7(c), the Commission has amended the rule to allow an extra thirty (30) days for NVOCCs to issue an invoice when they are passing through the charges from a VOCC to a customer. The Commission has also added § 541.7(c) to require that when an NVOCC informs a VOCC that its customer has disputed its invoice, the VOCC must then allow the NVOCC additional time to dispute the invoice it received from the VOCC. NVOCCs must still follow the correct procedures for issuing an invoice when acting as a “billing party” and are entitled to the same protections as other “billed parties” when acting in that capacity.

3. Demurrage and Detention

(a) Separate Definitions of “Demurrage” and “Detention”

Issue: Four comments requested that the rule separately define “demurrage” and “detention.” [72] In support of this change, commenters generally made generic statements about how billing practices are frequently different for demurrage compared to detention.

FMC response: The Commission has made the determination not to split “demurrage and detention” into separately defined terms because part 541 and OSRA 2022 treat both charges equally. It may be true that practices differ when billing demurrage versus detention. None of the commenters, however, provided sufficient evidence to support what these specific differences are and how they would require changes to the rule. The Commission will continue to monitor the matter and retains the authority to separately define these terms in a future rulemaking for these or other regulations if circumstances warrant.

(b) Ports/MTO Demurrage Versus VOCC/NVOCC Demurrage

Issue: One commenter said that the rule needed to distinguish between demurrage and detention fees charged by ports and MTOs and those charged by VOCCs and NVOCCs because of the difference in underlying agreements and the fact that the charges serve different purposes.[73] 

FMC response: The Commission declines to make the requested change. As noted in the NPRM, the definition of “demurrage or detention” in this rule is the same as the scope used in 46 CFR 545.5(b)—the goal is to encompass all charges having the purpose or effect of demurrage or detention.[74] The Commission has the same goal in this rule of ensuring all charges having the purpose or effect of demurrage or detention are covered and believes the definition proposed is the most accurate.

(c) Chassis and Other Special Equipment

Issue: One commenter requested that the Commission expand the proposed definition of “demurrage and detention” to include charges related to the use of chassis and other special equipment.[75] 

FMC response: The Commission declines to make the requested change. As noted in the NPRM, the definition of “demurrage or detention” in this rule is the same as the scope used in 46 CFR 545.5(b).[76] Section 7, paragraph (b)(2) of OSRA 2022 directs that this rulemaking “only seek to further clarify reasonable rules and practices related to the assessment of detention and demurrage charges to address the issues identified in [the 2020 Interpretive Rule].” Expanding the scope of the definition of “demurrage and detention” in this rule beyond the term's definition in the 2020 Interpretive Rule would be contrary to statute because it would require us to address issues not identified in that Interpretive Rule.

(d) “Marine Terminal Space”

Issue: The Commission received two comments related to the phrase “marine terminal space” in the definition of “demurrage and detention.” New York New Jersey Freight Forwarders & Brokers Association, Inc. requested clarification of what “marine terminal space” means in the “demurrage or detention” definition.[77] They asked whether “marine terminal space” includes when a through bill of lading is used to transport imported merchandise into an interior port or rail yard and suggested that specific language be added to the definition of “detention and demurrage” to clarify this. The other commenter, International Dairy Foods Association, requested that the Commission include a provision in the final rule indicating that container dwell fees are “detention and demurrage charges” since they are “related to the use of marine terminal space.” [78] 

FMC response: The Commission declines to make these changes. As noted in Section I, regarding inland rail, the Commission has jurisdiction over cargo moved inland pursuant to a through bill of lading. This jurisdiction is clear pursuant to Norfolk Southern Railway Co. v. Kirby,543 U.S. 14 (2004). As a result, the Commission does not see a need to add this language specifically into this regulation. In response to International Dairy Foods Association, the Commission notes that the common definition of “container dwell fees” is interchangeable with the definition of “detention and demurrage.” As a result, the Commission declines to add another provision stating that container dwell fees are included in the rule's definition.

4. Additional Comments

(a) “Designated Agent”

Issue: Two comments requested that the Commission define in § 541.3 the term “designed agent,” which was used in § 541.2 in the notice of proposed rulemaking.[79] 

FMC response: The Commission has not incorporated this request into the final rule. The term “designated agent” does not appear in any of the final regulatory text and thus including the term would not be useful or appropriate.

(b) “Billable party for origin demurrage”, “Billable party for destination demurrage”, and “Billable party for detention”

Issue: One commenter requested that the terms “billable party for origin demurrage”, “billable party for destination demurrage”, and “billable party for detention” be added to § 541.3 to “[define] the appropriately billable parties” associated with demurrage and detention charges.[80] 

FMC response: The Commission declines to make the proposed insertions. Just as the Commission determined not to split “demurrage and detention” into separate terms because the rule treats both charges equally, we also decline further delineations for origin demurrage, destination demurrage, and detention. The delineations are not required for the purposes of this rule.

D. § 541.4 Properly Issued Invoices

The Commission received many comments on proposed § 541.4, the “Properly Issued Invoice” provision. The majority of commenters, especially motor carriers and shippers, expressed support for the proposed rule. One commenter characterized this proposed provision as “critical to accomplishing the Commission's objective in the rulemaking.” [81] 

Many commenters that supported the proposed provision noted that third parties do not have a contractual relationship with the ocean carrier.[82] Accordingly, it would be difficult for such third parties to dispute demurrage or detention invoices because they are not aware of the terms of the contract under which the container was shipped. Instead, commenters observed that the person that contracted for the carriage of goods or space to store cargo had the most knowledge about the shipment and are in the best position to understand the shipment invoice and to dispute the invoice if needed.[83] In addition, requiring that the billing party only invoice the person that contracted for carriage or storage of goods affirms that both the billing party and the billed party know the terms and conditions under which demurrage or detention may be charged.

Furthermore, several commenters asserted that because there is a contractual relationship between the billing and billed parties, there would be a greater incentive to provide timely and accurate invoices as well as a greater willingness to resolve disputes.[84] 

Commenters stated that “parties who are not party to the ocean transportation contract and had no financial interests in the cargo itself, should not be subjected to detention [or] demurrage invoices.” [85] Commenters asserted that without a contractual relationship, third parties have little commercial leverage to dispute charges imposed upon them by common carriers.[86] 

Additionally, several commenters noted that the proposed provision would improve the current demurrage and detention billing process because the invoice would be sent to the person with the most knowledge of the terms of the contract.[87] Because the invoice is going to the party who has this knowledge, one commenter asserted that this will streamline the entire billing process, reduce costs, and increase efficiency to the supply chain.[88] 

Motor carriers and motor carrier trade organizations detailed several issues with the current system. For example, motor carriers frequently find themselves locked out from marine terminals for failure to pay detention charges as the motor carriers wait to receive payment from their customers.[89] Essentially, under the current system, motor carriers, who are threatened with being locked out of terminals, can be trapped in situations where they have no contractual leverage or negotiating power to fight back.[90] Such commenters stated that the current system does not adequately protect motor carriers from unfair billing practices.[91] In addition, motor carrier and motor carrier trade organizations frequently stated that the party responsible for demurrage or detention charges is simply not them.[92] 

In addition, the proposed provision would reduce confusion with who is responsible for paying the invoice because it prohibits the billing party from invoicing more than one party.

Although many commenters supported proposed § 541.4, a few commenters, especially ocean common carriers and MTOs, expressed concerns with the proposed regulation.

1. Alternative Approaches

Issue: A few commenters expressed concern with the Commission's analytical approach to the rule—using contractual relationships as the basis for establishing to whom demurrage and detention invoices should be sent. For example, Dole Ocean Cargo Express urged the Commission not to adopt a rule that “categorically limits the entities to which ocean carriers may bill detention and/or demurrage charges.” [93] NITL recommended that instead of a contractual relationship-based approach, the Commission's rule should instead focus on which party “is best able to comply with a carrier's reasonable demurrage and detention rules, except when an alternative party requests and assumes this responsibility in a written agreement with the carrier other than the bill of lading contract.” On the opposite end of the spectrum, the National Retail Federation said that instead the Commission should provide clear rules for who can be billed for detention or demurrage and provided example language based on who, in their opinion has influence over occurrences of these charges.[94] Hapag-Lloyd (America) LLC said that the rule's prohibition on issuing an invoice to any other person than the person for whose account the billing party provided ocean transportation or storage would slow down the release of cargo and complicate the process of properly assessing the lawfulness of a charge, particularly in the case of overseas shippers, and thus would not support cargo fluidity.[95] 

FMC response: After careful analysis, the Commission has determined that prohibiting billing parties from issuing demurrage and detention invoices to persons with whom they do not have a contractual relationship will best benefit the supply chain. If the billed party has firsthand knowledge of the terms of its contract, then they are in a better position to ensure that both they and the billing party are abiding by those terms. Although other parties may in some circumstances have more influence on whether demurrage or detention actually accrues, they are not the best party to understand the terms of the contract and dispute any charges. While there are benefits to bright-line rules such as the one suggested by the National Retail Federation, there are drawbacks as well. For example, the National Retail Federation's specific suggestion that drayage motor carriers potentially be the responsible billed party under certain conditions fails to account for situations where a motor carrier's delay is the result of no action of their own, but rather the result of the actions of others, such as MTOs cancelling appointments with little to no notice to the motor carrier. The Commission understands that some regulated parties will need to change their business practices in order to comply with this rule.

Finally, the Commission does not believe that shippers located outside of the United States will serve as a basis of significant delay in the movement of cargo. As discussed in the preamble to the Interpretive Rule, shippers have commercial incentives to get their cargo off terminal, and modern digital Information Technology systems allow for prompt communications between parties, regardless of potential vast geographical distances.[96] 

2. Meaning of “Contracted With”

Issue: The Commission received several comments requesting clarification about the proposed requirement that the party “must have contracted” for the carriage or storage of goods. BassTech International LLC asked if, given that both the shipper and the consignee are parties to the bill of lading (which is the contract of carriage), this meets the Commission's intended criteria.[97] BassTech also asked whether, alternatively, the regulatory language is meant to limit invoicing to a party that has entered into a Service Contract with the ocean carrier for the transportation of the cargo.[98] The National Customs Brokers & Forwarders Association of America, Inc. requested guidance on whether a consignee may be considered to have a contract with a common carrier when listed on a bill of lading.[99] Other comments on this issue raised questions about implied contracts. The Shippers Coalition was concerned about implied contracts being used as the basis for an invoice and suggested that the Commission require in the regulation that these contracts be in writing.[100] Finally, several MTOs requested clarification or acknowledgement by the Commission about their right to enforce a published Terminal Schedule as an implied contract against a BCO or trucker that enters the terminal.[101] 

FMC response: “Contract” in this rule has its normal and ordinary legal meaning.[102] This can be reflected in a document such as a contract of affreightment, for example, or a bill of lading, which courts have held to be maritime contracts.[103] Because contracts (other than contracts implied by law) require a meeting of the minds, merely listing a party on a bill of lading, or other shipping transportation document, is not sufficient for them to become a billed party for purposes of part 541 if they played no role in contracting for the transportation of the cargo. Whether a meeting of the minds has occurred is something that can vary based on the specific circumstances of a given relationship. Because a contract can exist even if not memorialized in writing, the Commission declines to add a requirement that contracts need to be in writing for purposes of this rule. The Commission notes, however, that written contracts can provide important documentary evidence of agreement. In addition, the Commission notes that the term “contracts” for the purposes of § 541.4 is not limited to service contracts; the term is broader given its normal and ordinary legal meaning and a contractual relationship can exist without a written document or specific form.

This rule does not prohibit or otherwise limit an MTO from maintaining the practice of issuing any party—including BCOs or Motor Carriers—an invoice based on a Terminal Schedule, including charges for detention or demurrage, if the Terminal Schedule includes such charges and the Schedule has been made available in accordance with 46 CFR 525.3. In fact, the practice of issuing invoices based on a Terminal Schedule that includes those charges continue to be permissible if they are just and reasonable as stated in 46 CFR 545.4. The consistent application of the Terminal Schedule charges to various customers is likely to be done on a normal, customary, and continuous basis, meeting that crucial element of the interpretive rule. Also, as noted by commenters, 46 U.S.C. 40501(f) and 46 CFR 525.2(a)(2) establish that such Schedules are enforceable as implied contracts. Under such a scenario, a Motor Carrier has a contractual relationship with the MTO and the terms of the contract (the Schedule) are known to the Motor Carrier in advance by operation of 46 CFR 523.3. This is a very different situation than where a Motor Carrier is billed for demurrage or detention and the Motor Carrier has no contractual relationship with the billing party and is not privy to the specifics of the contractual agreement (such as where a Motor Carrier is billed demurrage or detention based on an agreement between a shipper and a billing party).

This rule does require that when an MTO issues a bill for demurrage or detention for purposes of enforcing a Terminal Schedule, the billing must comply with part 541, including providing all the information required by § 541.6. The Commission recognizes that this may require MTOs to revise their current business practices. The Commission's primary concern with this rule is to ensure that billed parties understand the demurrage or detention invoices they receive.[104] Additional burdens on MTOs to be able to provide the necessary data, which the Commission does not believe to be unduly burdensome, is outweighed by the benefits of transparency, which will allow billed parties to verify the accuracy of demurrage and detention charges and with whom the charges originate (for example, the MTO itself or the VOCC). As discussed in the Commission's Order of Investigation for Fact Finding Investigation No. 28, the lack of visibility surrounding current MTO demurrage and detention billing practices “have raised questions over whether the current practices allow for a competitive and reliable American freight delivery system.” [105] 

3. Consignees

Issue: Noting that there are a variety of shipping arrangements that allocate risks, obligations, and costs between the shipper and the consignee named on the bill of lading, the Commission sought comments in the NPRM on whether it would be appropriate to also include the consignee named on the bill of lading as another person who may receive a demurrage or detention invoice, thus allowing the common carrier to bill either the person who contracted for the shipment of the cargo or consignee named on the bill of lading.[106] The Commission received 29 comments in response. Three comments said that invoices should be sent to contractual parties only.[107] These commenters said consignees were not the party responsible for payment,[108] or that consignees typically do not have enough knowledge to determine whether the billing information is consistent with the terms of the underlying contract.[109] Two comments said that invoices should be sent only to consignees.[110] The International Tank Container Organisation (ITCO) opposed allowing charges to be sent back to the shipper, saying that it would “further complicate an already complex supply chain and hinder both efficient operations and global trade.” [111] ITCO asserted doing so ignores the INTERCOMS understanding and will put the United States in conflict with international trading terms.[112] 

The vast majority of comments (24), however, were of the opinion that the rule should make allowances for sending invoices to the shipper or the consignee (in at least some scenarios).[113] Comments that supported allowing invoices to be sent to consignees generally said that consignees should be included because: (1) consignees are frequently the party best situated to mitigate against the accrual of demurrage and detention charges and (2) consignees frequently have the most knowledge about a shipment and therefore best able to dispute any charges. A few supporters put qualifiers on when they thought consignees should be allowed to be invoiced. For example, SM Line said that consignees should be included as a potential party to be billed but that the Commission should not limit billed parties according to how, and whether the party appears on a specific bill of lading.[114] In contrast, Shippers Coalition and the American Association of Exporters and Importers said that consignees should only be allowed to be invoiced if there is an advance written agreement between the carrier and consignee to do so.[115] 

4. Payment by Third Parties Generally

Issue: The Commission received four comments regarding allowing payment of invoices by third parties.[116] The Agriculture Transportation Coalition and Pacific Coast Council of Customs Brokers and Freight Forwarders Association requested that the rule include a clear mandate that the delegation payment authority is allowed but must be based on actual acceptance of such responsibility by the third party, such as a written or digital signature evidencing acceptance. FedEx Trade Networks and John S. Connor, Inc. requested that the rule specify that third parties may only receive copies of invoices and pay them with the billed party's knowledge and consent (but did not say that such consent should be required to be in writing). FedEx Trade Networks and John S. Connor, Inc. also requested that the regulation contain an explicit statement that if a third party receives a copy of the invoice that the third party itself is not accountable for the payment.

FMC response: The Commission does not believe that the suggested changes are necessary. The rule is clear in its direction that, with a limited exception for consignees, demurrage and detention invoices must be issued to the person for whose account the billing party provided ocean transportation or storage and who contracted with the billing party for the carriage or storage of goods. This will often, but not always, be the shipper of record. Outside of the exception for consignees, billing parties must not send invoices to third parties. The rule only mandates to whom the invoice can be issued and therefore who has legal liability to pay it. It is purposefully silent on third parties voluntarily paying an invoice—thus allowing the practice by declining to prohibit it. The Commission does not believe it is necessary to require such agreements to be in writing or otherwise memorialized between the billed party and the third party. The Commission does not believe it is the agency's place to dictate a third party's business liability decision in this scenario. A third party will either: (1) pay the invoice on behalf of the billed party based on a previous guarantee by the billed party that they will be reimbursed; or (2) pay the invoice without such an agreement in place and assume the risk that they potentially may not be reimbursed.

E. § 541.5 Failure To Include Required Information

1. Invoice Attachments

Issue: Four commenters requested clarification whether a billing party may provide the required data elements as an attachment, addendum, additional pages, etc. to their invoice, for reasons of convenience or necessity because of the invoice's length.[117] FedEx Trade Networks asserted that when an NVOCC is merely passing through the VOCC's charges, it should be able to satisfy the requirements by attaching the ocean carrier's invoice.[118] 

FMC response: The required information may be included as an attachment to the invoice, as the statute simply requires that invoices “include” this information. In addition, § 541.6 states that an invoice must “contain” that information. As such, it is the Commission's position that this information may be included as an attachment, or otherwise incorporated. An NVOCC passing through VOCC demurrage or detention charges can satisfy the requirements by merely attaching the ocean carrier's invoice if that invoice contains all the necessary information in § 541.6. If all the necessary information is not on the ocean carrier's invoice, the NVOCC must locate and amend the missing information prior to sending the invoice on.

2. Voiding of Invoice Too Extreme a Penalty

A few commenters asserted that the penalty of having a billed party not be required to pay an invoice if the invoice was not compliant is an extreme penalty for a single violation.[119] The National Association of Waterfront Employers (NAWE) additionally argued that such a stringent penalty is not consistent with the Commission's Interpretive Rule on 46 CFR 545.4, which requires more than a single instance to something that happens on a “normal, customary, and continuous basis.” [120] 

FMC response: The elimination of the billed party's obligation to pay an invoice that lacks the required information is statutorily mandated under 46 U.S.C. 41104(f) for common carriers. As such, 46 CFR 541.5 merely states what the statute already requires and the Commission lacks discretion to eliminate or relax this requirement. Section 41104(f) does allow the elimination of payment obligation for “an invoice” that does not meet the contents of the invoice requirements. This language signals Congress' desire to not require that a common carrier repeat the error multiple instances for a shipper to be able to seek relief. Thus, in the demurrage and detention context, the statutory language of section 41104(f) is clear and unambiguous in requiring only a single instance to trigger the elimination of the obligation to pay the inaccurate invoice and supersedes the “more than one instance” interpretation of the “normal, customary, and continuous basis” language found in 46 CFR 545.4.

Similarly, pursuant to 46 U.S.C. 41102(c), it is a prohibited practice for an MTO to fail to include the required minimum information in a demurrage and detention invoice sent to a party other than a VOCC. Sending incomplete bills that do not contain sufficient information for shippers to verify if the bills received are accurate would not constitute having just and reasonable practices relating to or connected with receiving, handling, storing or delivering property. Extending the elimination of charge obligations provision at 46 U.S.C. 41104(f) to MTOs issuing demurrage and detention invoices would meet the statutory direction that the Commission must “further define prohibited practices by . . . marine terminal operators, . . . under section 41102(c) of title 46, United States Code, regarding the assessment of demurrage or detention charges” and ensure that all demurrage and detention bills sent to billed parties provide the necessary information for the bills to be paid or disputed quickly thereby ensuring efficiency across the shipping system. Having the invoice content and elimination of charge obligations requirements for all billing parties be the same throughout the industry will ensure that there is more clarity and accuracy in invoicing throughout the shipping system.

F. § 541.6 Contents of Invoice

1. § 541.6(a), Identifying Information

(a) § 541.6(a)(1), Bill of Lading and § 541.6(a)(2), Container Number

Issue: The Commission did not receive any comments directly addressing the requirement that the invoice must list the container number—presumably because this is a data element listed in OSRA 2022. A few commenters, however, raised concerns that requiring the bill of lading number, especially in conjunction with the container number, would increase the risk of theft of the cargo and create security risks by allowing for false pick-up appointments.[121] Some of these comments further asserted that requiring bill of lading information to be included on the invoice would require significant and costly upgrades to their IT systems.

FMC response: The Commission disagrees with the commenters' assertion regarding potential security issues. The Commission previously addressed this concern when the issue was raised by the Ocean Carrier Equipment Management Association (OCEMA) in response to the ANPRM.[122] Here, we reiterate and expand upon that response. Bill of lading numbers are available through publicly accessible import and export data systems, such as the Journal of Commerce's Port Import/Export Reporting Services (PIERS) and are already frequently included on demurrage and detention invoices. Because bill of lading numbers are not confidential information, they are not a good basis for security measures. Container numbers are not protected information either. Container numbers are written on the outside of the container. Thus, like bill of lading numbers, they are not a good basis for security measures. Including an already publicly available number on an invoice does not increase security concerns. The commenters' claims also do not consider the multiple levels of security at the port that deter an incorrect party from taking the cargo. These security measures include basic security infrastructure such as perimeter fencing, security gates, monitoring equipment, and alarm systems, and other access control measures such as Port Security Plans and Transportation Worker Identification Credential (“TWIC”) requirements. Nor do their comments consider that the rule prohibits the billing party from issuing demurrage or detention invoices to a person other than the person for whose account the billing party provided ocean transportation or space to store goods.

The bill of lading number and container number provide valuable identifying information to the billed party such as determining which shipment is being charged and a means of verifying accuracy of charges. Therefore, the Commission is retaining the requirement that this information be included on the invoice. The Commission recognizes that some billing parties may need to revise operations, including software and website updates, such as those related to how they generate cargo pick-up numbers. However, the Commission has no evidence to support a finding nor received data from commenters showing that such revisions would be time intensive or costly. Billing parties could, for example, for minimal time and cost, replace that portion of a pick-up number currently based on bill of lading number/container number with a number produced by a random number generator and doing so would be more secure than current systems that incorporate bill of lading numbers/container numbers into the pick-up number.

(b) § 541.6(a)(3), Port(s) of Discharge

Issue: New York New Jersey Foreign Freight Forwarders and Brokers Association requested the Commission amend § 541.6(a)(3) to clarify that the port of discharge can be any U.S. port—ocean or interior—to address situations, for example, where cargo arrives at a West or East Coast port, or via Canada, and then moves by rail to the interior.[123] The commenter was concerned that without the suggested clarification to the regulation there is the risk that the billed party would not receive the proper billing information to assess the correctness of invoices issued for charges incurred at interior ports.

FMC response: The commenter is correct that detention or demurrage invoices issued for cargo delivered on a through bill of lading under the Commission's jurisdiction are required under this rule to list all ports of discharge, ocean and inland. The Commission believes that this requirement is sufficiently incorporated into the language we proposed in the NRPM and have adopted in this final rule. The regulation's use of “port(s),” as opposed to “port” accounts for situations where there are multiple ports of discharge.

(c) § 541.6(a)(4), Basis for Why the Billed Party Is the Proper Party of Interest

Issue: The Commission received several requests from commenters to clarify what level of detail is necessary to satisfy the requirement that the invoice include the basis for why billed party is the proper party of interest and thus liable for the charge.[124] Mediterranean Shipping Company specifically requested guidance as to whether the requirement would be satisfied with: (1) a reference to the applicable tariff rule supporting the billing; (2) specific reference needed to contractual provisions; or (3) a reference number to identify the contract at issue.[125]

FMC response: There is no specific or set of specific documents or reference(s) that would meet the requirement of § 541.6(a)(4). The purpose of the regulation is that billed parties must be able to identify why the billing party believes that they are responsible for paying the invoice and to refute that basis if they believe that they have been billed incorrectly. A reference to the applicable tariff rule supporting the billing, specific reference to contractual provisions, or a reference number to identify the contract at issue might all, or might all not, meet this standard depending on the specific circumstances of a particular invoice.

(d) Requests for Additional Identifying Information

Issue: The U.S. Department of Agriculture requested that the Commission also require billing parties include on the invoice transportation history information, such the date and time a container was loaded on or off a vessel, and the date and time the vessel left or arrived at the port.[126] The Meat Import Council of America, Inc. (MICA) and the North American Meat Institute proposed that the Commission should require billing parties to identify on the invoice the vessel(s) used to transport the cargo.[127] These commenters believe that these additional data elements on the invoice would increase transparency and help billed parties in verifying calculations of free time, availability, and earliest-return-date, and thus make it easier to identify and dispute excess charges.

FMC response: The Commission agrees that having this additional information may be helpful in some circumstances. The Commission, however, has not been presented with enough evidence to be convinced that the potential benefits to some billed parties on some invoices outweigh the burden to billing parties by requiring this information on all invoices. The Commission will continue to monitor detention and demurrage billing trends and retains the authority to revise non-statutorily mandated detention and demurrage invoice data elements in the future if it determines there is a need to do so.

(e) Billing Exceptions

Issue: The American Association of Exporters and Importers (AAEI) supported § 541.6 and the required contents of the invoice.[128] AAEI also stated that if demurrage and detention charges are incurred or removed due to terminal or vessel operating deficiencies, then the invoices should include the details with standardized categories of billing exceptions.

FMC response: The Commission declines to add a requirement for billing exceptions to § 541.6. Under OSRA 2022, the billing party has an obligation to ensure the accuracy of its invoices. In addition, § 541.8 specifies the procedures for disputing charges—these disputes can be initiated if the billed party feels they are not responsible for the charges. As a result, the Commission declines to proscribe that billing parties deduct certain charges, especially given that there could be disagreement over where the fault in the charges lies.

2. § 541.6(b), Timing Information

(a) § 541.6(b)(1), Invoice Date

Issue: The National Customs Brokers & Forwarders Association of America,[129] CV International,[130] and New York New Jersey Foreign Freight Forwarders and Brokers Association, Inc.[131] asked the Commission to clarify whether backdating of invoices is permissible under this rule, or whether the billing date on demurrage and detention invoices should reflect the actual date an invoice is mailed out or otherwise finalized. John S. Connor, Inc. agreed, saying that backdating is a common practice that must not be allowed.[132] National Industrial Transportation League raised related concerns about some carriers continuing to assess charges during the time spent to process payments after payment has been made by the billed party or its agent.[133] 

FMC response: Billing parties have an obligation under 46 U.S.C. 41104(d)(2) to issue detention and demurrage invoices that contain accurate information concerning the statutorily specified data elements as well as any additional information determined necessary by the Commission. To solidify this point, the Commission has incorporated into § 541.6 the requirement for accurate information. Accuracy is an implied legal condition of any statutory or regulatory information collection imposed on regulated parties by Congress or agencies and is generally not specifically incorporated as a written requirement. However, based on these comments, it appears that such clarification in the regulatory text may be of use to regulated parties and its incorporation mirrors the use of the word in 46 U.S.C. 41104(d).

(b) § 541.6(b)(2), Invoice Due Date

Issue: Seafrigo USA urged the Commission to clarify the meaning of “billing due date,” and specifically asked whether it means the payment due date.[134] The Meat Import Council of America, Inc. and the North American Meat Institute, in a joint comment, suggested that billing parties must be prohibited from listing the payment due date as the same date the invoice is issued as billed parties should have the full 30 days after an invoice is received, not simply issued.[135] The U.S. Department of Agriculture recommended that the Commission specify in the regulation the timeframe for payment of an invoice, making certain that the regulation is clear that payment is not due until any disputes are resolved.[136] Fenix Marine Services stated that the proposed demurrage and detention invoice requirements are incompatible with traditional MTO billing practices, and changing their practice to conform to the FMC's rule would mean a major overhaul of many MTO's longstanding billing practices.[137] 

FMC response:The billing due date (or “invoice due date” as worded in this final rule) is the date by which the billed party must pay the invoiced charges. The Commission has revised § 541.8(a) to make clear that billing parties must allow billed parties at least 30 calendar days from the invoice issuance date to request mitigation, refund, or waiver of fees. Correspondingly, the due date of an invoice must be on or after 30 days after it is issued. As discussed in the NPRM and elsewhere in this document, the Commission acknowledges that this rule may require some billing parties to change their billing information technology systems and practices.

(c) § 541.6(b)(3)–(5), Free Time

Issue: One commenter requested that “end of free time” in § 541.6(b)(5) be defined as “the end of free time as determined by the ocean common carrier or marine terminal, whichever, is later” because ocean common carriers and marine terminal may have disparate last free day dates.[138] 

FMC response: The Commission declines to define “end of free time”, “start of free time”, or “free time” as part of this rulemaking for the reason noted by the commenter—their meaning can vary terminal to terminal.[139] The Commission does not have evidence at this time to support a finding that standardizing these terms is warranted.

(d) § 541.6(b)(6), Container Availability Date

Issue: Two NVOCCs requested clarification of the meaning of “availability date” in § 541.6(b)(6).[140] One of the commenters requested that FMC define the term in § 541.3.[141] A third commenter said that the term “availability date” creates too much ambiguity in that some shipments may be delayed in customs resulting from actions taken or not taken by the receivers and import customs brokers.[142] They argued that vessel arrival date should be used instead because actual time of arrival of the vessel is clearly defined and gives NVOCCs a clear date from which to start the clock.

FMC response: The Commission declines to incorporate the commenters' suggestions. First, the date of container availability is statutorily mandated by 46 U.S.C. 41104(d)(2)(A). Congressional action would be needed to change it to vessel arrival date. Second, the Commission declines to add a definition of “availability date” to § 541.3 for the same reason we declined to define it in our 2020 final Interpretive Rule on demurrage and detention—“availability” can vary by port or marine terminal.[143] As we discussed there: “Suffice it to say, availability at a minimum includes things such as the physical availability of a container: Whether it is discharged from the vessel, assigned a location, and in an open area (where applicable).” [144] Additionally, as discussed in the Interpretive Rule's notice of proposed rulemaking: “In this context, `cargo availability' or `accessibility' refers to the actual ability of a cargo interest or trucker to retrieve its cargo. Cargo is not available, for instance, if a cargo interest or trucker cannot pick it up because it is in a closed area of a terminal, or if the port is closed.” [145] We adopt the meaning for these terms provided in the Interpretive Rule in this rule as well.

(e) § 541.6(b)(7), Earliest Return Date

A number of comments raised the issue of earliest return date. Intermodal Motor Carriers Conference urged the Commission to clarify OSRA 2022's earliest return date, and to require that date on the detention and demurrage invoice.[146] The International Tank Container Organisation (ITCO) noted that OSRA 2022 requires that the earliest return date be specified, while this rule does not require it on the invoice.[147] ITCO opined that the term “availability date,” which is currently used in the rule, creates too much ambiguity. Balsam Brands [148] and Harbor Trucking Association [149] said that the earliest return date should be listed for export shipments, and any modifications to this date should be identified. The New York New Jersey Foreign Freight Forwarders and Brokers Association, Inc. (NYNJFF&BA) stated that the requirement to provide the earliest return date for export shipment should be understood as meaning the first notice for receiving containers at ports, as this notice sets the rest of the process in motion for getting a container back on a vessel.[150] NYNJFF&BA states that if demurrage and detention can be charged in instances when cargo remains at the terminal beyond the free time as a result of VOCC decisions, then there is no incentive to improve the information and receiving window dates in the early return date (ERD) notices. When containers are delivered per ERD notices, the cargo waiting for a new vessel cannot be incentivized by the imposition of demurrage and detention to reduce time at the terminal.

To strengthen the rule's requirements, the National Association of Chemical Distributors [151] and Connection Chemical [152] suggested that the Commission add the term “accurate” before the earliest return date, to ensure that any changes to this date are reflected as conditions change. CV International stated that earliest return dates change frequently because of unreliable vessel schedules and congested terminals.[153] As a result, CV International suggested that when a container is in motion, the earliest advised return date should apply. John S. Connor, Inc. made similar comments.[154] 

The Meat Import Council of America, Inc. (MICA) and the North American Meat Institute (NAMI) jointly argued that the final rule should not diminish the significance of intervening, clock-stopping events when a billed party disputes the charges.[155] MICA/NAMI suggests that the Commission requiring including earliest return date and changes to that date on detention and demurrage invoices would increase transparency and minimize billing disputes. Lastly, the National Customs Brokers and Forwarders Association of America requested clarification and Commission guidance on how billing parties should account for data elements in the minimum invoice information requirements where dates, such as the earliest return dates, change.[156] 

FMC response: The Commission declines to make the commenters' changes requested regarding earliest return date in this rule. This is an issue that the Commission will continue to examine. For example, the Commission issued a Request for Information in August 2023 seeking comments on what shippers and BCOs can do to better predict container earliest return dates.[157] 

In addition, Commissioner Rebecca Dye has proposed to reform three practices of ocean carriers and marine terminal operators at the Ports of Los Angeles and Long Beach, and the Port of New York and New Jersey that relate to earliest return date, container returns, and container pickup (notice of availability).[158] Commissioner Dye encourages reactions or questions regarding these proposals from the shipping public. More information on this project may be found on FMC's website.

(f) § 541.6(b)(8), Date(s) for Which Demurrage and/or Detention Were Charged

Issue: TraPac LLC stated that requiring billing parties to include the specific dates on which demurrage or detention is charged would, for MTOs, result in an unnecessary burden on terminals as MTOs would need to develop a reporting system to provide information regarding the container's status on a “clock start” and “clock stop” basis.[159] According to the commenter: (1) it is not reasonable or realistic to expect MTOs to transmit information in real time; and (2) if not in real time, it could result in significant delay. Consumer Technology Association said that the Commission should require disclosure of any relevant “stop-the-clock” events that toll the passage of free time—such as container availability, facility closures, port congestion, or lack of available appointment slots. They said that having this information would greatly facilitate the timely resolution of disputes but noted that this information is often only available to billing parties.[160] BassTech International LLC suggested that, for emphasis of the billing party's obligation for the accurate assessment of charges, the Commission change “were charged” to “were incurred and charged.” [161] 

FMC response: As discussed in the NPRM, instead of requiring billing parties to identify specific “clock-stopping” events on demurrage and detention invoices, this rule requires the billing parties to identify the specific dates on which they charged demurrage or detention.[162] The rule permits billing parties to take into account any intervening events that affected the charges, if known, and enables billed parties to confirm or dispute the validity of charges on specific dates. The rule incorporates the intent of OSRA 2022 to shift the burden to billing parties to justify the demurrage or detention charges while allowing billing parties to correct invoices when the intervening events are not initially known to them.

(g) General Comments

Issue: One commenter said that any schedule data on invoices must include all previous revisions and not only the final dates.[163] The commenter said such information was necessary because issues on exports in demurrage and detention invoices are caused by last minute schedule changes over which the shipper has no control.

FMC response: The Commission declines at this time to mandate that billing parties include all previous revisions. We do not believe that enough evidence has been presented to the Commission at this time to justify the increased burden of such a requirement. However, we will continue to monitor the issue of demurrage and detention invoices and may consider this or other additional changes in the future if circumstances warrant.

3. § 541.6(c), Rate Information

The Commission did not receive comments regarding proposed § 541.6(c). It is adopting the proposed language from the NPRM in this final rule with minor, non-substantive, clarifying amendments. In paragraph (c), “The invoice” has been changed to “A demurrage or detention invoice” to reflect the language of § 541.3. Paragraph (c) has also been amended to clarify that these are minimum requirements. Paragraph (c)(2) has been amended by adding terminal schedule to the listed examples of documents, and “i.e.,” has been changed to “e.g.,” to reflect that this is not an exhaustive list of all possible documents.

4. § 541.6(d), Dispute Information

(a) § 541.6(d)(1)

One commenter suggested eliminating paragraphs (d)(2) and (3) and merging the necessary information into a single paragraph § 541.6(d) to read as follows: “The invoice must contain sufficient information to enable the billed party to readily identify a contact to whom they may direct questions or concerns related to the invoice including the name, email, telephone number and mailing address of the responsible person to whom invoice questions or notifications of a billing dispute must be submitted.” [164] According to the commenter, the proposed revision “prevent[s] the imposition of potentially unreasonable or obstructive processes by the billing party” and instead allows disputes to be handled following the standard business practice for similar events.

FMC response: The Commission declines to make the suggested changes. Subsection (d)(1) already accomplishes what the proposed changes seek. In addition, this rule makes dispute resolution simpler, more consistent, and transparent. These are the same goals that the Commission espoused in the Interpretive Rule, which the commenter acknowledges in their submission. In addition, the “conventional manner” in which these disputes have been handled “in the normal course of business” for which the commenter advocates have until now not always been successful and resulted in practices that resulted in OSRA 2022 and this rulemaking. Maintaining the existing model would fail to address the reasons behind the statute and this rulemaking.

(b) § 541.6(d)(2), Information on How To Request Fee Mitigation, Refund, or Waiver

Issue: The Commission received a number of comments regarding the proposed requirement in § 541.6(d)(2) that the URL address of a publicly accessible part of the billing party's website provide a detailed description of what the billed party must provide to request fee mitigation, refund or waver. Two commenters said that the proposed URL requirement would be too burdensome. One of these commenters urged the Commission to instead adopt a requirement that allows for any method of delivery of such information to the shipper so long as it includes a transparent description of the required information.[165] The other commenter said that the proposal could lead to burdensome procedures that are inconsistent with the shifting of the burden of proof regarding reasonableness of the charges from shippers to carriers that OSRA 2022 espouses.[166] Six commenters were in support of the URL requirement.[167] The International Dairy Foods Association stated that this requirement “will help cargo owners easily find and understand what information they need to include in such requests. This will improve the efficiency of the dispute process and make it less likely that requests are denied on procedural grounds.” [168] 

Three additional commenters all said the rule would benefit from expanding the acceptable digital platforms beyond URLs to include QR codes or digital watermarks, for example, so that information regarding the dispute process can be retrieved to keep pace with evolving innovations and technologies.[169] The Meat Import Council of America, Inc. and the North American Meat Institute proposed replacing “URL address” with either “[a] digital trigger (URL address, QR code, digital watermark or other similar digital triggers) to the publicly-accessible portion of the billing party's website that provides a detailed description of information or documentation that the billed party must provide to successfully request fee mitigation, refund, or waiver” or “[a] digital trigger to the publicly-accessible portion of the billing party's website that provides a detailed description of information or documentation that the billed party must provide to successfully request fee mitigation, refund, or waiver.” [170] 

FMC response: The Commission disagrees with the two commenters' assertion that the proposed requirement is too burdensome. While there may be some initial time/infrastructure requirements in order for some billing parties to comply, those will be minimal, and the benefits of transparency to billed parties greatly outweigh these minimal burdens. In response to commenters, the Commission has added language to § 541.6(d)(2) to expand this category from URLs to digital means more generally, including URLs, QR codes and other digital means that would allow this requirement to keep pace with technology.

(c) § 541.6(d)(3), Disclosure of Timeframe for Requesting a Fee Mitigation, Refund, or Waiver

The Commission did not receive comments regarding proposed § 541.6(d)(3) and is adopting the proposed language from the NPRM in this final rule.

5. § 541.6(e), Certifications

(a) § 541.6(e)(1), Certification of Compliance With FMC Demurrage and Detention Rules

Issue: The International Tank Container Organisation[171] and Maher Terminals LLC [172] argued that the certification of compliance is not necessary given that it is legally required for regulated parties to comply with Commission regulations. Maher Terminals also expressed concern that such a certification would require billing parties “to state as a fact a matter that which is really a conclusion of law.” [173] 

FMC response:

Certification that the billing party's charges are consistent with FMC detention and demurrage rules is required by 46 U.S.C. 41104(d)(2)(L). Accordingly, the Commission will include it in the rule.

(b) § 541.6(e)(2), Certification That Billing Party's Performance Did Not Cause or Contribute to the Underlying Invoiced Charges

Issue: One commenter said that the certification statement should reflect an NVOCC's more limited liability in instances where it is simply passing through the charges from a VOCC and, as with the other required elements on the invoice, is just a vehicle and not the responsible party.[174] They provided the following sample certification statement for the Commission's consideration: “To the best of our knowledge the charges on this invoice are a direct pass through and compliant with the requirements of the Shipping [Act] of 1984 as amended by [OSRA 2022] and that our NVOCC did not cause, contribute, or mark up these underlying charges.”

FMC response: The Commission declines to change the proposed language and finalizes it in this rule. A billing party has a legal obligation to include accurate information on each of the invoice elements found in § 541.6. In accordance with 46 U.S.C. 41104, the Commission will make a determination if a particular self-certification is inaccurate or false only after an investigation following filing of a charge complaint.

(c) MTOs

Issue: Four commenters argued that MTOs do not have the information necessary to make these certifications and certifications should not be required of MTOs because of the burden it would impose on them to collect the necessary information, and further, such certification would not address the Commission's primary concern, which is having transparent and clear invoices for billed parties to clearly understand billed charges.[175] A fifth commenter asserted that imposing these certifications on MTOs is beyond OSRA 2022.[176] 

FMC response: In instances where an MTO invoices a shipper, the Commission has determined that the MTO should be subject to the same regulations that apply to VOCCs and NVOCCs, including certification requirements. As discussed earlier in this preamble, the Commission has statutory authority to apply this rule to MTOs. Paragraph (c) of section 41102, title 46, United States Code, prohibits MTOs from failing to establish, observe, and enforce reasonable practices connected to the receiving, handling, storing, or delivering of property. This section provides clear and direct authority for the Commission to regulate MTO practices connected to the receiving, handling, storing, or delivery of cargo, including mandating certification requirements. In addition, OSRA 2022 explicitly instructed the Commission to issue a rule defining prohibited practices by common carriers, marine terminal operators, shippers, and ocean transportation intermediaries under 46 U.S.C. 41102(c) regarding the assessment of demurrage and detention charges. MTOs are not required to include the data elements listed in § 541.6 when they are issuing invoices to VOCCs.

(d) Additional Certification/Disclaimer

Issue: One comment said that the rule should include a requirement on the invoice or the accompanying website a note that reminds the billed party that if the information is incorrect or details are missing, then the shipper is not obligated to pay the invoice.[177] 

FMC response: At this time, the Commission will not impose additional mandatory certifications/disclaimers on top of those found in OSRA 2022, as codified at 46 U.S.C. 41104(d)(2)(L) and (M). Nonetheless, the agency recognizes the potential benefits of such a statement and does not object to the voluntary adoption of this practice.

(e) Independent Assessment

Issue: One commenter posited that in addition to the self-certification requirements of OSRA 2022, the Commission should also consider requiring billing parties to utilize an independent third-party certification body, from an official roster of such bodies that is recognized by the Commission, to conduct an annual audit of billing party's detention and demurrage practices and provide an annual report to the FMC with its findings.[178] According to the commenter, the self-certification requirements of OSRA 2022 provide no benefit to billed parties as they do not prevent “over-invoicing by carriers.” According to the commenter, since the self-certification requirements took effect with the passage of OSRA 2022, their members “have received detention and demurrage invoices that included such a statement, that were later refunded or waived by the carrier when disputed because the carrier issued the invoice after having rolled shippers' bookings for weeks on end.” [179] 

FMC response: The Commission declines to adopt this change at this time. The Commission will continue to monitor the situation following implementation of this final rule and may take additional action(s) in the future if circumstances warrant.

6. Contents of Invoice, Generally

(a) Machine-Readable Invoice Data

Issue: A few commenters indicated their support for the Commission to explore mandating that invoice data be provided in electronic, computer-readable format, such as spreadsheets. American Chemistry Council [180] and Consumer Brands Association,[181] for example, highlighted that providing computer-readable data invoices would allow for faster and more accurate analysis of demurrage charges and associated data. American Chemistry Council [182] and Agriculture Transportation Coalition [183] both noted in their comment that U.S. Surface Transportation Board (STB) regulations require Class I railroads to provide machine-readable access to demurrage billing information.

FMC response: Electronic invoices have a number of benefits for billing parties and billed parties, and the Commission highly encourages billing parties to adopt computer-readable invoice formats into their standard operating procedures. The Commission, however, has chosen not to mandate usage at this time due to concerns about the current low rate of infiltration of electronic documentation processes within the industry. The Journal of Commerce, for example, recently reported that: “[o]nly 2.1% of bills of lading and waybills in the container trade were electronic last year.” [184] The Commission will continue to monitor the use of machine-readable invoices within the industry and may consider compulsory use in the future.

(b) MTOs

Issue: One comment asserted that if the Commission requires demurrage or detention invoices issued by MTOs to contain information in addition to those elements specifically enumerated in OSRA 2022, it should “recognize the nature of MTO pass through charges and either afford MTO invoices a conceptually similar safe harbor, or not compel MTOs to provide such information.” [185] 

FMC response: While the most common practice is for MTOs to invoice the VOCC and the VOCC to send a combined invoice to the shipper, in some cases MTOs bill shippers directly. The Commission's primary concern with this rule is to ensure that billed parties understand the demurrage or detention invoices they receive. In instances where an MTO invoices a shipper, the MTO should be subject to the same regulations that apply to VOCCs and NVOCCS when they invoice shippers.

G. § 541.7 Issuance of Demurrage or Detention Invoices

1. § 541.7(a), Timeframe for Issuing an Invoice

Issue: The Commission received 109 comments on its proposal to require billing parties to issue detention and demurrage invoices within 30 days: one from another federal agency, 16 from BCOs, 66 from motor carriers, 10 from NVOCCs/OTIs/Customs Brokers/Third-party logistics (3PLs), 10 from individuals, and 6 from VOCCs/MTOs.

The U.S. Department of Agriculture supported the 30-day time limit.[186] Fifteen of the 16 BCOs supported the 30-day requirement. One BCO thought that 30 days was too long and that the deadline should be 10 days.[187] All of the motor carriers other than the Intermodal Association of North America (IANA), which administers the UIAA supported the 30-day time limit. The IANA advocated for the Commission to follow the UIAA standard of 60 days to issue demurrage and detention invoices (UIAA Section E.6).[188] All of the NVOCC/OTI/Customs Brokers/3PLs supported the 30-day deadline.

VOCCs/MTOs and their trade associations were mixed in their responses. Intransit Container fully supported a deadline of 30 days.[189] The World Shipping Council (WSC) [190] and the American Association of Port Authorities [191] supported a deadline but said that the deadline should align with the UIAA standard of 60 days. Port Houston [192] and the Ocean Carrier Equipment Management Association, Inc. (OCEMA) [193] were adamant that the Commission should not impose a deadline at all. OCEMA said that if a deadline was imposed, it should be no later than the UIAA standard. OCEMA acknowledged that the Commission based their deadline of 30 days on an understanding that billing parties are capable of issuing demurrage or detention invoices, on average, within 30 days. OCEMA, however, believes that justification was not adequately supported and potentially flawed. First, OCEMA said that the Commission did not explain how the average was derived, and it was therefore unclear how many of the transactions exceeded 30 days. Second, OCEMA asserted that in making its determination, the Commission did not consider the potential sources of delay for those invoices that take more than 30 days to be issued, such as delays in transmission of essential data by third parties, IT system capabilities and differing levels of automation regionally in the invoicing process, personnel and labor shortages, force majeure events, or cyber-attacks or system outages. Related to this point, OCEMA also asserts that the Commission did not take into consideration that under a free-contract system, parties sometimes come to an agreement for longer deadlines in light of the circumstances applicable to a particular shipment for a given shipper or consignee's product supply chain.

The VOCCs and their trade associations also complained that the proposal is unfair. Hapag-Lloyd (America) LLC argued that the proposal provides no consequences for failure to timely submit a dispute to an invoice, so it is unclear what incentive billed parties have to respond quickly.[194] WSC said that billed parties would face no consequences for failing to meet the deadline to dispute an invoice, while billing parties forfeit contractual rights by missing the deadline. WSC argued that fundamental fairness, equal protection, and due process dictate the Commission must add language to impose similar requirements on billed parties, namely that they forfeit the right to request fee mitigation, refund, or waiver by failing to submit that request within 30-days from receiving the invoice. OCEMA focused on the fact that the rule includes no flexibility for delays outside the billing parties' control, for instance caused by third parties, that prevent compliance with the 30-day deadline to issue invoices. Finally, OCEMA argued that the 30-day deadline could turn out to create a disincentive principle since shippers or truckers in possession of equipment will no longer feel compelled to return it quickly as the unavailability of data or other tools to delay billing will prevent billing parties from meeting the 30-day deadline.

BassTech International LLC stated that the proposed rule's invoicing requirements do not address the need for invoicing “on demand” in instances where payment is a prerequisite for cargo release, such as is customary for import demurrage charges.[195] As such, they suggested revising § 541.7(a) to read as follows: “A billing party must issue a demurrage or detention invoice within thirty (30) days from the date on which the charge was last incurred or, when payment of charges is a precondition for delivery of cargo or containers, on demand. If the billing party does not issue demurrage or detention invoices within the required timeframe, then the billed party is not required to pay the charge.”

FMC response: The Commission will maintain the 30 days proposed in the NPRM. The Commission explained in the NPRM why a deadline of 30 days for issuing demurrage or detention invoices is reasonable.[196] WSC and OCEMA suggest the Commission should prove why other deadlines are unreasonable before proposing a deadline, but the Commission declines this invitation to try to prove a negative. WSC and OCEMA did not offer concrete examples of why billing parties could not comply with a 30-day deadline, and instead made reference to delays caused by third parties without offering specifics of the types of delays they routinely face or how long they take to resolve.[197] The Commission does not agree with the argument that the deadline in the rule is insufficiently supported.

Neither is the Commission persuaded by commenters stating that it should follow widely accepted and longstanding practices. The text of OSRA 2022 indicates it was written to help remedy dysfunctional, predatory, and unfair invoicing permitted by these accepted and longstanding practices.[198] The complaint that this proposal is unfair and inequitable to carriers misunderstands the regulation's approach to implementing OSRA. The rule provides a minimum time for the dispute of detention and demurrage invoices, after which billing parties are free to reject any further attempts at dispute as untimely. The rule does not lay out penalties for failure by a billed party to timely dispute an invoice, because it is up to the billing party to choose how to remedy that failure.

2. § 541.7(b), Invoices Sent to an Incorrect Party

Issue: The U.S. Department of Agriculture expressed concern about billed parties incurring additional costs of unexpected and harder-to-verify charges in situations where the invoice was originally sent to the wrong person.[199] USDA urged that the Commission remove from the rule the proposed grant of additional time to the billing party to issue an invoice to a billed party when the invoice was originally issued to an incorrect person (and that original recipient disputed the charges). USDA asserted that the carrier should, in all circumstances, have 30 days from the date charges stop accruing to bill the correct party.

Hapag-Lloyd (America) LLC noted that the rule provides no consequences for failing to timely dispute an invoice.[200] They asserted that, given the requirement that billing parties must issue corrected invoices within 60 days, the rule actively dissuades billed parties from timely settling disputes. The World Shipping Council pointed out that 46 CFR 541.7(b) sets a hard deadline of 60 days after the charges were last incurred by which the correct party must be invoiced but if a billing party uses 30 days to issue the invoice and the billed party takes 30 days to dispute the invoice, there is no time left to bill another party before the 60-day invoicing deadline.[201] WSC said that this would result in the correct party not having to pay the invoice and billed parties being incentivized to delay disputing invoices.

Another commenter requested that paragraph (b) be deleted from § 541.7 “and to leave this exceptional circumstance to be handled through reasonable and conventional business practice . . . .” [202] 

FMC response: The final rule removes the link between a billing party's ability to reissue an invoice with an incorrectly billed party's disputing of that invoice. With this reworded language, the billing party must reissue the invoice to the correct party within 30 calendar days of when the charges were last incurred. Otherwise, the billed party is not required to pay the charges. This penalty is consistent with the language and purposes of OSRA 2022. It also reflects the Commission's position that the billing party should only be issuing a demurrage and detention invoice to a billed party based on their contractual privity with that billed party, and that this invoice should be sent to the correct party in the first instance. Tying the issuance of the corrected invoice to when the demurrage and detention charges stop accruing is consistent with the incentive present in the rest of the rule. The burden of issuing a correct invoice should not rely on an incorrectly billed party to dispute the incorrect invoice. The change is also consistent with the comments received on the NPRM.

3. Timeframes for NVOCCs

Issue: The Commission solicited comments in the NPRM on whether different timeframes should apply to NVOCCs. Most commenters supported applying the same timelines to NVOCCs and VOCCs. However, when NVOCCs pass through demurrage or detention invoices assessed against their customers, it may be difficult for them to issue demurrage and detention invoices within the required timeframe if the NVOCC does not receive the initial invoice in a timely manner. Therefore, the Commission requested comments on how it could best reflect the application of the deadline to NVOCCs that pass through demurrage or detention charges. A number of NVOCCs commented that § 541.7's thirty (30) calendar-day timeframe for a billing party to issue an invoice did not allow time for an NVOCC to issue an invoice when it passes through the charges. Many of these comments supported adding additional time to § 541.7 for NVOCCs to issue an invoice. Some of the comments suggested specific extra time that ranged from 21 days to 60 days. Many suggested an extra 30 days because the initial billing party had 30 days to issue an invoice, and NVOCCs should be given the same amount of time. CMA CGM argued that it is vital that the deadline for resolution not be triggered until all the information required to support the dispute is submitted to the carrier and that the rule should emphasize, not undermine, the carriers' publicly available dispute resolution process.

FMC response: In response to these comments, the Commission has amended § 541.7 to state that NVOCCs have an additional thirty (30) calendar days in which to issue an invoice. This 30-day period runs from the date on which the invoice the NVOCC received was issued. In addition, the Commission recognizes the fact that an NVOCC can be both a billed party and a billing party with respect to the same transaction, and that in such a situation, the NVOCC may not be in a position to dispute an invoice with a VOCC until the NVOCC's customer has disputed the invoice with the NVOCC. As such, the Commission has added § 541.7(c) to require that when an NVOCC informs a VOCC that its customer has disputed its invoice, the VOCC must then allow the NVOCC additional time to dispute the invoice it received from the VOCC.

4. Ability To Cure an Invoice Not in Compliance With § 541.6

Issue: A number of commenters requested the ability to correct an invoice that lacked certain information or contained incorrect data. FedEx Trade Networks, for example, stated that the ability to cure an invoice error is reasonable, especially given that a billed party is not required to pay the invoice in the face of any error.[203] Commenters also sought clarification on the timing of amendments, if amendments are allowable. FedEx Trade Networks stated that each billing party should have the same amount of time to correct the invoice, as an error that originates with the VOCC may need to be remedied by the ocean carrier and each subsequent billing party. CV International suggested that the billing party have two working days from the time the billed party communicates the error to make the corrections, during which time no additional demurrage and detention charges should accrue.[204] The New York New Jersey Foreign Freight Forwarders and Brokers Association, Inc. echoed these sentiments and also suggested that billed parties should be required to notify the billing party of any errors within a specific time frame, such as seven days.[205] John S. O'Connor Logistics made similar suggestions as well.[206] U.S. Dairy Export Council/National Milk Producers Federation requested clarification regarding a carrier's submission of a corrected invoice, and whether that must that be completed within the 30-day timeframe, or whether it restarts the clock.[207] Connection Chemical requested similar clarification.[208] 

FMC response: The Commission declines to add time for a billing party to correct its invoice. While billing parties have an obligation under 46 U.S.C. 41104(d)(2) to issue accurate invoices, issuing an invoice that does not comply with OSRA 2022's requirements does not permanently eliminate the billed party's obligation to pay those charges. In particular, 46 U.S.C. 41104(f) cancels the obligation to pay an invoice that does not conform to OSRA but does not prevent the carrier from reissuing the charges on an invoice/bill that does meet the statutory requirements. The correctly billed party has an obligation to pay charges billed via a compliant invoice. In addition, given the statutory obligation in 46 U.S.C. 41104(d)(2), the Commission also declines to add a requirement that billed parties inform billing parties of any inaccuracies.

5. § 541.7, General Comments

FedEx Trade Networks stated that the Commission should make clear that when a demurrage or detention charge is in dispute, the billing party should be prohibited from issuing further overdue statements.[209] In addition, FedEx Trade Networks recommended that the Commission explicitly state conditions under which the billing party may not charge demurrage and detention, such as when: the container has not arrived at the port; the container is not available within the terminal; the container cannot be released due to a hold by any government action; the container is in the terminal, but the ocean carrier fails to load it on the ocean vessel; the container is in a closed, blocked or inaccessible area; no appointments to pick-up freight are available; there is a “dual transaction,” in which a container cannot be picked up unless another piece of equipment is returned is required; and the equipment must be returned to a different location to be accepted.

FedEx Trade Networks also recommended that when demurrage and detention fees do have to be paid, the Commission should implement certain requirements to create greater efficiencies and serve the objective of demurrage and detention: demurrage bills should be separated from freight pick-up for credit-worthy customers; demurrage should be a standard amount per port and per day, with no tiered fees; more payment options, such as electronic funds transfers, credit cards (without fees), should be available, and credit should be universally accepted; charges should be fair and reasonable, with the goal of moving freight from the terminal; the amortized value of the equipment should be considered when setting detention rates; and the bill should be readily available, especially online.

FMC response: The Commission declines to make these changes to the final rule. The information required to be included in an invoice as per § 541.6 should discourage billing parties from issuing demurrage and detention invoices when charges have not yet accrued, such as when a vessel has not yet arrived in port, because an improperly issued invoice means that the billed party will not have to pay it under the terms of § 541.5. In addition, the rule contains a dispute resolution process that is designed to motivate the parties to a find a resolution within a short timeframe. This process should allow cargo to be released sooner, as well as discourage parties from repeated behaviors such as continuously issuing overdue invoices.

Furthermore, this rule provides the requirements for detention and demurrage invoices and is already designed to make the process more efficient. FedEx Trade Networks' suggestions are outside the process for demurrage and detention billing requirements. As such, they are outside the scope of this rulemaking.

H. § 541.8 Requests for Fee Mitigation, Refund, or Waiver

1. § 541.8(a), Request for Mitigation, Refund, or Waiver of Fees From the Billing Party

Issue: The Commission proposed giving billed parties 30 days to dispute demurrage and detention charges. Forty-five comments were submitted on this issue. Twenty-eight comments supported or supported with qualification the proposal (1 VOCC,[210] 5 NVOCCs/OTIs/3PLs,[211] 8 BCOs,[212] 13 Motor Carriers,[213] and 1 Federal agency [214]). One commenter that supported the proposal said that the 30-day time limit “will incentivize billing parties to ensure the accuracy of their invoices from the start.” [215] Fourteen comments were in clear opposition (11 BCOs [216] and 3 NVOCCs/3PLs [217]). Three additional commenters submitted comments on the matter that did not fall neatly into either support or opposition.[218]

As noted above, some of the commenters that supported the proposal, did so with qualification. The Agriculture Transportation Coalition said that 30 days is sufficient time for shippers to review invoices and submit requests for fee mitigation, refund, or waiver but that the clock should start once the shipper receives the invoice or after the invoice has been posted on-line in a location accessible to the shipper.[219] American Chemistry Council had similar views to Agriculture Transportation Coalition but said that the clock should not start until invoices are received by the billed party.[220] American Chemistry Council explained: “Carriers are increasingly moving to online systems where the billed party must search for new invoices. Because of resource constraints, small companies may track new invoices on a weekly basis, rather than daily.” [221] To address this concern, American Chemistry Council proposed amending § 541.8 by adding at the end “. . . or within thirty-seven (37) days of the billing party making the invoice available online” to ensure that these companies have the full 30-day window to review invoices. The National Association of Beverage Importers, Inc. supported the 30-day timeframe but said that it should be subject to a one-time additional 30-day extension.[222] Similarly, NYNJFF&BA supported a 30-day timeframe generally, but said the timeframe should be allowed to be extended if both parties agreed to the extension.[223] (NYNJFF&BA did not put a time limit on how far the deadline could be extended so long as both parties were in agreement.) NYNJFF&BA also said that the 30-day clock for a VOCC receipt of a dispute must be extended to accommodate the request if the dispute was raised within the proper timelines from the final party billed.

Billed parties, such as shippers and their trade associations, generally argued that 30 days is insufficient. They argued that they need more time because shippers do not have the administrative bandwidth to examine each invoice carefully within 30 days and to determine if a dispute should be filed, particularly considering that some charges have unique and complex scenarios that need to be investigated before they are disputed.[224] Commenters noted that low administrative bandwidth could be caused by a variety of factors, including: the billed party being a small business,[225] because of high transactional volume,[226] or because of the use of third-party auditors.[227] Some commenters pointed out that a billed party's primary business is not transportation, as opposed to billing parties, so shippers are at a disadvantage relative to carriers in validating and disputing invoices. Some expressed concern that a 30-day period for submitting invoice disputes could be construed as a legal “condition precedent” to filing a claim and essentially function to shorten the statute of limitations for claims brought before the Commission.[228] The National Retail Federation pointed out that while the Commission said in the NPRM that it was basing the 30-day deadline on the UIAA, that shippers have never been a party to the UIAA.[229] As an alternative, several of these commenters argued that a 60-day time period is more appropriate.[230] Other billed parties, however, argued that 30 days is insufficient without proposing an alternative timeframe,[231] or proposed eliminating the timeframe requirement entirely.[232] 

VOCCs and their trade associations asserted the proposal is unfair. Hapag-Lloyd (America) LLC argued that the proposal provides no consequences for failure to timely submit a dispute to an invoice, so it is unclear what incentive billed parties have to respond quickly.[233] The World Shipping Council said that billed parties face no consequences for failing to meet the deadline to dispute an invoice, while billing parties forfeit contractual rights by missing the deadline.[234] WSC argued that fundamental fairness, equal protection, and due process dictate the Commission must add language to impose similar requirements on billed parties, namely that they forfeit the right to request fee mitigation, refund, or waiver by failing to submit that request within 30-days from receiving the invoice. The Ocean Carrier Equipment Management Association, Inc. focused on the fact that the rule includes no flexibility for delays outside the billing parties' control, for instance caused by third parties, that prevent compliance with the 30-day deadline to issue invoices.[235] Finally, OCEMA argued that the 30-day deadline could turn out to create a disincentive principle since shippers or truckers in possession of equipment will no longer feel compelled to return it quickly as the unavailability of data or other tools to delay billing will prevent billing parties from meeting the 30-day deadline.

Commenters also expressed concern about the Commission setting strict deadlines for billing parties that could result in forfeiting contractual rights, with billed parties potentially facing no consequences for failing to meet the rule's deadlines. For instance, WSC, OCEMA, and Hapag-Lloyd all argued that it is unfair that billed parties face no consequences for failing to timely submit a dispute to an invoice. The Pacific Merchant Shipping Association (PMSA) agreed with WSC that the lack of consequences for billed parties is unfairly incongruous and inconsistent.[236] PMSA argued that if the consequences of failing to meet the prescribed deadlines are not removed for billing parties, then the rule should require billed parties to pay the charge if they have not disputed it within the 30-day deadline.[237] 

FMC response: The Commission must balance the benefits to billed parties against the detriment to billing parties of an extended timeline to dispute invoices. The longer billed parties take to investigate charges, validate them, and marshal evidence, the longer billing parties remain in limbo about whether the billed party intends to pay. Billed parties advocated for an extended timeframe but did not provide compelling evidence of how long each part of the dispute process takes, for instance investigating invoices or validating charges. Nor did they explain how an extended timeframe for billed parties to evaluate invoices helps facilitate the movement of cargo. The rule's new deadlines ensure billed parties are not scrambling to unearth ancient evidence to dispute stale invoices, and the Commission is not convinced by the evidence billed parties presented in support of extending the timeframe.

Further, the regulatory timeframe for disputes serves only as a minimum timeframe billed parties must permit dispute. The timeframes are not designed or intended to control in every dispute scenario. They are intended to ensure billing parties provide some minimum time for a billed party to dispute an invoice. The billing and billed parties can agree to extend the timeframe, or the billed party can file a complaint with the Commission at any time. Nothing in the final rule prevents a billed party from filing a complaint during the 30-day dispute deadline or prevents a billed party from filing a complaint with the Commission even though they did not dispute the charge with the billing party during the 30-day timeframe.

Based on this record, the Commission has removed the language from § 541.8(b) stating that a billed party was not required to pay an invoice if a billing party takes longer than 30 days to resolve a dispute. The Commission also added language to § 541.8(b) to allow the parties to agree to longer timeframes for the dispute resolution process. These changes better allow for the balancing of benefits that this process requires.

2. § 541.8(b), Resolution of Dispute

(a) 30-Day Timeframe

Issue: The Commission proposed giving parties 30 days to resolve a disputed demurrage or detention invoice charge. Thirty-nine comments were submitted on this issue. Thirty comments supported or supported with qualification the proposal (8 BCOs,[238] 5 NVOCCs/OTIs/Customs Brokers/3PLs,[239] 13 Motor Carriers,[240] 3 VOCCs/MTOs,[241] and 1 Federal agency [242]). Six comments were opposed (all BCOs).[243] The other three comments (all NVOCCs/OTIs/Customs Brokers/3PL) that were submitted neither clearly supported nor opposed the proposal.[244] 

Consumer Technology Association was concerned that the process would be subject to abuse and potentially undermine incentives of demurrage and detention charges.[245] The commenter was particularly concerned with the possibility of parties overwhelming a carrier with requests for waivers/refunds with the express intent of making it impossible for the carrier to act within 30 days. They said the Commission should make clear that:

(1) carriers may adopt reasonable documentation requirements for claims for waivers/refunds, and that carriers do not waive their right to collect charges when they do not act on claims that fail to comply with reasonable documentation requirements;

(2) claims that are not submitted to carriers via the informal dispute process are presumed reasonable and the burden of proof as to the unreasonableness of such charges shifts back to the entity challenging the charge;

(3) Abuse of the informal dispute resolution process (e.g.,by submitting excessive or frivolous claims) may constitute a violation of 46 U.S.C. 41102(a). (Alternatively, that abuse of the system creates a presumption that the charge was reasonable that must be overcome by the party challenging same);

(4) At an absolute minimum, indicate that: billed parties have an obligation to act in good faith when disputing invoices, that submission of excessive and/or frivolous disputes does not constitute good faith, and that charges that are the subject of waiver/refund requests not submitted in good faith are to be presumed reasonable.

Other commenters who opposed the proposed regulation, generally said that they disagreed with it because it did not account for those instances when more than 30 days is required to investigate and reach a final resolution.[246] 

Some commenters who generally supported the regulation agreed with these concerns. (The dividing line between support and opposition generally came down to those that supported some type of alternative timeframe to the strict 30 days in the NPRM and those that would eliminate a specified timeframe entirely.) For example, the World Shipping Council generally supported the proposal but recommended that the 30-day period be subject to a single extension request of a second 30-day period.[247] Maher Terminals supported having a specific timeframe but said that instead of 30 days, the timeframe should be extended to 90–120 days.[248] 

FMC response: The Commission has decided to maintain a 30-day dispute resolution timeframe, but in response to these comments has created an exception to allow for resolution beyond 30 days when a later date has been agreed to by both parties. The Commission has also clarified in the text that the 30-day deadline is 30 calendar days. The rule does not prescribe or prohibit the billing party from imposing reasonable consequences on the billed party for failing to dispute the charge during the 30-calendar-day period.

(b) What does “resolve” mean?

Issue: The Commission received several comments concerning what “resolve” means in the proposed regulation.[249] These commenters said it was unclear from the text of the proposed regulation whether a refund, if one were to be issued, or other final form of redress, needed to be completed within the 30-day deadline, or whether the parties merely needed to come to an agreement for resolution of the matter and final tender could be after the 30 day deadline. Two commenters, Mediterranean Shipping Company [250] and the World Shipping Council,[251] requested that the Commission formally define the term in the rule. American Chemistry Council had similar concerns, but instead of requesting that “resolution” be defined, they requested that the Commission codify into the regulation that final redress be completed within the 30-day limit.[252] Shippers Coalition expressed their concern that the proposed language would result in billing parties just saying “no” to a request for mitigation/refund/waiver, in order meet the 30-day deadline.[253] To address this concern, Shippers Coalition proposed amending § 541.8(b) to include an additional sentence such as: “In considering a request for mitigation, refund, or waiver of fees, a common carrier shall consider that under 46 U.S.C. 41310(b) a common carrier shall bear the burden of establishing the reasonableness of any demurrage or detention charges.” [254]

FMC response: The Commission has amended § 541.8(b) to: (1) require attempted resolution, rather than resolution, within 30 days; and (2) allow extension of the timeframe, if such a later date is agreed to by the parties. The Commission recognizes that this change will mean that the rule will no longer impose definite outer limits for closing out of a disputed transaction. These changes, however, further the goal of building better relationships in the demurrage and detention context between the billing and billed parties, the parties that know the most about the transaction. While parties can come to the Commission at any time during the process, the Commission wants to encourage to the fullest extent possible good-faith efforts for resolution between the parties when disagreements occur.

We decline to formally define “resolution” or “attempted resolution” because what these terms mean in any particular instance will be determined based upon mutual agreement of the involved parties. The Commission believes it is acceptable for some ambiguity, especially given that the Commission has removed the penalty of the billed party not having to pay the invoice if the parties do not come to a resolution. Applying the normal meaning of the word, resolution of a request includes payment by the billing party of any refund due to the billed party.

As noted above, § 541.8 does not impact a party's right to file a Charge Complaint with the Commission. Parties do not need to wait a certain period of time or for a triggering event to occur prior to filing a complaint under § 541.8. Parties interested in filing a Charge Complaints at the Commission may do so by following the Interim Procedures for Submitting “Charge Complaints.” [255] 

(c) Penalty

Pacific Merchant Shipping Association (PMSA) argued that voiding an invoice is a harsh result.[256] PMSA disagreed with the Commission's conclusion that voiding a charge in its entirety is the only potential remedy of consequence that the Commission could establish, or that this penalty is consistent the Commission's current practices or the Congressional mandates in OSRA 2022. PMSA stated that such a conclusion flies in the face of the Commission's charge compliant process and argued that even if this penalty were intended to be punitive, it exceeds the congressional direction and authority granted to the Commission in OSRA 2022. PMSA noted that OSRA 2022, at section 7(b), directs the Commission to conduct the present rulemaking in order to “further clarify reasonable rules and practices” regarding demurrage and detention, and to determine “which parties may be appropriately billed for any demurrage, detention, or other similar per container charges.” PMSA argued that Congress did not authorize the Commission to adopt new penalties whereby demurrage and detention charges would be eliminated as a punishment for violating a prohibited practice, and that the rule contravenes Congress' wishes in this regard.

Furthermore, PMSA argued that because the Charge Complaint process is available to any billed party, § 541.8(b) could have been set up in any number of more reasonable and less punitive ways to address a non-responsive billing party and still be within the scope of clarifying the process, such as introducing a rebuttable presumption against a non-responsive billing party or foreclosing certain defenses against a non-responsive billing party in the Complaint process.

FMC response: In consideration of these concerns, the Commission has removed the provision from § 541.8(b) that allows the billed party to avoid paying the invoice if the dispute is not resolved within 30 days. Although that provision had been added to speed up and incentivize the dispute resolution process, this was not a requirement that was mandated by OSRA 2022. By contrast, the rule keeps the requirement of 46 U.S.C. 41104(d)(1) and codified in 46 CFR 541.5, regarding voiding an invoice that does not include the necessary information, because this requirement was mandated by OSRA 2022.

(d) Release of Cargo During Dispute

Issue: The Commission received a few comments concerning the ability to hold cargo as a lien against demurrage and detention invoices when an invoice is disputed. Commenters were concerned not only about the cargo that is the subject of a dispute but also about the potential for lockouts of non-related cargo.

Mediterranean Shipping Company argued that cargo that is the subject of a disputed demurrage or detention invoice should be permitted to be maintained by the billing party pending payment.[257] FedEx Trade Networks argued, in contrast, that when a demurrage or detention charge is in dispute, the billing party should be required to release the cargo that is the subject of a disputed charge.[258] 

A third alternative was proposed by Consumer Technology Association.[259] CTA argued that during a dispute resolution period, the billing party should be required to release the billed party's property so long as the billed party pays the undisputed portion of an invoice.

The joint comment of the Meat Import Council of America and North America Meat Institute said that it is a common practice by VOCCs to hold additional, unrelated cargo from being released until all outstanding invoices are paid, even when the receiving party may be contesting the validity of those original invoices.[260] 

MICA/NAMI said that when invoiced charges are contested by the receiving party, it is unacceptable for VOCCs to “lock out” that entity from all future business with the VOCC until those outstanding fees are paid. MICA/NAMI argued that the current practice does not comport with the tenets of the Incentive Principle, and that allowing it to continue would dissuade importers and exporters, as well as third party service providers, from availing themselves of any dispute settlement mechanisms that are available given the need to service other, unrelated loads with the VOCC.

The Retail Industry Leaders Association echoed similar concerns of MICA/NAMI, stating that a common complaint among its members is the practice of ocean common carriers and MTOs refusing to provide additional bookings to a BCO unless the BCO or another entity in the supply chain pays outstanding detention and demurrage charges that are under dispute.[261] According to RILA, this practice is often used as a way of forcing a BCO to abandon a dispute with the carrier or MTO and pay the charges due. The Association noted that this practice could take several forms, including a demand for payment upon receipt of an invoice. The Association expressed its concern that this practice could be used to circumvent the text and purpose of the rule and recommended that the Commission thus prohibit it.

FMC response: This rule does not impact traditional cargo lien rights. This rule allows billing parties to make their own business decisions about whether or not they require demurrage and detention charges to be paid prior to releasing cargo or whether or not to release cargo conditionally or unconditionally.

The Commission does not believe that leaving the issue of not allowing additional bookings unaddressed will result in circumvention of the rule. The main purpose of this rule is to provide clarity and transparency of invoices and the billing process. This rule also eliminates the practice of issuing invoices to multiple parties in the hopes that one of them will pay it, which was one of the concerns raised by RILA.

I. Rail

1. Through Bill of Lading

Issue: One NVOCC/OTI requested that the Commission explicitly state in § 541.2 whether the rule applies demurrage and detention billing originating from the rail for the rail leg of a through bill of lading.[262] 

FMC response: Ocean cargo that is shipped under a through bill of lading to a final destination in the United States remains under Commission jurisdiction for any Shipping Act violations, including violations occurring under OSRA 2022, and associated implementing regulations.[263] These cases are discussed in greater detail below.

2. Storage and Demurrage Fees for Shipments Moving on Through Bill of Lading

Issue: National Customs Brokers & Forwarders Association of America, Inc. requested guidance as to whether the proposed definition of “demurrage and detention” would cover certain storage or demurrage fees for shipments moving on through bills of lading.[264] Two other commenters, John S. Connor, Inc.[265] and CV International,[266] specifically requested that inland rail be included in the definition of “demurrage and detention” to account for storage at inland rail terminals.

FMC response: The Commission declines to make a specific addition to the definition of “demurrage and detention” to add inland rail. This is an issue that has been raised in the National Shipper Advisory Committee (NSAC) and continues to be examined by the Commission.[267] The Commission has direct jurisdiction over common carriers, marine terminal operators (MTOs), and ocean transportation intermediaries (OTIs).[268] This includes jurisdiction over “through transportation,” meaning continuous transportation between the origin and destination and is offered or performed by one or more carriers, at least one of which is a common carrier under the Shipping Act. As such, ocean cargo that is shipped under a through bill of lading to a final destination in the United States remains under Commission jurisdiction for any Shipping Act violations. The Commission has long held that its jurisdiction extends to ocean cargo that is shipped under a through bill of lading to a final destination in the United States. The Supreme Court addressed this issue in Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004), which held that inland transportation pursuant to a through bill of lading does not change the fact that the bill of lading is a maritime contract. This case addressed the delivery of machinery from Australia to Huntsville, Alabama, on a through bill of lading. The machinery arrived in Savannah, Georgia, by way of an ocean vessel, where it was discharged and loaded onto a train whose ultimate destination was the inland port of Huntsville. The train derailed en route to Huntsville, causing damage to the machinery.[269] The Supreme Court decided Norfolk Southern Railway Co. under admiralty law even though the machinery's damage arose from the train crash because the inland rail portion was pursuant to through bills of lading, which the court noted were “essentially, contracts” for the transportation of the goods. These bills of lading were “maritime contracts because their primary objective is to accomplish the transportation of goods by sea from Australia to the eastern coast of the United States.” [270] 

This principle has become settled in Commission case law decided under the Shipping Act. For example, in Mitsui O.S.K. Lines Ltd. v. Global Link Logistics, Inc., Olympus Partners, Olympus Growth Fund III, L.P, Louis J. Mischianti, David Cadenas, Keith Heffernan, CJR World Enterprises, Inc. and Chad J. Rosenberg, the Commission stated that the Shipping Act of 1984's legislative history specifically recognized intermodalism “as an important component of ocean transportation, and the implications of intermodalism for ocean transportation were addressed.” [271] In particular, the legislative history “recognized that an ocean carrier's use of a single intermodal tariff could save shippers time and allow them to avoid having to arrange the transfer of cargo from one transportation mode to another.” The legislative history further stated that “when an ocean carrier offers an intermodal service, that carrier has the single responsibility for assuring the delivery of cargo from point to point, and only that carrier needs to be concerned with the arrangements for transferring the cargo between modes. Furthermore, this process involves a single bill-of-lading rather than multiple bills of lading.” [272] 

In Mitsui, the Commission also stated that “the intermodal nature of ocean transportation was reflected in the [Shipping] Act's inclusion of definitions of `through rate' and `through transportation,' ” which were “in recognition of the need to permit the employment of modern intermodalism concepts and practices in our foreign trade.” [273] As such, the Commission concluded that “given this legislative history, it appears that Congress intended to extend the Commission's jurisdiction to encompass through rates and through transportation. Congress specifically noted the use by ocean carriers of single intermodal bills of lading, such as those involved in this case, to cover shipments going to inland destinations or points.” [274] Given this discussion, it remains the Commission's position that it has jurisdiction over ocean cargo that is shipped under a through bill of lading to a final destination in the United States. This rulemaking does not change the Commission's authority over merchandise carried pursuant to a through bill of lading.

3. Amending the Definition of “Demurrage and Detention”

Issue: One commenter requested that the Commission add “storage” to the definition of “demurrage and detention,” as well as including rail/inland depot space in the definition.[275] There, the commenter reasoned that on through bills of lading, the VOCC is responsible for transporting cargo inland via rail, and that the same demurrage and detention billing regulations should apply to rail storage/demurrage.

FMC response: The Commission declines to add storage to the definition of “demurrage and detention.” The terms “detention and demurrage” are used extensively in the shipping industry, and they are not generally defined within the industry to include “storage.” Expanding the definition to include “storage” is beyond the scope of this rulemaking.

J. Paperwork Reduction Act

Issue: One commenter asserted that the Commission violated the Paperwork Reduction Act of 1995 (PRA) because “it does not appear that any effort was made to realistically assess the time or cost burdens imposed by the rule[.]” [276] 

FMC response: The Commission complied with PRA requirements. In accordance with 5 CFR 1320.11, in the NPRM, the Commission discussed costs associated with the information collection outlined in the proposed rule, and the bases for those costs.[277] The Commission requested comments on the information collection generally, and specifically requested comments on the accuracy of the burden estimate. Neither the commenter [278] nor anyone else submitted a comment on the proposed information collection. While some commenters on the NPRM, particularly MTOs, generally asserted concerns about potential burdens that the rule would impose on them, neither this particular commenter nor any other commenter provided data or information to the Commission that directly challenged the FMC's burden calculation or provided additional information to improve the calculation estimate.[279] 

K. Miscellaneous Comments

1. Requests for Additional Regulations

Issue:

While many commenters expressed support for this rulemaking, a number of them mentioned items they thought required further action by the Commission. In particular, the Cheese Importers Association of America (CIAA) noted that even with the regulation's change to billing practices, there are operational practices that are still harming food importers.[280] This included charging detention and demurrage even when parties cannot access their shipping containers, when the ship did not go to the proper port, and when the carrier failed to properly notify that the container was available for pick up. CIAA requested that the Commission develop a reasonable standard regarding delivery practices. Similarly, the Northwest Horticultural Council (NHC) stated that the Commission should take further action to clarify reasonable detention and demurrage practices and make sure shippers are not unreasonably charged in situations where delays are beyond their control, an issue that was echoed in a comment by an anonymous exporter.[281] This exporter also noted that a number of issues regarding earliest return dates could be ripe for Commission regulation.

Pacifica Trucks LLC stated that in addition to the invoicing rules that this regulation encompasses, the Commission should address ocean carriers' application of demurrage and detention fees in other situations that Pacifica Trucks considers unfair.[282] In particular, Pacifica Trucks opined that the Commission should ban ocean carriers from assessing demurrage and detention fees in the following situations: when the carrier's intermodal marine or terminal truck gate is closed; when the carrier's intermodal marine or terminal does not offer unrestricted appointments to pick up cargo; when the motor carrier documents an unsuccessful attempt to make an appointment for either a loaded or empty container and no other unrestricted appointments were available; when the intermodal marine container terminal diverts equipment from the original interchange location without 48 hours' notice to the motor carrier; when a loaded container is not available for pickup when the motor carrier arrives at the intermodal marine terminal, or the area containing the cargo is closed or inaccessible; when the intermodal marine terminal is too congested to accept the container and turns the motor carrier away; when the carrier's intermodal marine terminal unilaterally imposes transaction restrictions such as chassis matching or empty container requirements that prevent a transaction and fail to provide a return location or other conditions that impede the motor carrier's ability to pick up or return their containers.

In addition, the Harbor Trucking Association requested Commission action on the return of empty containers, as well as standardizing payment practices such as payment centers having differing hours of operation, delays in payment processing and the need for consistency as to how free days are applied.[283] Other commenters raised similar issues.

FMC response: The Commission agrees that these are important issues but concludes that they are outside the scope of this rulemaking. The Commission thanks commenters for their thoughtful input on these issues.

2. APA Challenge

Issue: Three commenters asserted that the NPRM violates the Administrative Procedure Act (APA).[284] 

The World Shipping Council argued that the proposed rule violates the APA “because the Commission's replacement of the Interpretive Rule and the Incentive Principle with a series of bright-line rules represents a clear departure from its past precedent on detention and demurrage without any reasonable explanation.” WSC elaborated, saying: 

[T]he Commission's proposed bright-line regulations on which parties can be billed cannot logically coexist with its current policies under the Interpretive Rule, which employs a case-by-case analytical tool and the Incentive Principle to determine if a carrier, MTO, or OTI's detention and demurrage billing practices are reasonable. The proposed rules and the Interpretive Rule cannot coexist because there are numerous instances when it is not only reasonable for carriers to take actions prohibited by this proposed regulation, but to do otherwise would disincentivize the fluid movement of freight through the supply chain. The predictable result is a proposal that is not only unworkable and unreasonable as a matter of policy, but per se arbitrary and capricious as a matter of law.

The National Association of Waterfront Employers and Port Houston said that in contravention of 46 CFR 545.4(b)'s requirement that an unjust and unreasonable practice must be something that occurs on a “normal, customary, and continuous basis,” this rule, as proposed would penalize MTOs for any isolated, one-off invoice omission, and apply the penalty to the entire invoice, including as to charges that may not be implicated by the mistake at issue. These commenters said that: “In effect, this regulation would be an implicit repeal of the existing regulatory definition of “unjust and unreasonable practices” under 46 CFR 545.5 as it relates to MTO demurrage charges, without an opportunity for public comment on such repeal, as required by the APA.”

FMC response: The Commission disagrees with the commenters' characterization of this action and assertion of APA violations. The rule's provisions have been extensively explained by the agency, and the rule is implemented by the Commission in accordance with the APA's rulemaking procedures under 5 U.S.C. 553. As noted above, the Commission has twice solicited public input on the proposal to regulate MTO invoicing. The Commission stated unequivocally in the NPRM that MTOs would be subject to this rule. MTOs have had repeated public notice that the Commission was considering regulating MTO demurrage and detention invoicing, so the Commission disagrees with concerns that the rule lacked adequate public notice and comment.

As for concerns that this rule implicitly overrules the Commission's Interpretive Rule at 46 CFR 545.4, these concerns have also been previously addressed. Any argument about what parts of the Interpretive Rules at 46 CFR 545.4 and 545.5 remain in force is inherently an argument about that guidance and not about whether this rule complies with the APA. OSRA 2022 specifically required the Commission to issue rules under 46 U.S.C. 41102(c) that further define the prohibited practices by common carriers, marine terminal operators, and shippers, regarding the assessment of detention or demurrage charges. The plain language of this direction and the plain language of 41104(d) do not require evidence of multiple violations. This view is further supported by 46 U.S.C. 41104(f) which functions to void an invoice if a single required element is not included, not when the complainant can show multiple instances of such behavior.[285] To the extent that this rule requires a change in the narrow context of the Commission's guidance on how it will apply 46 U.S.C. 41102(c) to MTO demurrage and detention invoicing, this rule merely implements changes made by Congress.

In response to NAWE and Port Houston, the Commission has amended § 541.5 to read “applicable charge” rather than “applicable invoice.” This change mirrors the statutory language of 46 U.S.C. 41104(f). It was not the Commission's intent to imply that a failure to include the mandatory invoice requirements related to detention and demurrage charges would void non-detention or demurrage charges that might appear on the same invoice.

3. Extended Implementation Time Period

Issue: The Commission received four requests for delayed implementation of the final rule. Two MTOs requested an implementation date of no less than 120 days from publication of any final rule.[286] The Intermodal Association of North America (IANA) requested no less than 90 days, saying that would be the minimum amount of time needed they would need to make necessary changes to the UIAA associated with implementation of § 541.7(a).[287] The third MTO requested delayed implementation but did not propose a specific timeframe.[288] 

FMC response: The agency is delaying the general effective date of this rule 90 days from publication in the Federal Register and § 541.6's implementation is delayed pending approval of the associated Collection of Information by the Office of Management and Budget. The Commission believes that the additional days of general implementation together with any additional waiting period for OMB approval of the Information Collection will provide industry with sufficient time to implement all changes required by this rule.

4. Requests for Hearing and Additional Public Comment Period

Issue: The Commission received two requests for a hearing so that the Commission could further hear from stakeholders about impacts and potential unintended consequences of implementing the rule.[289] 

FMC response: After careful consideration, the Commission declines to establish another round of public comments or to hold the requested hearings. The Commission has already issued an ANPRM and an NPRM on this subject. As such, there have been two opportunities for public comments on these matters. As demonstrated by the number and quality of the comments received, the Commission believes that the ANPRM and the NPRM have provided the public and interested parties with sufficient opportunity to comment on the underlying issues. As such, the Commission believes that a hearing or additional opportunity for public comment is unnecessary. In addition, the Commission is not making significant changes to the final regulations such that a Supplementary Notice of Proposed Rulemaking (SNPRM) would be warranted.

5. Costs and Benefits Analysis

Issue: Three commenters asserted that the Commission did not adequately assess costs and benefits of the proposed rule in the NPRM and that the Commission violated Executive Order 13579.[290] 

FMC response: The Commission provided an estimate of the costs for regulated entities to implement the proposed rule to be between $6.3 and $12.7 million.[291] As discussed above with regards to comments concerning the Paperwork Reduction Act, the Commission did not receive information from these, or any other commenters, to support changing that estimate. The Commission highlights for the awareness of these commenters that, as an independent agency, the Commission is not subject to the same cost benefit analysis requirements as non-independent agencies. Executive Order 13579 was written taking into account the unique nature of independent agencies. The Executive Order does not require independent agencies to take specific actions, nor does it impose mandates on independent agencies to comply with Executive Order 12866, Executive Order 13563, or any other Executive order.

IV. Summary of Final Rule and Changes From the NPRM

§ 541.1 Purpose

There are no changes from the text proposed in the NPRM.

§ 541.2 Scope and Applicability

This final rule makes minor changes to the text proposed in the NPRM. In paragraph (a), “to a billed party or their designated agent” has been removed. “To a billed party” has been removed because part 541 also covers demurrage or detention invoices that are sent to persons who are not a “billed party” as defined in § 541.3. “Or their designated agent” has been removed as the text is unnecessary. Traditional rules of agency remain applicable under the Shipping Act.[292] In paragraph (b), “regulation” has been replaced with “part.” “Regulation” was a scrivener's error in the proposed text. While “regulation” is sometimes used to describe a rule in totality, it more frequently is used to describe a single section or subsection of the Code of Federal Regulations. “Part” is more precise and, most importantly, aligns with the Code of Federal Regulation's organizational taxonomy.

Part 541 governs any invoice issued by an ocean common carrier or non-vessel-operating common carrier for the collection of demurrage or detention charges. Part 541 does not govern the billing relationships among and between ocean common carriers and marine terminal operators. The Commission has not received information about the relationships or interactions between VOCCs and MTOs that warrants regulating the format used by MTOs to bill VOCCs. At the present time, the Commission is confident that the strong commercial relationships between the parties is enough to ensure that the proper information is shared and that the party who ultimately receives the invoice is receiving accurate information. Part 541 does apply to all other demurrage and detention invoices issued by MTOs. MTOs often do not have direct contractual relationships with shippers. However, MTOs are entitled to separately assess demurrage as an implied contract provided that it is published as part of an MTO Schedule and there are some situations where marine terminal operators impose fees directly on shippers and NVOCCs. A primary concern of the Commission is to ensure billed parties understand the demurrage or detention invoices they receive. Therefore, in those cases where an MTO charges any party other than a VOCC detention or demurrage charges, the Commission finds that MTOs should be subject to the same regulations that apply to VOCCs and NVOCCs.

§ 541.3 Definitions

This final rule makes three changes from the text proposed in the NPRM. “Billing dispute” has been removed and “consignee” and “person” have been added as defined terms. “Billing dispute” does not need to be defined because it is not a term used in §§ 541.4–541.99, in either the NPRM or final rule.

Billed party. For purposes of part 541, “billed party” means the person receiving the demurrage or detention invoice and who is responsible for payment of any incurred demurrage or detention charge.

Billing party. For purposes of part 541, “billing party” means the VOCC, NVOCC, or MTO who issues a demurrage or detention invoice. While in most cases, the billing party will be a VOCC, this term is defined broadly to incorporate the occasions when an MTO or an NVOCC may issue a demurrage or detention invoice.

Consignee. The definition of “consignee” that has been added to § 541.3 comports with the definition of “consignee” that appears in § 520.2.

Demurrage or detention. “Demurrage or detention” includes any charge assessed by common carriers and marine terminal operators related to the use of marine terminal space or shipping containers. The scope of the term in § 541.3 is the same as the scope of “demurrage or detention” in § 545.5(b). It encompasses all charges having the purpose or effect of demurrage or detention regardless of what those charges may be called by the billing party. The definition excludes charges related to equipment other than containers, such as chassis, because depending on the context, “per diem” can refer to containers, chassis, or both.

Demurrage or detention invoice. For purposes of part 541, “demurrage or detention invoice” means any statement, printed, written, or accessible online, that documents an assessment of demurrage or detention charges. This broad definition includes all currently existing methods of invoicing shipping (e.g., email and online portal), as well as those that may be developed in the future.

Person. The definition of “person” that has been added to § 541.4 aligns with § 515.2(n).

§ 541.4 Properly Issued Invoices

This final rule makes changes to the proposed § 541.4 text to allow consignees to be issued demurrage and detention invoices as an alternative billed party. The revised regulation makes clear that the consignee is an alternative billed party, and the same invoice may be not issued to both the shipper and the consignee. Additionally, the Commission has made minor, non-substantive changes that aid in clarity.

If the billed party has firsthand knowledge of the terms of a service contract with a common carrier, then they are in a better position to ensure that both they and the carrier are abiding by those terms. When demurrage or detention invoice disputes do arise, the billed party is in a better position than third parties such as truckers and customs brokers to analyze the accuracy of the charge. Further, when the billed party disputes a charge, they have an existing commercial relationship with the billing party and are in a better position to resolve the dispute. Therefore, under this final rule, a properly issued invoice is an invoice that is issued to: (1) the person that has contracted with the billing party for the ocean transportation or storage of cargo, or (2) the consignee (when in contractual privity with the carrier).

In the final rule, the Commission has changed the word “goods” to “cargo” in § 541.4(a)(1). “Cargo” is a broader term that puts the focus on the container, rather than the items inside it. As such, this comports with the rule's focus on the container, as demurrage and detention charges are levied on the container rather than the items inside it.

“Contract” in this rule has its normal and ordinary legal meaning.[293] Because contracts (other than contracts implied by law) require a meeting of the minds, merely listing a party on a bill of lading, or contract of affreightment, will not be sufficient for them to become a billed party for purposes of part 541 if they played no role in contracting for the ocean transportation or storage of cargo. Whether a meeting of the minds has occurred is something that can vary based on the specific circumstances of a given relationship. Because a contract can exist even if not memorialized in writing, the Commission declines to add a requirement that contracts need to be in writing for purposes of this rule. The Commission notes, however, that written contracts can provide important documentary evidence of agreement.

Consignees may be billed as an alternative to the shipper when the consignee is the party contracting for the shipping and is therefore in contractual privity with the carrier. Merely listing the consignee on the bill of lading is not sufficient to support billing the consignee. (Conversely, although rarer, it is possible to properly issue an invoice to a consignee that has not been listed on the bill of lading.)

This rule does not prohibit or otherwise limit an MTO from issuing any party—including BCOs or Motor Carriers—an invoice based on a Terminal Schedule, including charges for detention or demurrage, if the Terminal Schedule includes such charges and the Schedule has been made available in accordance with 46 CFR 525.3. As noted by the commenters, 46 U.S.C. 40501(f) and 46 CFR 525.2(a)(2) establish that such Schedules are enforceable as implied contracts. Under such a scenario, a Motor Carrier has a contractual relationship with the MTO and the terms of the contract (the Schedule) are known to the Motor Carrier in advance by operation of 46 CFR 525.3. This is a very different situation than where a Motor Carrier is billed for demurrage or detention and the Motor Carrier has no contractual relationship with the billing party and is not privy to the specifics of the contractual agreement (such as where a Motor Carrier is billed demurrage or detention based on an agreement between a shipper and a billing party).

This rule does require that when an MTO issues a bill for demurrage or detention for purposes of enforcing a Terminal Schedule, the billing must comply with part 541, including providing all the information required by § 541.6. The Commission recognizes that this may require MTOs to revise their current business practices. As discussed in the NPRM, the Commission's primary concern with this rule is to ensure that billed parties understand the demurrage or detention invoices they receive.[294] Any additional burden on MTOs to be able to provide the necessary data, which the Commission does not believe will be unduly burdensome, is outweighed by the benefits of transparency.

The Commission notes that other MTO billing relationships are also subject to part 541. For example, an MTO issuing a demurrage or detention invoice in order to collect on behalf of a VOCC or issuing a demurrage or detention invoice to an NVOCC must comply with part 541. However, MTOs sometimes require BCOs or their agents to pay freight charges prior to removal of cargo and those freight charges are excluded from the definition of “demurrage and detention” in § 541.3.

§ 541.5 Failure To Include Required Information

Under 46 U.S.C. 41104(f), failure to include any of the required minimum information in 46 U.S.C. 41104(d) eliminates the obligation of the charged party to pay the applicable charge. Section 541.5 is intended to mirror this requirement. To clarify that intent, the Commission has changed the paragraph from “applicable invoice” in the NPRM to “applicable charge” in this final rule. It was not the agency's intent to imply that non-demurrage or detention charges could be voided by failure to include the information in § 541.6.

Similarly, pursuant to 46 U.S.C. 41102(c), it is a prohibited practice for an MTO to fail to include the required minimum information in a demurrage and detention invoice sent to a party other than a VOCC. Sending incomplete bills that do not contain sufficient information for shippers to verify if the bills received are accurate would not constitute having just and reasonable practices relating to or connected with receiving, handling, storing or delivering property. Extending the elimination of charge obligations provision at 46 U.S.C. 41104(f) to MTOs issuing demurrage and detention invoices would enforce Congress' intent to have the Commission “further define prohibited practices by . . . marine terminal operators, . . . under section 41102(c) of title 46, United States Code, regarding the assessment of demurrage or detention charges” and ensure that all demurrage and detention bills sent to billed parties provide the necessary information for the bills to be paid or disputed quickly thereby ensuring efficiency across the shipping system.

§ 541.6 Contents of Invoice

This final rule makes minor changes to the proposed requirements regarding digital notification of how a billed party can request fee mitigation, refund, or waiver as well as minor, non-substantive changes to align language with OSRA 2022 and the defined terms in § 541.3.

The Commission has made changes throughout the regulation to align the text to the defined terms in § 541.3. “Invoice” has been replaced with “demurrage or detention invoice.” “Billing date” and “billing due date” have been changed to “invoice date” and “invoice due date.” Finally, “invoiced party” has been changed to “billed party.”

In response to comments, the Commission has added language that clearly specifies that the information submitted on the invoice must be accurate. Inclusion of the language aligns with the language used in 46 U.S.C. 41104(d)(2).

The Commission has amended the introductory sentences of paragraphs (a), (b), and (c) to make clear that these are minimum information elements. Billing parties may include additional information on the invoices and are encouraged to do so if they believe that such information will be useful to billed parties in verifying the validity of demurrage and detention charges.

The Commission has amended paragraph (c)(2) by adding terminal schedule to the listed examples of documents, and changing “i.e.,” to “e.g.,” to reflect that this is not an exhaustive list of all possible documents.

The Commission has amended paragraph (d)(2) to expand the means of digital notification to billed parties of what they need to do to successfully submit a fee mitigation, refund, or waiver request. The language in the proposed rule required that the invoice contain a URL address that directs the billed party to a publicly accessible website that provides the necessary information. This final rule has expanded that to any digital means, including QR codes, or digital watermarks.

§ 541.7 Issuance of Demurrage and Detention Invoices

This rule requires detention and demurrage invoices to be issued within specified timeframes. As the proposed timeframe language was ambiguous, in this final rule the Commission has clarified that all “days” in the regulation are calendar days.

The Commission is retaining the requirement as proposed in the NPRM that, generally, all demurrage and detention invoices must be issued in 30 days. The Commission has removed the language “required timeframe” from the version of § 541.7(a) that appeared in the NPRM in order to make this subsection clearer. The Commission has revised this subsection to more explicitly dictate the required timing for purposes of clarity.

In response to comments received during the NPRM, the Commission has revised § 541.7 to allow an exception for NVOCCs. That exception is located in paragraph (b) in this final rule. NVOCCs must issue demurrage and detention invoices within 30 days from the issuance date of the demurrage or detention invoice it received. If a billing party does not issue a demurrage or detention invoice within the required timeframe, then the billed party is not required to pay the charge. Paragraph (c) has been added to reflect situations where an NVOCC is acting as both a billing and billed party in relation to the same charge, and allows the NVOCC to inform its billing party that the charge has been disputed by the NVOCC's billed party. In that circumstance, the NVOCC must provide an additional 30 days for the NVOCC to dispute the charge upon notice.

The final language of § 541.7(d) has removed the link between a billing party reissuing an invoice with an incorrectly billed party's disputing of that invoice. This is consistent with the incentive present in the rest of the rule. The burden of issuing a correct invoice should not rely on an incorrectly billed party to dispute the incorrect invoice. Removing this link is also consistent with several comments that requested removing the 60-day requirement from § 541.7(d), which applied to bills sent to a correctly billed party following the billing of an incorrect party. Section 541.7(d) now gives a billing party 30 calendar days to issue a corrected invoice, which is consistent with the rule's purpose of a swift timeline for demurrage and detention billing.

The NPRM's linking a billing party's ability to reissue an invoice with an incorrectly billed party's disputing that invoice also caused confusion as to whether there was any interplay between § 541.7 and § 541.8. The changes to the rule text adopted in this final rule make clear that § 541.7 spells out the rules for issuing an invoice to the correctly billed party. By contrast, § 541.8 speaks to a process that assumes the invoice was sent to the correct party, as the term “billed party” encompasses the fact that it is the correct party.

§ 541.8 Requests for Fee Mitigation, Refund, or Waiver

This rule requires billing parties to allow at least 30 days for billed parties to submit a fee mitigation, refund, or waiver request. The Commission has retained the NRPM's proposal that if such a request is submitted by the billed party, the billing party must resolve the request within 30 days. However, based on public comments, the Commission has allowed an exception. A request for fee mitigation, refund, or waiver may be resolved later than 30 days if both parties agree to the later date. The Commission has added language to clarify that the timeframes in the regulation are calendar days. Also based on public comment, the Commission has removed the penalty provision proposed in the NPRM that if the billing party fails to resolve the fee mitigation, refund, or waiver request within the 30-day deadline, the billed party is not required to pay the charge at issue. This proposed penalty provision is not a requirement of OSRA 2022.

Section 541.8 does not impact a party's right to file a Charge Complaint with the Commission. Parties do not need to wait a certain period of time or for a triggering event to occur prior to filing a complaint. Parties interested in filing a Charge Complaints at the Commission may do so by following the steps outlined on the Commission's website.[295] 

When the Commission receives sufficient information, it will promptly initiate an investigation.[296] 
SectionParagraphChange from NPRMReason
541.2 Scope and applicability(a) (b)Removes “to a billed party or their designated agent” Changes “regulation” to “part”Language unnecessary. Correction of scrivener’s error.
541.3 Definitions“Billing dispute”Definition removedLanguage unnecessary. Correction of scrivener’s error. Term not used in §§ 541.4–541.99.
“Consignee”Definition addedFinal Rule allows consignees to be an alternative billed party.
“Person”Definition addedClarification.
541.4 Properly issued invoices(a)Paragraph divided into subparagraphs (a)(1) and (2); consignees listed as an alternative billed partyFinal Rule allows consignees to be an alternative billed party.
“provided ocean transportation or storage” changed to “provided ocean transportation or storage of cargo”The term “cargo” was added to put the focus on the storage of the container rather than the merchandise inside of it and to be consistent with the addition of the term in the second clause.
“for the carriage or storage of goods” changed to “for the ocean transportation or storage of cargo”The term “goods” was changed to “cargo” for a broader term that put the focus on the container rather than the merchandise inside it.
(b)Language added stating that invoices cannot be issued to more than one partyClarification.
(c)Formerly paragraph (b)Conforming amendment.
541.5 Failure to include required information“invoice” changed to “charge”Conforms regulatory language to statutory language.
541.6 Contents of invoiceIntroductory paragraphremovedInformation incorporated into other paragraphs.
(a)“The invoice” changed to “A demurrage or detention invoice”Correction of scrivener’s error.
“including” changed to “and at a minimum must include”Clarification.
In (a)(4), “invoiced party” changed to “billed party”Correction of scrivener’s error.
“must be accurate” addedClarification.
(b)“The invoice” changed to “A demurrage or detention invoice”Correction of scrivener’s error.
“including” changed to “and at a minimum must include”Clarification.
“must be accurate” addedClarification.
In (b)(1) and (2) “billing date” changed to “invoice date”Conforming change; elsewhere in the regulatory text “invoice” is used.
(c)“The invoice” changed to “A demurrage or detention invoice”Correction of scrivener’s error.
“including” changed to “and at a minimum must include”Clarification.
“must be accurate” addedClarification.
In (c)(2) “( i.e., the tariff name and rule number, applicable service contract number and section, or applicable negotiated arrangement)” changed to “ e.g., the tariff name and rule number, terminal schedule, applicable service contract number and section, or applicable negotiated arrangement)”Clarification/Correction of scrivener’s error. Adds terminal schedule to the list of examples and clarifies that this is a non-exhaustive set of examples.
(d)“The invoice” changed to “A demurrage or detention invoice”Correction of scrivener’s error.
“including” changed to “and at a minimum must include”Clarification.
In (d)(2), “The URL address” changed to “Digital means, such as a URL address, QR code, or digital watermark, that directs the billed party to”; “portion of the billing party’s website” removedExpands the means of digital notification.
(e)“The invoice” changed to “A demurrage or detention invoice”Correction of scrivener’s error.
“must be accurate” addedClarification.
541.7 Issuance of demurrage and detention invoice(a)“30 days” changed to “thirty (30) calendar days”Clarification.
“demurrage or detention invoices” changed to “a demurrage or detention invoice”Correction of scrivener’s error.
In the second sentence “the required timeframe” changed to “thirty (30) calendar days from the date on which the charge was last incurred”Clarification.
(b)New paragraph addedClarifies timeframe for NVOCCs passing through demurrage and detention charges to issue their own invoices.
(c)New paragraph addedClarifies timeframe for NVOCCs when acting as both a billing and billed party in relation to the same charge.
(d)Formerly paragraph (b)Conforming amendment.
In the first sentence “the incorrect party” changed to “an incorrect person”Correction of scrivener’s error and clarification to further distinguish an incorrectly issued invoice.
“days” changed to “calendar days”Clarification.
In the NPRM, the correct billed party had to receive the invoice within 30 days from the date of the dispute, but no later than 60 days after the charges were last incurred. The final rule instead imposes a strict 30-calendar-day deadline from when the charges were last incurred for the issuance of an invoice to a correct billed party, regardless of whether or not there may have been an invoice previously issued to an incorrect partyShifts burden to the billing party to issue accurate invoices.
541.8 Requests for fee mitigation, refund, or waiver(a)Paragraph rewordedClarification. The paragraph has been re-worked for clarity. No substantive change from the NPRM; billing parties must still allow billed parties 30 days from when an invoice is issued to request mitigation, refund or waiver. Clarification that the timeframe is in calendar days.
(b)“must resolve” changed to “must attempt to resolve”Change promotes good-faith efforts of billing and billed parties to work resolve disputes.
“30 days” changed to “thirty (30) calendar days”Clarification.
added “or at a later date as agreed upon by both parties” to the end of the first sentenceClarification.
“If the billing party fails to resolve the fee mitigation, refund, or waiver request within the 30-day deadline, the billed party is not required to pay the charge at issue.” removedRemoves non-statutory penalty.
V. Rulemaking Analyses and Notices

A. Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 601–612, provides that whenever an agency is required to publish a notice of proposed rulemaking under the Administrative Procedure Act (APA), 5 U.S.C. 553, the agency must prepare and make available for public comment an initial regulatory flexibility analysis (IRFA) describing the impact of the proposed rule on small entities, unless the head of the agency certifies that the rulemaking will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 603, 605.

This final rule requires VOCCs, NVOCCs, and MTOs to include minimum billing information on detention and demurrage invoices. The rulemaking additionally requires billing parties that issue demurrage and detention invoices to follow certain billing practices; specifically, billing parties must issue demurrage and detention invoices within 30 calendar days from when charges stop accruing. See 87 FR at 27975–27976.

The Commission presumes that VOCCs and MTOs generally do not qualify as small entities under the guidelines of the Small Business Administration (SBA). The Commission previously stated that VOCCs and MTOs generally are large companies that exceed the employee (500) and/or annual revenue ($21.5 million) thresholds to be considered small business entities. However, the Commission presumes that NVOCCs are small business entities.

There are likely two types of costs imposed by the proposed rulemaking on the affected businesses. The imposition of a 30-calendar day deadline to issue an invoice from when demurrage and detention charges stop accruing could result in a loss of revenue to the billing party. In addition, the minimum billing information requirements imposed by the proposed rule may require the billing party to collect additional information and change its billing information technology system to include all the required information on invoices.

Most of the costs of the rulemaking will be borne by VOCCs and MTOs as they generally assess demurrage and detention charges, and not NVOCCs. As discussed above, in most cases, NVOCCs pass through detention and demurrage charges billed to them on invoices generated by VOCCs or MTOs. Accordingly, NVOCCs should receive the minimum billing information required by the proposed rule from either the VOCC or MTO issuing the invoice.

For these reasons, the Chairman of the Federal Maritime Commission certifies that this rule will not have a significant economic impact on a substantial number of small entities.

B. Congressional Review Act

The rule is not a “major rule” as defined by the Congressional Review Act (5 U.S.C. 801 et seq). The rule will not result in: (1) An annual effect on the economy of $100,000,000 or more; (2) a major increase in costs or prices; or (3) significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based companies to compete with foreign based companies. 5 U.S.C. 804(2).

C. National Environmental Policy Act

The National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321–4347) requires Federal agencies to consider the environmental impacts of proposed major Federal actions significantly affecting the quality of the human environment, as well as the impacts of alternatives to the proposed action. When a Federal agency prepares an environmental assessment, the Council on Environmental Quality (CEQ) NEPA implementing regulations (40 CFR parts 1500–1508) require it to “include brief discussions of the need for the proposal, of alternatives [. . .], of the environmental impacts of the proposed action and alternatives, and a listing of agencies and persons consulted.” 40 CFR 1508.9(b). After an environmental assessment, the Commission issued a Finding of No Significant Impact (“FONSI”), 87 FR 73278 (Nov. 29, 2022), and explained that the FONSI would become final 10 days after publication unless a petition for review was filed with FMC by Dec. 9, 2022. (The World Shipping Council and Pacific Merchant Shipping Association jointly filed a petition for review on December 9, 2022.[297] FMC denied the petition on January 6, 2023.[298]). The FONSI and environmental assessment, as well as the petition and the Commission's denial of the petition are available for inspection in the docket at www.regulations.gov.

D. Paperwork Reduction Act

This final rule calls for a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520). As defined in 5 CFR 1320.3(c), “Collection of Information” comprises reporting, recordkeeping, monitoring, posting, labeling, and other, similar actions. In compliance with the PRA, the Commission submitted the proposed information collection to the Office of Management and Budget. Notice of the information collections was published in the Federal Register and public comments were invited. 87 FR 62341, 62356 (Oct. 14, 2022). Neither the Commission nor OMB received any comments that impacted the FMC's burden calculation or provided additional information to improve the calculation estimate.The title and description of the information collections, a description of those who must collect the information, and an estimate of the total annual burden follow. The estimate covers the time for reviewing instructions, searching existing sources of data, gathering and maintaining the data needed, and completing and reviewing the collection.

Title: 46 CFR Part 541—Demurrage and Detention Billing Requirements

Summary of the Collection of Information: Title 46 U.S.C. 41104(a)(15) and (d)(2), as well as 46 CFR part 541 subpart A, require demurrage and detention invoices to contain certain additional information to increase transparency so that billed parties can identify the containers at issue, the applicable rate, dates for which charges accrued, and how to dispute charges. Further, 46 U.S.C. 41104(d)(2) and 46 CFR part 541 also require demurrage and detention invoices to certify that the charges comply with applicable regulatory provisions and that the invoicing party's behavior did not contribute to the charges.

Need for Information: The Commission identifies information that entities must include on demurrage and detention invoices to ensure compliance with the Shipping Act of 1984, as amended. Specifically, 46 CFR part 541 subpart A implements the billing information requirements contained in 46 U.S.C. 41104(d)(2) and adds additional minimum information that billing parties must include on demurrage and detention invoices.

Frequency: The frequency of demurrage and detention invoices is determined by the billing party. It is the billing entity's responsibility to ensure that their demurrage and detention charges comply with applicable statutory and regulatory provisions. The Commission estimates that between five and ten percent of all containers moving in U.S.-foreign trade will receive a demurrage and/or detention invoice or an estimated range of 1,135,000 and 2,270,000 invoices annually.

Type of Respondents: VOCCs, MTOs, and NVOCCs are required to include specific information on their demurrage and detention invoices sent to billed parties.

Number of Annual Respondents: The Commission anticipates an annual respondent universe of 354 VOCCs and MTOs. The Commission did not include NVOCCs in its annual respondent universe because in most, if not all cases, NVOCCs pass through the demurrage and detention charges it receives to their customers. Because NVOCCs are passing through the charges, they are not collecting the required minimum information themselves.

Estimated Time per Response: The Commission estimates a one-time burden of an estimated 25 hours per respondent to integrate the required billing information elements into their existing invoicing system. After this initial burden, the Commission anticipates that the estimated time to create and retain each demurrage or detention invoice to be six minutes or 0.1 hours.

Total Annual Burden: The Commission estimates a one-time burden for respondents to integrate the additional billing information elements, required by OSRA 2022 and by the proposed rule, into their existing invoicing system to be 8,850 person-hours and $882,522. After this initial integration, the Commission estimates the total annual burden to provide demurrage and detention invoices and to ensure accuracy to be 113,500–227,000 person-hours and $6,339,020–$12,678,040.

As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), we have submitted a copy of this rule to the Office of Management and Budget (OMB) for its review of the collection of information. Before the Commission may enforce the collection of information requirements in this rule, OMB must approve FMC's request to collect this information. You need not respond to a collection of information unless it displays a currently valid control number from OMB.

E. Executive Order 12988 (Civil Justice Reform)

This rule meets the applicable standards in E.O. 12988, “Civil Justice Reform,” (61 FR 4729, Feb. 7, 1996) to minimize litigation, eliminate ambiguity, and reduce burden.

List of Subjects in 46 CFR Part 541

– Demurrage and detention; Common carriers; Exports; Imports; Marine terminal operators

For the reasons set forth in the preamble, the Federal Maritime Commission amends title 46 of the CFR by adding part 541 to read as follows:

1. Add part 541 to read as follows: 

PART 541—DEMURRAGE AND DETENTION

Subpart A—Billing Requirements and Practices

541.1           Purpose.

541.2           Scope and applicability.

541.3           Definitions.

541.4           Properly issued invoice.

541.5           Failure to include required information.

541.6           [Reserved]

541.7           Issuance of demurrage and detention invoice.

541.8           Requests for fee mitigation, refund, or waiver.

541.9–541.99    [Reserved]

Subpart B [Reserved]

Authority: 5 U.S.C. 553; 46 U.S.C. 40101, 40102, 40307, 40501–40503, 41101–41106, 40901–40904, and 46105; and 46 CFR 515.23.

Subpart A—Billing Requirements and Practices

§ 541.1 Purpose.

This part establishes the minimum information that must be included on or with demurrage and detention invoices. It also establishes procedures that must be adhered to when invoicing for demurrage or detention.

§ 541.2 Scope and applicability.

(a) This part sets forth regulations governing any invoice issued by an ocean common carrier, marine terminal operator, or non-vessel-operating common carrier for the collection of demurrage or detention charges.

(b) This part does not govern the billing relationships among and between ocean common carriers and marine terminal operators.

§ 541.3 Definitions.

In addition to the definitions set forth in 46 U.S.C. 40102, when used in this part:

Billed party means the person receiving the demurrage or detention invoice and who is responsible for the payment of any incurred demurrage or detention charge.

Billing party means the ocean common carrier, marine terminal operator, or non-vessel-operating common carrier who issues a demurrage or detention invoice.

Consignee means the ultimate recipient of the cargo; the person to whom final delivery of the cargo is to be made.

Demurrage or detention mean any charges, including “per diem” charges, assessed by ocean common carriers, marine terminal operators, or non-vessel-operating common carriers related to the use of marine terminal space (e.g., land) or shipping containers, but not including freight charges.

Demurrage or detention invoice means any statement of charges printed, written, or accessible online that documents an assessment of demurrage or detention charges.

Person means an individual, corporation, or company, including a limited liability company, association, firm, partnership, society, or joint stock company existing under or authorized by the laws of the United States or of a foreign country.

§ 541.4 Properly issued invoices.

(a) A properly issued invoice is a demurrage or detention invoice issued by a billing party to:

(1) The person for whose account the billing party provided ocean transportation or storage of cargo and who contracted with the billing party for the ocean transportation or storage of cargo; or

(2) The consignee.

(b) If a billing party issues a demurrage or detention invoice to the person identified in paragraph (a)(1) of this section, it cannot also issue a demurrage or detention invoice to the person identified in paragraph (a)(2) of this section.

(c) A billing party cannot issue an invoice to any other person.

§ 541.5 Failure to include required information.

Failure to include any of the required minimum information in this part in a demurrage or detention invoice eliminates any obligation of the billed party to pay the applicable charge.

§ 541.6 [Reserved]

§ 541.7 Issuance of demurrage and detention invoices.

(a) A billing party must issue a demurrage or detention invoice within thirty (30) calendar days from the date on which the charge was last incurred. If the billing party does not issue a demurrage or detention invoice within thirty (30) calendar days from the date on which the charge was last incurred, then the billed party is not required to pay the charge.

(b) If the billing party is a non-vessel-operating common carrier, then it must issue a demurrage or detention invoice within thirty (30) calendar days from the issuance date of the demurrage or detention invoice it received. If such a billing party does not issue a demurrage or detention invoice within thirty (30) calendar days from the issuance date of the demurrage or detention invoice it received, then the billed party is not required to pay the charge.

(c) A non-vessel-operating common carrier (NVOCC) can be both a billing and billed party in relation to the same charge. When an NVOCC is acting in both roles, it can inform its billing party that the charge has been disputed by the NVOCC's billed party. The NVOCC's billing party must then provide an additional thirty (30) calendar days for the NVOCC to dispute the charge upon this notice.

(d) If the billing party invoices an incorrect person, the billing party may issue an invoice to the correct billed party provided that such issuance is within thirty (30) calendar days from the date on which the charge was last incurred. If the billing party does not issue this corrected demurrage or detention invoice within thirty (30) calendar days from the date on which the charge was last incurred, then the billed party is not required to pay the charge.

§ 541.8 Requests for fee mitigation, refund, or waiver.

(a) The billing party must allow the billed party at least thirty (30) calendar days from the invoice issuance date to request mitigation, refund, or waiver of fees from the billing party.

(b) If a billing party receives a fee mitigation, refund, or waiver request from a billed party, the billing party must attempt to resolve the request within thirty (30) calendar days of receiving such a request or at a later date as agreed upon by both parties.

§ 541.9–541.99 [Reserved]

2. Delayed indefinitely, add § 541.6 to read as follows: 

§ 541.6 Contents of invoice.

(a) Identifying information. A demurrage or detention invoice must be accurate and contain sufficient information to enable the billed party to identify the container(s) to which the charges apply and at a minimum must include:

(1) The Bill of Lading number(s);

(2) The container number(s);

(3) For imports, the port(s) of discharge; and

(4) The basis for why the billed party is the proper party of interest and thus liable for the charge.

(b) Timing information. A demurrage or detention invoice must be accurate and contain sufficient information to enable the billed party to identify the relevant time for which the charges apply and the applicable due date for invoiced charges and at a minimum must include:

(1) The invoice date;

(2) The invoice due date;

(3) The allowed free time in days;

(4) The start date of free time;

(5) The end date of free time;

(6) For imports, the container availability date;

(7) For exports, the earliest return date; and

(8) The specific date(s) for which demurrage and/or detention were charged.

(c) Rate information. A demurrage or detention invoice must be accurate and contain sufficient information to enable the billed party to identify the amount due and readily ascertain how that amount was calculated and must include at a minimum:

(1) The total amount due;

(2) The applicable detention or demurrage rule (e.g., the tariff name and rule number, terminal schedule, applicable service contract number and section, or applicable negotiated arrangement) on which the daily rate is based; and

(3) The specific rate or rates per the applicable tariff rule or service contract.

(d) Dispute information. A demurrage or detention invoice must be accurate and contain sufficient information to enable the billed party to readily identify a contact to whom they may direct questions or concerns related to the invoice and understand the process to request fee mitigation, refund, or waiver, and at a minimum must include:

(1) The email, telephone number, or other appropriate contact information for questions or request for fee mitigation, refund, or waiver;

(2) Digital means, such as a URL address, QR code, or digital watermark, that directs the billed party to a publicly accessible website that provides a detailed description of information or documentation that the billed party must provide to successfully request fee mitigation, refund, or waiver; and

(3) Defined timeframes that comply with the billing practices in this part, during which the billed party must request a fee mitigation, refund, or waiver and within which the billing party will resolve such requests.

(e) Certifications. A demurrage or detention invoice must be accurate and contain statements from the billing party that:

(1) The charges are consistent with any of the Federal Maritime Commission's rules related to demurrage and detention, including, but not limited to, this part and 46 CFR 545.5; and

(2) The billing party's performance did not cause or contribute to the underlying invoiced charges.

3. Delayed indefinitely, add § 541.99 to read as follows: 

§ 541.99 OMB control number assigned pursuant to the Paperwork Reduction Act.

The Commission has received Office of Management and Budget approval for this collection of information pursuant to the Paperwork Reduction Act of 1995, as amended. The valid control number for this collection of information is 3072–XXXX.

Subpart B [Reserved]

By the Commission.

David Eng,

Secretary.


Footnotes

1. Federal Maritime Commission, 
Detention and Demurrage, https://www.fmc.gov/​detention-and-demurrage/#:~:text=In%20dollar%20terms%2C%20the%20nine,over%20the%20two%2Dyear%20period (last visited Oct. 11, 2023).

2. There are two types of common carriers: (1) vessel-operating common carriers (VOCCs), also called ocean common carriers, and (2) non-vessel-operating common carriers (NVOCCs). 46 U.S.C. 40102(7), (17), (18).

3. “Marine terminal operator” (MTO) is defined at 46 U.S.C. 40102(15).

4. See Fact Finding Investigation No. 29, Interim Recommendations at 6 (July 28, 2021) (Fact Finding 29 Interim Recommendations), available at: https://www2.fmc.gov/​ReadingRoom/​docs/​FFno29/​FF29%20Interim%20Recommendations.pdf/​.

5. Fact Finding 29 Interim Recommendations at 7.

6. Fed. Mar. Comm'n, Press Release, FMC to Issue Guidance on Complaint Proceedings and Seek Comments on Demurrage and Detention Billings (Sept. 15, 2021), https://www.fmc.gov/​fmc-to-issue-guidance-on-complaint-proceedings-and-seek-comments-on-demurrage-and-detention-billings/​.

7. Advance Notice of Proposed Rulemaking on Demurrage and Detention Billing Requirements, 87 FR 8506 (Feb. 15, 2022). See Docket No. 22–04, Demurrage and Detention Billing Requirements.

8. 87 FR at 8507, 8508–8509 (Questions 1 and 7).

9. 87 FR at 8507, 8509 (Questions 2 and 3).

10. 87 FR at 8508.

11. Id.

12 87 FR at 8509 (Question 6).

13. Id.

14. 87 FR at 8508, 8509 (Question 12).

15. The UIIA is a standard industry contract that provides rules for the interchange of equipment between motor carriers and equipment providers, such as VOCCs. Participation is voluntary.

16. 87 FR at 8508.

17. 87 FR at 8508, 8509 (Question 14).

18. Public Law 117–146, 136 Stat. 1272 (2022).

19. Public Law 117–146 at Sec. 7(a)(1), 136 Stat. at 1274 (codified at 46 U.S.C. 41104(a)(15)).

20. Public Law 117–146 at Sec. 7(a)(2), 136 Stat. at 1275 (codified at 46 U.S.C. 41104(d)(2)).

21. Public Law 117–146 at Sec. 7(a)(2), 136 Stat. at 1275 (codified at 46 U.S.C. 41104(f)).

22. Public Law 117–146 at Sec. 7(b)(1), 136 Stat. at 1275.

23. Public Law 117–146 at Sec. 7(b)(2), 136 Stat. at 1275 (emphasis added).

24. Id.

25. 87 FR 62341.

26. Bass Tech International (FMC–2022–0066–0230); National Industrial Transportation League (FMC–2022–0066–0230–0104).

27. E.g., Husky Terminal and Stevedoring, LLC (FMC–2022–0066–0248); Port Houston (FMC–2022–0066–0268).

28. Husky Terminal and Stevedoring, LLC (FMC–2022–0066–0248).

29. National Association of Waterfront Employers (FMC–2022–0066–0276); Port of NY/NJ Sustainable Services Agreement (FMC–2022–0066–0218). NAWE and PONYNJSSA also argued that: (1) the only way OSRA 2022 can be harmonized with 46 U.S.C. 41102(c) is by excluding MTOs from the proposed rule's substantive demurrage and detention billing requirements, and (2) if 46 U.S.C. 41102(c) and OSRA 2022 cannot be harmonized, the more specific statute, OSRA 2022, should control.

30. Port Authority of New York & New Jersey (FMC–2022–0066–0226); Port Houston (FMC–2022–0066–0268); West Coast MTO Agreement (FMC–2022–0066–0229).

31. Port Authority of New York & New Jersey (FMC–2022–0066–0226); American Association of Port Authorities (FMC–2022–0066–0255); West Coast MTO Agreement (FMC–2022–0066–0229).

32. Letter from Jake Auchincloss and Brian Babin, U.S. House Representatives (Aug. 17, 2023) (FMC–2022–0066–0282). The Congressmen also took issue with a recent Commission decision finding the imposition of equipment charges on a holiday weekend at odds with the incentive principle. That issue is outside the scope of this rulemaking.

33. Letter from John Garamendi, Dusty Johnson, Jim Costa, David Valado, Mike Thompson, and Jimmy Panetta, U.S. House Representatives (Jan. 2, 2023)(FMC–2022–0066–0279).

34. Id. (“Since enactment of the Ocean Shipping Reform Act of 2022, we have heard reports of marine terminal operators invoicing their own charges for demurrage and detention separate from those charged by ocean carriers. This practice directly contradicts written comments by the National Association of Waterfront Employers—the trade association for marine terminal operators—on the House discussion draft and to the Committee on Transportation and Infrastructure in 2021.”)

35. Id.

36. National Association of Waterfront Employers (FMC–2022–066–0276).

37. American Association of Port Authorities (FMC–2022–0066–0255); West Coast MTO Agreement (FMC–2022–0066–0229); Trapac, LLC (FMC–2022–0066–0136).

38. Interpretive Rule on Demurrage and Detention Under the Shipping Act, 84 FR 48850, 48852 (Sep. 17, 2019); Interpretive Rule on Demurrage and Detention Under the Shipping Act, 85 FR 29638 (May 18, 2020); Fact Finding Investigation No. 28, Final Report (Dec. 3, 2018), available at: https://www2.fmc.gov/​readingroom/​documents/​20973; Fact Finding Investigation No. 29, Final Report (May 31, 2022), available at: https://www.fmc.gov/​wp-content/​uploads/​2022/​06/​FactFinding29FinalReport.pdf; see also California v. United States, 320 U.S. 577, 584–85 (1944) (interpreting the analogous provision in the Shipping Act of 1916 as applying to demurrage); Am. Export-Isbrandtsen Lines, Inc. v. Fed. Mar. Comm'n, 444 F.2d 824, 829 (D.C. Cir. 1970) (interpreting the analogous provision in the Shipping Act of 1916 as applying to detention).

39. 46 U.S.C. 46105(a).

40. The Commission notes that canons of construction, such as reviewing legislative drafting history, are most useful in evaluating an interpretation of an ambiguous statute or regulation. See, e.g., Green v.  Bock Laundry Mach. Co., 490 U.S. 504, 508–09 (1989)(“We begin by considering the extent to which the text of [the disputed provision] answers the question before us. Concluding that the text is ambiguous with respect to [that question], we then seek guidance from legislative history . . .”). But that is not why the commenters raised the legislative drafting history. The commenters would have the Commission affirmatively read into existence a prohibition on regulating MTO demurrage and detention invoices because some versions of legislation contemplated by Congress laid out statutory requirements and others did not. The absence of a statutory requirement is not proof of a prohibition on issuing regulations. If Congress wanted to prohibit the Commission from regulating MTO demurrage and detention invoices, it could have done so. The Commission does not agree that the legislative history prohibits inclusion of MTOs in these regulations.

41. Public Law 117–146, 136 Stat. 1272, at 1275.

42. Garamendi, Johnson, Costa, Valado, Thompson, and Panetta, supra note 33.

43. See Balsam Brands (FMC–2022–0066–0095) (arguing that excluding MTOs potentially creates a loophole that would undermine the purposes and effectiveness of the regulation).

44. Auchincloss and Babin, supra note 32.

45. Many MTOs also made the argument that the legislative history of OSRA 2022 shows that Congress intended to exempt MTOs from demurrage and detention invoice requirements. American Association of Port Authorities (FMC–2022–0066–0255); West Coast MTO Agreement (FMC–2022–0066–0229); Fenix Marine Services, Ltd. (FMC–2022–0066–0186); Husky Terminal and Stevedoring, LLC (FMC–2022–0066–0248); Port of Houston (FMC–2022–0066–0268); Trapac, LLC (FMC–2022–0066–0136); National Association of Waterfront Employers (FMC–2022–0066–0276).

46. Garamendi, Johnson, Costa, Valado, Thompson, and Panetta, supra note 33.

47. “[T]he intent of this rulemaking is to ensure that the person receiving the bill understands the charges, regardless of whether the billing party is a VOCC, NVOCC, or an MTO.” See 87 FR at 62347.

48. Harbor Trucking Association (FMC–2022–0066–0261).

49. As noted above, demurrage and detention invoices between MTOs and VOCCs are not subject to this rule.

50. Garamendi, Johnson, Costa, Valado, Thompson, and Panetta, supra note 33.

51. Fenix Marine Services (FMC–2022–0066–0186); West Coast MTO Agreement (FMC–2022–0066–0229).

52. Trapac, LLC (FMC–2022–0066–0136).

53. Ports America/SSA Marine (FMC–2022–0066–0249).

54. Fenix Marine Services, Ltd. (FMC–2022–0066–0186).

55. Husky Terminal and Stevedoring, LLC (FMC–2022–0066–0248).

56. American Association of Port Authorities (FMC–2022–0066–0255).

57. See, e.g., Order of Investigation, Fact Finding Investigation No 28.

58. See, e.g., American Association of Port Authorities (FMC–2022–0066–0255); West Coast MTO Agreement (FMC–2022–0066–0229).

59. E.g., Cross Equip. Ltd. v. Hyundai Merch. Marine (Am.) Inc., 214 F.3d 1349 (Table) (5th Cir. 2000)(2000 WL 633596)(citing e.g., 4,885 Bags of Linseed, 66 U.S. (1 Black) 108, 109 (1861)).

60. Id. (citing e.g., The Bird of Paradise, 72 U.S. 545, 555 (1866)).

61. See also46 U.S.C. 41310(b) (Charge complaints authority states that Commission is required to investigate compliance with section 41102 of “the charge” received and does not specify that multiple instances must be alleged for the Commission to investigate and order a refund and/or civil penalty).

62. E.g., Landstar Exp. Am., Inc. v. Fed. Mar. Comm'n, 569 F.3d 493, 495 (D.C. Cir. 2009).

63. National Customs Brokers & Forwarders Association of America, Inc. (FMC–2022–0066–0180).

64. 87 FR 62341, 62347.

65. Maher Terminals, LLC (FMC–2022–0066–0269).

66. Shippers Coalition (FMC–2022–0066–0160).

67. Metro Group Maritime (FMC–2022–0066–0209).

68. New York New Jersey Foreign Freight Forwarders & Brokers Association, Inc. (FMC–2022–0066–0247).

69. Meat Import Council of America, Inc./North American Meat Institute (FMC–2022–0066–0188); Tyson Foods, Inc. (FMC–2022–0066–0225).

70. 87 FR 62341, 62350 (Oct. 14, 2022).

71. CV International, Inc. (FMC–2022–0066–0217).

72. BassTech International LLC (FMC–2022–0066–0230); National Retail Federation (FMC–2022–0066–0231); Pacific Merchant Shipping Association (FMC–2022–0066–0233); Ports America/SSA Marine (FMC–2022–0066–0249).

73. American Association of Port Authorities (FMC–2022–0066–0255).

74. 87 FR 62341, 62348.

75. Consumer Technology Association (FMC–2022–0066–0228).

76. 87 FR 62341, 62348.

77. FMC–2022–0066–0247.

78. FMC–2022–0066–0244.

79. Meat Import Council of America, Inc./North American Meat Institute (FMC–2022–0066–0188); Tyson Foods, Inc. (FMC–2022–0066–0225).

80. BassTech International, LLC (FMC–2022–0066–0230).

81. E.g, Harbor Trucking Association (FMC–2022–0066–0261).

82. See, e.g., Bipartisan House Comment (FMC–2022–0066–0279); T.G. Logistics, Inc. (FMC–2022–0066–0253); Retail Industry Leaders Association (FMC–2022–0066–0259); Meat Import Council of America, Inc./North American Meat Institute (FMC–2022–0066–0188); RPM Courier Systems (FMC–2022–0066–0120); Monica Rivera Beattie's Trucking Group (FMC–2022–0066–0115); Monk Transportation Ltd. (FMC–2022–0066–0117); Pacifica Trucks, LLC (FMC–2022–0066–0118); Harbor Freight Transport Corp. (FMC–2022–0066–0123); BBT Logistics, Inc. (FMC–2022–0066–0127); Golden State Logistics (FMC–2022–0066–0158); Dependable Highway Express (FMC–2022–0066–0164); Impact Transportation (FMC–2022–0066–0172); Tricon Transportation, Inc. (FMC–2022–0166–0174); RANTA Transport LLC (FMC–2022–0066–0175); Bridgeside Incorporated (FMC–2022–0066–0179); RED Trucking agents for Cowan Systems LLC (FMC–2022–0066–0181); FOX Intermodal Corp. (FMC–2022–0066–0185); Pacific Coast Container Inc. (FMC–2022–0066–0194); Bonelli Logistics, Inc. (FMC–2022–0066–0196); DELKA Trucking, Inc. (FMC–2022–0066–0221); A1 Dedicated Transport, LLC (FMC–2022–0066–0232); Mutual Express Company (FMC–2022–0066–0243); Dray Trucking, LLC (FMC–2022–0066–0258). Several commenters highlighted the importance of prohibiting common carriers from invoicing parties.

83. American Chemistry Council (FMC–2022–0066–0184).

84. See, e.g., Eagle Systems, Inc. (FMC–2022–0066–0203); Association of Bi-State Motor Carriers (FMC–2022–0066–0212); Harbor Trucking Association (FMC–2022–0066–0090).

85. Agriculture Transportation Coalition (FMC–2022–0066–0275).

86. Id.

87. Excargo Services Inc. (FMC–2022–0066–0151).

88. Reliable Transportation Specialist, Inc. (FMC–2022–0066–0214).

89. Association of Bi-State Motor Carriers (FMC–2022–0066–0212); Agriculture Transportation Coalition (FMC–2022–0066–0275); Intransit Container, Inc. (FMC–2022–0066–0227); Best Transportation (FMC–2022–0066–0090).

90. Association of Bi-State Motor Carriers (FMC–2022–0066–0212).

91. Andale Trucking (FMC–2022–0066–0146).

92. See, e.g., Cloud Trucking Inc. (FMC–2022–0066–0105).

93. FMC–2022–0066–0201.

94. FMC–2022–0066–0231.

95. FMC–2022–0066–0240.

96. 85 FR 29638, 29652.

97. FMC–2022–0066–0230.

98. “Service Contract” is defined at 46 U.S.C. 40102(21).

99. FMC–2022–0066–0180.

100. FMC–2022–0066–0160.

101. TraPac (FMC–2022–0066–0136); Fenix Marine Services (FMC–2022–0066–0186); West Coast MTO Agreement (FMC–2022–0066–0229). Furthermore, “schedule” is defined by FMC regulations at 46 CFR 525.1(c)(17).

102. See, e.g., Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14, 16 (2004) (“[C]ontracts for carriage of goods by sea must be construed like any other contracts: by their terms and consistent with the intent of the parties”); Contract, Black's Law Dictionary (11th ed. 2019).

103. E.g., Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004).

104. E.g.,87 FR 62341, 62347.

105. FMC Order of Investigation, Fact Finding Investigation No. 28, 2 (2018). The Order of Investigation and other materials related to Fact Finding 28 are available on the Commission's website at https://www.fmc.gov/​fact-finding-28/​.

106. 87 FR 62341, 62349–62350.

107. Meat Import Council of America, Inc./North American Meat Institute (FMC–2022–0066–0188); International Association of Movers (FMC–2022–0066–0222); and Consumer Technology Association (FMC–2022–0066–0228).

108. International Association of Movers (FMC–2022–0066–0222).

109. Consumer Technology Association (FMC–2022–0066–0228).

110. International Tank Container Organisation (FMC–2022–0066–0096); Flexport, Inc. (FMC–2022–0066–0111).

111. FMC–2022–0066–0096.

112. INTERCOMS (International Commercial Terms) are a set of standardized trade terms published by the International Chamber of Commerce (ICC) that are commonly used in international trade contracts.

113. Shippers Coalition (FMC–2022–0066–0160); FedEx Trade Networks Transport & Brokerage, Inc. (FMC–2022–0066–0165); American Association of Exporters and Importers (FMC–2022–0066–0168); National Customs Brokers & Forwarders Association of America, Inc. (FMC–2022–0066–0180); SM Line Corp. (FMC–2022–0066–0182); American Chemistry Council (FMC–2022–0066–0184); International Housewares Association (FMC–2022–0066–0187); A Customs Brokerage, Inc. (FMC–2022–0066–0200); Dole Ocean Cargo Express (FMC–2022–0066–0201) (would prefer no limits on who an invoice could be issued to but included statements that a consignee is sometimes the proper person to be billed); National Association of Chemical Distributors (FMC–2022–0066–0208); Metro Group Maritime (FMC–2022–0066–0209); Consumer Brands Association (FMC–2022–0066–0210); CV International (FMC–2022–0066–0217); Seafrigo USA Inc. (FMC–2022–0066–0223); West Coast MTO (FMC–2022–0066–0229); Bass Tech International LLC (FMC–2022–0066–0230); National Retail Federation (FMC–2022–0066–0231); Pacific Merchant Shipping Association (FMC–2022–0066–0233); Connection Chemical LP (FMC–2022–0066–0236); World Shipping Council (FMC–2022–0066–0242); Husky Terminal and Stevedoring LLC (FMC–2022–0066–0248); New York New Jersey Foreign Freight Forwarders and Brokers Association, Inc. (FMC–2022–0066–0247); Ocean Carrier Equipment Management Association, Inc. (FMC–2022–0066–0257); Cheese Importers Association of America (FMC–2022–0066–0265).

114. FMC–2022–0066–0182.

115. Shippers Coalition (FMC–2022–0066–0160); National Association of Exporters and Importers (FMC–2022–0066–0168).

116. FedEx Trade Networks Transport & Brokerage, Inc (FMC–2022–0066–0165); Pacific Coast Council of Customs Brokers and Freight Forwarders Association (FMC–2022–0066–0224); John S. Connor, Inc. (FMC–2022–0066–0267); and Agriculture Transportation Coalition (FMC–2022–0066–0275).

117. New York New Jersey Foreign Freight Forwarders & Brokers Association, Inc. (FMC–2022–0066–0247); CV International, Inc. (FMC–2022–0066–0217); National Customs Brokers & Forwarders Association of America, Inc. (FMC–2022–0066–0180); FedEx Trade Networks Transport & Brokerage, Inc. (FMC–2022–0066–0165).

118. FMC–2022–0066–0165.

119. E.g., National Association of Waterfront Employers (FMC–2022–0066–0276); Ports America/SSA Marine (FMC–2022–0066–0249); Port Houston (FMC–2022–0066–0268).

120. FMC–2022–0066–0202.

121. TraPac, LLC (FMC–2022–0066–0136); Fenix Marine Services (FMC–2022–0066–0186); West Coast MTO Agreement (FMC–2022–0066–0229); National Association of Waterfront Employers (FMC–2022–0066–0276); Pacific Merchant Shipping Association (FMC–2022–0066–0233); Husky Terminal and Stevedoring, LLC (FMC–2022–0066–0248); Port Houston (FMC–2022–0066–0268).

122. 87 FR 62341, 62350 (Oct. 14, 2022).

123. FMC–2022–0066–0247.

124. National Customs Brokers & Forwarders Association of America, Inc. (FMC–2022–0066–0180); Mediterranean Shipping Company (FMC–2022–0066–0143); FedEx Trade Networks Transport & Brokerage, Inc. (FMC–2022–0066–0165); U.S. Dairy Export Council/National Milk Producers Federation (FMC–2022–0066–0235).

125. FMC–2022–0066–0143.

126. FMC–2022–0066–0274.

127. FMC–2022–0066–0188.

128. FMC–2022–0066–0168.

129. FMC–2022–0066–0180.

130. FMC–2022–0066–0217.

131. FMC–2022–0066–0247.

132. FMC–2022–0066–0267.

133. FMC–2022–0066–0277.

134. FMC–2022–0066–0223.

135. FMC–2022–0066–0188.

136. FMC–2022–0066–0274.

137. FMC–2022–0066–0186.

138. FedEx Trade Networks Transport & Brokerage, Inc. (FMC–2022–0066–0165).

139. See 85 FR 29638, 29654.

140. Seafrigo USA (FMC–2022–0066–0223); DHL Global Forwarding (FMC–2022–0066–0219).

141. Seafrigo USA (FMC–2022–0066–0223).

142. International Tank Container Organisation (FMC–2022–0066–0096).

143. 85 FR 29638, 29654 (May 18, 2020) (internal citation omitted).

144. Id.

145. 84 FR 48850, 48852 (Sept. 17, 2019) (internal citation omitted)

146. FMC–2022–0066–0189.

147. FMC–2022–0066–0096.

148. FMC–2022–0066–0095.

149. FMC–2022–0066–0262.

150. FMC–2022–0066–0247.

151. FMC–2022–0066–0208.

152. FMC–2022–0066–0236.

153. FMC–2022–0066–0217.

154. FMC–2022–0066–0267.

155. FMC–2022–0066–0188.

156. FMC–2022–0066–0180.

157. 88 FR 55697, 55698 (Aug. 16, 2023) (Question 6).

158. https://www.fmc.gov/​commissioner-dye-proposes-reforms-to-international-ocean-supply-chain-practices/ ​(July 26, 2023).

159. FMC–2022–0066–0136.

160. FMC–2022–0066–0228.

161. FMC–2022–0066–0230

162. 87 FR 62341, 62351.

163. Anonymous (FMC–2022–0066–0093).

164. BassTech International LLC (FMC–2022–0066–0230).

165. Seafrigo USA Inc. (FMC–2022–0066–0223).

166. National Retail Federation (FMC–2022–0066–0231).

167. International Tank Container Organisation (FMC–2022–0066–0096); International Dairy Foods Association (FMC–2022–0066–0244); and the Retail Industry Leaders Association (FMC–2022–0066–0259).

168. FMC–2022–0066–0244.

169. Meat Import Council of America, Inc. and the North American Meat Institute (FMC–2022–0066–0188); Tyson Foods Inc. (FMC–2022–0066–0225); and the Agriculture Transportation Coalition (FMC–2022–0066–0275)

170. FMC–2022–0066–0188.

171. FMC–2022–0066–0096.

172. FMC–2022–0066–0269.

173. Id.

174. A Customs Brokerage, Inc. (FMC–2022–0066–0200).

175. The National Association of Waterfront Employers (FMC–2022–0066–0276); Husky Terminal and Stevedoring, LLC (FMC–2022–0066–0248); and Ports America/SSA Marine (FMC–2022–0066–0249).

176. Maher Terminals LLC (FMC–2022–0066–0269).

177. The U.S Dairy Export Council/National Milk Producers Federation (FMC–2022–0066–0235).

178. International Dairy Foods Association (FMC–2022–0066–0244).

179. Id.

180. FMC–2022–0066–0090.

181. FMC–2022–0066–0210.

182. FMC–2022–0066–0184.

183. FMC–2022–0066–0275.

184. Greg Knowler, Key supply chain stakeholders commit to electronic bills of lading, Journal of Commerce, Sept. 5, 2023 (https://www.joc.com/​article/​key-supply-chain-stakeholders-commit-electronic-bills-lading_​20230904.html).

185. Ports America/SSA Marine (FMC–2022–0066–0249).

186. FMC–2022–0066–0274.

187. National Fisheries Institute (FMC–2022–0066–0256).

188. FMC–2022–0066–0157.

189. FMC–2022–0066–0227.

190. FMC–2022–0066–0242.

191. FMC–2022–0066–0255.

192. FMC–2022–0066–0268.

193. FMC–2022–0066–0257.

194. FMC–2022–0066–0240.

195. FMC–2022–0066–0230.

196. 87 FR 62341, 62354.

197. FMC–2022–0066–0242; FMC–2022–0066–0257.

198. See Testimony of Chairman Maffei before Congress: “Review of Fiscal Year 2024 Budget Request for the Federal Maritime Transportation Programs, and Implementation of the Ocean Shipping Reform Act of 2022,” March 23, 2023, available at https://www.fmc.gov/​testimony-of-chairman-maffei-before-congress-review-of-fy2024-budget/​; Statement by President Joe Biden on Congressional Passage of Ocean Shipping Reform Act, June 13, 2022, available at https://www.whitehouse.gov/​briefing-room/​statements-releases/​2022/​06/​13/​statement-by-president-joe-biden-on-congressional-passage-of-ocean-shipping-reform-act/#:~:text=Statement%20by%20President%20Joe%20Biden%20on%20Congressional%20Passage%20of%20Ocean%20Shipping%20Reform%20Act,-Home&text=Lowering%20prices%20for%20Americans%20is,American%20retailers%2C%20farmers%20and%20consumers.

199. FMC–2022–0066–0274.

200. FMC–2022–0066–0240.

201. FMC–2022–0066–0242.

202. BassTech International LLC (FMC–2022–0066–0230).

203. FMC–2022–0066–0165.

204. FMC–2022–0066–0217.

205. FMC–2022–0066–0247.

206. FMC–2022–0066–0267.

207. FMC–2022–0066–0235.

208. FMC–2022–0066–0236.

209. FMC–2022–0066–0165.

210. American Association of Exporters and Importers (FMC–2022–0066–0168).

211. International Tank Container Organisation (FMC–2022–0066–0096); Excargo Services Inc. (FMC–2022–0066–0151); Seafrigo USA Inc. (FMC–2022–0066–0223); APL Logistics Americas, Ltd (FMC–2022–0066–0271); New York New Jersey Foreign Freight Forwarders and Brokers Association, Inc. (FMC–2022–0066–0247).

212. Northwest Horticultural Council (FMC–2022–0066–0178); American Chemistry Council (FMC–2022–0066–0184); International Housewares Association (FMC–2022–0066–0187); MICA/NAMI (FMC–2022–0066–0188); Tyson Foods, Inc. (FMC–2022–0066–0225); National Association of Beverage Importers, Inc. FMC–2022–0066–0238); International Dairy Foods Association (FMC–2022–0066–0244); Agriculture Transportation Coalition (FMC–2022–0066–0275)

213. BW Mitchum Trucking Co. (FMC–2022–0066–0110); GBA Transport (FMC–2022–0066–0152); Triple G Express (FMC–2022–0066–0154); MacMillan-Piper, Inc. (FMC–2022–0066–0159); Bridgeside Inc. (FMC–2022–0066–0179); Intermodal Motor Carriers Conference (FMC–2022–0066–0189); Eagle Systems, Inc. (FMC–2022–0066–0203); Bi-State Motor Carriers (FMC–2022–0066–0212); California Trucking Association (FMC–2022–0066–0220); Maryland Motor Truck Association, Inc. (FMC–2022–0066–0241); Virginia Trucking Association (FMC–2022–0066–0260); Harbor Trucking Association (FMC–2022–0066–0261); California Trucking Association (FMC–2022–0066–0270).

214. U.S. Department of Agriculture (FMC–2022–0066–0274).

215. Harbor Trucking Association (FMC–2022–0066–0261).

216. Shippers Coalition (FMC–2022–0066–0160); National Association of Chemical Distributors (FMC–2022–0066–0208); Consumer Brands Association (FMC–2022–0066–0210); Consumer Technology Association (FMC–2022–0066–0228); BassTech International LLC (FMC–2022–0066–0230); National Retail Federation (FMC–2022–0066–0231); National Milk Producers Federation/U.S. Diary Export Council (FMC–2022–0066–0235); Connection Chemical (FMC–2022–0066–0236); Retail Industry Leaders Association (FMC–2022–0066–0259); National Association of Manufacturers (FMC–2022–0066–0264); National Industrial Transportation League (FMC–2022–0066–0277).

217. DHL Global Forwarding (FMC–2022–0066–0219); CVI International (FMC–2022–0066–0217); International Association of Movers (FMC–2022–0066–0222).

218. Hapag-Lloyd (America) LLC (FMC–2022–0066–0240); World Shipping Council (FMC–2022–0066–0242); Maher Terminals LLC (FMC–2022–0066–0269).

219. FMC–2022–0066–0275.

220. FMC–2022–0066–0184.

221. Id.

222. FMC–2022–0066–0238.

223. FMC–2022–0066–0247.

224. E.g., Connection Chemical (FMC–2022–0066–0236); National Association of Chemical Distributors (FMC–2022–0066–0208).

225. National Association of Chemical Distributors (FMC–2022–0066–0208).

226. E.g., Consumer Technology Association (FMC–2022–0066–0228); Retail Industry Leaders Association (FMC–2022–0066–0259).

227. E.g., National Retail Federation (FMC–2022–0066–0231).

228. National Association of Chemical Distributors (FMC–2022–0066–0208).

229. Id.

230. Shippers Coalition (FMC–2022–0066–0160); Consumer Brands Association (FMC–2022–0066–0210); International Association of Movers (FMC–2022–0066–0222); National Milk Producers Federation/U.S. Dairy Export Council (FMC–2022–0066–0235); Retail Industry Leaders Association (FMC–2022–0066–0259).

231. E.g., Connection Chemical (FMC–2022–0066–0236); National Retail Federation (FMC–2022–0066–0231).

232. National Association of Chemical Distributors (FMC–2022–0066–0208); BassTech International LLC (FMC–2022–0066–0230); National Industrial Transportation League (FMC–2022–0066–0277).

233. FMC–2022–0066–0240.

234. FMC–2022–0066–0242.

235. FMC–2022–0066–0257.

236. FMC–2022–0066–0233.

237. Id.

238. Northwest Horticultural Council (FMC–2022–0066–0178); American Chemistry Council (FMC–2022–0066–0184); International Housewares Association (FMC–2022–0066–0187); MICA/NAMI (FMC–2022–0066–0188); Tyson Foods, Inc. (FMC–2022–0066–0225); National Association of Beverage Importers, Inc. (FMC–2022–0066–0238); International Dairy Foods Association (FMC–2022–0066–0244); Agriculture Transportation Coalition (FMC–2022–0066–0275).

239. International Tank Container Organisation (FMC–2022–0066–0096); Excargo Services Inc. (FMC–2022–0066–0151); Seafrigo USA Inc. (FMC–2022–0066–0223); New York New Jersey Foreign Freight Forwarders and Brokers Association, Inc. (FMC–2022–0066–0247); APL Logistics, Ltd (FMC–2022–0066–0271).

240. BW Mitchum Trucking Co. (FMC–2022–0066–0110); GBA Transport (FMC–2022–0066–0152); Triple G Express (FMC–2022–0066–0154); MacMillan-Piper, Inc. (FMC–2022–0066–0159); Bridgeside Inc.(FMC–2022–0066–0179); Intermodal Motor Carriers Conference (FMC–2022–0066–0189); Eagle Systems, Inc. (FMC–2022–0066–0203); Bi-State Motor Carriers (FMC–2022–0066–0212); California Trucking Association (FMC–2022–0066–0220); Maryland Motor Truck Association, Inc. (FMC–2022–0066–0241); Virginia Trucking Association (FMC–2022–0066–0260); Harbor Trucking Association (FMC–2022–0066–0261); California Trucking Association (FMC–2022–0066–0270).

241. American Association of Exporters and Importers (FMC–2022–0066–0168); World Shipping Council (FMC–2022–0066–0242); Maher Terminals LLC (FMC–2022–0066–0269).

242. U.S. Department of Agriculture (FMC–2022–0066–0274).

243. Consumer Technology Association (FMC–2022–0066–0228); National Retail Federation (FMC–2022–0066–0231); National Milk Producers Federation/U.S. Diary Export Council (FMC–2022–0066–0235); Retail Industry Leaders Association (FMC–2022–0066–0259); National Association of Manufacturers (FMC–2022–0066–0264); National Industrial Transportation League (FMC–2022–0066–0277).

244. CVI International (FMC–2022–0066–0217); DHL Global Forwarding (FMC–2022–0066–0219); International Association of Movers (FMC–2022–0066–0222).

245. Consumer Technology Association (FMC–2022–0066–0228).

246. E.g., National Retail Federation (FMC–2022–0066–0231); Retail Industry Leaders Association (FMC–2022–0066–0259).

247. FMC–2022–0066–0242.

248. FMC–2022–0066–0269.

249. E.g., International Tank Container Organisation (FMC–2022–0066–0096); Dole Ocean Cargo Express, LLC (FMC–2022–0066–0201); Mediterranean Shipping Company (FMC–2022–0066–0142); World Shipping Council (FMC–2022–0066–0242); American Chemistry Council (FMC–2022–0066–0184); Shippers Coalition (FMC–2022–0066–0160); New York New Jersey Foreign Freight Forwarders and Brokers Association, Inc. (FMC–2022–0066–0247).

250. FMC–2022–0066–0142.

251. FMC–2022–0066–0242.

252. FMC–2022–0066–0184.

253. FMC–2022–0066–0160.

254. Id.

255. Industry Advisory—Interim Procedures for Submitting “Charge Complaints” Under 46 U.S.C. 41310—Federal Maritime Commission—Federal Maritime Commission (fmc.gov) (posted July 14, 2022) (https://www.fmc.gov/​industry-advisory-interim-procedures-for-submitting-charge-complaints/​).

256. FMC–2022–0066–0233.

257. FMC–2022–0066–0143.

258. FMC–2022–0066–0165.

259. FMC–2022–0066–0228.

260. FMC–2022–0066–0188.

261. FMC–2022–0066–0259.

262. FedEx Trade Networks Transport & Brokerage, Inc. (FMC–2022–0066–0165).

263. See Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14; see also Mitsui O.S.K. Lines Ltd. v. Global Link Logistics, Inc., Olympus Partners, Olympus Growth Fund III, L.P, Louis J. Mischianti, David Cadenas, Keith Heffernan, CJR World Enterprises, Inc. and Chad J. Rosenberg (2011 WL 7144008 (F.M.C.) January 30, 2014).

264. FMC–2022–0066–0180.

265. FMC–2022–0066–0267.

266. FMC–2022–0066–0217.

267. https://www.fmc.gov/​industry-oversight/​national-shipper-advisory-committee/​.

268. See46 U.S.C. 40901–40904, 41104, 41106.

269. 543 U.S. at 18–19.

270. Id. at 24 (internal citations omitted).

271. 2011 WL 7144008 (F.M.C.) January 30, 2014.

272 Id. at 6, citing H.R. REP. NO. 98–53, pt. 1, at 13 (1983).

273. Id. at 6, citing H.R. REP. NO. 98–53, pt. 1, at 29.

274. Id. at 6.

275. CV International, Inc. (FMC–2022–0066–0217).

276. Ocean Carrier Equipment Management Association, Inc. (FMC–2022–0066–0257).

277. 87 FR 62341, 62356.

278. Ocean Carrier Equipment Management Association, Inc. (FMC–2022–0066–0257).

279. Regulations.gov, Docket FMC–2022–0066 and https://www.reginfo.gov/​public/​do/​PRAViewICR?​ref_​nbr=​202210-3072-001# (last visited June 12, 2023).

280. FMC–2022–0066–0265.

281. FMC–2022–0066–0178.

282. FMC–2022–0066–0118.

283. FMC–2022–0066–0261.

284. World Shipping Council (FMC–2022–0066–0242); National Association of Waterfront Employers (FMC–2022–0066–0276); Port Houston (FMC–2022–0066–0268).

285. See also46 U.S.C. 41310(b) (Charge complaints authority states that Commission is required to investigate compliance with section 41102 of “the charge” received and does not specify that multiple instances must be alleged for the Commission to investigate and order a refund and/or civil penalty).

286. West Coast MTO Agreement (FMC–2022–0066–0229); Fenix Marine Services, Ltd. (FMC–2022–0066–0186).

287. West Coast MTO Agreement (FMC–2022–0066–0229).

288. CMA CGM (America) LLC (FMC–2022–0066–0183).

289. National Retail Federation (FMC–2022–0066–0231); National Industrial Transportation League (FMC–2022–0066–0277).

290. TraPac, LLC (FMC–2022–0066–0136); National Association of Waterfront Employers (FMC–2022–0066–0276); Port Houston (FMC–2022–0066–0268).

291. 87 FR 62342, 62356 (Oct. 14, 2022).

292. E.g., Landstar Exp. Am., Inc. v. Fed. Mar. Comm'n, 569 F.3d 493, 495 (D.C. Cir. 2009).

293. See, e.g., Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14, 16 (2004) (“[C]ontracts for carriage of goods by sea must be construed like any other contracts: by their terms and consistent with the intent of the parties”); Contract, Black's Law Dictionary (11th ed. 2019).

294. E.g.,87 FR 62341, 62347.

295. Industry Advisory—Interim Procedures for Submitting “Charge Complaints” Under 46 U.S.C. 41310—Federal Maritime Commission—Federal Maritime Commission (fmc.gov) (posted July 14, 2022) (https://www.fmc.gov/​industry-advisory-interim-procedures-for-submitting-charge-complaints/​).

296. Id.

297. FMC–2022–0066–0162.

298. FMC–2022–0066–0278.

[FR Doc. 2024–02926 Filed 2–23–24; 8:45 am]

BILLING CODE 6730–02–P

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Decoding OSRA: Section 16. Dwell Time Statistics https://www.universalcargo.com/decoding-osra-section-16-dwell-time-statistics/ https://www.universalcargo.com/decoding-osra-section-16-dwell-time-statistics/#respond Wed, 28 Feb 2024 04:02:09 +0000 https://www.universalcargo.com/?p=12500 As we continue to see the beginnings of how the recent and ongoing changes to U.S. shipping law affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping, let's keep digging into the exact changes made to U.S. maritime law. At Universal Cargo, we want to help shippers know how law changes affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

If you're new to this series, we give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments and/or additions; and consider what the changes mean for U.S. importers and exporters. However, this section is a little different.

Section 16 does not amend any title of U.S. Code as sections of OSRA typically do. Rather, this section of OSRA creates regulation within its own text that is not a permanent change to U.S. Code.

Find out what the OSRA section says and does by reading the full post in Universal Cargo's blog.

The post Decoding OSRA: Section 16. Dwell Time Statistics appeared first on Universal Cargo.

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Introduction

As we continue to see the beginnings of how the recent and ongoing changes to U.S. shipping law affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping, let’s keep digging into the exact changes made to U.S. maritime law. At Universal Cargo, we want to help shippers know how law changes affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

If you’re new to this series, we give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments and/or additions; and consider what the changes mean for U.S. importers and exporters. However, this section is a little different.

Section 16 does not amend any title of U.S. Code as sections of OSRA typically do. Rather, this section of OSRA creates regulation within its own text that is not a permanent change to U.S. Code.

Previously covered in this series:

Now let’s move forward with Section 16 of OSRA. Exactly what does it say and do…

Quick Overview

As stated above, Section 16 does not amend or insert text into Title 46. That doesn’t mean it does nothing at all.

This section mandates reporting of information about dwell time of intermodal transportation equipment, particularly TEU (twenty foot equivalent unit) shipping containers and chassis. The data collected will then be published statistically for the public. All that is, however, if available allocations allow it. If it is decided the money cannot be made available for these tasks, Section 16 could be rendered moot.

Section 16 Text

SEC. 16. DWELL TIME STATISTICS.

    (a) Definitions.--In this section:
            (1) Director.--The term ``Director'' means the Director of 
        the Bureau of Transportation Statistics.
            (2) Marine container.--The term ``marine container'' means 
        an intermodal container with a length of--
                    (A) not less than 20 feet; and
                    (B) not greater than 45 feet.
            (3) Out of service percentage.--The term ``out of service 
        percentage'' means the proportion of the chassis fleet for any 
        defined geographical area that is out of service at any one 
        time.
            (4) Street dwell time.--The term ``street dwell time'', with 
        respect to a piece of equipment, means the quantity of time 
        during which the piece of equipment is in use outside of the 
        terminal.

    (b) Authority to Collect Data.--
            (1) In general. – <<NOTE: Determination.>> Each port, marine 
        terminal operator, and chassis owner or provider with a fleet of 
        over 50 chassis that supply chassis for a fee shall submit to 
        the Director such data as the Director determines to be 
        necessary for the implementation of this section, subject to 
        subchapter III of chapter 35 of title 44, United States Code.
            (2) Approval by omb. – <<NOTE: Deadline.>> Subject to the 
        availability of appropriations, not later than 60 days after the 
        date of enactment of this Act, the Director of the Office of 
        Management and Budget shall approve an information collection 
        for purposes of this section.

    (c) Publication. – <<NOTE: Deadline. Time period.>> Subject to the 
availability of appropriations, not later than 240 days after the date 
of enactment of this Act, and not less frequently than monthly 
thereafter, the Director shall publish statistics relating to the dwell 
time of equipment used in intermodal transportation at the top 25 ports, 
including inland ports, by 20-foot equivalent unit, including--
            (1) total street dwell time, from all causes, of marine 
        containers and marine container chassis; and
            (2) the average out of service percentage, which shall not 
        be identifiable with any particular port, marine terminal 
        operator, or chassis provider.

    (d) Factors.--Subject to the availability of appropriations, to the 
maximum extent practicable, the Director shall publish the statistics 
described in subsection (c) on a local, regional, and national basis.
    (e) Sunset.--The authority under this section shall expire December 
31, 2026.

Original Title 46 Text

N/A.

Amended Text

N/A.

I left these sections in here to show how OSRA normally amends text of Title 46 and display the way posts of this series usually work.

Paragraph (a) Observations

The first paragraph, with its four subparagraphs, of OSRA’s sixteenth section is made up of definitions to add clarity to the regulation Section 16 creates in later paragraphs.

I won’t break down each definition or redefine their terms, but I will make an observation. It is clear from this set of definitions that the lawmakers are concerned with information about shipping equipment, and standard shipping containers in particular, that are not at the ports. And it’s easy to understand why.

Maldistribution of shipping containers, after hundreds of blanked (cancelled) sailings early in the pandemic, factored into the “supply chain crisis” that inspired politicians on both sides of the aisle to make shipping law changes. Information about the percentage of shipping containers that are unavailable is clearly relevant information for a smoothly operating supply chain and, thus, on the minds of the lawmaker(s) who wrote this section.

Paragraph (b) Observations

Paragraph (b) breaks down into two subparagraphs that are very distinct from each other, so let’s break down this section of today’s post into two subsections.

Subparagraph (1)

Subparagraph (1) defines who (ports, marine terminal operators, and chassis owners or providers) are to report information to the Director of the Bureau of Transportation Statistics (who “Director” was defined as previously). The Director of the Bureau of Transportation Statistics is to determine exactly what information needs to be reported. Here, subparagraph (1) references Title 44 because it sets regulation or policy around government required information in Chapter 35.

There’s nothing too difficult to understand here. The one observation is that the lawmakers didn’t put it upon themselves to decide exactly what information should be reported; they gave leeway to the Bureau of Transportation Statistics to figure out the specifics.

Subparagraph (2)

I find the second subparagraph of Paragraph (a) to be a little more interesting than the first. Only a little. According to this subparagraph, the Office of Management and Budget has to approve the information collection we were just talking about. That approval is to be based on the amount of government money available. It doesn’t make the information collection, and therefore Section 16, seem as important to the lawmakers as previous sections. Perhaps that’s why this little piece of legislation doesn’t get written directly into Title 46. On the other hand, the two month timeline from when OSRA is enacted puts a ticking clock on getting this information reporting in place and approved, which might give it some sense of urgency.

This subparagraph could be interpreted in the positive light of there being some monetary oversight regarding what Section 16 requires. Alternately, some might see it in the negative light that the government might be making unnecessary levels of legislation here, possibly causing more spending of resources on this than necessary.

Paragraph (c) Observations

The third main paragraph of this section is where the real meat is found. This brings together what a reader likely would have already suspected from the definitions and reporting paragraphs. Here we learn exactly what the lawmakers of OSRA want reported with the inclusion of Section 16: statistics relating to the unavailability of shipping containers and chassis at America’s top 25 ports.

While Paragraph (c) reveals the specific things the lawmakers want reported about to the Bureau of Transportation Statistics, it also gives the purpose of it and instructions to the bureau. The lawmakers want this data published for the public at least once a month. But again, the lawmakers make it clear this is all dependent upon available appropriations, which again makes it feel like this is not a top priority in OSRA.

Paragraph (d) Observations

Paragraph (d) is very short. It does again point out that this is “subject to the availability of appropriations,” but I won’t pound what that says to me into the ground. The lawmakers want the Director of the Bureau of Transportation Statistics to publish reports on the percentages of shipping containers and chassis that are unavailable on a local, regional, and national level. Perhaps collecting the data and publishing such reports every single month seems like a lot to OSRA’s writers, and they put the condition of available appropriations as an out for the Bureau of Transportation Statistics if the task seemed like too much. Ultimately, there’s nothing in this section that I can see that you wouldn’t be able to see for yourself, dear reader, so I won’t belabor it.

Paragraph (e) Observations

No real observation here. This just provides an end date for this reporting and publishing business, which is probably the real reason this doesn’t go into Title 46 itself. Section 16’s legislation comes to an end on December 31, 2026.

Conclusion

Section 16 sets up the reporting and publishing of data on the percentage of standard shipping containers and chassis that are away from the port terminals, thus, unavailable. It’s not a permanent rule and is, in fact, subject to available appropriations.

The lawmakers who wrote OSRA obviously see value in this data, but it is not one of the highest priorities of the act.

If you noticed something in Section 16 of OSRA that you think deserves more attention, please let us know in the comments section below. Perhaps you have a take on it that I didn’t consider or disagree with an observation I’ve made. We’d love to hear from you.

Stay tuned for when Decoding OSRA continues, looking at Section 17….

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Are Cranes at U.S. Ports Chinese Spy Tools? https://www.universalcargo.com/are-cranes-at-u-s-ports-chinese-spy-tools/ https://www.universalcargo.com/are-cranes-at-u-s-ports-chinese-spy-tools/#respond Thu, 22 Feb 2024 22:24:21 +0000 https://www.universalcargo.com/?p=12495 "How can it be a spy satellite if they announce on television that it's a spy satellite?"
--George Carlin

If you're ever at a major U.S. port, take a look at the cranes looming over the container ships and see if you can spot any Made in China stickers on them. Did you know that about 80% of the cranes that lift containers off ships and put them on the docks in the U.S. are made by China? Now imagine China using those cranes for espionage and cyber attacks. I'm not describing the plot of some James Bond-type spy movie. The government is warning us right now that that's a real possibility.

Thus, U.S. ports are getting a new set of regulations to follow in case their cranes really are spy devices, as John Gallagher reports in a FreightWaves article:

"Owners and operators of over 200 Chinese-made container cranes at U.S. ports will be subject to new cyber-risk management requirements aimed at reducing China’s ability to spy on America’s domestic supply chains."

The Coast Guard, on behalf of the Department of Homeland Security, announced yesterday that owners and operators of the Chinese-made cranes "should immediately contact their local Coast Guard Captain of the Port (COTP)" to obtain copies of Maritime Security Directive 105-4. The directive gives the new "cyber risk management actions" to follow.

For more, read the full post in Universal Cargo's blog.

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“How can it be a spy satellite if they announce on television that it’s a spy satellite?”
–George Carlin

If you’re ever at a major U.S. port, take a look at the cranes looming over the container ships and see if you can spot any Made in China stickers on them. Did you know that about 80% of the cranes that lift containers off ships and put them on the docks in the U.S. are made by China? Now imagine China using those cranes for espionage and cyber attacks. I’m not describing the plot of some James Bond-type spy movie. The government is warning us right now that that’s a real possibility.

New Regulation Around Threat from Chinese-Made Cranes

U.S. ports are getting a new set of regulations to follow in case their cranes really are spy devices, as John Gallagher reports in a FreightWaves article:

Owners and operators of over 200 Chinese-made container cranes at U.S. ports will be subject to new cyber-risk management requirements aimed at reducing China’s ability to spy on America’s domestic supply chains.

The Coast Guard, on behalf of the Department of Homeland Security, announced yesterday that owners and operators of the Chinese-made cranes “should immediately contact their local Coast Guard Captain of the Port (COTP)” to obtain copies of Maritime Security Directive 105-4. The directive gives the new “cyber risk management actions” to follow.

I won’t be able to share the directive and new rules that will have to be followed at the ports because “The directive contains security-sensitive information and, therefore, cannot be made available to the general public.” But I will share the full text of the Coast Guard announcement at the end of this post.

How Are Cranes a Threat?

The Coast Guard announcement contains some explanation of how and why the Chinese-manufactured ship to shore (SPS) cranes are a threat:

By design, these cranes may be controlled, serviced, and programmed from remote locations, and those features potentially leave PRC-manufactured STS cranes vulnerable to exploitation, threatening the maritime elements of the national transportation system.

As such, additional measures are necessary to prevent a Transportation Security Incident in the national transportation system due to the prevalence of PRC-manufactured STS cranes in the U.S., threat intelligence related to the PRC’s interest in disrupting U.S. critical infrastructure, and the built-in vulnerabilities for remote access and control of these STS cranes.

Hunt for Threats on Cranes

The Coast Guard says an examination of the cranes for security threats is well underway, as Gallagher reports in his FreightWaves article:

At a White House briefing on Tuesday, Coast Guard Rear Adm. John Vann, who heads the agency’s cybercommand, said that his teams have “assessed cybersecurity or hunted for threats” on 92 of the cranes so far.

“Those assessments determine the cybersecurity posture, and the hunt missions actually look for malicious cyberactivity on the cranes,” Vann said. “We’ve almost canvassed about 50% of the existing cranes,” he added, but did not state whether security concerns were discovered on those cranes.

President Biden Allocates Billions for American-Made Cranes

The Biden Administration announced that serious money will be put into the American manufacture of STS cranes, as reported by Michael Angell in the Journal of Commerce:

The Biden Administration plans to spend $20 billion to bring the manufacturing of ship-to-shore cranes back to the US as the White House raises an alarm over the potential of Chinese-made cranes being used to launch a cyberattack on America’s port infrastructure. 

The White House said in a statement Wednesday the funding — to be made available over the next five years through the Infrastructure Investment and Jobs Act and the Inflation Reduction Act — will bring “port crane manufacturing capabilities back to the US for the first time in 30 years.”  

Government Coordinates Warnings of Chinese Espionage

Meanwhile, the FBI and Department of Transportation’s Maritime Administration are getting in on the warnings of possible Chinese espionage in the U.S. supply chain. Angell reports:

FBI Director Christopher Wray testified before Congress this week that the Chinese government’s attempts at planting spyware and mounting cyberattacks on US infrastructure are “at a scale greater than we’d seen before.” US intelligence experts have warned that sensors and remote monitoring software installed in ZPMC cranes make the equipment vulnerable to hacking attacks.

…the Department of Transportation’s Maritime Administration (MARAD) issued an advisory that US ports need to be alert to the security risks of ZPMC [China’s Zhenhua Heavy Industries] cranes because the remote monitoring and similar features make them “vulnerable to exploitation.” 

MARAD also advised caution regarding the use of Logink, a logistics management software system developed by a Chinese government agency that is in use at 24 ports globally. The agency also warned about X-ray and cargo scanning equipment from a Chinese state-controlled entity called Nuctech due to its inability to screen for certain types of radioactive material. 

Conclusion

Foreign entities in the economically and security crucial U.S. ports have long been an issue. When I started writing about international shipping more than a decade ago, around 80% of U.S. port terminals were owned and operated by foreign companies. I touched on this issue last year when yet another such company, CMA CGM, acquired two more U.S. terminals at the Port of New York and New Jersey. The previous administration found it particularly concerning when a Chinese state owned company was gaining control of a Port of Long Beach Terminal.

President Trump, who launched a trade war against China, forced the sale of the Long Beach terminal because of the national security threat of China owning and operating the terminal. So the idea of China being a threat at the ports isn’t new, but it hasn’t gotten a great deal of attention.

The idea of cranes being espionage tools for China makes for good headlines. That’s also why it’s easy to suspect this as a political ploy in an election year. Is, has, or will China use the cranes for espionage or cyber attack on the U.S. supply chain? I don’t know, but if the possibility results in a bit more attention to the security of U.S. ports, and foreign entities in them, that at least seems like a good thing.

As promised, the full text of the Coast Guard’s announcement of Directive 105-4 is below.

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Full Text of Coast Guard Announcement

This document is scheduled to be published in the
Federal Register on 02/23/2024 and available online at
https://federalregister.gov/d/2024-03822, and on https://govinfo.gov


DEPARTMENT OF HOMELAND SECURITY
Coast Guard
[Docket No. USCG-2024-0049]
Issuance of Maritime Security (MARSEC) Directive 105-4; Cyber Risk
Management Actions for Ship-to-Shore Cranes Manufactured by People’s Republic
of China Companies
AGENCY: Coast Guard, DHS.
ACTION: Notice of availability.
________________________________________________________________________

SUMMARY: The Coast Guard announces the availability of Maritime Security
(MARSEC) Directive 105-4, which provides cyber risk management actions for owners
or operators of ship-to-shore (STS) cranes manufactured by People’s Republic of China
(PRC) companies (PRC-manufactured STS cranes). The directive contains security-
sensitive information and, therefore, cannot be made available to the general public.
Owners or operators of PRC-manufactured STS cranes should immediately contact their
local Coast Guard Captain of the Port (COTP) or District Commander for a copy of
MARSEC Directive 105-4.

DATES: MARSEC Directive 105-4 is available on February 21, 2024.

FOR FURTHER INFORMATION CONTACT: For information about this document
call or e-mail Brandon Link, Commander, U.S. Coast Guard, Office of Port and Facility
Compliance; telephone 202-372-1107, e-mail Brandon.M.Link@uscg.mil.

SUPPLEMENTARY INFORMATION:

Background and Purpose

MARSEC Directive 105-4 provides cyber risk management actions for owners or
operators of PRC-manufactured STS cranes. Owners or operators of PRC-manufactured
STS cranes should immediately contact their local COTP or cognizant District
Commander for a copy of MARSEC Directive 105-4.
The Maritime Transportation Security Act’s implementing regulations in 33 CFR parts
101-105 are designed to protect the maritime elements of the national transportation
system. Under 33 CFR 101.405, the Coast Guard may set forth additional security
measures to respond to a threat assessment or to a specific threat against those maritime
elements. In addition, per 33 CFR 6.14-1, the Commandant “may prescribe such
conditions and restrictions relating to the safety of waterfront facilities and vessels in port
as the Commandant finds to be necessary under existing circumstances.”
PRC-manufactured STS cranes make up the largest share of the global ship-to-shore
crane market and account for nearly 80% of the STS cranes at U.S. ports. By design,
these cranes may be controlled, serviced, and programmed from remote locations, and
those features potentially leave PRC-manufactured STS cranes vulnerable to exploitation,
threatening the maritime elements of the national transportation system.
As such, additional measures are necessary to prevent a Transportation Security Incident
in the national transportation system due to the prevalence of PRC-manufactured STS
cranes in the U.S., threat intelligence related to the PRC’s interest in disrupting U.S.
critical infrastructure, and the built-in vulnerabilities for remote access and control of
these STS cranes.

Procedural

COTPs and District Commanders can access all MARSEC directives on Homeport by
logging in and going to Missions > Maritime Security > Domestic Ports and Waterway
Security > Policy. Owners and operators of PRC-manufactured cranes must contact their
local COTP or cognizant District Commander to acquire a copy of MARSEC Directive
105-4. COTPs or cognizant District Commanders may provide this MARSEC Directive
to appropriate owners and operators in accordance with SSI handling procedures.
Pursuant to 33 CFR 101.405, we consulted with the Department of State, Department of
Defense, Department of Transportation/Maritime Administration, Department of
Homeland Security, Transportation Security Administration, Cybersecurity and
Infrastructure Security Agency, and National Maritime Intelligence-Integration Office.
All MARSEC Directives issued pursuant to 33 CFR 101.405 are marked as SSI in
accordance with 49 CFR Part 1520. COTPs and District Commanders will require
individuals requesting a MARSEC Directive to prove that they meet the standards for a
“covered person” under 49 CFR 1520.7, have a “need to know” the information, as
defined in 49 CFR 1520.11, and that they will safeguard the SSI in MARSEC Directive
105-4 as required in 49 CFR 1520.9.

This notice is issued under authority of 33 CFR 6.14-1 and 101.405(a)(2) and 5 U.S.C.
552(a).

Dated: February 21, 2024.

Amy M. Beach,
Captain, U.S. Coast Guard,
Director of Inspections and Compliance.

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Red Sea Crisis Getting Worse Not Better https://www.universalcargo.com/red-sea-crisis-getting-worse-not-better/ https://www.universalcargo.com/red-sea-crisis-getting-worse-not-better/#respond Tue, 20 Feb 2024 23:29:53 +0000 https://www.universalcargo.com/?p=12490 Shippers should make no plans for a return to ocean freight routes through the Suez Canal in the near future.

Perhaps the most damaging attacks in the Red Sea area so far happened on Sunday. Iran-backed Houthi rebels executed missile attacks upon a cargo ship in the Gulf of Aden, forcing the crew to abandon ship. There are conflicting reports, but the Houthi rebels claim they sank the ship. If it was not fully sunk, it certainly was taking on water and damaged badly enough that the crew had to evacuate. By all reports, the whole crew made it out and have been escorted to safety.

David Gritten & Joshua Cheetham reported in the BBC that the cargo ship was the Belize-flagged and British-registered Rubymar. They wrote that the UK government "condemned the attacks as 'completely unacceptable' and said the UK and its allies reserved the right to respond appropriately."

So far, US and UK responses to Houthi attacks, largely in the form of air strikes, have obviously not stopped the attacks from continuing. It doesn't even seem like they have slowed the Houthi attacks down at all.

Keep reading in Universal Cargo's blog.

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Shippers should make no plans for a return to ocean freight routes through the Suez Canal in the near future.

Crew Must Abandon Ship After Houthi Attacks

Perhaps the most damaging attacks in the Red Sea area so far happened on Sunday. Iran-backed Houthi rebels executed missile attacks upon a cargo ship in the Gulf of Aden, forcing the crew to abandon ship. There are conflicting reports, but the Houthi rebels claim they sank the ship. If it was not fully sunk, it certainly was taking on water and damaged badly enough that the crew had to evacuate. By all reports, the whole crew made it out and have been escorted to safety.

map of Africa Suez Canal vs Cape Route
Map of Africa by mapswire with Suez Canal and Cape Route markings added.

David Gritten & Joshua Cheetham reported in the BBC that the cargo ship was the Belize-flagged and British-registered Rubymar. They wrote that the UK government “condemned the attacks as ‘completely unacceptable’ and said the UK and its allies reserved the right to respond appropriately.”

Military Responses Only See Escalation Thus Far

So far, US and UK responses to Houthi attacks, largely in the form of air strikes, have obviously not stopped the attacks from continuing. It doesn’t even seem like they have slowed the Houthi attacks down at all.

According to the BBC article:

The Houthi movement’s spokesman also claimed its forces had attacked two US-owned cargo vessels, the Sea Champion and the Navis Fortuna, in the Gulf of Aden.

He added that Houthi air defences in the Red Sea province of Hudaydah had shot down a US MQ-9 Reaper unmanned aerial vehicle (UAV) “while it was carrying out hostile missions against our country on behalf of [Israel]”.

The Houthis’ evil anti-Jewish agenda of violence in the Red Sea began with attacks on ships that were somehow linked to Israel, even if it was old and out-of-date intel sometimes used to connect the ships to Israel. UK- and US-linked ships quickly became targets as well. Whether that was initially because the UK and US are ally countries of Israel or because they were protecting ships in the Red Sea is hard to tell.

Ultimately, no ships can truly feel safe in the Red Sea or Gulf or Aden. However, showing some sort of alignment with values of Iran and the Houthi might help secure passage. For example, Patrick Sykes reported in a Bloomberg article about a ship that changed its call sign to “All Crew Muslims” in order to safely sail through.

Of course, no one should want to align with the Houthi terrorists, whose attacks appear to be getting even more extreme.

Increasing Attack Capabilities

Gritten and Cheetham reported on newly discovered abilities for the Houthi rebels to execute “swarm attacks”:

US Central Command said its forces had carried out five strikes against three mobile anti-ship cruise missiles, one unmanned underwater vessel (UUV) and one unmanned surface vessel (USV) in Houthi-controlled areas of Yemen on Saturday after determining that they presented an imminent threat to US Navy ships and merchant vessels in the region.

It was the first time that US forces had identified a UUV, or submarine drone, being employed by the Houthis since the attacks began.

BBC security correspondent Frank Gardner says the discovery that the Houthis are deploying both USVs and UUVs is a worrying development. The concept of a “swarm attack” – launching a number of relatively cheap missiles and drones simultaneously at an enemy in the hopes of confusing and overwhelming their defences – is straight out of the playbook of the navy of Iran’s Revolutionary Guards.

It’s not surprising the Houthi would take strategy out of Iran’s playbook as Iran backs the Houthi, as well as Hamas and other terror organizations in the region. Under the Biden Administration’s watch, Iran has had a great deal more money for funding such terrorists, including ones who’ve made direct attacks on, and killed, U.S. soldiers. In apparent pursuit of an Iran nuclear deal that it’s hard to believe would be worth the paper it’s written on, the administration has softened sanctions, extended sanction waivers, and either failed or have not bothered with sanction enforcement on Iran. The results have been billions upon billions of dollars pouring into Iran’s coffers.

Thus, there’s a near unlimited funding source for the Houthi to continue attacks in the Red Sea. At this moment, there’s nothing to give any confidence they will stop anytime in the near future.

Ocean Freight Planning Looking Forward

The strategy carriers have mostly taken of diverting ships away from the Gulf of Aden, Red Sea, and, therefore, Suez Canal, will definitely continue. Perhaps I should say continue indefinitely. Attacks on container ships that do dare to sail the area, like the Rubymar, reinforce the decision to move ocean freight away from the sea portal that previously was traversed by about 12% of global ocean shipping.

Carriers currently have overcapacity, which helps absorb the problem of needing more ships to cover the same global shipping services because of the increased amount of sailing time in avoiding the Suez Canal. But perhaps a bigger danger is the availability of shipping containers.

One of the biggest factors during the pandemic’s supply chain crisis was maldistribution of shipping containers. Hundreds of blanked (cancelled) sailings at the beginning of the pandemic caused shipping containers to be in the wrong places in the world. Soon, carriers would deny containers to some shippers, like U.S. agricultural exporters, in favor of sending empty containers faster to more lucrative shipping routes. Hundreds of ships now redirected with longer shipping routes runs the risk of similar issues appearing with the availability of shipping containers.

At least shippers have gotten some good news recently with improvement at the Panama Canal. That gives some relief to the situation, as simultaneous disruption at the two canals presents incredible levels of difficulty for ocean shipping. So shippers really needed that relief. For now, they should be looking down the road, even to the peak season, without expecting relief at the Suez Canal. Shippers should plan on not being able to utilize the Suez Canal for the foreseeable future.

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Decoding OSRA: Section 15. Technical Amendments https://www.universalcargo.com/decoding-osra-section-15-technical-amendments/ https://www.universalcargo.com/decoding-osra-section-15-technical-amendments/#respond Thu, 15 Feb 2024 20:31:31 +0000 https://www.universalcargo.com/?p=12486 It's been a while since our last entry in this series, where we go through the Ocean Shipping Reform Act (OSRA) section by section, but we haven't forgotten. We’re still only beginning to see how the changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. So what exactly does OSRA say and do? That's what we find out in this series. And we're over half way through examining exactly what our lawmakers changed in the U.S. Code dealing with shipping.

You probably know how it works by now, but in case you've stumbled upon this series in the middle, we give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Find out about Section 15 of OSRA by reading this full post in Universal Cargo's blog.

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Introduction

It’s been a while since our last entry in this series, where we go through the Ocean Shipping Reform Act (OSRA) section by section, but we haven’t forgotten. We’re still only beginning to see how the changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. So what exactly does OSRA say and do? That’s what we find out in this series. And we’re over half way through examining exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

You probably know how it works by now, but in case you’ve stumbled upon this series in the middle, we give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

That means today we’re covering Section 15 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

This section of OSRA makes four changes to Title 46 of the U.S. Code. However, those changes are more clerical than anything else. As lawmakers went about amending the code – changing, deleting, and adding sections, paragraphs, and subparagraphs – it sometimes requires references within the code to other parts of it to be amended. That’s all this section does. It corrects references in accordance with changes the lawmakers made to the code.

Section 15 Text

SEC. 15. TECHNICAL AMENDMENTS.

    (a) Section 41108(a) of title 46, United States Code, is amended by 
striking ``section 41104(1), (2), or (7)'' and inserting ``paragraph 
(1), (2), or (7) of section 41104(a)''.
    (b) Section 41109(c) of title 46, United States Code, as amended by 
section 8 of this Act, is further amended by striking ``section 41102(a) 
or 41104(1) or (2) of this title'' and inserting ``subsection (a) or (d) 
of section 41102 or paragraph (1) or (2) of section 41104(a)''.
    (c) Section 41305 of title 46, United States Code, as amended by 
section 12 of this Act, is further amended--
            (1) in subsection (c), by striking ``41104(3) or (6), or 
        41105(1) or (3) of this title'' and inserting ``paragraph (3) or 
        (6) of section 41104(a), or paragraph (1) or (3) of section 
        41105''; and
            (2) in subsection (d), by striking ``section 41104(4)(A) or 
        (B) of this title'' and inserting ``subparagraph (A) or (B) of 
        section 41104(a)(4)''.

Original Title 46 Text

§41108. Additional penalties

(a) Suspension of Tariffs.—For a violation of section 41104(1), (2), or (7) 1 of this title, the Federal Maritime Commission may suspend any or all tariffs of the common carrier, or that common carrier's right to use any or all tariffs of conferences of which it is a member, for a period not to exceed 12 months.

(b) Operating Under Suspended Tariff.—A common carrier that accepts or handles cargo for carriage under a tariff that has been suspended, or after its right to use that tariff has been suspended, is liable to the United States Government for a civil penalty of not more than $50,000 for each shipment.

(c) Failure To Provide Information.—

(1) Penalties.—If the Commission finds, after notice and opportunity for a hearing, that a common carrier has failed to supply information ordered to be produced or compelled by subpoena under section 41303 of this title, the Commission may—

(A) suspend any or all tariffs of the carrier or the carrier's right to use any or all tariffs of conferences of which it is a member; and

(B) request the Secretary of Homeland Security to refuse or revoke any clearance required for a vessel operated by the carrier, and when so requested, the Secretary shall refuse or revoke the clearance.

(2) Defense based on foreign law.—If, in defense of its failure to comply with a subpoena or discovery order, a common carrier alleges that information or documents located in a foreign country cannot be produced because of the laws of that country, the Commission shall immediately notify the Secretary of State of the failure to comply and of the allegation relating to foreign laws. On receiving the notification, the Secretary of State shall promptly consult with the government of the nation within which the information or documents are alleged to be located for the purpose of assisting the Commission in obtaining the information or documents.

(d) Impairing Access to Foreign Trade.—If the Commission finds, after notice and opportunity for a hearing, that the action of a common carrier, acting alone or in concert with another person, or a foreign government has unduly impaired access of a vessel documented under the laws of the United States to ocean trade between foreign ports, the Commission shall take action that it finds appropriate, including imposing any of the penalties authorized by this section. The Commission also may take any of the actions authorized by sections 42304 and 42305 of this title.

(e) Submission of Order to President.—Before an order under this section becomes effective, it shall be submitted immediately to the President. The President, within 10 days after receiving it, may disapprove it if the President finds that disapproval is required for reasons of national defense or foreign policy.

§41109. Assessment of penalties

(a) General Authority.—Until a matter is referred to the Attorney General, the Federal Maritime Commission may, after notice and opportunity for a hearing, assess a civil penalty provided for in this part. The Commission may compromise, modify, or remit, with or without conditions, a civil penalty.

(b) Factors in Determining Amount.—In determining the amount of a civil penalty, the Commission shall take into account the nature, circumstances, extent, and gravity of the violation committed and, with respect to the violator, the degree of culpability, history of prior offenses, ability to pay, and other matters justice may require.

(c) Exception.—A civil penalty may not be imposed for conspiracy to violate section 41102(a) or 41104(1) or (2) 1 of this title or to defraud the Commission by concealing such a violation.

(d) Prohibited Basis of Penalty.—The Commission or a court may not order a person to pay the difference between the amount billed and agreed upon in writing with a common carrier or its agent and the amount set forth in a tariff or service contract by that common carrier for the transportation service provided.

(e) Time Limit.—A proceeding to assess a civil penalty under this section must be commenced within 5 years after the date of the violation.

(f) Review of Civil Penalty.—A person against whom a civil penalty is assessed under this section may obtain review under chapter 158 of title 28.

(g) Civil Actions To Collect.—If a person does not pay an assessment of a civil penalty after it has become final or after the appropriate court has entered final judgment in favor of the Commission, the Attorney General at the request of the Commission may seek to collect the amount assessed in an appropriate district court of the United States. The court shall enforce the order of the Commission unless it finds that the order was not regularly made and duly issued.

§41305. Award of reparations

(a) Definition.—In this section, the term "actual injury" includes the loss of interest at commercial rates compounded from the date of injury.

(b) Basic Amount.—If the complaint was filed within the period specified in section 41301(a) of this title, the Federal Maritime Commission shall direct the payment of reparations to the complainant for actual injury caused by a violation of this part.

(c) Additional Amounts.—On a showing that the injury was caused by an activity prohibited by section 41102(b), 41104(3) or (6), or 41105(1) or (3) of this title, the Commission may order the payment of additional amounts, but the total recovery of a complainant may not exceed twice the amount of the actual injury.

(d) Difference Between Rates.—If the injury was caused by an activity prohibited by section 41104(4)(A) or (B) of this title, the amount of the injury shall be the difference between the rate paid by the injured shipper and the most favorable rate paid by another shipper.

(e) Attorney Fees.—In any action brought under section 41301, the prevailing party may be awarded reasonable attorney fees.

Amended Text

§41108. Additional penalties

(a) Suspension of Tariffs.—For a violation of paragraph (1), (2), or (7) of section 41104(a) 1 of this title, the Federal Maritime Commission may suspend any or all tariffs of the common carrier, or that common carrier's right to use any or all tariffs of conferences of which it is a member, for a period not to exceed 12 months.

(b) Operating Under Suspended Tariff.—A common carrier that accepts or handles cargo for carriage under a tariff that has been suspended, or after its right to use that tariff has been suspended, is liable to the United States Government for a civil penalty of not more than $50,000 for each shipment.

(c) Failure To Provide Information.—

(1) Penalties.—If the Commission finds, after notice and opportunity for a hearing, that a common carrier has failed to supply information ordered to be produced or compelled by subpoena under section 41303 of this title, the Commission may—

(A) suspend any or all tariffs of the carrier or the carrier's right to use any or all tariffs of conferences of which it is a member; and

(B) request the Secretary of Homeland Security to refuse or revoke any clearance required for a vessel operated by the carrier, and when so requested, the Secretary shall refuse or revoke the clearance.

(2) Defense based on foreign law.—If, in defense of its failure to comply with a subpoena or discovery order, a common carrier alleges that information or documents located in a foreign country cannot be produced because of the laws of that country, the Commission shall immediately notify the Secretary of State of the failure to comply and of the allegation relating to foreign laws. On receiving the notification, the Secretary of State shall promptly consult with the government of the nation within which the information or documents are alleged to be located for the purpose of assisting the Commission in obtaining the information or documents.

(d) Impairing Access to Foreign Trade.—If the Commission finds, after notice and opportunity for a hearing, that the action of a common carrier, acting alone or in concert with another person, or a foreign government has unduly impaired access of a vessel documented under the laws of the United States to ocean trade between foreign ports, the Commission shall take action that it finds appropriate, including imposing any of the penalties authorized by this section. The Commission also may take any of the actions authorized by sections 42304 and 42305 of this title.

(e) Submission of Order to President.—Before an order under this section becomes effective, it shall be submitted immediately to the President. The President, within 10 days after receiving it, may disapprove it if the President finds that disapproval is required for reasons of national defense or foreign policy.

§41109. Assessment of penalties

(a) General Authority.—Until a matter is referred to the Attorney General, the Federal Maritime Commission may, after notice and opportunity for a hearing, assess a civil penalty provided for in this part. The Commission may compromise, modify, or remit, with or without conditions, a civil penalty.

(b) Factors in Determining Amount.—In determining the amount of a civil penalty, the Commission shall take into account the nature, circumstances, extent, and gravity of the violation committed and, with respect to the violator, the degree of culpability, history of prior offenses, ability to pay, and other matters justice may require.

(c) Exception.—A civil penalty may not be imposed for conspiracy to violate subsection (a) or (d) of section 41102 or paragraph (1) or (2) of section 41104(a) 1 of this title or to defraud the Commission by concealing such a violation.

(d) Prohibited Basis of Penalty.—The Commission or a court may not order a person to pay the difference between the amount billed and agreed upon in writing with a common carrier or its agent and the amount set forth in a tariff or service contract by that common carrier for the transportation service provided.

(e) Time Limit.—A proceeding to assess a civil penalty under this section must be commenced within 5 years after the date of the violation.

(f) Review of Civil Penalty.—A person against whom a civil penalty is assessed under this section may obtain review under chapter 158 of title 28.

(g) Civil Actions To Collect.—If a person does not pay an assessment of a civil penalty after it has become final or after the appropriate court has entered final judgment in favor of the Commission, the Attorney General at the request of the Commission may seek to collect the amount assessed in an appropriate district court of the United States. The court shall enforce the order of the Commission unless it finds that the order was not regularly made and duly issued.

§41305. Award of reparations

(a) Definition.—In this section, the term "actual injury" includes the loss of interest at commercial rates compounded from the date of injury.

(b) Basic Amount.—If the complaint was filed within the period specified in section 41301(a) of this title, the Federal Maritime Commission shall direct the payment of reparations to the complainant for actual injury caused by a violation of this part.

(c) Additional Amounts.—On a showing that the injury was caused by an activity prohibited by paragraph (3) or (6) of section 41104(a), or paragraph (1) or (3) of section 41105, the Commission may order the payment of additional amounts, but the total recovery of a complainant may not exceed twice the amount of the actual injury.

(d) Difference Between Rates.—If the injury was caused by an activity prohibited by subparagraph (A) or (B) of section 41104(a)(4), the amount of the injury shall be the difference between the rate paid by the injured shipper and the most favorable rate paid by another shipper.

(e) Attorney Fees.—In any action brought under section 41301, the prevailing party may be awarded reasonable attorney fees.

Commentary on Section 15?

There’s not much to say about Section 15, as even its title informs that the changes it makes are only technical. If it weren’t for the commitment to go through OSRA section by section, I probably would have skipped past 15. It is, of course, important that when referencing activities expressly defined by the Title 46, as the parts amended by Section 15 of OSRA do, that they reference the correct sections. Thus, Section 15 of OSRA importantly does cleanup duty.

I did include the full sections of Title 46 to which this section of OSRA makes clerical corrections. All three sections deal with penalties and reparations for breaking shipping law.

Conclusion

Perhaps you, the reader, have more to say on Section 15 than I do. If so, please do share in the comments. Otherwise, just know that this is a necessary section, cleaning up references rather than actually making any substantial changes to the law.

Stay tuned for when Decoding OSRA continues, looking at Section 16….

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Good News Shippers: Panama Canal Situation Is Much Improved https://www.universalcargo.com/good-news-shippers-panama-canal-situation-is-much-improved/ https://www.universalcargo.com/good-news-shippers-panama-canal-situation-is-much-improved/#respond Tue, 13 Feb 2024 23:10:18 +0000 https://www.universalcargo.com/?p=12483 You wouldn't know it by watching the news, but the water conditions at the Panama Canal have improved. More ships can transit the canal than restrictions had been and were planning to allow. With that, carriers are returning shipping services through the canal. This is especially good news as the Red Sea and Gulf of Aden remain volatile, continuing to force carriers to route ships away from the Suez Canal.

Find out all about it in Universal Cargo's blog.

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You wouldn’t know it by watching the news, but the water conditions at the Panama Canal have improved. More ships can transit the canal than restrictions had been and were planning to allow. With that, carriers are returning shipping services through the canal. This is especially good news as the Red Sea and Gulf of Aden remain volatile, continuing to force carriers to route ships away from the Suez Canal.

The Panama Canal Situation

Panama Canal
Picture: Panama Canal – Looking Back by Roger W

The drought that lowered the water level of Gatun Lake, which feeds the Panama Canal, made mainstream news with many using it to feed into the climate change narrative. With it also being a naturally occurring El Niño year, which tends to cause less rainfall in Panama, feared rose that the drought conditions would get much worse. October seemed to confirm those fears. October is part of Panama’s “rainy” season, but precipitation levels were reported as the lowest since 1950.

By the time November hit, restrictions tightened on the Panama Canal. Rainfall actually started improving in November, but by the time December hit, the Iran-backed Houthi attacks on ships in the Red Sea captured the news. With restrictions still going strong on the Panama Canal, now both of international shipping’s major canals were suffering disruption.

Despite shippers facing double bad news, conditions at the Panama Canal were quietly improving in December. In fact, on December 15th, the Panama Canal Authority put out an advisory to shippers, announcing a loosening of its restrictions on the number of ships allowed to cross the canal. Things were not back to normal, but the outlook for January and February majorly improved.

Restrictions were supposed to limit the number of ships allowed to transit the Panama Canal per day from a normal of about 36 to 22 in December, 20 in January, and only 18 in February. Instead of a decrease in January, the Panama Canal Authority changed course to increasing the number of ship crossings per day to 24. Improvement has helped things move from looking bleak for the canal in February to extremely optimistic.

Carriers Returning Services to Panama Canal

Keith Wallis reported in the Journal of Commerce (JOC) yesterday (February 12th) on services carriers are bringing back to the Panama Canal:

Hapag-Lloyd said THE Alliance restored transits through the canal on some of its trans-Pacific to US East Coast EC2 services from January. 

“Yes, the EC2 service is transiting through the Panama Canal again,” a Hapag-Lloyd spokesperson told the Journal of Commerce. 

Ocean Network Express (ONE) said Panama Canal transits would be fully restored on east and westbound sailings on the EC2 service from Feb. 11 with the departure of Tayma Express from Norfolk, Va. At least four eastbound EC2 services are due to use the canal in February, schedules showed. 

ONE, in a customer advisory last week, said due to the improving situation at the canal, other services are also being considered for a resumption of Panama transits. And the carrier said it was ending its Panama Canal contingency surcharge on US and Canadian exports “due to operation improvements within the canal.” 

THE Alliance has also increasingly switched its EC6 service back to using the canal rather than via the Cape of Good Hope, although a final decision is still made “on a case-by-case basis depending on available vessel bookings through the canal,” the Hapag-Lloyd spokesperson added. 

ONE vessel schedules show three EC6 eastbound sailings from Mobile have used the Panama Canal since Jan. 28, while a March 3 sailing is also expected to use the waterway. 

The EC2 service calls at US East Coast ports including Norfolk, Charleston and Savannah and ports in China and South Korea such as Shanghai, Ningbo and Busan. The EC6 service connects the US Gulf ports of Mobile and Houston with Busan, Kaohsiung and ports in China including Hong Kong, Shenzhen and Shanghai. 

The situation on the Europe-Latin America trade is “OK, since for the LatAm-Europe services — South America West Coast Express [SWX] and Mediterranean, Central America and South America West Coast Express [MSW] — we have most of the canal transits pre-booked,” the Hapag-Lloyd spokesperson said. 

Things are not 100% back to normal at the Panama Canal, but that the situation is improving is clear. And it couldn’t be needed more.

Additionally, there are also truck and rail options across Panama that carriers are still utilizing, which help the situation too. I won’t share all the details here, but Wallis wrote about them and other boosting services to help international cargo flow, so you can get more information of how carriers are using those options in his JOC article.

Ultimately, shippers could probably use some good news right now, so I’m happy to be able to share this with Universal Cargo blog readers who haven’t already heard about the much needed improvement at the Panama Canal.

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Sad Port Story Finally Concludes with ILWU Paying Over $20M https://www.universalcargo.com/sad-port-story-finally-concludes-with-ilwu-paying-over-20m/ https://www.universalcargo.com/sad-port-story-finally-concludes-with-ilwu-paying-over-20m/#respond Fri, 09 Feb 2024 00:57:42 +0000 https://www.universalcargo.com/?p=12480 Maybe this will finally be the last time I write about this story. The International Longshore & Warehouse Union (ILWU) will at last pay one of the parties it wronged at the Port of Portland, concluding a drama that dragged on for over a decade.

During a five-year time span, the ILWU executed illegal labor actions against the Port of Portland. Despite rulings against it, the union persisted in slowing down operations at the port in order to gain control over two jobs that had always belonged to another union, the International Brotherhood of Electrical Workers (IBEW). The jobs involved plugging and unplugging reefer containers. You know, electricity-related things that it's not surprising electrical workers did. But, hey, the jobs were at a port, and the ILWU is adamant about taking control of every job at the ports.

ILWU's slowdowns became so disruptive to operations at the Port of Portland that ocean freight carriers had to stop calling on the port with container ships altogether. This was, of course, extremely expensive for the terminal operator ICTSI Oregon, but also for shippers, and even for the ILWU itself.

Keep reading post in Universal Cargo's blog.

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Maybe this will finally be the last time I write about this story. The International Longshore & Warehouse Union (ILWU) will at last pay one of the parties it wronged at the Port of Portland, concluding a drama that dragged on for over a decade.

During a five-year time span, the ILWU executed illegal labor actions against the Port of Portland. Despite rulings against it, the union persisted in slowing down operations at the port in order to gain control over two jobs that had always belonged to another union, the International Brotherhood of Electrical Workers (IBEW). The jobs involved plugging and unplugging reefer containers. You know, electricity-related work that it’s not surprising electrical workers did. But, hey, the jobs were at a port, and the ILWU is adamant about taking control of every job at the ports.

ILWU’s slowdowns became so disruptive to operations at the Port of Portland that ocean freight carriers had to stop calling on the port with container ships altogether. This was, of course, extremely expensive for the terminal operator ICTSI Oregon, but also for shippers, and even for the ILWU itself.

Before even getting to the millions the union is now paying, there were about three years when no container ships were calling on the Port of Portland. That means three years of lost union jobs. But maybe it was worth it to the union for those members’ jobs to no longer be there. After all, the ILWU got to flex its muscle, showing everyone how powerful it is.

The ILWU won’t be paying ICTSI nearly as much as it could have been. Originally, the US District Court ordered the ILWU to pay $93 million. So, the ILWU and its Local 8 chapter, which executed the labor actions, filed for bankruptcy. Now the union has settled with ICTSI, as Bill Mongelluzzo reported last week in a Journal of Commerce (JOC) article:

The International Longshore and Warehouse Union (ILWU) and ICTSI Oregon said Thursday they have settled a long-running legal dispute in a deal that will pay ICTSI $20.5 million and end the ILWU’s Chapter 11 bankruptcy case. 

“The ILWU settlement arises from the parties’ participation in several days of mediation during ILWU’s chapter 11 bankruptcy case, which will be voluntarily dismissed as part of the terms of the settlement,” the parties said in a joint statement. 

If you want to revisit the drama, here are some related posts Universal Cargo published through the years:

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As Carriers Squeeze Shippers, FMC to Hold Hearing on Red Sea-Related Surcharges https://www.universalcargo.com/as-carriers-squeeze-shippers-fmc-to-hold-hearing-on-red-sea-related-surcharges/ https://www.universalcargo.com/as-carriers-squeeze-shippers-fmc-to-hold-hearing-on-red-sea-related-surcharges/#respond Tue, 06 Feb 2024 22:42:13 +0000 https://www.universalcargo.com/?p=12478 Many shippers feel like ocean freight carriers are unfairly taking advantage of recent global events for financial gain. In particular, many believe the Red Sea-related surcharges carriers are levying go way beyond the costs for carriers to divert ships. And carriers are directing higher increases toward particular shippers. Or perhaps guarding their largest customers from paying as much in freight rate hikes. Small to medium shippers, who don't have direct contracts with carriers, appear to be suffering increased international shipping costs the most.

So are shippers right to complain? Are the surcharges carriers hitting shippers with unfair cost increases?

Tomorrow, the U.S. Federal Maritime Commission (FMC) will hold a public hearing on the issue.

Find out more by reading the full post in Universal Cargo's blog.

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Many shippers feel like ocean freight carriers are unfairly taking advantage of recent global events for financial gain. In particular, many believe the Red Sea-related surcharges carriers are levying go way beyond the costs for carriers to divert ships. And carriers are directing higher increases toward particular shippers. Or perhaps guarding their largest customers from paying as much in freight rate hikes. Small to medium shippers, who don’t have direct contracts with carriers, appear to be suffering increased international shipping costs the most.

So are shippers right to complain? Are the surcharges carriers hitting shippers with unfair cost increases?

Tomorrow, the U.S. Federal Maritime Commission (FMC) will hold a public hearing on the issue.

FMC Hearing on Red Sea-Related Surcharges

The surcharges carriers implemented were approved by the FMC. They had to be in order to be put in place as quickly as they were. The commission will have to explain why it allowed the surcharges in the hearing tomorrow. Certainly, the issue of the fairness of the charges will be raised.

There’s no secret freight rates shot way up after Iran-backed Houthi Rebels began attacking ships in the Red Sea. In fact, Michael Angell reports in the Journal of Commerce (JOC):

Since major liner operators began rerouting container ships via southern Africa’s Cape of Good Hope in mid-December, spot container rates have, on average, doubled globally, according to Drewry. The world container index from the maritime consultancy has risen from $1,661 per FEU on Dec. 18 to $3,824 per FEU by Jan. 29.

There has been some recent relief to the hikes imposed on shippers, but freight rates remain very high compared to the period leading up to the attacks. Certainly, the attacks have added costs to carriers. Hundreds of sailings have been diverted away from the Red Sea and Suez Canal, taking many ships on the long trip around the southern tip of Africa, where the Cape of Good Hope is located.

However, many complain that the cost of those diversions is nowhere near the amount carriers are billing in surcharges. In a JOC article about the FMC hearing, Teri Errico Griffis reports:

Some shippers, such as the US-based Agriculture Transportation Coalition (AgTC) have pushed the FMC to force carriers to offer more transparency into the economics behind the recent surcharges, citing analysts’ reports that show the charges exceeding the costs of ship diversions. Peter Friedmann, AgTC’s executive director, cautioned in a Jan. 2 commentary in the Journal of Commerce that the surcharges could become a new “profit center” for ocean carriers. 

Ocean Carriers Making Money Off Red Sea Crisis

Indeed, reports are coming out of improved financial outlooks for carriers in the wake of the Red Sea situation. For example, Mike Wackett reported in the Loadstar about the Japanese ocean carrier One Network Express (ONE) going from an operating of loss of $248M in the last three months of 2023 to expectations of profits for the first quarter of 2024, thanks directly to the huge rate increases because of the Red Sea crisis.

In his article, Wackett quoted another major carrier, MOL, as saying “it expected its containership business to ‘secure a certain profit level, due to the recent situation in the Middle East’.”

Special Surcharge Rules

Perhaps carriers should have the right to increase freight rates as much as market conditions allow. However, the surcharges resulting from the Red Sea crisis are special charges and come with special rules, particularly when dealing with U.S. shipping law. Griffis reports:

Under the US Shipping Act, carriers must provide 30 days’ notice to customers before implementing special charges but can petition the FMC for a waiver of that rule. The commission in recent weeks has granted waivers as carriers were forced to quickly reroute vessels around southern Africa to avoid escalating attacks on commercial shipping by Houthi militants based in Yemen. 

The surcharges sought for a dry FEU range from $400 to $2,700, while refrigerated surcharges vary from $600 to $3,000 per FEU, according to FMC filings by APL, CMA CGM, Hapag-Lloyd, Maersk, Mediterranean Shipping Co., and Ocean Network Express (ONE). 

Shippers Want Transparency

Especially for small to medium shippers, these kinds of charges have enormous impacts on their businesses. It’s no wonder they would want at least some semblance of transparency in how these kinds of numbers are reached by carriers. Plus, the fees are separate from the actual spot market for freight rates. Or perhaps it would be better to call them “in addition to” the spot market freight rate increases.

Griffis writes:

[FMC Chairman Daniel Maffei] said in a situation such as what’s occurring in the Red Sea, “there’s no question that there will be added costs” to keep carriers and their crew safe. But customers have an equal interest in how the surcharges are determined, how they’re implemented and what happens if the carriers’ diversions end up costing less, or more, than anticipated, he said.

The surcharges are a particularly sensitive topic because they are being implemented amid fast-rising spot rates linked to the Red Sea shipping crisis. Ultimately, however, whether customers pay the surcharges is not guaranteed, as the final price paid comes down to negotiations between the carrier and the shipper or forwarder. 

Hearing Shouldn’t Change Much

Shippers will be able to dispute fees but shouldn’t expect the FMC to change its position on granting the carriers permission to implement them. That’s clear from the FMC quotes Griffis shares at the end of his article:

If shippers want to dispute any surcharges, Maffei said they can go through the typical FMC channels, adding more information will be provided at the Feb. 7 hearing. But Maffei noted that the FMC granting special permission for the surcharges is not necessarily “exceptional” — the uncertain security situation in the Red Sea is.  

“This is precisely the situation when these permissions come up unexpectedly. There is no way the carrier could have provided 30 days’ notice,” he said. “And if you don’t [grant the waiver] the implications could be far worse, such as a breakdown in [shipping] lanes.” 

Carriers Targeting Freight Forwarders and Small to Medium Shippers?

Large shippers probably aren’t complaining as reports are showing minimal financial impact for them. Meanwhile, medium to small shippers, using freight forwarders to deal with carriers, are feeling targeted. That appears to be a rightful feeling for them and their freight forwarders, as reports are showing they are being targeted.

Angell reported in his JOC article:

Three ocean forwarders and four beneficial cargo owners (BCOs) that spoke to the Journal of Commerce about their contract of carriage terms agreed that ocean carriers have been opportunistically targeting certain customers for higher rates and surcharges.  

An US agent for a Hong Kong-based ocean freight consolidator said ocean carriers were pushing FAK rates on ocean forwarders of $5,000 per FEU to the US West Coast and $7,000 per FEU to the East Coast for cargo loading in the second half of January. 

However, he said major BCOs with contract commitments that move upward of 60,000 FEUs annually are still paying their contracted rates of $1,250 per FEU to the West Coast and $2,350 per FEU to the East Coast.  

“Only the non-vessel-operating common carrier [NVO] is taking the big increases,” the agent said. The source said other generous contract terms for higher-volume shippers, such as 15 days of free time for containers and chassis, also remain intact, indicating an unwillingness by ocean carriers to upset larger customers. 

“They don’t want to rip off the big boys for short-term gain since the market is still soft,” the agent added. “But many small importers who use NVOCCs can’t ship anymore.” 

Stay Up to Date

Universal Cargo is closely monitoring the crisis in the Red Sea as it does constantly with the international shipping industry and situations that impact it. You can keep up to date with the things that affect your importing and exporting by subscribing to Universal Cargo’s blog. And, of course, we’re always here to help you with your international shipping needs.

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China Asks Iran to Tell Houthi, Attacking Red Sea, to ‘Show Restraint’ https://www.universalcargo.com/china-asks-iran-to-tell-houthi-attacking-red-sea-to-show-restraint/ https://www.universalcargo.com/china-asks-iran-to-tell-houthi-attacking-red-sea-to-show-restraint/#respond Thu, 01 Feb 2024 23:17:41 +0000 https://www.universalcargo.com/?p=12474 Shippers are waiting for someone to do something about the Iran-backed Houthi attacks on ships in the Red Sea, which have escalated, disrupted international shipping, and catapulted freight rates. Well, it looks like China is trying to use its leverage with Iran to make it safer for ships to traverse the area and use the Suez Canal for international shipping again.

Find out all about it in Universal Cargo's blog.

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Shippers are waiting for someone to do something about the Iran-backed Houthi attacks on ships in the Red Sea, which have escalated, disrupted international shipping, and catapulted freight rates. Well, it looks like China is trying to use its leverage with Iran to make it safer for ships to traverse the area and use the Suez Canal for international shipping again.

American, Chinese, and Iranian flags

Parisa Hafezi and Andrew Hayley reported in Reuters:

Chinese officials have asked their Iranian counterparts to help rein in attacks on ships in the Red Sea by the Iran-backed Houthis, or risk harming business relations with Beijing, four Iranian sources and a diplomat familiar with the matter said.

The discussions about the attacks and trade between China and Iran took place at several recent meetings in Beijing and Tehran, the Iranian sources said…

“Basically, China says: ‘If our interests are harmed in any way, it will impact our business with Tehran. So tell the Houthis to show restraint’,” said one Iranian official briefed on the talks, who spoke to Reuters on condition of anonymity.

China is Iran’s biggest trade partner. The lopsided nature of the trade between China and Iran, as described by Hafezi and Hayley, should give China significant leverage on Iran:

Chinese oil refiners, for example, bought over 90% of Iran’s crude exports last year, according to tanker tracking data from trade analytics firm Kpler, as U.S. sanctions kept many other customers away and Chinese firms profited from heavy discounts.

Iranian oil, though, only accounts for 10% of China’s crude imports and Beijing has an array of suppliers that could plug shortfalls from elsewhere.

China’s leverage would be stronger if the Biden administration hadn’t loosened sanctions on Iran since President Biden took office, increasing the country’s koffers by billions of dollars, which helped Iran pump money into terrorist organizations like Hamas and the Houthi rebels. Iran has even funded scores of attacks directly on U.S. soldiers in the region.

U.S. officials said the drone used to kill 3 U.S. soldiers and injure many more in Jordan was Iran-made. President Biden vowed to respond against Iran. The president now has even said he’s decided on the response. We’ll have to wait and see what that response is. However, with his history of moves made abroad, from his botched exit from Afghanistan to now, doesn’t give much confidence in his decisions.

Unfortunately, China getting Iran to rein in the attacks in the Red Sea seem more realistic than the Biden Administration succeeding there.

The language used in the Reuters article isn’t as strong as China telling Iran it will cut off trade if Iran doesn’t stop the attacks. However, there is a subtext of threat to the friendlier-sounding words reported:

The Iranian sources said Beijing had made it clear it would be very disappointed with Tehran if any vessels linked to China were hit, or the country’s interests were affected in any way.

Very disappointed. I’ll bet you’ve heard that language from your own parents growing up. “I’m not angry, just very disappointed.” Yeah, we all know really means you’re angry as hell, Mom.

I don’t think Iran wants to test what what a very angry–ahem–very disappointed China will do. Hopefully, that will result in Iran reining in the Houthi rebels, if they’re even controllable by Iran at this point, and quelling the attacks on ships in the Red Sea.

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Carrier Alliance Reshuffle Moves Are Happening https://www.universalcargo.com/carrier-alliance-reshuffle-moves-are-happening/ https://www.universalcargo.com/carrier-alliance-reshuffle-moves-are-happening/#respond Thu, 25 Jan 2024 22:29:49 +0000 https://www.universalcargo.com/?p=12464 Big changes are happening in the international shipping landscape, or waterscape (?), as the 2M, Ocean, and THE carrier alliances are reshuffling.

These three carrier alliances, tying all of the world's major ocean shipping lines together with vessel sharing agreements, have dominated international shipping for almost a decade. When news broke, a year ago, that the 2M Alliance, between the two largest ocean freight carriers (MSC and Maersk), is splitting, it was only a matter of time before a shift happened with the other two alliances.

Speculation felt like guessing the plot points of a cheesy novel. Which alliances would fall or split? What new alliances might form? The first big turning point after the inciting incident of Maersk and MSC breaking up came last week....

Find out more by reading the full post in Universal Cargo's blog.

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Big changes are happening in the international shipping landscape, or waterscape (?), as the 2M, Ocean, and THE carrier alliances are reshuffling.

These three carrier alliances, tying all of the world’s major ocean shipping lines together with vessel sharing agreements, have dominated international shipping for almost a decade. When news broke, a year ago, that the 2M Alliance, between the two largest ocean freight carriers (MSC and Maersk), is splitting, it was only a matter of time before a shift happened with the other two alliances.

Speculation felt like guessing the plot points of a cheesy novel. Which alliances would fall or split? What new alliances might form? The first big turning point after the inciting incident of Maersk and MSC breaking up came last week.

Hapag-Lloyd Is Leaving THE to Form Gemini with Maersk

Hapag-Lloyd Ship

News dropped that Hapag-Lloyd is leaving the THE Alliance to form a new one with Maersk. Greg Knowler knows all about it, and reported on the news in a Journal of Commerce (JOC) article:

Maersk and Hapag-Lloyd on Wednesday unveiled a new operational partnership called “Gemini Cooperation” that will begin early next year and revolve around a global “hub-and-spoke” network of owned or controlled terminals in key locations. 

Hapag-Lloyd will exit THE Alliance and link up with Maersk in February 2025 after the dissolution of the Maersk-Mediterranean Shipping Co. 2M Alliance. The Gemini Cooperation will operate a fleet of 290 vessels with an overall capacity of 3.4 million TEUs serving the major global trade lanes. 

The cornerstone of the new partnership will be the hub-and-spoke network the carriers believe will enable them to achieve schedule reliability above 90%, a level that has not been achieved in years and would differentiate Gemini from other alliances.

Majorly Improved Carrier Reliability?

That 90% reliability mark would be incredible for the international shipping industry, in which carriers are notoriously unreliable when it comes to reaching ports with goods on schedule. To be fair to carriers, there are many factors outside of their control that contribute to this problem. Congestion at any major shipping hub around the world can send ripples through supply chains, causing a chain reaction of delayed arrivals. However, carriers’ practices around blanked (cancelled) sailings, often to limit capacity and put upward pressure on freight rates, come into play. A lot.

The arrangement of the carriers into three alliances controlling global shipping has given carriers much higher control over capacity. It’s something I’ve been outspoken about, calling on regulatory agencies to reconsider approval of these massive vessel sharing agreements that result in reduced competition and increased risk in the international shipping industry. Warnings like mine were validated when the alliances coordinated for hundreds of blanked sailings at the beginning of the pandemic for fear of losses from expected reduced demand. The mass blanked sailings massively contributed to the supply chain crisis that followed.

If Maersk and Hapag-Lloyd’s Gemini Cooperation does achieve 90% reliability, it may spark competition from other carriers and their alliances to increase their reliability. Shippers would welcome that kind of competition in the industry.

What Now for THE and Ocean Alliances

Over a quarter of THE Alliance’s tonnage comes from Hapag-Lloyd. It’s hard to imagine that won’t cause the alliance, or its individual remaining members, to scramble, maybe even attempt to poach carriers from the Ocean Alliance. Despite this, THE is saying “it’s business as usual in 2024,” according to another JOC article from Knowler:

Ocean carriers within THE Alliance on Wednesday pledged their “unwavering commitment” to the vessel-sharing agreement — for at least this year — following last week’s surprise announcement by Hapag-Lloyd that it was leaving to join the new Gemini Cooperation with Maersk. 

“We wish to emphasize our unwavering commitment to maintaining a robust cooperation throughout 2024, ensuring that the highest standards of cooperation and exceptional service are delivered to our stakeholders and the industry at large,” member lines Hapag Lloyd, HMM, Yang Ming Marine Transport and Ocean Network Express (ONE) said in a joint statement. 

Of course, that’s only an unwavering commitment for the rest of this year. It sounds like they’re already trying to figure out what they’ll do afterward. I expect we’ll hear more big carrier alliance arrangement news well before this year is out. So far, the Ocean Alliance is the only one to stand pat. We’ll see if that will last long.

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Escalations in Red Sea, More Diversions, More Ships, More Freight Rate Pressure https://www.universalcargo.com/escalations-in-red-sea-more-diversions-more-ships-more-freight-rate-pressure/ https://www.universalcargo.com/escalations-in-red-sea-more-diversions-more-ships-more-freight-rate-pressure/#respond Tue, 16 Jan 2024 22:51:07 +0000 https://www.universalcargo.com/?p=12448 Missile Strikes U.S. Cargo Ship

A CBS News video reports that the Iran-backed Houthi rebels, who have been attacking ships in the Red Sea, hit the U.S. cargo ship Gibraltar Eagle with a missile strike off the coast of Yemen in the Gulf of Aden, which connects the Indian Ocean and Arabian Sea to the Red Sea. From the anti-ship ballistic missile, "the vessel suffered limited damage to a cargo hold but is stable and is heading out of the area." There were no injuries reported.

The attack follows U.S. and U.K. cooperative air strikes across Yemen, targeting Houthi forces in response to the Houthi attacks that have been happening in the Red Sea. The air raids obviously did not deter Houthi rebels from launching missiles at ships. They also fired an anti-ship cruise missile, after the air raids, at the U.S.S. Boone Destroyer in the Red Sea, but the missile was shot down by a fighter jet.

Unfortunately, this means the situation in the Red Sea is only escalating, which for shippers means...

Ongoing Diversions from Red Sea for Foreseeable Future, According to Geopolitical Analylists

According to a Journal of Commerce (JOC) article by Mark Szakonyi, geopolitical analysts see ship diversions from the Red Sea and Suez Canal to down and around southern Africa's Cape of Good Hope to stay away from Houthi attacks to continue for the foreseeable future.

Keep reading in Universal Cargo's blog.

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Missile Strikes U.S. Cargo Ship

A CBS News video reports that the Iran-backed Houthi rebels, who have been attacking ships in the Red Sea, hit the U.S. cargo ship Gibraltar Eagle with a missile strike off the coast of Yemen in the Gulf of Aden, which connects the Indian Ocean and Arabian Sea to the Red Sea. From the anti-ship ballistic missile, “the vessel suffered limited damage to a cargo hold but is stable and is heading out of the area.” There were no injuries reported.

The attack follows U.S. and U.K. cooperative air strikes across Yemen, targeting Houthi forces in response to the Houthi attacks that have been happening in the Red Sea. The air raids obviously did not deter Houthi rebels from launching missiles at ships. They also fired an anti-ship cruise missile, after the air raids, at the U.S.S. Boone Destroyer in the Red Sea, but the missile was shot down by a fighter jet.

Unfortunately, this means the situation in the Red Sea is only escalating, which for shippers means…

Ongoing Diversions from Red Sea for Foreseeable Future, According to Geopolitical Analylists

According to a Journal of Commerce (JOC) article by Mark Szakonyi, geopolitical analysts see ship diversions from the Red Sea and Suez Canal to down and around southern Africa’s Cape of Good Hope to stay away from Houthi attacks to continue for the foreseeable future.

map of Africa Suez Canal vs Cape Route
Map of Africa by mapswire with Suez Canal and Cape Route markings added.

While it’s too soon to determine what impact joint US-UK air strikes on the Houthis will have, experts warn it’s unlikely to deter the Iran-backed group from future attacks. The Houthis — seeing their regional influence rise and galvanized by wider anger among Arab states amid the Israel-Hamas war — have plenty to gain by keeping up their attacks via drones and cruise and ballistic missiles, according to Jack Kennedy, associate director of country risk for the Middle East and North Africa at S&P Global Market Intelligence.

“The group is unlikely to be deterred,” Kennedy told the Journal of Commerce….

A US aircraft carrier and submarines hit more than 60 Houthi-linked targets at 16 sites in Yemen last week, followed up by two subsequent strikes. 

While the attacks may have helped US forces weaken the ability of militants to target commercial ships, they won’t likely deter the Houthis or their Iranian backers, said Bruce Jones, a geopolitical analyst at the Brookings Institution. Being widely dispersed across western Yemen, the Houthis can easily move, hide and launch drone strikes from anywhere, he said. 

“We should expect to see continued uncertainty in the Red Sea in the days and probably weeks ahead,” Jones said. 

There’s nothing surprising about what the geopolitical experts said. Frankly, with this article being published today (January 16th), after the Houthi militants have continued attacking after the air raids, any layman following the news could tell you the U.S.-U.K. air strikes did not stop Houthi attacks and ship diversions will continue.

With the much longer transit times of ships going around the whole continent of Africa…

It Takes More Ships

More ships are required to handle the longer routes around Africa while keeping all the other port to port services carriers offer going. Bottom line, it takes more ships to transport the same amount of cargo.

Regular readers of Universal Cargo’s blog likely already know that more ships and capacity have been and are entering the international shipping waters. Many analysts thought carriers were bringing too many ships, too much capacity, into the market. That increased capacity beyond likely growth of demand was likely to put downward pressure on freight rates, which shippers like but can be very bad for ocean freight carriers. Now, those added ships look like a good thing for carriers, at least in the short-term.

Szakonyi points to the new and incoming vessels as the capacity being available to handle longer transits:

… container lines have plenty of ships to deploy on these now-longer services that require more vessels to keep to schedule. Container capacity is expanding 10% this year from 2023 while demand growth will be between 3% to 4%, according to the Baltic and International Maritime Council (BIMCO).

However, all the carriers don’t seem quite as set on ships as Szankonyi makes it sound. According to a Miller Time (Greg Miller) article in FreightWaves, container lines are scrambling to rent more ships to handle the situation.

This scrambling demand means higher rates for chartering ships. Of course, the higher cost of shipping will likely be passed on to shippers, who have already seen freight rates spike in the wake of the Red Sea attacks.

Miller Time reports:

“This week saw a scramble for prompt tonnage,” said MB Shipbrokers (formerly Maersk Broker) in a market report on Friday, referring to ships that can be chartered immediately.

“Owners have certainly become more bullish and are pushing for higher-than-last-done levels in all segments and most regions.” Charter rates are headed higher, “specifically for short periods of three to six months’ duration,” said MB Shipbrokers.

Shipbroker Braemar reported Sunday: “Chartering activity [has] further improved. Various prompt vessels across all sizes and regions [are] seeing increased interest. Charter rates as well as periods are witnessing a firming trend.”

“Despite a continued influx of newbuilding tonnage of all types, demand for most sizes of charter-market ships … remains strong. The crisis in the Red Sea, with most carriers now avoiding the area, is in part contributing to the market’s brisk activity,” said Alphaliner.

Because of the already mentioned ships entering the waters, 2024 was expected to be a weak year for chartering ships. That means the current supply of ships available to be chartered is not up to the influx in demand, putting even more upward pressure on chartering costs. Miller Time writes about how most of the charter tonnage out there from non-operating owners (NOOs) is already tied up in long-term leases.

During the supply chain crisis, there was heavy demand to charter ships, so NOOs were able to dictate terms for not only historically high rates but also forcing container lines to take multi-year leases. Miller Time demonstrated how most of these ships are already chartered with the following data:

Among the U.S.-listed NOOs, Danaos (NYSE: DAC) has 90% of its fleet already locked up on charters through the end of 2024. Charter coverage of Costamare (NYSE: CMRE) is 87% for 2024, with Global Ship Lease (NYSE: GSL) at 82% and Euroseas (NASDAQ: ESEA) at 70%.

It all adds up to…

Conclusion

Ultimately, the ongoing and intensifying situation in the Red Sea and longer shipping routes to avoid it mean continuing upward pressure on freight rates. I know that’s something shippers don’t like to hear, but at least we are coming up on a slower time of year for international shipping. The lower demand after the Chinese New Year starts is a downward pressure on rates. The potential for some relief for shippers in the near future is something you can read about in our post:

Good News for Shippers in Wake of Red Sea Attacks & High Freight Rates

In the meantime, we’re looking at overall upward pressure on freight rates at the moment. And for a look at freight rate behavior projections for the year, check out our last post:

2024 Expert Freight Rate Outlook in Wake of Red Sea Attacks & Rate Spikes

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2024 Expert Freight Rate Outlook in Wake of Red Sea Attacks & Rate Spikes https://www.universalcargo.com/2024-expert-freight-rate-outlook-in-wake-of-red-sea-attacks-rate-spikes/ https://www.universalcargo.com/2024-expert-freight-rate-outlook-in-wake-of-red-sea-attacks-rate-spikes/#respond Fri, 12 Jan 2024 01:43:29 +0000 https://www.universalcargo.com/?p=12444 What should shippers expect when it comes to freight rates in 2024? Predicting trends is never an easy thing, as international shipping's freight rates have always been highly volatile. Shippers got another taste of that volatility to start out 2024 with spiking freight rates in the wake of attacks on container ships in the Red Sea. In the last post, we talked about how, starting next month, shippers could start seeing relief from the surging freight rates. Does that mean freight rates will return to the behavior experts expected of them at that point?

How even did the experts expect freight rates to behave in 2024?

Let's round up a bunch of industry professional opinions for 2024 freight rates and see some updated expert outlooks in the wake of the Red Sea attacks.

It's all in the post in Universal Cargo's blog.

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What should shippers expect when it comes to freight rates in 2024? Predicting trends is never an easy thing, as international shipping’s freight rates have always been highly volatile. Shippers got another taste of that volatility to start out 2024 with spiking freight rates in the wake of attacks on container ships in the Red Sea. In the last post, we talked about how, starting next month, shippers could start seeing relief from the surging freight rates. Does that mean freight rates will return to the behavior experts expected of them at that point?

How even did the experts expect freight rates to behave in 2024?

Man Looking Up at Shipping Containers

Let’s round up a bunch of industry professional opinions for 2024 freight rates and see some updated expert outlooks in the wake of the Red Sea attacks.

General Combined Outlook Heading into 2024

Not surprisingly, experts’ outlooks on freight rates for 2024 are mixed. However, a majority of international shipping industry professionals expected freight rates to decline in the first half of the year. The second half is where opinions diverged more often. Some experts believed freight rates would continued to decline while others predicted a potential rebound in the latter half of 2024.

Five common key factors influencing freight rates are often brought up by the experts….

Factors Influencing Freight Rates in 2024:

  • Global Economic Slowdown: A potential global recession could lead to decreased demand for goods, putting downward pressure on freight rates.
  • Excess Shipping Capacity: The ongoing supply chain issues of 2021 and 2022 led to a surge in new ship orders, which are now entering the market and creating an oversupply of shipping capacity. That will potentially drive down freight rates.
  • Port Congestion: While port congestion has eased compared to the peak of the pandemic, it can still cause delays and disruptions, impacting costs and influencing rates.
  • Geopolitical Tensions: Ongoing conflicts and political instability, like but not limited to what we’ve seen with the wars in Ukraine and Israel, can disrupt trade routes and raise insurance costs, impacting freight rates. This often creates upward pressure on rates.
  • Fuel Prices: Fluctuations in oil prices can significantly impact shipping costs, with higher prices leading to increased freight rates.

Let’s get more specific with…

Expert Outlooks

Despite a mixed bag in outlooks, freight rates declining in 2024 was a common theme before the freight rate spike following the Red Sea attacks took place. Here are some of the expert companies and their outlooks for the year:

  • UPS Supply Chain Solutions: They predict relatively flat rates for the first nine months of 2024, with a potential for growth and a return to peak season in Q4.
  • S&P Global: They expect freight rates to continue declining in 2024, with significant pressure on shipping company profitability.
  • Xeneta: Their 2024 Ocean Freight Shipping Outlook report highlights six key factors impacting the market, with a cautious outlook for the first half of the year and a potential for upward correction later.
  • Wicker Park Logistics: They see a mixed picture, with LTL (less than container load) rates remaining stable, TL (truckload) contract rates potentially improving, and continued challenges for the ocean freight market.

Here’s a prominent voice from different sectors of the international shipping industry on 2024 freight rates:

Air Freight:

  • Eric Kulstad, Vice President of Global Accounts at Airblox: “We expect air freight rates to remain under pressure in Q1 due to continued economic uncertainty and weak demand. However, a gradual recovery is possible later in the year, particularly for certain high-value goods and industries.”

Ocean Freight:

  • Maersk Line CEO Søren Skou: “The first half of 2024 will likely see continued downward pressure on ocean freight rates due to overcapacity and weak demand. However, we remain optimistic about a gradual recovery in the second half, especially if peak season demand rebounds.”

Intermodal:

  • Jett McCray, President of the Intermodal Association of North America: “We’re seeing renewed interest in intermodal transportation from shippers seeking cost-effective alternatives to truckload shipping. This could lead to some stabilization or even modest growth in intermodal rates in 2024.”

LTL:

  • Gene Seroka, Chairman and CEO of the American Trucking Associations: “The LTL market remained relatively stable in 2023, and we expect this trend to continue in 2024. Capacity may tighten slightly later in the year, but overall rates are likely to remain predictable.”

Overall, the outlook for freight rates in 2024 was uncertain before the Red Sea attacks happened. However, downward pressure was generally expected for the beginning of the year. Economic and capacity factors played largely into first half falling freight rates. Looking across expert opinions, there was a decent amount of optimism (though maybe not such a positive from shippers’ perspective) for a potential rebound in freight rates later in the year. That potential rebound was dependent upon economic recovery and peak season demand.

However, because of Houthi Rebels, backed by anti-Israel Iran, targeting container ships in the Red Sea, keeping container ships from traversing the Suez Canal when tightening restrictions for crossing the Panama Canal were already happening, the start of 2024 for freight rates was very different than expected.

Impact of Red Sea Attacks

Freight rates soared in the immediate aftermath of the Red Sea attacks. The fallout on shipping included the following:

  • The attacks have caused port closures, rerouting, and increased insurance costs, adding significant surcharges to shipping routes traversing the Red Sea.
  • These disruptions directly impact Asian-European and Asian-East Coast US lanes, which previously saw significant price drops.
  • Uncertainty regarding future attacks creates a volatile market environment, making long-term predictions challenging.

Additional Considerations:

  • Geopolitical developments in the region and potential escalation of violence could further exacerbate the Red Sea situation.
  • Alternative routes bypassing the Red Sea, like the Cape of Good Hope, are longer and more expensive, but may become more popular if disruptions continue.
  • The long-term impact of the attacks on supply chains and regional trade patterns remains to be seen.

After the Red Sea attacks, many industry professionals updated their 2024 freight rates outlook….

Updated Expert Outlooks

  • S&P Global: While they still predict overall downward pressure on freight rates in 2024, they acknowledge the Red Sea situation could lead to shorter-term spikes and regional imbalances.
  • Xeneta: Their revised outlook emphasizes the Red Sea disruptions as a wild card, increasing their caution for the first half of the year and suggesting a more volatile market than previously anticipated.
  • Maersk Line CEO Søren Skou: While maintaining optimism about a second-half recovery, he acknowledges the Red Sea situation creates additional uncertainty and may delay the normalization of freight rates.
  • FreightWaves: Recent articles highlight the significant impact of the attacks on specific lanes, with experts predicting sustained high rates for affected routes even if overall market trends show decline.

Conclusion:

The Red Sea attacks have injected a new layer of complexity and uncertainty into the 2024 freight rate outlook. While predictions for a general downward trend in rates still hold, expect volatility and potential spikes, especially on affected routes. Shippers should closely monitor the situation, explore alternative options, and – for BCOs (beneficial cargo owners who deal directly with carriers – seek flexible contracts to navigate the evolving market landscape.

The decreased shipping demand from the arrival of the Chinese New Year next month could help bring spiking freight rates down and improved stability of freight as carriers adjust to alternative and longer shipping routes, as discussed in the previous blog post.

By staying informed and adaptable, shippers can minimize the impact of situations like the attacks in the Red Sea on their shipping costs and increase smoother deliveries of their goods throughout 2024. It’s an ongoing objective of Universal Cargo’s blog to do just that: keep you updated on information that provides a more comprehensive and current perspective on international shipping and its freight rate outlooks, factoring in the recent developments like what’s happening in the Red Sea.

Thus, keep coming back for more about what’s happening in international shipping, and feel free to contact us anytime to help you with your importing and exporting needs.

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Good News for Shippers in Wake of Red Sea Attacks & High Freight Rates https://www.universalcargo.com/good-news-for-shippers-in-wake-of-red-sea-attacks-high-freight-rates/ https://www.universalcargo.com/good-news-for-shippers-in-wake-of-red-sea-attacks-high-freight-rates/#respond Tue, 09 Jan 2024 22:31:12 +0000 https://www.universalcargo.com/?p=12440 Anti-Israel, Iranian-backed Houthi rebel attacks on container ships in the Red Sea. Freight rates spiking. Cargo delays. That's what has dominated international shipping news over the last few weeks. I posted a quick Shipper Alert about it before leaving for a holiday vacation with family. The situation hasn't gotten any better for shippers during the two weeks I was away from this blog. And shippers should expect high freight rates and delays to persist for the rest of the month.

However, relief could be coming soon thereafter, once the Chinese New Year arrives on February 10th.

Find out all about it by reading the full post in Universal Cargo's blog.

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Anti-Israel, Iranian-backed Houthi rebel attacks on container ships in the Red Sea. Freight rates spiking. Cargo delays. That’s what has dominated international shipping news over the last few weeks. I posted a quick Shipper Alert about it before leaving for a holiday vacation with family. The situation hasn’t gotten any better for shippers during the two weeks I was away from this blog. And shippers should expect high freight rates and delays to persist for the rest of the month.

However, relief could be coming soon thereafter, once the Chinese New Year arrives on February 10th.

cargo ship in water overlooking sunset

Michael Angell, like a messenger of God, delivered words of hope in a Journal of Commerce (JOC) article

… [Philip Damas, the head of Drewry Shipping’s supply chain practice] said he expects the rate surge to subside as demand eases following Lunar New Year and ocean carriers deploy more ships in their service strings and update schedules to account for longer transits.  

“The next five weeks leading to Chinese New Year will be very difficult for shippers and for shipping, but Drewry believes shipping has more than enough capacity to do the ship diversions around Africa and that spot rates will decline again after Chinese New Year,” he said. 

Obviously, that doesn’t mean freight rates will plummet instantly and ships will have smooth sailing through the Suez Canal on February 10th, but we should see a period of improving rates and stability for shippers that begins in February. The largest driving force will be the decrease in shipping demand that takes place during the Chinese New Year.

With the Chinese New Year comes the Chinese Spring Festival holiday. While the holiday itself is 7 days long, celebration goes on for 15 days, shutting down factories in China. It’s usually a month before factories can resume normal operations, and it is not uncommon for them to be impacted for two months. That’s why there’s typically a shipping surge that takes place right before the Chinese New Year as retailers and other businesses that import from China rush to restock after the Christmas and holiday shopping season has ended and the shutdowns in China take place.

The time of year of the attacks in the Red Sea, causing hundreds of container ships to divert routes from the Suez Canal during the shipping industry’s surge before Chinese New Year, is an aggravating factor for the situation shippers are in.

Panama Canal Movement Improvement

Another timing-related aggravating factor is the drought already happening at the Panama Canal. Carriers were planning to route more ships through the Suez Canal because the drought has been limiting the number of ships that can go through the Panama Canal per day. But Angell has good news on that front as well:

…with Panama Canal transits now expected to reach a total of 24 ships per day compared with an earlier forecast of 18, trans-Pacific services face less disruption than originally thought, according to a report issued last week by M+R Spedag Group. 

That’s very good news for U.S. shippers. Prognostications were extremely bad when Suez Canal disruption was first added to Panama Canal congestion. The drought and ship restrictions at the Panama Canal are certainly not over, but the route is far from unviable. And shipping stability for U.S. shippers is much better than many shipping industry experts feared. Angell’s JOC article elaborates with more from the M+R Spedag Group report:

While carriers in THE Alliance made a Suez routing a contingency plan for US East and Gulf coast services, 2M’s Maersk and MSC and Ocean Alliance’s CMA CGM and Cosco Shipping have kept routing ships via Panama Canal, the report said.  

Vessels still face delays between five and seven days going through the Panama Canal, but those delays are “still significantly less than the additional steaming time for a Suez/Cape transit,” according to M+R Spedag.  

“When lines announced plans to reroute services from Panama to the Suez Canal, then subsequently altered those plans further by bypassing Red Sea routes, many were quick to assume that a massive wave of service disruption would impact the trans-Pacific trade,” the report said. “Despite the noise, trans-Pacific services have remained relatively stable.”

That’s the good news I’d like to leave you with as we continue into the new year of 2024. Shipping stability is much better for U.S. shippers than expected when the Red Sea attacks began and improvement on that stability along with some relief from the high freight rates we’re seeing right now should be arriving soon.

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Top 10 International Shipping Blog Posts of 2023! https://www.universalcargo.com/top-10-international-shipping-blog-posts-of-2023/ https://www.universalcargo.com/top-10-international-shipping-blog-posts-of-2023/#respond Tue, 26 Dec 2023 15:00:00 +0000 https://www.universalcargo.com/?p=12406 What were Universal Cargo's top blog posts of 2023? Every year, we like to count it down from 10 to 1, classic David Letterman style. Sometimes we do the top 10 international shipping news stories or storylines of the year, while some years it's all about which blog posts were the most viewed.

Usually, the biggest shipping news stories of the year will be covered in the year's top blog posts. Of course, if most of the top-viewed posts are about the same storyline (like the ILWU contract negotiations), we'll go with shipping news storylines countdowns to give more variety. That wasn't the case this year, with the 2M alliance breaking up, trouble at the canals, and – of course – ILWU contract negotiations and port disruption making the list.

Going with the top viewed international shipping blog posts also means we get an extra bonus: finding out how many guest contributors made the top ten list!

I'll give you a hint. It's three. But I'm not telling you who they are or where they landed on the list. You'll have to scroll below to find out.

I did post these a little differently this year. Instead of writing a little blurb on each post as we count them down, I dropped in our preview links to each story. These include excerpts from the beginning of each post, so you can read and find out if you want to click on the post's title to read the full article.

All right, that's enough preamble. Let's count them down from number ten to the most viewed blog post of 2023!

Check it out in Universal Cargo's blog!

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What were Universal Cargo’s top blog posts of 2023? Every year, we like to count it down from 10 to 1, classic David Letterman style. Sometimes we do the top 10 international shipping news stories or storylines of the year, while some years it’s all about which blog posts were the most viewed.

Usually, the biggest shipping news stories of the year will be covered in the year’s top blog posts. Of course, if most of the top-viewed posts are about the same storyline (like the ILWU contract negotiations), we’ll go with shipping news storylines countdowns to give more variety. That wasn’t the case this year, with the 2M alliance breaking up, trouble at the canals, and – of course – ILWU contract negotiations and port disruption making the list.

Going with the top viewed international shipping blog posts also means we get an extra bonus: finding out how many guest contributors made the top ten list!

I’ll give you a hint. It’s three. But I’m not telling you who they are or where they landed on the list. You’ll have to scroll below to find out.

I did post these a little differently this year. Instead of writing a little blurb on each post as we count them down, I dropped in our preview links to each story. These include excerpts from the beginning of each post, so you can read and find out if you want to click on the post’s title to read the full article.

All right, that’s enough preamble. Let’s count them down from number ten to the most viewed blog post of 2023!

#10 COSCO Predicted to Take Down Ocean Alliance

#9 The Challenges of Shipping Oversized Cargo and How to Navigate Complex Logistics

#8 ILWU & PMA Finally Resume Contract Negotiations

#7 How MSC and Maersk’s 2M Alliance Split Will Affect Shippers

#6 What Do Shippers Do When Longshore Negotiations Happen Across the Continent?

#5 Explaining the Freight Forwarding Process – 8 Best Steps

#4 Trouble at Suez & Panama Canals as Iran-Backed Attacks Raise Uncertainty

#3 Highly Paid ILWU Workers Want More, So Shippers Pay the Price

#2 Must-See “Sound of Freedom” Depicts Kids Trafficked in Shipping Container

#1 Exploring the Advantages and Disadvantages of Nearshoring

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Shipper Alert: Soaring Freight Rates in Wake of Red Sea Attacks https://www.universalcargo.com/shipper-alert-soaring-freight-rates-in-wake-of-red-sea-attacks/ https://www.universalcargo.com/shipper-alert-soaring-freight-rates-in-wake-of-red-sea-attacks/#respond Sat, 23 Dec 2023 10:00:43 +0000 https://www.universalcargo.com/?p=12436 Freight rates are massively spiking in the wake of Iranian-backed Houthi Rebel attacks on ships in the Red Sea. Literally hundreds of ships are being rerouted away from the Suez Canal.

Spot rates were already on the rise with general rate increases (GRIs) on December 1st and 15th. But with nearly 90% of ships heading for the Red Sea, which connects to the Suez Canal, getting rerouted at a time when the Panama Canal is experiencing disruption because of a drought, freight rates are now really spiking.

Reports (such as in this CNBC article from Lori Ann LaRocco) have come out of shipping container quotes in the $10,000 range. All-Ways sent a shipping Newsflash in which the international shipping company wrote, "Surcharges can reach up to $1 million in added voyage time through the Cape of Good Hope or in the high fares and long wait times of crossing the Panama Canal without an appointment."

The kind of freight rate numbers being talked about are not only massive but outrageous. Additionally, here at Universal Cargo, we were sent a warning that carriers would add $1,000 GRIsto freight rates on January 1st.

Air freight rates are also increasing as shippers are looking to the sky for alternatives.

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Freight rates are massively spiking in the wake of Iranian-backed Houthi Rebel attacks on ships in the Red Sea. Literally hundreds of ships are being rerouted away from the Suez Canal.

Spot rates were already on the rise with general rate increases (GRIs) on December 1st and 15th. But with nearly 90% of ships heading for the Red Sea, which connects to the Suez Canal, getting rerouted at a time when the Panama Canal is experiencing disruption because of a drought, freight rates are really spiking.

Reports (such as in this CNBC article from Lori Ann LaRocco) have come out of shipping container quotes in the $10,000 range. All-Ways sent a shipping newsflash in which the international shipping company wrote, “Surcharges can reach up to $1 million in added voyage time through the Cape of Good Hope or in the high fares and long wait times of crossing the Panama Canal without an appointment.”

The kind of freight rate numbers being talked about are not only massive but outrageous. Additionally, here at Universal Cargo, we were sent a warning that carriers would add $1,000 GRIs to freight rates on January 1st.

Air freight rates are also increasing as shippers are looking to the sky for alternatives.

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Trucks Have to Go Electric in California, But at What Cost? https://www.universalcargo.com/trucks-have-to-go-electric-in-california-but-at-what-cost/ https://www.universalcargo.com/trucks-have-to-go-electric-in-california-but-at-what-cost/#respond Wed, 20 Dec 2023 04:44:21 +0000 https://www.universalcargo.com/?p=12401 Expect trucking to become even more expensive in California. Since about 40% of U.S. containerized imports and approximately 30% of all U.S. exports go through the Golden State's ports, this impacts a large portion of national supply chains and businesses. As of January 1st, 2024, California will only allow companies to register zero-emission vehicles (ZEV) into the state's drayage registry. Of course, such trucks are significantly more expensive than traditional ones and put more strain on California's electric grid, which is already in crisis. So, yeah, happy New Year.

No New Gas-Engine Trucks from 2024 Forward

California is utilizing the power of law to remove all trucks with internal combustion (or gas-powered) engines from the supply chain in the state. Actually, they're coming for residents' cars, lawnmowers, generators... basically anything powered by gas. But that's big picture over several years. We're all about international shipping and the supply chain in this blog, so let's focus on the trucks. And January 1st. In less than two weeks, we hit the first big, big date of California's Advanced Clean Fleets (ACF) rule.

Truck companies have until the end of the year to register new trucks with internal combustion engines. Afterward, only ZEVs can be added. Then, a year after that, companies must remove "legacy trucks" from the California fleet when the vehicles "reach the end of their minimum useful life." Don't worry, the state has defined that. Senate Bill 1 (Beall, Statutes 2017, Chapter 5) puts the end of a truck's minimum useful life at 18 years or 800,000 miles, whichever comes first.

While buying traditional trucks for drayage in California to replace previous ones now makes little sense, eventually, it won't even be legal. By 2036, manufacturers will only be allowed to sell medium- and heavy-duty vehicles that are zero emissions.

Find out more by reading the full post in Universal Cargo's blog.

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Expect trucking to become even more expensive in California. Since about 40% of U.S. containerized imports and approximately 30% of all U.S. exports go through the Golden State’s ports, this impacts a large portion of national supply chains and businesses. As of January 1st, 2024, California will only allow companies to register zero-emission vehicles (ZEV) into the state’s drayage registry. Of course, such trucks are significantly more expensive than traditional ones and put more strain on California’s electric grid, which is already in crisis. So, yeah, happy New Year.

No New Gas-Engine Trucks from 2024 Forward

international shipping federal antitrust law

California is utilizing the power of law to remove all trucks with internal combustion (or gas-powered) engines from the supply chain in the state. Actually, they’re coming for residents’ cars, lawnmowers, generators… basically anything powered by gas. But that’s big picture over several years. We’re all about international shipping and the supply chain in this blog, so let’s focus on the trucks. And January 1st. In less than two weeks, we hit the first big, big date of California’s Advanced Clean Fleets (ACF) rule.

Truck companies have until the end of the year to register new trucks with internal combustion engines. Afterward, only ZEVs can be added. Then, a year after that, companies must remove “legacy trucks” from the California fleet when the vehicles “reach the end of their minimum useful life.” Don’t worry, the state has defined that. Senate Bill 1 (Beall, Statutes 2017, Chapter 5) puts the end of a truck’s minimum useful life at 18 years or 800,000 miles, whichever comes first.

While buying traditional trucks for drayage in California to replace previous ones now makes little sense, eventually, it won’t even be legal. By 2036, manufacturers will only be allowed to sell medium- and heavy-duty vehicles that are zero emissions.

Milestones to 100% ZEV

Ultimately, businesses in California as well as federal, state, or local governments must eventually phase out traditional trucks to get to 100% zero-emission vehicle fleets in California. CARB gives an option of, instead of using the minimum useful life rule (or Model Year Schedule) of when a truck has to be retired and replaced by a ZEV, using a set of ACF milestones. Then fleets must have a high enough percentage of ZEVs by given dates:

Percentage of vehicles that must be
zero-emission
10%25%50%75%100%
Milestone Group 1: Box trucks, vans, buses with two axles, yard tractors, light-duty package delivery vehicles20252028203120332035 and beyond
Milestone Group 2: Work trucks, day cab tractors, buses with three axles20272030203320362039 and beyond
Milestone Group 3: Sleeper cab tractors and specialty vehicles20302033203620392042 and beyond

Fleet owners can pick their poison for staying in ACF compliance.

Cost of Doing Business

ZEVs are much more expensive than traditional vehicles. In 2019, according to Statistica, “Heavy-duty [internal combustion engine] commercial vehicles had an average selling price of 126,000 U.S. dollars, 29,000 U.S. dollars less than electric heavy-duty trucks.”

The costs of zero-emission trucks, as with everything else, seem to have skyrocketed from its 2019 average price ($155,000).

According to a 2021 International Council on Clean Transportation (ICCT) study by Ben Sharpe and Hussein Basma, “battery-electric tractor truck up-front costs range from about $200,000 to $800,000, and generally costs increase with increased driving range as a function of total battery capacity.” But don’t worry. They expect battery pack and fuel cell system costs to reduce significantly over the next decade, making the cost of these trucks lower. I’m sure that cheery outlook, and reversal of the current cost trend, isn’t tinted by ICCT’s goal of decarbonizing transport.

Hopefully, a study the ICCT commissioned from Ricardo Strategic Consulting is correct in “that battery-electric tractor truck costs will be reduced by 23% in 2025 and 40% in 2030.” Even still, ZEVs are very expensive. But don’t worry, California taxpayers will help fleet owners. Some fleet owners.

California’s 2021 and 2022 state budgets “invest” $10 billion over 6 years to reduce CO2 emissions from the transportation sector by supporting ZEVs and ZEV infrastructure. To no one’s surprise, the funding will be administered by CARB as well as the California Energy Commission, the California State Transportation Agency, and the Governor’s Office of Economic and Business Development.

There will be programs to help fund early-adapting companies on a combination of first-come, first served and “equity” bases. CARB says:

These investments will focus on an equitable ZEV transition by continuing to find ways to support disproportionately impacted communities.

Several funding programs are available to support the use of advanced technologies, and because funding programs only pay for early adoption not for compliance, more funding opportunities exist for those fleets that act early. These programs are administered by State agencies, federal agencies, and local air districts.

CARB also points to lower costs in maintenance and electricity over gasoline to offset the initial costs of ZEVs. Still, shippers should expect trucking companies to pass some of those initial costs on to them. Hundreds of thousands of trucks will have to be replaced with ZEVs thanks to the ACF regulation alone. And there’s other California regulation pushing out combustion for electric engines too.

“CARB staff estimate that, of the 1.8 million medium- and heavy-duty vehicles operating daily in California, 532,000 will be subject to ACF,” CARB reported. How that cost will spread out through the next several years is unclear. CARB expects the ACF regulation with California’s Advanced Clean Trucks regulation will result in about 510,000, 1,350,000 and 1,690,000 ZEVs in the state in 2035, 2045, and 2050, respectively.

What shippers pay for trucking should be expected to pay a portion of the costs for that.

Zero-Emissions Is a Misnomer

It should be pointed out that zero-emission vehicles don’t actually produce zero emissions.

First, there are greater CO2 emissions in the creation of ZEVs than that of traditional internal combustion engine vehicles. According to Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions, and Energy use in Technologies Model, sponsored by the U.S. Department of Energy, building a ZEV can create 80% more CO2 emissions than building a new traditional vehicle creates.

While the vehicle itself doesn’t emit CO2, the power plants required to produce the electricity ZEVs draw from do. Over the life of the vehicles, ZEVs should be responsible for less CO2 emission, but it is extremely far from zero.

Speaking of electricity…

California’s Power Grid Can’t Handle ZEV Legislation

California doesn’t produce enough electricity for all the mandates its lawmakers have created to switch gas-powered vehicles to electric ones. In fact, California doesn’t have enough electricity for its needs without adding ZEV mandates into the mix. The state doesn’t generate close to enough electricity for its needs.

In 2022, 30% of California’s electricity had to be imported from other states, according to the California Energy Commission. And this isn’t an issue that has seen improvement.

Indeed, it’s getting worse. According to the U.S. Energy Information Administration, California imported “only” 25% of its total electricity supply in 2019. And California’s net electricity imports then were already the largest of any state in the union.

California residents already experience rolling brownouts and blackouts because of the state’s inability to manage its electrical grid. Plus, laughably, only days after CARB announced all cars sold in California will have to be ZEVs by 2035, Governor Newsom asked residents not to charge their electric vehicles because the power grid wouldn’t be able to handle it with an expected heat wave likely to cause more electricity usage for air conditioning.

California might have to do something like embrace <GASP> nuclear power in order to solve its electricity problems. If things get worse, power issues could also create disruptions to shippers’ supply chains.

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Shipping Alert! Iranian-backed Missile Sets Cargo Ship Ablaze in Red Sea https://www.universalcargo.com/shipping-alert-iranian-backed-missile-sets-cargo-ship-ablaze-in-red-sea/ https://www.universalcargo.com/shipping-alert-iranian-backed-missile-sets-cargo-ship-ablaze-in-red-sea/#respond Fri, 15 Dec 2023 19:15:10 +0000 https://www.universalcargo.com/?p=12398 Yemen’s Iranian-backed Houthi rebels continue to attack ships in the Red Sea. They hit the Liberian-flagged cargo ship Al Jasrah today, which set the ship on fire, as reported by Jon Gambrell in a Times of Israel article. I highly recommend reading the article for more details, as this is just a quick news flash for shippers.

Shippers' goods trying to pass through the Suez Canal, not to mention the lives of the crews manning the ships, are in danger. Simultaneously, cargo is being delayed at the Panama Canal because of a drought in the area. For more on the shipping uncertainty created between risks at both canals, check out our post on it from last week.

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Yemen’s Iranian-backed Houthi rebels continue to attack ships in the Red Sea. They hit the Liberian-flagged cargo ship Al Jasrah today, which set the ship on fire, as reported by Jon Gambrell in a Times of Israel article. I highly recommend reading the article for more details, as this is just a quick news flash for shippers.

Shippers’ goods trying to pass through the Suez Canal, not to mention the lives of the crews manning the ships, are in danger. Simultaneously, cargo is being delayed at the Panama Canal because of a drought in the area. For more on the shipping uncertainty created between risks at both canals, check out our post on it from last week.

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How Are EPR Laws Impacting the International Supply Chain? https://www.universalcargo.com/how-are-epr-laws-impacting-the-international-supply-chain/ https://www.universalcargo.com/how-are-epr-laws-impacting-the-international-supply-chain/#respond Thu, 14 Dec 2023 22:40:49 +0000 https://www.universalcargo.com/?p=12395 This is a guest post by Ellie Gabel.

Extended producer responsibility laws are creating ripples of change in international supply chains, from packaging to product design. Over the past several years, numerous jurisdictions have enacted laws and regulations surrounding extended producer responsibility, or EPR, which refers to business sustainability. How are these laws impacting businesses and their international supply chain partners? 

Find out by reading the post in Universal Cargo's blog.

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This is a guest post by Ellie Gabel.

Extended producer responsibility laws are creating ripples of change in international supply chains, from packaging to product design. Over the past several years, numerous jurisdictions have enacted laws and regulations surrounding extended producer responsibility, or EPR, which refers to business sustainability. How are these laws impacting businesses and their international supply chain partners? 

Accelerating the Shift to Green Packaging

One of the most notable results of new EPR regulations is a faster shift toward green packaging. Businesses need to make a concentrated effort to adopt more sustainable packaging in order to comply with the recycling goals outlined in EPR regulations. 

For example, the EU has established standards for packaging recycling. According to the official directives published by the EU, at least 65% of all packaging waste must be recycled by 2025. Seventy-five percent of paper and cardboard waste specifically must be recycled. These are ambitious targets, but that may be what’s needed to spark widespread change. 

Many EPR directives have been law since 2020 or even earlier, but the pressure to meet recycling targets is increasing as deadlines approach. As of 2023, only 49% of municipal waste is recycled in the EU. This creates a challenge for businesses since a lack of recycling means a lack of material for recycled packaging options. 

While the EU was the first region to enact EPR regulations, the U.S. is now following suit. As of 2023, several states have passed or reviewed similar legislation. California has the most comprehensive EPR regulations, which closely mirror those in the EU. 

The Plastic Pollution Prevention and Packaging Producer Responsibility Act requires 100% of packaging in California to be recyclable by 2032. This includes at least 65% of all single-use plastic packaging. 

The shift to green packaging in the EU and states like California might specifically include increased collaboration with international supply chain partners. For example, California businesses might begin working more closely with international recycled packaging suppliers. While that is good for stimulating widespread growth in the supply chain, it may also mean local suppliers will lose some business if they can’t adapt to green packaging needs.  

Increasing Investment and Innovation

Extended producer responsibility is forcing businesses to reconsider everything from product design to packaging to the product life cycle. Regulations like green packaging directives are motivating businesses to invest time and resources into improving sustainability at every stage of product development. This activity could have major long-term implications for international supply chains. 

For example, pressure to reduce supply chain waste is increasing innovation in sustainable packaging, leading to some amazing innovations. Bioplastics are one such innovation to emerge over the past several years. These biodegradable plastics are designed to deteriorate naturally without hurting the environment. They offer the benefits of plastic packaging without the harmful side effects or long-term waste. 

Businesses are also increasing investments in new product life cycle designs. Conventional product development typically does not consider end-of-life plans. However, EPR laws are changing that. 

The fashion industry is a perfect example. The EU’s EPR regulations are already impacting the global fashion supply chain. Europe has long been the heart of the fashion world, so new business practices in the EU have a major impact on the entire market. 

EPR laws are driving many fashion brands to reduce textile waste and use more recycled fabrics. New strategies range from a growth in clothing resale markets to increased use of sustainable fabric dyes. 

Shifting investment in sustainable clothing is changing the way suppliers and manufacturers around the world operate. For instance, with more European fashion brands leaving toxic dyes behind, textile manufacturers need to transition to clean, water-based alternatives. 

In the U.S., states like California are hubs for some of the world’s biggest packaging consumers, such as Amazon. Big companies like this can face intense scrutiny and fines if they fail to meet EPR regulations. 

New legislation around green packaging may spur leading e-commerce companies to rapidly shift their investments into developing new types of packaging. For example, in 2022, Amazon announced plans to reduce packaging and begin shifting away from non-recyclable packaging. While this move is good for the environment, it may have a temporary negative impact on manufacturers and suppliers as they adjust to new business models. 

Improving Awareness of Supply Chain Sustainability

EPR laws are pushing businesses to change their approach to consumer waste. Government agencies aren’t the only voices calling for improved sustainability, though. EPR laws reflect a growing desire for green products among consumers. 

Surveys show that consumers are buying more sustainable goods and considering environmental impact more when shopping. This is particularly true among Millennials and Generation Z. For young people, sustainability can be a deal breaker. 

EPR laws are forcing businesses to improve their awareness of their supply chains’ impact on the environment. Doing so will eventually result in reduced carbon footprints and help businesses align with modern shoppers’ priorities. 

Unfortunately, many businesses simply aren’t aware of all the negative side effects conventional supply chain practices can have. Complying with EPR laws around the world requires expanding supply chain visibility so these negative impacts finally come to light. Once businesses are able to identify where they can improve on sustainability, they can take action to reduce waste and emissions. 

EPR laws apply to businesses most, but their positive impact on sustainability awareness will trickle down through international supply chains. As brands work to improve their products’ environmental impact, suppliers and manufacturers will also need to adopt more sustainable practices. Over the next several years, this could lead to a significant decrease in non-recyclable packaging and other consumer goods waste. 

Building Cleaner Supply Chains With EPR

Extended producer responsibility is motivating businesses to expand their supply chain visibility and take initiative to improve sustainability. EPR laws around the world emphasize ambitious goals for reducing packaging waste. As businesses strive to meet these goals, they will spark a ripple effect of positive change throughout international supply chains. Eventually, it could result in significant declines in waste from packaging and other consumer goods.

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This was a guest post by Ellie Gabel.

Ellie is a freelance writer who loves exploring the latest advancements in tech and science and how they’re impacting the world we live and work in. She’s also the associate editor of Revolutionized.com.

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3 More Chinese Companies Sanctioned by U.S. for Forced Labor (plus Full UFLPA Entity List) https://www.universalcargo.com/3-more-chinese-companies-sanctioned-by-u-s-for-forced-labor-plus-full-uflpa-entity-list/ https://www.universalcargo.com/3-more-chinese-companies-sanctioned-by-u-s-for-forced-labor-plus-full-uflpa-entity-list/#respond Wed, 13 Dec 2023 00:57:15 +0000 https://www.universalcargo.com/?p=12392 The Departement of Homeland Security just added three companies in China to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List: COFCO Sugar Holding Co. Ltd, Sichuan Jingweida Technology Group Co., Ltd., and Anhui Xinya New Materials Co., Ltd.

That means, as of yesterday, no goods produced by these companies are allowed to enter the U.S. Importers should always strive to be aware of the business practices of goods producers before working with those companies, particularly in China, where there is a major issue with forced labor.

To find out more and get the full list of Chinese companies it's illegal to import goods from because they use forced labor, go to Universal Cargo's blog.

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The Departement of Homeland Security just added three companies in China to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List: COFCO Sugar Holding Co. Ltd, Sichuan Jingweida Technology Group Co., Ltd., and Anhui Xinya New Materials Co., Ltd.

made in China

That means, as of yesterday, no goods produced by these companies are allowed to enter the U.S. Importers should always strive to be aware of the business practices of goods producers before working with those companies, particularly in China, where there is a major issue with forced labor.

According to the U.S Department of Labor:

The People’s Republic of China has arbitrarily detained more than one million Uyghurs and other mostly Muslim minorities in China’s far western Xinjiang Uyghur Autonomous Region. It is estimated that 100,000 Uyghurs and other ethnic minority ex-detainees in China may be working in conditions of forced labor following detention in re-education camps. Many more rural poor workers also may experience coercion without detention.

The UFLPS Entity List provides U.S. companies some support in knowing Chinese companies from which not to import goods. It is, in fact, illegal to import goods from companies on the list, as they’ve been identified as companies whose goods, wares, articles, or merchandise has been mined, produced, or manufactured wholly or in part with forced labor.

With new companies just getting added onto the list yesterday, it is obvious that not every company in China that utilizes forced labor has already been identified. U.S. importers should always perform due diligence into the foreign companies with which they work to do their utmost to avoid having forced labor inside their supply chains.

I’m sure there are companies who conceal their practices well enough that’s it’s difficult to discover they’re utilizing forced labor. However, the UFLPA Entity List is published for the public, so when it comes to working with Chinese companies already discovered to be using forced labor, U.S. shippers have no excuse.

If you’re thinking about importing from China, here’s the complete UFLPA Entity List (as of December 12th, 2023) for your convenience:

A list of entities in Xinjiang that mine, produce, or manufacture wholly or in part any goods, wares, articles and merchandise with forced labor
Section 2(d)(2)(B)(i)

Name of EntityEffective Date
Baoding LYSZD Trade and Business Co., Ltd. June 21, 2022
Changji Esquel Textile Co. Ltd. (and one alias : Changji Yida Textile)June 21, 2022
Hetian Haolin Hair Accessories Co. Ltd. (and two aliases: Hotan Haolin Hair Accessories; and Hollin Hair Accessories)June 21, 2022
Hetian Taida Apparel Co., Ltd (and one alias: Hetian TEDA Garment)June 21, 2022
Hoshine Silicon Industry (Shanshan) Co., Ltd (including one alias: Hesheng Silicon Industry (Shanshan) Co.) and subsidiariesJune 21, 2022
Xinjiang Daqo New Energy, Co. Ltd (including three aliases: Xinjiang Great New Energy Co., Ltd.; Xinjiang Daxin Energy Co., Ltd.; and Xinjiang Daqin Energy Co., Ltd.)June 21, 2022
Xinjiang East Hope Nonferrous Metals Co. Ltd. (including one alias: Xinjiang Nonferrous)June 21, 2022
Xinjiang GCL New Energy Material Technology, Co. Ltd (including one alias: Xinjiang GCL New Energy Materials Technology Co.)June 21, 2022
Xinjiang Junggar Cotton and Linen Co., Ltd.June 21, 2022
Xinjiang Production and Construction Corps (including three aliases: XPCC; Xinjiang Corps; and Bingtuan) and its subordinate and affiliated entitiesJune 21, 2022

A list of entities working with the government of Xinjiang to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of Xinjiang
Section 2(d)(2)(B)(ii)

Name of EntityEffective Date
Aksu Huafu Textiles Co. (including two aliases: Akesu Huafu and Aksu Huafu Dyed Melange Yarn)June 21, 2022
Anhui Xinya New Materials Co., Ltd. (formerly known as Chaohu Youngor Color Spinning Technology Co., Ltd.; and Chaohu Xinya Color Spinning Technology Co., Ltd.)December 11, 2023
Camel Group Co., Ltd. August 2, 2023
COFCO Sugar Holdings Co., Ltd.December 11, 2023
Hefei Bitland Information Technology Co., Ltd. (including three aliases: Anhui Hefei Baolongda Information Technology; Hefei Baolongda Information Technology Co., Ltd.; and Hefei Bitland Optoelectronic Technology Co., Ltd.)June 21, 2022
Hefei Meiling Co. Ltd. (including one alias: Hefei Meiling Group Holdings Limited)June 21, 2022
KTK Group (including three aliases: Jiangsu Jinchuang Group; Jiangsu Jinchuang Holding Group; and KTK Holding)June 21, 2022
Lop County Hair Product Industrial ParkJune 21, 2022
Lop County Meixin Hair Products Co., Ltd.June 21, 2022
Nanjing Synergy Textiles Co., Ltd. (including two aliases: Nanjing Xinyi Cotton Textile Printing and Dyeing; and Nanjing Xinyi Cotton Textile)June 21, 2022
Ninestar Corporation and its eight Zhuhai-based subsidiaries, which include Zhuhai Ninestar Information Technology Co. Ltd., Zhuhai Pantum Electronics Co. Ltd., Zhuhai Apex Microelectronics Co., Ltd., Geehy Semiconductor Co., Ltd., Zhuhai Pu-Tech Industrial Co., Ltd., Zhuhai G&G Digital Technology Co., Ltd., Zhuhai Seine Printing Technology Co., Ltd., and Zhuhai Ninestar Management Co., Ltd.June 12, 2023
No. 4 Vocation Skills Education Training Center (VSETC)June 21, 2022
Sichuan Jingweida Technology Group Co., Ltd. (also known as Sichuan Mianyang Jingweida Technology Co., Ltd. and JWD Technology; and formerly known as Mianyang High-tech Zone Jingweida Technology Co., Ltd.)December 11, 2023
Tanyuan Technology Co. Ltd. (including five aliases: Carbon Yuan Technology; Changzhou Carbon Yuan Technology Development; Carbon Element Technology; Jiangsu Carbon Element Technology; and Tanyuan Technology Development)June 21, 2022
Xinjiang Production and Construction Corps (XPCC) and its subordinate and affiliated entitiesJune 21, 2022
Xinjiang Tianmian Foundation Textile Co., Ltd. September 27, 2023
Xinjiang Tianshan Wool Textile Co. Ltd. September 27, 2023
Xinjiang Zhongtai Chemical Co. Ltd. June 12, 2023
Xinjiang Zhongtai Group Co. Ltd September 27, 2023

A list of facilities and entities, including the Xinjiang Production and Construction Corps, that source material from Xinjiang or from persons working with the government of Xinjiang or the Xinjiang Production and Construction Corps for purposes of the ‘‘poverty alleviation’’ program or the ‘‘pairing-assistance’’ program or any other government-labor scheme that uses forced labor
Section 2(d)(2)(B)(v)

Entity NameEffective Date
Baoding LYSZD Trade and Business Co., Ltd. June 21, 2022
Chenguang Biotech Group Co., Ltd. and its subsidiary Chenguang Biotechnology Group Yanqi Co. Ltd.August 2, 2023
Hefei Bitland Information Technology Co. Ltd.June 21, 2022
Hetian Haolin Hair Accessories Co. Ltd.June 21, 2022
Hetian Taida Apparel Co., Ltd.June 21, 2022
Hoshine Silicon Industry (Shanshan) Co., Ltd., and SubsidiariesJune 21, 2022
Xinjiang Junggar Cotton and Linen Co., Ltd.June 21, 2022
Lop County Hair Product Industrial ParkJune 21, 2022
Lop County Meixin Hair Products Co., Ltd.June 21, 2022
No. 4 Vocation Skills Education Training Center (VSETC)June 21, 2022
Xinjiang Production and Construction Corps (XPCC) and its subordinate and affiliated entitiesJune 21, 2022
Yili Zhuowan Garment Manufacturing Co., Ltd.June 21, 2022
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Trouble at Suez & Panama Canals as Iran-Backed Attacks Raise Uncertainty https://www.universalcargo.com/trouble-at-suez-panama-canals-as-iran-backed-attacks-raise-uncertainty/ https://www.universalcargo.com/trouble-at-suez-panama-canals-as-iran-backed-attacks-raise-uncertainty/#respond Wed, 06 Dec 2023 01:47:04 +0000 https://www.universalcargo.com/?p=12378 Two of the world's most important international shipping route connections are being disrupted simultaneously: the Panama Canal and the Suez Canal. When one important international shipping hub experiences disruption, the effects tend to ripple across the oceans to supply chains around the world. When disruption happens at more than one major shipping focal point, those ripples turn into waves, and the negative effects on supply chains can grow exponentially rather than just multiply.

We've previously covered drought in Panama causing the restrictions on the size and number of ships that can traverse the Panama Canal. The situation is ongoing, causing shippers and carriers to reroute cargo and vessels to avoid the bottleneck. In fact, just today Supply Chain Brain posted a Bloomberg article about a diesel ship sailing down and around the southern tip of South America instead of waiting to get through the Panama Canal.

More commonly when there is disruption at the Panama Canal, carriers and shippers reroute goods in a way that includes the Suez Canal. That is particularly the case when talking about cargo from Asia to the U.S. East Coast or vice versa. Imagine goods normally shipped from Asia across the Pacific Ocean, through the Panama Canal, and to ports at the Atlantic Ocean or the Gulf of Mexico. If the Panama Canal connection needed to be avoided, carriers and shippers could do something like the following:

Let's say the cargo starts around the South China Sea. It's sailed over to the Arabian Sea, into the Gulf of Aden, and through the Red Sea, which takes it to the Suez Canal. The cargo ship comes out of the Suez Canal into the Mediterranean Sea, through the Strait of Gibraltar, and into the Atlantic Ocean. Without the Suez Canal, ships would have to instead sail all the way down and around Africa.

But that brings us to the problems over at the Suez Canal....

Find out all about them by reading the full post in Universal Cargo's blog.

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Simultaneous Problems at Panama & Suez Canals Spells Trouble for Shippers

Two of the world’s most important international shipping route connections are being disrupted simultaneously: the Panama Canal and the Suez Canal. When one important international shipping hub experiences disruption, the effects tend to ripple across the oceans to supply chains around the world. When disruption happens at more than one major shipping focal point, those ripples turn into waves, and the negative effects on supply chains can grow exponentially rather than just multiply.

Panama Drought Diverts Cargo through Suez Canal

We’ve previously covered drought in Panama causing the restrictions on the size and number of ships that can traverse the Panama Canal. The situation is ongoing, causing shippers and carriers to reroute cargo and vessels to avoid the bottleneck. In fact, just today Supply Chain Brain posted a Bloomberg article about a diesel ship sailing down and around the southern tip of South America instead of waiting to get through the Panama Canal.


Image: Main maritime shipping routes, chokepoints and biggest container ports in 2018
by Heinrich-Böll-Stiftung European Union

More commonly when there is disruption at the Panama Canal, carriers and shippers reroute goods in a way that includes the Suez Canal. That is particularly the case when talking about cargo from Asia to the U.S. East Coast or vice versa. Imagine goods normally shipped from Asia across the Pacific Ocean, through the Panama Canal, and to ports at the Atlantic Ocean or the Gulf of Mexico. If the Panama Canal connection needed to be avoided, carriers and shippers could do something like the following:

Let’s say the cargo starts around the South China Sea. It’s sailed over to the Arabian Sea, into the Gulf of Aden, and through the Red Sea, which takes it to the Suez Canal. The cargo ship comes out of the Suez Canal into the Mediterranean Sea, through the Strait of Gibraltar, and into the Atlantic Ocean. Without the Suez Canal, ships would have to instead sail all the way down and around Africa.

But that brings us to the problems over at the Suez Canal.

Attacks in Gateway to Suez Canal Escalates Problems

Since the terrorist organization Hamas savagely attacked Israel on October 7th, launching the Israel-Hamas war, there has been a big increase of attacks on ships trying to sail through the Red Sea.

Like Iran backed the October 7th Hamas attacks on Israel, Iran also backs Houthi rebels attacking merchant ships with Israeli connections in the Red Sea and the Gulf of Aden. Apparently, the Houthi rebels don’t have the best intelligence, targeting ships with outdated information that has led them to attack at least one ship that is not linked to Israel. Lori Ann LaRocco reported on it in a FreightWaves article:

Geopolitical tensions and attacks in the Red Sea have increased since the commencement of the Israel-Hamas conflict. Iran-backed Houthi rebels have focused their attacks in the Red Sea and Gulf of Aden on any merchant shipping that they believe is affiliated with Israel. Following this weekend’s four attacks on three civilian ships near Yemen, the U.S. Navy destroyer USS Carney responded, thrusting the security of trade into the spotlight.

The Suez has seen an increase in U.S. energy and grain exports as well as U.S. eastbound container imports as the Panama Canal drought restrictions are constricting the flow of trade.

… A Houthi military spokesperson confirmed it targeted a container ship with a drone and another bulk grain vessel because it claimed both vessels were linked to Israel. One, however, was not. Houthis reportedly had outdated information, according to maritime security firm Ambrey.

According to the U.S. Central Command (Centcom), the bulk vessel — Number 9 — that was attacked Sunday is owned by U.K.-based Castle Harbour and operated by U.K.-based Bernhard Schulte Shipmanagement (BSM) and not connected to Israel. The operator appeared to change from Zim in November 2021, according to Ambrey. MarineTraffic shows the vessel left Singapore on Nov. 22 and was slated to go through the Suez Canal this Wednesday.

Ambrey has advised company security officers to assess whether their vessels were owned or managed by an Israel-affiliated company within the last year. But the Israel connection seems to go to the individual level.

Centcom reported that another one of the four vessels attacked was the Bahamas-flagged Unity Explorer. While owned and operated in the U.K., the Israel connection is among its management. Unity Maritime is controlled by Danny Ungar, the son of Israeli shipping businessman Abraham “Rami” Ungar. In November, Ungar’s shipping company, Ray Car Carriers, had its 5,100-unit car carrier Galaxy Leader hijacked by the Houthis.

Unity Explorer is a dry bulk ship that was loaded with grain from the U.S. Cargill grain elevator and transported from the Gulf of Mexico. The vessel left Nov. 2 bound for Singapore and traveled through the Suez Canal approximately six days ago, according to MarineTraffic.

In a statement following the attacks, Centcom said, “These attacks represent a direct threat to international commerce and maritime security. They have jeopardized the lives of international crews representing multiple countries around the world. We also have every reason to believe that these attacks, while launched by the Houthis in Yemen, are fully enabled by Iran. The United States will consider all appropriate responses in full coordination with its international allies and partners.”

But given the misidentification by Houthis of the Number 9, should any ocean carrier that was once linked to Israel consider itself a target because the militants may be working with old information?

What Does This Mean for Shippers?

LaRocco goes on to write about the possibility of increased shipping costs through the area from “war risk premiums.” Obviously, risks go far beyond that.

Shippers will have to keep watch (or have company’s like Universal Cargo keep watch for them) as the risk is high for severe disruption at the Suez Canal simultaneous to worsening bottlenecks at the Panama Canal. Delays, blanked (cancelled) sailings, heavy cargo and vessel rerouting, and increased shipping costs are all likely to happen as a result of current events. Only time will tell the level of severity.

Escalating Geopolitical Situation

Even more disconcerting than its international shipping effects is how much the geopolitical situation could escalate. Iran’s “death to Israel” and “death to America” slogans are more than just words. The country has been backing those words up against Israel, although cowardly, behind the cover Hamas and Houthi as discussed above. But, since Hamas attacked Israel, there have also been over 70 attacks on U.S. troops in the Middle East, all of which are believed to have been by Iranian proxies. The U.S. shooting down a few Iranian-backed drones attacking merchant ships gives no confidence that Iran won’t escalate aggression.

Unfortunately, the track record of the current Commander and Chief of the United States when it comes to foreign affairs and military leadership is dreadful. Worse, the Wall Street Journal’s editorial board reports the Biden Administration’s relaxed sanctions on Iran keeps billions of dollars flowing into the country, even after its proxied attacks on U.S. troops and Israel.

Just a couple weeks before Hamas’s Iranian-backed attack on Israel happened, the U.S. House Committee on Oversight and Accountability reported in a release:

… the Biden Administration has participated without transparency in unlawful negotiations with Iran, facilitated a ransom payment [of $6 billion] to Iran to free five Americans, and provided no explanation for the removal of a top special envoy. Members also discussed how the Biden Administration’s reversal of the “maximum pressure” strategy has allowed Iran to skirt sanctions, supply U.S. adversaries like China and Russia with oil and weapons, and decrease stability in the Middle East.

Funding the country that chants “Death to Israel” and “Death to America” and then funds the worst attack on Israel the country has ever seen? Some of that blood on Israel’s streets may belong on President Biden’s hands.

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Biden Administration Announces 30-ish – Give or Take 16 – Supply Chain Related Actions https://www.universalcargo.com/biden-administration-announces-30-ish-give-or-take-16-supply-chain-related-actions/ https://www.universalcargo.com/biden-administration-announces-30-ish-give-or-take-16-supply-chain-related-actions/#respond Wed, 29 Nov 2023 00:49:53 +0000 https://www.universalcargo.com/?p=12367 In case you were worried the government isn't upping its involvement enough in international shipping and the supply chain with recent legislation, including the Ocean Shipping Reform Act of 2022 (OSRA), the Biden Administration announced yesterday (Monday, November 27th) a bunch of new actions aimed at U.S. supply chains.

How many is a bunch? It's a little unclear.

In a White House briefing room release, a summary sentence said, "President Biden will unveil more than 30 new actions to strengthen America’s supply chains," but the first sentence of the actual statement said, "President Biden is announcing nearly 30 new actions to strengthen supply chains critical to America’s economic and national security." More than 30, nearly 30... let's just say around 30. The Biden Administration is announcing around 30 new actions aimed at the American supply chain. Maybe.

When the release got to listing actions, there appeared to be only about half as many actions as the statement claimed. I counted 14. I included the text listing and describing the new actions below. The Biden Administration could be counting multiple actions, which aren't clearly delineated yet, within the new actions the release listed. Or maybe the release only listed some of the actions that would be announced at the first meeting of the Council on Supply Chain Resilience (the formation of which is one of the new actions).

With the inaugural meeting also happening yesterday, I read the transcript of President Biden's speech at the inaugural meeting. That didn't contain the 30 actions (instead, it contained things like the president saying, "this Thanksgiving dinner was the fourth-cheapest ever on record"). Maybe he announced the actions just to the council itself rather than to the public in his speech. Maybe there are simply more actions he's announcing in the near future.

It's possible the Biden Administration, when counting the number of new actions, included how it "continues to deepen engagement with allies and partners to strengthen global supply chains." The release listed several examples. However, it listed them as "in addition to the announcements above," which made me think the deepening engagements the Biden Administration is allegedly making with other countries and global partners are separate from the new actions Biden and his administration are announcing.

That list included things like establishing a trilateral Sub-Committee on Emergency Response with Canada and Mexico through the United States-Mexico-Canada Agreement (USMCA), which was negotiated by the Trump Administration. The trilateral sub-committee was formed close to a year ago, back in February. Other items on this additional list go back further than that, making them not exactly feel new. However, there are 12 items on this additional list. That doesn't quite get us to 30, but maybe close enough at 26. So let's count them as new actions – "new" is a subjective term, after all.

Including all the text below that lists actions and partnerships from the White House's release gives 30-ish new-ish actions-ish from the Biden Administration. The administration's spin on the items won't give us exactly how these actions will be implemented or what their results will be. Unfortunately, increased government involvement in an industry or sector often results in it being bogged down by overregulation and it becoming more expensive, particularly for consumers. Hopefully, that won't end up being the case here with the supply chain. However, President Biden's track record doesn't fill me with confidence.

See what the Biden Administration announced it's doing by continuing to read in Universal Cargo's blog.

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In case you were worried the government isn’t upping its involvement enough in international shipping and the supply chain with recent legislation, including the Ocean Shipping Reform Act of 2022 (OSRA), the Biden Administration announced yesterday (Monday, November 27th) a bunch of new actions aimed at U.S. supply chains.

How many is a bunch? It’s a little unclear.

Photo of Joe Biden by Gage Skidmore
Photo of Joe Biden by Gage Skidmore

In a White House briefing room release, a summary sentence said, “President Biden will unveil more than 30 new actions to strengthen America’s supply chains,” but the first sentence of the actual statement said, “President Biden is announcing nearly 30 new actions to strengthen supply chains critical to America’s economic and national security.” More than 30, nearly 30… let’s just say around 30. The Biden Administration is announcing around 30 new actions aimed at the American supply chain. Maybe.

When the release got to listing actions, there appeared to be only about half as many actions as the statement claimed. I counted 14. I included the text listing and describing the new actions below. The Biden Administration could be counting multiple actions, which aren’t clearly delineated yet, within the new actions the release listed. Or maybe the release only listed some of the actions that would be announced at the first meeting of the Council on Supply Chain Resilience (the formation of which is one of the new actions).

With the inaugural meeting also happening yesterday, I read the transcript of President Biden’s speech at the inaugural meeting. That didn’t contain the 30 actions (instead, it contained things like the president saying, “this Thanksgiving dinner was the fourth-cheapest ever on record”). Maybe he announced the actions just to the council itself rather than to the public in his speech. Maybe there are simply more actions he’s announcing in the near future.

It’s possible the Biden Administration, when counting the number of new actions, included how it “continues to deepen engagement with allies and partners to strengthen global supply chains.” The release listed several examples. However, it listed them as “in addition to the announcements above,” which made me think the deepening engagements the Biden Administration is allegedly making with other countries and global partners are separate from the new actions Biden and his administration are announcing.

That list included things like establishing a trilateral Sub-Committee on Emergency Response with Canada and Mexico through the United States-Mexico-Canada Agreement (USMCA), which was negotiated by the Trump Administration. The trilateral sub-committee was formed close to a year ago, back in February. Other items on this additional list go back further than that, making them not exactly feel new. However, there are 12 items on this additional list. That doesn’t quite get us to 30, but maybe close enough at 26. So let’s count them as new actions – “new” is a subjective term, after all.

Including all the text below that lists actions and partnerships from the White House’s release gives 30-ish new-ish actions-ish from the Biden Administration. The administration’s spin on the items won’t give us exactly how these actions will be implemented or what their results will be. Unfortunately, increased government involvement in an industry or sector often results in it being bogged down by overregulation and it becoming more expensive, particularly for consumers. Hopefully, that won’t end up being the case here with the supply chain. However, President Biden’s track record doesn’t fill me with confidence.

White House Text Listing Biden Administration’s “New Actions to Strengthen America’s Supply Chains, Lower Costs for Families, and Secure Key Sectors”

  • The creation of the Council on Supply Chain Resilience. Today, President Biden will convene the inaugural meeting of the White House Council on Supply Chain Resilience, which will advance his long-term, government-wide strategy to build enduring supply chain resilience. The Council will be co-chaired by the National Security Advisor and National Economic Advisor, and include the Secretaries of Agriculture, Commerce, Defense, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, Labor, State, Transportation, the Treasury, and Veterans Affairs; the Attorney General; the Administrators of the Environmental Protection Agency and the Small Business Administration; the Directors of National Intelligence, the Office of Management and Budget, and the Office of Science and Technology Policy; the Chair of the Council of Economic Advisers; the U.S. Trade Representative; and other senior officials from the Executive Office of the President and other agencies.
     
  • Use of the Defense Production Act to make more essential medicines in America and mitigate drug shortages. President Biden will issue a Presidential Determination to broaden the Department of Health and Human Services’ (HHS) authorities under Title III of the Defense Production Act (DPA) to enable investment in domestic manufacturing of essential medicines, medical countermeasures, and critical inputs that have been deemed by the President as essential to the national defense. HHS has identified $35 million for investments in domestic production of key starting materials for sterile injectable medicines. HHS will also designate a new Supply Chain Resilience and Shortage Coordinator for efforts to strengthen the resilience of medical product and critical food supply chains, and to address related shortages. HHS intends to institutionalize this coordination to advance the department’s supply chain resilience and shortage mitigation goals over the long term. The Department of Defense (DOD) will also soon release a new report on pharmaceutical supply chain resilience aimed at reducing reliance on high-risk foreign suppliers. These actions are a subset of the Administration’s broader work to increase access to essential medicines and medical products.
     
  • New cross-governmental supply chain data-sharing capabilities. The Administration has developed several cross-government partnerships to improve supply chain monitoring and strategy, including:
    • The Department of Commerce’s new, first-of-its-kind Supply Chain Center is integrating industry expertise and data analytics to develop innovative supply chain risk assessment tools, and is coordinating deep-dive analyses on select critical supply chains to drive targeted actions to increase resilience. This Center is building broad partnerships across government, industry, and academia, including collaborating with the Department of Energy (DOE) to conduct deep-dive analyses on clean energy supply. Additionally, Commerce is partnering with HHS to assess industry and import data that can help address foreign dependency vulnerabilities and points of failure for critical drugs.
    • The Department of Transportation’s (DOT) Freight Logistics Optimization Works (“FLOW”) program is a public-private partnership that brings together U.S. supply chain stakeholders to create a shared, common picture of supply chain networks and facilitate a more reliable flow of goods. DOT is announcing a new milestone for FLOW, in which participants are beginning to utilize FLOW data to inform their logistics decision making, helping to avoid bottlenecks, shorten lead times for customers, and enable a more resilient and globally competitive freight network through earlier warnings of supply chain disruption. As the effort continues to mature, DOT will work with the Department of Agriculture (USDA) to increase data transparency for containerized shipments of agricultural products in the United States, efforts that can help producers and sellers avoid disruptions that can increase food prices.
    • These new analytical capabilities will enable the Council to coordinate a more complete, whole-of-government critical supply chain monitoring function.

Additional actions to support stronger supply chains and access to affordable, reliable energy and critical technology:

Investing in critical supply chains:

  • DOE today announced $275 million in grant selections for its Advanced Energy Manufacturing and Recycling Grant Program, investments that will revitalize communities affected by coal mine or coal power plant closures through investment in clean energy supply chains, including production of critical materials, components for grid-scale batteries and electric vehicles, onshore wind turbines, and energy conservation technologies. DOE also announced up to $10 million of funding for a “critical material accelerator” and a $5.6-million prize to develop circular clean energy supply chains. These efforts build on action by President Biden to authorize DOE’s use of the DPA to increase domestic production of five key clean energy technologies—including electric heat pumps—as well as DOE’s recently announced $3.5-billion investment through the Bipartisan Infrastructure Law to boost domestic production of advanced batteries and battery materials needed for essential clean energy technologies such as stationary storage and electric vehicles.
  • USDA is making investments worth $196 million to strengthen our domestic food supply chains and create more opportunity for farmers and entrepreneurs in 37 states and in Puerto Rico. These investments—which build on prior investments in diversified food processing, resilient agricultural markets, and fertilizer production—expand farmer income opportunities, create economic opportunities for people and businesses in rural areas, and lower food costs.
  • DOD, building on the $714 million in DPA investments it has made in 2023 to support defense-critical supply chains, will publish the first ever National Defense Industrial Strategy (NDIS). The NDIS will guide engagement, policy development, and investment in the defense industrial base over the next three to five years. It will ensure a coordinated, whole-of-government approach to and focus on the multiple layers of suppliers and sub-suppliers that make up these critical supply chains.

Planning for long-term industrial resilience and future supply chain investments:

  • Launch of the quadrennial supply chain review. The Council will complete the first quadrennial supply chain review by December 31, 2024. As part of the review, the Council will update criteria on industries, sectors, and products defined as critical to national and economic security. In addition, 12 months after the Council promulgates the criteria, and annually thereafter, the Council will apply the criteria to review and update the list of critical sectors, as appropriate.
  • Smart manufacturing plan. DOE’s Office of Energy Efficiency and Renewable Energy (EERE) Advanced Materials and Manufacturing Technologies Office (AMMTO) is sponsoring a study by the National Academies of Science, Engineering, and Medicine to develop a nationwide plan for smart manufacturing. The report will establish key priorities for investment to support new digital and artificial intelligence technologies. These investments will enhance the productivity and security of the manufacturing systems that are critical for maintaining domestic supply chains.

Deploying new capabilities to monitor existing and emerging risks:

  • New Resilience Center and tabletop exercises for supply chain disruptions. The Department of Homeland Security (DHS) is announcing the launch of a new Supply Chain Resilience Center (SCRC), which will be dedicated to ensuring the resilience of supply chains for critical infrastructure needed to deliver essential services to the American people. Near-term priorities will include addressing supply chain risks resulting from threats and vulnerabilities inside U.S. ports. Additionally, in 2024, in collaboration with other federal agencies and foreign governments, DHS will facilitate at least two tabletop exercises designed to test the resilience of critical cross-border supply chains. Further, DHS and the Department of Commerce will collaborate to continue to strengthen the semiconductor supply chain and further the implementation of the CHIPS and Science Act.
  • Launch of DOT Multimodal Freight Office. As part of the Bipartisan Infrastructure Law (“BIL”) implementation, DOT is launching its Office of Multimodal Freight Infrastructure and Policy (“Multimodal Freight Office”). This office is responsible for maintaining and improving the condition and performance of the nation’s multimodal freight network including through the development of the National Multimodal Freight Network, review of State Freight Plans, and the continued advancement of the FLOW initiative in partnership with the Bureau of Transportation Statistics.
  • Monitoring of climate impacts. The White House National Security Council, Office of Science and Technology Policy, and the Council of Economic Advisers will co-lead an interagency effort in partnership with the National Oceanic and Atmospheric Administration to monitor global developments related to El Niño, including this climate phenomenon’s impact on U.S. and global commodity prices, agriculture and fishery output, disruptions to global and trade supply chains, and resulting impacts on food security, human health, and social instabilities.
  • Energy and critical mineral supply chain readiness. To more consistently track risk and opportunity across energy supply chains, DOE is developing an assessment tool that accounts for raw materials, manufacturing, workforce, and logistics considerations. Additionally, to help assess the potential for trade disruptions of select critical minerals and materials, the Department of the Interior’s U.S. Geological Survey (USGS) will map and develop geospatial databases for select global critical product supply chains, with a current focus on semiconductor components; and will seek designation by the Chief Statistician of the United States of a federal statistical unit providing the nation’s official minerals statistics. Additionally, the National Science and Technology Council’s Critical Minerals Subcommittee plans to launch a new criticalminerals.gov website in January 2024 that will highlight cross-governmental supply chain efforts.
  • Defense supply chain mapping and risk management. DOD is increasing supply chain visibility through the creation of a Supply Chain Mapping Tool to analyze supplier data for 110 weapon systems. This capability will be used to develop defense industrial base wargaming scenarios to identify vulnerabilities and develop mitigation strategies.
  • Risk mapping for labor rights abuses. The Department of Labor (DOL) updated its Comply Chain guidance for identifying and addressing labor rights violations in global supply chains. In addition, DOL is providing $8 million for two four-year projects to identify supply chain traceability methods and technologies to address child labor or forced labor risks in diverse supply chains, such as the cobalt and cotton sectors. DOL will also undertake new supply chain research on mining and agriculture products across Asia, Africa, and Latin America.

In addition to the announcements above, the Administration continues to deepen engagement with allies and partners to strengthen global supply chains, including:

Deepening international early warning systems to detect and respond to supply chain disruptions in critical sectors with allies and partners, including:

  • With the European Union. In May 2023, the United States and the EU established an early warning system for semiconductor supply chain disruptions under the U.S.-EU Trade and Technology Council.
  • With Japan and the Republic of Korea. In August, the United States, Japan, and the Republic of Korea committed at Camp David to launch early warning system pilots, starting by identifying priority products and materials such as critical minerals and rechargeable batteries and establishing mechanisms to rapidly share information on disruptions to critical supply chains.
  • With Mexico and Canada. Through the United States-Mexico-Canada Agreement (USMCA), the United States, Canada, and Mexico established a trilateral Sub-Committee on Emergency Response to coordinate North American efforts to maintain regional trade flows during emergency situations.
  • With Australia, Canada, the European Union, Japan, the United Kingdom, and the World Health Organization. The Global Regulatory Working Group on Drug Shortages, currently chaired by the U.S. Food and Drug Administration, meets quarterly to discuss product shortages participating jurisdictions are encountering and ways such shortages are being addressed. The group’s exchange of information helped address product shortages experienced by each partner during the COVID-19 pandemic and subsequent “tripledemic” including COVID-19, influenza, and respiratory syncytial virus.
  • With global partners. Through the President’s Emergency Plan for Adaptation and Resilience (PREPARE), the U.S. government funds activities to improve the weather, water, and climate observing capabilities and data sharing in regions and countries that are needed to produce actionable local, regional, and global climate information and minimize impacts upon infrastructure, water, health, and food security.

Strengthening global supply chains through other innovative multilateral partnerships:

  • Indo-Pacific Economic Framework for Prosperity (IPEF) Supply Chain Agreement. The United States and 13 IPEF partners concluded a first-of-its-kind Supply Chain Agreement that gives partners new tools to build diversified, competitive supply chains for critical sectors, including an IPEF Supply Chain Council to coordinate action. The Department of Commerce is kickstarting this effort through pilot projects to enhance the resilience of key supply chains, including those related to semiconductors, critical minerals, and cold chain services. In addition, the Supply Chains Agreement establishes a Crisis Response Network that will allow IPEF partners to better prepare for and respond to supply chain disruptions through emergency communication channels and joint crisis simulations, as well as a Labor Rights Advisory Board to promote worker rights across supply chains.
  • Americas Partnership for Economic Prosperity (Americas Partnership). The Americas Partnership is focused on, among other things, strengthening and diversifying supply chains. In its first year of work, the Americas Partnership will focus on the development of regional competitiveness plans in three critical sectors: semiconductors, clean energy, and medical supplies.
  • North American Leaders’ Summit (NALS). Through NALS, the United States, Canada, and Mexico are enhancing the resilience of North America’s supply chains for critical minerals, semiconductors, and other essential goods. This trilateral effort includes partnering with regional industry and academia to create quality jobs, promote investment, grow talent, and catalyze innovation.
  • Partnership for Global Infrastructure and Investment (PGI). Through PGI, the United States is mobilizing public and private financing to incentivize investments and develop transformative economic corridors to diversify global supply chains and create new opportunities for American workers and businesses. From the development of the Lobito Corridor, connecting the Democratic Republic of the Congo and Zambia with global markets through Angola, to the launch of the landmark India-Middle East-Europe Economic Corridor—through PGI, the United States is creating novel interconnections across regions to facilitate trade and secure clean energy, digital, food security, and other critical supply chains.
  • Global Labor Directive. On November 16, President Biden signed the Presidential Memorandum on Advancing Worker Empowerment, Rights, and High Labor Standards Globally. The President directed several departments to address labor rights abuses in global supply chains and identify innovative approaches to promote internationally recognized labor rights throughout the supply chain, including by collaborating with labor organizations, workers, and other labor stakeholders to consider efforts that support worker-led monitoring of labor rights compliance.
  • The Mineral Security Partnership (MSP). The Department of State, along with partners including Australia, Canada, Finland, France, Germany, India, Italy, Japan, Norway, the Republic of Korea, Sweden, the United Kingdom, and the European Union (represented by the European Commission), established the MSP to accelerate the development of diverse and sustainable critical energy minerals supply chains. The MSP works with host governments and industry to facilitate targeted financial and diplomatic support for strategic projects along the value chain with an emphasis on those projects which adhere to and promote the highest labor, environmental and sustainability standards.
  • International Technology Security and Innovation (ITSI) Fund. Created by the CHIPS and Science Act of 2022, the ITSI Fund promotes the diversification of the global semiconductor supply chain. State will partner with countries to develop the most attractive economic environments for private investment. With ITSI Fund support, the Organization of Economic Cooperation and Development has established the Semiconductor Exchange Network allowing policymakers in the semiconductor industry to examine risks and interdependencies on the current state of the semiconductor ecosystem. Additionally, the ITSI Fund is supporting ecosystem reviews in key partner countries that will inform future collaboration on developing this critical sector.
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Decoding OSRA: Section 14. Annual Report to Congress https://www.universalcargo.com/decoding-osra-section-14-annual-report-to-congress/ https://www.universalcargo.com/decoding-osra-section-14-annual-report-to-congress/#respond Fri, 17 Nov 2023 04:11:50 +0000 https://www.universalcargo.com/?p=12355 We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Series Introduction & Quick Coverage of Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9
Section 10
Section 11
Section 12
Section 13

Obviously, that means today we’re covering Section 14 of OSRA.

Check out Universal Cargo's blog to see exactly what it says and changes…

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Introduction

We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 14 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

This section of OSRA doesn’t have a direct impact on shippers, but it could make a difference for them down the road. The section mandates the Federal Maritime Commission (FMC) reports on any concerning practices by ocean carriers, particularly those owned or controlled by foreign countries or corporations.

Thus, if ocean freight carriers are found acting in ways that are unfair to shippers, there could be laws created or changed in the future to address those practices. Of course, suspicious activities from carriers wouldn’t have to involve their interactions with shippers. I don’t want to go down the rabbit hole of potential ocean carrier activities or responses Congress could have to those practices because there are just too many hypotheticals.

Overall, Section 14 continues a theme in OSRA of increased scrutiny on ocean freight carriers.

Section 14 Text

SEC. 14. ANNUAL REPORT TO CONGRESS.

    Section 46106(b) of title 46, United States Code, is amended--
            (1) in paragraph (5), by striking ``and'' at the end;
            (2) in paragraph (6), by striking the period and inserting 
        ``; and''; and
            (3) by adding at the end the following:
            ``(7) an identification of any otherwise concerning 
        practices by ocean common carriers, particularly such carriers 
        that are controlled carriers, that are--
                    ``(A) State-owned or State-controlled enterprises; 
                or
                    ``(B) owned or controlled by, a subsidiary of, or 
                otherwise related legally or financially (other than a 
                minority relationship or investment) to a corporation 
                based in a country--
                          ``(i) identified as a nonmarket economy 
                      country (as defined in section 771(18) of the 
                      Tariff Act of 1930 (19 U.S.C. 1677(18))) as of the 
                      date of enactment of this paragraph;
                          ``(ii) identified by the United States Trade 
                      Representative in the most recent report required 
                      by section 182 of the Trade Act of 1974 (19 U.S.C. 
                      2242) as a priority foreign country under 
                      subsection (a)(2) of that section; or
                          ``(iii) subject to monitoring by the United 
                      States Trade Representative under section 306 of 
                      the Trade Act of 1974 (19 U.S.C. 2416).''.

Original Title 46 Text

§46106. Annual report

  (a) In General.—Not later than April 1 of each year, the Federal Maritime Commission shall submit a report to Congress. The report shall include the results of its investigations, a summary of its transactions, the purposes for which all of its expenditures were made, and any recommendations for legislation.

  (b) Report on Foreign Laws and Practices.—The Commission shall include in its annual report to Congress—

    (1) a list of the 20 foreign countries that generated the largest volume of oceanborne liner cargo for the most recent calendar year in bilateral trade with the United States;

    (2) an analysis of conditions described in section 42302(a) of this title being investigated or found to exist in foreign countries;

    (3) any actions being taken by the Commission to offset those conditions;

    (4) any recommendations for additional legislation to offset those conditions;

    (5) a list of petitions filed under section 42302(b) of this title that the Commission rejected and the reasons for each rejection; and

    (6) an analysis of the impacts on competition for the purchase of certain covered services by alliances of ocean common carriers acting pursuant to an agreement under this part 1 between or among ocean common carriers, including a summary of actions, including corrective actions, taken by the Commission to promote such competition.

  (c) Definition of Certain Covered Services.—In this section, the term "certain covered services" has the meaning given the term in section 40102.

Amended Text

§46106. Annual report

  (a) In General.—Not later than April 1 of each year, the Federal Maritime Commission shall submit a report to Congress. The report shall include the results of its investigations, a summary of its transactions, the purposes for which all of its expenditures were made, and any recommendations for legislation.

  (b) Report on Foreign Laws and Practices.—The Commission shall include in its annual report to Congress—

    (1) a list of the 20 foreign countries that generated the largest volume of oceanborne liner cargo for the most recent calendar year in bilateral trade with the United States;

    (2) an analysis of conditions described in section 42302(a) of this title being investigated or found to exist in foreign countries;

    (3) any actions being taken by the Commission to offset those conditions;

    (4) any recommendations for additional legislation to offset those conditions;

    (5) a list of petitions filed under section 42302(b) of this title that the Commission rejected and the reasons for each rejection;

    (6) an analysis of the impacts on competition for the purchase of certain covered services by alliances of ocean common carriers acting pursuant to an agreement under this part 1 between or among ocean common carriers, including a summary of actions, including corrective actions, taken by the Commission to promote such competition; and

    (7) an identification of any otherwise concerning practices by ocean common carriers, particularly such carriers that are controlled carriers, that are--

      (A) State-owned or State-controlled enterprises; or

      (B) owned or controlled by, a subsidiary of, or otherwise related legally or financially (other than a minority relationship or investment) to a corporation  based in a country--

        (i) identified as a nonmarket economy country (as defined in section 771(18) of the Tariff Act of 1930 (19 U.S.C. 1677(18))) as of the date of enactment of this paragraph;

        (ii) identified by the United States Trade Representative in the most recent report required by section 182 of the Trade Act of 1974 (19 U.S.C. 2242) as a priority foreign country under subsection (a)(2) of that section; or

        (iii) subject to monitoring by the United States Trade Representative under section 306 of the Trade Act of 1974 (19 U.S.C. 2416).

  (c) Definition of Certain Covered Services.—In this section, the term "certain covered services" has the meaning given the term in section 40102.

Observations on Section 14’s Paragraphs

Section 14 is a longer section than many of the sections we’ve recently gone through. However, that doesn’t mean there’s a whole lot more to it than most of those sections. The FMC already had an annual report the commission had to turn in to Congress. Section 14 adds one additional item to the list of things the 106th section of Title 46 requires the FMC include in that report.

Let’s quickly break down the three paragraphs of Section 14:

Paragraph (1) gets rids of the “and” at the end of the fifth item in the listed things the FMC is to include in its annual report to Congress. This indicates the list is about to get longer by at least one item.

Paragraph (2) lets us know that there is just one more item being added to the list, as it replaces the period with “; and” at the end of what was previously the last item on the list.

Paragraph (3) gets us to the real meat of the Section 13. This gives us the seventh thing the FMC must now include in its annual report. And it’s all about ocean freight carriers.

Observations on Inserted Text

The text of the new 7th item the FMC is to include in its annual report to Congress is a paragraph (7) with two subparagraphs (A and B), the second of which (B) is divided into three clauses (i, ii, and iii).

The paragraph is simple. If there are any carrier activities the FMC finds to be suspect or “concerning” that the commission isn’t already required to report, it is now to also report those.

Congress is particularly concerned with carriers that are owned or controlled by foreign countries or corporations. Thus, Congress emphasizes “controlled” carriers in the paragraph. Subparagraphs (A) and (B) then define what entities controlling carriers make those carriers of more particular concern.

Subparagraph (A) points to state owned or controlled carriers. Perhaps the most obvious example of this that comes to my mind is COSCO, the world’s fourth largest ocean freight carrier by capacity. This shipping giant is state-owned by China. It’s not surprising that the U.S. government would want to know about any of its concerning practices.

Subparagraph (B) adds ocean carriers controlled by foreign corporations to those of particular concern. The thing is none of the major ocean freight carriers are U.S. companies. This would seem to make concerning practices of every major ocean carrier of particular concern.

The clauses give more specifics to what countries those corporations being based in makes them of particular concern. These are countries the U.S. already has particular concerns with, are monitoring, or find to be nonmarket countries – which is to say the U.S. government finds they don’t have market principles of cost and pricing structure, leading to sales that do not reflect a product’s fair value.

Conclusion

Basically, Congress calls upon the FMC to be its watchdog on ocean freight carriers. If these companies are doing anything the FMC finds concerning, the commission is to report it to Congress.

Congress is especially concerned with ocean freight carriers that are controlled by foreign contries and corporations. But frankly, that’s pretty much all ocean freight carriers. Still, the countries that the U.S. already finds concerning are of particular interest when it comes to corporations based there. When an actual state controls an ocean freight carrier, Congress seems most concerned. But that is a bit of an assumption from the fact Congress made state-owned or -controlled explicit before being controlled by foreign corporations, which it diluted by specifying the type of countries those corporations being based creates the particular concern.

If you noticed something in Section 14 of OSRA that you think deserves more attention, please let us know in the comments section below. Perhaps you have a take on it that I didn’t consider. We’d love to hear from you.

Stay tuned for when Decoding OSRA continues, looking at Section 15….

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ILA Stance Is Worse Than Just Threatening Strike https://www.universalcargo.com/ila-stance-is-worse-than-just-threatening-strike/ https://www.universalcargo.com/ila-stance-is-worse-than-just-threatening-strike/#respond Wed, 15 Nov 2023 02:15:09 +0000 https://www.universalcargo.com/?p=12352 Sometimes bad news isn't as bad as it appears. This isn't one of those times.

Last week, I wrote about the International Longshoremen's Association (ILA) using the word shippers most fear hearing from one of the giant unions that control the jobs at the ports all along U.S. coasts: strike.

A strike by the ILA or International Longshore & Warehouse Union (ILWU) would shut down all the ports along a whole side of the country, massively disrupting national (and global) supply chains while costing the U.S. economy billions of dollars per day. That's not an exaggeration. A study by the National Association of Manufacturers and the National Retail Federation found such a strike, lasting at least five days, would cost the economy $2.5 billion per day. Granted, that was almost a decade ago and specifically for the ILWU. However, with the high amount of inflation we've seen since that 2015 study, the dollar cost would now likely be significantly higher, no matter which side of the country gets its ports shut down.

Luckily, threats of strike are much more common than actual strikes, but the more you dig into what the ILA and its president, Harold Daggett, are saying, the more serious this potential threat is. And Daggett's words are worse than merely warning there's a chance of a strike. Three things stand out to make this story even worse than it appeared in the blog I wrote last week.

First, and unsurprisingly, Daggett is drawing a hard line on automation. This will create contention in negotiations, and it is hard to imagine the issue will be worked out before the current contract expires.

Second, the ILA wants no White House mediation, even if negotiations go south.

Third, if union demands are not met before the current contract expires, Daggett says ILA dockworkers will not continue working under current contract terms until a new contract is reached. "We will be in the streets,” he said, clearly referring to picketing during a strike.

Find out more by reading the full post in Universal Cargo's blog.

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Sometimes bad news isn’t as bad as it appears. This isn’t one of those times.

Last week, I wrote about the International Longshoremen’s Association (ILA) using the word shippers most fear hearing from one of the giant unions that control the jobs at the ports all along U.S. coasts: strike.

Dockworker and cargo containers
Dockworker and cargo containers

A strike by the ILA or International Longshore & Warehouse Union (ILWU) would shut down all the ports along a whole side of the country, massively disrupting national (and global) supply chains while costing the U.S. economy billions of dollars per day. That’s not an exaggeration. A study by the National Association of Manufacturers and the National Retail Federation found such a strike, lasting at least five days, would cost the economy $2.5 billion per day. Granted, that was almost a decade ago and specifically for the ILWU. However, with the high amount of inflation we’ve seen since that 2015 study, the dollar cost would now likely be significantly higher, no matter which side of the country gets its ports shut down.

Luckily, threats of strike are much more common than actual strikes, but the more you dig into what the ILA and its president, Harold Daggett, are saying, the more serious this potential threat is. And Daggett’s words are worse than merely warning there’s a chance of a strike. Three things stand out to make this story even worse than it appeared in the blog I wrote last week.

First, and unsurprisingly, Daggett is drawing a hard line on automation. This will create contention in negotiations, and it is hard to imagine the issue will be worked out before the current contract expires.

Second, the ILA wants no White House mediation, even if negotiations go south.

Third, if union demands are not met before the current contract expires, Daggett says ILA dockworkers will not continue working under current contract terms until a new contract is reached. “We will be in the streets,” he said, clearly referring to picketing during a strike.

Last week was Miller Time; I used an excellent article by Greg Miller in FreightWaves as my main source for what Daggett and the ILA were saying. Today, I lean on the heraldry of Michael Angell in a Journal of Commerce (JOC) article.

Automation

Here’s what Angell reported on Daggett drawing a line between the ILA and its contract negotiations versus those of the ILWU on the issue of automation:

In 2008, the ILWU agreed to language in their collective bargaining agreement that conceded “new technologies … necessarily displaces traditional longshore work and workers.” The ILWU’s current leadership, whom the ILA supported throughout their negotiations, inherited the concession as part of their current collective bargaining agreement. 

Daggett said the ILA will again seek strong protections against the introduction of full automation at any East or Gulf coast marine terminals. Reading a letter from a “casual” ILWU member about the impact of automation on full-time longshore employment, Daggett said the casual was a “casualty” due to the lack of protection against automation at West Coast ports. 

“We are not the ILWU, we are nothing like the ILWU,” Daggett said. The automation that was implemented at terminals at the Ports of Los Angeles and Long Beach under the ILWU’s earlier contracts “should have never happened, but it happened anyway,” he said. 

It’s not surprising that the dockworkers unions would fight against automation. They see automation as an existential issue. In theory, a 100% automated port would need no dockworkers, right?

However, the ports need automation to create the ability to handle larger and larger amounts of cargo that move through them. Unions fighting against automation at U.S. ports has caused our ports to fall behind ports in Asia and parts of Europe in efficiency and capacity. This played a large role in the bottlenecks and port congestion we saw during the shipping boom of the pandemic. Ports simply were not able to handle the high level of cargo moving through them.

Typically, cargo volume moving through the ports increase year after year. If ports fail to upgrade their ability to handle more cargo, they will not be able to meet the demands ahead of them. Employers at the ports and the ILA are going to have trouble seeing eye to eye on this issue.

Daggett acknowledged ILA dockworkers are not reaching the number of moves per hour the union promised the USMX during previous contract negotiations in order to stave off automation. He urged locals to up efficiency in order to help get them a good contract.

Mediation

I expect to start hearing about letters to the White House from groups of shippers begging the president to ensure a smooth transition to a new ILA contract very soon. The ILA wants none of it.

[Daggett] said the union will reject any efforts by the federal government to intervene in the talks should the ILA and USMX [United States Maritime Alliance] not come to terms.  

… “We will not be interested in Biden sending us a mediator if negotiations are not going well.” 

To me, these words are worse than the strong things Daggett had to say about automation. Automation is always a contentious point in union contract negotiations, whether you’re talking about the ILWU or ILA. But a preemptive refusal of mediation? That sounds like a side is only interested in getting its demands met rather than actually negotiating.

Mediation can obviously be a powerful tool for helping two sides reach resolution in negotiations. Mediation has often been necessary in union contract negotiations at the port.

President Biden has called himself “the most pro-union president in American history.” If the ILA isn’t interested in supposedly the most union-friendly president’s administration acting as mediator between it and its employers, I don’t like the chances of a new contract being reached before the current one expires.

Strike as Soon as Contract Expires

The way Daggett is talking, it doesn’t sound like he’s merely threatening strike for leverage. It sounds like he’s planning to lead the ILA in a strike. He’s not willing to negotiate on any terms until the union’s pay raise demands are met, and he’s not willing to let dockworkers keep working once the current contract expires if there’s not a new one in place. Here’s what Angell reported on this:

[USMX and the ILA] failed last month to agree on new pay raises, the union’s president said Tuesday, slowing further progress in contract talks and prompting the union to warn members they should “start saving money” to prepare for the possibility of the first coastwide strike in 47 years in 2024.  

… at a meeting in Nashville for ILA locals along the South Atlantic and Gulf Coast, [Daggett] said maritime employers need to provide a “substantial” increase in hourly wages before talks on other contract terms can begin, adding that ILA’s 45,000 members will walk off the job if there’s no signed deal in place before the current contract expires on Sept. 30, 2024.  

“The ILA has not had a coastwide strike since 1977, but we must be prepared if our demands are not met,” Daggett said. He told local representatives at the meeting they need to prepare their members for a potential loss of income from a walkout. 

“Start saving money because that day may come,” Daggett said.  

“I want wages done first, and then we’ll sit down and negotiate the contract,” he said. “Our current contract expires in less than a year and we are facing the most challenging negotiations in our history.” 

Daggett said the ILA outlined its most recent wage increase proposal to the [USMX] at an October meeting in Newark, New Jersey. But he said ILA walked out of the meeting after two and a half hours after it appeared the USMX was not interested in the proposal but “wanted to play hardball.”  

“I wish I could report that the exploratory talks we have had with the USMX have led to an understanding, but I can’t,” Daggett said.  

He did not say what the union is seeking for a pay raise. But he pointed to the recent contract that the United Auto Workers secured from Ford Motors that will bring the lowest hourly straight-time wage autoworker from $18 per hour up to $40 over four years as an example of the strong wage increases that other unions have been able to secure recently.  

“The ILA expects the companies to compensate its workforce with a substantial increase in hourly pay,” Daggett said. 

Daggett also rebuffed the idea that the ILA would remain on the job, as did members of the [ILWU] when their contract expired in July 2022….

“There will be no extensions like the ILWU did. We will be in the streets,” Daggett said.

As I talked about in the previous blog, reaching a new contract before the current expires goes against the unions’ traditional modus operandi. However, we’ve seen much smoother contract transitions over the last decade. Unfortunately, we now seem to be moving back in the wrong direction.

A new ILA contract before the current one expires doesn’t look likely, and the ILA says it will strike if a new contract isn’t reached by then. Thankfully, there’s still the better part of a year before the contract expires on September 30th, 2024, so there still is time. But shippers would be wise spending that time preparing for the eventuality of a strike at East and Gulf Coast ports.

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ILA Already Threatening Strike https://www.universalcargo.com/ila-already-threatening-strike/ https://www.universalcargo.com/ila-already-threatening-strike/#respond Fri, 10 Nov 2023 02:05:11 +0000 https://www.universalcargo.com/?p=12348 If there's one word shippers hate to hear in relation to the dockworkers and their unions that control the jobs up and down the U.S. coasts, it's strike. We're a little under a year away from the contract between the International Longshoremen's Association (ILA), representing dockworkers at the East and Gulf Coast ports, and the United States Maritime Alliance (USMX), representing employers at those ports, expiring. However, the ILA is already talking strike.

We've barely gotten past the long, contentious, on-again and off-again contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) on the West Coast, which to no one's surprise included port-disrupting labor action and had shippers diverting imports and exports through East and Gulf Coast ports. Now, shippers have to get ready to deal with unpredictable labor action, which could include a strike, at those East and Gulf Coast ports.

It's Miller Time. For those of you who regularly read this blog, you know that doesn't mean the unions are driving me to drink. Miller Time means we're checking out a FreightWaves article by Greg Miller. Sometimes, I even use Miller Time as a nickname for the man himself. Here's what Miller Time reported:

“'Members should prepare for the possibility of a coastwide strike in October 2024,' the International Longshoremen’s Association (ILA) — the union representing 45,000 East and Gulf Coast dockworkers — warned in a press release on Saturday.

"The current six-year agreement expires on Sept. 30, 2024. 'The union will hold firm on its pledge not to extend the contract beyond its expiration date,' said the ILA."

Continue reading in Universal Cargo's blog.

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ILA Tells Members to Prepare for Possible Coastwide Strike
ILA logo

If there’s one word shippers hate to hear in relation to the dockworkers and their unions that control the jobs up and down the U.S. coasts, it’s strike. We’re a little under a year away from the contract between the International Longshoremen’s Association (ILA), representing dockworkers at the East and Gulf Coast ports, and the United States Maritime Alliance (USMX), representing employers at those ports, expiring. However, the ILA is already talking strike.

We’ve barely gotten past the long, contentious, on-again and off-again contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) on the West Coast, which to no one’s surprise included port-disrupting labor action and had shippers diverting imports and exports through East and Gulf Coast ports. Now, shippers have to get ready to deal with unpredictable labor action, which could include a strike, at those East and Gulf Coast ports.

truckers strike Port of Los Angeles Long Beach

It’s Miller Time. For those of you who regularly read this blog, you know that doesn’t mean the unions are driving me to drink. Miller Time means we’re checking out a FreightWaves article by Greg Miller. Sometimes, I even use Miller Time as a nickname for the man himself. Here’s what Miller Time reported:

“Members should prepare for the possibility of a coastwide strike in October 2024,” the International Longshoremen’s Association (ILA) — the union representing 45,000 East and Gulf Coast dockworkers — warned in a press release on Saturday.

The current six-year agreement expires on Sept. 30, 2024. “The union will hold firm on its pledge not to extend the contract beyond its expiration date,” said the ILA.

Relatively Smooth Decade

Traditionally, the dockworker unions don’t agree to a new contract before the previous one expires. That’s long documented and basically a matter of policy for both the ILA and ILWU. This policy allows the unions to use their biggest weapons of leverage in negotiations: slowdowns, strikes, and threats of strike.

While ILWU contract negotiations pretty much always mean labor action and port disruptions, ILA contract negotiations have actually been surprisingly smooth over the last decade.

Backlash from massive port disruptions during the 2014-15 ILWU negotiations led to market share gains for East and Gulf Coast ports. It also seemed to make the ILA and USMX realize change needed to happen with how labor negotiations at the ports was handled.

Only about a year before the messy and costly negotiations on the West Coast, negotiations between the ILA and USMX on the East Coast were contentious, with the ILA threatening to strike. Ships were being diverted from East and Gulf Coast ports and market share was being gained by the West Coast ports. Here in Universal Cargo’s blog, we were keeping shippers informed with the 2012/13 ILA Strike Watch.

The ILA and USMX seemed to have learned a lesson that they were better off keeping negotiations smooth instead of trading back and forth discretionary cargo with the West Coast depending on who was disrupting supply chains because of contract negotiations that year. The ILA’s move toward more port stability with smooth new contract negotiations or extensions seemed to rub off on the ILWU as well. In 2017, the ILWU actually reached a contract extension agreement before their contract at the time expired. We were living in new, unprecedented times.

Unfortunately, they didn’t last.

Labor Action Ramps Up

Now is a time when unions in various industries all over the globe, and especially in North America, are ready to strike for higher pay. Business be damned. It appears to be paying off for them. The ILWU’s contentious negotiations resulted in massive pay gains. Of course, the ILA wants to get big pay raises for its members as well (and more control of the jobs at the ports). It may take port disruption. It may result in higher costs for shippers and consumers. It may even cost union jobs down the road. But the dockworker unions seem to be done diverted from their traditional, disruptive contract negotiation tactics. With the ILWU executing port disruptions during their drawn-out negotiations and the ILA already talking strike, the lesson learned from the 2012-13 ILA strike threat and 2014-15 ILWU port congestion appears to be lost.

The ILA is ready to stop the flow of goods through East and Gulf Coast ports to get its extremely high wage demands met. Miller Time reports:

“If it goes to the wire, I will guarantee there will be no extensions and we will be out on the street,” said Daggett at the July convention. “Don’t come back and say we cannot afford that kind of raise. You definitely can afford it — and you know it.”

The United States Marine Alliance (USMX) represents dockworker employers at East and Gulf Coast ports and shipping lines serving those facilities. The ILA is seeking a new contract from USMX that includes “a landmark compensation package,” prohibitions against terminal automation and tightened language ensuring all work at new terminals goes to ILA members.

ILA Already Showing It’s Serious with Terminal Stranglehold

Of course, over the last couple years, the ILA has been showing it still has the will to flex its muscle and stop the flow of goods to get what it wants. In 2021, I wrote about the ILA putting a stranglehold on what was a new terminal at the Port of Charleston. We’re approaching three years since the Hugh K. Leatherman Terminal opened at the Port of Charleston, but it has gone largely unused despite great need for it, particularly during the shipping boom.

The ILA is fighting for control of all the jobs at the terminal instead of the traditional hybrid labor model of employing union members and state employees there. The ILA sued over the issue, and the case could make it to the Supreme Court. Getting rid of the hybrid model, so the ILA controls all jobs at the East and Gulf Coast ports could play a big role in the upcoming contract negotiations, as could the issue of automation.

In the meantime, shippers may want to start planning ahead for shipping options in October of 2024 that divert cargo away from East and Gulf Coast ports as much as possible.

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Watch Out Shippers – Panama Canal Further Tightening Capacity https://www.universalcargo.com/watch-out-shippers-panama-canal-further-tightening-capacity/ https://www.universalcargo.com/watch-out-shippers-panama-canal-further-tightening-capacity/#respond Fri, 03 Nov 2023 00:41:02 +0000 https://www.universalcargo.com/?p=12339 Panama's drought, affecting the water level of the Panama Canal, continued in October. According to the Weather Channel, "The driest October since at least 1950 has left the Panama Canal with too little water to support the massive cargo ships that are critical to global trade."

That might sound a little hyperbolic, as large container ships are still passing through the Panama Canal, but weight restrictions have indeed limited container ships, Neo-Panamax ones in particular. Additionally, the Panama Canal Authority (ACP) continues to cut the number of ships that can move through the Panama Canal as well as the weight they can carry. Decreases are scheduled in the number of ships allowed through the canal per day all the way through February. That certainly has an impact on international shipping, particularly for U.S. shippers importing goods from Asia to the East Coast.

The decrease of ships able to get through the Panama Canal has already helped U.S. West Coast ports gain back some of the market share they lost to East and Gulf Coast ports in the lead-up to and over a year of on-again, off-again contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU). The contentious negotiations led to uncertainty at the West Coast ports for shippers and plenty of port disruption from dockworker labor action.

Shippers go from one uncertainty to the next as congestion at the Panama Canal looks likely for at least the next few months.

Meteorologist Orelon Sydney reported in a Weather Channel video, "Because El Niño typically causes drier conditions in the region, officials have plans to further reduce shipping transit in the coming months."

Find out the details in Universal Cargo's blog.

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Panama’s drought, affecting the water level of the Panama Canal, continued in October. According to the Weather Channel, “The driest October since at least 1950 has left the Panama Canal with too little water to support the massive cargo ships that are critical to global trade.”

That might sound a little hyperbolic, as large container ships are still passing through the Panama Canal, but weight restrictions have indeed limited container ships, Neo-Panamax ones in particular. Additionally, the Panama Canal Authority (ACP) continues to cut the number of ships that can move through the Panama Canal as well as the weight they can carry. Decreases are scheduled in the number of ships allowed through the canal per day all the way through February. That certainly has an impact on international shipping, particularly for U.S. shippers importing goods from Asia to the East Coast.

The decrease of ships able to get through the Panama Canal has already helped U.S. West Coast ports gain back some of the market share they lost to East and Gulf Coast ports in the lead-up to and over a year of on-again, off-again contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU). The contentious negotiations led to uncertainty at the West Coast ports for shippers and plenty of port disruption from dockworker labor action.

Shippers go from one uncertainty to the next as congestion at the Panama Canal looks likely for at least the next few months.

Meteorologist Orelon Sydney reported in a Weather Channel video, “Because El Niño typically causes drier conditions in the region, officials have plans to further reduce shipping transit in the coming months.”

Panama Canal Restriction Details

Greg Miller (yes, the one I regularly refer to as Miller Time in Universal Cargo’s blog) reported yesterday in a FreightWaves article about the situation. He gave details of the tightening restrictions limiting the number of ships the ACP is allowing through the canal:

… The ACP had previously reduced daily transit reservation slots from 36 to 32. On Tuesday, it announced that reservation slots will be limited to 25 as of Friday, 24 starting Nov. 8 and 22 on Dec. 1. The number of reservation slots will fall to 20 on Jan. 1, 2024, then 18 starting Feb. 1.

He even put the details into a nice table form:

chart of Panama Canal reservations slots
Table of Panama Canal Reservation Slots courtesy of FreightWaves

Panama Canal Restrictions’ Effects on Container Shipping

I already mentioned the Panama Canal situation helping to restore import market share to U.S. West Coast ports, but Miller Time provides more details on how tightening capacity at the canal affects container shipping:

Larger container ships sailing from Asia to U.S. East and Gulf Coast ports already feel the effect of Panama’s drought, because they need more than 44 feet of draft [to which the Panama Canal is being limited] when fully loaded. Vasquez said that for every foot of lost draft, container ships lose capacity for 350 twenty-foot equivalent units.

Thus, this year’s loss of 6 feet of draft equates to 2,100 TEUs of cargo. Liners have either had to sail with lower utilization or unload 2,100 TEUs on the Pacific side of Panama, rail them across the isthmus and reload on the Atlantic side.

The just-announced transit restrictions avert or delay further draft reductions that would force liner companies to unload and reload even more containers.

However, the transit reservation cap itself looks likely to affect schedules.  

Over the next two months, the number of Neopanamax transit reservation slots will be cut in half, from 10 currently to five as of Jan. 1.

During the past two fiscal years (the ACP’s fiscal year ends Sept. 30), there was an average of 4.7 container ships transiting the Neopanamax locks per day, according to FreightWaves calculations based on ACP transit data.

That historical container-ship average is right at the Feb. 1 limit for total Neopanamax reservation slots (for all ship types) — and it’s just an average, meaning that on many days over the past two fiscal years, there were more than five container ship transits through the Neopanamax locks. 

Container shipping flows, as with other ocean cargo flows, rise and fall seasonally. Thus, some container service scheduling changes appear likely while restrictions are in place.

Conclusion

Unfortunately, supply chain disruptions are a regular part of the international shipping industry.

During the pandemic, we saw exceptional port disruption from a combination of things, including hundreds of blanked (cancelled) sailings maldistributing shipping containers around the world right before shipping demand exploded to record levels for which the ports were not prepared. That’s not to mention lockdowns, shutdowns, Covid restrictions, and a ship getting wedged in the middle of the Suez Canal adding to the chaos. Then there were the disruptions with the ILWU contract negotiations on the U.S. West Coast followed by the ILWU Canada strike. More labor strikes have hit logistics around the world too, with rippling effects across supply chains. Now we have the restrictions at the Panama Canal, which will probably be followed by some other disruptive event before uncertainty centering around the International Longshoremen’s Association (ILA) contract negotiations on the East Coast starts making headlines.

Many shipping disruptions are unforeseeable. Cargo insurance is an obvious necessity to protect against disasters no one sees coming, but shippers should partner with experienced logistics experts who prepare ahead of disruptions that can be foreseen. Regular readers of Universal Cargo’s blog were not surprised when disruptions hit during the ILWU contract negotiations. Disruption is pretty much a guarantee during ILWU negotiations, and we were warning our readers and customers well before negotiations began.

Likewise, trusted and experienced freight forwarders can help you right now to protect your imports and exports by informing you of what’s happening at the Panama Canal and helping you choose the best and least risky routes for your international shipping. Universal Cargo’s account executives also communicate directly and promptly with customers (who can also contact them anytime), so you know exactly what’s happening with your shipments, even when the unexpected happens.

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Israel Needs More Imports Because of Hamas Terrorist Attacks & Resulting War Effort https://www.universalcargo.com/israel-needs-more-imports-because-of-hamas-terrorist-attacks-resulting-war-effort/ https://www.universalcargo.com/israel-needs-more-imports-because-of-hamas-terrorist-attacks-resulting-war-effort/#respond Fri, 27 Oct 2023 01:21:29 +0000 https://www.universalcargo.com/?p=12329 By now, everyone should know what's happening in Israel, but there's a heavy propaganda machine muddying it. So before getting into the related international shipping story, I'll make my position clear. No sugarcoating, no talking about how complicated the situation is, and no playing the moral equivalency game:

Hamas is a terrorist organization. It doesn't believe the Jewish people have a right to a nation or even to live. Earlier this month, Hamas launched terrorist attacks on Israel with a death toll around 1,400 people. Hamas terrorists murdered children and babies. They raped women. They took hostages. Israel is responding as it must: with a war effort. A Jewish friend put it to me this way over the weekend, "There are three types of people. Those who think a Jewish state has the right to exist. Those who don't. And those who are indifferent." I am not indifferent.

Israel has a right to exist. The terrorist organization called Hamas does not. Its goals are evil. Its actions are evil. If allowed to continue on, we'll just see more horrific days like October 7th, 2023 orchestrated by Hamas. Its an organization that called for Jihad in its original 1988 charter and has carried out act after act of terrorism in the decades that followed. There's nothing complicated about that.

Now I can turn my attention to global trade. Conflicts around the globe generally affect international shipping, and the war in Israel is no different. One of the biggest results of this war, when it comes to international trade, is Israel needs more imports.

Keep reading in Universal Cargo's blog.

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By now, everyone should know what’s happening in Israel, but there’s a heavy propaganda machine muddying it. So before getting into the related international shipping story, I’ll make my position clear. No sugarcoating, no talking about how complicated the situation is, and no playing the moral equivalency game:

Hamas is a terrorist organization. It doesn’t believe the Jewish people have a right to a nation or even to live. Earlier this month, Hamas launched terrorist attacks on Israel with a death toll around 1,400 people. Hamas terrorists murdered children and babies. They raped women. They took hostages. Israel is responding as it must: with a war effort. A Jewish friend put it to me this way over the weekend, “There are three types of people. Those who think a Jewish state has the right to exist. Those who don’t. And those who are indifferent.” I am not indifferent.

Israel protest against terror – 03/02 2017 More: View public domain image source here

Israel has a right to exist. The terrorist organization called Hamas does not. Its goals are evil. Its actions are evil. If allowed to continue on, we’ll just see more horrific days like October 7th, 2023 orchestrated by Hamas. Its an organization that called for Jihad in its original 1988 charter and has carried out act after act of terrorism in the decades that followed. There’s nothing complicated about that.

Israel Needs Goods

Now I can turn my attention to global trade. Conflicts around the globe generally affect international shipping, and the war in Israel is no different. One of the biggest results of this war, when it comes to international trade, is Israel needs more imports.

Eric Kulisch reported in a FreightWaves article:

Israel will need to import more goods because the war effort makes domestic production more difficult…

The call-up of tens of thousands of army reservists will limit Israel’s economic output and ability to support itself, driving a need for imported goods and related logistics support, Brian Bourke, global chief commercial officer at Seko Logistics, told reporters on a conference call. Seko has 65 employees in the country.

If you’re an exporter, or even a manufacturer who doesn’t normally export goods, one way to support Israel is simply to export goods there. Perhaps, if you’re in the indifferent category my Jewish friend spoke of, the altruistic motivation isn’t necessary. Where there’s an increased demand, there’s an increased opportunity. Israel certainly has an increased demand.

Kulisch wrote:

The departure of Israeli citizens from their regular jobs to join the Israel Defense Forces “has impacts on supply chains because factories are not going to be producing as much, distribution centers aren’t going to be moving goods as much,” said Bourke. “And so Israel as a country is going to be needing to import a lot more than they were before. And traditionally they import quite a bit.” 

Israel is a big market for sectors like high-tech, although much of the trade flow in technology is outbound. In 2022, Israel imported $107.7 billion worth of merchandise from the world, led by raw materials and consumer goods, according to the U.S. International Trade Administration.

Supply Chain Stressed But Israeli Government Uses Exemptions to Ease It

Along with the increased demand for goods, there are strains on the supply chain in Israel. However, the Isreali government is doing what it can to make it as easy as possible to get imports into the country.

Kulisch continues in his article:

The Israeli government last week exempted many high-priority imported products from inspections and document requirements to ease their entry into the country, according to Reuters.

The Port of Ashdod is open, but working at less efficiency with workers having to take shelter when there are rocket attacks and some personnel called up for military duty. The northern Port of Haifa and Tel Aviv Airport are open and operating close to normal. 

Jonathan Saul, in a Reuters article, describes how the workers at the Port of Ashdod are keeping the supply chain going under the threat of rocket strikes from Gaza:

When wailing sirens warn of incoming rockets from Gaza, workers at Israel’s Port of Ashdod stop operations within moments and quickly resume their work minutes later when the all clear is given.

It’s an unusual way for a port to keep operational but it has become the only means to keep supply lines moving in time of war.

A combination of practice drills, protective shelters and an Iron Dome air defence battery nearby have meant the government-owned port, which is 40 km (30 miles) from Gaza, can minimise any supply chain disruptions amid concerns over tightening supplies for the home front.

The entire port is dotted with protective shelters and the waiting time for staff under protection is around 10 minutes to ensure that even after a rocket falls there is no risk of falling shrapnel, port foreman Yigal Ben Kalifa told Reuters.

Diverted Ships and Flights Add to Import Need

The war isn’t only a problem for port operations on the ocean shipping side of supply chains in Israel but for air freight as well.

Kulisch reports:

Operating in a conflict zone is challenging for commercial transportation providers. Many international passenger and cargo airlines have suspended flights to Tel Aviv until hostilities subside. Aviation experts say there is a risk that an aircraft could be accidentally struck by a missile fired by Hamas in Gaza or Iran-backed forces in southern Lebanon or by Israel’s antimissile defense system. Interference with GPS signals also could cause aircraft to move off their intended flight paths and into more dangerous skies. Israeli authorities counter that their mitigation measures make it safe to fly into Tel Aviv.

It’s not surprising airlines would be afraid to fly through the area. According to Saul’s Reuters article, Israeli government data shows that more than 7,600 rockets have been fired from Gaza towards Israel since Hamas’s October 7th terrorist attacks on Israel civilians.

Back on the ocean side, diverted ships add to canceled flights in preventing cargo from reaching Israel.

Saul also reports in his Reuters article:

At least 20 ships have opted to divert from Ashdod to the northern Israeli port of Haifa in recent weeks, and the port has seen a 30% drop in volume week-on-week, said Shaul Schneider, chairman of the Port of Ashdod’s board of directors.

An average container ship transports thousands of shipping containers of goods. All those diverted cargo containers, as well as the freight on cancelled flights, add to the need Israel will be having for goods. On top of regular goods, there will be a particular need for medical supplies.

If you decide to donate goods, medical supplies, or money to Israel, make sure you do it through an organization you know and trust or have researched thoroughly.

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Decoding OSRA: Section 13. Enforcement of Reparation Orders https://www.universalcargo.com/decoding-osra-section-13-enforcement-of-reparation-orders/ https://www.universalcargo.com/decoding-osra-section-13-enforcement-of-reparation-orders/#respond Tue, 24 Oct 2023 20:28:14 +0000 https://www.universalcargo.com/?p=12327 We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Series Introduction & Quick Coverage of Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9
Section 10
Section 11
Section 12

Obviously, that means today we’re covering Section 13 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Like a nice cabernet sauvignon with a filet mignon, Section 13 of OSRA pairs nicely with Section 8. Actually, make that a light pinot noir because Section 8 is another short section, not nearly full-bodied enough to be a cab. And, of course, we're talking about shipping law here, so it's nowhere close to as enjoyable as red wine and steak. However, it is still pretty good for shippers. Sticking with the simile, Section 8 would have been the main course whereas Section 13 is what you put with it to complete the meal.

Keep reading in Universal Cargo's blog....

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Introduction

We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 13 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Like a nice cabernet sauvignon with a filet mignon, Section 13 of OSRA pairs nicely with Section 8. Actually, make that a light pinot noir because Section 8 is another short section, not nearly full-bodied enough to be a cab. And, of course, we’re talking about shipping law here, so it’s nowhere close to as enjoyable as red wine and steak. However, it is still pretty good for shippers. Sticking with the simile, Section 8 would have been the main course whereas Section 13 is what you put with it to complete the meal.

Section 8 added refunds to penalties the Federal Maritime Commission (FMC) can assess against violators of U.S. shipping code. Now Section 13 adds the refunds to reparations that violators can be enforced to pay should they not comply with such orders from the FMC. Thus, shippers can go to a district court to force carriers to pay them refunds awarded by the FMC.

Section 13 Text

SEC. 13. ENFORCEMENT OF REPARATION ORDERS.

    Section 41309 of title 46, United States Code, is amended--
            (1) in subsection (a), by striking ``reparation, the person 
        to whom the award was made'' and inserting ``a refund of money 
        or reparation, the person to which the refund or reparation was 
        awarded''; and
            (2) in subsection (b), in the first sentence--
                    (A) by striking ``made an award of reparation'' and 
                inserting ``ordered a refund of money or any other award 
                of reparation''; and
                    (B) by inserting ``(except for the Commission or any 
                component of the Commission)'' after ``parties in the 
                order''.

Original Title 46 Text

§41309. Enforcement of reparation orders

(a) Civil Action.—If a person does not comply with an order of the Federal Maritime Commission for the payment of reparation, the person to whom the award was made may seek enforcement of the order in a district court of the United States having jurisdiction over the parties.

(b) Parties and Service of Process.—All parties in whose favor the Commission has made an award of reparation by a single order may be joined as plaintiffs, and all other parties in the order may be joined as defendants, in a single action in a judicial district in which any one plaintiff could maintain an action against any one defendant. Service of process against a defendant not found in that district may be made in a district in which any office of that defendant is located or in which any port of call on a regular route operated by that defendant is located. Judgment may be entered for any plaintiff against the defendant liable to that plaintiff.

(c) Nature of Review.—In an action under this section, the findings and order of the Commission are prima facie evidence of the facts stated in the findings and order.

(d) Costs and Attorney Fees.—The plaintiff is not liable for costs of the action or for costs of any subsequent stage of the proceedings unless they accrue on the plaintiff's appeal. A prevailing plaintiff shall be allowed reasonable attorney fees to be assessed and collected as part of the costs of the action.

(e) Time Limit on Bringing Actions.—An action under this section to enforce an order of the Commission must be brought within 3 years after the date the order was violated.

Amended Text

§41309. Enforcement of reparation orders

(a) Civil Action.—If a person does not comply with an order of the Federal Maritime Commission for the payment of a refund of money or reparation, the person to which the refund or reparation was awarded may seek enforcement of the order in a district court of the United States having jurisdiction over the parties.

(b) Parties and Service of Process.—All parties in whose favor the Commission has ordered a refund of money or any other award of reparation by a single order may be joined as plaintiffs, and all other parties in the order (except for the Commission or any component of the Commission) may be joined as defendants, in a single action in a judicial district in which any one plaintiff could maintain an action against any one defendant. Service of process against a defendant not found in that district may be made in a district in which any office of that defendant is located or in which any port of call on a regular route operated by that defendant is located. Judgment may be entered for any plaintiff against the defendant liable to that plaintiff.

(c) Nature of Review.—In an action under this section, the findings and order of the Commission are prima facie evidence of the facts stated in the findings and order.

(d) Costs and Attorney Fees.—The plaintiff is not liable for costs of the action or for costs of any subsequent stage of the proceedings unless they accrue on the plaintiff's appeal. A prevailing plaintiff shall be allowed reasonable attorney fees to be assessed and collected as part of the costs of the action.

(e) Time Limit on Bringing Actions.—An action under this section to enforce an order of the Commission must be brought within 3 years after the date the order was violated.

Observations on Section 13

Because of how short and straightforward Section 13 is, for me to go through it line by line would be repetitive and redundant. Sorry for the old dad joke there. However, there is something of note beyond adding refunds to reparations as something that is enforceable when the violating party does not comply.

After two amendments adding refunds, there’s a third amendment that adds the parenthetical “(except for the Commission or any component of the Commission).”

This exception of the FMC makes it explicit that the Commission cannot become one of the defendants in cases where plaintiffs are seeking enforcement of money awards the FMC ruled the plaintiffs should receive. Lawmakers made a clear protection for the FMC here. Shippers can’t say to the FMC, “You awarded us this money and the carriers won’t pay, so you give us our reparations or refunds in the meantime.”

The government won’t be held responsible for paying plaintiffs who lost money or were damaged by someone violating shipping law against them.

Conclusion

Section 13 returns to the idea of refunds of money when shippers or other parties are in a situation like having been charged unfair detention or demurrage fees. That’s not the only situation Section 13 could apply to, but it is one of the main things lawmakers focused on while writing OSRA.

With Section 13, if a shipping law violator does not comply with an FMC order to refund money, that violator can be taken to court for the enforcement of the award. Section 41309 of Title 46 of the U.S. Code, which Section 13 of OSRA amends, already granted this enforcement for reparations the FMC awarded to complainants.

Additionally, Section 13 protects the FMC from being added to the defendants in seeking award enforcement in court.

Now, there may be something you notice in Section 13 of OSRA that I didn’t. Or there’s another take you have on it that I didn’t consider. If there is, please share it in the comments section below.

Stay tuned for when Decoding OSRA continues, looking at Section 14….

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Is This a Good Time to Import Via Air Freight? https://www.universalcargo.com/is-this-a-good-time-to-import-via-air-freight/ https://www.universalcargo.com/is-this-a-good-time-to-import-via-air-freight/#respond Wed, 18 Oct 2023 00:56:38 +0000 https://www.universalcargo.com/?p=12318 I admit it. I write about ocean freight shipping in Universal Cargo's blog a whole lot more than air freight. Perhaps I have a bias in the ocean freight vs. air freight debate. The last time I really wrote about air freight rates and the conditions for shippers importing or exporting via air freight was at the end of last year. Then, overcapacity was putting downward pressure on air freight rates and creating shipper-friendly conditions for utilizing air freight as we moved into 2023.

Has the situation changed or are air freight rates still favorable for shippers?

Traditionally, this is the peak season time of year for the international shipping industry. Freight rates, in general, are up this time of year as retailers prepare for the holiday shopping season, with Christmas especially creating an increase in consumer spending. However, we're getting to the part of the peak season when ocean freight shipping often starts slowing down and air freight shipping really takes off.

Unfortunately, the economy could be better. Consumers' budgets are stretched thin under Bidenomics' inflation on goods and gas, the final residual pandemic measures like loan moratoriums and child-care subsidies are over or expiring, and extra money people accrued from government stimuli and reduced travel and services during the pandemic seems mostly spent. That means lower expectations for the holiday shopping season and, generally, less importing of goods by retailers.

There is some good news in that for shippers though. The reduced demand means peak season air freights are less likely to fly as high as they normally do this time of year.

Obviously, every individual business is different when it comes to its shipping needs. However, if you need to import goods quickly, particularly for the holiday shopping season, this could be a good peak air freight shipping season for you. The seasonal demand has been enough to uptick air freight rates a little. However, analysts appear doubtful there will be a big jump in November and December air freight rates as would be typical.

In fact, Eric Krulisch wrote in a FreightWaves article published yesterday, "The [air freight] market is essentially flat versus an anemic final stretch in 2022, according to the latest data.... More industry experts now say real growth in the air cargo sector is still a year away."

Continue reading in Universal Cargo's blog.

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I admit it. I write about ocean freight shipping in Universal Cargo’s blog a whole lot more than air freight. Perhaps I have a bias in the ocean freight vs. air freight debate. The last time I really wrote about air freight rates and the conditions for shippers importing or exporting via air freight was at the end of last year. Then, overcapacity was putting downward pressure on air freight rates and creating shipper-friendly conditions for utilizing air freight as we moved into 2023.

Has the situation changed or are air freight rates still favorable for shippers?

Traditionally, this is the peak season time of year for the international shipping industry. Freight rates, in general, are up this time of year as retailers prepare for the holiday shopping season, with Christmas especially creating an increase in consumer spending. However, we’re getting to the part of the peak season when ocean freight shipping often starts slowing down and air freight shipping really takes off.

Unfortunately, the economy could be better. Consumers’ budgets are stretched thin under Bidenomics’ inflation on goods and gas, the final residual pandemic measures like loan moratoriums and child-care subsidies are over or expiring, and extra money people accrued from government stimuli and reduced travel and services during the pandemic seems mostly spent. That means lower expectations for the holiday shopping season and, generally, less importing of goods by retailers.

There is some good news in that for shippers though. The reduced demand means peak season air freights are less likely to fly as high as they normally do this time of year.

Obviously, every individual business is different when it comes to its shipping needs. However, if you need to import goods quickly, particularly for the holiday shopping season, this could be a good peak air freight shipping season for you. The seasonal demand has been enough to uptick air freight rates a little. However, analysts appear doubtful there will be a big jump in November and December air freight rates as would be typical.

In fact, Eric Krulisch wrote in a FreightWaves article published yesterday, “The [air freight] market is essentially flat versus an anemic final stretch in 2022, according to the latest data…. More industry experts now say real growth in the air cargo sector is still a year away.”

Air Freight Turnaround Not Happening

Last year, things were not looking good for the air freight industry. In September, I was writing about how air freight might be a better option, even for some traditional ocean freight shippers, than shipping over the seas was. The cost gap, which is usually extraordinarily large, between ocean and air shipping narrowed to a point where it was worth it for many ocean freight carriers to consider air. The supply/demand balance simply was not good for air carriers. As I mentioned above, that overcapacity trend continued into this year.

Frankly, the market hasn’t been good for air freight carriers throughout the year. Demand also hasn’t been the strongest this year for ocean freight shipping, so lower ocean freight rates kept the price gap from shrinking enough for a large chunk of shipping market share to switch from ocean to air. That, too, is unfortunate for air freight carriers. However, just recently, air freight demand and rates ticked up a little bit. Many in the industry seemed to have their hopes shoot up that the poor air freight market was turning around.

Not so fast, according to Krulisch’s article:

Many media outlets jumped on the International Air Transport Association’s recent announcement that air cargo traffic grew 1.5% in August — the first year-over-year (y/y) gain in 19 months — as a sign of a turnaround. A more complete analysis, taking into account different methodologies and IATA’s distance multiplier on tonnage, indicates the industry’s economic cycle has hit bottom. Market intelligence firm Xeneta previously reported airfreight demand was negative 1% in August. Taken together, growth for the month was essentially zero.

And it didn’t change in September. Xeneta reported global demand increased 6% month over month. But demand didn’t budge from the September 2022 level, when cargo bookings were quickly sinking.

Meanwhile, cargo capacity in September grew at the slowest pace in 11 months as passenger airlines entered the shoulder season and pulled flights from the market to match lower travel interest, but it is still about 10% more than a year ago. 

Bottom line, there’s no turnaround here. That means air freight rates should still be favorable for shippers. However…

Air Freight Market Is Improved for Carriers But Better for Shippers

Just because a full turnaround is not being seem doesn’t mean it’s all gloom and doom for air freight carriers. The market is better for them than it was a year ago, according to Krulisch:

U.S. import tonnage from the Asia-Pacific, the United States’ largest air trade corridor, in August was below the rolling eight-year average, U.S. Commerce Department statistics show.

Still, the airfreight market is in a better spot now than 10 months ago. Cargo volume is down 6% to 7% year to date through August versus the same period in 2022, an improvement from the double-digit contraction at the start of the year.

Krulisch’s FreightWaves article does speak of Apple moving supplies of its new iPhone 15 and rushes to beat holiday factory shutdowns in China as creating shipping rate surges rather than any actual increase in consumer demand. This sort of activity can create a mirage of improvement in air freight and ocean freight markets.

At Universal Cargo, we’ll obviously be paying attention to the air freight market to give our customers the best service in that department as possible. It could always behave differently than expected, but while there likely will be a little seasonal increase in November and December air freights, demand does not seem like it will be high enough to make those air rates really take off.

Expert expectations for demand growth in the near future are not good. In fact, Krulisch ended his article by quoting Niall van de Wouw, Xeneta’s chief airfreight officer:

“I still hear very little hope of demand growth before the third quarter of 2024.”

That means air freight rates for air freight shippers should be relatively good through at least the first half of next year. Air freight is still much more expensive than ocean shipping. Thus, it will mainly be reserved for shippers who need to move their goods with speed or special handling. But if you are one of those shippers, this could be a good time for the logistics end of your business.

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Decoding OSRA: Section 12. Award of Additional Amounts https://www.universalcargo.com/decoding-osra-section-12-award-of-additional-amounts/ https://www.universalcargo.com/decoding-osra-section-12-award-of-additional-amounts/#respond Thu, 12 Oct 2023 22:57:33 +0000 https://www.universalcargo.com/?p=12312 We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Series Introduction & Quick Coverage of Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9
Section 10
Section 11

Obviously, that means today we’re covering Section 12 of OSRA.

Check out Universal Cargo's blog to see exactly what it says and changes…

The post Decoding OSRA: Section 12. Award of Additional Amounts appeared first on Universal Cargo.

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Introduction

We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 12 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 12 has to be the shortest section of OSRA we’ve covered so far. However, what it does is not insignificant.

Section 12 adds a prohibition previously established in Title 46 of the U.S. Code to a list of things for which the Federal Maritime Commission (FMC) can make ocean freight carriers, terminal operators, or even intermediaries like freight forwarders pay additional damages beyond injury to shippers. Prohibition is almost a weird way to say it. It’s actually something carriers, terminal operators, or intermediaries must not fail to do, or they could be punished if it turns out costly to shippers.

Specifically, for the failure “to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property,” carriers, terminal operators, or intermediaries could have to pay shippers.

Section 12 Text

SEC. 12. AWARD OF ADDITIONAL AMOUNTS.

    Section 41305(c) of title 46, United States Code is amended by 
striking ``41102(b)'' and inserting ``subsection (b) or (c) of section 
41102''.

Original Title 46 Text

§41305. Award of reparations

(a) Definition.—In this section, the term "actual injury" includes the loss of interest at commercial rates compounded from the date of injury.

(b) Basic Amount.—If the complaint was filed within the period specified in section 41301(a) of this title, the Federal Maritime Commission shall direct the payment of reparations to the complainant for actual injury caused by a violation of this part.

(c) Additional Amounts.—On a showing that the injury was caused by an activity prohibited by section 41102(b), 41104(3) or (6), or 41105(1) or (3) of this title, the Commission may order the payment of additional amounts, but the total recovery of a complainant may not exceed twice the amount of the actual injury.

(d) Difference Between Rates.—If the injury was caused by an activity prohibited by section 41104(4)(A) or (B) of this title, the amount of the injury shall be the difference between the rate paid by the injured shipper and the most favorable rate paid by another shipper.

(e) Attorney Fees.—In any action brought under section 41301, the prevailing party may be awarded reasonable attorney fees.

Amended Text

§41305. Award of reparations

(a) Definition.—In this section, the term "actual injury" includes the loss of interest at commercial rates compounded from the date of injury.

(b) Basic Amount.—If the complaint was filed within the period specified in section 41301(a) of this title, the Federal Maritime Commission shall direct the payment of reparations to the complainant for actual injury caused by a violation of this part.

(c) Additional Amounts.—On a showing that the injury was caused by an activity prohibited by section subsection (b) or (c) of section 
41102, 41104(3) or (6), or 41105(1) or (3) of this title, the Commission may order the payment of additional amounts, but the total recovery of a complainant may not exceed twice the amount of the actual injury.

(d) Difference Between Rates.—If the injury was caused by an activity prohibited by section 41104(4)(A) or (B) of this title, the amount of the injury shall be the difference between the rate paid by the injured shipper and the most favorable rate paid by another shipper.

(e) Attorney Fees.—In any action brought under section 41301, the prevailing party may be awarded reasonable attorney fees.

Observations on Section 12

Normally, I’m going through these sections subsection by subsection, even sentence by sentence within those. However, Section 12 is so short, it can’t be broken down that way.

Like last time, there does seem to be a small mistake the lawmakers made in the text. I think they should have struck “section 41102(b)” instead of just “41102(b)” from the original text. Now, the text reads “section subsection (b) or (c) of section 41102” instead of just “subsection (b) or (c) of section 41102” as Section 41305 of Title 46 begins a list of subsections that prohibit actions.

Again, I won’t judge the lawmakers too harshly on this, as it is easy to make editing errors. On the other hand, there is only one sentence that Section 12 changes. You would think they could have double checked to make sure they got it right.

As stated in the Quick Overview, this text simply adds one new prohibited action (or more correctly, failure of action) to a list of actions for which the FMC can order the offender to pay extra damages to an injured party beyond the injury. As the text just points to elsewhere in Title 46 to define the action, here’s Subsection 41102(c), which it points to (subsection 41102(b) is not included because it was already part of the list):

(c) Practices in Handling Property.—A common carrier, marine terminal operator, or ocean transportation intermediary may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.

There is definitely some vagueness to “just and reasonable regulations and practices.” It wouldn’t be hard to imagine a carrier and shipper arguing over whether the carrier’s regulations and practices were or are “just and reasonable.” The assumption is, as usual, the FMC will be the final judge of that when investigating shippers’ complaints. Of course, the FMC’s decision could potentially be appealed through the courts.

On top of the vagueness just pointed out, “connected with receiving, handling, storing, or delivering” is quite broad. Thus, this could potentially pertain to any point, part, or parts of the supply chain.

It is worth pointing out that a limit does exist on how much the FMC can award to a shipper against a carrier, terminal operator, or intermediary. The limit is twice the amount of the actual injury.

Conclusion

Section 12 continues the trend we’ve seen in OSRA of protecting shippers. It seems that protecting shippers, who were particularly loud in their complaints during the “supply chain crisis” caused largely by reaction to the COVID-19 pandemic, was lawmakers’ top priority when writing OSRA.

This section adds one more way shippers could suffer financial loss at the fault of carriers, terminal operators, or intermediaries for which those shippers could be awarded additional money beyond the injury. For shippers, there’s probably nothing not to like here. For carriers, terminal operators, and intermediaries, it’s another story.

Of course, there may be something you notice in Section 12 of OSRA that I didn’t. Or there’s another take you have on it that I didn’t consider. If there is, please share it in the comments section below.

Stay tuned for when Decoding OSRA continues, looking at Section 13….

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Decoding OSRA: Section 11. Investigations https://www.universalcargo.com/decoding-osra-section-11-investigations/ https://www.universalcargo.com/decoding-osra-section-11-investigations/#respond Thu, 05 Oct 2023 21:38:32 +0000 https://www.universalcargo.com/?p=12300 It seems like every week there's an international shipping news story about shippers' filed complaints against carriers and rulings on them. We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Series Introduction & Quick Coverage of Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9
Section 10

Obviously, that means today we’re covering Section 11 of OSRA. Check it out in Universal Cargo's blog.

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Introduction

It seems like every week there’s an international shipping news story about shippers’ filed complaints against carriers and rulings on them. We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 11 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 11 of OSRA is a very short section that adds fees and charges to agreements and general conduct that the Federal Maritime Commission (FMC) was already given authority to investigate.

There are three small amendments added to Section 41302 of Title 46. Each amendment just turns “agreement” or “conduct or agreement” into a list that includes “fee” and “charge” in it. Lawmakers might have rushed a little on this section because it does appear they made a couple of small grammatical errors.

In addition to the minute amount of amending Section 11 does, it also requires the FMC to publish a report that appeared to already have been published before this legislation was passed.

Section 11 Text

SEC. 11. INVESTIGATIONS.

    (a) Amendments.--Section 41302 of title 46, United States Code, is 
amended--
            (1) in subsection (a), in the first sentence, by striking 
        ``or agreement'' and inserting ``agreement, fee, or charge''; 
        and
            (2) in subsection (b)--
                    (A) in the subsection heading, by striking 
                ``Agreement'' and inserting ``Agreement, fee, or 
                charge''; and
                    (B) by inserting ``, fee, or charge'' after 
                ``agreement''.

    (b) Report. – <<NOTE: Public information. Web posting.>> The Federal 
Maritime Commission shall publish on a publicly available website of the 
Commission a report containing the results of the investigation entitled 
``Fact Finding No. 29, International Ocean Transportation Supply Chain 
Engagement''.

Original Title 46 Text

§41302. Investigations

(a) In General.—The Federal Maritime Commission, on complaint or its own motion, may investigate any conduct or agreement that the Commission believes may be in violation of this part. The Commission may by order disapprove, cancel, or modify any agreement that operates in violation of this part.

(b) Effectiveness of Agreement During Investigation.—Unless an injunction is issued under section 41306 or 41307 of this title, an agreement under investigation by the Commission remains in effect until the Commission issues its order.

(c) Date for Decision.—Within 10 days after the initiation of a proceeding under this section or section 41301 of this title, the Commission shall set a date by which it will issue its final decision. The Commission by order may extend the date for good cause.

(d) Sanctions for Delay.—If, within the period for final decision under subsection (c), the Commission determines that it is unable to issue a final decision because of undue delay caused by a party to the proceeding, the Commission may impose sanctions, including issuing a decision adverse to the delaying party.

(e) Report.—The Commission shall make a written report of every investigation under this part in which a hearing was held, stating its conclusions, decisions, findings of fact, and order. The Commission shall provide a copy of the report to all parties and publish the report for public information. A published report is competent evidence in a court of the United States.

Amended Text

§41302. Investigations

(a) In General.—The Federal Maritime Commission, on complaint or its own motion, may investigate any conduct[,] agreement, fee, or charge that the Commission believes may be in violation of this part. The Commission may by order disapprove, cancel, or modify any agreement that operates in violation of this part.

(b) Effectiveness of Agreement, [F]ee, or [C]harge During Investigation.—Unless an injunction is issued under section 41306 or 41307 of this title, an agreement, fee, or charge under investigation by the Commission remains in effect until the Commission issues its order.

(c) Date for Decision.—Within 10 days after the initiation of a proceeding under this section or section 41301 of this title, the Commission shall set a date by which it will issue its final decision. The Commission by order may extend the date for good cause.

(d) Sanctions for Delay.—If, within the period for final decision under subsection (c), the Commission determines that it is unable to issue a final decision because of undue delay caused by a party to the proceeding, the Commission may impose sanctions, including issuing a decision adverse to the delaying party.

(e) Report.—The Commission shall make a written report of every investigation under this part in which a hearing was held, stating its conclusions, decisions, findings of fact, and order. The Commission shall provide a copy of the report to all parties and publish the report for public information. A published report is competent evidence in a court of the United States.

Additional Mandate

At first glance, the following text – Subsection (b) of OSRA Section 11 – seemed like an amendment or replacement for subsection (e) of Title 46’s Section 41302. Both Subsections have the same “Report” title. However, the lawmakers gave no instruction for this to amend or replace text within Section 41302 nor to amend or replace any other part of Title 46. Thus, we must take this Report subsection to be an additional mandate that’s just made upon the FMC directly from OSRA.

Report. – <<NOTE: Public information. Web posting.>> The Federal Maritime Commission shall publish on a publicly available website of the Commission a report containing the results of the investigation entitled "Fact Finding No. 29, International Ocean Transportation Supply Chain 
Engagement".

There’s not much to say about this other than it’s consistent with previous sections requiring the FMC to publish data for the public. Plus, the specified report here was published before the final version of OSRA that we’re examining in this series was passed into law. Lawmakers appear to be at least attempting to increase transparency in the ocean shipping sector.

If you want the details around the report, you can click here for the FMC’s executive summary of Fact Finding 29.

Observations on Subsection (a), Subparagraph (1)

The first sentence of Subsection (a) just tells us we’re amending text in Title 46, Section 41302. Subparagraph (1) gives us the first amendment.

Originally, the FMC was given the authority to investigate any conduct or agreement it believed violated U.S. shipping code. From what we’ve seen in the previous sections of OSRA, there seems to be a specific focus on ocean freight carriers, but this is certainly not limited to carriers. The amendment adds specific mention of fees and charges to the conduct and agreements the FMC may investigate.

It seems a small grammatical error snuck through the editing of this section of OSRA. No comma was added after conduct, so the list in the law would now read “conduct agreement, fee, or charge.” I added the missing comma inside brackets in the amended text above.

Lawmakers appear to specifically be aiming to appease shippers with the addition of fees and charges to the language here. Shippers have long complained about unfair fees and charges, particularly detention and demurrage fees, in the international shipping industry.

Observations on Subparagraph (2)

Subparagraph (2) is very similar to Subparagraph (1). It even includes a small grammatical error as well. This time, the error is one of capitalization rather than punctuation.

Subparagraph (2) has two subparagraphs of its own: (A) and (B). Both are adding fee or charge as something the FMC can investigate where the original text stopped at agreement.

The error comes in Subparagraph (A). The words “fee” and “charge” should be capitalized, as they are being inserted into the title of a subsection where the rest of the words are capitalized.

Maybe the lawmakers were a little tired when writing and editing this section of OSRA. I know grammatical errors, often much worse than these, have slipped through onto Universal Cargo blog posts I’ve written and edited. Thus, I’m not going to judge the lawmakers too harshly on the punctuation and capitalization errors that slipped into the bill. I did, however, correct the mistake inside of brackets in the amended text of the law.

I already talked about the additional mandate, which is the only thing in Section 11 of OSRA after Subparagraph (2), so we can jump straight to the…

Conclusion

Section 11 doesn’t really make much change to U.S. shipping code. It could be argued that fees and charges, which is a bit redundant in and of itself, could be included in “any conduct” that the FMC was already granted authority to investigate.

The lawmakers appear to be showing their commitment to responding to shippers’ complaints by adding this language to Title 46. As stated before, fees and charges are a major concern of shippers, and Congress wanted to show it is listening to shippers’ complaints.

Additionally, by the time the legislation was passed, the report this section requires to be published was already posted online. Thus, this section – in and of itself – appears to have little effect on international shipping law.

Of course, there may be something you notice in Section 11 of OSRA that I didn’t take into account. If there is, please share it in the comments section below.

Stay tuned for when Decoding OSRA continues, looking at Section 12….

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ILWU Files Bankruptcy Claim https://www.universalcargo.com/ilwu-files-bankruptcy-claim/ https://www.universalcargo.com/ilwu-files-bankruptcy-claim/#respond Tue, 03 Oct 2023 20:24:55 +0000 https://www.universalcargo.com/?p=12296 The International Longshore & Warehouse Union (ILWU), which represents approximately 40,000 dockworkers up and down the West Coast, filed for Chapter 11 bankruptcy Saturday night, according to a FreightWaves article by Greg Miller (a.k.a. Miller Time):

"The ILWU 'will continue to operate as usual throughout the restructuring process,' the union said in a statement on Sunday morning. It plans to 'continue honoring its employee and payroll obligations in the ordinary course of business.'

"The bankruptcy filing was precipitated by a massive damage award and ongoing litigation in a long-running dispute between ILWU Local 8, the union chapter in Portland, Oregon, and terminal operator ICTSI Oregon."

I've written a great deal over the years about what the ILWU pulled at the Port of Portland. Over two jobs that never even belonged to the union, the ILWU slowed down port operations so much container ships could no longer call on the port.

Those two jobs, plugging and unplugging reefer containers, always belonged to the International Brotherhood of Electrical Workers (IBEW). However, in its bid to control every job up and down the West Coast ports, the mighty ILWU flexed its muscle to punish the terminal operator for daring to leave those two jobs in the hands of the union that had always performed them and warn all the West Coast ports of the possible consequences of not handing over any other jobs that had always been performed by other unions.

The ILWU's actions, which were found to be unlawful, damaged the port, its terminal owners, IBEW, local truckers, shippers, and itself – which is quite obvious as now it has filed for bankruptcy protection....

Keep reading in Universal Cargo's blog.

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The International Longshore & Warehouse Union (ILWU), which represents approximately 40,000 dockworkers up and down the West Coast, filed for Chapter 11 bankruptcy Saturday night, according to a FreightWaves article by Greg Miller (a.k.a. Miller Time):

The ILWU “will continue to operate as usual throughout the restructuring process,” the union said in a statement on Sunday morning. It plans to “continue honoring its employee and payroll obligations in the ordinary course of business.”

The bankruptcy filing was precipitated by a massive damage award and ongoing litigation in a long-running dispute between ILWU Local 8, the union chapter in Portland, Oregon, and terminal operator ICTSI Oregon.

Dockworker and cargo containers
Dockworker and cargo containers

Illegal ILWU Actions that Led to Bankruptcy

I’ve written a great deal over the years about what the ILWU pulled at the Port of Portland. Over two jobs that never even belonged to the union, the ILWU slowed down port operations so much container ships could no longer call on the port.

Those two jobs, plugging and unplugging reefer containers, always belonged to the International Brotherhood of Electrical Workers (IBEW). However, in its bid to control every job up and down the West Coast ports, the mighty ILWU flexed its muscle to punish the terminal operator for daring to leave those two jobs in the hands of the union that had always performed them and warn all the West Coast ports of the possible consequences of not handing over any other jobs that had always been performed by other unions.

The ILWU’s actions, which were found to be unlawful, damaged the port, its terminal owners, IBEW, local truckers, shippers, and itself – which is quite obvious as now it has filed for bankruptcy protection.

If you want a more in depth look at what the ILWU did at the Port of Portland and the fallout from it, here is a handful of posts on it:

Judge Rules ILWU Purposefully Slowed Import/Export @ Port of Portland

ILWU Takes Advantage of No Contract, Slowing Down Port of Portland

ILWU Local 8 Should Pay Damages to Portland Shippers

Jury Hits ILWU with $93M Verdict for What Union Did to Port of Portland

Why Is This International Shipping Story So Sad?

If you don’t have time to go back and read those stories but gave the headlines a quick glance, you probably noticed the $93M verdict a jury hit the ILWU with after finding the union guilty of illegal slowdowns and work stoppages. That $93M verdict is what ultimately led to the union filing for bankruptcy protection.

The jury found both the Local ILWU 8 and ILWU National to be guilty.

What’s Happening Now

The union has continued to fight the verdict ever since it was reached and even got a victory a few years ago when a judge drastically reduced the damages ILWU was ordered to pay. Miller Time gives the details:

In March 2020, Oregon District Judge Michael Simon dramatically reduced the amount due, ruling that damages should not exceed $19.1 million.

While the sides of the case continue to fight in court, the union told its members, “Unfortunately, the ILWU cannot afford to continue to litigate this case,” according to Miller’s FreightWaves article.

So now the ILWU will use Chapter 11 to reorganize, renegotiate, and resolve the debt.

Unfortunately, labor action causing slowdowns at the ports is not an uncommon thing. Particularly when its time for the ILWU to negotiate a new master contract. This pattern led shippers to divert cargo from West Coast to East and Gulf Coast ports over the last couple years to protect themselves from potential cargo delays in the lead-up to and period of contract negotiations between the ILWU and employers represented by the Pacific Maritime Association (PMA). East Coast ports are still enjoying a market share increase of imports.

Here are a bunch of articles from the last year or so relating to the ILWU and ports:

Another Foreign Company Purchases U.S. Port Terminals & ILWU Ratifies Contract

ILWU Canada Strike Again, Stop, Reissue Strike Notice, Then Cancel – Head Spinning Yet?

New ILWU Tentative Contract Details & Fallout

Highly Paid ILWU Workers Want More, So Shippers Pay the Price

ILWU Disrupts West Coast Ports Friday & Continues Labor Action This Week

Strong Ruling Against ILWU in Seattle T-5 Jurisdictional Dispute Could Be Motivation Behind Labor Action that Closed Ports of LA-LB

ILWU Action Closed Ports of LA & LB Last Week, Slowed Opening This Week

ILWU Labor Action Creates Disruption at the Ports of Los Angeles & Long Beach

ILWU & PMA Finally Resume Contract Negotiations

ILWU Negotiations Help NY/NJ Surpass LA/LB as Busiest U.S. Port

More ILWU Port Disruption & Terminals Cutting Man-Hours as Contentious Contract Negotiations Drag

ILWU Slows Oakland & Seattle Port Operations

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Falling Freight Rates for Shippers Importing Goods https://www.universalcargo.com/falling-freight-rates-for-shippers-importing-goods/ https://www.universalcargo.com/falling-freight-rates-for-shippers-importing-goods/#respond Wed, 27 Sep 2023 00:40:47 +0000 https://www.universalcargo.com/?p=12287 Can you hear that voice that sounds suspiciously like Chicken Little? "Freight rates are falling! Freight rates are falling!"

For shippers, those words are like music to their ears. And as often happens when we start talking freight rates... It's Miller time! No, I'm not talking about cracking some cold ones in celebration or ocean freight carriers drinking to forget the news. As our regular readers might have noticed, Miller time in Universal Cargo's blog means taking a look at a FreightWaves article written by Greg Miller.

Really astute Universal Cargo blog readers may even know that when we're looking at Miller's articles in FreightWaves, there's a good chance we'll be looking at specifics data about freight rates. And we'll get there. But let's start with the overview.

International Shipping's peak season seems to be fizzling out. Miller reports in FreightWaves:

"... Spot rates are sliding into loss-making territory [for carriers].

"Rates 'continue to lose ground, bending under the pressure of insufficient demand and growing overcapacity,' said Alphaliner this week.

"According to Linerlytica, 'Container market sentiment continues to deteriorate, with freight rates still slipping and little prospect for a rate rebound in October despite carriers’ efforts to contain capacity availability through blanked [canceled] sailings.'”

Find out more by reading the full post in Universal Cargo's blog.

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Can you hear that voice that sounds suspiciously like Chicken Little? “Freight rates are falling! Freight rates are falling!”

For shippers, those words are like music to their ears. And as often happens when we start talking freight rates… It’s Miller time! No, I’m not talking about cracking some cold ones in celebration or ocean freight carriers drinking to forget the news. As our regular readers might have noticed, Miller time in Universal Cargo’s blog means taking a look at a FreightWaves article written by Greg Miller.

Really astute Universal Cargo blog readers may even know that when we’re looking at Miller’s articles in FreightWaves, there’s a good chance we’ll be looking at specifics data about freight rates. And we’ll get there. But let’s start with the overview.

International Shipping’s peak season seems to be fizzling out. Miller reports in FreightWaves:

… Spot rates are sliding into loss-making territory [for carriers].

Rates “continue to lose ground, bending under the pressure of insufficient demand and growing overcapacity,” said Alphaliner this week.

According to Linerlytica, “Container market sentiment continues to deteriorate, with freight rates still slipping and little prospect for a rate rebound in October despite carriers’ efforts to contain capacity availability through blanked [canceled] sailings.”

Tricky Situation for Carriers Could Mean Tricky Time for Shippers

Cargo ship fully loaded with freight

Now the sky isn’t exactly falling for ocean freight carriers (I don’t know why I’m obsessed with Chicken Little today). After raking in billions upon billions during the shipping boom caused largely by reactionary policy to the pandemic, carriers can absorb some periods of unhealthy freight rates.

However, there was an incredibly high amount of ship ordering that carriers did while money was flowing. All the new capacity hitting the water during a now economically uncertain time period has set carriers up for a challenge of managing supply and demand to keep freight rates healthy. Additionally, U.S. shipping code changes seem to have carriers in the cross-hairs. You can find out the details about that in our ongoing series Decoding OSRA (the Ocean Shipping Reform Act of 2022).

That’s not all good news for shippers.

High levels of blanked (cancelled) sailings is one of carriers’ top strategies for battling their supply/demand problem, as mentioned during the Miller time above. That means unpredictability for shippers when it comes to goods delivery. There can be costly delays and fees associated with unpredictable sailing schedules. For exporters, who haven’t seen freight rates come down in the same way importers have, all the blank sailings have been particularly costly.

Whenever possible, carriers will introduce GRIs in their attempts to get freight rates moving in an upward direction. And carriers will definitely do anything within their power to pass any extra costs they face because of law changes on to shippers. Often, increased regulation in an industry results in increased prices for consumers. There could be a much more volatile period for freight rates on the way than we’ve seen in a while. Traditionally, freight rates are already quite volatile.

Freight Rate Data on Imports from Asia

Really, when we’re talking about falling freight rates, the main focus is on spot rates for imports from Asia. Miller gathers and shares data showing not only falling freight rates on imports to the U.S. but also to Europe. While our focus, obviously, is on freight rates for shipping goods to the U.S., knowing that rates are falling elsewhere increases the odds of more extreme reaction from carriers in battling to bring shipping prices back up. This gives shippers all the more reason to expect high levels of blank sailings to continue and implementations of GRIs (general rate increases) from carriers whenever possible.

But let’s get to the specific data. What exactly is happening with freight rates? That’s right, it’s back to the Miller time:

The Freightos Baltic Daily Index (FBX) spot assessment for the Asia-North America West Coast lane has fallen 16% over the past month, to $1,712 per forty-foot equivalent unit as of Thursday. The FBX Asia-North America East Coast assessment is down 13% over the past month, to $2,662 per FEU.

The WCI’s Shanghai-Los Angeles assessments have declined 11% since Aug. 17, to $2,104 per FEU for the week ending Thursday. The WCI Shanghai-New York index dropped 18% over the same period, to $2,900 per FEU.

Freight Rates Still in Black for Carriers

Freight rates, despite all their recent falling, are actually still in the black for carriers. Unless carriers’ contracts with BCOs (beneficial cargo owners) are locked in at unprofitable levels, freight rates are in the black as long as spot rates are above those long-term contract rates. Generally, carriers will not lock into contracts low enough to be loss-making with the shippers who are large enough to deal directly with them.

There would need to be drastic market condition changes to make contracts shift into loss-making territory. But that’s not impossible either.

Most of the time, it’s really only when spot rates fall below contract rates that carriers risk suffering losses. And there have been years in the not-too-distant past when carriers suffered losses measured not only in millions but in billions.

For example, 2016 saw more than $10B in losses from the top ocean freight carriers. Obviously, carriers don’t want to go back to a time like that. Thus, carriers are very leery of spot rates dropping below contract rates, and when they get close, carriers start talking about unprofitable and loss-making freight rates.

As we go back to Miller time, you’ll see that freight rates have fallen close to contract levels, but they are still above them. Therefore, carriers, while in danger of falling into the red margins, are still lingering in the black. Here’s the Miller time:

Ocean carriers saw some green shoots in July and August as trans-Pacific spot levels rebounded to above annual contract rates. Carrier executives said they did not lock in loss-making rates in their annual contract negotiations, implying that if spot rates exceeded contract rates, the spot business was back in the black.

But the premium of spot rates to contract rates in the Asia-East Coast trade has collapsed over the past month, according to data from Xeneta.

Xeneta data shows that average short-term (spot) rates in the Asia-East Coast trade were an impressive $580 per FEU higher than average long-term (contract) rates on Aug. 15.

No longer. Short-term rates were just $77 per FEU higher than long-term rates as of Thursday. (The spot-to-contract premium is still material in the Asia-West Coast lane, at $283 per FEU.)

Carriers do have something to worry about as spot rates have dropped so close to contract rates. If they keep falling, rates will move into the red for them. If peak season is truly finished early with the economic outlook still not being great, falling demand will keep putting greater and greater downward pressure on freight rates. With more capacity still hitting the waters, freight rates do indeed appear to be heading into the loss-making territory for carriers. But they’re not fully in it yet.

How Are Latest Peak Season Predictions Holding Up?

In answering your questions about Peak Season 2023, I wrote about international shipping expert opinions predicting a small surge in freight rates at the beginning of September, as carriers were hitting the market with a new round of GRIs, that carriers wouldn’t be able to maintain through the month.

Those predictions didn’t turn out too badly. I doubted we would see a major freight rate tumble before Halloween, mainly because of carriers’ ability to manipulate capacity (supply) through large numbers of blank sailings. However, carriers haven’t been as successful with their blank sailings efforts in fighting falling freight rates as I expected.

On the other hand, I did say, “If September volumes drop and the peak season fizzles out, freight rates will decline quickly from the carriers’ early September GRIs.” That looks like what we’re seeing. “If volumes stay close,” I continued, “carriers have a decent chance at maintaining healthy freight rates.”

When I wrote those words at the end of August, I saw no reason to believe there would be a surge in demand in September or October. Nothing has changed my mind since then. That meant it would be unlikely to see freight rates increase like they did in July and August. It will be interesting to see official volume numbers for September when they come out. I saw a decrease between 5% and 6% in Universal Cargo’s projected shipment numbers in September from August. I use Universal Cargo’s numbers as a barometer for the industry, so I expected some decrease from August to September. But it looks like there may have been a larger-than-I-expected cargo volume decline between the months because of how much freight rates declined.

Freight rates are bordering on unhealthy for carriers, so cargo volumes don’t appear to be holding up. That does give opportunity for shippers still looking to import goods a chance at pretty good freight rates right now.

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Decoding OSRA: Section 10. Charge Complaints https://www.universalcargo.com/decoding-osra-section-10-charge-complaints/ https://www.universalcargo.com/decoding-osra-section-10-charge-complaints/#respond Thu, 21 Sep 2023 21:29:37 +0000 https://www.universalcargo.com/?p=12282 We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Series Introduction & Quick Coverage of Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9

Obviously, that means today we’re covering Section 10 of OSRA. Go to Universal Cargo's blog to see exactly what it says and changes…

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Introduction

We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 10 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 10 of OSRA adds a new section at the end of Chapter 413 of Title 46 of the U.S. Code.

The section is specifically telling shippers they can submit complaints about ocean freight carriers’ fees, with detention and demurrage fees specifically mentioned, to the FMC. The FMC must accept such complaints and investigate. Carriers must prove that such fees are reasonable. Failing that, carriers must pay refunds and/or penalties as previously laid out in Title 46.

Section 10 Text

SEC. 10. CHARGE COMPLAINTS.

    (a) In General.--Chapter 413 of title 46, United States Code, is 
amended by adding at the end the following:

[[Page 136 STAT. 1278]]

``Sec. 41310. <<NOTE: 46 USC 41310.>>  Charge complaints

    ``(a) In General.--A person may submit to the Federal Maritime 
Commission, and the Commission shall accept, information concerning 
complaints about charges assessed by a common carrier. The information 
submitted to the Commission shall include the bill of lading numbers and 
invoices, and may include any other relevant information.
    ``(b) Investigation.--Upon receipt of a submission under subsection 
(a), with respect to a charge assessed by a common carrier, the 
Commission shall promptly investigate the charge with regard to 
compliance with section 41104(a) and section 41102. The common carrier 
shall--
            ``(1) be provided an opportunity to submit additional 
        information related to the charge in question; and
            ``(2) bear the burden of establishing the reasonableness of 
        any demurrage or detention charges pursuant to section 545.5 of 
        title 46, Code of Federal Regulations (or successor 
        regulations).

    ``(c) Refund.--Upon receipt of submissions under subsection (a), if 
the Commission determines that a charge does not comply with section 
41104(a) or 41102, the Commission shall promptly order the refund of 
charges paid.
    ``(d) Penalties. – <<NOTE: Applicability.>> In the event of a 
finding that a charge does not comply with section 41104(a) or 41102 
after submission under subsection (a), a civil penalty under section 
41107 shall be applied to the common carrier making such charge.

    ``(e) Considerations.--If the common carrier assessing the charge is 
acting in the capacity of a non-vessel-operating common carrier, the 
Commission shall, while conducting an investigation under subsection 
(b), consider--
            ``(1) whether the non-vessel-operating common carrier is 
        responsible for the noncompliant assessment of the charge, in 
        whole or in part; and
            ``(2) whether another party is ultimately responsible in 
        whole or in part and potentially subject to action under 
        subsections (c) and (d).''.

    (b) Clerical Amendment.--The analysis for chapter 413 of title 46, 
United States Code, <<NOTE: 46 USC 41301 prec.>>  is amended by adding 
at the end the following:

``41310. Charge complaints.''.

Original Title 46 Text

Section 10 does not edit text within the U.S. shipping code. Rather, it adds an additional section to Chapter 413 of Title 46. That chapter is titled Enforcement. Putting the whole chapter here seems like too much. However, I will include the analysis for the chapter, which is really just a list of its sections that comes at the beginning of the chapter:

Sec.
41301.      Complaints.
41302.      Investigations.
41303.      Discovery and subpoenas.
41304.      Hearings and orders.
41305.      Award of reparations.
41306.      Injunctive relief sought by complainants.
41307.      Injunctive relief sought by the Commission.
41308.      Enforcement of subpoenas and orders.
41309.      Enforcement of reparation orders.

Amended Text

I could just put an N/A here as there isn’t really any edited text in Title 46 from Section 10 of OSRA. However, I’ll show the list of Chapter 413 sections including the new one added by this section:

Sec.
41301.      Complaints.
41302.      Investigations.
41303.      Discovery and subpoenas.
41304.      Hearings and orders.
41305.      Award of reparations.
41306.      Injunctive relief sought by complainants.
41307.      Injunctive relief sought by the Commission.
41308.      Enforcement of subpoenas and orders.
41309.      Enforcement of reparation orders.
41310.      Charge Complaints.

Inside the chapter itself, the new section simply appears after what had previously been the final section of the chapter.

Observations on Paragraph (a)

Since you can read the addition OSRA is making to Title 46 here as well as I can, rather than summarize or paraphrase the changes made, I’ll just quote the paragraphs in the following parts of this blog and state what stands out to me about each paragraph in relation to the international shipping industry.

Starting with Paragraph (a), I’m referring to the paragraph within the new text added to the chapter, not paragraph (a) of Section 10 of OSRA. Paragraph (a) of Section 10 of OSRA just tells us where this new text goes in Title 46.

“(a) In General.–A person may submit to the Federal Maritime Commission, and the Commission shall accept, information concerning complaints about charges assessed by a common carrier. The information submitted to the Commission shall include the bill of lading numbers and invoices, and may include any other relevant information.”

This paragraph really shows Congress’s focus on targeting unfair charges from ocean carriers against shippers. Really, this feels a bit redundant. The first section of Title 46’s 413th chapter already gave people the ability to make complaints to the FMC:

“A person may file with the Federal Maritime Commission a sworn complaint alleging a violation of this part…”

The point of the new section seems to be emphasizing shippers ability to submit complaints about fees charged by carriers. This does make sense as shippers have long complained about unfair fees, particularly but not exclusively detention and demurrage fees, from carriers. Congress likely wants to show it’s being responsive to its constituents.

There is actually a feeling of encouragement for shippers to make complaints against ocean freight carriers in relation to their fees. It’s as though the government is saying we’re doing something about these unfair detention and demurrage fees.

Observations on Paragraph (b)

The next thing piece of law added from OSRA Section 10 is:

“(b) Investigation.–Upon receipt of a submission under subsection (a), with respect to a charge assessed by a common carrier, the Commission shall promptly investigate the charge with regard to compliance with section 41104(a) and section 41102. The common carrier shall–
“(1) be provided an opportunity to submit additional information related to the charge in question; and
“(2) bear the burden of establishing the reasonableness of any demurrage or detention charges pursuant to section 545.5 of title 46, Code of Federal Regulations (or successor regulations).”

What’s most interesting to me in this part of the new section is that the burden falls upon carriers to prove their detention and demurrage fees are resonable. It feels like a guilty until proven innocent situation. The target is clearly carriers and these detention and demurrage fees. If they can’t prove to the FMC’s satisfaction that their fees are reasonable, then, well, that’s the next part…

Observations on Paragraphs (c) and (d)

As promised, Paragraphs (c) and (d) cover what happens if carriers can’t prove their fees are resonable:

“(c) Refund.–Upon receipt of submissions under subsection (a), if the Commission determines that a charge does not comply with section 41104(a) or 41102, the Commission shall promptly order the refund of charges paid.
“(d) Penalties.– <<NOTE: Applicability.>> In the event of a finding that a charge does not comply with section 41104(a) or 41102 after submission under subsection (a), a civil penalty under section 41107 shall be applied to the common carrier making such charge.”

The refund part in Paragraph (c) is about as straightforward as it gets. But it does start referring to previous Title 46 sections, as does the “Penalties” part in Paragraph (d). Luckily, we already covered the refunds and penalties part of Title 46 when we dug into Section 8 of OSRA. You can check that out for the specifics on refunds and penalties.

Observations on Paragraph (e) and Its Subparagraphs

Paragraph (e) gives a caveat for NVOCCs (non-vessel-operating common carriers):

“(e) Considerations.–If the common carrier assessing the charge is acting in the capacity of a non-vessel-operating common carrier, the Commission shall, while conducting an investigation under subsection (b), consider–
“(1) whether the non-vessel-operating common carrier is responsible for the noncompliant assessment of the charge, in whole or in part; and
“(2) whether another party is ultimately responsible in whole or in part and potentially subject to action under subsections (c) and (d).”

For those unfamiliar with what an NVOCC is, they’re basically middle-men between shippers and ship operators. NVOCCs buy space on ships from the ocean freight carriers and sell that space to shippers. They basically act as the carrier for the shippers. Often, freight forwarders are NVOCCs, but they don’t have to be.

Here, Congress protects NVOCCs by making sure the FMC investigates whether they’re actually the responsible party for unreasonable fees if shippers submit complaints against them. Again, Congress seems to be keeping its eyes on the prize of going after shipping lines themselves for unfair fees.

Conclusion

Section 10 shows lawmakers’ commitment of protecting shippers from long-complained-about fees levied by carriers. As I read the law, it mainly serves to emphasize that shippers can submit complaints to the FMC, and the FMC will investigate carriers and their fees rather than adding much that is truly new. Specifically protecting NVOCCs who are not responsible for such fees is a nice caveat.

Of course, there may be something you notice in Section 10 of OSRA that I didn’t talk about above. If there is, please share it in the comments section below.

Stay tuned for when Decoding OSRA continues, looking at Section 11….

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Exporters Still Suffering High International Shipping Costs https://www.universalcargo.com/exporters-still-suffering-high-international-shipping-costs/ https://www.universalcargo.com/exporters-still-suffering-high-international-shipping-costs/#respond Wed, 20 Sep 2023 00:56:55 +0000 https://www.universalcargo.com/?p=12280 Importers can thank goodness that their freight rates and international shipping costs are generally on par with pre-COVID levels and behaviors. To say the astronomically high freight rates and auxiliary costs through and well after the pandemic were unsustainable would be an understatement of the highest order. But while things are back to a level of normalcy for importers, exporters are still suffering much higher freight rates and costs than what would be considered normal.

Greg Miller reported on this just yesterday (September 18th) in a FreightWaves article:

"Both spot and contract rates for U.S. exports are still up double digits from pre-COVID levels.

"And rates are not the biggest cost issue exporters face, according to Peter Friedmann, executive director of the Agriculture Transportation Coalition."

The biggest issue, according to Friedmann, has to do with all the blanked (cancelled) sailings ocean freight carriers have been doing and the lack of communication from the shipping lines about them. Regular readers of Universal Cargo's blog know that blank sailings and carriers' lack of transparency are things I bring up often.

Carriers have notoriously lacked transparency since long before I started writing about international shipping over a decade ago. And while blank sailings have always been a thing, I don't recall ever seeing such a coordinated amount pre-pandemic. The blank sailings we've seen since have certainly been impactful.

Continue reading in Universal Cargo's blog.

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Importers can thank goodness that their freight rates and international shipping costs are generally on par with pre-COVID levels and behaviors. To say the astronomically high freight rates and auxiliary costs through and well after the pandemic were unsustainable would be an understatement of the highest order. But while things are back to a level of normalcy for importers, exporters are still suffering much higher freight rates and costs than what would be considered normal.

Greg Miller reported on this just yesterday (September 18th) in a FreightWaves article:

Both spot and contract rates for U.S. exports are still up double digits from pre-COVID levels.

And rates are not the biggest cost issue exporters face, according to Peter Friedmann, executive director of the Agriculture Transportation Coalition.

Blank Sailings & Lack of Carrier Transparency

Freight Rates

The biggest issue, according to Friedmann, has to do with all the blanked (cancelled) sailings ocean freight carriers have been doing and the lack of communication from the shipping lines about them. Regular readers of Universal Cargo’s blog know that blank sailings and carriers’ lack of transparency are things I bring up often.

Carriers have notoriously lacked transparency since long before I started writing about international shipping over a decade ago. And while blank sailings have always been a thing, I don’t recall ever seeing such a coordinated amount pre-pandemic. The blank sailings we’ve seen since have certainly been impactful.

Blank sailings preceded the first big spike in freight rates during the pandemic. Early on in 2020, it was presumed COVID would result in a drop in shipping demand with predictions of ocean freight carriers losing billions. Because ocean shipping was dominated by three major carrier alliances, those alliances were able to control capacity (demand) in the international shipping industry by blanking hundreds of sailings. They blanked so many sailings, despite an initial dip in shipping demand, carriers managed to drop supply well below that demand and make freight rates actually increase. Then demand for goods skyrocketed with a combination of lockdowns and government stimulus checks to everyone sending freight rates out of control. All those blanked sailings also messed up the distribution of shipping containers around the world, adding to congestion at ports and supply chain issues around the world, which in turn, added more upward pressure on freight rates.

When demand, which stayed near-record to record levels through 2020 and 2021, finally really started falling in 2022, carriers cranked blank sailings back up. The resulting supply chain issues, along with carriers’ lack of communication and transparency, are being particularly felt by U.S. exporters, as Friedmann told FreightWaves, and Miller reported:

[Friedmann] told FreightWaves that sailing schedules are now more irregular than before the pandemic, while ocean carrier communications to exporters are as bad as ever.

Consequently, exporters are paying more in detention and demurrage and spending more on storage and trucking due to insufficient communications on erratic sailing schedules than they did prior to 2020.

“Higher rates have not been the primary issue because the rate issue is being overwhelmed by the additional costs imposed on exporters by the carriers’ inability or unwillingness to provide timely and accurate data on things like ERD [earliest return date], when the ship is coming in, and which terminal exporters should send the cargo to,” said Friedmann.

Friedmann’s choice to include the word “unwillingness” when talking about carriers not providing timely and accurate data is an interesting one. He may be implying intent from the carriers to increase the likelihood that shippers are having to pay more in detention and demurrage fees and other shipping related costs. The costly result for exporters could turn costly for carriers.

There’s a great deal of recent law changes to U.S. shipping code. Much of it is focused on scrutinizing carriers and detention and demurrage fees while making it easier for shippers to bring complaints against them and the Federal Maritime Commission (FMC) more powerful in judging and punishing carriers for practices that may be unfair.

Formal shipper complaints to the FMC against ocean freight carriers have ratcheted up. There have already been some rulings against carriers. Watching how the legal trends continue will be interesting.

Friedmann’s Argument Against Carriers’ Current Practice

Miller’s article gives details on specifics of freight rates for exporters as well as getting into how volume trends are currently better than import trends when it comes to volume growth versus loss. I’ll let you read that on the FreightWaves website, which I recommend, but I will share the complaint argument Friedmann makes on behalf of exporters that Miller reported:

Friedmann explained how carrier service strategy on the import side, combined with a lack of timely data, has translated into higher costs for exporters compared to the pre-pandemic era, above and beyond the rate issue.

“What determines the carriers’ placement of ships and services is the inbound cargo,” he said. “Export volumes and revenues are not their primary concerns when making that determination. And as import volumes have dropped, carriers have adjusted — and they’re still adjusting. The erratic schedules remain an issue and the question is how long it will last.

“The decision to blank [cancel] a sailing is not made three days before the ship is supposed to call at the terminal. Why aren’t carriers providing that information immediately upon making a decision?” he asked.

“When you go to the airport, your phone is blowing up with text messages saying the flight is delayed three minutes or the gate of departure is now E31, not E26. These are flights that are only a few hours long. Exporters ask: Why can’t ocean carriers tell them the date, time and terminal of arrival for a two-week voyage?

“I can’t tell you how many hours our agriculture exporters spend on the phone trying to find out which terminal they should send their exports to. The ocean carrier people will tell them: ‘We don’t know for sure. You’d better call the terminal.’

“I’m not saying people like paying higher freight rates, but you can kind of budget for freight rates. What’s impossible to budget for is when a carrier blanks a sailing or skips a port and doesn’t tell you soon enough — or a terminal is closed — and you’ve got storage costs and production costs and all sorts of additional trucking costs, and detention and demurrage charges that dwarf the freight rates. That’s the biggest challenge right now.”

Friedmann makes a good argument.

The import cargo to the U.S. from Asia that Friedmann brings up is more lucrative for carriers than U.S. exports going the other way. It makes sense that the imports would factor more heavily into carriers’ business and ship sailing decisions. However, it’s hard to understand why carriers are unable or unwilling to communicate better about ship departures, arrivals, and related information.

Perhaps carriers have an argument as to why they are unable to share this information in a more timely manner. They should probably start explaining quickly. Congress and the FMC appear to be addressing exporters’ complaints with the Ocean Shipping Reform Act of 2022 and the rulemaking the FMC has gotten from it. We’re only beginning to see the implications and results all this will have on the international shipping industry. But lawmakers appear to be writing some of the rules and regulations to protect shippers and target carriers.

Carriers likely should feel leery. In fact, there’s reason for us all to feel a little that way. Increased government involvement in an industry very often results, even if completely opposite of the intention, in the industry and its services becoming more expensive for the consumers. In the international shipping industry, that’s shippers.

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Decoding OSRA – Section 9. Data Collection https://www.universalcargo.com/decoding-osra-section-9-data-collection/ https://www.universalcargo.com/decoding-osra-section-9-data-collection/#respond Thu, 14 Sep 2023 20:39:48 +0000 https://www.universalcargo.com/?p=12275 We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Series Introduction & Quick Coverage of Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8

Obviously, that means today we’re covering Section 9 of OSRA. Let’s see exactly what it says and changes…

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Introduction

We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 9 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 9 is simple and straightforward. It requires ocean freight carriers to report to the Federal Maritime Commission (FMC) the tonnage of shipping containers in TEUs (20′ equivalent units), delineating loaded versus empty, that are imported and exported per vessel to and from the United States. The FMC is to publish that information quarterly on its website.

Section 9 Text

SEC. 9. DATA COLLECTION.

    (a) In General.--Chapter 411 of title 46, United States Code, is 
amended by adding at the end the following:
``Sec. 41110. <<NOTE: 46 USC 41110.>>  Data collection

    ``The <<NOTE: Web posting. Time period Reports.>>  Federal Maritime 
Commission shall publish on its website a calendar quarterly report that 
describes the total import and export tonnage and the total loaded and 
empty 20-foot equivalent units per vessel (making port in the United 
States, including any territory or possession of the United States) 
operated by each ocean common carrier covered under this 
chapter. <<NOTE: Determination.>> Ocean common carriers under this 
chapter shall provide to the Commission all necessary information, as 
determined by the Commission, for completion of this report.''.

    (b) <<NOTE: 46 USC 41110 note.>>  Rule of Construction.--Nothing in 
this section, and the amendment made by this section, shall be construed 
to compel the public disclosure of any confidential or proprietary data, 
in accordance with section 552(b)(4) of title 5, United States Code.

    (c) Clerical Amendment.--The analysis for chapter 411 of title 46, 
United States Code, <<NOTE: 46 USC 41101 prec.>>  is amended by adding 
at the end the following:

``41110. Data collection.''.

Original Title 46 Text

Normally, sections of OSRA edit and replace text in Title 46, but Section 9 is a little bit different. It doesn’t amend any text in the U.S. shipping code. Instead, it just adds a new section at the end of Chapter 411. So this “Original Text” section that we’ve had in every part of this series so far gets an N/A, and the “Amended Text” section that’s also previously been in every part of this series gets an N/A too.

Amended Text

N/A.

Observations on Paragraph (a)

Since you can read the addition OSRA is making to Title 46 here as well as I can, rather than summarize or paraphrase the changes made, I’ll just state what stands out to me about each paragraph in relation to the international shipping industry.

Notoriously, ocean freight carriers are not transparent. This paragraph forces some transparency by sharing with the public data about how many containers, full and empty, are on ships.

For U.S. exporters, particularly agricultural exporters, the data about empty containers is of interest. Agricultural exporters have complained about being refused containers and services by carriers increasing profits by sending empty containers overseas instead of ones slowed down by being filled with agricultural exports.

This data would also allow shippers to compare actual shiploads of cargo to the potential capacity of ships to see if cargo has gotten bumped or space has been refused for reasons other than the ship is full. The data also may help analysts determine how low a percentage of ships’ capacity filled it takes for carriers to blank (cancel) sailings.

Those are just a few points of interest shippers could have from this data, but I’m sure there are many more.

Observations on Paragraph (b)

I’m sure carriers don’t like the idea of disclosing any more data than they have to. Even without getting into the idea of disclosing trade secrets, there are costs associated with having people compile and submit data (there are even costs if this can be largely automated).

Costs aside, this paragraph attempts to give carriers assurance of not being compelled to publicly disclose confidential or proprietary information. However, carriers may consider the information about loaded and empty containers per vessel to be such information. I’d have some trouble with this reasoning because that information should be reported to the government anyway for the security purposes of knowing what is entering and leaving the country through the ports. Such information reported to the government also likely should be of public access.

Summary of Paragraph (c)

All paragraph (c) does is add the new section to the list of sections at the beginning of Chapter 11.

Conclusion

Section 9 brings a little more transparency to the international shipping industry. While this adds a little bit of work to the FMC and ocean freight carriers, I doubt that burden is too great to outweigh the benefits of the public knowledge. But that’s my opinion. Maybe yours is different, and you have something you think I should consider. If so, share it in the comments section below.

Of course, if there’s anything else in Section 9 of OSRA you think I missed, let me know that too.

Stay tuned for when Decoding OSRA continues, examining Section 10….

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Decoding OSRA – Section 8. Assessment of Penalties or Refunds https://www.universalcargo.com/decoding-osra-section-8-assessment-of-penalties-or-refunds/ https://www.universalcargo.com/decoding-osra-section-8-assessment-of-penalties-or-refunds/#respond Tue, 12 Sep 2023 23:19:18 +0000 https://www.universalcargo.com/?p=12255 We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Series Introduction & Quick Coverage of Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7

Go to Universal Cargo's blog to see exactly what OSRA Section 8 says and changes!

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Introduction

We’re still only beginning to see how the recent and ongoing changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 8 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 8 of OSRA might look somewhat complex at a quick glance, but it is actually quite simple. There is one main purpose of this section, and that is to add refunds to the penalties the Federal Maritime Commission (FMC) can assess against violators of U.S. shipping code.

Section 8 Text

SEC. 8. ASSESSMENT OF PENALTIES OR REFUNDS.

    (a) In General.--Title 46, United States Code, is amended--
            (1) in section 41107--
                    (A) in the section heading, by inserting ``or 
                refunds'' after ``penalties'';
                    (B) in subsection (a), by inserting ``or, in 
                addition to or in lieu of a civil penalty, is liable for 
                the refund of a charge'' after ``civil penalty''; and
                    (C) in subsection (b), by inserting ``or, in 
                addition to or in lieu of a civil penalty, the refund of 
                a charge,'' after ``civil penalty''; and
            (2) section 41109 is amended--
                    (A) by striking subsections (a) and (b) and 
                inserting the following:

    ``(a) General Authority.--Until a matter is referred to the Attorney 
General, the Federal Maritime Commission may--
            ``(1) <<NOTE: Notice.>>  after notice and opportunity for a 
        hearing, in accordance with this part--
                    ``(A) assess a civil penalty; or
                    ``(B) in addition to, or in lieu of, assessing a 
                civil penalty under subparagraph (A), order a refund of 
                money (including additional amounts in accordance with 
                section 41305(c)), subject to subsection (b)(2); and
            ``(2) compromise, modify, or remit, with or without 
        conditions, a civil penalty or refund imposed under paragraph 
        (1).

    ``(b) Determination of Amount.--
            ``(1) Factors for consideration.--In determining the amount 
        of a civil penalty assessed or refund of money ordered pursuant 
        to subsection (a), the Federal Maritime Commission shall take 
        into consideration--
                    ``(A) the nature, circumstances, extent, and gravity 
                of the violation committed;
                    ``(B) with respect to the violator--
                          ``(i) the degree of culpability;
                          ``(ii) any history of prior offenses;
                          ``(iii) the ability to pay; and
                          ``(iv) such other matters as justice may 
                      require; and
                    ``(C) the amount of any refund of money ordered 
                pursuant to subsection (a)(1)(B).
            ``(2) Commensurate reduction in civil penalty.--
                    ``(A) In general.--In any case in which the Federal 
                Maritime Commission orders a refund of money pursuant to 
                subsection (a)(1)(B) in addition to assessing a civil 
                penalty pursuant to subsection (a)(1)(A), the amount of 
                the civil penalty assessed shall be decreased by any 
                additional amounts included in the refund of money in 
                excess of the actual injury (as defined in section 
                41305(a)).
                    ``(B) Treatment of refunds.--A refund of money 
                ordered pursuant to subsection (a)(1)(B) shall be--
                          ``(i) considered to be compensation paid to 
                      the applicable claimant; and
                          ``(ii) deducted from the total amount of 
                      damages awarded to that claimant in a civil action 
                      against the violator relating to the applicable 
                      violation.'';
                    (B) in subsection (c), by striking ``may not be 
                imposed'' and inserting ``or refund of money under 
                subparagraph (A) or (B), respectively, of subsection 
                (a)(1) may not be imposed'';
                    (C) in subsection (e), by inserting ``or order a 
                refund of money'' after ``penalty'';
                    (D) in subsection (f), by inserting ``, or that is 
                ordered to refund money,'' after ``assessed''; and
                    (E) in subsection (g), in the first sentence, by 
                inserting ``or a refund required under this section'' 
                after ``penalty''.

Original Title 46 Text

§41107. Monetary penalties

(a) In General.—A person that violates this part or a regulation or order of the Federal Maritime Commission issued under this part is liable to the United States Government for a civil penalty. Unless otherwise provided in this part, the amount of the penalty may not exceed $5,000 for each violation or, if the violation was willfully and knowingly committed, $25,000 for each violation. Each day of a continuing violation is a separate violation.

(b) Lien on Carrier's Vessels.—The amount of a civil penalty imposed on a common carrier under this section constitutes a lien on the vessels operated by the carrier. Any such vessel is subject to an action in rem to enforce the lien in the district court of the United States for the district in which it is found.

[Historical and Revision Notes chart omitted.]

§41109. Assessment of penalties

(a) General Authority.—Until a matter is referred to the Attorney General, the Federal Maritime Commission may, after notice and opportunity for a hearing, assess a civil penalty provided for in this part. The Commission may compromise, modify, or remit, with or without conditions, a civil penalty.

(b) Factors in Determining Amount.—In determining the amount of a civil penalty, the Commission shall take into account the nature, circumstances, extent, and gravity of the violation committed and, with respect to the violator, the degree of culpability, history of prior offenses, ability to pay, and other matters justice may require.

(c) Exception.—A civil penalty may not be imposed for conspiracy to violate section 41102(a) or 41104(1) or (2) 1 of this title or to defraud the Commission by concealing such a violation.

(d) Prohibited Basis of Penalty.—The Commission or a court may not order a person to pay the difference between the amount billed and agreed upon in writing with a common carrier or its agent and the amount set forth in a tariff or service contract by that common carrier for the transportation service provided.

(e) Time Limit.—A proceeding to assess a civil penalty under this section must be commenced within 5 years after the date of the violation.

(f) Review of Civil Penalty.—A person against whom a civil penalty is assessed under this section may obtain review under chapter 158 of title 28.

(g) Civil Actions To Collect.—If a person does not pay an assessment of a civil penalty after it has become final or after the appropriate court has entered final judgment in favor of the Commission, the Attorney General at the request of the Commission may seek to collect the amount assessed in an appropriate district court of the United States. The court shall enforce the order of the Commission unless it finds that the order was not regularly made and duly issued.

Amended Text

Now let’s see how the Monetary Penalties section of Title 46 reads after the changes are made. To add attention to the changes, I’ve bolded them in text below.

§41107. Monetary penalties or refunds

(a) In General.—A person that violates this part or a regulation or order of the Federal Maritime Commission issued under this part is liable to the United States Government for a civil penalty or, in addition to or in lieu of a civil penalty, is liable for the refund of a charge. Unless otherwise provided in this part, the amount of the penalty may not exceed $5,000 for each violation or, if the violation was willfully and knowingly committed, $25,000 for each violation. Each day of a continuing violation is a separate violation.

(b) Lien on Carrier's Vessels.—The amount of a civil penalty or, in  addition to or in lieu of a civil penalty, the refund of a charge imposed on a common carrier under this section constitutes a lien on the vessels operated by the carrier. Any such vessel is subject to an action in rem to enforce the lien in the district court of the United States for the district in which it is found.

§41109. Assessment of penalties

(a) General Authority.—Until a matter is referred to the Attorney General, the Federal Maritime Commission may, after notice and opportunity for a hearing, assess a civil penalty provided for in this part. The Commission may compromise, modify, or remit, with or without conditions, a civil penalty.

(b) Factors in Determining Amount.—In determining the amount of a civil penalty, the Commission shall take into account the nature, circumstances, extent, and gravity of the violation committed and, with respect to the violator, the degree of culpability, history of prior offenses, ability to pay, and other matters justice may require.

(a) General Authority.--Until a matter is referred to the Attorney General, the Federal Maritime Commission may--

(1) <<NOTE: Notice.>>  after notice and opportunity for a hearing, in accordance with this part--

(A) assess a civil penalty; or

(B) in addition to, or in lieu of, assessing a civil penalty under subparagraph (A), order a refund of money (including additional amounts in accordance with section 41305(c)), subject to subsection (b)(2); and

(2) compromise, modify, or remit, with or without conditions, a civil penalty or refund imposed under paragraph (1).

(b) Determination of Amount.--

(1) Factors for consideration.--In determining the amount of a civil penalty assessed or refund of money ordered pursuant to subsection (a), the Federal Maritime Commission shall take into consideration--

(A) the nature, circumstances, extent, and gravity of the violation committed;

(B) with respect to the violator--

(i) the degree of culpability;
(ii) any history of prior offenses;
(iii) the ability to pay; and
(iv) such other matters as justice may require; and

(C) the amount of any refund of money ordered pursuant to subsection (a)(1)(B).

(2) Commensurate reduction in civil penalty.--

(A) In general.--In any case in which the Federal Maritime Commission orders a refund of money pursuant to subsection (a)(1)(B) in addition to assessing a civil penalty pursuant to subsection (a)(1)(A), the amount of the civil penalty assessed shall be decreased by any additional amounts included in the refund of money in excess of the actual injury (as defined in section 41305(a)).

(B) Treatment of refunds.--A refund of money ordered pursuant to subsection (a)(1)(B) shall be--

(i) considered to be compensation paid to the applicable claimant; and
(ii) deducted from the total amount of damages awarded to that claimant in a civil action against the violator relating to the applicable violation.

(c) Exception.—A civil penalty or refund of money under subparagraph (A) or (B), respectively, of subsection (a)(1) may not be imposed for conspiracy to violate section 41102(a) or 41104(1) or (2) 1 of this title or to defraud the Commission by concealing such a violation.

(d) Prohibited Basis of Penalty.—The Commission or a court may not order a person to pay the difference between the amount billed and agreed upon in writing with a common carrier or its agent and the amount set forth in a tariff or service contract by that common carrier for the transportation service provided.

(e) Time Limit.—A proceeding to assess a civil penalty or order a refund of money under this section must be commenced within 5 years after the date of the violation.

(f) Review of Civil Penalty.—A person against whom a civil penalty is assessed, or that is ordered to refund money, under this section may obtain review under chapter 158 of title 28.

(g) Civil Actions To Collect.—If a person does not pay an assessment of a civil penalty or a refund required under this section after it has become final or after the appropriate court has entered final judgment in favor of the Commission, the Attorney General at the request of the Commission may seek to collect the amount assessed in an appropriate district court of the United States. The court shall enforce the order of the Commission unless it finds that the order was not regularly made and duly issued.

Summary of Subparagraph (1)(A)

The first line of OSRA Section 8, paragraph (a), simply states Title 46 is being amended in the ways that follow, and subparagraph (1) gives us the section of Title 46 being amended. So let’s move forward right to the meat with the actual changes.

Subparagraph (A) changes the title of Section 41107 of Title 46, adding “or refunds.” This pretty much tells the reader right away how the law is being changed here. OSRA is adding refunds to the monetary penalties offenders face when breaking U.S. shipping code.

Summary of Subparagraphs (1)(B) and (C)

Subparagraphs (B) and (C) both add the same phrase, “or, in addition to or in lieu of a civil penalty, is liable for the refund of a charge,” after “civil penalty” in the two paragraphs of section 41107. Worth noting is that offenders may have to refund charges instead of paying fees or in addition to paying fees.

Summary of Subparagraph (2)(A)

Subparagraph 2 starts off by deleting a couple of paragraphs from Section 41109 of Title 46 and replacing them several paragraphs/subparagraphs. Previously, this section allowed the Federal Maritime Commission (FMC) to assess civil penalties against U.S. shipping code violators. It also gave a brief outline as to how these civil penalties were to be derived.

The new text still allows for such civil penalties to be assessed by the FMC, but it also adds refunds of money to what the FMC can assess. Of particular interest, violators can be ordered to give additional money with the full interest. As we saw earlier, these refunds can be in the place of civil penalties or in addition to them.

It is interesting that the final subparagraphs added by Section 8’s subparagraph (2)(A) subtract the refunds, and any additional money awards along with them, from the civil penalties assessed against violators and the total amount of damages awarded to claimants. This makes awarded refunds feel less like double whammies against violators.

Summary of Subparagraph (2)(B)-(2)(E)

Subparagraphs (2)(B), (2)(C), (2)(D), and (2)(E) are very straightforward. They simply add the possibility of refund to all the remaining things Section 41109 of Title 46 specifies in regard to penalties.

Conclusion

For you shippers out there, Section 8 of OSRA means that if carriers, terminal operators, etcetera violate U.S. Title 46 shipping code by doing something like charging you unfair detention and demurrage fees, you can be refunded your money instead of or in addition to civil penalties charged against the violators. As we’ve been seeing throughout OSRA, the FMC is in charge of determining whether any refund or additional money is due to a claimant and if the accused party is guilty of violating U.S. shipping law.

If there’s anything you think I missed in this section of OSRA, please share it in the comments section below.

Stay tuned for when Decoding OSRA continues, examining Section 9….

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Explaining the Freight Forwarding Process – 8 Best Steps https://www.universalcargo.com/explaining-the-freight-forwarding-process-8-best-steps/ https://www.universalcargo.com/explaining-the-freight-forwarding-process-8-best-steps/#respond Thu, 07 Sep 2023 20:25:09 +0000 https://www.universalcargo.com/?p=12262 This is a guest post by Naveen Kumar.

Managing the supply chain and logistics work for any business is not an easy task. It can easily make or break any new business. Being a global business, if you want to survive in the worldwide market, you have to deal with the logistics process. A robust transport or logistics infrastructure is necessary to ensure safe and smooth shipments. Therefore, the freight forwarding process comes into play.

Freight forwarding is a subpart of logistics that ensures the smooth delivery of cargo globally. The process of freight forwarding is complex, involving various steps. It needs expertise in logistics and supply chain management to ensure the smooth delivery of goods between various international destinations.

The freight forwarding process is a central part of any international trade transaction. Knowing the steps involved can assist businesses in handling smooth shipments and on-time deliveries. So, in this blog, you will learn about such basic things involved in freight forwarding to have a complete overview of the process.

Keep reading in Universal Cargo's blog.

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This is a guest post by Naveen Kumar.

Explaining The Freight Forwarding Process -8 Best Steps

Managing the supply chain and logistics work for any business is not an easy task. It can easily make or break any new business. Being a global business, if you want to survive in the worldwide market, you have to deal with the logistics process. A robust transport or logistics infrastructure is necessary to ensure safe and smooth shipments. Therefore, the freight forwarding process comes into play.

Freight forwarding is a subpart of logistics that ensures the smooth delivery of cargo globally. The process of freight forwarding is complex, involving various steps. It needs expertise in logistics and supply chain management to ensure the smooth delivery of goods between various international destinations.

The freight forwarding process is a central part of any international trade transaction. Knowing the steps involved can assist businesses in handling smooth shipments and on-time deliveries. So, in this blog, you will learn about such basic things involved in freight forwarding to have a complete overview of the process.

What is the freight forwarding process?

The organization and coordination of the successful transfer of goods between two destinations carried out by freight forwarders is known as the freight forwarding process. The transfer of goods and commodities across global borders is done on behalf of the shipper and receiver.

The process generally involves arranging the pick-up, transport, and delivery of goods. Apart from this, getting the necessary paperwork done and customs clearance are the major responsibilities of the forwarders. Hence, to ensure the shipment is legally compliant, here is how freight forwarders help make the freight forwarding process smooth.

How do freight forwarders assist in the freight forwarding process?

The middlemen responsible for the facilitation of the shipping are freight forwarders. Although they do not perform the shipping themselves, they provide freight forwarding services. 

They prepare for the shipment of a company’s merchandise by making arrangements like storage, transportation, documentation, etc. Here are some of the services that a freight forwarder can provide:

  • For importing or exporting goods, prepare all the necessary documents.
  • Choosing a transportation provider to transfer the goods to the destination.
  • They can also help to negotiate the charges in the place of clients.
  • Filing insurance claims when necessary. Like, if any cargo gets damaged while in transportation, they can help you with the cargo insurance claim process.  
  • They help to manage the inventory during storage and transportation. 
  • They also ensure the correct label package. 

With all such arrangements done by freight forwarders, the process becomes easier. These all are the basic tasks involved in a forwarding process at various stages. Let’s understand more about the steps involved. 

What are the steps in the freight forwarding process?

The freight forwarding process requires several documents for exporting cargo as per different countries’ requirements. Regardless of the format and name difference, the information to be input is essentially the same. Here is the list of documents required for the process to fulfill all the necessary steps:

  • Commercial invoice or bill
  • Packing list
  • Lading bill
  • Export shipping bill
  • Certificate of origin
  • Inspection certificate
  • Insurance certificate
  • License and declaration document

After freight forwarders handle the paperwork for shipping and receiving logistics, the main steps that are followed under a freight forwarding process are discussed below. 

  1. Export Haulage

The transportation of items from the shipper’s location to the freight forwarder’s location is called export haulage. A truck or train is usually required in this process. The time required for export haulage depends on different factors, like:

  • Distance
  • Location
  • Type of items to be hauled

This step can usually take from a few hours to several weeks. 

  1. Items Checkpoint

After the export haulage step, the goods are now with the freight forwarders. They will check and inspect them to confirm everything was transported smoothly and without any incident. They also match the booking items with the received order.

  1. Export Custom Clearance

Before items may leave the country, they require clearance from the country of origin. Custom brokers perform this procedure. They are expected to submit cargo details and any necessary supporting documents. 

The consignor and shipper usually sign an agreement to have responsibility for the process. Many freight forwarding companies don’t support this agreement, in such cases, there are third-party custom brokers. 

  1. Origin Handling

There are a variety of tasks that the freight forwarders or their agents may execute as part of the origin handling step of the operation. This normally involves the arrival and unloading of the cargo. Before giving the forwarder’s cargo receipt, the cargo is checked against the booking information. 

The freight forwarding team also ensures that any item has restrictions if they are going to any other specific country other than their origin country. Some of the items may include:

  • Drugs
  • Flammable liquids
  • Perishable items
  • Alcohol, etc. 
  1. Import Custom Clearance

Once the shipment arrives, the officials in the destination nation must verify the import customs documentation. One of the main points to note here is that the step may start even before the arrival of the shipment. 

It is the responsibility of the freight forwarder or the agent to complete all the clearance formalities before the shipment arrives. 

  1. Destination Handling

As part of the destination handling step, the freight forwarders perform a variety of tasks. At this stage, the freight forwarder office will receive all the necessary documents of the cargo, like carrier bills, outstanding documentation, and more. 

Some of the functions of the destination handling step are:

  • Getting the documentation from the freight forwarding office or agent.
  • Reviewing all the documents.
  • Submitting the carrier bills.
  1. Import Haulage

The next step is import haulage which is almost similar to export haulage. The shipment is transported to the destination from the warehouse. This process can be performed with the help of freight forwarders or the consignee who picks up the goods directly. 

  1. Fast Deliveries

The freight forwarders or delivery agents may choose the mode of transport to deliver as per the cargo type and the distance between the warehouse and the destination. Usually, mileage and the mode of transport determine how long it will take to deliver the shipment. The recipient may get the goods from a few hours to a few days. 

What are the benefits of the freight forwarding process?

As you have already read, the freight forwarding process is a little complex and involves multiple steps. But is it really necessary to opt for freight forwarders? 

Let’s clear this confusion by knowing the importance of freight forwarding.

Cost-effectiveness

As freight forwarders are professionally trained for transporting goods across borders, they have the proper knowledge and resources to do effective shipment. They are well capable of negotiating the shipping prices. They can even consolidate the smaller shipments into larger ones to save resources. This helps to save the business costs. 

Apart from saving operational costs, they are well capable of saving transport costs too as they know the effective transport routes. 

Time Saver

As already mentioned, freight forwarding companies know the effective transport routes, so they can save a lot of time. They are well capable of handling all the logistics work from getting goods from the manufacturer to the final destination. This is especially helpful for small or new businesses as they may have less expertise and knowledge for handling the goods. 

Tracking and visibility capabilities

A business can have a single point of contact for tracking the status of the shipment with the freight forwarders. They are also responsible for updating the status of the shipments. After getting the status of the shipments, businesses can plan their logistics and inventory processes accordingly. One can have an estimated arrival time and exact location of the shipment to manage the supply chain. 

Having expertise in customs and regulations

Another important benefit of taking the assistance of freight forwarding companies is their expertise in customs and regulations. They have a deep understanding of the rules and regulations of different nations. This helps to comply with necessary laws and regulations. 

International shipments require proper documentation which can be hard for businesses to handle on their own. With this, businesses can avoid costly fines and penalties for non-compliance. 

Concluding Thoughts

This blog focused on the freight forwarding process. The steps discussed above are the general framework of the freight forwarding industry. The major role of freight forwarders is to include proper routes and select the best transport options for any business. 

Many industries get the benefit of freight forwarding, especially the ones involved in international trading. Some of the industries are:

  • Manufacturing
  • Medical
  • E-commerce
  • Construction, etc. 

Freight forwarding is beneficial for businesses of all sizes. Whether you are new or a seasoned business company, the freight forwarding process can help you in various ways. By involving any freight forwarder for any business, one can focus on increasing the productivity and revenue of the company. 

By now you must have understood the complete details of a freight forwarding process and how it can help in various ways. Still, if you have any questions in mind, feel free to ask. We will connect with you soon!

Hope you find this blog informative!

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This was a guest post by Naveen Kumar.

Author Bio

Naveen Kumar is the marketing and product head at Nitic company. He is also an occasional writer who loves to share his ideas with people through his writings.

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Another Foreign Company Purchases U.S. Port Terminals & ILWU Ratifies Contract https://www.universalcargo.com/another-foreign-company-purchases-u-s-port-terminals-ilwu-ratifies-contract/ https://www.universalcargo.com/another-foreign-company-purchases-u-s-port-terminals-ilwu-ratifies-contract/#respond Tue, 05 Sep 2023 22:39:29 +0000 https://www.universalcargo.com/?p=12252 Did you know that most U.S. port terminals are owned and operated by foreign entities? Do you find that a concerning fact about these important access points to the country? If that seems like a national security problem to you, you probably won't love this news. CMA CGM just bought two container terminals at the Port of New York and New Jersey.

Greg Knowler reported in the Journal of Commerce (JOC):

"CMA CGM completed its acquisition of two container terminals at the Port of New York and New Jersey this week, strengthening the carrier’s footprint on the US East Coast which continues to capture a growing share of Asia-US business from West Coast ports. 

"The terminals — Bayonne in New Jersey and Howland Hook in New York sold by Canada’s Global Container Terminals — expand CMA CGM’s portfolio of US terminals to seven."

Since the terminals were already owned and operated by a foreign entity, maybe it doesn't seem to matter that a foreign company purchased them. However, foreign entities selling U.S. port terminals to other foreign entities doesn't really seem less concerning.

When I started writing about international shipping over a decade ago, around 80% of U.S. terminals were owned and operated by foreign entities. Sadly, I haven't really seen any data to suggest a reversal of that trend.

Find out more by reading the full post in Universal Cargo's blog.

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Did you know that most U.S. port terminals are owned and operated by foreign entities? Do you find that a concerning fact about these important access points to the country? If that seems like a national security problem to you, you probably won’t love this news. CMA CGM just bought two container terminals at the Port of New York and New Jersey.

Greg Knowler reported in the Journal of Commerce (JOC):

CMA CGM completed its acquisition of two container terminals at the Port of New York and New Jersey this week, strengthening the carrier’s footprint on the US East Coast which continues to capture a growing share of Asia-US business from West Coast ports. 

The terminals — Bayonne in New Jersey and Howland Hook in New York sold by Canada’s Global Container Terminals — expand CMA CGM’s portfolio of US terminals to seven. 

Port of New York and New Jersey
The island of Manhattan and areas of the New York / New Jersey Port seen from aboard a plane in July, 2005 by Maureen on flickr.

Since the terminals were already owned and operated by a foreign entity, maybe it doesn’t seem to matter that a foreign company purchased them. However, foreign entities selling U.S. port terminals to other foreign entities doesn’t really seem less concerning.

When I started writing about international shipping over a decade ago, around 80% of U.S. terminals were owned and operated by foreign entities. Sadly, I haven’t really seen any data to suggest a reversal of that trend.

One of our top-read blog posts from about 4 years ago was about the Trump administration forcing China’s state-owned COSCO to sell a major terminal at the Port of Long Beach. It wasn’t a story that got very much media attention, but I haven’t seen much else where a foreign-owned terminal switched ownership to a U.S.-based organization. One would think that would be something of a significant story. Adding to the background of that story, we were in the middle of an intense trade war with China, and China owning and operating a major U.S. port terminal seemed a particular national security issue.

The increased readership of that post does indicate people are concerned with the topic of foreign ownership of U.S. port terminals. Of course, Trump and China playing a part in that previous story likely upped the amount of views it received as well.

While CMA CGM purchasing the terminals at the Port of New York and New Jersey doesn’t involve Trump or China, it is still significant for us to consider who’s in charge at these major gateways to the country. There’s no doubt the companies controlling them understand how critical these terminals are. A quote from Knowler’s article makes that clear:

“These two new assets provide the group with flagship terminal operations at a critical entry point on the US East coast,” CMA CGM said in a statement Friday. 

CMA CGM’s terminals include ones on both U.S. coasts with their most recent terminal acquisition deals. Knowler reports:

CMA CGM’s East Coast deal follows its acquisition of the Fenix Marine Services container terminal in Los Angeles in late 2021. 

ILWU Ratifies New Contract

In other U.S. port related news, the International Longshore & Warehouse Union (ILWU) ratified the master contract reached between the dockworkers union and the West Coast port employers represented by the Pacific Maritime Association (PMA).

ILWU PMA meet about contract extension

Bill Mongelluzzo reported in the JOC last week:

The rank-and-file of the International Longshore and Warehouse Union (ILWU) have voted overwhelmingly to ratify the new six-year coastwide contract with the Pacific Maritime Association (PMA), the ILWU said Thursday. The union said in a statement that 75% of ILWU members voting agreed to ratify the deal, which was nailed down in June after 13 months of contentious negotiations.

With the big salary increase and bonus ILWU members will see with the new contract, one would think the rank-and-file would overwhelmingly vote in favor of the new contract. Mongelluzzo includes the following details about the contract in his brief article:

The new contract calls for a 32% salary increase over six years that will be paid retroactively to July 1, 2022, plus a one-time $70 million bonus spread throughout the ILWU’s 20,000-strong membership for working through the COVID-19 pandemic.

With the contract running until July 1st, 2028, we have a handful of years before we see union slowdowns at the ports to gain negotiation leverage. There are quotes out there now that say this ratification will start bringing back discretionary cargo that was lost to the East Coast during the contentious contract negotiations. Some of it likely will come back; however, I expect a portion of it to be permanently lost. Shippers are tired of their cargo being used as ransom every time a new ILWU contract has to be negotiated.

Knowler’s article about CMA CGM’s acquisition of Port of New York and New Jersey terminals actually contained fresh data on the market share East Coast ports have gained on West Coast ports:

The share of Asian imports landing on the West Coast in July fell to 53.1%, down from 59.3% in June and the lowest since last November, according to data from PIERS, a sister company of the Journal of Commerce within S&P Global. The share was 60.4% when longshore contract talks began in May 2022. 

US imports from Asia increased for the fifth consecutive month in July to 1.46 million TEUs — the highest since last September, while the East Coast increased its share of that volume to 37.7% from 32.9% in June. 

A great deal of investment has been put into and is committed to increasing the capacity East Coast ports. The trend in its market share increase looks likely to continue in the long-term future.

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Answering Your Questions About International Shipping Peak Season 2023 https://www.universalcargo.com/answering-your-questions-about-international-shipping-peak-season-2023/ https://www.universalcargo.com/answering-your-questions-about-international-shipping-peak-season-2023/#respond Thu, 31 Aug 2023 23:13:46 +0000 https://www.universalcargo.com/?p=12236 Freight rates, particularly Asia to U.S. West Coast (USWC) freight rates, have increased by more than 100% since June. That's not too surprising, since we're in the peak season, and freight rates tend to rise during the peak season. However, seemingly everyone has been calling this a weak peak season. Is that true? If it is, why have freight rates increased so much? Is there another factor pushing them up? Are they still climbing?

We'll get into all these questions in today's post.

Check it out in Universal Cargo's blog!

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Freight rates, particularly Asia to U.S. West Coast (USWC) freight rates, have increased by more than 100% since June. That’s not too surprising, since we’re in the peak season, and freight rates tend to rise during the peak season. However, seemingly everyone has been calling this a weak peak season. Is that true? If it is, why have freight rates increased so much? Is there another factor pushing them up? Are they still climbing?

We’ll get into all these questions in today’s post.

Is This a Weak Peak Season?

shipping containers for import export

Now, this hasn’t by any means been a spectacular peak season. But, yes, we are still seeing a peak season. In fact, while I might still call it somewhat muted, it hasn’t been a terrible peak season either.

Almost two weeks ago, Bill Mongelluzzo reported in a Journal of Commerce (JOC) article that U.S. July imports from Asia reached an 11-month high:

US imports from Asia increased for the fifth consecutive month in July to 1.46 million TEUs — the highest since last September, raising the likelihood that the eastbound trans-Pacific trade will return to year-over-year import growth this fall.  

July’s imports were up more than 35% from the 2023 low of 1.08 million TEUs recorded in February and matched in March, according to PIERS, a sister product of the Journal of Commerce within S&P Global. 

With August closing right now, we still have a little wait to see its official cargo import numbers. However, I often look at Universal Cargo’s shipment numbers to get an indicator on what’s happening in the industry.

Indeed, Universal Cargo had an increase in shipments from June to July, as would be expected from the overall trend Mongelluzzo reported. But Universal Cargo’s internal numbers show we had an even larger increase in shipments from July to August. That was 15% increase compared to a 4% from June to July. I doubt the industry’s growth will match that exactly, but I would expect to see growth in Asia to U.S. August imports from what was imported in July. Of course, it’s always possible that Universal Cargo is an outlier.

A number of reports are still saying there has not been and probably won’t be a large 2023 inventory restocking from retailers in the wake of overstocking during the pandemic’s shipping boom followed by severe inflation and economic uncertainty. Some are pointing to the ILWU Canada strike as helping to push up import numbers through the USWC in July and August. That would mean the peak season is a bit weaker for the U.S. than the numbers would make it appear. The strike ended as July reached its last couple weeks, but uncertainty over the strike restarting lingered on in the days following, making it likely to have had some impact in July and August USWC shipping numbers.

Ultimately, this peak season is somewhat weak, but it’s not altogether terrible.

Is a Factor Other Than Volume Pushing Up Rates?

There are many factors that affect ocean freight rates. Of course, the biggest tends to be volume. The basic laws of supply and demand apply to the international shipping industry.

When there is more volume shipped internationally, it puts upward pressure on freight rates. As noted, there has been an increase in cargo volume. However, the increase we’ve seen wasn’t enough to increase freight rates as much as we’ve seen. Carriers are able to manipulate that supply and demand equation. Which they have. And that’s probably the biggest factor in the increase.

Carriers have been aggressively blank (cancel) sailing a great many voyages to reduce capacity (supply) and help them increase freight rates. Combining blank sailings with a series of general rate increases (GRIs), which are common this time of year, has helped carriers turn a modest volume increase into a significant freight rate increase.

To give an idea of the amount of blanked sailing we’ve seen from carriers, Mongelluzzo reported the following in another JOC article:

Spot rates have more than doubled since June, owing to a seasonal increase in import demand and labor-related supply chain disruptions, but mostly because carriers have managed capacity by aggressively canceling — or blanking — sailings, according to industry analysts. 

According to Sea-Intelligence Maritime Analysis, in July, carriers blanked nearly 20% of total capacity to the West and East coasts of North America. That is the highest level of blanking since February through April when import volumes hit their lows for the year thus far. 

There are other factors that also put upward pressure on freight rates. Port congestion and supply chain disruption are common ones. The ILWU Canada strike and the bottleneck at the Panama Canal caused by a drought there likely gave some upward pressure. However, neither are likely close to having the impact carriers’ blank sailing has had.

Are Freight Rates Continuing to Rise?

During the writing of this article, we’re right on the verge of another round of GRIs dropping. Despite this, the freight rate rise we’ve been seeing appears to be stalling.

Just a few days ago, Greg Miller reported in a FreightWaves article:

Container shipping spot rates in the Asia-U.S. trade have halted their ascent after rising double digits since late June. Several spot-rate indexes are now showing a retreat from recent highs.

Spot rates still remain relatively healthy — above pre-COVID spot rates and current contract rates — and it’s too early to know whether this is the start of a pronounced reversal or just a temporary setback.

Two weeks ago, all the reports were that freight rates were continuing to rise. Tomorrow, the next wave of GRIs start dropping. However, reports and predictions are now hitting like Miller’s, making it likely we’ll see a small surge in freight rates at the beginning of September that won’t likely be maintained through the end of the month.

The international shipping industry is always volatile when it comes to freight rates. Carriers, through their alliances, have a strong ability to manipulate capacity with blank sailings. We saw an extreme example of this when the pandemic first hit. It was believed shipping volumes would fall because of the pandemic, and carriers would lose billions. Carrier alliances blanked hundreds of sailings, sinking supply well below demand. They were able to increase freight rates, and then the shipping surge happened on top, causing carriers to rake in billions up billions in not just revenue but in profits.

That said, I don’t think carriers will give in easily in September. The aggressive blank sailing strategy they’ve been employing will likely continue. Experts think they won’t be able to maintain the early rate increases they impose in September through the month, but I certainly doubt we’ll see a large freight rate tumble before Halloween either. I wouldn’t even be surprised if freight rates were slightly higher at the close of September than they are here at the close of August.

In the last week or so, we have seen a small decline in freight rates (somewhere around 5%). If September volumes drop and the peak season fizzles out, freight rates will decline quickly from the carriers’ early September GRIs. If volumes stay close, carriers have a decent chance at maintaining healthy freight rates.

Looking at Universal Cargo’s shipments set up for September, it’s between a 5 and 6% decrease from August. That’s not a huge gap, and it could still be made up. Using those initial numbers as an indicator for the industry, I don’t see a volume surge happening that would cause another large freight rate increase. I haven’t found anyone, from retailer organizations to shipping experts to economists, predicting a large restocking that would create an import surge like I’m not seeing in Universal Cargo’s shipment counts. Thus it would likely take massive capacity manipulation paired with significant disruption to see freight rates increase the likes of what we saw in July and August.

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Decoding OSRA – Section 7. Common Carriers https://www.universalcargo.com/decoding-osra-section-7-common-carriers/ https://www.universalcargo.com/decoding-osra-section-7-common-carriers/#respond Fri, 25 Aug 2023 01:24:34 +0000 https://www.universalcargo.com/?p=12219 Introduction We’re still only beginning to see how the changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act […]

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Introduction

We’re still only beginning to see how the changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 7 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 7 is the longest section of OSRA we’ve covered so far. But while it looks daunting, it’s not too difficult to read through. OSRA section 7 amends section 41104 of Title 46, which deals with common carriers.

The first half is mostly editing the code, making changes and replacements that definitely seem to be in favor of U.S. shippers over ocean freight carriers. That’s something of a theme, or at least a motif, in OSRA so far. The second half of this section is whole new additions to the common carriers section of the shipping code.

Section 7 Text

SEC. 7. COMMON CARRIERS.

    (a) In General.--Section 41104 of title 46, United States Code, is 
amended--
            (1) in subsection (a)--
                    (A) in the matter preceding paragraph (1), by 
                striking ``may not'' and inserting ``shall not'';
                    (B) by striking paragraph (3) and inserting the 
                following:
            ``(3) unreasonably refuse cargo space accommodations when 
        available, or resort to other unfair or unjustly discriminatory 
        methods;'';
                    (C) in paragraph (5), by striking`` in the matter of 
                rates or charges'' and inserting ``against any commodity 
                group or type of shipment or in the matter of rates or 
                charges'';
                    (D) in paragraph (10), by adding ``, including with 
                respect to vessel space accommodations provided by an 
                ocean common carrier'' after ``negotiate'';
                    (E) in paragraph (12) by striking ``; or'' and 
                inserting a semicolon;
                    (F) in paragraph (13) by striking the period and 
                inserting a semicolon; and
                    (G) by adding at the end the following:
            ``(14) <<NOTE: Assessment.>>  assess any party for a charge 
        that is inconsistent or does not comply with all applicable 
        provisions and regulations, including subsection (c) of section 
        41102 or part 545 of title 46, Code of Federal Regulations (or 
        successor regulations);
            ``(15) invoice any party for demurrage or detention charges 
        unless the invoice includes information as described in 
        subsection (d) showing that such charges comply with--
                    ``(A) all provisions of part 545 of title 46, Code 
                of Federal Regulations (or successor regulations); and
                    ``(B) applicable provisions and regulations, 
                including the principles of the final rule published on 
                May 18, 2020, entitled `Interpretive Rule on Demurrage 
                and Detention Under the Shipping Act' (or successor 
                rule); or
            ``(16) for service pursuant to a service contract, give any 
        undue or unreasonable preference or advantage or impose any 
        undue or unreasonable prejudice or disadvantage against any 
        commodity group or type of shipment.''; and
            (2) by adding at the end the following:

    ``(d) Detention and Demurrage Invoice Information.--


            ``(1) Inaccurate invoice. – 
        <<NOTE: Determination. Applicability.>> If the Commission 
        determines, after an investigation in response to a submission 
        under section 41310, that an invoice under subsection (a)(15) 
        was inaccurate or false, penalties or refunds under section 
        41107 shall be applied.
            ``(2) Contents of invoice.--An invoice under subsection 
        (a)(15), unless otherwise determined by subsequent Commission 
        rulemaking, shall include accurate information on each of the 
        following, as well as minimum information as determined by the 
        Commission:
                    ``(A) Date that container is made available.
                    ``(B) The port of discharge.
                    ``(C) The container number or numbers.
                    ``(D) For exported shipments, the earliest return 
                date.
                    ``(E) The allowed free time in days.
                    ``(F) The start date of free time.
                    ``(G) The end date of free time.
                    ``(H) The applicable detention or demurrage rule on 
                which the daily rate is based.
                    ``(I) The applicable rate or rates per the 
                applicable rule.
                    ``(J) The total amount due.
                    ``(K) The email, telephone number, or other 
                appropriate contact information for questions or 
                requests for mitigation of fees.
                    ``(L) A statement that the charges are consistent 
                with any of Federal Maritime Commission rules with 
                respect to detention and demurrage.
                    ``(M) A statement that the common carrier's 
                performance did not cause or contribute to the 
                underlying invoiced charges.

    ``(e) Safe Harbor.--If a non-vessel operating common carrier passes 
through to the relevant shipper an invoice made by the ocean common 
carrier, and the Commission finds that the non-vessel operating common 
carrier is not otherwise responsible for the charge, then the ocean 
common carrier shall be subject to refunds or penalties pursuant to 
subsection (d)(1).
    ``(f) Elimination of Charge Obligation.--Failure to include the 
information required under subsection (d) on an invoice with any 
demurrage or detention charge shall eliminate any obligation of the 
charged party to pay the applicable charge.''.
    (b) <<NOTE: 46 USC 41102 note.>>  Rulemaking on Demurrage or 
Detention.--
            (1) <<NOTE: Deadlines.>>  In general.--Not later than 45 
        days after the date of enactment of this Act, the Federal 
        Maritime Commission shall initiate a rulemaking further defining 
        prohibited practices by common carriers, marine terminal 
        operators, shippers, and ocean transportation intermediaries 
        under section 41102(c) of title 46, United States Code, 
        regarding the assessment of demurrage or detention charges. The 
        Federal Maritime Commission shall issue a final rule defining 
        such practices not later than 1 year after the date of enactment 
        of this Act.
            (2) Contents. – <<NOTE: Determination.>> The rule under 
        paragraph (1) shall only seek to further clarify reasonable 
        rules and practices related to the assessment of detention and 
        demurrage charges to address the issues identified in the final 
        rule published on May 18, 2020, entitled ``Interpretive Rule on 
        Demurrage and Detention Under the Shipping Act'' (or successor 
        rule), including a determination of which parties may be 
        appropriately billed for any demurrage, detention, or other 
        similar per container charges.

    (c) <<NOTE: Deadline. 46 USC 41104 note.>>  Rulemaking on Unfair or 
Unjustly Discriminatory Methods.--Not later than 60 days after the date 
of enactment of this Act, the Federal Maritime Commission shall initiate 
a rulemaking defining unfair or unjustly discriminatory methods under 
section 41104(a)(3) of title 46, United States Code, as amended by this 
section. The Federal Maritime Commission shall issue a final rule not 
later than 1 year after the date of enactment of this Act.

    (d) <<NOTE: Deadlines.>>  Rulemaking on Unreasonable Refusal to Deal 
or Negotiate With Respect to Vessel Space Accommodations.--Not 
later <<NOTE: Consultation.>>  than 30 days after the date of enactment 
of this Act, the Federal Maritime Commission, in consultation with the 
Commandant of the United States Coast Guard, shall initiate a rulemaking 
defining unreasonable refusal to deal or negotiate with respect to 
vessel space under section 41104(a)(10) of title 46, as amended by this 
section. The Federal Maritime Commission shall issue a final rule not 
later than 6 months after the date of enactment of this Act.

Original Title 46 Text

§41104. Common carriers

(a) In General.—A common carrier, either alone or in conjunction with any other person, directly or indirectly, may not—

(1) allow a person to obtain transportation for property at less than the rates or charges established by the carrier in its tariff or service contract by means of false billing, false classification, false weighing, false measurement, or any other unjust or unfair device or means;

(2) provide service in the liner trade that is—

(A) not in accordance with the rates, charges, classifications, rules, and practices contained in a tariff published or a service contract entered into under chapter 405 of this title, unless excepted or exempted under section 40103 or 40501(a)(2) of this title; or

(B) under a tariff or service contract that has been suspended or prohibited by the Federal Maritime Commission under chapter 407 or 423 of this title;

(3) retaliate against a shipper by refusing, or threatening to refuse, cargo space accommodations when available, or resort to other unfair or unjustly discriminatory methods because the shipper has patronized another carrier, or has filed a complaint, or for any other reason;

(4) for service pursuant to a tariff, engage in any unfair or unjustly discriminatory practice in the matter of—

(A) rates or charges;

(B) cargo classifications;

(C) cargo space accommodations or other facilities, with due regard being given to the proper loading of the vessel and the available tonnage;

(D) loading and landing of freight; or

(E) adjustment and settlement of claims;

(5) for service pursuant to a service contract, engage in any unfair or unjustly discriminatory practice in the matter of rates or charges with respect to any port;

(6) use a vessel in a particular trade for the purpose of excluding, preventing, or reducing competition by driving another ocean common carrier out of that trade;

(7) offer or pay any deferred rebates;

(8) for service pursuant to a tariff, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage;

(9) for service pursuant to a service contract, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage with respect to any port;

(10) unreasonably refuse to deal or negotiate;

(11) knowingly and willfully accept cargo from or transport cargo for the account of a non-vessel-operating common carrier that does not have a tariff as required by section 40501 of this title, or an ocean transportation intermediary that does not have a bond, insurance, or other surety as required by section 40902 of this title;

(12) knowingly and willfully enter into a service contract with an ocean transportation intermediary that does not have a tariff as required by section 40501 of this title and a bond, insurance, or other surety as required by section 40902 of this title, or with an affiliate of such an ocean transportation intermediary; or

(13) continue to participate simultaneously in a rate discussion agreement and an agreement to share vessels, in the same trade, if the interplay of the authorities exercised by the specified agreements is likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost.

(b) Rule of Construction.—Notwithstanding any other provision of law, there is no private right of action to enforce the prohibition under subsection (a)(13).

(c) Agreement Violation.—Participants in an agreement found by the Commission to violate subsection (a)(13) shall have 90 days from the date of such Commission finding to withdraw from the agreement as necessary to comply with that subsection.

Amended Text

Now let’s see how the common carriers section of Title 46 reads after the changes are made. To add attention to the changes, I’ve bolded them in text below.

§41104. Common carriers

(a) In General.—A common carrier, either alone or in conjunction with any other person, directly or indirectly, shall not—

(1) allow a person to obtain transportation for property at less than the rates or charges established by the carrier in its tariff or service contract by means of false billing, false classification, false weighing, false measurement, or any other unjust or unfair device or means;

(2) provide service in the liner trade that is—

(A) not in accordance with the rates, charges, classifications, rules, and practices contained in a tariff published or a service contract entered into under chapter 405 of this title, unless excepted or exempted under section 40103 or 40501(a)(2) of this title; or

(B) under a tariff or service contract that has been suspended or prohibited by the Federal Maritime Commission under chapter 407 or 423 of this title;

(3) unreasonably refuse cargo space accommodations when available, or resort to other unfair or unjustly discriminatory methods;

(4) for service pursuant to a tariff, engage in any unfair or unjustly discriminatory practice in the matter of—

(A) rates or charges;

(B) cargo classifications;

(C) cargo space accommodations or other facilities, with due regard being given to the proper loading of the vessel and the available tonnage;

(D) loading and landing of freight; or

(E) adjustment and settlement of claims;

(5) for service pursuant to a service contract, engage in any unfair or unjustly discriminatory practice against any commodity group or type of shipment or in the matter of rates or charges with respect to any port;

(6) use a vessel in a particular trade for the purpose of excluding, preventing, or reducing competition by driving another ocean common carrier out of that trade;

(7) offer or pay any deferred rebates;

(8) for service pursuant to a tariff, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage;

(9) for service pursuant to a service contract, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage with respect to any port;

(10) unreasonably refuse to deal or negotiate, including with respect to vessel space accommodations provided by an ocean common carrier;

(11) knowingly and willfully accept cargo from or transport cargo for the account of a non-vessel-operating common carrier that does not have a tariff as required by section 40501 of this title, or an ocean transportation intermediary that does not have a bond, insurance, or other surety as required by section 40902 of this title;

(12) knowingly and willfully enter into a service contract with an ocean transportation intermediary that does not have a tariff as required by section 40501 of this title and a bond, insurance, or other surety as required by section 40902 of this title, or with an affiliate of such an ocean transportation intermediary;

(13) continue to participate simultaneously in a rate discussion agreement and an agreement to share vessels, in the same trade, if the interplay of the authorities exercised by the specified agreements is likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost;

(14) <<NOTE: Assessment.>>  assess any party for a charge that is inconsistent or does not comply with all applicable provisions and regulations, including subsection (c) of section 41102 or part 545 of title 46, Code of Federal Regulations (or successor regulations);

(15) invoice any party for demurrage or detention charges unless the invoice includes information as described in subsection (d) showing that such charges comply with--

(A) all provisions of part 545 of title 46, Code of Federal Regulations (or successor regulations); and

(B) applicable provisions and regulations, including the principles of the final rule published on May 18, 2020, entitled `Interpretive Rule on Demurrage and Detention Under the Shipping Act' (or successor rule); or

(16) for service pursuant to a service contract, give any undue or unreasonable preference or advantage or impose any undue or unreasonable prejudice or disadvantage against any commodity group or type of shipment.''; and

(b) Rule of Construction.—Notwithstanding any other provision of law, there is no private right of action to enforce the prohibition under subsection (a)(13).

(c) Agreement Violation.—Participants in an agreement found by the Commission to violate subsection (a)(13) shall have 90 days from the date of such Commission finding to withdraw from the agreement as necessary to comply with that subsection.

(d) Detention and Demurrage Invoice Information.--

(1) Inaccurate invoice. – 
        
<<NOTE: Determination. Applicability.>> If the Commission determines, after an investigation in response to a submission under section 41310, that an invoice under subsection (a)(15) was inaccurate or false, penalties or refunds under section 41107 shall be applied.

(2) Contents of invoice.--An invoice under subsection (a)(15), unless otherwise determined by subsequent Commission rulemaking, shall include accurate information on each of the following, as well as minimum information as determined by the Commission:

(A) Date that container is made available.

(B) The port of discharge.

(C) The container number or numbers.

(D) For exported shipments, the earliest return date.

(E) The allowed free time in days.

(F) The start date of free time.

(G) The end date of free time.

(H) The applicable detention or demurrage rule on which the daily rate is based.

(I) The applicable rate or rates per the applicable rule.

(J) The total amount due.

(K) The email, telephone number, or other appropriate contact information for questions or requests for mitigation of fees.

(L) A statement that the charges are consistent with any of Federal Maritime Commission rules with respect to detention and demurrage.

(M) A statement that the common carrier's performance did not cause or contribute to the underlying invoiced charges.

(e) Safe Harbor.--

If a non-vessel operating common carrier passes through to the relevant shipper an invoice made by the ocean common carrier, and the Commission finds that the non-vessel operating common carrier is not otherwise responsible for the charge, then the ocean common carrier shall be subject to refunds or penalties pursuant to subsection (d)(1).

(f) Elimination of Charge Obligation.--

Failure to include the information required under subsection (d) on an invoice with any demurrage or detention charge shall eliminate any obligation of the charged party to pay the applicable charge.

(b) <<NOTE: 46 USC 41102 note.>>  Rulemaking on Demurrage or Detention.--

(1) <<NOTE: Deadlines.>>  In general.-- Not later than 45 days after the date of enactment of this Act, the Federal Maritime Commission shall initiate a rulemaking further defining prohibited practices by common carriers, marine terminal operators, shippers, and ocean transportation intermediaries under section 41102(c) of title 46, United States Code, regarding the assessment of demurrage or detention charges. The Federal Maritime Commission shall issue a final rule defining such practices not later than 1 year after the date of enactment of this Act.

(2) Contents. – <<NOTE: Determination.>> The rule under paragraph (1) shall only seek to further clarify reasonable rules and practices related to the assessment of detention and demurrage charges to address the issues identified in the final rule published on May 18, 2020, entitled ``Interpretive Rule on Demurrage and Detention Under the Shipping Act'' (or successor rule), including a determination of which parties may be appropriately billed for any demurrage, detention, or other similar per container charges.

(c) <<NOTE: Deadline. 46 USC 41104 note.>>  Rulemaking on Unfair or Unjustly Discriminatory Methods.--Not later than 60 days after the date of enactment of this Act, the Federal Maritime Commission shall initiate a rulemaking defining unfair or unjustly discriminatory methods under section 41104(a)(3) of title 46, United States Code, as amended by this section. The Federal Maritime Commission shall issue a final rule not later than 1 year after the date of enactment of this Act.

(d) <<NOTE: Deadlines.>>  Rulemaking on Unreasonable Refusal to Deal or Negotiate With Respect to Vessel Space Accommodations.--Not later <<NOTE: Consultation.>>  than 30 days after the date of enactment of this Act, the Federal Maritime Commission, in consultation with the Commandant of the United States Coast Guard, shall initiate a rulemaking defining unreasonable refusal to deal or negotiate with respect to vessel space under section 41104(a)(10) of title 46, as amended by this section. The Federal Maritime Commission shall issue a final rule not later than 6 months after the date of enactment of this Act.

Summary of Subparagraph (1)

Paragraph (a) simply tells us the section in Title 46 we’re amending, so we can jump straight to the meat in the subparagraphs.

The first change, which comes in subparagraph (A), looks small, but Congress changed “may” to the legally stronger word “shall.” Cornell Law School’s website sheds some light on the significance of this word change:

The word “may” is an expression of possibility, a permissive choice to act or not, and ordinarily implies some degree of discretion. This contrasts with the word “shall,” which is generally used to indicate a mandatory provision.

“Shall not” makes it clear that perpetrating any of the actions to follow would be illegal and make common carriers subject to penalty for such an offense.

Subparagraph (B) is an interesting change that could have serious ramifications. This paragraph used to be be about carriers refusing space on ships in retaliation. Retaliation was dealt with in Section 5 of OSRA, so lawmakers felt comfortable getting rid of retaliation here and went with something stronger. Well, broader. Carriers are not to “unreasonably withhold space.” Now we’re talking about any reason the Federal Maritime Commission (FMC) ends up deeming unreasonable, not just cases of retaliation. And then to make sure the scope is as fully broad and vague as possible, the lawmakers throw in a second part: “or resort to other unfair or unjustly discriminatory methods.” That’s something to be defined by the FMC, which we’ll come back to later.

Subparagraph (C) adds commodity groups and types of shipments to the rates and charges that common carriers cannot “engage in any unfair or unjustly discriminatory practice” against, pursuant to service contracts. Yes, it’s more for carriers to be careful about.

Subparagraph (D) makes specific mention of vessel space accommodations as something on which ocean carriers can’t unreasonably refuse to deal or negotiate.

Subparagraphs (E) and (F) just make small grammatical and punctuation changes because lawmakers are extending the list of things carriers shall not do.

Subparagraph (G) gives us three items to be added to the list of things carriers shall not do. Items (14) and (15) are about preventing carriers from assessing charges, including detention and demurrage fees, that don’t comply with updated regulation on these. When I covered Section 6 of OSRA, I included the pertinent text on detention and demurrage fees for you to check out.

The last list item, (16), given in Subparagraph (G) is aimed at stopping carriers from giving unfair preference to commodity groups or types of shipment. This is something U.S. agricultural exporters complained about, particularly during the pandemic. Carriers were giving preference to more lucrative Asia to U.S. shipments, even refusing service to U.S. agricultural exporters in many circumstances. Congress seems to be trying to address exporters’ complaints here, which the FMC is also trying to do with its proposed (and controversial) refusal of service rules.

Summary of Subparagraph (2)

Subparagraph (2) is all addition to Title 46. At the end of subparagraph (1), we saw a transition from Congress editing to straight adding law to the legal code. Now the transition is complete, and the lawmakers really focus in on invoices and charges, particularly detention and demurrage fees, which have been contentious things in the international shipping industry for a long, long time.

Paragraph (d) is about detention and demurrage invoices. Its subparagraph (1) states that detention and demurrage invoices the FMC determines are false or inaccurate will result in penalties or refunds. Its subparagraph (2) just states invoices will contain all the information laid out in subparagraphs (A) through (M), which would just be redundant to repeat here. That said, the obvious goal is to make it more difficult for carriers to charge shippers with unfair detention and demurrage fees.

Paragraph (e), titled Safe Harbor, protects NVOCCs, which are your 3rd party logistics companies or freight forwarders. Liability for penalties or refunds on fees that NVOCCs pass on from ocean carriers to shippers, which the NVOCCs are not otherwise responsible for, falls upon the ocean carrier with which those fees originated. This keeps the middleman from getting stuck paying refunds or penalties on unfair fees from ocean carriers.

Shippers should like paragraph (f). If carriers fail to include any of the information listed in subparagraphs (A) through (M), shippers don’t have to pay that invoice.

The final things subparagraph (2) adds to Title 46 are notes (b), (c), and (d).

Summary of (b), (c), and (d) Notes

Note (b) focuses on rulemaking around detention and demurrage, and it has two subparagraphs. Subparagraph (1) simply sets a time period for the FMC to complete additional rulemaking around the topic of detention and demurrage fees. Subparagraph (2) lays out that the rulemaking referred to in the first subparagraph is to clarify the already created “Interpretive Rule on Demurrage and Detention Under the Shipping Act” from the FMC.

Note (c) lays out more rulemaking for the FMC. This time, the FMC rulemaking is meant to define “unfair or unjustly discriminatory methods.” I told you we’d come back to that. The FMC was given a year to do this.

Note (d) tells the FMC to complete rulemaking on “Unreasonable Refusal to Deal or Negotiate With Respect to Vessel Space Accommodations.” Interestingly, this time, the FMC is told to do its rulemaking in consultation with the Commandant of the United States Coast Guard. For all the others, the FMC is given no such consultation instruction. As mentioned earlier, we’re still looking at a proposed version of this rule, despite the fact that this subparagraph says a final rule shall be published no later than 6 months after OSRA is enacted.

Conclusion

Section 7 of OSRA continues Congress’s attempts to redress shippers’ complaints with ocean freight carriers. This section attempts to make it harder for carriers to charge unfair fees, particularly detention and demurrage ones. But it also attempts to prevent refusal of service from carriers, at least of the unfair variety. Again, Congress keeps pointing to the FMC as the authority on these matters.

If there’s anything you think I missed in this section of OSRA, please share it in the comments section below.

Stay tuned for when Decoding OSRA continues, examining Section 8….

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Panama Canal Update: Down to 125 Ships Waiting as Congestion Improves https://www.universalcargo.com/panama-canal-update-down-to-125-ships-waiting-as-congestion-improves/ https://www.universalcargo.com/panama-canal-update-down-to-125-ships-waiting-as-congestion-improves/#respond Wed, 23 Aug 2023 01:35:30 +0000 https://www.universalcargo.com/?p=12223 I posted a week ago about the massive delays happening at the Panama Canal. I've seen new articles on the topic, published today and yesterday, that would make you think the situation has only gotten worse over the last seven days. While the number of ships waiting has increased by some reports of the numbers I read today, the situation is actually improving. The number of ships waiting has reduced.

The number of ships waiting right now is not up to 160+, which I would have mistakenly shared with you if I hadn't fact-checked the number. The number of ships waiting is not "some 200" as the top tweet about the Panama Canal (at the time of this writing) states:

We should all know to be dubious of any "facts" we read on social media posts at this point, though this tweet (or X) does share a pretty cool video of waiting ships.

The most current data I found in a news article on the congestion at the Panama Canal comes from Elida Moreno and Marianna Parraga, whose reporting is in a Reuters article:

"As of Tuesday [today], 125 booked and non-booked vessels were waiting to pass, down from more than 160 ships two weeks ago, according to official numbers. Another 40 vessels were approaching the waterway, versus 50 two weeks ago, according to Refinitiv Eikon data."

Check it out in Universal Cargo's blog.

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I posted a week ago about the massive delays happening at the Panama Canal. I’ve seen new articles on the topic, published today and yesterday, that would make you think the situation has only gotten worse over the last seven days. While the number of ships waiting has increased by some reported numbers I read today, the situation is actually improving. The number of ships waiting has reduced.

The number of ships waiting right now is not up to 160+, which I would have mistakenly shared with you if I hadn’t fact-checked the number. The number of ships waiting is not “some 200” as the top tweet about the Panama Canal (at the time of this writing) states:

We should all know to be dubious of any “facts” we read on social media posts at this point, though this tweet (or X) does share a pretty cool video of waiting ships.

global business

The most current data I found in a news article on the congestion at the Panama Canal comes from Elida Moreno and Marianna Parraga, whose reporting is in a Reuters article:

As of Tuesday [today], 125 booked and non-booked vessels were waiting to pass, down from more than 160 ships two weeks ago, according to official numbers. Another 40 vessels were approaching the waterway, versus 50 two weeks ago, according to Refinitiv Eikon data.

The situation is improving, but it certainly isn’t over according to the Reuters article:

A backlog of vessels waiting to pass the Panama Canal due to drought-related restrictions has eased in recent days after the waterway’s authority authorized more non-booked ships to pass and as others are choosing alternate routes to avoid the delays.

The Panama Canal Authority last week opened two additional slots per day for vessels without booking to transit to help clear bottlenecks on both sides of the interoceanic corridor.

It has, however, kept the total number of ships passing through to per day to a maximum of 32, versus 36 per day in normal conditions.

I wouldn’t be surprised if this story gains more mainstream coverage in the upcoming weeks. The biggest reason is a drought is the root cause for the backup, and mainstream media outlets will therefore use it in their alarmist climate catastrophe narratives. In fact, they’ve already been doing that.

Additionally, the fact the Panama Canal is a significant connection point for international shipping supply chains may cause media outlets to talk about it, as the supply chain became something of a hot-button topic over the last few years. The Panama Canal is particularly important for U.S.-related international shipping. There will be delays in cargo heading to the U.S., potential for upward pressure on freight rates, and ultimately an impact for U.S. consumers as holiday shopping seasons approach. It’s one more thing politicians and media outlets can use as a scapegoat for poor economic performance.

However, the situation is improving at the moment. Of course, we’re still watching it carefully here at Universal Cargo to make sure to give you the best service possible when it comes to importing and exporting your goods. The situation could again take a negative turn. Even without that, its effects are rippling through the supply chain. With this peak season being on the weaker side, the Panama Canal’s congestion is not having as big of an impact as it could have had. We can call that a silver lining. Of course, Panama could use the rain clouds rather than their silver linings.

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Are FMC’s Proposed Refusal of Service Rules Dangerous? https://www.universalcargo.com/are-fmcs-proposed-refusal-of-service-rules-dangerous/ https://www.universalcargo.com/are-fmcs-proposed-refusal-of-service-rules-dangerous/#respond Thu, 17 Aug 2023 23:07:33 +0000 https://www.universalcargo.com/?p=12220 Controversy continues to swirl around the Federal Maritime Commission's (FMC's) proposed rules on "unreasonable refusal to deal or negotiate with respect to vessel space accommodations provided by an ocean common carrier."

Refusal of service turns out to be a difficult topic, leading to contentious rulemaking.

The Ocean Shipping Reform Act of 2022 (OSRA) gave the FMC a long rope to write new rules for the international shipping industry. Now the commission is walking it like a tightrope according to the title of a Journal of Commerce (JOC) article by Mark Szakonyi that was published yesterday. But it's possible the FMC is tying the rope into a noose that will strangle the free market of America's international shipping.

Find out all about it by reading the full post in Universal Cargo's blog.

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Controversy continues to swirl around the Federal Maritime Commission’s (FMC’s) proposed rules on “unreasonable refusal to deal or negotiate with respect to vessel space accommodations provided by an ocean common carrier.”

Refusal of service turns out to be a difficult topic, leading to contentious rulemaking.

The Ocean Shipping Reform Act of 2022 (OSRA) gave the FMC a long rope to write new rules for the international shipping industry. Now the commission is walking it like a tightrope according to the title of a Journal of Commerce (JOC) article by Mark Szakonyi that was published yesterday. But it’s possible the FMC is tying the rope into a noose that will strangle the free market of America’s international shipping.

Szakonyi started his article with:

A change in how the US Federal Maritime Commission (FMC) is approaching contentious rulemaking on when a container line can refuse to serve shippers could significantly alter the regulatory landscape by making it hard for carriers to turn away loss-making cargo or not honor a booking.

Frankly, I think those two situations should be treated completely differently from each other, as they are very distinct situations. The law probably should make it difficult not to honor a booking. Once a deal has been made, both parties should honor that deal. When it comes to turning away loss-making cargo, I generally have trouble thinking the law should stand in the way of that unless a deal has already been made in good faith.

Szakonyi puts this contentious rulemaking from the FMC succinctly:

[The FMC] has taken the suggestions of some agricultural exporters, along with other shippers, to forbid container lines from refusing shipments because the economics aren’t justifiable. Container lines are worried about the myriad of implications for their ability to run their networks, and ultimately, when they can turn away less profitable or even loss-making bookings.

This probably won’t be popular with many shippers, and I know you’re my main audience, but I have to agree with ocean carriers on this. Regulation that forces businesses to make deals or provide service that is unprofitable sounds like bad regulation. The proposed rules might sound good to shippers, but if the government forced your business to make unprofitable deals and suffer losses, wouldn’t you have a problem with that?

Businesses have to make profits to be viable. That’s foundational. It’s existential.

If carriers can’t consider basic business factors like profitability when determining shipments to take and customers to serve, how devastating could that become to their businesses? Where might they have to raise rates to make up for losses? How many carriers might be driven out of the market altogether? How would this not, in the long-term, be bad for this industry and, yes, for shippers themselves?

How does the FMC answer such questions? How does it explain how this policy will work to protect the industry from such feared outcomes? According to Szakonyi’s article, not well:

The FMC’s explanation for the changes isn’t exactly straightforward. “Profit and business factors may be present when engaging in negotiations, but these factors would have to be considered alongside other factors presented when the commission is determining what the true driving factor is for refusing to deal in a given case and whether that driving factor is reasonable,” the agency wrote.

That sounds like financial loss is not enough grounds to refuse service. Maybe profitability could be considered alongside other factors, but even that is unclear.

I don’t claim to be a legal expert, but there are some principles I believe are extremely important when it comes to law. Clarity is high on the list. Law needs to be clear, and clearly, that’s a problem with the FMC’s proposed refusal of service regulation.

Additionally, people – or businesses – must only be asked to follow laws they are able to obey. Unclear laws fail in that department, and so do laws that would force businesses to operate at loss. That’s unsustainable. Two strikes.

Furthermore, laws should be applied fairly and equally. How can unclear law be applied equally? This sets the FMC up to be able to decide what the criteria is that makes refusal of service illegal on a case-by-case basis. When laws are subjective instead of objective, they not only become difficult to follow but they can make it easy to target a person or business.

I do think U.S. exporters, and agricultural exporters in particular, need to be protected. And protected from unfair refusal of service. I’ve gone on record a number of times to say so.

In a post near the end of 2020 about carriers withholding shipping containers from agricultural exporters and whether its illegal, I opened with the statement: “U.S. agricultural exporters are getting screwed.”

In March of 2021, I told reporter William Schulz “I believe exporters are raising a very valid concern” when he asked me to respond to a letter agricultural exporters sent to the president about carriers refusing them service. In fact, when I laid out what was happening in the international shipping industry, I ended by calling out the problem of carriers refusing agricultural exporters service to prioritize more lucrative shipping routes:

“… here’s where U.S. agricultural exporters really have a complaint: carriers withholding shipping containers and services from them. It seems pretty clear that carriers prioritized getting shipping containers back to Asia, where they were making more money on eastbound transpacific routes, delivering goods from China to the U.S. especially, over getting containers to U.S. exporters. Rather than shipping containers full of U.S. agricultural goods to Asia, they shipped empty containers back to Asia, seriously damaging U.S. agricultural exporters’ ability to ship their goods.”

My worry is that to fix one problem, the FMC may be creating an even bigger one.

But that’s just my opinion. I’d love to read yours in the comments section below.

 

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Massive Delays at Panama Canal Posing Big Peak Season Risks https://www.universalcargo.com/massive-delays-at-panama-canal-posing-big-peak-season-risks/ https://www.universalcargo.com/massive-delays-at-panama-canal-posing-big-peak-season-risks/#respond Tue, 15 Aug 2023 19:04:36 +0000 https://www.universalcargo.com/?p=12215 Chain reaction. Noun. A series of events where one event causes another, then another, and so on. Example: there's a drought happening in Panama. The drought lowers the water level of Gatun Lake. Gatun Lake sources water for the Panama Canal's locks. The Panama Canal Authority must implement water conservation restrictions, which means less water to the canal. Reduced water in the canal means reduced space and more danger for ships crossing the canal. Therefore, the Panama Canal Authority puts restrictions on ship crossings and scheduling at the canal. Thus, ships routed to cross the major shipping lane gateway experience major delays....

This is not a hypothetical example. This is a chain reaction happening right now. Of course the chain reaction doesn't end there.

Find out all about it by reading the full post in Universal Cargo's blog.

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supply chain

Chain reaction. Noun. A series of events where one event causes another, then another, and so on. Example: there’s a drought happening in Panama. The drought lowers the water level of Gatun Lake. Gatun Lake sources water for the Panama Canal’s locks. The Panama Canal Authority must implement water conservation restrictions, which means less water to the canal. Reduced water in the canal means reduced space and more danger for ships crossing the canal. Therefore, the Panama Canal Authority puts restrictions on ship crossings and scheduling at the canal. Thus, ships routed to cross the major shipping lane gateway experience major delays….

This is not a hypothetical example. This is a chain reaction happening right now. Of course the chain reaction doesn’t end there.

Whenever major disruptions happen at large international shipping hubs, the effects ripple across the oceans and splash onto the land for shippers around the globe. As would be expected by the nomenclature, global supply chains are particularly susceptible to chain reactions. Events on the other side of the world from them can often hit shippers with costly delays and increased freight rates.

Right now, with it being international shipping peak season, supply chains are particularly vulnerable to disruption. And the disruption at the Panama Canal is escalating.

Last week, Michael Angell reported in the Journal of Commerce:

On Tuesday, the Panama Canal Authority reduced the total number of ships that can pre-reserve a transit to 14 from 19, with that reduction expected to last through Aug. 21. The reduction means fewer than 34 ships can move through the canal in both directions daily, compared with the 34 to 42 it can handle at peak capacity. The reduction in the number of ships followed a move in June by the Authority that reduced the maximum draft for neo-Panamax vessels from 50 feet to 44 feet. 

… Port agency WaterFront Maritime Services said in a notice Thursday that neo-Panamax ships are waiting up to 18 days before transiting the canal northward, with similar delays for southbound transits.

Then I received a notification from All-Ways that reported:

Panama Canal
Picture: Panama Canal – Looking Back by Roger W

The drought in the Panama Canal has worsened. There are now 154 vessels waiting to cross and a 21-day wait.

The Panama Canal Authority has put in place and keeps tightening water conservation measures as the drought continues. Currently, vessels can only carry 4,500 twenty-foot equivalent units (TEUs). The booking slots lowered from 23 daily to 14, a drastic decrease from 36 a day pre-drought.

Ships with reservations get priority. About 62% of vessels waiting are without reservations. In an attempt to reduce the congestion, 5 ships can cross the canal a day on a first come first served basis.

Some ships were in the queue before weight reductions occurred and were forced to offload some cargo at another port. Those containers will likely require another vessel to go pick them up.

While some are choosing to wait, others are looking for alternative routes. Either way, shipping costs and time will go up and affect businesses down the supply chain, inevitably affecting consumers.

While this peak season has felt slower than it actually is because its being on the heels of the unnaturally large shipping boom caused by the likes of locked downs and government stimuli checks, previously plummeting cargo volume has risen to a pre-pandemic level. Meanwhile, carriers have implemented general rate increases (GRI) and blanked (cancelled) sailings. It adds up to higher freight rates for shippers (though luckily nothing near the record freight rates seen during the poor authoritarian reaction period to the pandemic).

The disruption at the Panama Canal threatens to increase costs for shippers, not only in expensive delays but also in upward pressure on freight rates.

Obviously, this is one more situation we’ll be keeping an eye on here at Universal Cargo as we serve shippers, helping to get their goods imported and exported with as much efficiency as is possible.

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Universal Cargo Sponsoring Learning from Pros Golf Event at AON World Conference https://www.universalcargo.com/universal-cargo-sponsoring-learning-from-pros-golf-event-at-aon-world-conference/ https://www.universalcargo.com/universal-cargo-sponsoring-learning-from-pros-golf-event-at-aon-world-conference/#respond Tue, 08 Aug 2023 23:00:30 +0000 https://www.universalcargo.com/?p=12198 Even people who have never swung a club know that business is done on the golf course. If you don't play, you're missing out. Don't know how to play? Universal Cargo is hosting a golf event that could fix that.

The AON World Annual Conference 2023 is coming up next month, from September 4th to 7th in Bankok, Thailand. Universal Cargo will be there, sponsoring a golf event that kicks off the conference on September 3rd at Bangkok's Thana City Country Club from 8am to 1pm. But this isn't any regular old golf event. It's your chance to learn how to play, all the way down to the basics if you're a beginner, from professional golfers.

Universal Cargo has its own, in-house professional golfer in General Manager Micah Burke.

Before joining Universal Cargo's family-owned business of helping businesses import and export goods, Micah was out on the PGA circuit. However, just because he joined his father, CEO Devin Burke; mother, President Shirley Burke; and brother, Support Manager Bryan Burke in the freight forwarding business doesn't mean he's completely left golf behind. And this exciting golf event in Bangkok is one of the ways Micah's worlds mix.

Micah will be joined by fellow professional golfer Tommy Mansuwan in hosting this unique opportunity to mix business with pleasure, where participants will network and learn while enjoying the beautiful course at Thana City Country Club.

Find out more by reading the full post in Universal Cargo's blog.

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Even people who have never swung a club know that business is done on the golf course. If you don’t play, you’re missing out. Don’t know how to play? Universal Cargo is hosting a golf event that could fix that.

The AON World Annual Conference 2023 is coming up next month, from September 4th to 7th in Bankok, Thailand. Universal Cargo will be there, sponsoring a golf event that kicks off the conference on September 3rd at Bangkok’s Thana City Country Club from 8am to 1pm. But this isn’t any regular old golf event. It’s your chance to learn how to play, all the way down to the basics if you’re a beginner, from professional golfers.

No alt text provided for this image

Universal Cargo has its own, in-house professional golfer in General Manager Micah Burke.

Before joining Universal Cargo’s family-owned business of helping businesses import and export goods, Micah was out on the PGA circuit. However, just because he joined his father, CEO Devin Burke; mother, President Shirley Burke; and brother, Support Manager Bryan Burke in the freight forwarding business doesn’t mean he’s completely left golf behind. And this exciting golf event in Bangkok is one of the ways Micah’s worlds mix.

Micah will be joined by fellow professional golfer Tommy Mansuwan in hosting this unique opportunity to mix business with pleasure, where participants will network and learn while enjoying the beautiful course at Thana City Country Club.

I had the chance to catch up with Micah and get the lowdown on this exciting venture, where he and Tommy will share their experience and knowledge as professional golfers. “I’m going to be running the instructional clinic for the basics,” Micah said, his enthusiasm palpable. He obviously has more than a basic idea of what the fundamentals are. “I want to teach that,” he said.

But it’s going to go beyond the basics. Micah and Tommy will be roaming the golf course, getting involved, hitting shots, and offering insights to participants. “Because we’re both professionals, we have some swings that can impress people. So we can get involved, hit some shots, show them how to hit shots around the golf course. Give them some insight, you know, when they’re faced with challenging shots.”

Micah talked about things they’ll be covering. From teaching the absolute basics, like how to stand and put your fingers on the golf club, to helping participants make smart choices when faced with challenging shots, Micah is excited about covering all aspects of the game.

What’s Micah most excited about? “Being in my element and networking in that space,” he said. “I’m able to use that opportunity to make good connections with people, and that’s what this business is all about.”

Universal Cargo is not just sponsoring the golf event but will also have a presence at the conference itself through Micah. He will attend, participating in one-on-one meetings and social events. The golf will facilitate his networking there. “The golf event is going to give me a brand within the conference,” he explained. “It gets me around almost everybody in the conference, and they’ll remember me as a professional golfer.”

But why golf, you might ask? Micah confirms the simple answer that we all know. “It’s a cliché, but business is done on a golf course,” he says. “So if you don’t know how to play, you’re getting left out. It’s growing. It’s growing every day, and business is just attached to it.”

This event is not just about golf or business; it’s about Universal Cargo’s commitment to building relationships and providing unique experiences. As a family-owned business, Universal Cargo brings a personal touch to everything we do, and this golf event is no exception. And, of course, the advertising for the company is always good too. As Micah puts it, “I’m excited about Universal Cargo being the title sponsor on the first event because if this grows, this could be a great opportunity for UC to get out there, and our name. It’s going to be good exposure.”

So, whether you’re a seasoned golfer or a novice eager to learn, join us for this exciting event. Don’t expect to go out there and beat Micah at his own game. But it could take your game to a new level. And who knows, you could discover a great talent for it like Micah did as a kid. It only took him a year after he first started playing to beat his dad, CEO Devin Burke, who was no slouch himself after playing the game all his life.

Remember, golf doesn’t have to become your professional life to change your professional life. And for the better.

Here’s what AON World had to say about the golf event:

We are thrilled to invite AON WBLN [World Business Logistics Network] members to participate in the upcoming Bangkok Golf Event, supported by Universal Cargo Management, USA.

Whether you’re a seasoned golfer or new to the sport, this event is perfect for anyone who loves golf, and wants to have a fun and enjoyable experience in beautiful Bangkok! 

Registration for the AON WBLN Golf Event is limited and closes on July 31st, 2023. To register for the event, please contact our AON World representatives at secretariat@aonworld.net

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Will the FMC Regulate Freight Rates? Full Text of Supplemental Notice of Proposed Rulemaking https://www.universalcargo.com/will-the-fmc-regulate-freight-rates-full-text-of-supplemental-notice-of-proposed-rulemaking/ https://www.universalcargo.com/will-the-fmc-regulate-freight-rates-full-text-of-supplemental-notice-of-proposed-rulemaking/#respond Fri, 04 Aug 2023 02:22:32 +0000 https://www.universalcargo.com/?p=12192 A hot topic just popped up in international shipping. It revolves around the Federal Maritime Commission (FMC) potentially getting involved in regulating pricing when it comes to importing and exporting.

The FMC itself brought it to the forefront on Monday when it published its proposed rule revision concerning carriers' service refusal and summary of submitted comments to it. The full text of what the FMC published is shared at the end of this post.

The Ocean Shipping Reform Act of 2022 (OSRA) has increased the FMC's authority when it comes to U.S. maritime policy. It has the commission writing rules pertaining to international shipping. Particular targets for the rules have been unfair demurrage and detention fees and carriers' unreasonable refusal of service. The latter is the one stirring controversy right now.

Last year, the FMC first published a notice of proposed rulemaking on the topic. Neither shippers nor carriers were happy with it. Generally speaking, carriers thought the rules were too much and shippers thought they didn't go far enough. However, the divide didn't seem to get better after the FMC published its revised version with summaries of comments the commission received from shippers, carriers, and lawmakers.

Carriers think the rules got even worse.

The most controversial part comes in one of the factors for the FMC to consider when deciding if a refusal of service, or to negotiate on vessel space, is reasonable. The factor is whether carriers quote freight rates "so far above current market rates they cannot be considered a real offer or an attempt at engaging in good faith negotiations."

Carriers say that provision could make the FMC into price regulators in the industry.

While I often am on the side of shippers in debates between them and carriers, I have to admit the carriers have a point. Many shippers' perspective that carriers could simply quote ridiculous freight rates to prevent providing services to importers or exporters is legitimate. Discriminatory practices are certainly possible in that arena. However, making the government in charge of what is a reasonable or unreasonable freight rate is a dangerous route to sail.

Keep reading in Universal Cargo's blog to find out more...

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A hot topic just popped up in international shipping. It revolves around the Federal Maritime Commission (FMC) potentially getting involved in regulating pricing when it comes to importing and exporting.

The FMC itself brought it to the forefront on Monday when it published its proposed rule revision concerning carriers’ service refusal and summary of submitted comments to it. The full text of what the FMC published is shared at the end of this post.

The Ocean Shipping Reform Act of 2022 (OSRA) has increased the FMC’s authority when it comes to U.S. maritime policy. It has the commission writing rules pertaining to international shipping. Particular targets for the rules have been unfair demurrage and detention fees and carriers’ unreasonable refusal of service. The latter is the one stirring controversy right now.

Last year, the FMC first published a notice of proposed rulemaking on the topic. Neither shippers nor carriers were happy with it. Generally speaking, carriers thought the rules were too much and shippers thought they didn’t go far enough. However, the divide didn’t seem to get better after the FMC published its revised version with summaries of comments the commission received from shippers, carriers, and lawmakers.

Carriers think the rules got even worse.

The most controversial part comes in one of the factors for the FMC to consider when deciding if a refusal of service, or to negotiate on vessel space, is reasonable. The factor is whether carriers quote freight rates “so far above current market rates they cannot be considered a real offer or an attempt at engaging in good faith negotiations.”

Carriers say that provision could make the FMC into price regulators in the industry.

While I often am on the side of shippers in debates between them and carriers, I have to admit the carriers have a point. Many shippers’ perspective that carriers could simply quote ridiculous freight rates to prevent providing services to importers or exporters is legitimate. Discriminatory practices are certainly possible in that arena. However, making the government in charge of what is a reasonable or unreasonable freight rate is a dangerous route to sail.

In the short run, such a policy may be a good thing for shippers. But in the long run? I worry shippers will end up paying a hefty price.

I often point out education and healthcare as two industries that have seen heavy increase of government involvement. With increased involvement came severely increased costs to consumers. I worry we will see the same when it comes to international shipping. Who are the consumers of international shipping? Importers and exporters, of course. The very people, and businesses, these rules are designed to protect very well could be the ones hurt the most by them.

How will the FMC determine if freight rates are unreasonably above market rates? That’s uncomfortably vague. Here’s the paragraph the FMC wrote on the topic:

The SNPRM [supplemental notice of proposed rulemaking] rule proposes that quoting rates that are so far above market as to render the quote not a serious negotiation is unreasonable conduct. An ocean common carrier would be required to consider in good faith a shipper’s effort at negotiation. Consideration in good faith includes, among other things, quotes that are within reasonable market rates. See, e.g., NITL/ISRI at 13–14. If in response to a shipper’s request for vessel space accommodations the carrier quotes rates far above market (or insists on other terms, such as unrealistic quantity demands), it will likely be regarded under the SNPRM as an unreasonable refusal to deal or negotiate under 46 U.S.C. 41104(a)(10).

Even more vague is an additional factor the FMC gives for ruling against a carrier on the issue of unreasonable refusal to deal or negotiate with a shipper: “any other interactions or communications with the shipper or other conduct the Commission finds unreasonable.”

What exactly does that mean? What could it include? It seems entirely up to the FMC in the moment on a case by case basis.

Shippers seem to like that the changes made are even harder on carriers than the rules were before. But I don’t think they’ll like it if the ultimate result is higher freight rates across the board.

But I leave it up to you to decide what you think about the changes. The complete text of the SNPRM is below. Also, if you want to see more about how OSRA is changing U.S. shipping code, we’re in the middle of a series that goes through the whole act section by section. Here’s what Universal Cargo has published in the series so far:

Full text of FMC’s SNPRM

Definition of Unreasonable Refusal To Deal or Negotiate With Respect to Vessel Space Accommodations Provided by an Ocean Common Carrier

AGENCY:

Federal Maritime Commission.

ACTION:

Supplemental notice of proposed rulemaking.

SUMMARY:

The Federal Maritime Commission (Commission) issues this supplemental notice of proposed rulemaking (SNPRM) to address a statutory requirement arising from the Ocean Shipping Reform Act of 2022 that prohibits ocean common carriers from unreasonably refusing to deal or negotiate with respect to vessel space accommodations and a related prohibition against unreasonably refusing cargo space accommodations. This proposal revises certain aspects of the proposed rule issued on September 21, 2022, by modifying defined terms and discussing the relationship between the United States Code and the elements required to establish violations of those provisions. This SNPRM is issued in response to comments to the original proposal and to more directly provide a potential standard for unreasonable conduct by ocean common carriers that prevents shippers from obtaining space aboard vessels for their cargo. In this SNPRM, the Commission proposes to:

define unreasonable by stating a general principle and a non-exhaustive list of examples of unreasonable conduct; establish the elements for a refusal of cargo space accommodations; revise the definition of transportation factors to focus on vessel operation considerations; clarify that vessel space services were already included in the definition of vessel space accommodations and add a definition for cargo space accommodations; define documented export policy and add mandatory document export policy requirements; and remove the voluntary certification provision. The Commission seeks comments on these changes.

DATES:

Submit comments before 11:59 p.m. EDT on July 31, 2023.

ADDRESSES:

Since the publication of the NPRM, the Commission has transitioned from accepting comments via email and using its Electronic Reading Room for rulemaking activities to accepting rulemaking comments exclusively through the Federal eRulemaking Portal at www.regulations.gov. The docket of this SNPRM can be found at https://www.regulations.gov/​ under Docket No. FMC–2023–0010. The NPRM and related comments can be found in this new docket. Also, comments to this SNPRM may be submitted and viewed there. Please refer to the “Public Participation” heading under the SUPPLEMENTARY INFORMATION section of this notice for detailed instructions on how to submit comments, including instructions on how to request confidential treatment and additional information on the rulemaking process.

FOR FURTHER INFORMATION CONTACT:

William Cody, Secretary; Phone: (202) 523–5725; Email: secretary@fmc.gov.

SUPPLEMENTARY INFORMATION:

I. Background

A. Legislative Authority and Regulatory History

On September 21, 2022, the Commission proposed adding a new part 542 under title 46 of the Code of Federal Regulations (CFR) that would address prohibited acts by ocean common carriers under 46 U.S.C. 41104(a)(10). 87 FR 57674. The proposal was issued in response to certain obligations imposed on the Commission as a result of legislation signed by the President on June 16, 2022. That legislation, the Ocean Shipping Reform Act of 2022 (OSRA 2022), amended various statutory provisions contained in Part A of Subtitle IV of Title 46, United States Code, which collectively comprise the Shipping Act. Among these changes were amendments to 46 U.S.C. 41104(a)(3) and (a)(10) along with accompanying requirements for the Commission to initiate and complete specific rulemakings related to each amendment.

Although OSRA 2022’s focus on export cargo is new, the Commission and the courts have considered similar Shipping Act prohibitions against unreasonable conduct and refusals to deal or negotiate in the past.

Section 7(d) of OSRA 2022 requires the Commission, in consultation with the United States Coast Guard, to initiate and complete a rulemaking to define the phrase “unreasonable refusal to deal or negotiate with respect to vessel space accommodations” and this rulemaking implements that requirement. This rulemaking now also addresses OSRA 2022’s amendment to part of section 41104(a)(3), which prohibits a common carrier from unreasonably refusing cargo space accommodations when available. At a different time, the Commission will address the statutory requirement in section 7(c) of OSRA 2022 to complete a rulemaking defining unfair or unjustly discriminatory methods in a separate rulemaking.

B. Need for SNPRM

After receiving comments on its proposal and examining the feedback received in response, the Commission has decided to issue this SNPRM to further explore certain issues and to modify other aspects of the initial September 2022 proposal. The Commission proposes to make the following changes: (1) revise the definition of transportation factors to focus on vessel operation considerations; (2) revise the definition of the term unreasonable to include a general definition and a non-exhaustive list of unreasonable conduct scenarios; (3) clarify that vessel space services are already included in the definition of vessel space accommodations; (4) remove the voluntary export strategy documentation language; (5) propose a definition of documented export policy and that ocean common carriers submit a documented export policy to the Commission once per year; and (6) remove the voluntary certification provision. These modifications, along with the reasoning behind these changes, are discussed in the sections that follow.

In its September 2022 proposal, the Commission explained that OSRA 2022 amended 46 U.S.C. 41104(a) as a whole by replacing “may not” with “shall not” to highlight the mandatory nature of that section’s list of common carrier prohibitions and sought comment on the treatment of these terms. See87 FR 57674. The Commission sought comment on its initial proposal to apply the amended prohibitions under section 41104(a)(10) to ocean common carriers and its proposed definition of the phrase “unreasonable refusal to deal or negotiate with respect to vessel space accommodations” contained in that provision. The Commission also noted other key terms and phrases remained undefined, such as “unreasonably,” “refuse to deal or negotiate,” and “vessel space accommodations,” and sought comment regarding the meaning of these terms. See87 FR 57676–57677.

In applying the common carrier prohibitions in 46 U.S.C. 41104, the Commission stresses that the statute does not distinguish between U.S. exports or imports and this supplemental proposal also applies to both. The Commission explained its basis for this view as part of its initial proposal, noting the challenges faced by U.S. exporters to obtain vessel space and observing that the purpose of the Commission’s authority under the Shipping Act contains an export focus while also noting reports of restricted access to equipment and vessel space for U.S. importers, particularly in the Trans-Pacific market. 87 FR 57674–57675. Further background and discussion on market conditions can be found in the notice of proposed rulemaking. 87 FR 57674–57675.

The Commission also notes that nothing in the previous proposed rule or in this SNPRM is meant to restrict the ability of ocean common carriers to reposition empty containers. The repositioning of empty containers can include the use of sweeper vessels. Vessels cannot be arbitrarily designated as sweeper vessels to avoid accepting exports. After the fact or ad hoc reclassifications of a vessel as a sweeper vessel may be closely scrutinized by the Commission. A shipper or the Commission’s Bureau of Enforcement, Investigations, and Compliance (BEIC) can also allege that a reclassification was a subterfuge to avoid providing vessel space for exports. As the Commission previously explained, staff review of ocean common carrier documents indicates that ocean common carriers typically maintain documented procedures and policies related to their operations. The Commission stated further that effective export policies should be tailored to specific categories of cargoes and include documented policies on export business practices. Because every ocean common carrier operating in the U.S. market is presumed by the Commission—barring the submission of further information to the contrary—to be able to transport both exports and imports, an ocean carrier may not categorically exclude U.S. exports from its service without showing how this action is reasonable. 87 FR 57675. This presumption continues to apply in this SNPRM.

The Commission also took note of common carrier assertions that they have seen delays in the movement of export cargo due to a lack of mutual commitment between shippers and common carriers leading to cancellations of vessel space accommodation by either party, sometimes as late as the day of sailing. These actions contribute to uncertainty for both the common carriers and shippers. See87 FR 57675. Bookings canceled by common carriers lead to rolled freight and other negative consequences for shippers. See American Chemistry Council (ACC) at 4.

Finally, as stated in the initial proposed rule and elsewhere, ocean common carriers and those with whom they contract to operate and load/unload their vessels have the best information on the ability of any particular vessel to accept cargo for import or export—information that shippers generally do not have. See87 FR 57675–57676; see also Fact Finding Investigation 29 Final Report (F.M.C.), 2022 WL 2063347 at 11, 21–23, 26, 34–35 (noting difficulties experienced by non-carrier entities to obtain information such as earliest return dates and vessel scheduling information held by ocean common carriers). As a result, the Commission proposed a mechanism by which, upon a prima facie case of a violation of section 41104(a)(10) being made, the burden would shift from the shipper (or the BEIC) to the ocean common carrier. At this step, the ocean common carrier would need to satisfy its burden of showing that the refusal to deal or negotiate was reasonable. The Commission stressed that its proposal concerned the negotiations or discussions that lead up to a decision about whether an import or export load is accepted for transportation. It added that while there will be situations where an ocean common carrier and a shipper engage in good faith negotiations or discussions that do not result in the provision of transportation, cases where an ocean common carrier categorically excludes U.S. exports from its service will create a presumption of an unreasonable refusal to deal. See87 FR 57675–57676.

The specific provisions of OSRA 2022 that are the subject of this SNPRM are new, and accordingly there is a lack of prior Commission precedent to aid in interpretation of this newly-enacted amendment. In the Commission’s history, many cases found the essence of the prohibition on unreasonable refusals to deal or negotiate in contravention of the amended section 41104(a)(10) and its predecessors to be the imposition by a common carrier of an unreasonable impediment to a shipper’s access to common carriage. Such impediments can take many forms, and no legislation or regulatory process can predict or attempt to encompass every possible scenario in which an unreasonable refusal to deal or negotiate might occur. Thus, the caselaw is instructive when considering the new legislation. Commission determinations will be factually driven and determined on a case-by-case basis.

This SNPRM describes how the Commission will consider private party adjudications and agency-initiated enforcement cases in which violations of 46 U.S.C. 41104(a)(3) and (a)(10) are alleged relating to unreasonable refusal to provide cargo space accommodations and/or refusals to deal by ocean common carriers. It also considers the common carriage roots in the Shipping Act, as well as the overall competition basis of the Commission’s authority,[1] and lays out the framework for considering violations of section 41104(a)(10). In this SNPRM, the Commission continues to note that future cases that allege violations of section 41104(a)(3) and (a)(10) will be factually driven and determined on a case-by-case basis. The framework for this supplemental proposal is taken from Commission precedent on refusal to deal cases generally and on suggestions offered by commenters.

C. Inclusion of Claims of Unreasonable Refusals of Cargo Space Accommodations Subject to 46 U.S.C. 41104(a)(3)

Although this rulemaking was initiated under OSRA 2022 section 7(d) to define terms and elements required for a cause of action under 46 U.S.C. 41104(a)(10), shippers and exporters in particular commented on conduct that occurs outside the scope of that provision. Section 41104(a)(10) prohibits unreasonable refusals during the negotiation stage, when the parties do not have an existing relationship and/or are initiating negotiations over terms and conditions of service. That is different from conduct prohibited under 46 U.S.C. 41104(a)(3). The latter would apply to situations where the parties have an existing relationship and/or already mutually agreed on terms and conditions via a booking confirmation, but the ocean common carrier then unreasonably refuses cargo space accommodations when available, or in other words, refuses to execute on the deal negotiated on the previously agreed-upon terms.

The restrictions that 46 U.S.C. 41104(a)(3) and (a)(10) impose on ocean common carriers are distinct but closely related. Both provisions address refusals by ocean common carriers to accommodate shippers’ attempts to secure overseas transportation for their cargo. The distinction between the conduct covered by these two provisions is timing, more specifically whether the refusal occurred while the parties were still negotiating and attempting to reach a deal on service terms and conditions (negotiation stage) or after a deal was reached (execution stage). If the refusal occurred at the negotiation stage, 46 U.S.C. 41104(a)(10) would apply. If the refusal occurred at the execution stage, after the parties reached a deal or mutually agreed on service terms and conditions, then 46 U.S.C. 41104(a)(3) would apply. When a shipper acting in good faith follows the export policy of the ocean common carrier with which it has been negotiating, either 46 U.S.C. 41103(a)(3) or (a)(10) would still apply if the shipper was unreasonably denied space.

Comments to the NPRM show that shippers and exporters in particular consistently cited blank sailings, no-notice or delayed notice of schedule changes, inadequate loading times, and similar actions as primary drivers that prevented them from getting their cargo to overseas markets. These impediments occur during the execution stage over shippers’ interactions with ocean common carriers, taking them outside the scope of 46 U.S.C. 41104(a)(10) and beyond the confines of the initial proposal. In order to fully address the comments received, the Commission has decided to issue an SNPRM and expand the scope of the rulemaking. Rather than defer addressing these concerns in a separate rulemaking, the Commission proposes broadening the scope of this rulemaking. The Commission is also currently working on addressing section 7(c) of OSRA 2022 and will separately complete a rulemaking defining different terms than those defined in this SNPRM from section 41104(a)(3), i.e., “unfair or unjustly discriminatory methods.”

Protecting shippers from unreasonable refusals to deal or negotiate only partially addresses the obstacles that shippers and trade associations have identified in the comments as major impediments to their ability to get their cargo to overseas markets. As commenters have pointed out, there are far-reaching consequences that cannot easily or quickly be reversed if they cannot meet their contractual obligations to their overseas buyers. U.S. exporters’ ability to rely on ocean common carriers meeting their obligations by providing cargo space accommodations negotiated for or as advertised is a critical component of that equation. U.S. exporters are in an untenable position if they cannot rely on vessels calling at U.S. ports to load and transport their cargo to overseas destinations as scheduled or agreed to by the ocean common carrier. Missed or late deliveries to overseas buyers are likely to cause them to lose confidence in the reliability of their U.S. suppliers and prompt them to look to alternative suppliers from other countries able to commit to a more reliable delivery system. Overseas buyers would not continue dealing with U.S. suppliers who repeatedly miss delivery dates and cannot promise on-schedule deliveries because they are at the mercy of ocean common carriers who unpredictably change scheduled sailings, blank scheduled sailings, or otherwise unreasonably refuse to execute on their commitments. Business that U.S. exporters lose to competitors from other countries will be difficult to recapture over the short term and perhaps over the long term as well. The longer reliability issues persist, the more harm U.S. exporters will suffer and the more difficult it will be to restore lost confidence in ocean transportation for U.S. exports.

Restricting this rulemaking to refusals to deal or negotiate under 46 U.S.C. 41104(a)(10) will not address the reliability issues that commenters identified as a critical and a driving factor impeding their ability to ship cargo overseas. Shippers impacted by unlawful refusals to accommodate their requests for vessel space accommodations have been able to bring a cause of action against ocean common carriers since the OSRA 2022 amendments took effect immediately in June 2022. They may find it more difficult, however, to plead, and prevail on those claims without implementing regulations from the Commission defining the elements and statutory terms. Parties may also find it more difficult to identify and litigate claims for unreasonable refusals under 46 U.S.C. 41104(a)(3) without a clearer indication from the Commission of conduct covered by that provision as distinguished from 46 U.S.C. 41104(a)(10). Absent further guidance now from the Commission, shippers and BEIC are likely to devote considerable resources to litigating how an “unreasonable refusal” under 46 U.S.C. 41104(a)(3) should be defined and the elements required to prove a violation of that provision. That may make litigating 46 U.S.C. 41104(a)(3) claims a time-consuming and resource-intense process as parties litigate not just the facts of their particular case but also advocate for their proposed interpretation of key terms like “unreasonable refusal” and the factors relevant in determining whether an ocean common carrier acted unreasonably. Parties would also expend time litigating the difference between “unreasonable refusals to deal or negotiate” and “unreasonable refusals to provide vessel space accommodations.”

Clearly delineating these distinctions as part of the current rulemaking will lessen the time and resources that shippers, carriers and the Commission will otherwise need to devote to defining these concepts in individual cases. Defining the elements and terms used in 46 U.S.C. 41104(a)(3) requirements as part of this rulemaking is also important because in practice it may be difficult to discern whether a carrier’s refusal was at the negotiation or execution stage and additional guidance now from the Commission may help avoid needless disputes over that issue. Shippers’ and carriers’ interactions about service terms and conditions and securing vessel space may not always march consistently forward from the initial offer through booking and loading cargo on the vessel bound for the destination point. It is important for ocean common carriers to have sufficient guidance to conform their conduct and practices to fall within the bounds of reasonable or unreasonable within the meaning of 46 U.S.C. 41104(a). Also, this rule would ensure that shippers can readily discern when a carrier has acted outside the bounds of reasonableness and know what type of claim to bring before the Commission.

Interpreting these related provisions in tandem in a single rulemaking will allow the Commission to delineate the types of refusal conduct covered by 46 U.S.C. 41104(a)(3) and (a)(10) and highlight where the differences are between them.

D. Differences in Cases Involving Section 41104(a)(10) and Section 41104(a)(3)

Generally, the distinction between those acts covered under section 41104(a)(3) and those falling under section 41104(a)(10) is temporal-based. Although it is possible for claims to arise later in the process, “refusal to deal or negotiate” (section 41104(a)(10)) will frequently involve those actions occurring prior to a carrier providing a shipper with a booking confirmation to carry that shipper’s cargo. If negotiations to reach an agreement have ceased (or if efforts to engage in negotiations were ignored), then a claim of unreasonable refusal to deal or negotiate under section 41104(a)(10) could arise. When read in conjunction with this provision, to “unreasonably refuse cargo space accommodations” or “resort to other unfair or unjustly discriminatory methods” under section 41104(a)(3) would necessarily involve a set of acts that occur after a booking has been confirmed. As a result, this SNPRM adds to the scope of the original NPRM by proposing to address those refusals that occur at the execution stage, after the parties reached a deal or mutually agreed on service terms and conditions via a booking confirmation subject to section 41104(a)(3). In a future rulemaking, the Commission will define “unfair and unjustly discriminatory methods” within the meaning of section 41104(a)(3). The Commission seeks comment on its approach with respect to the difference between potential violations of 46 U.S.C. 41104(a)(3) and 46 U.S.C. 41104(a)(10).

II. Comments to the NPRM and Responses by the Commission

In developing this SNPRM, the Commission carefully considered the comments it received regarding its previous proposed rule. These comments, along with issues relevant to those comments, are addressed in greater detail in the discussion that follows.

A. Commenters

The Commission received responses from shippers, shipping industry trade associations, common carriers, and governmental entities. These commenters consisted of the following entities:

COMMENTERSENTITY TYPE
Agriculture Transportation Coalition (AgTC)Shippers Trade Association.
American Chemistry Council (ACC)Shippers Trade Association.
American Cotton Shippers Association (ACSA)Shippers Trade Association.
BassTech International (BassTech)Shipper.
Consumer Brands Association (CBA)Shippers Trade Association.
CMA CGM (America) LLCCarrier.
Dole Ocean Cargo Express, LLC (DOCE)Carrier.
International Federation of Freight Forwarders Association (FIATA)Freight Forwarding Trade Association.
International Dairy Foods Association (IDFA)Shippers Trade Association.
International Fresh Produce Association (IFPA)Shippers Trade Association.
Lanca Sales, IncShipper/Beneficiary Cargo Owner.
Meat Import Council of America and North American Meat Institute (MICA/NAMI)Shippers Trade Association.
National Association of Chemical Distributors (NACD)Shippers Trade Association.
National Association of Manufacturers (NAM)Shippers Trade Association.
National Customs Brokers & Forwarders Association of America, Inc. (NCBFAA)Freight Forwarder, Custom Broker, and Ocean Transportation (incl’g Carriers) Trade Association.
National Fisheries Institute (NFI)Shippers Trade Association.
Northwest Horticultural Council (NHC)Shippers Trade Association.
National Industrial Transportation League and Institute for Scrap Recycling Industries, Inc. (NITL/ISRI)Shippers Trade Association.
Pacific Merchant Shipping Association (PMSA)Carrier Trade Association.
Retail Industry Leaders Association (RILA)Shippers Trade Association.
Tyson Foods (Tyson)Shipper.
U.S. Dairy Exporters Council (USDEC)Shipper Trade Association.
World Shipping Council (WSC)Carrier Trade Association.
Members of the House of Representatives (Congress)Legislative Branch (Federal)—multiple comments.
United States Department of Justice (DOJ)Executive Branch (Federal).
United States Department of Agriculture (USDA)Executive Branch (Federal).

Except as noted, each relevant comment is addressed within the context of the specific topics raised. These topics are discussed in detail in the sections that follow.

1. General Comments From Federal Government Commenters

The Commission notes that it received four separate submissions from Federal commenters. One set of comments was submitted by a group of seven Members of the House of Representatives—Representative John Garamendi, Representative Dusty Johnson, Representative Jim Costa, Representative Adrian Smith, Representative Mike Thompson, Representative David G. Valadao, and Representative Jimmy Panetta. The Members made the specific point that “[o]cean carriers refusing to accommodate American exports is an unreasonable business practice and, following passage of the Ocean Shipping Reform Act of 2022, also is now illegal.” Congress at 1. It also received one comment jointly submitted by Senator John Thune, Senator Amy Klobuchar, Senator John Hoeven, and Senator Tammy Baldwin. The Senators state they have received reports of ocean carriers refusing certain export cargo, particularly agricultural cargo, even when vessel space was readily available, and often opting to carry empty containers instead. Senate at 1. Also, the Senators urge the Commission to consider whether additional clarifying language about the magnitude of the “transportation factors” might provide useful industry guidance. Id.

The Commission greatly appreciates the comments offered by the Members and Senators. As the Commission agrees and explained in its proposal, the categorical refusal to accommodate U.S. exports, without demonstrating that the refusal is reasonable, would violate 46 U.S.C. 41104(a)(10). 87 FR 57675. Under section 41104(a)(10), an ocean common carrier’s refusal to deal or refusal to negotiate must be unreasonable to constitute a violation. See46 U.S.C. 41104(a)(10). By definition, not all refusals will necessarily violate this provision. Whether a refusal to deal or a refusal to negotiate falls within the scope of section 41104(a)(10) depends upon the particular circumstances in a given case.

In response to various public comments, including those from Senators Thune, Klobuchar, Hoeven, and Baldwin, the Commission is proposing new language that relies on both 46 U.S.C. 41104(a)(3) and (a)(10) to address more comprehensively potential violations related to refusal to deal or negotiate. The new proposed approach covers a broader set of conduct, explicitly including those instances where an ocean common carrier refuses export cargo even when vessel space was readily available. This SNPRM also revises the definition of transportation factors and proposes to remove the language initially referring to scheduling considerations.

The Antitrust Division of the United States Department of Justice (DOJ) also submitted comments and agreed that reasonableness is necessarily a case-by-case determination. However, DOJ expressed concern that the Commission’s proposed criteria to prove the statutory elements of “refusal to deal” and “unreasonable” would be too difficult to establish. DOJ also suggested including additional considerations, such as the parties’ prior course of dealings or whether a carrier, after issuing a refusal, offered the affected shipper any remedies or assistance. DOJ suggested that information may be relevant in deciding whether the carrier’s refusal was unreasonable. The Commission adopted DOJ’s proposed language on further remedies or assistance offered to the shipper and added it to the proposed rule in § 542.1(d)(1). DOJ also believes that it would be critical to evaluate past business actions in the context of allegations to refuse the provision of service.

As to DOJ’s concern that the proposed standard for establishing the second and third elements of a prima facie case may set the bar too high by suggesting that complainants must show an actual refusal to even entertain their proposal, this SNPRM clarifies that is not a required showing and emphasizes that claims will be evaluated on a case-by-case basis.

As to the elements that the Commission would rely on to make a determination of reasonableness, the Commission believes that the new proposed elements form an appropriate basis for determining whether an ocean common carrier has acted reasonably in refusing to deal with a particular shipper. Those elements are: (1) whether the ocean common carrier follows a documented export policy enabling the efficient movement of export cargo; (2) whether the ocean common carrier engaged in good-faith negotiations; (3) the existence of legitimate transportation factors; and (4) any other factors the Commission deems relevant. These elements, when coupled with the opportunity for the ocean common carrier to establish that conduct was reasonable, are both workable and fair by allowing potential claimants to bring complaints of violations under section 41104(a)(10) and shifting the burden of production of information to the carrier to justify its actions. And in evaluating a given case, the Commission’s proposed approach in this SNPRM would provide the information it would need and also enable it to consider other relevant factors such as prior dealings and mitigation measures in determining whether a refusal was unreasonable.

Finally, DOJ noted that the terms “deal” and “negotiate” have different meanings under the antitrust laws and encouraged the Commission to define those terms in the Commission’s rule. DOJ at 4–5. It states that the term “negotiate” refers to the discussion about a particular transaction, while “deal” typically refers to the transaction itself—whether it be the provision of goods or services. DOJ at 5. The goal of prohibiting unreasonable refusal to deal or negotiate by ocean common carriers with respect to vessel space will be achieved better by giving the terms their ordinary meanings. That way, the Commission will be able to address unreasonable refusal to deal or negotiate with respect to vessel space with more flexibility. That is consistent with our case-by-case approach which DOJ endorses.

The Secretary of the United States Department of Agriculture (USDA) submitted a comment and asked the Commission to broaden the definition of an unreasonable refusal to deal or negotiate, narrow the proposal’s guidance on reasonableness, and encourage specific actions by carriers to guard against engaging in an unreasonable refusal. USDA suggested the Commission specify certain actions, such as cancellations without sufficient notice, perpetual re-bookings, and failure to provide necessary equipment, in the definition of refusal to deal or negotiate. USDA at 2. The points that USDA focuses on as potentially unfair or unjustly discriminatory conduct may be refined at a later date through another rulemaking or on a case-by-case basis.

USDA also suggested that in considering reasonableness of refusal to deal or negotiate, “[t]he Commission should excuse only a few exceptional circumstances.” USDA at 2. It urged the Commission to narrow the language on reasonableness and clarify that the existence of multiple factors (such as profitability, business development strategy, or transportation factors) will not absolve problematic practices. USDA also encouraged “clearer, more affirmative duties for carriers, greater specificity with respect to the requirements they need to meet, and that non-confidential portions of these documents be made available for shippers and the public to review.” USDA at 2–3. This SNPRM includes greater specificity and strives to better delineate each party’s duties when communicating with each other about vessel space accommodations. The Commission’s NPRM included some of the factors USDA discussed, and it does not absolve problematic practices based upon just a few factors or certain affirmative actions. Rather, each case will be considered under the totality of the circumstances to prohibit all possible unreasonable refusals to deal or negotiate by ocean common carriers with respect to vessel space accommodations.

2. Inability To Obtain Vessel Space for Export Cargo Despite Having Previously Negotiated Terms and Conditions

Comments from the Retail Industry Leaders Association (RILA) assert that an unreasonable refusal to deal or negotiate is not confined to the negotiation stage under 46 U.S.C 41104(a)(10) but can arise at any point in the parties’ dealings short of the point at which the shippers’ cargo is actually loaded aboard the vessel. As RILA explains:

The “lived experience” of U.S. importers during the COVID–19 pandemic has demonstrated that unreasonable refusals to deal or negotiate can arise not only in the context of negotiating (or refusing to negotiate) the terms of a service contract before it is entered into, or of booking (or seeking to book) carriage pursuant to the common carrier’s published tariff before cargo is tendered, but also during the term of a service contract and even after the provision of (or failure to provide) the services contemplated.

RILA Comments at 3. RILA urged the Commission to address this issue by expansively defining unreasonable refusals to deal or negotiate within the meaning of section 41104(a)(10) to include actions or communications that “can arise at any point in parties’ dealings with each other.” Id.

The Commission understands and concurs with the concern underlying this suggestion but does not agree that expanding the definition of unreasonable refusal to deal or negotiate within the meaning of section 41104(a)(10) is the solution. As discussed elsewhere in this proposal, the Commission proposes defining section 41104(a)(3) and (a)(10) in tandem as the better solution. Further, as also mentioned in this discussion, expanding the definition of conduct governed by 46 U.S.C. 41104(a)(10) to include the same conduct prohibited by section 41104(a)(3) would render meaningless (at least in part) the section 41104(a)(3) language prohibiting unreasonable refusals to accept cargo. That interpretation would violate the canon of statutory construction against construing the statute in a manner that renders language superfluous or meaningless.[2]

RILA further explains that in its experience,[3] unless shippers have enforceable service contracts, they “are unable to protect themselves from volatile shipping rates and ocean carriers have few forecasting tools to provide the shipping capacity necessary to serve their customers.” Id. at 3. RILA suggests as a partial remedy that the Commission explicitly announce that the existence of a service contract does not insulate a common carrier from a claim that it violated 46 U.S.C. 41104(a). This SNPRM should clarify that carriers are not immune from 46 U.S.C. 41104(a)‘s restrictions because they have a service contract with the shipper. Although the Commission does have jurisdiction over 46 U.S.C. 41104(a) violations, breach of contract claims are not within the Commission’s jurisdiction.

Other shippers and trade associations expressed similar misgivings about the proposed scope of 46 U.S.C. 41104(a)(10) and the urgent need for a solution to refusals that arise past the negotiation stage, i.e., after the parties have (or ostensibly have) a contract to transport the cargo. The U.S. Dairy Export Council (USDEC) termed these concerns “anti-backsliding considerations” and explained why these post-negotiation issues urgently need to be addressed and how these concerns relate to 46 U.S.C. 41104(a)(10) restrictions on unreasonable refusals to deal or negotiate. USDEC Comments at 3–4. As it explained:

Negotiations between shippers and carriers are functionally intended to facilitate the international carriage of goods on an ocean vessel. The rule should not permit carriers to negotiate for vessel accommodations, only to have those bookings get rolled, delayed or cancelled. Disruptions to vessel schedules are understandable, but should a pattern emerge where negotiated vessel space accommodations are regularly unreliable, that should raise questions at the FMC about the intent and purpose of the negotiations. Compliance on negotiating for vessel space should be done in good faith and not solely as a means of achieving compliance without affording the service.

Id. at 4.

The International Dairy Foods Association (IDFA) raised the same concerns and termed them “de facto” unreasonable refusals to deal. IDFA Comments at 2. IDFA listed multiple examples of de facto unreasonable refusals to deal, such as:

skipping or cancelling services to certain ports; changing the port of loading; calling on such ports but not alerting exporters to their presence; poorly communicating when vessel schedules change; providing windows for loading that are impractical due to their short length; blank sailings without providing sufficient notice to exporters; not pre-positioning containers inland close to export customers; providing inaccurate and unreliable vessel, shipment and tracking information; and continually rolling export bookings, which amounts to an effective denial of service.

Id. at 2–3. IDFA also emphasized the untenable consequence of these de facto refusals—“a shipping environment where there is no schedule reliability which harms the competitiveness of U.S. export in oversea markets.” Id. IDFA also stated that its members have reported that as frequently as 90–100% of the time, their bookings have been rolled or canceled. Id.

IDFA proposed that the Commission address these problems by declaring the following actions presumptively unreasonable under section 41104(a)(10): (1) a blank sailing with less than six weeks’ notice; (2) not providing at least 72 hours’ notice to load a vessel; (3) skipping, suspending, or discontinuing services to ports or changing the port of loading despite export demand at such ports; (4) not clearly communicating or providing consistent, accurate information directly to cargo owners when ships come into port or vessel schedules change; (5) rolling a valid export booking; and (6) refusing a booking for perishable cargo. Id. at 4 and 7. Most of these actions could not logically be considered part of the negotiation stage since in most cases, they would occur after shipper and carrier have negotiated a deal.

IDFA criticized the proposed rule as inappropriately “preoccupied with solving unreasonable refusals to deal in specific negotiation and discussion contexts,” which it contends “is not the heart of the problem.” Id. IDFA states that “[i]n order to address the bulk of the unreasonable refusal to deal issue, a Commission rule must target the VOCC [vessel-operating common carriers] policies and procedures that systematize and operationalize the de facto unreasonable refusal to deal or negotiate with cargo owners.” Id. at 7–8. The Commission acknowledges that these concerns are legitimate and proposes broadening the scope of this rulemaking to encompass section 41104(a)(3) as the best solution. The revised rulemaking will globally address unreasonable refusals prohibited under Section 41104(a) that hamstring shippers’ attempts to transport their cargo to their overseas buyers.

The American Chemistry Council (ACC) raised the same concerns and pointed out that if the NPRM only covers contract negotiations and discussions between carriers and shippers, it will “leave[ ] a gaping hole that will continue to allow unreasonable conduct by” ocean common carriers. ACC Comments at 2. To emphasize that point, it lists numerous practices “that amount to an effective refusal to deal that the NPRM does not appear to address.” Id. The examples ACC recited include providing insufficient vessel space allocations; calling on ports but not alerting exporters to their presence; poorly communicating when vessel schedules change; providing insufficient windows for loading a vessel; blank sailings without providing sufficient notice to exporters; and repeated rolling of export bookings. Id. at 3–4.

The American Cotton Shippers Association (ACSA) highlighted the same concerns about carriers not loading their containerized export cargo. ACSA Comment at 6–7. ACSA submitted numbers showing their calculations and comparisons on warehouse pickup performance in terms of cotton bales shipped and bales not picked up between August 2019 and June 2021. Id. at 7. The Commission has not independently verified ACSA’s statistics but notes that they reflect the same general concern raised by others, namely that unreasonable refusals to deal or negotiate is only a part of the export problem that OSRA 2022 was meant to address. See also, Comments from Bass Tech International at 1–2 (noting other ways, besides outright refusal to deal or negotiate, that common carriers use to avoid providing service and stating that it “is critical that the NPRM addresses these types of conduct as well”); Comments from Members of Congress at 1 (identifying service cancellations at ports that agricultural exports rely on, like the Port of Oakland, as concerns to be addressed).

B. Distinguishing Between Negotiation Refusals Under 46 U.S.C. 41104(a)(10) and Execution Refusals Under 46 U.S.C. 41104(a)(3)

Comments from the USDEC highlight the fallacy of presuming that as a practical matter, it will always be feasible to draw a discernible line between unreasonable refusals covered by section 41104(a)(10) as distinguished from those covered by section 41104(a)(3). See USDEC at 2–4. USDEC explained how communications between shippers and carriers typically flow in the real world. As it explained, shippers’ and carriers’ negotiations are not always neatly confined to rates and general terms of service. Id. Rather, negotiations may cover all

matters related to the shipment, such as the cost of the shipment, the volume of the shipment (both in terms of total TEU containers as well as weight), the timing of vessel accommodations, origin and location of shipments, whether the shipment involves any intermodal carriage, the inclusion of equipment (containers, reefers, chassis), among other details.

Id. at 2–3.

What these concerns mean as a practical matter is that discerning whether a common carrier has unreasonably refused cargo or vessel space accommodations is not a simple binary question of determining what prevented the shippers’ cargo from actually being loaded aboard an outbound vessel. That question may be bound up with an unbroken series of interactions and communications that cannot always be neatly separated into the negotiation stage (covered by 46 U.S.C. 41104(a)(10)) and the execution stage (covered by 46 U.S.C. 41104(a)(3)) of the parties’ interactions. Id. at 3–4. USDEC suggests the Commission address this concern by defining “whether negotiation can occur on only limited aspects of this scope, or if it must encompass all the aspects of a vessel accommodation.” Id. Instead of broadening the scope of section 41104(a)(10) as USDEC suggests, the Commission proposes defining unreasonable refusals covered by section 41104(a)(3) in the same rulemaking. For reasons already discussed, this proposed approach is superior to a bifurcated rulemaking that defines the two provisions separately. Further, the Commission proposes to define what constitute unfair or unjustly discriminatory methods within the meaning of section 41104(a)(3) in a separate rulemaking pursuant to section 7(c) of OSRA 2022.

3. Reasonableness Factors

Most commenters addressed the proposed reasonableness factors with mixed support for the existence of a documented export strategy or policy and the scope of legitimate transportation factors.

A. Documented Export Policy

The concept of having a documented export policy as stated in § 542.1(b)(2)(i) of the NPRM was generally supported by ACSA, ACC, CBA, IDFA, USDEC, and DOJ. Nearly all commenters in support provided additional context for how export strategies should be structured. ACC commented that the Commission should make it clear that export strategies should include provisions that facilitate exports, not just maintain the status quo. ACC at 4–5. ACC also asserted that carriers should report every year. ACC at 5.

Multiple commenters suggested that a more specific definition of export strategy should be provided. See CBA at 2, DOJ at 5. IDFA further recommends mandatory standards for an export strategy and regulations concerning failure to adhere to such standards. IDFA at 9–11. USDEC recommended that carrier export strategies be made public. See USDEC at 3.

PMSA and WSC opposed the proposed export strategy component for a variety of reasons. WSC stated that including an export strategy is equivalent to requiring such a strategy and the Commission lacks the authority to do so. WSC at 3. They further asserted that the Commission failed to explain how such a document would be relevant and to consider that they are sensitive business documents. WSC provided additional information it believed supports its assertion that the Commission lacks the authority to require such a document. WSC at 4. WSC also asserted that this proposed requirement will result in the lack of a document being interpreted as a per se indicator of unreasonableness, resulting in a disadvantage to the carrier. It further asserted that the lack of a required “import strategy” means that the proposed rule would not equally apply to both imports and exports, contradicting an assertion included by the Commission in the preamble. It added that this criticism should not be interpreted as suggesting that an “import strategy” document should be required. WSC at 7. Finally, it asserted that the lack of specifics on how the export strategy will be used further supports WSC’s view that such a document should be stricken from the list of factors and that any information in such a document would not be able to be made public.

Similarly, PMSA contended that the NPRM ignores imports, and as the Commission has no authority to require an import or export strategy from ocean common carriers, it cannot use the existence, or not, of such a strategy as a factor in the reasonableness analysis. PMSA at 1. It further contended that only shippers regard cargo as imports or exports and ocean carriers simply regard freight as cargo, regardless of the direction of trade.

The Commission notes the concerns of WSC that export strategies are constantly evolving as the nature of international trade changes and for this reason does not define an exhaustive list of items that must be included in an export policy but instead identifies certain elements that would be helpful in determining reasonableness. If an ocean common carrier also wanted to provide an import policy to help establish how a refusal to deal is reasonable, the Commission would consider that information. And while the Commission will not adopt the IDFA recommendation that the Commission directly compare a carrier’s export strategy to key performance indicators, the Commission notes that there are many sources of data on the amount and type of freight that carriers transport for both imports and exports which provide insight into whether the carrier’s behavior aligns with its purported policy or strategy.

While WSC is concerned that the lack of an export strategy might be considered a per se indicator of unreasonableness, that is not the intent behind the inclusion of this provision. The intent is to provide carriers with the opportunity to document that their actions align with a documented export policy. And while both WSC and PMSA comment that no similar documentation was requested for imports, the Commission notes that there are few carriers who would need to rely on such a document to provide evidence that they intend to serve the U.S. markets when their ships are already visiting U.S. ports. On the other hand, a cursory glance at the continued decline in containerized exports carried by some ocean common carriers raises the question about the carriers’ operations concerning export trades. Further, while PMSA asserts that carriers do not consider exports and imports as separate types of cargo, there is ample evidence in comments from the public, including WSC, that they do. See, e.g., CMA CGM at 2; AgTC at 2; RILA at 2–3. In addition, PMSA’s assertion in this regard ignores the existence of exporters, such as USDEC and NHC. In this SNPRM, the Commission has newly proposed revisions on the use of export policy to show what type of information from an existing export policy may be useful in establishing that a refusal to deal was reasonable. In § 542.1(b)(1), the Commission is proposing a definition of “documented export policy.” Also, the Commission is proposing extensive revisions to § 542.2(d) by revising the burden shifting framework found in the NPRM (this framework applies even if it is not included in the regulatory text) and adding a proposed requirement to have ocean common carriers follow and submit to the Commission on a yearly basis a documented export policy. It is noted that it is possible that an export policy will have different applications in different situations. An export policy is a long-term document, but it can shed light on what an individual ocean common carrier’s best business practice would generally be and whether it was adhered to in an individual case. An export policy can also address import concerns given that the two are interconnected. Proposing a requirement to submit a documented export policy to the Commission pursuant to its authority under 46 U.S.C. 40104 is an important part of monitoring the industry for unreasonable behavior vis-à-vis exports in an effort to address those concerns. Also, in § 542.1(d)(1), the Commission identifies what type of information would be required to be included in a documented export policy that would help the Commission determine whether an ocean common carrier’s conduct in a specific matter aligns with their general policies and thus acted reasonably.

B. Legitimate Transportation Factors

The proposed inclusion of legitimate business factors as one of the reasonableness factors was opposed by the majority of commenters. Two commenters expressed concerns that legitimate business factors would be used to justify rejecting entire classes of cargo, such as hazardous materials. NACD at 3 and NITL/ISRI at 9–10. While WSC favored the use of legitimate business factors, it objected to a reference to the “character of the cargo” as vague (87 FR 57677) and suggested removing it from the final rule (WSC at 11). The Commission clarifies that this reference is not intended to allow ocean common carriers to wholesale refuse to deal or negotiate with respect to carriage of certain categories of cargo, such as hazardous materials. The Commission further notes that the definition proposed in the regulatory text does not include “character of the cargo.” This SNPRM does revise the definition of transportation factors to focus the scope more squarely on vessel operation considerations.

Multiple commenters worried about including profit or revenue as a legitimate business factor. AgTC cited including revenue factors as part of transportation factors will create a “loophole” for carriers. AgTC at 4–5. Likewise, several commenters suggested dropping profit and business decisions or strategies from the list of legitimate factors. See BassTech at 3; IDFA at 9–11; IFPA at 1; NITL/ISRI at 10. CMA CGM stated that profitability and legitimate business decisions must be factors. CMA CGM at 2. WSC suggested adding business decisions to the regulatory text. In its view, the scope of business decisions would include past poor performance from the shippers, changing port calls due to blank sailings or other factors, and balancing import and export customer needs. WSC at 9–11. Given the thoughtful and varied comments received on the concept of reasonable business decision-making, this SNPRM removes the general concept from the definition of unreasonableness. Information on business decisions relevant to establishing a reasonable refusal to deal, however, would still be relevant in the Commission’s analysis. The SNPRM does not preclude considerations that an ocean common carrier can present when articulating its justification for refusing to deal.

The Commission notes that in its proposed regulatory text at § 542.1(b)(1) of the NPRM, the term “transportation factors” would encompass “the genuine operational considerations underlying an ocean common carrier’s practical ability to accommodate laden cargo for import or export, which can include, but are not limited to, vessel safety and stability, scheduling considerations, and the effect of blank sailings.” The Commission notes the disconnect between this language and language in the preamble that, “[a]n ocean common carrier may be viewed as having acted reasonably in exercising its business discretion to proceed with a certain arrangement over another by taking into account such factors as profitability and compatibility with its business development strategy.” In this SNPRM, at § 542.1(b)(2), the transportation factors have been changed and the Commission now proposes to focus those factors on considerations related to vessel operations. Some relevant business decisions do need to be explained as part of an export policy. Business decisions that should be explained as part of an export policy include providing a justification for why a refusal to deal by an ocean common carrier is reasonable when there was a blank sailing that affected the ocean common carrier’s ability to take on a shipment to the detriment of the shipper. Also relevant are business decisions that show that the ocean common carrier offered alternative remedies or assistance to the shipper after refusing to deal or negotiate for vessel space accommodations.

The Commission further notes, however, profit and business factors may be present when engaging in negotiations, but these factors would have to be considered alongside other factors presented when the Commission is determining what the true driving factor is for refusing to deal in a given case and whether that driving factor is reasonable.

FIATA noted a concern with the characterization of ocean common carriers’ operational decisions, particularly with request to canceled sailings and capacity decisions; namely, that the final rule needed to provide clarity around when an ocean common carrier’s operational decisions, particularly with respect to canceled sailings and capacity decisions, will result in a finding of an unreasonable refusal to deal or negotiate. FIATA at 1. WSC explained that its list of business decisions includes schedule changes, including canceled sailings. WSC at 11. The Commission notes the concern from FIATA that since carriers control capacity, they might strategically alter capacity to refuse to deal or negotiate. Canceled sailings or schedule changes are typically driven by decreased demand, port congestion, or changes in service by a vessel sharing partner. The Commission notes that evidence that an ocean common carrier changes schedules for other purposes would result in those changes not being considered a legitimate transportation factor under § 542.1(b)(2)(iii) of the NPRM. This SNPRM proposes changes to the transportation factors definition at § 542.1(b)(2) that addresses these concerns.

ACC and IDFA suggested that shippers’ lost sales be considered a reasonableness factor. ACC at 4; IDFA at 8. As noted elsewhere, the rule allows the Commission to consider any relevant factor in determining whether a refusal to deal or negotiate was unreasonable. The focus of the definition of reasonableness, however, is on the ocean common carrier’s conduct rather than the impact on the shipper. Generally, however, transportation factors relate to the characteristics of the vessel, not the status of the shipper.[4]

Finally, commenters addressed the key role of contract carriage in ocean transportation and expressed concerns that the rule will interfere with contract carriage. DOCE at 5–6, WSC at 14. The Commission notes that service contracts are key to ocean carriage and the intent of the rule is not to dictate a return to carriage under tariff, nor is it intended to interfere with the substance of service contracts reached between parties. Presumably, an enforceable service contract would not allow for the type of conduct that the Commission would be likely to consider an unreasonable refusal to deal or negotiate, and if a service contract is materially breached, the parties have remedies that are beyond the Commission’s purview. The Commission also recognizes that, as stated in the preamble, its “role is not to ensure all interested parties get the same deal,” and understands that “me too” contracts were abolished in the Ocean Shipping Reform Act of 1998. Fully cognizant of the privilege that private parties may enter into their own service contracts, the Commission means to clarify here that, regardless of contract status, an ocean common carrier may not effectively bar a shipper, including one without a service contract, from having direct access to ocean common carriage by failing or refusing unreasonably to deal or negotiate the terms of such carriage. This can include an ocean common carrier’s failure or refusal to timely provide a rate quotation upon request or to refuse to provide required ancillary intermodal services, if available.

3. Elements

Pursuant to OSRA 2022 and Commission precedent, the Commission proposed that complainants would be required to meet three elements to establish a violation for unreasonable refusal to deal or negotiate. As indicated in the NPRM, the elements would apply in cases where the allegation relates to vessel space accommodations by an ocean common carrier. As proposed, the elements were derived directly from the statutory text established in OSRA 1998 and are: (1) the respondent is an ocean common carrier under the Commission’s jurisdiction; (2) the respondent refuses to deal or negotiate with respect to vessel space accommodations; and (3) that the refusal is unreasonable. See87 FR 57679.

Commenters were generally supportive of the proposed elements, see, e.g., BassTech at 1; MICA/NAMI at 2; NFI at 2, although some specific comments expressed concerns regarding the impact of the rule in general and meeting the required elements. As noted earlier, DOJ worried that satisfying the “refusal to deal” and “unreasonable” elements would be difficult. DOJ at 4–5. While NHC viewed the proposal as falling short of the objective of ensuring the carriage of export containers, see NHC at 1, most other comments regarding the proposed elements sought a lengthier or stronger definition of “refusal” and “unreasonable,” but did not criticize the elements as a whole. See MICA/NAMI at 3–4; NITL/ISRI at 6–7, 13–14; RILA at 1, 5 (suggesting additional clarifying language for the proposed regulatory text for 46 CFR 542.1(c)(2)); Tyson at 1. This SNPRM includes changes to the definition of unreasonable to include a non-exhaustive list of scenarios of unreasonable conduct and to propose the removal of business decisions from the definition. Regarding PMSA’s concerns that the elements of the proposed rule may impact individual contract negotiations addressing price, volume, timing, payment, delivery, prior experiences, dual commitment contracts and all other factors that are addressed, see PMSA at 1, the Commission notes that this rule does not dictate the contractual terms that may be reached between an ocean common carrier and a shipper.

4. Definitions

As the Commission noted in its preamble discussion for its proposal, neither the Shipping Act, as amended, nor OSRA 2022 define the phrase “vessel space accommodations,” and this phrase has not been interpreted in prior Commission matters. Therefore, the Commission proposed to define “vessel space accommodations” generally as space provided aboard a vessel of an ocean common carrier for laden containers being imported to, or exported from, the United States. In this SNPRM, the Commission also clarifies that “vessel space services”— i.e., the services necessary to access or book vessel space accommodations—are included in the definition of “vessel space accommodations.” This definition continues to be based on the common meaning of the words in the phrase as applied in ocean shipping.

Because the phrase “refusal to deal or negotiate” does not lend itself to a general definition, the Commission proposed using a case-by-case evaluation. This SNPRM proposes a revised definition of unreasonableness after further consideration of the comments received. Additionally, the proposed definition now includes a non-exhaustive list of examples of unreasonable conduct.

A. Vessel Accommodations

The Commission received several comments regarding its proposed “vessel space accommodations” definition. Comments were generally supportive, with a few suggestions and critiques. In broad summary, the comments urged the Commission to broaden its definition of “vessel space accommodations” to include access to vessel space accommodations, meaning the services to book vessel space, the equipment to obtain vessel space, and other ancillary services that would impact exporters’ ability to obtain vessel space. While some comments supported the proposed definition but urged expansion, others withheld support due to the definition’s perceived narrow interpretation.

First, the National Industrial Transportation League (NITL) and Institute for Scrap Recycling Industries (ISRI) asked that the Commission broaden its definition of vessel space accommodation to include “vessel services.” NITL/ISRI at 7. Without the expansion, the NITL and ISRI contended that the proposed rule “fails to adhere to the intent of Congress.” Id. Similarly, the Agriculture Transportation Coalition (AgTC) says the rulemaking and the above definition is unable to “recognize the various means the carriers decline to carry export cargo.” AgTC at 1. While AgTC did not critique the “vessel space accommodations” definition specifically, it deliberately used the phrase “export cargo” instead of “vessel space accommodations” when discussing unreasonable refusals to deal or negotiate. Vessel space accommodation and export cargo hold different meanings. The Commission interprets this deliberate use of “export cargo” as a suggestion to revise the vessel space accommodation definition to refer specifically to “export cargo.” As explained elsewhere, this proposed rule applies to both import and exports. The differences between the “vessel space accommodations” definition and “cargo space accommodations” will be addressed below.

Second, the International Federation of Freight Forwarders Associations (FIATA) asked the Commission to clearly define vessel space accommodations to give context to “operational decisions” by ocean common carriers that result in a refusal to deal or negotiate. FIATA at 1. It listed “operational decisions” as common carrier actions to “carry out blank sailings, withdraw or reposition capacity, and impose peak season surcharges.” Id. BassTech also asked the Commission to revise the proposed definition of “vessel space accommodation.” BassTech at 1. Although it agreed with the Commission’s proposed definition, it asked the Commission to consider the processes and practices that would obstruct a shipper from obtaining vessel space. Id. at 2.

Third, related to the Commission’s proposed definition of vessel space accommodations, the National Customs Brokers & Forwarders Association of America, Inc. (NCBFAA) suggested that non-vessel-operating common carriers (NVOCCs) be excluded from the rule because they do not control vessel space accommodations. NCBFAA at 2–3. It cited the inability of these entities “to control vessel space accommodations.” Id. at 2. The Commission recognizes the role NVOCCs play and concur that their exclusion is appropriate as they do not control vessel space accommodations. Thus, like the proposed rule, this SNPRM only applies to ocean common carriers.

The Commission notes the potential hardships a narrow reading of “vessel space accommodations” would impose on certain industry members. In the Commission’s view, services that would impact the actual acquisition of a “vessel space” could also be used by ocean common carriers to frustrate shippers and amount to an “unreasonable refusal to deal or negotiate.” Therefore, the definition of “vessel space accommodations” necessarily implies that “vessel space services,” i.e., the services necessary to access or book vessel space accommodations, are included. Thus, this SNPRM adds a sentence to the definition to acknowledge that vessel space services are included.

5. Shifting Burden From Complainant to Ocean Common Carrier

The Commission’s initial proposal also set forth a framework for an ocean common carrier to establish that its efforts to consider an entity’s proposal or efforts at negotiation were done in good faith based on the criteria above. Once a complainant (or the BEIC) has established a prima facie case for each of the three elements above, the ocean common carrier will have the burden of production to show or justify why its refusal was reasonable. However, the ultimate burden of persuasion remains with the complainant to show that the refusal to deal or negotiate was unreasonable. Further, the proposed rule included a rebuttable presumption of unreasonableness for those situations where an ocean common carrier categorically excludes U.S. exports shipments.

A. Burden-Shifting

The Commission received various comments with regard to the proposed burden-shifting regime in the NPRM. Three entities (ACSA, NACD, NFI) supported the burden-shifting regime laid out in the NPRM without further comment. ACSA at 10; NACD at 4; NFI at 2. Three entities (AgTC, CBA, IDFA) commented that the ultimate burden should be on the ocean common carriers, not the shippers, due to the ocean common carriers’ superior access to real-time data on space availability. AgTC at 5–6; CBA at 2; IDFA at 3–4. CMA CGM commented that Congress did not expressly direct the Commission to incorporate a burden-shifting regime as part of the proposal, as it did with regard to charge complaints. CMA CGM at 2–3.

Other entities supported the burden-shifting regime, but with caveats. AgTC and WSC supported the approach but pointed out that the burden-shifting explanation in the preamble is not in the proposed regulatory text. AgTC at 5; WSC at 15. BassTech supported the proposal so long as the carrier’s evidence can be challenged (which, as noted below, would occur in Step 3). BassTech at 3–4. MICA/NAMI suggested that the Commission should also consider whether the carrier has actually engaged in good-faith communications and negotiation. MICA/NAMI at 3. NITL/ISRI strongly supported burden-shifting but did not want a carrier’s self-certification to be given dispositive or outsized weight (this SNPRM proposes the deletion of the self-certification provision). NITL/ISRI at 14–15. RILA broadly supported burden-shifting but asked it to be more closely aligned with the charge complaints procedure found in 46 U.S.C. 41310(a) and (b). RILA at 1, 4. Several entities (ACSA, CBA, IDFA) sought the addition of time limits on carrier responses, especially in cases dealing with refusals of perishable goods. ACSA at 10–11; CBA at 3; IDFA at 4.

The Commission has given careful consideration to the comments received on its proposed burden-shifting approach. As a preliminary matter, the Commission notes that this SNPRM proposes to continue using the process followed in cases arising under the Administrative Procedure Act (APA). The initial burden of production is with the complainant (Step 1). If the complainant can satisfy its initial burden of producing evidence sufficient to make out a prima facie case of a violation, the burden then shifts to the respondent to produce evidence sufficient to rebut the complainant’s prima facie case (Step 2). But the ultimate burden of persuading the Commission always remains with the complainant (Step 3). See46 CFR 502.203; 5 U.S.C. 551–559. Although a given practice could be treated as per se unreasonable, the occurrence of which would suffice to create a prima facie case of an unreasonable refusal to deal and trigger the ocean common carrier’s burden to produce evidence that the refusal was not unreasonable and thus move the case directly to Step 2, the complainant or BEIC would still have to persuade the Commission in Step 3 that the refusal was unreasonable.

Congress tasked the Commission with defining whether a particular action is an unreasonable refusal to deal or negotiate with respect to vessel space under 46 U.S.C. 41104(a)(10). It did not prescribe a particular method for the Commission to follow in developing this definition and it did not proscribe the Commission from using any particular approach. Thus, the Commission adopts the existing process for APA cases and notes in proposed § 541.2(k) that the standard is based “in accordance with applicable laws” such as the APA. The Commission also proposes to include Step 3 so that the full standard is available in the regulatory text.

As to the additional suggested modifications of the proposed burden-shifting approach, the Commission does not adopt them at this time. The Commission believes that the approach laid out in this SNPRM sufficiently expresses its expectations as to what is required and provides a reasonable approach that will effectively produce the information needed to allow the Commission to decide whether a given matter involves an unreasonable refusal to deal or negotiate.

Regarding the inclusion of specific aspects such as the application of time limitations in the context of cases involving perishable goods, the Commission may consider the inclusion of such conditions within a given case as appropriate but has opted not to mandate such limits consistent with our case-by-case approach. Regarding suggestions that the procedure be modified to more closely align with that which Congress detailed for charge complaints under 46 U.S.C. 40310, the Commission also does not adopt such an approach because section 40310 on charge complaints does not apply to refusal to deal cases. Similarly, the evidence produced by the ocean common carrier in making its case that refusal to deal or negotiate was not unreasonable is subject to challenge by the opposing party, and all evidence, as in any contested case, will be subject to scrutiny by the Commission. 5 U.S.C. 556(d).

B. Rebuttable Presumption

A number of commenters responded to the Commission’s proposed rebuttable presumption approach. For the most part, commenters generally favored the Commission’s proposal, with some strongly favoring it, see ACSA at 5; MICA/NAMI at 2; Tyson at 1, others offering general support, see NCBFAA at 2; NFI at 2; RILA at 1; and others offering suggestions along with their support. See NITL/ISRI at 14; PMSA at 3; WSC at 16. One commenter opposed the approach (and the proposal as a whole) as being insufficient in protecting exporters from being denied service whenever there is available cargo space on a vessel and urged that the proposal be revised to limit exceptions and clearly define when it is unreasonable for carriers to deny service. NHC at 1–2.

With respect to those commenters who offered specific suggestions for the Commission to consider, NITL/ISRI suggested that the regulatory text should include language specifying that a rebuttable presumption of unreasonableness applies in those cases where an ocean common carrier categorically excludes U.S. exports from its backhaul trips from the United States. NITL/ISRA at 14. PMSA offered a number of specific factors for the Commission to use in establishing a rebuttable presumption of reasonableness: (1) the presence of Federal, state or local/port policies that advocate the prioritization of the export of empty containers either through stowage plans or through the use of sweeper vessels; (2) prior experience with individual cargo owners who have engaged in unlawful or improper behavior ( e.g., misdeclaration of cargo or shipment of hazardous cargo that has caused or threatened the safety of a vessel and/or that has given rise to adverse governmental action, penalties, fines or other liability); (3) a history of late or nonpayment of services; (4) whether viable alternatives exist, whether through other VOCCs or via NVOCCs, Ocean Freight Forwarders or through Shippers’ Associations; (5) the failure to provide contracted amount of cargo or to meet minimum quantity commitments or a history of falling down ( i.e., cancellation by either party) or making ghost bookings; (6) changes in vessel rotations due to inland congestion or other factors beyond the carrier’s control; (7) whether the export customer is prepared to pay prevailing market freight rates for shipments together with all reasonable charges associated with the destination; and (8) whether the export destination is one with sufficient infrastructure to handle the return of equipment (containers, chassis) such that a return shipment and/or repositioning can be accomplished at a reasonable time and cost. PMSA at 3.

The WSC suggested that the Commission modify the proposed regulatory text for the shifting of the burden of production to emphasize that the burden of persuasion ultimately remains with the complainant or BEIC:

A complainant (or the BEIC) may seek to establish a violation of 46 U.S.C. 41104(a)(10) by producing sufficient evidence to establish a prima facie case of a violation. If a complain[ant] (or the BEIC) establishes a prima facie case of a violation, the burden of production shifts to the ocean common carrier to rebut the complainant’s [or the BEIC’s] evidence and justify that its actions were reasonable. Once the ocean common carrier has fulfilled its burden of production, the burden of persuasion rests with the complainant (or BEIC) to prove its case.

WSC at 16. The Commission is proposing to include similar language in § 541.2(k)(3).

Regarding the specific suggestion offered by the NITL/ISRA, the Commission notes that the regulatory text proposed in this SNPRM is sufficient to cover those situations where an unreasonable refusal to carry U.S. exports occurs. The inclusion of the specific example of a carrier’s exclusion of U.S. exports from a backhaul trip is unnecessary given the criteria for evaluating whether an ocean common carrier’s action is unreasonable. While PMSA’s specific examples are illustrative of the types of factors that the Commission may consider when evaluating a specific claim, including these examples within the regulatory text is also unnecessary for similar reasons. However, the Commission notes that this rulemaking does not restrict the ability of ocean common carriers to reposition empty containers, including through use of sweeper vessels. As for the WSC’s suggested rewriting of the proposed regulatory text for the shifting of the burden of production, the Commission is proposing language that shows that the burden of persuasion lies with the complainant within the regulatory text.

6. Certification

The proposed rule also sought to include a mechanism for an ocean common carrier to justify its actions through means of a certification. Although the proposal did not require a certification for this purpose, the Commission indicated that it was considering whether to make certification by a U.S.-based compliance officer mandatory. The Commission also noted that any justification must be directly relevant and specific to the case at hand and further noted that information or data supporting generalized propositions would not be helpful in determinations of reasonableness for a specific case. Instead, a certification should document the ocean common carrier’s decision in a specific matter, the good faith consideration of an entity’s proposal or request to negotiate, and the specific criteria considered by the ocean common carrier to reach its decision. The Commission explained that certification in this context meant that an appropriate U.S.-based representative of the ocean common carrier attests that the decision and supporting evidence is correct and complete. An appropriate representative can include the ocean common carrier’s U.S.-based compliance officer. As explained above, however, certification by a compliance officer that a refusal to deal was not unreasonable, and the evidence underlying the certification, are elements that the Commission will consider in the context of deciding the case. The Commission will receive evidence that is relevant and will give it the appropriate weight. Certification by a compliance officer would be but one factor; it does not automatically end the case in favor of the ocean common carrier.

Some commenters supported the proposed certification. See BassTech at 3–4 (supported so long as the certification can still be disputed), DOJ at 5; MICA/NAMI at 2; NCBFAA at 2; NFI at 2; Tyson at 1 (supporting MICA/NAMI comments). Others raised concerns. See NACD at 4 (indicating that while it did not oppose the use of an optional certification by carriers it harbored concern over that certification being given undue weight in determining reasonableness); NITL/ISRI at 15 (expressing concern over undue weight being afforded to carrier decisions when evaluating reasonableness under the proposed certification approach); WSC at 15–16 (suggesting that (1) the proposed certification method be only one of a variety of permissible ways for an ocean common carrier to demonstrate reasonableness, (2) ocean common carriers who do not certify not be prejudiced, (3) the Commission explain the probative value of certifying, and (4) the Commission explain why it is considering making certification by a U.S.-based compliance officer necessary). Still other commenters expressly opposed allowing any self-certification by carriers. See IDFA at 10–11 (opposing carrier self-certification and suggesting that certification be continuous and overseen by an independent third party), NHC at 1–2 (generally critical of the proposal in its entirety).

After carefully considering these comments, the Commission has decided not to adopt a mandatory requirement that the certification be made by a U.S.-based compliance officer. Although self-certification could have provided some useful information, a robust and mandatory self-certification approach would require a more holistic and costly approach and the Commission finds it is not necessary at this time.

7. Other Issues

Finally, the Commission received a number of comments that did not fall within the categories already discussed. These comments covered a broad range of topics ranging from simply offering the commenter’s expertise through further individualized discussions to help better understand the Commission’s proposal ( e.g., Lanca at 1) to more in-depth suggestions falling outside the immediate scope of the proposal ( e.g., Tyson at 1–2 (suggesting that the Commission require carriers to provide accurate forecasting and updated information to ensure that shippers can position their shipments at port terminals within agreed-upon time windows, supporting greater transparency with respect to vessel capacity, loading timeframes, and vessel schedule changes that would impact contracted delivery times, and urging the Commission consider how it plans to address forthcoming changes to import rotation and the impact of these changes on port congestion)). Some of these issues are under consideration in the Maritime Transportation Data System project. See https://www.fmc.gov/​fmc-maritime-transportation-data-initiative/​.

AgTC and IDFA both commented that the proposal failed to deal with “de facto unreasonable refusals to deal” that are not the product of negotiations, but rather are dropped on the shipper by the carrier at the last minute. AgTC at 3; IDFA at 2–3. FIATA suggested that the Commission should address whether the rule applies to shipments of foreign cargo as long as there are some U.S. shipments involved in the same service contract. FIATA at 2. BassTech appreciated that the status of the shipper is not a legitimate transportation factor sufficient to refuse a booking but expressed concern that a shipper’s status could nevertheless be grounds for a refusal based on a reasonable business decision ( i.e., especially with regard to hazardous cargo). BassTech at 3. ACC believed that the proposed rule failed to consider the negative effect on the exporter of a refused booking. ACC at 2. CBA argued that there should be a national data portal or similar information technology infrastructure to allow all parties to have access to all the relevant booking and space-availability data. CBA at 3. CMA CGM commented that “me too” contracts were abolished in 1998 and parties must continue to be free to contract as they wish. CMA CGM at 2.

MICA/NAMI noted that difficulties in getting perishable cargo shipped has led to the loss of business for U.S. suppliers and enabled in-roads by competitors in Europe and Australia. MICA/NAMI at 2. They cited to export data showing blank sailings rose as chilled beef and pork exports to high-value markets declined. MICA/NAMI at 2. MICA/NAMI also pointed to insufficient information shared by ocean common carriers regarding vessel schedules and space availability as factors complicating the ability of shippers to identify alternate routes or means of transportation for their products. MICA/NAMI at 3. MICA/NAMI further noted that ocean common carriers often cancel meat and poultry export bookings up to the sailing date with no warning to shippers and that its member experiences with “failures to deal or negotiate” on detention and demurrage fees posed a major problem. MICA/NAMI at 3. They also urged that “[i]n cases where a carrier may be holding cargo until an invoice is paid regardless of its validity, the lack of a clear channel of communication to challenge the billing statement is unconscionable and should be addressed by the FMC” as part of this (and other) rulemakings. MICA/NAMI at 3.

As indicated elsewhere, this supplemental proposal addresses the criteria that the Commission will consider in evaluating whether there has been a refusal to deal or negotiate, which will occur on an individualized basis. The Commission appreciates the additional feedback provided regarding the field experiences shared by MICA/NAMI members. These experiences will be considered as appropriate within the context of a given case. Also, some proposals may be outside the scope of this rule and/or better addressed by other Commission initiatives such as the Demurrage and Detention Billing Requirement rule, Commission’s Docket No. 22–04, other future rulemakings or the Maritime Transportation Data System project.

NAM observed that ocean common carriers own and operate the ships (and often, the containers) used in ocean transit and noted that any enforcement measures should be directed towards those parties responsible for schedules and operational disruption. NAM at 2. NAM also generally noted that disruptions to the supply chain have a ripple effect and indicated that “[e]stablishing minimum notification thresholds for ocean common carriers as they plan strategic equipment movement and port calls would ease burdens for all shipping partners and enhance system-wide transportation supply chain reliability.” NAM at 2. NAM also noted that the prominence of blank sailings and a rising propensity/apparent partiality of ocean common carriers to accept empty containers for profitability goals are linked to economic viability and competitiveness for U.S. manufacturers and encouraged the Commission to consider these factors in this rulemaking. NAM at 2–3.

The Commission acknowledges the disruptions noted by NAM and appreciates the concerns it raised with respect to the impacts these disruptions have on the overall supply chain. With respect to the factors noted by NAM regarding the evaluation of blank sailings, the Commission notes that the causes of blank sailings may vary, ranging from inclement weather, force majeure events, port congestion, vessel mechanical failure and a steep decline in demand. As a result, an individual ocean common carrier may not necessarily have control over the causes leading to blank sailings. While the impacts of these actions often lead to cascading negative impacts, the Commission’s focus in the context of this rule is to address instances where ocean common carriers fail to mitigate the impacts flowing from blank sailings and other similar actions instead of actively working with the shipper to get alternative accommodations for the freight. In its evaluations, the Commission anticipates that it will consider the relevant facts present in an individual situation to determine whether those actions by an ocean common carrier fall within the scope of the definition being set out as part of this SNPRM.

NCBFAA suggested that NVOCCs be excluded from the scope of the rule and described the supportive role that NVOCCs play in helping their customers navigate the complex ocean shipping industry by securing competitive pricing and favorable transportation routes by using the unique industry experience and relationships NVOCC have developed with ocean common carriers. NCBFAA at 2. NCBFAA emphasized that NVOCCs, unlike ocean common carriers, do not control vessel space accommodations. NCBFAA at 2–3. This SNPRM continues to restrict its application to VOCCs and does not include NVOCCs at this time. The Commission agrees that NVOCCs, unlike ocean common carriers, do not control vessel space accommodations.

NFI noted its members continue to face carrier-related shipping issues, including unpredictable dwell times; exponential increases in demurrage and other port-related costs; unfair and discriminatory commercial practices against shippers by oceangoing carriers and NVOCCs; shortages of containers, chassis, and labor; dramatically higher tariff/contract rates for oceangoing freight; and limited cold storage availability. NFI at 2.

The Commission acknowledges the presence of the issues noted by NFI but also notes that issues centering on container, chassis, and labor shortages are, in many cases, not carrier-related in origin. This SNPRM may not necessarily directly resolve each of these issues, but the Commission acknowledges that shippers face significant stresses stemming from supply chain congestion and also notes that these factors fall outside the scope of the Commission’s task in defining what constitutes an unreasonable refusal to deal or refusal to negotiate.

NITL/ISRI asserted that blank sailing decisions must be reasonable to justify refusals to deal or negotiate, such as being based on a legitimate need to right-size supply based on demand rather than an action to reduce capacity to artificially inflate prices. NITL/ISRI at 11.

As noted previously, blank sailings may be attributed to a variety of causes that may fall outside of an ocean common carrier’s control. The Commission notes that an ocean common carrier’s refusal to deal or negotiate within a blank sailing context must also be weighed against an ocean common carrier’s efforts to mitigate the impacts on its customers when a blank sailing (or other similarly adverse outcome due to vessel schedule changes, including timing and port calls) occurs. Through this SNPRM, the Commission is setting forth the criteria that will be applied to determine whether a given refusal to deal or negotiate satisfies the condition of being unreasonable. Such a determination will necessarily include a consideration of the mitigating steps taken by an ocean common carrier to work with its shipper customers. The Commission will monitor these activities and act accordingly. Any future refinements to the Commission’s regulations may be considered, if appropriate.

PMSA asserted that the proposal ignored imports even though imports are part of the overall network. PMSA at 1. It added that the proposal also did not mention the roles of shipper associations, NVOCCs, and ocean freight forwarders. PMSA asserted that these entities can collectively combine their bargaining power and provide export-related support to individual shippers and their respective roles should factor into any export policy or inquiry. PMSA at 2.

The September 2022 proposal specifically noted that the current statutory framework does not distinguish between U.S. exports or imports and that it would apply to both. See87 FR 57674. The Commission recognizes that imports are an inherent component of the overall shipping network and the application of this rule to both imports and exports reflects that recognition. As to the roles of those entities who are not VOCCs, the Commission notes that while this SNPRM would apply only to VOCCs, the roles of other entities who play a role in potential Shipping Act violations would be addressed in the context of the appropriate statutory provisions applicable to those violations, such as those provided under 46 U.S.C. 41102 and 41104, and the Commission will evaluate those violations as appropriate.

RILA urged the Commission to strengthen the language of its proposal, particularly with respect to its applicability to conduct occurring in the context of an existing service contract relationship to help ensure that the rule addresses the concerns and real-world experiences of U.S. importers and exporters. RILA at 1. RILA also emphasized that the Commission should account for the circumstances and criteria relevant to U.S. importers in addition to exporters. RILA at 2. It noted that many U.S. importer plans were disrupted when VOCC contract partners abruptly stopped providing cargo space for which importers had contracted, thereby forcing them onto the spot market and its accompanying higher rates. RILA at 2.

The Commission assumes that in those instances where a service contract already exists between an ocean common carrier and a shipper, a refusal to deal or negotiate would be addressed within the context of the provisions of the agreement made between those parties and the remedies afforded when there is a breach of contract. However, it is possible that there are circumstances in which a contract is silent on what to do if there is a refusal to deal or negotiate within the bounds of the contractual relationship. The Commission is interested in comments identifying those situations where a contract does not address how a refusal to deal with respect to vessel accommodations would be remedied.

In addition to the issues noted earlier, Tyson stated that the proposed rule would enable the Commission to ensure carriers are “providing a sound business rationale for either failing to accept a booking request or failing to fulfill an existing booking agreement.” Tyson at 2. It added that changes are needed “to ensure the flow of information is balanced and allows each party, both carriers and shippers, to have fair and informed discussions regarding vessel space.” Tyson at 2.

The Commission acknowledges the importance of ensuring that a sufficient information flow exists between ocean common carriers and shippers regarding vessel space, but this particular issue falls outside the scope of this rulemaking.

USDEC indicated that the regulations that the Commission adopts must emphasize consistency and to this end, suggested that the Commission establish a “consistency test” to help it assess whether a carrier is deviating from its past practices with respect to negotiating for vessel accommodations. USDEC at 3. It also suggested that the Commission consider what information a shipper should retain to substantiate a violation under whatever regulation is adopted. USDEC at 3. In its view, the adopted regulations should result in increasing a shipper’s ability “to effectively seek and secure vessel space accommodations in a competitive marketplace.” USDEC at 3. With respect to the scope of negotiation, USDEC suggested that the Commission outline “whether negotiation can occur on only limited aspects” or all aspects of vessel accommodation such as the shipment’s cost, volume, origin or location, and the involvement of intermodal carriage. USDEC at 3–4. USDEC suggested that the Commission consider adopting “anti-backsliding” provisions as part of its rule to ensure that carriers negotiate in good faith and to prevent carriers from engaging in a pattern of rolling, delaying, or cancelling shipper bookings. USDEC at 4. Additionally, USDEC asserted that the Commission should consider the impacts to shippers from a failure to negotiate on vessel accommodations within the context of potential enforcement actions and penalties for violations, impacts such as those on potential lost sales, diminished product values, additional shipping costs, and increased administrative costs. USDEC at 4–5. USDEC added that penalties imposed by the Commission should operate as a deterrent to willful or negligent violations of the regulations and be sizable enough to encourage corrective action by the carrier. USDEC at 5.

The Commission agrees that its rules should be applied consistently after a careful consideration of the facts presented in a given case. Regarding the types of information that a shipper should retain to substantiate a potential violation, each shipper should retain those materials that it believes clearly demonstrates that the violation being alleged has occurred. This information may differ based on the specific circumstances involved and may involve items such as (but not limited to) the documenting of attempts to reach an ocean common carrier and, if available, written communications indicating a refusal by an ocean common carrier. The scope of any negotiation will depend on the individual circumstances that present themselves and the Commission will evaluate those circumstances as they appear in a given case as appropriate. Consideration of an anti-backsliding provision to ensure that ocean common carriers negotiate in good faith and do not engage in a pattern of disrupting shipper bookings, along with the setting of appropriate penalties for violations, are issues falling outside the scope of this specific rulemaking but may be considered in the context of other rulemakings as well as enforcement actions taken by the Commission.

III. Proposed Changes to the NPRM

The Commission is modifying aspects of the NPRM in this SNPRM after evaluating the proposed rule in light of the comments received. The SNPRM proposes to modify the definition of transportation factors to focus on vessel operation considerations. The SNPRM proposes a revision of the definition of the term unreasonable as well as includes a non-exhaustive list of examples of unreasonable conduct. This change is intended to provide a better idea of what types of conduct that Commission believes would generally be considered unreasonable. The Commission proposes to clarify that vessel space services were already included in the definition of vessel space accommodations and add a definition for cargo space accommodations as well. It also includes new text discussing the relationship between 46 U.S.C. 41104(a)(3) and (a)(10) and the elements required to establish violations of those provisions. Also, many comments expressed concerns about how business decisions would affect the overall analysis and thus this SNPRM changes how business decisions will be considered. This SNPRM then revises the voluntary export policy documentation language and proposes that ocean common carriers submit a documented export policy to the Commission once per year. It also revises the burden shifting framework to clarify that it applies even if it was not included in the rule and notes that the ultimate burden of persuasion lies with the complainant or BEIC. Finally, this SNPRM proposes to remove the voluntary certification provision as it is not necessary.

A. Section 542.1(b)—Definitions

In § 542.1(b), this SNPRM proposes a new definition of “cargo space accommodations,” “documented export policy,” and “sweeper vessel.” It also proposes to modify the definitions for “transportation factors” and “unreasonable,” and “vessel space accommodations.” After careful consideration of the comments, these proposed definitions now provide more clarification and specificity to allow parties to identify unreasonable refusal to deal more easily.

The proposed definition of “cargo space accommodations,” like the definition of “vessel space accommodations” has not been interpreted in prior Commission matters. The two definitions are similar because both terms are part of concepts aimed at preventing similar conduct at different points of a shipping transaction. Because the term “cargo space accommodations” concerns situations where the parties have an existing relationship and/or already mutually agreed on terms and conditions via a booking confirmation, it is presumed that there is some evidence that negotiation for space aboard the vessel has already occurred. The Commission is interested in comments addressing if, in fact, that space has been agreed to at the time of a booking confirmation.

The new proposed definition of “vessel space accommodations” means space that is available aboard a vessel. Since 46 U.S.C. 41104(a)(10) prohibits unreasonable refusals during the negotiation stage—when the parties do not have an existing relationship and/or are initiating negotiations over terms and conditions of service, it is presumed that space has not yet been provided but that it may be available.

Both definitions, “cargo space accommodations” and “vessel space accommodations” should also include the concept of vessel space services. The Commission proposes to include in these definitions a reference to the services necessary to access or book vessel space accommodations. As some comments pointed out and is discussed above, services that would impact the actual acquisition of a “vessel space” could also be used by ocean common carriers to frustrate shippers and amount to an “unreasonable refusal to deal or negotiate.” Thus, an unreasonable refusal to deal over the related services should also be included in the definition. These services could include for example, a shipper’s access to a representative or a booking portal for vessel space, in summary any service impacting a shipper’s ability to confirm its booking. It could also include services involving operational decisions that would impact a shipper’s already-confirmed booking for purposes of the definition of “cargo space accommodations.”

The Commission is also proposing a new definition of “documented export policy.” This proposed definition uses the term “policy” instead of “strategy” to better describe the type of information the Commission seeks. The proposal is intended to identify that the export policy must be in the form of a report and it must detail practices and procedures for U.S. outbound services. Pursuant to its authority in 46 U.S.C. 40104, the Commission seeks to require ocean common carriers to provide this information to the Commission on a yearly basis. It will use this information to monitor the industry for any unreasonable behavior with respect to refusals to deal or negotiate.

This SNPRM newly proposes a definition for “sweeper vessel.” After reviewing the public comments, the Commission wanted to note that the use of sweeper vessels is a legitimate practice that is critical to the efficiency of our transportation system. This new definition, however, does specify that a sweeper vessel must be one exclusively designated for that purpose, i.e., a carrier that does not want to take exports cannot designate a vessel as a sweeper vessel in order to avoid certain shipments.

In the “transportation factors” definition, this SNPRM proposes to focus the definition on “vessel operation considerations” rather than the broader “genuine operational considerations” phrase that included factors other than those related to the safe operation of the vessel. For that reason, this SNPRM also proposes to remove the phrase “the effect of blank sailings” since this factor is not directly related to vessel safety or operational needs. Given the focus on operational considerations, the proposed definition now also includes “weather-related scheduling considerations” to ensure that scheduling within the control of the ocean common carrier is not used as a factor. The Commission also seeks to clarify with this SNPRM that transportation factors are not a way for a carrier to refuse to carry entire classes of cargo such as properly tendered hazardous cargo, heavier products or inland shipments. Instead, legitimate transportation factors must exist, be outside the vessel operators’ control and relate to the facts of a specific transaction or vessel.

The Commission also seeks to revise the definition of the term “unreasonable” by proposing an overarching definition that applies in both 46 U.S.C. 41104(a)(3) and 41104(a)(10) claims. In later sections of the rule, the SNPRM proposes revised factors and examples of unreasonable conduct that are non-binding and illustrate the type of conduct that Commission will consider unreasonable. The new proposed definition of the term “unreasonable” is ocean common carrier conduct that unduly restricts the ability of shippers to access ocean carriage services. The Commission believes this definition better aligns with the purpose of OSRA 2022 and the Shipping Act, as amended, as a whole.

B. Section 542.1(c) Through (e)—Claims Under 46 U.S.C. 41104(a)(3)

The Commission proposes adding new § 542.1(c) through (e) to define how a shipper can address unreasonable conduct by ocean common carriers that prevents shippers from obtaining space aboard vessels, when available, for their cargo pursuant to 46 U.S.C. 41104(a)(3). Section 542.1(c) proposes the elements of a claim. These elements are similar to those for a 46 U.S.C. 41104(a)(10) claim under § 542.1(f) given that both claims aim to prevent similar conduct at different points of a shipping transaction. As previously stated above, 46 U.S.C. 41104(a)(3) claims focus on those refusals that occur at the execution stage, after the parties reached a deal or mutually agreed on service terms and conditions via a booking confirmation subject to section 41104(a)(3).

Section 542.1(d) proposes a list of factors that the Commission may choose to consider in evaluating whether a particular ocean common carrier’s conduct was unreasonable. Like in a claim under 46 U.S.C. 41104(a)(10), the factors mentioned would help establish an ocean common carrier’s bona fide attempts and interest in fulfilling its previously made commitment to a shipper to take its cargo. Provision of a documented export policy includes a good faith effort in mitigating the impact of the refusal as well as evidence that the refusal was based on legitimate transportation factors. These are all considerations the Commission could rely on to make a reasonableness finding.

In § 542.1(e), the Commission proposes a non-binding and non-exhaustive list of examples to show the type of conduct it could consider unreasonable pursuant to 46 U.S.C. 41104(a)(3). The examples listed are the types of situations that could signal that an ocean common carrier was not sincere in attempting to fulfill the previously agreed-to service terms and conditions.

The example in § 542.1(e)(4) identifies an issue raised in the comments. See, e.g., Bass Tech at 1; IDFA at 2. The imposition by ocean common carriers of time restrictions on when a vessel can be loaded that are impracticably short thereby denies a shipper actual access to cargo space accommodations that have ostensibly been provided. As discussed, the focus of the rule is on eliminating impediments to access. The Commission may view carrier-imposed time constraints as unreasonable if they unduly deprive a shipper acting in good faith of access to cargo space.

Finally, the Commission believes it should keep open the opportunity to consider any other interactions or communications with the shipper as well as other conduct that the Commission finds unreasonable in any given case. Thus, the proposed list is considered non-exhaustive and only provides examples of conduct that could be considered unreasonable. The decision will be made on a case-by-case basis.

C. Section 542.1(f) Through (h)—Claims Under 46 U.S.C 41104(a)(10)

The Commission proposes adding new § 542.1(f) through (h) to define how a shipper can address unreasonable conduct by ocean common carriers that refuses to deal or negotiate with shippers regarding vessel space accommodations pursuant to 46 U.S.C. 41104(a)(10). Section 542.1(f) contains the elements of a claim. These elements are the same as those proposed in the NPRM.

Section 542.1(g) proposes a list of factors that the Commission may choose to consider in evaluating whether a particular ocean common carrier’s conduct was unreasonable. The factors in this section are those that were proposed in § 542.1(b)(2)(i) through (iv) of the NPRM except that business decisions are no longer a factor to be explicitly considered. The Commission decided with the help of the public comments that there is the potential for business decisions to overwhelm the rest of the factors and thus it decided to remove that language from the proposed rule. In this SNPRM, the provision of a documented export policy, good faith effort showing an interest and ability in mitigating the impact of the refusal and evidence that the refusal was based on legitimate transportation factors are all considerations the Commission could rely on to make a reasonableness finding. The list is not exhaustive as other facts the Commission finds relevant could be considered. The factors in § 542.1(g) are the same as those proposed in § 542.1(d).

In 46 CFR 542.1(h), the Commission proposes a non-binding and non-exhaustive list of examples to show the type of conduct it could consider unreasonable pursuant to 46 U.S.C. 41104(a)(10). The examples listed are the types of situations that could signal that an ocean common carrier was not sincere in attempting to fulfill the previously agreed-to service terms and conditions.

The various proposed scenarios the Commission finds involve unreasonable conduct by ocean common carriers. These include: (1) quoting rates that are so far above market as to render the quote not a serious negotiation; (2) categorically or systematically excluding exports in providing vessel space accommodations, and (3) any other interactions or communications with the shipper or other conduct the Commission finds unreasonable.

The SNPRM rule proposes that quoting rates that are so far above market as to render the quote not a serious negotiation is unreasonable conduct. An ocean common carrier would be required to consider in good faith a shipper’s effort at negotiation. Consideration in good faith includes, among other things, quotes that are within reasonable market rates. See, e.g., NITL/ISRI at 13–14. If in response to a shipper’s request for vessel space accommodations the carrier quotes rates far above market (or insists on other terms, such as unrealistic quantity demands), it will likely be regarded under the SNPRM as an unreasonable refusal to deal or negotiate under 46 U.S.C. 41104(a)(10).

Finally, the Commission believes it should keep open the opportunity to consider any other interactions or communications with the shipper as well as other conduct generally the Commission finds unreasonable in any given case. Thus, the proposed list is considered non-exhaustive and just provides examples of conduct that could be considered unreasonable. The decision will be made on a case-by-case basis.

1. Section 542.1(i)—Use of Sweeper Vessels

In § 542.1(i), the Commission is proposing that the use of sweeper vessels is a legitimate practice that is critical to the efficiency of our transportation system. Along with the proposed definition, this paragraph serves as a reminder that a sweeper vessel must be one designated for that purpose. This provision is proposed to prevent ocean common carriers from using ad hoc designations of vessels as sweeper vessels to avoid having to take certain export shipments.

2. Section 542.1(j)—Documented Export Policy

This SNPRM modifies the voluntary documented export policy found in the NPRM and now proposes a requirement that ocean common carriers follow and submit to the Commission on a yearly basis a documented export policy. Proposing a requirement to submit a documented export policy to the Commission pursuant to its authority under 46 U.S.C. 40104 is an important part of monitoring the industry for unreasonable behavior vis-à-vis exports in an effort to address those concerns. Also, in § 542.1(j)(1), the Commission identifies what type of information it seeks to have included in a documented export policy that would help the Commission determine whether an ocean common carrier’s conduct in a specific matter aligns with their general policies and that the ocean common carrier thus acted reasonably. The yearly requirement would provide an appropriate but not overly burdensome time frame on which to report updates to the policy relative to changes in the industry. The proposed report documenting an ocean common carrier’s export policy would remain confidential. Aggregate data may be provided in annual reports submitted to Congress or compiled for other purposes but will not reveal confidential information provided by or about individual carriers.

Although the Commission is not proposing in this SNPRM a voluntary export policy, it is interested in receiving comments on this alternative. The Commission believes the new proposed requirement to submit the export policy to the Commission on a yearly basis will enhance its ability to monitor the industry for prohibited actions but would also consider a voluntary approach. Maintenance of a voluntary documented export policy would allow ocean common carriers to maintain and provide a documented export policy showing how it developed and applied business decisions in a fair and consistent manner in the instance of a claim before the Commission. The documented export policy could also address situations, such as schedule disruptions (due to blank sailings or other conditions) on the ability to take on shipments. Carriers may also address the alternative remedies or assistance it will make available to a shipper who is refused vessel space accommodations. Developing this type of detailed information and providing it during the burden shifting process could assist the Commission’s analysis when deciding whether the ocean common carrier’s conduct was reasonable. The Commission seeks comments on these two approaches.

3. Proposed language in the NPRM Removed in This SNPRM

The Commission is proposing revisions to § 542.1(d) of the NPRM by moving the burden shifting framework to § 542.1(k) and clarifying certain issues raised in the comments. Various commenters pointed out that this is the existing process under the APA. The new proposed section emphasizes that the burden shifting framework is not unique to this proposed rule and remains a legal requirement whether it appears in the SNPRM or not. Also, this SNPRM proposes including in § 542.1(k)(3) that the ultimate burden of persuading the Commission remains with the complainant (or BEIC). This language is responsive to comments received recommending this language be included.

The Commission also proposes to remove the self-certification by ocean common carrier provision in § 542.1(d) of the original proposed rule. Numerous commenters raised concerns about this voluntary provision and that they would be given undue weight in the Commission’s analysis. Some commenters supported the provision if it was part of a more robust process including an independent evaluation of the information forming the basis of the certification. Although self-certification could have provided some useful information, a robust and mandatory self-certification approach addressing some of these concerns would require a more holistic and costly approach and the Commission finds it is not necessary at this time.

The Commission seeks comment and supporting information regarding all the proposed changes in this SNPRM.

IV. Public Participation

How do I prepare and submit comments?

Your comments must be written and in English. You may submit your comments electronically through the Federal Rulemaking Portal at www.regulations.gov. To submit comments on that site, search Docket No. FMC–2023–0010 and follow the instructions provided.

How do I submit confidential business information?

The Commission will provide confidential treatment for identified confidential information to the extent allowed by law. If your comments contain confidential information, you must submit the following by mail to the address listed above under ADDRESSES :

  • A transmittal letter requesting confidential treatment that identifies the specific information in the comments for which protection is sought and demonstrates that the information is a trade secret or other confidential research, development, or commercial information.
  • A confidential copy of your comments, consisting of the complete filing with a cover page marked “Confidential-Restricted,” and the confidential material clearly marked on each page. You should submit the confidential copy to the Commission by mail.
  • A public version of your comments with the confidential information excluded. The public version must state “Public Version—confidential materials excluded” on the cover page and on each affected page and must clearly indicate any information withheld. You may submit the public version to the Commission by email or mail.

How can I read comments submitted by other people?

You may read the comments received on this SNPRM at www.regulations.gov by searching Docket No. FMC–2023–0010, Definition of Unreasonable Refusal to Deal or Negotiate with Respect to Vessel Space Accommodations Provided by an Ocean Common Carrier.

V. Rulemaking Analyses

A. Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 601–612, provides that whenever an agency publishes a notice of proposed rulemaking under the Administrative Procedure Act (APA), 5 U.S.C. 553, the agency must prepare and make available for public comment a regulatory flexibility analysis describing the impact of the rule on small entities, unless the head of the agency certifies that the rulemaking will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 603–605. As the head of the agency, the Chairman, by voting to approve this SNPRM, is certifying that it will not have a significant economic impact on a substantial number of small entities.

B. National Environmental Policy Act

The Commission’s regulations categorically exclude certain rulemakings from any requirement to prepare an environmental assessment or an environmental impact statement because they do not increase or decrease air, water or noise pollution or the use of fossil fuels, recyclables, or energy. 46 CFR 504.4. This SNPRM describes the Commission’s criteria to determine whether an ocean common carrier has engaged in an unreasonable refusal to deal with respect to vessel space accommodations under 46 U.S.C. 41104(a)(10), and the elements necessary for a successful claim under that section. This rulemaking thus falls within the categorical exclusion for matters related solely to the issue of Commission jurisdiction and the exclusion for investigatory and adjudicatory proceedings to ascertain past violations of the Shipping Act. See46 CFR 504.4(a)(20), (22). Therefore, no environmental assessment or environmental impact statement is required.

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3521) (PRA) requires an agency to seek and receive approval from the Office of Management and Budget (OMB) before collecting information from the public.[5] The agency must submit collections of information in proposed rules to OMB in conjunction with the publication of the notice of proposed rulemaking.[6] As defined in 5 CFR 1320.3(c), “collection of information” comprises reporting, recordkeeping, monitoring, posting, labeling, and other similar actions. An agency may not collect or sponsor the collection of information, nor may it impose an information collection requirement, unless it displays a currently valid OMB control number.

This action contains new information collection requirements. The title and description of the information collection, a description of those who must collect the information, and an estimate of the total annual burden follow. The estimates cover the time for reviewing instructions, searching existing sources of information, gathering and maintaining the information needed, and completing and reviewing the collection.

Title: Documented Export Policy.

OMB Control Number: None assigned yet.

Summary of the Collection of Information: This SNPRM proposes a requirement that ocean common carriers create and maintain a documented export policy they submit to the Commission on a yearly basis.

Need and Proposed Use of Information: Proposing a requirement to submit a report documenting an ocean common carrier’s export policy to the Commission pursuant to its authority under 46 U.S.C. 40104 is an important part of monitoring the industry for unreasonable behavior vis-à-vis exports. Also, in proposed § 542.1(j)(1), the Commission identifies what type of information it seeks to have included in a documented export policy that would help the Commission determine whether an ocean common carrier’s conduct in a specific matter aligns with their general policies and that the ocean common carrier thus acted reasonably. The yearly requirement would provide an appropriate but not overly burdensome time frame on which to report updates to the policy relative to changes in the industry. An ocean common carrier can update their policy more frequently than once per year if it chooses to do so. The proposed reporting by individual ocean common carriers would remain confidential but, in practice, the Commission would provide aggregate descriptions and potentially best practices that do not contain individual carrier-level information but do provide information to the public and Congress (via annual report or other documents available to the public).

Frequency: This SNPRM proposes that respondents will file a documented export policy meeting the requirements in § 541.2(j) once per calendar year.

Type of Respondents: Ocean common carriers.

Number of Annual Respondents: The Commission anticipates an annual respondent universe of 140 ocean common carriers.

Estimated Time per Response: The Commission estimates 40 hours of burden for developing, documenting, and submitting an export policy using the parameters in proposed § 541.2(j) for the first year, assuming that no such policy already exists. For annual updates, the estimated burden would be 5 hours including review and revisions of the existing policy and submitting it electronically.

Total Annual Burden: The Commission estimates the total person-hour burden at 5,600 hours for initial filing and 700 hours thereafter.

Comments are invited on:

  • Whether the collection of information will have practical utility;
  • Whether the Commission’s estimate for the burden of the information collection is accurate;
  • Ways to enhance the quality, utility, and clarity of the information to be collected;
  • Ways to minimize the burden of the collection of information on respondents, including the use of automated collection techniques or other forms of information technology.

Please submit any comments, identified by the docket number in the heading of this document, by the methods described in the ADDRESSES section of this document.

D. Regulation Identifier Number

The Commission assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulatory and Deregulatory Actions (Unified Agenda). The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda, available at https://www.reginfo.gov/​public/​do/​eAgendaMain.

List of Subjects in 46 CFR Part 542

  • Administrative practice and procedure
  • Non-vessel-operating common carriers
  • Ocean common carrier
  • Refusal to deal or negotiate
  • Vessel-operating common carriers
  • Vessel space accommodations

For the reasons set forth in the preamble, the Federal Maritime Commission proposes to add 46 CFR part 542 to read as follows:

PART 542—COMMON CARRIER PROHIBITIONS

542.1 – Definition of unreasonable refusal of cargo space accommodations when available and unreasonable refusal to deal or negotiate with respect to vessel space provided by an ocean common carrier.

542.2 – [Reserved]

Authority: 5 U.S.C. 553; and 46 U.S.C. 46105, 40307, 40501–40503, 40901–40904, 41101–41106.

§ 542.1 – Definition of unreasonable refusal of cargo space accommodations when available and unreasonable refusal to deal or negotiate with respect to vessel space provided by an ocean common carrier.

(a) Purpose. This part establishes the elements and definitions necessary for the Federal Maritime Commission (Commission) to apply 46 U.S.C. 41104(a)(3) with respect to refusals of cargo space accommodations when available and to apply 46 U.S.C. 41104(a)(10) with respect to refusals of vessel space accommodations provided by an ocean common carrier. This part applies to complaints brought before the Commission by a private party and enforcement cases brought by the Commission.

(b) Definitions. For the purposes of this section:

(1) Cargo space accommodations means space which has been negotiated for aboard the vessel of an ocean common carrier for laden containers being imported to or exported from the United States. Cargo space accommodations includes the services necessary to access and load or unload cargo from a vessel calling at a U.S. port.

(2) Documented export policy means a written report produced by an ocean common carrier that details the ocean common carrier’s practices and procedures for U.S. outbound services.

(3) Sweeper vessel means a vessel exclusively designated to load and move empty containers from a U.S. port for the purpose of transporting them to another designated location.

(4) Transportation factors means factors that encompass the vessel operation considerations underlying an ocean common carrier’s ability to accommodate laden cargo for import or export, which can include, but are not limited to, vessel safety and stability, weather-related scheduling considerations, and other factors related to vessel operation outside the vessel operators’ control.

(5) Unreasonable means ocean common carrier conduct that unduly restricts the ability of shippers to meaningfully access ocean carriage services.

(6) Vessel space accommodations means space available aboard a vessel of an ocean common carrier for laden containers being imported to or exported from the United States. Vessel space accommodations also includes the services necessary to access or book vessel space accommodations.

(c) Elements for claims. The following elements are necessary to establish a successful private party or enforcement claim under 46 U.S.C. 41104(a)(3):

(1) The respondent must be an ocean common carrier as defined in 46 U.S.C. 40102;

(2) The respondent refuses or refused cargo space accommodations when available; and

(3) The ocean common carrier’s conduct is unreasonable.

(d) Non-binding considerations when evaluating unreasonable conduct. In evaluating the reasonableness of an ocean common carrier’s refusal to provide cargo space accommodations, the Commission may consider the following factors:

(1) Whether the ocean common carrier followed a documented export policy that enables the efficient movement of export cargo;

(2) Whether the ocean common carrier made a good faith effort to mitigate the impact of a refusal;

(3) Whether the refusal was based on legitimate transportation factors; and

(4) Any other factors relevant in determining whether there was a refusal in that particular case.

(e) Non-binding examples of unreasonable conduct. The following are examples of the kinds of conduct that may be considered unreasonable under 46 U.S.C. 41104(a)(3) when linked to a refusal to provide cargo space accommodations:

(1) Blank sailings or schedule changes with no advance notice or with insufficient advance notice;

(2) Vessel capacity limitations not justified by legitimate transportation factors;

(3) Failing to alert or notify shippers with confirmed bookings;

(4) Scheduling insufficient time for vessel loading so that cargo is constructively refused;

(5) Providing inaccurate or unreliable vessel information;

(6) Categorically or systematically excluding exports in providing cargo space accommodations; or

(7) Any other conduct the Commission finds unreasonable.

(f) Elements for claims. The following elements are necessary to establish a successful private party or enforcement claim under 46 U.S.C. 41104(a)(10):

(1) The respondent must be an ocean common carrier as defined in 46 U.S.C. 40102;

(2) The respondent refuses or refused to deal or negotiate with respect to vessel space accommodations; and

(3) The ocean common carrier’s conduct is unreasonable.

(g) Non-binding considerations when evaluating unreasonable conduct. In evaluating the reasonableness of an ocean common carrier’s refusal to deal or negotiate with respect to vessel space accommodations, the Commission may consider the following factors:

(1) Whether the ocean common carrier followed a documented export policy that enables the efficient movement of export cargo;

(2) Whether the ocean common carrier engaged in good-faith negotiations;

(3) Whether the refusal was based on legitimate transportation factors; and

(4) Any other factors relevant in determining whether there was a refusal in that particular case.

(h) Non-binding examples of unreasonable conduct. The following are examples of the kinds of conduct that may be considered unreasonable under 46 U.S.C. 41104(a)(10) when linked to a refusal to deal or negotiate:

(1) Quoting rates that are so far above current market rates they cannot be considered a real offer or an attempt at engaging in good faith negotiations;

(2) Categorically or systematically excluding exports in providing vessel space accommodations; and

(3) Any other interactions or communications with the shipper or other conduct the Commission finds unreasonable.

(i) Use of sweeper vessels. Nothing in this part precludes ocean common carriers from using sweeper vessels previously designated for that purpose to reposition empty containers.

(j) Documented export policy. Ocean common carriers must follow a documented export policy that enables the efficient movement of export cargo.

(1) A documented export policy must be submitted once per calendar year and include, in a manner prescribed by the Commission, pricing strategies, services offered, strategies for equipment provision, and descriptions of markets served. Updates may be submitted more than once per year if the ocean common carrier chooses to do so. Other topics a documented export policy should also address, if applicable, include:

(i) The effect of blank sailings or other schedule disruptions on the ocean common carrier’s ability to accept shipments; and

(ii) The alternative remedies or assistance the ocean common carrier would make available to a shipper to whom it refused vessel space accommodations.

(2) A documented export policy required to be filed by this part must be submitted to: Director, Bureau of Trade Analysis, Federal Maritime Commission, exportpolicy@fmc.gov.

(k) Shifting the burden of production. In accordance with applicable laws, the following standard applies:

(1) The burden to establish a violation of this part is with the complainant or Bureau of Enforcement, Investigations, and Compliance.

(2) Once a complainant sets forth a prima facie case of a violation, the burden shifts to the ocean common carrier to justify that its action were reasonable.

(3) The ultimate burden of persuading the Commission remains with the complainant or Bureau of Enforcement, Investigations, and Compliance.

§ 542.2 – [Reserved]

By the Commission.

William Cody,

Secretary.

Footnotes

1.   See Orolugbagbe v. A.T.I.,U.S.A., Inc., Informal Docket No. 1943(I) at *31–38.
Back to Citation

2.  “It is `a cardinal principle of statutory construction” that “a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.’ ” TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) quoting Duncan v. Walker, 533 U.S. 167 (2001); United States v. Menasche, 348 U.S. 528, 538–539, (1955) (“It is our duty `to give effect, if possible, to every clause and word of a statute.’ ” (quoting Montclair v. Ramsdell, 107 U.S. 147, 152, (1883)).
Back to Citation

3.  RILA also points to concerns identified in the Commission’s Final Report on Fact Finding Investigation 29 in which Commissioner Rebecca F. Dye emphasized that “[f]or some time, [she] has been concerned that the contracts negotiated by many U.S. importers and exporters lack . . . mutuality of understanding and obligation and are not enforceable. Without enforceable contracts, shippers are unable to protect themselves from volatile shipping rates and ocean carriers have few forecasting tools to provide the shipping capacity necessary to serve their customers.” RILA Comments at 3.
Back to Citation

4.   See, e.g., Credit Practices of Sea-land Serv., Inc., & Nedlloyd Lijnen, B.V., No. 90–07, 1990 WL 427463 (F.M.C. Dec. 20, 1990); Dep’t of Def. v. Matson Navigation Co., 19 F.M.C. 503 (1977).
Back to Citation

5.  44 U.S.C. 3507.
Back to Citation

6.  5 CFR 1320.11.
Back to Citation

[FR Doc. 2023–12744 Filed 6–12–23; 4:15 pm]

BILLING CODE 6730–02–P

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Yes, Virginia, There Is a Peak Season https://www.universalcargo.com/yes-virginia-there-is-a-peak-season/ https://www.universalcargo.com/yes-virginia-there-is-a-peak-season/#respond Fri, 28 Jul 2023 01:08:24 +0000 https://www.universalcargo.com/?p=12173 So some have deemed to tell you there is no peak season this year? Virginia, your little friends are wrong. They have been affected by the skepticism of a skeptical age. There is, indeed, a peak season this year.

This is not the peak season of the last few years, no. A singular situation created a singular period – and rather long one at that – of heightened cargo volumes, increased supply chain disruption, and soaring freight rates. Strangely, a feeling of what is will continue to be often fills people despite the knowledge that what goes up, must come down. For example, carriers – making record profits off of record volumes – began ordering new ships, increasing industry capacity, like the influx of cargo would never end.

Of course, it would end. Last year, the fall began. It was inevitable that cargo volume would eventually tumble. When it did, record high freight rates became unprofitably low ones.

As volumes remained much reduced and low freight rates stayed fairly flat for months, that feeling crept in again. That feeling that creates phrases like "the new normal." Low volumes and low freight rates are here. They'll stay here. There'll be no peak season. But things that fall also have a tendency to rise again. And volumes and freight rates have risen. Yes, a peak season has arrived....

Keep reading in Universal Cargo's blog.

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So some have deemed to tell you there is no peak season this year? Virginia, your little friends are wrong. They have been affected by the skepticism of a skeptical age. There is, indeed, a peak season this year.

This is not the peak season of the last few years, no. A singular situation created a singular period – and rather long one at that – of heightened cargo volumes, increased supply chain disruption, and soaring freight rates. Strangely, a feeling of what is will continue to be often fills people despite the knowledge that what goes up, must come down. For example, carriers – making record profits off of record volumes – began ordering new ships, increasing industry capacity, like the influx of cargo would never end.

Of course, it would end. Last year, the fall began. It was inevitable that cargo volume would eventually tumble. When it did, record high freight rates became unprofitably low ones.

Freight Rates

As volumes remained much reduced and low freight rates stayed fairly flat for months, that feeling crept in again. That feeling that creates phrases like “the new normal.” Low volumes and low freight rates are here. They’ll stay here. There’ll be no peak season. But things that fall also have a tendency to rise again. And volumes and freight rates have risen. Yes, a peak season has arrived.

Increased Cargo Volume & Freight Rates – the Basic Signs of Peak Season

Carriers imposed general rate increases (GRIs), which have managed to stick so far. Blanked (cancelled) sailings to reduce capacity and an increase in cargo volume have helped carriers to get spot rates higher than contracted freight rates and keep them there for the moment.

Bill Mongelluzzo reported on this in the Journal of Commerce (JOC) and shared data on the volume increases over the last few months:

US imports from Asia continue to increase each month. Imports totaled 1.42 million TEUs in June, up from 1.08 million TEUs in March, 1.34 million TEUs in April and 1.37 million TEUs in May, according to PIERS, a sister product of the Journal of Commerce within S&P Global.

And that brings us to a legitimate peak season. Certainly not the strongest we’ve ever seen, but it is a peak season nonetheless.

Weaker Peak Seasons Are Still Peak Seasons

There can be some fuzziness around when the international shipping peak season starts and ends. Who’s defining it and the strength of the economy in any given year expands and shrinks the time period. Often by two to four months. However, we’re arriving on the months, August and September, that are always considered peak season. You could think of them as peak peak season. It’s possible in a bad economic year that the peak season fizzles by the end of September, but normally the first half of October is considered standard peak season as well. Perhaps this will be a September-fizzling type of year. Some are predicting that. I wouldn’t go quite so far.

However, while I’ve been predicting there to be a peak season this year, I’ve also been saying I expect it to be a weaker one to go along with the weaker economic outlook we’re in.

It didn’t take prescience for me to repeatedly predict in this blog that we would have a peak season this year. Yes, there are still many retailers overstocked. Yes, there is economic uncertainty and increasing percentages of spending going to travel and services to curtail consumer spending on goods. However, the back to school and holiday shopping seasons are still coming. And weak economic years still have peak seasons.

It would seem to me, predicting no peak season would be much more of a long shot than predicting there would be one. In fact, it felt like such a safe bet that saying we’d have a peak season, despite voices to the contrary, didn’t even seem like much of a prediction at all. The focus probably should have been more on what kind of peak season we would end up having.

Appearances May Be Weaker Than Reality

One of the most common words I’ve been hearing, and that I’ve even used myself, to describe this peak season is “muted.” But I’m starting to think this peak season may not be quite as weak as it appears. The problem is one of perspective.

Often, cargo volumes and freight rates are reported on a year-over-year basis. After the pandemic hit, shutdowns, stimuli checks, supply chain disruptions/potential disruptions, and perhaps even plain fear helped create massive spikes in shipping demand and freight rates. It took a couple years for things to calm down, demand start dropping, and freight rates to fall. Comparing this year’s peak season to the kind of numbers we saw through the pandemic and in its early aftermath would make it appear especially weak. Terrible even. After all, we were seeing record shattering volume and freight rates during what felt like a never-ending peak season.

However, when you compare this peak season to pre-pandemic volume, it doesn’t look so bad.

Consider how Mongelluzzo opened his JOC article I quoted above:

After three general rate increases (GRIs) and four consecutive months of rising imports from Asia, trans-Pacific carriers are achieving their goal of pushing spot rates higher than contract rates as they enter what is expected to be a peak shipping season that is muted compared with last year but on par with pre-pandemic 2019.

What Was 2019 Peak Season Like to Compare?

One would think on par with pre-pandemic 2019 might put things closer to where the peak season should be if you remove the aberration of the pandemic from between then and now. Of course, that’s quite a simplification.

Economically, the country was doing well in 2019; however, the international shipping peak season was actually on the weaker side. In fact, some international shipping companies, such as freight forwarders, struggled at that time because of the trade war with China. President Trump had imposed increasing amounts of tariffs on goods imported from China with more threatened to come if a trade deal couldn’t be reached.

Before the year was over, we eventually got the trade deal from China, but it was immediately overshadowed and basically ignored because we also got COVID-19 from China. We didn’t get the deal until the peak season was over and well-weakened in the process.

2019 import volumes from China had dropped from what they would have been. However, some of what would have been lost peak season volume was made up for through sourcing goods from other countries. Sourcing domestically was another option some businesses took, significantly boosting U.S. manufacturing, but that obviously didn’t make the peak season stronger. Increased U.S. manufacturing was, however, a positive for the U.S. economy in 2019.

While weakened by the trade war, there was still a peak season in 2019. And it wasn’t as weak as many thought it could be. There was weak global trade growth in 2019 from a robust 2018, but one thing that kept the peak season from becoming very weak was many shippers rushing to beat a December tariff hike. Thankfully, reaching the trade deal with China in the days leading up to the scheduled hike stopped it from happening.

Outlook on 2023’s Peak Season

Being back to a similar level to 2019’s peak season now, when the economic outlook is much, much worse, might not be altogether terrible.

In general, though, we’re used to year-over-year growth in global trade. Thus, if we were simply returning to pre-pandemic peak season trade levels, we might think we should have grown from 2019’s peak season rather than just being on par with it. However, we can’t simply pretend the years since the pandemic struck never happened. Our trade levels skyrocketed, unnaturally so, from where they were previously. Dropping below where we might normally have ended up as we level out and likely start climbing again shouldn’t be all that surprising.

There is also an interesting factor that may play a role in why we’d be falling back to pre-pandemic trade levels: Trump’s tariffs.

When Trump rose to the presidency, he brought protectionist policies with him that prioritized cultivating U.S. manufacturing over global trade, which had been more the focus for years. When Biden came into office, his administration got busy tearing down any Trump Administration policy it could. Surprisingly, the Biden Administration never reversed Trump’s tariffs on China.

Economic uncertainty seems a much larger factor in limiting the peak season than those tariffs. Especially as shippers and retailers have had time to find alternate sourcing, whether from home or abroad, if they wish to avoid the tariffs. Still, the tariffs may be playing a part in making this peak season similar to 2019’s. Are they still pushing retailers toward domestic sourcing, U.S. manufacturing?

We also have to watch how August, September, and October play out.

Demand has been increasing. Carriers have been cutting capacity to control supply. Freight rates have been rising. If you want to compare this peak season to the last few, it won’t look like much. But it already looks as strong as the peak season before the pandemic and it could still very well prove to be stronger.

Expect freight rates to increase with the onset August. More GRIs and peak season surcharges (PSS) should hit. I’d be surprised if carriers were unable to hold the increase they gain into September. From there, we’ll follow how the rest of peak season plays out. Some think it will fizzle in September. I think the higher levels of volume we’ve been building toward will still be seen through the first couple weeks of October, if not until Halloween. You can read more on this website to learn all about traveling in peak season.

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Decoding OSRA – Section 6. Public Disclosure https://www.universalcargo.com/decoding-osra-section-6-public-disclosure/ https://www.universalcargo.com/decoding-osra-section-6-public-disclosure/#respond Tue, 25 Jul 2023 21:06:11 +0000 https://www.universalcargo.com/?p=12162 We’re still only beginning to see how the changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers' and other industry stakeholders' operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

-Series Introduction & Quick -Coverage of Section 1
-Section 2
-Section 3
-Section 4
-Section 5

Obviously, that means today we’re covering Section 6 of OSRA.

Check out the full post in Universal Cargo's blog to see exactly what the section says and changes...

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Introduction

We’re still only beginning to see how the changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 6 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 6 of OSRA makes a short addition to a section of Title 46.

The addition requires that, each year, the Federal Maritime Commission (FMC) publishes online for the public to see the commission’s findings against ocean carriers on the issue of demurrage and detention fees and include penalties the FMC imposes on the carriers.

Section 6 Text

SEC. 6. PUBLIC DISCLOSURE.

    Section 46106 of title 46, United States Code, is amended by adding 
at the end the following:
    ``(d) Public Disclosures. – <<NOTE: Web posting.>> The Federal 
Maritime Commission shall publish, and annually update, on the website 
of the Commission--
            ``(1) all findings by the Commission of false detention and 
        demurrage invoice information by common carriers under section 
        41104(a)(15) of this title; and
            ``(2) all penalties imposed or assessed against common 
        carriers, as applicable, under sections 41107, 41108, and 41109, 
        listed by each common carrier.''.

Portion of Title 46 Section 6 Amends

As we’ve seen earlier in this series from other OSRA sections, Section 5 does not edit text in Title 46 so much as it adds additional text. This time to Section 46106. As I’ve done in previous posts, I’ll still provide the full text of the section before the addition, so you can see what it already covers and how the new text fits in.

Luckily, the section isn’t long:

§46106. Annual report

(a) In General.—Not later than April 1 of each year, the Federal Maritime Commission shall submit a report to Congress. The report shall include the results of its investigations, a summary of its transactions, the purposes for which all of its expenditures were made, and any recommendations for legislation.

(b) Report on Foreign Laws and Practices.—The Commission shall include in its annual report to Congress—

    (1) a list of the 20 foreign countries that generated the largest volume of oceanborne liner cargo for the most recent calendar year in 
    bilateral trade with the United States;

    (2) an analysis of conditions described in section 42302(a) of this title being investigated or found to exist in foreign countries;

    (3) any actions being taken by the Commission to offset those conditions;

    (4) any recommendations for additional legislation to offset those conditions;

    (5) a list of petitions filed under section 42302(b) of this title that the Commission rejected and the reasons for each rejection; and

    (6) an analysis of the impacts on competition for the purchase of certain covered services by alliances of ocean common carriers acting 
    pursuant to an agreement under this part 1 between or among ocean common carriers, including a summary of actions, including corrective 
    actions, taken by the Commission to promote such competition.

(c) Definition of Certain Covered Services.—In this section, the term "certain covered services" has the meaning given the term in section 40102.

Visible Changes

Section 6 of OSRA makes an interesting addition to Section 46106 of Title 46. That section of Title 46 outlined an annual report the FMC had to submit to Congress. Section 6 of OSRA adds an annual report for the public published through the commission’s website.

Let’s go through the addition in more detail.

Paragraph (d)

After the initial paragraph of Section 6 of OSRA tells us where to add the new text, that new text begins with paragraph (d):

``(d) Public Disclosures. – <<NOTE: Web posting.>> The Federal  Maritime Commission shall publish, and annually update, on the website  of the Commission--

Nothing complicated here. The FMC is to publish and update once a year the information to be outlined in the following subparagraphs.

Subparagraph (1)

The first thing the FMC is to publish in this annual online report to the public is as follows:

“(1) all findings by the Commission of false detention and demurrage invoice information by common carriers under section 41104(a)(15) of this title;

This subparagraph sends us looking to another section of Title 46 to define what a false detention and demurrage invoice from an ocean carrier is. 41104(a)(15) states, “[a common carrier shall not] invoice any party for demurrage or detention charges unless the invoice includes information as described in subsection (d) showing that such charges comply with—
“(A) all provisions of part 545 of title 46, Code of Federal Regulations (or successor regulations); and
“(B) applicable provisions and regulations, including the principles of the final rule published on May 18, 2020, entitled “Interpretive Rule on Demurrage and Detention Under the Shipping Act” (or successor rule).”

This starts to take us down a little bit of a rabbit hole. When we find the referenced section of Title 46 to clarify what false detention and demurrage invoices are, it sends us to yet another part of Title 46 with which detention and demurrage invoices must comply and what’s commonly called the “interpretive rule” that the FMC published a few years ago.

41104(a)(15) says detention and demurrage invoices must show compliance with all of part 545, but there’s a specific section of 545 that deals explicitly with demurrage and detention. Furthermore, that section set up the guidelines for the FMC’s creation of the interpretive rule, which is too long to include in its entirety in this post. Still some will be included.

Here’s that text of the pertinent section of Part 545 of Title 46:

§ 545.5 Interpretation of Shipping Act of 1984—Unjust and unreasonable practices with respect to demurrage and detention.

(a) Purpose. The purpose of this rule is to provide guidance about how the Commission will interpret 46 U.S.C. 41102(c) and § 545.4(d) in the context of demurrage and detention

(b) Applicability and scope. This rule applies to practices and regulations relating to demurrage and detention for containerized cargo. For purposes of this rule, the terms demurrage and detention encompass any charges, including “per diem,” assessed by ocean common carriers, marine terminal operators, or ocean transportation intermediaries (“regulated entities”) related to the use of marine terminal space (e.g., land) or shipping containers, not including freight charges.

(c) Incentive principle —

(1) General. In assessing the reasonableness of demurrage and detention practices and regulations, the Commission will consider the extent to which demurrage and detention are serving their intended primary purposes as financial incentives to promote freight fluidity.

(2) Particular applications of incentive principle —

(i) Cargo availability. The Commission may consider in the reasonableness analysis the extent to which demurrage practices and regulations relate demurrage or free time to cargo availability for retrieval.

(ii) Empty container return. Absent extenuating circumstances, practices and regulations that provide for imposition of detention when it does not serve its incentivizing purposes, such as when empty containers cannot be returned, are likely to be found unreasonable.

(iii) Notice of cargo availability. In assessing the reasonableness of demurrage practices and regulations, the Commission may consider whether and how regulated entities provide notice to cargo interests that cargo is available for retrieval. The Commission may consider the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice, and the effect of the notice.

(iv) Government inspections. In assessing the reasonableness of demurrage and detention practices in the context of government inspections, the Commission may consider the extent to which demurrage and detention are serving their intended purposes and may also consider any extenuating circumstances.

(d) Demurrage and detention policies. The Commission may consider in the reasonableness analysis the existence, accessibility, content, and clarity of policies implementing demurrage and detention practices and regulations, including dispute resolution policies and practices and regulations regarding demurrage and detention billing. In assessing dispute resolution policies, the Commission may further consider the extent to which they contain information about points of contact, timeframes, and corroboration requirements.

(e) Transparent terminology. The Commission may consider in the reasonableness analysis the extent to which regulated entities have clearly defined the terms used in demurrage and detention practices and regulations, the accessibility of definitions, and the extent to which the definitions differ from how the terms are used in other contexts.

(f) Non-Preclusion. Nothing in this rule precludes the Commission from considering factors, arguments, and evidence in addition to those specifically listed in this rule.

FMC’s Interpretive Rule on Demurrage & Detention

From the above 545 guidelines, we go to the FMC’s interpretive rule. As I said, it’s too long to include here in its entirety, but I’ll include some highlights. Ultimately, the FMC decides on case by case basis the justness of demurrage and detention fee disputes. The interpretive rule, with all its background and supplementary information the FMC laid out, doesn’t definitively cover every possibility for which its commissioners would decide demurrage and detention invoices are “false”.

The interpretive rule does, however, give a good sense as to the standards on which the FMC judges these cases. Here are highlights from the FMC’s interpretive rule:

The interpretive rule was intended to reflect three general principles:

1. Importers, exporters, intermediaries, and truckers should not be penalized by demurrage and detention practices when circumstances are such that they cannot retrieve containers from, or return containers to, marine terminals because under those circumstances the charges cannot serve their incentive function.

2. Importers should be notified when their cargo is actually available for retrieval.

3. Demurrage and detention policies should be accessible, clear, and, to the extent possible, use consistent terminology.

The main thrust of the rule is that although demurrage and detention are valid charges when they work, when they do not, there is cause to question their reasonableness. This derives from the well-established principle that to pass muster under section 41102(c), a regulation or practice must be tailored to meet its intended purpose, that is, “fit and appropriate for the end in view.”  The Commission determined that because the purpose of demurrage and detention are to incentivize cargo movement, it will consider in the reasonableness analysis under section 41102(c) the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity.

The Commission explained in the NPRM that practices imposing demurrage and detention when such charges are incapable of incentivizing cargo movement, such as when a trucker arrives at a marine terminal to retrieve a container but cannot do so because it is in a closed area or the port is shutdown, might not be reasonable. Similarly, the Commission stated, “absent extenuating circumstances, demurrage and detention practices and regulations that do not provide for a suspension of charges when circumstances are such that demurrage and detention are not serving their purpose would likely be found unreasonable.” 

As you can tell from even the small portion of the FMC’s interpretive rule writing, its guidelines and authority to create this rule come from more than just Part 545 of Title 46. However, pulling the text from all of those would take us way too far off on a tangent.

As time has passed and the FMC has used the interpretive rule in deciding cases of unfair demurrage and detention fees, the idea of these fees being used for incentivizing the movement of cargo has become the most emphasized part of the rule. If the fees do not appear to serve this purpose, because of something like being assessed at times impossible for shippers and their truckers to remove or return shipping containers from or to port terminals, the relating invoices are the ones that would be deemed “false.”

Such decisions against carriers are what OSRA Section 6(d)(1) requires the FMC to publish online.

Subparagraph (2)

Subparagraph (2) gives the second thing the FMC is to publish online: the penalties against carriers it ruled issued false demurrage and detention invoices.

``(2) all penalties imposed or assessed against common 
        carriers, as applicable, under sections 41107, 41108, and 41109, 
        listed by each common carrier.''.

This subparagraph is straight forward, but it also references sections of Title 46 that define monetary and additional penalties as well as their assessment. I was going to include those here; however, later in OSRA, these sections of the U.S. code on shipping will be amended. Thus, I’ll wait until OSRA gets to changing these sections before including them, so the penalties listed are accurately up to date and this series doesn’t become too repetitive.

Conclusion

Section 6 of OSRA is short and straightforward. It simply requires the FMC to report to the public decisions the commission makes against carriers on the issue of demurrage and detention fees, including whatever penalties the FMC doles out to the carriers. This is to be published yearly and via the FMC’s website.

As we’ve generally been seeing in OSRA so far, lawmakers appear to have written this section to benefit shippers over carriers.

If there’s anything you think I missed in this section of OSRA, please share it in the comments section below.

Stay tuned for when Decoding OSRA continues, examining Section 7….

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ILWU Canada Strike Again, Stop, Reissue Strike Notice, Then Cancel – Head Spinning Yet? https://www.universalcargo.com/ilwu-canada-strike-again-stop-reissue-strike-notice-then-cancel-head-spinning-yet/ https://www.universalcargo.com/ilwu-canada-strike-again-stop-reissue-strike-notice-then-cancel-head-spinning-yet/#respond Thu, 20 Jul 2023 20:23:37 +0000 https://www.universalcargo.com/?p=12160 Well, that didn't last long. The good feelings that the strike at Canada's ports was over only lasted days. However, a resumed or new strike (depending on your point of view) this week was even shorter, followed by a back and forth, on and off again for the strike that's probably making shippers' heads spin.

In just our last blog post, on Tuesday, I wrote about the International Longshore & Warehouse Union Canada (ILWU Canada) strike ending and the aftermath of the nearly two-week affair. But before the night was even out, ILWU Canada took strike measures again.

Tuesday night's strike action was deemed illegal for a lack of proper notification, so the union went back to work. However, ILWU Canada quickly announced plans, giving formal notice, to go back on strike this Saturday, July 22nd.

Hours later, the union retracted that strike announcement "after Prime Minister Justin Trudeau directed a crisis meeting to pursue all options to ensure the stability of supply chains," according to an article from Reuters.

Obviously, the union is not happy with the contract it was offered. At least, the leaders of the union are not.

Find out more, including what's upsetting the ILA, by reading the full post in Universal Cargo's blog

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Well, that didn’t last long. The good feelings that the strike at Canada’s ports was over only lasted days. However, a resumed or new strike (depending on your point of view) this week was even shorter, followed by a back and forth, on and off again for the strike that’s probably making shippers’ heads spin.

In just our last blog post, on Tuesday, I wrote about the International Longshore & Warehouse Union Canada (ILWU Canada) strike ending and the aftermath of the nearly two-week affair. But before the night was even out, ILWU Canada took strike measures again.

truckers strike Port of Los Angeles Long Beach

Tuesday night’s strike action was deemed illegal for a lack of proper notification, so the union went back to work. However, ILWU Canada quickly announced plans, giving formal notice, to go back on strike this Saturday, July 22nd.

Hours later, the union retracted that strike announcement “after Prime Minister Justin Trudeau directed a crisis meeting to pursue all options to ensure the stability of supply chains,” according to an article from Reuters.

Obviously, the union is not happy with the contract it was offered. At least, the leaders of the union are not.

The tentative contract is what halted the strike late last week. ILWU Canada’s leaders reviewed the deal but ultimately decided to reject it. Rather than being a deal worked out by the union and their employers, there were at least a significant number of terms in the contract suggested by federal mediators.

Clearly, the union has a desire to go back on strike, but the Canadian government wants to keep that, because of the economic damage it causes the country, from happening. For the moment, the union is holding off on strike. But will they execute slowdowns like the ILWU did before the sister union reached a tentative agreement with employers on the U.S. West Coast? That could be quite damaging as well, especially as this is a moment when the Canadian ports need its dockworkers to work hard to recover from the strike ILWU Canada just executed.

This is a situation we’ll obviously have to keep our eyes on. I’ve compiled the complete text from ILWU Canada’s press releases around the “new” strike below to give a sense of the union’s state of mind and reasoning they’re giving for both rejecting the new contract and striking.

ILWU Canada’s Deal Rejection and Strike Announcement

Here’s the press release ILWU Canada put out Tuesday regarding its rejection of the deal and striking:

July 18, 2023

NEWS RELEASE

The ILWU Canada Longshore Caucus has voted down the Mediators Recommended Terms of Settlement.

The ILWU Canada Longshore Caucus does not believe the recommendations had the ability to protect our jobs now or into the future.

Our position since day one has been to protect our jurisdiction and this position has not changed.

With the record profits that the BCMEA’s member companies have earned over the last few years the employers have not addressed the cost of living issues that our workers have faced over the last couple of years as all workers have.

The term of the collective agreement that was given with today’s uncertain times, is far too long. We must be able to readdress the uncertainty in the world’s financial markets for our members.

On July 18, 2023, as of 16:30 the ILWU Canada Longshore Division will be back on the picket line for a fair and negotiated collective agreement.

Rob Ashton

President – ILWU Canada

ILWU Canada’s New Strike Notice

As stated, since the strike was deemed illegal, ILWU Canada was forced to resume work. The following day, Wednesday, ILWU Canada issued a press release with formal 72-hour notice of plans to go back on strike Saturday. The press release also contains the union’s argument for why it shouldn’t have had to give strike notice again.

Here’s the full text of that press release:

ILWU to reissue strike notice with the hope of returning to the bargaining table

The ILWU’s strike against the BCMEA for a negotiated collective agreement that provides fair compensation to the workers who work at the ports and which protects their job security continues after the ruling from CIRB today.

The ILWU has been in a legal strike position since July 1, but suspended picketing at the request of the Minister of Labour while the ILWU considered a collective agreement with settlement terms suggested by a mediator.

As required by our constitution, the ILWU contract caucus considered the tentative contract in a two-day meeting. The caucus was not satisfied the mediator’s deal met the membership’s goals and directed the bargaining committee to seek a negotiated agreement. After advising the Minister of Labour and the BCMEA, the ILWU resumed its lawful picketing activities.

Although the ILWU removed its picket lines voluntarily while it considered the tentative agreement, the BCMEA decided to exploit our good faith move by complaining to the CIRB that the ILWU has commenced a new strike for which 72 hours notice was required.

The ILWU has followed Canadian labour law which holds that a strike continues from the moment of job action until the ratification of a collective agreement. The CIRB however, did not follow the established cases, and determined that new strike notice was required. The ILWU will appeal the CIRB decision but will respect the ruling and reissue notice.

The ILWU regrets the economic impact of this labour dispute and that government interference such as the CIRB order will only serve to lengthen the strike. We once again ask the government to allow free collective bargaining to occur and allow the longshore workers to use the options allowed by the Canada Labour Code,

Rob Ashton

President – ILWU Canada

ILWU Canada’s Strike Retraction

ILWU Canada’s retraction of its strike announcement was very short. Just one sentence. Here it is:

Effective immediately the strike notice dated July 22 for 9:00am has now been removed.

Rob Ashton
President
ILWU Canada

At this point, no one should assume the drama is over. I wouldn’t expect recovery from the strike to end up on the lower side of estimates of just over a month.

ILA Demonstrates Over Jurisdiction

The blog I was going to write today was to be about the International Longshoremen’s Association (ILA) demonstrating at the state capitol of South Carolina. Obviously, the labor action by ILWU Canada changed my plans. However, since I wrote at the end of the last post that today’s post would look at that situation, I’ll cover it briefly now.

The issue the ILA is upset about is jurisdiction. Sound familiar? Jurisdiction was a major issue on the West Coast helping to make the last year of contract negotiations (when negotiations were actually happening) contentious.

The ILA has had a problem with the South Carolina Port Authority using non-union workers at its relatively new Hugh K. Leatherman Terminal since it opened a couple years ago. In 2021, I wrote about how the union was seriously hindering the terminal at the Port of Charleston from receiving ships. That was at a time when port congestion was rampant on both coasts and the terminal was desperately needed.

For about half a century, South Carolina ports have used a hybrid model, employing union and state employees. The ILA wants all of those jobs. And they want all such jobs to belong to the union up and down the East and Gulf Coast ports. Will this become a sticking point when it’s time for the ILA to negotiate its next contract? That’s one more piece of uncertainty for U.S. importers and exporters.

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ILWU Canada Strike Ends, So What’s the Fallout? https://www.universalcargo.com/ilwu-canada-strike-ends-so-whats-the-fallout/ https://www.universalcargo.com/ilwu-canada-strike-ends-so-whats-the-fallout/#respond Tue, 18 Jul 2023 19:15:43 +0000 https://www.universalcargo.com/?p=12154 The International Longshore & Warehouse Union Canada (ILWU Canada) strike ended with a tentative deal last week.

Chris Helgren reported in Reuters:

"Dock workers at ports along Canada's Pacific coast and their employers accepted a tentative wage deal on Thursday, ending a 13-day strike that disrupted trade at the country's busiest ports and risked worsening inflation.

"...

"'The scale of the disruption has been significant," Labour Minister Seamus O'Regan and Transport Minister Omar Alghabra said in a joint statement.

"...

"He offered terms drafted by a federal mediator and gave the union and employers 24 hours to decide if they were satisfied. The deal was reached at 10:20 am PT (1720 GMT), 10 minutes before the deadline, the ILWU said."

It's a thankful thing the dockworker strike in Canada is over. Obviously, it wasn't going to have as big effects on U.S. supply chains and businesses as those in Canada. But port shutdowns in Canada do have effects on U.S. supply chains and businesses. With the ILWU and International Longshoremen's Association (ILA) here in the U.S. pledging not to work ships diverted from Canada, the impact on U.S. ports, with such diverted ships already starting to arrive, was likely to significantly grow.

Nearly two weeks of a dockworker strike created serious impacts in Canada. The Reuters article even shared an estimate measured in the billions of Canadian dollars of trade disruption:

"The strike is estimated to have disrupted C$6.5 billion of cargo movement at the ports, based on the industry body Canadian Manufacturers & Exporters' calculation of about C$500 million in disrupted trade each day."

But what does the fallout look like for U.S. supply chains, shippers, and businesses?

Find out by reading the full post in Universal Cargo's blog.

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The International Longshore & Warehouse Union Canada (ILWU Canada) strike ended with a tentative deal last week.

Chris Helgren reported in Reuters:

Dock workers at ports along Canada’s Pacific coast and their employers accepted a tentative wage deal on Thursday, ending a 13-day strike that disrupted trade at the country’s busiest ports and risked worsening inflation.

“The scale of the disruption has been significant,” Labour Minister Seamus O’Regan and Transport Minister Omar Alghabra said in a joint statement.

He offered terms drafted by a federal mediator and gave the union and employers 24 hours to decide if they were satisfied. The deal was reached at 10:20 am PT (1720 GMT), 10 minutes before the deadline, the ILWU said.

Dockworker and cargo containers
Dockworker and cargo containers

It’s a thankful thing the dockworker strike in Canada is over. Obviously, it wasn’t going to have as big effects on U.S. supply chains and businesses as those in Canada. But port shutdowns in Canada do have effects on U.S. supply chains and businesses. With the ILWU and International Longshoremen’s Association (ILA) here in the U.S. pledging not to work ships diverted from Canada, the impact on U.S. ports, with such diverted ships already starting to arrive, was likely to significantly grow.

Nearly two weeks of a dockworker strike created serious impacts in Canada. The Reuters article even shared an estimate measured in the billions of Canadian dollars of trade disruption:

The strike is estimated to have disrupted C$6.5 billion of cargo movement at the ports, based on the industry body Canadian Manufacturers & Exporters’ calculation of about C$500 million in disrupted trade each day.

But what does the fallout look like for U.S. supply chains, shippers, and businesses?

Impact on the U.S.

There are two nice articles in FreightWaves right now that get into the ways that the now over ILWU Canada strike will still impact the U.S. moving forward. The first article is a shorter one by Greg Miller. The main purpose of the article was to cover that the ILWU Canada strike is over. The second article, by Lori Ann LaRocco, is specifically focused on the ongoing impact of the strike and, thus, is more in depth on the topic.

Both articles bring up early that the strike’s impact on the flow of U.S. imports via Canadian gateways will linger. Canadian rail to the U.S. is of specific concern to both reporters.

Miller gives us the big picture with:

Canadian railway CN told FreightWaves that disruptions could take weeks or even months to correct.

Then LaRocco gets into the details:

Considering 15% of U.S. trade arrives into the Port of Vancouver and 60% of all rail out of the Port of Prince Rupert is destined for the U.S., this is something we should be concerned about. Here’s why: The congestion is going to bleed into peak season. The Railway Association of Canada estimates one day of strike equals to three to five days of clearing up. This strike was 13 days, meaning the rail congestion alone could be between 39 and 65 days. Yep, you read that right.

Luckily, at least for the sake of congestion, this international shipping peak season is off to a slow start. That should save U.S. ports, particularly those on the West Coast, from serious congestion that would have been very likely if the peak season got off to a strong start. Even though the peak season has been rather muted so far, there are some reports that it is starting to pick up.

All-Ways reported in its email newsletter yesterday:

Containerized imports in the US are expected to begin an upwards trend, peaking in August. November is set to be the first month with a year-over-year increase since June 2022 with a projected 1.88 million TEUs in imports.

Adding to that increase in import cargo to the U.S. is Canadian imports that have been diverted to U.S. ports as Canadian shippers had no way of knowing when the ILWU Canada strike would end.

An example of such diverted cargo that will coincide with August import appears in LaRocco’s article:

“Many of our members are rebooking through U.S. West Coast ports with the likelihood of an extra 10-14 days of ground transit time because of the redirect,” said Eric Byer, CEO of the National Association of Chemical Distributors. “Some member company products have been on the water since June 30, and other arrivals earlier this month are now not being slated to be unloaded until early to mid-August at the earliest.”

While it is predicted that U.S. ports should handle the increased cargo without it resulting in any major congestion, the rail congestion coming out of Canada coinciding with the busiest moment for cargo arriving through U.S. ports is not a great combination. Especially with rail being one of the major common areas for congestion and disruption in supply chains.

It’s important to note that the rail disruption from Canada to the U.S. affects more than just imports coming in through Canada from overseas. Often, people think of places like China when they think of the United States’ trade partners. However, our biggest trade partner is Canada. Thus, disruption to Canada’s supply chains has a significant impact on overall U.S. trade.

And Canada’s rail disruption from the ILWU Canada strike is significant. When talking about getting the Association of American Railroads data regarding trade from Canada arriving in the U.S., LaRocco reported:

I knew it was going to be bad, but just how bad it was for one week shows you for what’s to come. The AAR reported a 46% drop in freight rail traffic entering the U.S. from Canada over the past week as a result of the strike.

The top sectors impacted chemicals, including oil and petroleum products, nonmetallic minerals such as crushed stone, sand, stone, clay and glass products, and forest products such as lumber and wood products. The National Association of Chemical Distributors said millions of dollars of chemicals that go into paints, coatings and acids from Asia are stuck on vessels.

The delays on the rails will be evident again in next week’s data. With volumes down almost 50% this week, you can expect a similar wallop.

So now that the ILWU is back to work and the plug that was stopping trade has been pulled, we need to look at the congestion that grew over this time. It’s a tangled mess for sure.

What we’re looking at in Canada is a backup of tens of thousands of shipping containers at terminals. Many, many more have been stuck on container ships waiting to be unloaded. The work of catching up will be intensive.

How Long to Catch Up?

I have found no estimates less than a month for catching up on the backlog of cargo caused by the almost two weeks of strike. Many estimates give numbers over two months. Some authorities are smart enough to say it’s too soon to give any estimate of recovery time at all.

LaRocco’s article quotes a port authority and spokesperson talking about how the ports will work to recover. Then things get more U.S. specific when she quotes Paul Brashier, vice president of drayage and intermodal at ITS Logistics:

“There are two weeks of containers needing to be removed from the terminals, which will take four weeks at best,” he explained. “There then will be rail ramp challenges in Chicago and the Midwest as a large share of the containers entering western Canada are routed there for U.S. consumption. That will add another two to four weeks of disruption.”

Basically, the strike will be negatively impacting supply chains, including U.S. ones at least until more than halfway through August and more likely into September. Often, delays associated with such congestion and disruption results in extra costs to shippers through fees, higher prices of rerouting, and lost time.

Next Time… ILA Protest

A protest over jurisdiction is happening with the dockworker’s union on the East Coast. We’ll look at what’s happening with the ILA in Thursday’s post…

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Must-See “Sound of Freedom” Depicts Kids Trafficked in Shipping Container https://www.universalcargo.com/must-see-sound-of-freedom-depicts-kids-trafficked-in-shipping-container/ https://www.universalcargo.com/must-see-sound-of-freedom-depicts-kids-trafficked-in-shipping-container/#respond Thu, 13 Jul 2023 22:07:00 +0000 https://www.universalcargo.com/?p=12149 If ever there was a must-see movie playing in theaters, Sound of Freedom is it. In a movie that already struck me where I live by being about a parent's worst nightmare of children kidnapped and sold into sex slavery, it then hit me where I work by depicting kids trafficked in a shipping container onboard a container ship.

That's the closest I'll come to a spoiler in this post focused on the Jim Caviezel-led film, which is deservingly the number one movie in the country right now. So you're safe to keep reading if you haven't seen the movie yet and don't want to know what happens. If you haven't seen it, go get your tickets.

I might be a writer, but I have trouble putting into words what I felt as a father watching this movie. Disturbed? Angry? Perhaps even scared? Yes. All of that. But none of those words seem quite right to capture the feelings.

Simultaneously, there were also positive feelings while watching. The most obvious on this side was probably thankfulness. Thankfulness for my family. Thankfulness that this horror hasn't touched my children. Thankfulness there are people out there like Tim Ballard, the real-life hero Caviezel plays, who fight trafficking.

I can't imagine even being human and watching this movie without rooting for Ballard and rejoicing in his victories. But rejoicing isn't quite the right word for the feeling either. The victories are bitter-sweet.

The saving of even a single child from sex slavery or the capture of a trafficker or pedophile who brings grave danger to children is cause for celebration. However, the loss and trauma such a child has suffered and the knowledge that there are millions more trafficked children out there in slavery bring more than a little ambivalence to such a celebration.

Additionally, it would be hard to go see Sound of Freedom and not be engrossed by its compelling and suspenseful story. There's always a certain satisfaction in a well-told story. And Sound of Freedom is certainly a well-told story. But satisfaction is another word that fails to describe the feeling of watching this movie. How can one be satisfied knowing the unfathomably large problem of human trafficking is happening not only in the world but right here in the United States?

Keep reading to find out more, including simple things you can do to combat human trafficking by reading the full post in Universal Cargo's blog.

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If ever there was a must-see movie playing in theaters, Sound of Freedom is it. In a movie that already struck me where I live by being about a parent’s worst nightmare of children kidnapped and sold into sex slavery, it then hit me where I work by depicting kids trafficked in a shipping container onboard a container ship.

That’s the closest I’ll come to a spoiler in this post focused on the Jim Caviezel-led film, which is deservingly the number one movie in the country right now. So you’re safe to keep reading if you haven’t seen the movie yet and don’t want to know what happens. If you haven’t seen it, go get your tickets.

The Feelings “Sound of Freedom”Evokes

I might be a writer, but I have trouble putting into words what I felt as a father watching this movie. Disturbed? Angry? Perhaps even scared? Yes. All of that. But none of those words seem quite right to capture the feelings.

Sound of Freedom Poster
Sound of Freedom Poster

Simultaneously, there were also positive feelings while watching. The most obvious on this side was probably thankfulness. Thankfulness for my family. Thankfulness that this horror hasn’t touched my children. Thankfulness there are people out there like Tim Ballard, the real-life hero Caviezel plays, who fight trafficking.

I can’t imagine even being human and watching this movie without rooting for Ballard and rejoicing in his victories. But rejoicing isn’t quite the right word for the feeling either. The victories are bitter-sweet.

The saving of even a single child from sex slavery or the capture of a trafficker or pedophile who brings grave danger to children is cause for celebration. However, the loss and trauma such a child has suffered and the knowledge that there are millions more trafficked children out there in slavery bring more than a little ambivalence to such a celebration.

Additionally, it would be hard to go see Sound of Freedom and not be engrossed by its compelling and suspenseful story. There’s always a certain satisfaction in a well-told story. And Sound of Freedom is certainly a well-told story. But satisfaction is another word that fails to describe the feeling of watching this movie. How can one be satisfied knowing the unfathomably large problem of human trafficking is happening not only in the world but right here in the United States?

Awareness of Human Trafficking

Thanks to Universal Cargo’s President Shirley Burke and CEO Devin Burke, I was probably more aware of how massive today’s human trafficking and child slavery problem is when I walked in to see Sound of Freedom than the average moviegoer. That’s because Universal Cargo’s leaders are passionate about fighting human trafficking and child sex slavery. For many years, they’ve supported organizations that fight this evil, and I’ve written about it from time to time in this blog with posts like these:

TAT Trains UPS About Human Trafficking – Please Join the Fight

Texas Hold’em Fights Human Trafficking & Sex Slavery

Freight Philanthropy: CAST Out Human Trafficking & Sex Slavery

Freight Philanthropy: CPAF Gala to End Domestic & Sexual Violence

But I wrote those posts at the prompting of the Burkes. They wanted to get the message out about the evils of human trafficking and give others the opportunity to give to organizations that battle it like ZOE International, iEmpathize, and Center for the Pacific Asian Family (CPAF) or find other ways to join the fight. I certainly cared about it too, but it’s now been years since I wrote a post on the topic in Universal Cargo’s blog.

Still, it was while writing those posts I learned that, through human trafficking, there are more people enslaved in today’s world than there have been at any time in human history. That’s a crazy thought, as legal slavery has been the norm of human history across cultures and on every continent. It’s been less than two hundred years since the norm started shifting to abolishing slavery. At least in its legal forms.

Maybe it’s because the problem is so vast that that it’s been so long since I’ve written about it here. Its enormity can almost make it feel abstract. It can certainly make it seem impossible for a person to make a difference in defeating it. Maybe it’s because human trafficking is only tangentially connected to international shipping that’s kept me from writing about it for so long. But both of those seem like excuses.

When a movie like Sound of Freedom tells the story of a few specific people, some suffering in human trafficking and some fighting against it, it makes the problem seem more real. More tangible. It makes it hit harder. That’s the power of good storytelling. It also heightens awareness of the problem and makes people want to do something about it. It even shows that individuals can make a difference. And a person doesn’t have to dedicate his or her life to the cause to join the fight.

What You Can Do to Fight Human Trafficking

There are simple things you can do such as giving to organizations like Zoe International, iEmpathize, and CPAF to fight human trafficking. Even giving tickets or taking people to Sound of Freedom can spread awareness. Learning how to spot signs of sex slavery, which reaches into every state in the U.S., in order to report it when you see it is an action step. Perhaps volunteering with an organization that fights the problem is for you. Or you can tap into your creativity to come up with other ways you can stand against this horror.

Human Trafficking and Shipping Containers

People being trafficked in shipping containers is purportedly rare. It’s impossible to know just how often it happens, but trips locked inside a container sailing across an ocean or sea are extremely dangerous. And there is also a great deal of security traffickers have to get around. Still, there have been many stories over recent years of people found, too often dead, inside of shipping containers. “Smuggling immigrants” is how I’ve most commonly seen these stories reported. There’s no way of knowing how many times people have successfully been transported in shipping containers with the assailants getting away with it.

It would be nicer to think the idea of children moved in shipping containers is fictional. Unfortunately, it is something about which the international shipping industry must be vigil.

Years ago, seeing a port and shipping containers so prominently displayed in Iron Man 3 inspired a blog post counting down the top 9 movie scenes featuring ports and shipping containers. Sound of Freedom’s shipping container scene could complete the list, rounding it off to a proper top 10 list. However, all the other movies were fun and exciting. Sound of Freedom‘s container scene is anything but fun. It would be the most impactful scene on the list from by far the most important movie. If Iron Man 3 is deserving of inspiring a blog post, how much more so is Sound of Freedom.

I highly recommend going out to see this movie. But I’d leave the kids with a trusted babysitter.

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U.S. Unions Won’t Work Diverted Ships from ILWU Canada Strike https://www.universalcargo.com/u-s-unions-wont-work-diverted-ships-from-ilwu-canada-strike/ https://www.universalcargo.com/u-s-unions-wont-work-diverted-ships-from-ilwu-canada-strike/#respond Tue, 11 Jul 2023 20:35:01 +0000 https://www.universalcargo.com/?p=12145 Both the International Longshore & Warehouse Union (ILWU) and the International Longshoremen's Association (ILA) said they will not work containerships diverted to U.S. ports because of the ILWU Canada strike. With congestion building up in Canada, this not at all unexpected decision by the unions could thwart efforts at a small level of relief. It could also create contention and strain at U.S. ports as the unions decide how to follow through with their decision.

With cargo being diverted from Canadian ports to U.S. ones, this is a tricky situation. Find out more in Universal Cargo's blog.

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Both the International Longshore & Warehouse Union (ILWU) and the International Longshoremen’s Association (ILA) said they will not work containerships diverted to U.S. ports because of the ILWU Canada strike. With congestion building up in Canada, this not at all unexpected decision by the unions could thwart efforts at a small level of relief. It could also create contention and strain at U.S. ports as the unions decide how to follow through with their decision.

Dockworker and cargo containers
Dockworker and cargo containers

Lori Ann LaRocco reported well on the situation in a CNBC article:

U.S. West Coast port workers’ unions say they won’t work containerships originally bound for the Port of Vancouver that changed course and were diverted to the Port of Seattle. The disruption comes as labor strikes at West Coast ports in Canada stretch into a seventh day.

The International Longshore and Warehouse Union U.S. West Coast chapter said Friday its members would not work any of the diverted vessels.

“The ILWU will not be unloading Canadian bound cargo in solidarity with our Brothers and Sisters in ILWU Canada,” said ILWU U.S. West Coast chapter President Willie Adams in a statement to CNBC.

The ILA, the largest union of maritime workers in North America, representing the workers at ports on the Atlantic and Gulf Coasts, Great Lakes, major U.S. rivers, Puerto Rico and Eastern Canada, also said in a statement that no diverted cargo from striking ports would be accepted.

Diverted Ships Are Arriving

The unions refusing to work diverted ships is quite problematic as ships are already being sent to U.S. ports because of the strike. The first of these ships was to arrive at the Port of Seattle yesterday (July 10th), according to LaRocco’s article.

She reported:

Two containerships that were diverted were identified as the MSC Sara Elena and the OOCL San Francisco. VesselsValue has also identified the MSC Matilde V which was anchored outside of Vancouver pulling up anchor and leaving with the Vancouver-bound cargo and heading back to Qingdao, China.

OL USA told CNBC all of its future cargo that normally goes to Vancouver is being rerouted to Seattle, Tacoma, Los Angeles, Long Beach and the East Coast.

There are things to wonder about with the unions’ stance. Some ships are scheduled to call at port in Canada and then the U.S. Would the unions consider these diverted ships and refuse to work them if shippers and carriers are diverting cargo that would have been unloaded in Canada to the U.S. stops? Shippers are undoubtedly diverting cargo whenever possible. That could mean diverting cargo on ships routed directly to the U.S. Could the unions decide to include any such ships?

How broadly will the ILWU and ILA apply their decision?

The unions shouldn’t have knowledge of particular cargo onboard ships, nor its destination or rerouting. If they wanted to make sure they’re not unloading any diverted cargo, the U.S. unions would basically have to strike themselves in solidarity.

Are we going to see ships anchored at U.S. ports that the unions refuse to work? Will we see more ships like the MSC Matilde V, heading back to Asia without completing their calls on ports? It’ll be a situation to watch, which is only compounded by the fact that we’re in the peak season, even though it’s a weak one.

Shippers Advised to Divert Cargo to U.S.

Despite the ILWU and ILA saying they won’t work diverted ships, shippers are being advised to divert cargo to and through the U.S.

LaRocco reports:

ITS Logistics told CNBC it has containers on the OOCL San Francisco. They were scheduled to arrive at the Port of Vancouver on July 3 and were then destined by rail for Memphis. Paul Brashier, vice president of drayage and intermodal at ITS Logistics, said clients are now looking for alternate American ports.

“Right now we are advising all clients with freight that was booked to Vancouver or Prince Rupert to work with their booking agents to track the US ports of call of the vessels that their containers are on and see if the ocean liners will allow reconsigment (switching container final destination) to a US port,” Brashier said.

Many ITS clients have requested a change in container destination and are waiting to see if the ocean carriers will accept that change. The ocean carriers are the final arbiter in any container destination change. Usually, you can change a container’s destination five days prior to a vessel docking.

There definitely should be an increase in cargo heading to U.S. ports, particularly those on the West Coast. There is normally a decent amount of U.S. cargo that comes in through Canadian ports. LaRocco’s article specifically points out auto and manufacturing parts, footwear, and apparel. The automotive industry in particular could suffer serious loss from the strike. Parts and materials for that industry are often ordered and brought in as they’re needed rather than well ahead of time. That makes it very likely importers in the auto industry are already scrambling to divert their goods.

Talks Resumed

Despite contentious words from both sides, talks between ILWU Canada and their employers, the British Columbia Maritime Employers Association (BCMEA), resumed with federal mediation.

Reuters reported:

Talks in Pacific Canada between striking dock workers and their employers have resumed after four days away from the negotiation table, a statement on Saturday by the British Columbia Maritime Employers Association (BCMEA) showed.

The BCMEA and the International Longshore and Warehouse Union Canada (ILWU Canada) met on Saturday, supported by federal mediators, the statement said. The talks had stalled on Tuesday and the two sides broke off negotiations.

At the very least, that’s a step in a positive direction. However, it is far from reassurance that this strike will be over soon.

 

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Freight Rates Watch: More Capacity Hitting Trans-Pacific During Already Weak Peak Season https://www.universalcargo.com/freight-rates-watch-more-capacity-hitting-trans-pacific-during-already-weak-peak-season/ https://www.universalcargo.com/freight-rates-watch-more-capacity-hitting-trans-pacific-during-already-weak-peak-season/#respond Thu, 06 Jul 2023 17:03:38 +0000 https://www.universalcargo.com/?p=12142 If there was a war over freight rates, whoever ocean freight carriers' version of Paul Revere is would be riding out, yelling, "The ships are coming! The ships are coming!"

Back in February, I blogged about the capacity on the way in 2023 to the ocean freight industry in the form of new ships. The increased capacity was the Sword of Damocles, threatening to fall on carriers' heads. March began the influx of new ships, which could be considered an onslaught of capacity by the time this weak (unfortunately so for carriers) peak season is over. The Sword of Damocles may be about to fall, slicing freight rates to unsustainably unprofitable levels for carriers.

Of course, shippers usually don't mind hearing that kind of news, even when the metaphor gets a bit messy, but just wait...

Find out more by reading the full post in Universal Cargo's blog.

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More Ships and Likely Lower Freight Rates

If there was a war over freight rates, whoever ocean freight carriers’ version of Paul Revere is would be riding out, yelling, “The ships are coming! The ships are coming!”

Back in February, I blogged about the capacity on the way in 2023 to the ocean freight industry in the form of new ships. The increased capacity was the Sword of Damocles, threatening to fall on carriers’ heads. March began the influx of new ships, which could be considered an onslaught of capacity by the time this weak (unfortunately so for carriers) peak season is over. The Sword of Damocles may be about to fall, slicing freight rates to unsustainably unprofitable levels for carriers.

Of course, shippers usually don’t mind hearing that kind of news, even when the metaphor gets a bit messy, but just wait…

Freight Rates

Negative Aspect of Increased Capacity for Shippers

Despite some pushes from carriers with peak season surcharges (PSS) and general rate increases (GRIs), freight rates have been fairly flat since a long period of tumbling that began around the middle of 2022. And now more downward freight rate pressure is about to enter the industry. That could mean lower freight rates for shippers during the time of year when freight rates are typically highest, but there could also be some drawbacks for shippers.

Carriers are likely to do a great deal of blank sailing to try to get capacity back under control. With all the sailings cancelled, shippers will see sudden delays in delivery of their cargo. Carriers will want to consolidate as much cargo as they can onto as few voyages as possible. That could have cargo taking longer routes through more countries and ports. Low freight rates combined with continued pressure to reduce carbon emissions should increase slow steaming. It all adds up to longer shipping times for importing and exporting cargo.

How Much Capacity Is on the Way?

In a Journal of Commerce (JOC) article, Michael Angell reported on how much capacity is about to enter the trans-Pacific shipping lanes:

Sea-Intelligence Maritime Analysis data released Wednesday shows that the trans-Pacific container fleet will see a 19.2% year-on-year increase in capacity by the fourth week of August. Vessel space between Asia and North America will increase at double-digit growth rates through early September, with a year-on-year 25.2% increase in ship supply by Sept. 11, Sea-Intelligence said.  

The number of new trans-Pacific ships expected in August and September is kicking off a wave of double-digit supply growth for the global container ship fleet that is expected to last into 2024. All told, the container ship fleet is expected to add another 2.5 million twenty-foot equivalent units (TEUs) of capacity this year, and 3.9 million TEUs next year.  

Angell’s article also quotes Sea-Intelligence CEO Alan Murphy as saying, “Some of the idle capacity might then be sent to yards to get retrofitted for slow steaming, in preparation for the tightening environmental regulations.”

It would seem likely that not only would carriers send ships for repair or upgrades but also increase scrapping to help control capacity. Still, there is a great deal of capacity on the way. Balancing supply and demand, especially with continued economic uncertainty, will be a major challenge for carriers.

In Other News, ILWU Canada Strike Continues

The International Longshore & Warehouse Union Canada (ILWU Canada) continues its strike that began on Saturday.

A strike by 7,400 Canadian dockworkers against their West Coast ports employers has entered its fifth day as negotiations have stalled.

The strike could affect container cargo traffic at two of Canada’s busiest ports in Vancouver and Prince Rupert, key export gateways for the country.

The strike looks like it could be long, which would be incredibly disruptive to Canada’s supply chain. While many Canadian importers are cut off from overseas imports, this could be an opportunity for U.S. manufacturers and exporters.

There could also be some cargo diversion through U.S. West Coast ports. That’s something they’d probably welcome as a change from having so much cargo diverted from them because of the disruption and risk of greater disruption from the ILWU contract negotiations that took over a year to reach a tentative agreement.

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Decoding OSRA – Section 5. Prohibition on Retaliation https://www.universalcargo.com/decoding-osra-section-5-prohibition-on-retaliation/ https://www.universalcargo.com/decoding-osra-section-5-prohibition-on-retaliation/#respond Tue, 04 Jul 2023 20:04:46 +0000 https://www.universalcargo.com/?p=12139 We're still only beginning to see how the changes to U.S. shipping law will affect businesses' imports and exports as well as carriers and other stakeholders operations within in the maritime industry. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

–Series Introduction & Quick Coverage of Section 1
–Section 2
–Section 3
–Section 4

Obviously, that means today we’re covering Section 5 of OSRA. Let’s see exactly what it says and changes…

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Edited on 4/24/23 to include subparagraph B, which was missing from initial post.

Introduction

We’re still only beginning to see how the changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 5 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 5 of OSRA is straightforward. It makes no edits to sentences or paragraphs of Title 46. Rather, Section 5 of OSRA adds a ban on retaliatory action from carriers against shippers to the General Prohibitions section of Title 46.

Section 5 outlaws carriers from actions like refusing service or discriminating against shippers for filing a complaint against the carrier or shipping through another carrier.

Section 5 Text

SEC. 5. PROHIBITION ON RETALIATION.

    Section 41102 of title 46, United States Code, is amended by adding 
at the end the following:
    ``(d) Retaliation and Other Discriminatory Actions.--A common 
carrier, marine terminal operator, or ocean transportation intermediary, 
acting alone or in conjunction with any other person, directly or 
indirectly, may not--
            ``(1) retaliate against a shipper, an agent of a shipper, an 
        ocean transportation intermediary, or a motor carrier by 
        refusing, or threatening to refuse, an otherwise-available cargo 
        space accommodation; or
            ``(2) resort to any other unfair or unjustly discriminatory 
        action for--
                    ``(A) the reason that a shipper, an agent of a 
                shipper, an ocean transportation intermediary, or motor 
                carrier has--
                          ``(i) patronized another carrier; or
                          ``(ii) filed a complaint against the common 
                      carrier, marine terminal operator, or ocean 
                      transportation intermediary; or
                    ``(B) any other reason.''.

Portion of Title 46 Section 5 Amends

Again, Section 5 does not edit text in Title 46 so much as it adds additional text to Section 41102 of the shipping law. However, I’ll still provide the full text of the section before the addition, so you can see what it already covers and how the new prohibition fits in. Luckily, this is not a long section.

§41102. General prohibitions

   (a) Obtaining Transportation at Less Than Applicable Rates.—A person may not knowingly and willfully, directly or indirectly, by means of false billing, false classification, false weighing, false report of weight, false measurement, or any other unjust or unfair device or means, obtain or attempt to obtain ocean transportation for property at less than the rates or charges that would otherwise apply.

   (b) Operating Contrary to Agreement.—A person may not operate under an agreement required to be filed under section 40302 or 40305 of this title if—

      (1) the agreement has not become effective under section 40304 of this title or has been rejected, disapproved, or canceled; or

      (2) the operation is not in accordance with the terms of the agreement or any modifications to the agreement made by the Federal Maritime Commission.

   (c) Practices in Handling Property.—A common carrier, marine terminal operator, or ocean transportation intermediary may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.

(Pub. L. 109–304, §7, Oct. 6, 2006, 120 Stat. 1540.)

[Historical and Revision Notes table omitted.]

Visible Changes

Section 5 adds a fourth item to the short list of general prohibitions in Section 41102 of Title 46. That item is broken down into two types of outlawed actions, which are further broken down into the two causes for the actions that would make the actions illicit.

Let’s go through it paragraph by paragraph.

Paragraph (d)

Paragraph (d) gives an overarching title to the new prohibition and defines who or what entity is prohibited from retaliatory or discriminatory actions:

``(d) Retaliation and Other Discriminatory Actions.--A common 
carrier, marine terminal operator, or ocean transportation intermediary, 
acting alone or in conjunction with any other person, directly or 
indirectly, may not--

What stands out here is that this not only applies to carriers but also to terminal operators and ocean transportation intermediaries, which would likely include freight forwarders, NVOCCs (non-vessel operating common carriers), and 3PLs (third-party logistics companies). Yes, there’s much overlap in those three company types listed.

Subparagraph (1)

Subparagraph (1) of the new section reads as follows:

``(1) retaliate against a shipper, an agent of a shipper, an 
        ocean transportation intermediary, or a motor carrier by 
        refusing, or threatening to refuse, an otherwise-available cargo 
        space accommodation; or

Subparagraph (1) does two things.

First, it defines who carriers, terminal operators, and ocean transportation intermediaries may not retaliate against: not only shippers but also their agents, ocean transportation intermediaries like freight forwarders, and truckers or trucking companies.

Second, it defines a way in which retaliation is prohibited: by refusing or threatening to refuse available cargo space a.k.a. refusing service.

It stands out that ocean transportation intermediaries are included both in the group that is prohibited from retaliating and the group that cannot be retaliated against. Ultimately, the goal appears to be protecting shippers, so this prohibition is designed to protect them from 3PLs or freight forwarders who might retaliate against them and protect them from suffering damage from a freight forwarder or 3PL representing them being retaliated against.

Subparagraph (2)

Subparagraph (2) is very broad:

``(2) resort to any other unfair or unjustly discriminatory 
        action for--

The lawmakers obviously didn’t want to limit prohibited retaliation to refusal of service. Thus, they included this subparagraph to include any “unfair of unjustly discriminatory action.” It’s not hard to imagine carriers and shippers may disagree on what is unfair or unjustly discriminatory.

It’s hard to think lawmakers could come up with every possible unfair or unjustly discriminatory practice possible, but maybe they should have come up with a few likely examples like charging a shipper more than others in retaliation.

Subparagraph (A)

Subparagraph (A) doesn’t do much on its own. It works in conjunction with the next two subparagraphs to define the things for which carriers, terminal operators, or ocean transportation intermediaries cannot resort to unfair or unjustly discriminatory action. Subparagraph (A) reads:

``(A) the reason that a shipper, an agent of a 
                shipper, an ocean transportation intermediary, or motor 
                carrier has--

The thought continues on into…

Subparagraph (i)

Subparagraph (i) of the new section reads as follows:

``(i) patronized another carrier; or

Thus, shippers (or their truckers or freight forwarders, etc.) can get services from other carriers, terminal operators, or ocean transportation intermediaries, and the previous ones (or latter hired ones) are not allowed to punish them for it.

Subparagraph (ii)

Subparagraph (ii) of the new section reads as follows:

``(ii) filed a complaint against the common 
                      carrier, marine terminal operator, or ocean 
                      transportation intermediary; or

This gives the second thing for which shippers and/or their agents can’t be retaliated against: filing a complaint. Presumably, this would mainly be complaints filed with the FMC. There has been an uptick in such complaints from shippers lately, so this may be having lawmakers’ desired effect.

Subparagraph (B)

Subparagraph (B) reads as follows:

``(B) any other reason.''.

This really extends the prohibition on carriers, marine terminal operators, or ocean transportation intermediaries refusing service or performing unfair or unjustly discriminatory practices. Such actions cannot be taken under any circumstance, not merely in the case of retaliation.

Additional Observation

The addition of subparagraph B basically makes subparagraphs (A), (i), and (ii) unnecessary. That the lawmakers still decided to include these subparagraphs makes it clear they had an emphasis on stopping retaliation against shippers and their representatives for acquiring the services of carriers’ (et al.) competitors or filing claims against carriers, terminal operators, or ocean transportation intermediaries.

It would seem lawmakers want to encourage shippers, or at least make them feel uninhibited, in filing claims with the FMC against the big businesses that dominate the shipping industry.

Conclusion

Section 5 is straightforward, prohibiting carriers, terminal operators, and ocean transportation intermediators from retaliating against shippers, their agents, ocean transportation intermediators, or trucking carriers for filing complaints or hiring the services of the first group’s competitors.

Lawmakers are clearly trying to protect shippers here and remove fear of repercussions from filing complaints against maritime stakeholders.

If there’s anything you think I missed in this section of OSRA, please share it in the comments section below.

Staye tuned for when Decoding OSRA continues, examining Section 6….

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ILWU Canada Announces Strike & Possible Opportunity for U.S. Exporters https://www.universalcargo.com/ilwu-canada-announces-strike-possible-opportunity-for-u-s-exporters/ https://www.universalcargo.com/ilwu-canada-announces-strike-possible-opportunity-for-u-s-exporters/#respond Thu, 29 Jun 2023 12:55:00 +0000 https://www.universalcargo.com/?p=12134 The International Longshore & Warehouse Union Canada (ILWU Canada) gave formal notice yesterday that it will strike starting Saturday morning. The union sent a short letter of notice to British Columbia Maritime Employers Association (BCMEA) President and CEO Mike Leonard and copied Minister of Labour Seamus O'Regan:

"This is your notice, pursuant to section 87(2)(1) of the Canada Labour Code, that the Union will commence strike action against the BCMEA and its member employers on July 1, 2023 at or about 08:00 am."

The letter was signed by ILWU Canada President Rob Ashton.

This strike is significant to U.S. businesspeople who import and export goods for a few reasons. Among them, a portion of U.S.-originating or -bound containerized goods shipped via ocean move through Canadian ports. Another is labor action at U.S. West Coast ports finally just ceased, as the ILWU at last reached a tentative contract agreement with the Pacific Maritime Association (PMA) two weeks ago, and some shippers may worry labor action here will start up again from the ILWU in solidarity with their Canadian West Coast dockworker brothers.

Not all reasons for U.S. businesspeople to be interested are necessarily bad. This could present an opportunity for U.S. manufacturers and exporters.

Find out all about it by reading the full post in Universal Cargo's blog.

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The International Longshore & Warehouse Union Canada (ILWU Canada) gave formal notice yesterday that it will strike starting Saturday morning. The union sent a short letter of notice to British Columbia Maritime Employers Association (BCMEA) President and CEO Mike Leonard and copied Minister of Labour Seamus O’Regan:

This is your notice, pursuant to section 87(2)(1) of the Canada Labour Code, that the Union will commence strike action against the BCMEA and its member employers on July 1, 2023 at or about 08:00 am.

The letter was signed by ILWU Canada President Rob Ashton.

truckers strike Port of Los Angeles Long Beach

This strike is significant to U.S. businesspeople who import and export goods for a few reasons. Among the reasons, a portion of U.S.-originating or -bound containerized goods shipped via ocean move through Canadian ports. Another is labor action at U.S. West Coast ports finally just ceased, as the ILWU at last reached a tentative contract agreement with the Pacific Maritime Association (PMA) two weeks ago, and some shippers may worry labor action here will start up again from ILWU members in solidarity with their Canadian West Coast dockworker brothers.

Not all reasons for U.S. businesspeople to be interested are necessarily bad. This could present an opportunity for U.S. manufacturers and exporters. More on that later below….

U.S. Ocean Freight Through Canada

According to the Canadian government’s website, less than 2.5% of U.S. containerized cargo imports go through Canadian ports. However, that is still a significant amount of U.S. imports that could be delayed by this dockworker strike, even if the Canadian government calls it marginal. If your cargo is coming in or going out through British Columbia ports, you probably don’t care what portion of U.S. ocean cargo it’s among. You just want your cargo to get to its destination.

Likelihood of Solidarity Strike

Happily, even with some looking, I’ve neither seen nor heard rumblings of labor action here connected to the ILWU Canada strike. However, as we’ve unfortunately seen again during recent port disruption, ILWU labor action can happen suddenly and without warning. Certainly without a formal letter of notice.

With the new tentative agreement just entering the ratification process, one would not expect the ILWU to resume labor action. The union successfully achieved significant pay hikes, and the PMA has to ratify the contract along with the ILWU.

On the other hand, and this may be a bit of gray area, the contract not being ratified yet means contractual protections against labor actions like a strike are not technically back in place yet. That would make now a moment the union would be more likely capable of executing labor action than after ratification.

All things considered, the strike should remain localized to ILWU Canada, but we have to remain vigilant.

ILWU Canada Strike Statement (Full Text)

Here’s the full statement ILWU Canada released with its 72 hour strike notice:

***FOR IMMEDIATE RELEASE***

STATEMENT FROM THE ILWU CANADA BARGAINING COMMITTEE

Free Collective Bargaining between the International Longshore and Warehouse Union Canada (ILWU) and the British Columbia Maritime Employers Association (BCMEA) has been ongoing since February of this year in an attempt renew the industry wide collective agreement which expired March 31, 2023.

The Union is seeking a fair deal that respects Longshore workers, one that protects our jobs and our jurisdiction. We are seeking recognition for the hard work and sacrifices that Longshore Workers made during the pandemic and the extraordinary work that Longshore Locals did in getting workers out to the terminals during the lockdowns.

Our Main Objectives are:

–To stop the erosion of our work through Contracting Out

–To protect current and future generations from the devastating impacts of Port Automation

–To protect longshore workers from record High Inflation and sky rocketing Cost of Living

But the Employers and their bargaining agent, the BCMEA have repaid our hard work and dedication with demands for major concessions. Their only objective is to take away rights and conditions from longshore workers after having gorged themselves on record profits during the pandemic.

Longshore workers kept this Province and the Country running during the Pandemic and when Canadians were told to shelter in place, our people went to work! We worked in difficult and hazardous conditions to ensure that the communities where we live, and all Canadians had the necessary supplies and personal protective equipment to defend against the Covid19 virus. This was an unprecedented time in the history of the world and longshore workers stepped up and proved that we are here to support the people of Canada. It is unfortunate that our employers hold us in such contempt.

Unfortunately, the ILWU Canada Bargaining Committee has run out options at the bargaining table because the BCMEA and their member employers have refused to negotiate on the main issues, and we feel we are left with no choice but to take the next step in the process. Therefore, at 8:00am on June 28, 2023, ILWU Canada issued 72-hour strike notice to the BCMEA. Longshore Workers are prepared to walk off the job at 8:00am on July 1, 2023.

We remain committed to negotiate an end to this dispute that respects Longshore Workers and we call on the BCMEA to drop all concessions and get serious about negotiating with the Union in good faith.

Rob Ashton

President – ILWU Canada

Opportunity for U.S. Exporters?

If the ILWU Canada strike creates significant and extended disruption to Canadian West Coast ports, this could be an opportunity for U.S. exporters.

Canada is already the United States’ second largest goods trading partner, but that doesn’t mean there isn’t room for growth. According to the Office of the U.S. Trade Representative, there was $292.7 billion worth of U.S. goods exported to Canada in 2019. And that number was down 2.4% from the prior year. More recent data from the Trade Representative would be nice, but now could be an opportunity to reclaim some of that goods market share.

Top U.S. exports to Canada, as of 2019 data from the Trade Representative, are vehicles ($52 billion), machinery ($45 billion), electrical machinery ($25 billion), mineral fuels ($25 billion), and plastics ($13 billion). But suppliers of other types of goods shouldn’t feel exports to Canada should be limited to those categories by any means.

Here’s a list of Canada’s top 10 imports as of 2022, according to World’s Top Imports:

  1. Machinery including computers: US$80.2 billion (14.1% of total imports)
  2. Vehicles: $78.8 billion (13.9%)
  3. Electrical machinery, equipment: $53 billion (9.3%)
  4. Mineral fuels including oil: $44.8 billion (7.9%)
  5. Plastics, plastic articles: $22.5 billion (4%)
  6. Pharmaceuticals: $20 billion (3.5%)
  7. Gems, precious metals: $19 billion (3.3%)
  8. Optical, technical, medical apparatus: $14.5 billion (2.6%)
  9. Articles of iron or steel: $14.1 billion (2.5%)
  10. Iron, steel: $11.1 billion (2%)

But whatever your product, now could be a good time to look for a trade partner in Canada. And Universal Cargo is always happy to help you export there or to other countries around the world.

Click Here for Free Air Freight PricingClick here for free freight rate pricing

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Decoding OSRA – Section 4. Shipping Exchange Registry https://www.universalcargo.com/decoding-osra-section-4-shipping-exchange-registry/ https://www.universalcargo.com/decoding-osra-section-4-shipping-exchange-registry/#respond Tue, 27 Jun 2023 16:05:25 +0000 https://www.universalcargo.com/?p=12127 Introduction

What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Series Introduction & Quick Coverage of Section 1
Section 2
Section 3

Obviously, that means today we’re covering Section 4 of OSRA. Let’s see exactly what it says and changes…

Check it out in Universal Cargo's blog.

The post Decoding OSRA – Section 4. Shipping Exchange Registry appeared first on Universal Cargo.

]]>
Introduction
Decoding OSRA

What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 4 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 4 of OSRA is the largest section we’ve covered so far. However, it makes no edits to sentences or paragraphs of Title 46 like we’ve seen in previous section. Rather, Section 4 adds a whole new section at the end of Chapter 405 of Title 46.

This section creates a new requirement for shipping exchanges to register with the Federal Maritime Commission (FMC). However, it leaves it to the FMC to create the regulations around this registration rather than creating them itself.

Section 4 Full Text

SEC. 4. SHIPPING EXCHANGE REGISTRY.

    (a) In General.--Chapter 405 of title 46, United States Code, is 
amended by adding at the end the following:
``Sec. 40504. <<NOTE: 46 USC 40504.>>  Shipping exchange registry

    ``(a) In General.--No person may operate a shipping exchange 
involving ocean transportation in the foreign commerce of the United 
States unless the shipping exchange is registered as a national shipping 
exchange under the terms and conditions provided in this section and the 
regulations issued pursuant to this section.

[[Page 136 STAT. 1273]]

    ``(b) Registration. – <<NOTE: Regulations.>> A person shall register 
a shipping exchange by filing with the Federal Maritime Commission an 
application for registration in such form as the Commission, by rule, 
may prescribe, containing the rules of the exchange and such other 
information and documents as the Commission, by rule, may prescribe as 
necessary or appropriate to complete a shipping exchange's registration.

    ``(c) Exemption.--The Commission may exempt, conditionally or 
unconditionally, a shipping exchange from registration under this 
section if the Commission finds that the shipping exchange is subject to 
comparable, comprehensive supervision and regulation by the appropriate 
governmental authorities in a foreign country where the shipping 
exchange is headquartered.
    ``(d) Regulations. – <<NOTE: Deadline. Standards.>> Not later than 3 
years after the date of enactment of the Ocean Shipping Reform Act of 
2022, the Commission shall issue regulations pursuant to subsection (a), 
which shall set standards necessary to carry out subtitle IV of this 
title for registered national shipping exchanges. For consideration of a 
service contract entered into by a shipping exchange, the Commission 
shall be limited to the minimum essential terms for service contracts 
established under section 40502 of this title.

    ``(e) Definition of Shipping Exchange.--In this section, the term 
`shipping exchange' means a platform (digital, over-the-counter, or 
otherwise) that connects shippers with common carriers for the purpose 
of entering into underlying agreements or contracts for the transport of 
cargo, by vessel or other modes of transportation.''.
    (b) <<NOTE: Effective date. 46 USC 40504 note.>>  Applicability.--
The registration requirement under section 40504 of title 46, United 
States Code (as added by subsection (a)), shall take effect on the date 
on which the Federal Maritime Commission states the rule is effective in 
the regulations issued under such section.

    (c) Clerical Amendment.--The analysis for chapter 405 of title 46, 
United States Code, <<NOTE: 46 USC 40501 prec.>>  is amended by adding 
at the end the following:

``40504. Shipping exchange registry.''.

Portion of Title 46 Section 4 Amends

As mentioned earlier, Section 4 doesn’t edit text in Title 46 so much as add an additional section to Chapter 405 of the shipping law. However, I’ll still provide the full text of the chapter so you can see everything it covered before the additional section was added to it and how that section fits in.

CHAPTER 405—TARIFFS, SERVICE CONTRACTS, REFUNDS, AND WAIVERS

Sec.
40501.    General rate and tariff requirements.
40502.    Service contracts.
40503.    Refunds and waivers.

§40501. General rate and tariff requirements

(a) Automated Tariff System.—

(1) In general.—Each common carrier and conference shall keep open to public inspection in an automated tariff system, tariffs showing all its rates, charges, classifications, rules, and practices between all points or ports on its own route and on any through transportation route that has been established. However, a common carrier is not required to state separately or otherwise reveal in tariffs the inland divisions of a through rate.

(2) Exceptions.—Paragraph (1) does not apply with respect to bulk cargo, forest products, recycled metal scrap, new assembled motor vehicles, waste paper, or paper waste.

(b) Contents of Tariffs.—A tariff under subsection (a) shall—

(1) state the places between which cargo will be carried;

(2) list each classification of cargo in use;

(3) state the level of compensation, if any, of any ocean freight forwarder by a carrier or conference;

(4) state separately each terminal or other charge, privilege, or facility under the control of the carrier or conference and any rules that in any way change, affect, or determine any part or the total of the rates or charges;

(5) include sample copies of any bill of lading, contract of affreightment, or other document evidencing the transportation agreement; and

(6) include copies of any loyalty contract, omitting the shipper's name.

(c) Electronic Access.—A tariff under subsection (a) shall be made available electronically to any person, without time, quantity, or other limitation, through appropriate access from remote locations. A reasonable fee may be charged for such access, except that no fee may be charged for access by a Federal agency.

(d) Time-Volume Rates.—A rate contained in a tariff under subsection (a) may vary with the volume of cargo offered over a specified period of time.

(e) Effective Dates.—

(1) Increases.—A new or initial rate or change in an existing rate that results in an increased cost to a shipper may not become effective earlier than 30 days after publication. However, for good cause, the Federal Maritime Commission may allow the rate to become effective sooner.

(2) Decreases.—A change in an existing rate that results in a decreased cost to a shipper may become effective on publication.

(f) Marine Terminal Operator Schedules.—A marine terminal operator may make available to the public a schedule of rates, regulations, and practices, including limitations of liability for cargo loss or damage, pertaining to receiving, delivering, handling, or storing property at its marine terminal. Any such schedule made available to the public is enforceable by an appropriate court as an implied contract without proof of actual knowledge of its provisions.

(g) Regulations.—

(1) In general.—The Commission shall by regulation prescribe the requirements for the accessibility and accuracy of automated tariff systems established under this section. The Commission, after periodic review, may prohibit the use of any automated tariff system that fails to meet the requirements established under this section.

(2) Remote terminals.—The Commission may not require a common carrier to provide a remote terminal for electronic access under subsection (c).

(3) Marine terminal operator schedules.—The Commission shall by regulation prescribe the form and manner in which marine terminal operator schedules authorized by this section shall be published.

(Pub. L. 109–304, §7, Oct. 6, 2006, 120 Stat. 1532.)

[Historical and Revision Notes chart omitted.]

In subsection (b)(3), the words “ocean freight forwarder” are substituted for “ocean transportation intermediary, as defined in section 1702(17)(A) of this Appendix” because the definition of “ocean transportation intermediary” in section 1702(17)(A) contains a definition of “ocean freight forwarder” which is restated as a separate definition.

In subsection (e), the word “calendar” is omitted as unnecessary.

In subsection (f)(1), the words “subject to section 1709(d) of this Appendix” are omitted as unnecessary.
§40502. Service contracts

(a) In General.—An individual ocean common carrier or an agreement between or among ocean common carriers may enter into a service contract with one or more shippers subject to the requirements of this part.

(b) Filing Requirements.—

(1) In general.—Each service contract entered into under this section by an individual ocean common carrier or an agreement shall be filed confidentially with the Federal Maritime Commission.

(2) Exceptions.—Paragraph (1) does not apply to contracts regarding bulk cargo, forest products, recycled metal scrap, new assembled motor vehicles, waste paper, or paper waste.

(c) Essential Terms.—Each service contract shall include—

(1) the origin and destination port ranges;

(2) the origin and destination geographic areas in the case of through intermodal movements;

(3) the commodities involved;

(4) the minimum volume or portion;

(5) the line-haul rate;

(6) the duration;

(7) service commitments; and

(8) the liquidated damages for nonperformance, if any.

(d) Publication of Certain Terms.—When a service contract is filed confidentially with the Commission, a concise statement of the essential terms specified in paragraphs (1), (3), (4), and (6) of subsection (c) shall be published and made available to the general public in tariff format.

(e) Disclosure of Certain Terms.—

(1) Definitions.—In this subsection, the terms “dock area” and “within the port area” have the same meaning and scope as in the applicable collective bargaining agreement between the requesting labor organization and the carrier.

(2) Disclosure.—An ocean common carrier that is a party to or is otherwise subject to a collective bargaining agreement with a labor organization shall, in response to a written request by the labor organization, state whether it is responsible for the following work at a dock area or within a port area in the United States with respect to cargo transportation under a service contract:

(A) The movement of the shipper's cargo on a dock area or within the port area or to or from railroad cars on a dock area or within the port area.

(B) The assignment of intraport carriage of the shipper's cargo between areas on a dock or within the port area.

(C) The assignment of the carriage of the shipper's cargo between a container yard on a dock area or within the port area and a rail yard adjacent to the container yard.

(D) The assignment of container freight station work and container maintenance and repair work performed at a dock area or within the port area.

(3) Within reasonable time.—The common carrier shall provide the information described in paragraph (2) to the requesting labor organization within a reasonable period of time.

(4) Existence of collective bargaining agreement.—This subsection does not require the disclosure of information by an ocean common carrier unless there exists an applicable and otherwise lawful collective bargaining agreement pertaining to that carrier. A disclosure by an ocean common carrier may not be deemed an admission or an agreement that any work is covered by a collective bargaining agreement. A dispute about whether any work is covered by a collective bargaining agreement and the responsibility of an ocean common carrier under a collective bargaining agreement shall be resolved solely in accordance with the dispute resolution procedures contained in the collective bargaining agreement and the National Labor Relations Act (29 U.S.C. 151 et seq.), and without reference to this subsection.

(5) Effect under other laws.—This subsection does not affect the lawfulness or unlawfulness under this part or any other Federal or State law of any collective bargaining agreement or element thereof, including any element that constitutes an essential term of a service contract.

(f) Remedy for Breach.—Unless the parties agree otherwise, the exclusive remedy for a breach of a service contract is an action in an appropriate court. The contract dispute resolution forum may not be controlled by or in any way affiliated with a controlled carrier or by the government that owns or controls the carrier.

(Pub. L. 109–304, §7, Oct. 6, 2006, 120 Stat. 1533.)

[Historical and Revision Notes chart omitted.]

In subsection (e)(5), the words “the National Labor Relations Act [29 U.S.C. 151 et seq.], the Taft-Hartley Act [29 U.S.C. 141 et seq.], the Federal Trade Commission Act [15 U.S.C. 41 et seq.], the antitrust laws” are omitted as unnecessary because of the reference to “any other Federal or State law”.
References in Text

The National Labor Relations Act, referred to in subsec. (e)(4), is act July 5, 1935, ch. 372, 49 Stat. 449, which is classified generally to subchapter II (§151 et seq.) of chapter 7 of Title 29, Labor. For complete classification of this Act to the Code, see section 167 of Title 29 and Tables.
§40503. Refunds and waivers

The Federal Maritime Commission, on application of a carrier or shipper, may permit a common carrier or conference to refund a portion of the freight charges collected from a shipper, or to waive collection of a portion of the charges from a shipper, if—

(1) there is an error in a tariff, a failure to publish a new tariff, or an error in quoting a tariff, and the refund or waiver will not result in discrimination among shippers, ports, or carriers;

(2) the common carrier or conference, before filing an application for authority to refund or waive any charges for an error in a tariff or a failure to publish a tariff, has published a new tariff setting forth the rate on which the refund or waiver would be based; and

(3) the application for the refund or waiver is filed with the Commission within 180 days from the date of shipment.

(Pub. L. 109–304, §7, Oct. 6, 2006, 120 Stat. 1535.)

[Historical and Revision Notes chart omitted.]

In paragraph (1), the words “an error in a tariff, a failure to publish a new tariff” are substituted for “an error in a, in failing to publish a new tariff” to correct an obvious error in the underlying statute.

In paragraph (2), the words “or waive” are added for consistency with the reference to a waiver later in the paragraph.

Visible Changes

“40504. Shipping exchange registry.” is added to the list of sections at the beginning of the chapter.

The section, as quoted above, is added to the end of Chapter 405.

Let’s go through the section paragraph by paragraph…

Paragraph (a)

The first paragraph of the new section reads as follows:

(a) In General.--Chapter 405 of title 46, United States Code, is amended by adding at the end the following: ``Sec. 40504. <<NOTE: 46 USC 40504.>> Shipping exchange registry

This paragraph just inserts the title headline of the new section.

Subparagraph (a)

Subparagraph (a) of the new section reads as follows:

In General.--No person may operate a shipping exchange involving ocean transportation in the foreign commerce of the United States unless the shipping exchange is registered as a national shipping exchange under the terms and conditions provided in this section and the regulations issued pursuant to this section.

This paragraph is straight forward, requiring the registration of a shipping exchange as a national shipping exchange in order for anyone to operate that shipping exchange. Explicitly, it is referring to shipping exchanges involving foreign trade of the U.S.

Subparagraph (b)

Subparagraph (b) of the new section reads as follows:

``(b) Registration. – <<NOTE: Regulations.>> A person shall register a shipping exchange by filing with the Federal Maritime Commission an application for registration in such form as the Commission, by rule, may prescribe, containing the rules of the exchange and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate to complete a shipping exchange's registration.

Registration will be with the FMC. The rules for registration, both how to apply for registration and the information and documents required in the registration, shall be determined by the FMC. While Congress leaves it up to the FMC to decide what is “necessary or appropriate” in the registration, legislators do include one thing for the registration to include: “the rules of the exchange.”

Subparagraph (c)

Subparagraph (c) of the new section reads as follows:

``(c) Exemption.--The Commission may exempt, conditionally or unconditionally, a shipping exchange from registration under this section if the Commission finds that the shipping exchange is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in a foreign country where the shipping exchange is headquartered.

This paragraph gives the FMC authority to exempt exchanges from registering under a special condition. If the shipping exchange is headquartered in a different country, it doesn’t have to register with the FMC as long as the exchange is “subject to comparable, comprehensive supervision and regulation” by the governmental authorities in that country. However, it’s up to the FMC to decide if that shipping exchange is exempt. The commission could choose to require the exchange to register anyway.

Subparagraph (d)

Subparagraph (d) of the new section reads as follows:

``(d) Regulations. – <<NOTE: Deadline. Standards.>> Not later than 3 years after the date of enactment of the Ocean Shipping Reform Act of 2022, the Commission shall issue regulations pursuant to subsection (a), which shall set standards necessary to carry out subtitle IV of this title for registered national shipping exchanges. For consideration of a service contract entered into by a shipping exchange, the Commission shall be limited to the minimum essential terms for service contracts established under section 40502 of this title.

This paragraph gives the FMC 3 years to come up with its regulations for registering shipping exchanges.

This paragraph also includes an interesting limitation in that it might not be much of a limitation at all. Service contracts entered into by a shipping exchange that the FMC considers, because they presumably must be registered like service contracts between ocean common carriers and shippers, can only be required to have the same minimum essential terms listed in Section 40502 of Title 46.

The reason I say this might not be much of a limitation at all is because, as we covered in the previous post on this series, Congress added to the list of essential terms “any other essential terms” the FMC decides are “necessary or appropriate.”

Essentially, the FMC could add anything it wants to the list of required terms shipping exchange service contracts must include when registering. The FMC just has to make those required for service contracts between carriers and shippers as well.

Subparagraph (e)

Paragraph (e) of the new section reads as follows:

``(e) Definition of Shipping Exchange.--In this section, the term `shipping exchange' means a platform (digital, over-the-counter, or  otherwise) that connects shippers with common carriers for the purpose of entering into underlying agreements or contracts for the transport of cargo, by vessel or other modes of transportation.''.

This paragraph defines what shipping exchanges are. The definition is rather broad. That it includes “by vessel or other modes of transportation” in the prepositional phrase modifying “the transport of cargo” could potentially broaden the FMC’s authority beyond maritime or ocean shipping.

Paragraph (b)

Paragraph (b) reads as follows:

(b) <<NOTE: Effective date. 46 USC 40504 note.>> Applicability. – The registration requirement under section 40504 of title 46, United States Code (as added by subsection (a)), shall take effect on the date on which the Federal Maritime Commission states the rule is effective in the regulations issued under such section.

To put it simply, this new shipping exchange registration goes into effect when the FMC says so.

Paragraph (c)

Paragraph (c) reads as follows:

(c) Clerical Amendment.--The analysis for chapter 405 of title 46, United States Code, <<NOTE: 46 USC 40501 prec.>> is amended by adding at the end the following: ``40504. Shipping exchange registry.''.

This is where Section 4 adds the “Shipping exchange registry” name to the list of sections in Chapter 405 of Title 46. No law change here.

Additional Observation

This section of OSRA, like the only other section so far to make actual rule changes to the United States’ shipping law, gives the FMC more authority and rule- and regulation-creating responsibility.

Again, no oversight is given to the FMC when it comes to this section. The FMC appears to be the final authority on the matter covered in Section 4, as it was in the matter covered in Section 3. No checks. No balances.

Conclusion

Section 4 deals with shipping exchanges, specifically requiring them to register with the FMC.

The FMC is to come up with the rules around this registration and has 3 years to do so.

Ultimately, this will create more paperwork for shipping exchanges. It could make it easier for the government, and the FMC specifically, to shut down their operation in the U.S.

How difficult or extensive the registration process will be shall be up to the FMC. This section could end up protecting shippers from potentially problematic shipping exchanges. It could also make the use or operation of shipping exchanges more difficult or more costly. Only time will tell the effects.

It is notable that the first two real legislative changes in OSRA increase the authority and power of the FMC.

If you have any thoughts on this section of OSRA that I didn’t cover, please share them.

Stay tuned for when Decoding OSRA continues, examining Section 5

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Decoding OSRA – Section 3. Service Contracts https://www.universalcargo.com/decoding-osra-section-3-service-contracts/ https://www.universalcargo.com/decoding-osra-section-3-service-contracts/#respond Thu, 22 Jun 2023 12:00:00 +0000 https://www.universalcargo.com/?p=12125 What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

– Series Introduction & Quick Coverage of Section 1
– Section 2

Obviously, that means today we're covering Section 3 of OSRA.

Read the full post in Universal Cargo's blog to see exactly what it says and changes...

The post Decoding OSRA – Section 3. Service Contracts appeared first on Universal Cargo.

]]>
Introduction

What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

Decoding OSRA

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Previously covered in this series:

Obviously, that means today we’re covering Section 3 of OSRA. Let’s see exactly what it says and changes…

Quick Overview

Section 3 of OSRA makes a significant change to the “Service contracts” portion of U.S. shipping law in Title 46.

There are technically three changes it makes, but they work together for a single addition to the law.

The first two changes are grammatical, changing punctuation and the usage of the coordinating conjunction “and”. The third change adds text to the end of the section that allows the Federal Maritime Commission (FMC) to add more contract terms to the filing requirements for agreements between common ocean carriers and shippers than are already listed in this portion of shipping law.

Section 3 Text

SEC. 3. SERVICE CONTRACTS.

    Section 40502(c) of title 46, United States Code, is amended--
            (1) in paragraph (7), by striking ``; and'' and inserting a 
        semicolon;
            (2) in paragraph (8), by striking the period and inserting 
        ``; and''; and
            (3) by adding at the end the following:
            ``(9) any other essential terms that the Federal Maritime 
        Commission determines necessary or appropriate through a 
        rulemaking process.''.

Portion of Title 46 Section 3 Amends

§40502. Service contracts

(a) In General.—An individual ocean common carrier or an agreement between or among ocean common carriers may enter into a service contract with one or more shippers subject to the requirements of this part.

(b) Filing Requirements.—

(1) In general.—Each service contract entered into under this section by an individual ocean common carrier or an agreement shall be filed confidentially with the Federal Maritime Commission.

(2) Exceptions.—Paragraph (1) does not apply to contracts regarding bulk cargo, forest products, recycled metal scrap, new assembled motor vehicles, waste paper, or paper waste.

(c) Essential Terms.—Each service contract shall include—

(1) the origin and destination port ranges;

(2) the origin and destination geographic areas in the case of through intermodal movements;

(3) the commodities involved;

(4) the minimum volume or portion;

(5) the line-haul rate;

(6) the duration;

(7) service commitments; and

(8) the liquidated damages for nonperformance, if any.

(d) Publication of Certain Terms.—When a service contract is filed confidentially with the Commission, a concise statement of the essential terms specified in paragraphs (1), (3), (4), and (6) of subsection (c) shall be published and made available to the general public in tariff format.

(e) Disclosure of Certain Terms.—

(1) Definitions.—In this subsection, the terms “dock area” and “within the port area” have the same meaning and scope as in the applicable collective bargaining agreement between the requesting labor organization and the carrier.

(2) Disclosure.—An ocean common carrier that is a party to or is otherwise subject to a collective bargaining agreement with a labor organization shall, in response to a written request by the labor organization, state whether it is responsible for the following work at a dock area or within a port area in the United States with respect to cargo transportation under a service contract:

(A) The movement of the shipper's cargo on a dock area or within the port area or to or from railroad cars on a dock area or within the port area.

(B) The assignment of intraport carriage of the shipper's cargo between areas on a dock or within the port area.

(C) The assignment of the carriage of the shipper's cargo between a container yard on a dock area or within the port area and a rail yard adjacent to the container yard.

(D) The assignment of container freight station work and container maintenance and repair work performed at a dock area or within the port area.

(3) Within reasonable time.—The common carrier shall provide the information described in paragraph (2) to the requesting labor organization within a reasonable period of time.

(4) Existence of collective bargaining agreement.—This subsection does not require the disclosure of information by an ocean common carrier unless there exists an applicable and otherwise lawful collective bargaining agreement pertaining to that carrier. A disclosure by an ocean common carrier may not be deemed an admission or an agreement that any work is covered by a collective bargaining agreement. A dispute about whether any work is covered by a collective bargaining agreement and the responsibility of an ocean common carrier under a collective bargaining agreement shall be resolved solely in accordance with the dispute resolution procedures contained in the collective bargaining agreement and the National Labor Relations Act (29 U.S.C. 151 et seq.), and without reference to this subsection.

(5) Effect under other laws.—This subsection does not affect the lawfulness or unlawfulness under this part or any other Federal or State law of any collective bargaining agreement or element thereof, including any element that constitutes an essential term of a service contract.

(f) Remedy for Breach.—Unless the parties agree otherwise, the exclusive remedy for a breach of a service contract is an action in an appropriate court. The contract dispute resolution forum may not be controlled by or in any way affiliated with a controlled carrier or by the government that owns or controls the carrier.

1st Change

Paragraph 7 of this section will now read “service commitments;” instead of “service commitments; and”.

Key Difference

§40502 of Title 46 is essentially a list of filing requirements for service contracts between ocean carriers and shippers. Because Section 3 of OSRA adds something to the list, Paragraph 7 will no longer be the penultimate item, as it was before. Thus, the “and” is removed.

2nd Change

Paragraph 8 used to read, “the liquidated damages for nonperformance, if any.” Now it shall read, “the liquidated damages for nonperformance, if any; and”.

Key Difference

Paragraph 8 used to be the last item on the list. This small grammatical change goes with the last, signifying 8 is now the second to last item on the list.

3rd & Final Change

Here’s where we get to the significant change in Title 46 and the reason the two above grammatical changes were made. Section 3 of OSRA adds the following item to the end of the contract terms filing requirements list:

“(9) any other essential terms that the Federal Maritime Commission determines necessary or appropriate through a rulemaking process.”

Key Difference

A rather vague and open-ended item is added to the end of the filing requirements for service contracts between ocean carriers and shippers. Ultimately, the FMC could add an unlimited number of contract terms required for filing carrier/shipper agreements.

Anything the FMC decides is “necessary or appropriate” could be added to the list of terms. That’s wide open authority granted to the FMC on what service contracts must include. The only limitation to this new authority is that the FMC decides what these “essential terms” are through “a rulemaking process.” However, that rulemaking process is not defined. It could be one the FMC already has in place or a new one it makes up on the spot for all the law change specifies.

Additional Observation

No oversight or limitation is given to the FMC when it comes to adding new term requirements to ocean shipping service contracts. The FMC appears to be the final authority on the matter without any checks or balances.

Conclusion

Section 3 deals with ocean shipping contracts, specifically the contract terms required when filing them with the FMC.

It gives the FMC a blank check of adding new term requirements for ocean shipping service contracts; however, it does not give the FMC the ability to remove requirements already on the list. Perhaps, however, commissioners could find a way to remove items if they added items that specified they could be in place of previously required items. That’s rather speculative, would possibly be controversial and challengeable, and there’s no reason to think commissioners would want to remove any previously required items from the list.

We shall see over time what additional requirements the FMC makes. There are no time limitations, so the list of required contract terms could grow and grow over the years. On the other hand, the FMC could choose not to add add new required terms if its commissioners don’t deem any new terms to be necessary or appropriate.

Possible repercussions of this change could include increased complexity and cost (in such things as lawyer billable hours) when creating service contracts. If the essential terms required really grow, this could add legislative red tape to the ocean shipping industry or new possible sticking points in contract negotiations between carriers and shippers. Maybe there will be more clarity added to contracts with new requirements the FMC comes up with. Who knows?

Ultimately, repercussions will be completely dependent upon what the FMC does, or doesn’t do, in terms of adding terms.

It is notable that the first real legislative change in OSRA is increasing the authority and power of the FMC.

If you have any thoughts on this section of OSRA that I didn’t cover, please share them..

Stay tuned for when Decoding OSRA continues, examining Section 4

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New ILWU Tentative Contract Details & Fallout https://www.universalcargo.com/new-ilwu-tentative-contract-details-fallout/ https://www.universalcargo.com/new-ilwu-tentative-contract-details-fallout/#respond Tue, 20 Jun 2023 12:15:00 +0000 https://www.universalcargo.com/?p=12122 Things were getting tense at West Coast ports when a tentative agreement for a new International Longshore & Warehouse Union (ILWU) contract was finally reached last week. The union and Pacific Maritime Association (PMA), representing the employers at the docks, announced the tentative deal Wednesday after vessel delays had been piling up for a couple […]

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Things were getting tense at West Coast ports when a tentative agreement for a new International Longshore & Warehouse Union (ILWU) contract was finally reached last week. The union and Pacific Maritime Association (PMA), representing the employers at the docks, announced the tentative deal Wednesday after vessel delays had been piling up for a couple weeks at the West Coast ports.

ILWU PMA meet about contract extension

Talks had grown more and more contentious in the 13 months since the previous contract expired. Union jurisdiction, automation, and wages all played roles in the difficult negotiation process. Many shippers took the strategy of diverting cargo to East and Gulf Coast ports, which turned out wise as labor action disrupted West Coast ports and even led to terminal shutdowns by the end of negotiations.

The deal will still have to be ratified. While there are usually some small groups amongst the dockworkers who oppose ratification, there normally is not much drama in the process. There’s no reason to expect failure to ratify this contract.

Contract Details

Details of the new ILWU contract are only beginning to come out. In the Journal of Commerce (JOC), Bill Mongelluzzo reported on what details have been released, and it’s a big score for dockworkers:

ILWU members will receive a 32% wage increase over the course of the 6-year contract along with a $70 million bonus to be split equally amongst them. As per usual, the pay increase will be retroactively applied from the date the previous contract expired, which was July 1st, 2022.

Deal Prevented Strike or Lockout

With labor action backing up ships and delaying both the export and import of cargo at West Coast ports over the last couple weeks, tensions boiled over. The union and employers began threatening a strike and a lockout, respectively, according to reports. The parties gave themselves a deadline to reach a deal to prevent a full shutdown of West Coast ports.

Mongelluzzo reported:

This week began on a tense note, as sources said negotiators for the ILWU and PMA were working under a self-imposed 72-hour deadline to reach a deal before a possible coastwide employer lockout or strike.

This is the point at which it appears the Biden Administration finally got involved as shippers have been begging the White House to do throughout the year-plus of tumultuous negotiations. Mongelluzzo added:

US Labor Secretary nominee Julie Su also arrived in San Francisco Monday, urging negotiators to reach an agreement and remaining in the Bay Area to offer further assistance until the tentative contract was agreed. 

It’s unclear how much of an effect Su had on the situation. Mongelluzzo reported last Monday, when Su arrived:

The PMA and the International Longshore and Warehouse Union (ILWU) declined comment Monday when asked if they would meet with Su.

The focus of his article then, as it was for reporting in general at that moment, was on disruption from labor action at the Ports of Seattle, Los Angeles, and Long Beach. Conflict between the PMA and ILWU was clearly high, and by current accounts, we were closer to a strike or lockout than most realized.

Shippers Deserve Better

It seems I write this every time the ILWU and PMA negotiate a new contract, but shippers deserve better.

In a FreightWaves article, Greg Miller reported, “ILWU President Willie Adams said the union will now ‘turn our full attention back to the operation of the West Coast ports.'”

Dockworkers’ jobs are the operation of West Coast ports. That they turn away from that every time a new contract is to be negotiated is unacceptable. Over and over again, shippers have paid the price. Could we, for a change, start seeing the ILWU continuing to do its job without causing disruption while negotiations happen?

I suppose that would be too much to ask from these very well-paid workers.

Deal Just Beats Peak Season’s Full Swing

At least shippers can find some solace in this deal being reached just before peak season hits full stride. Economic uncertainty has the peak season looking weaker than it could. However, we are seeing a peak season, as I predicted. Miller laid out what we’re looking at this peak season:

Volumes to the West Coast have been seasonally rising, in line with pre-pandemic patterns. The Port of Los Angeles handled 409,150 twenty-foot equivalent units of imports in May, up 19% from April and up 64% from the recent low in March.

As of Monday, there were 58 container ships en route to the ports of Los Angeles and Long Beach from Asia, compared to 46 a month before and 47 two months prior.

Port of Los Angeles Executive Gene Seroka said his port is operating at about 70% of capacity. Of the 30% shortfall, he said half was due to macroeconomic issues and half was due to cargo switched to East Coast and Gulf Coast ports as a result of labor concerns at West Coast ports.

“If we can get a labor deal soon and the economy doesn’t falter, we’ll have a strong second half,” Seroka said on Tuesday.

They got the labor deal. Now it’s up to the economy.

The tentative ILWU contract agreement being reached last week was crucial for the ports and shippers. Thus, I do give kudos to the ILWU for going to the table and making an agreement before we got any deeper into this peak season. By all accounts, with the new agreement made, the union has gotten fully back to work, ending the labor action it was executing. That’s good news.

What will be interesting to watch now is how much of the market gain East and Gulf Coast ports made during these negotiations will stay at those ports rather than returning to the West Coast ones.

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Highly Paid ILWU Workers Want More, So Shippers Pay the Price https://www.universalcargo.com/highly-paid-ilwu-workers-want-more-so-shippers-pay-the-price/ https://www.universalcargo.com/highly-paid-ilwu-workers-want-more-so-shippers-pay-the-price/#respond Thu, 08 Jun 2023 20:57:04 +0000 https://www.universalcargo.com/?p=12113 The latest International Longshore & Warehouse Union (ILWU) labor action that shut down terminals and slowed down port operations up and down the West Coast is all about money. The ILWU is demanding big pay raises for its workers, who are already among the top paid people in the country. By all reports, the demand for more money is what was behind all the port disruption this week and last.

In a news flash email today, All-Ways summed up the situation pretty well:

"The ILWU wants to raise their wages to increase more than 100% over the 6-year contract, so they’re holding up cargo across the West Coast?

"Yes, you heard that right!

"Wage disparity is the root of this past week's job actions.

"The ILWU wants a $7.50/hour increase for each year of the new contract but the PMA [Pacific Maritime Association] generally has only increased hourly rates by 50 cents to $1.50! Plus, the ILWU wants all longshore workers to be paid 2 hours overtime for any 8-hour shift worked."

To find out details on delays the ILWU created, exactly how much these union members make, and more, read the rest in Universal Cargo's blog.

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The latest International Longshore & Warehouse Union (ILWU) labor action that shut down terminals and slowed down port operations up and down the West Coast is all about money. The ILWU is demanding big pay raises for its workers, who are already among the top paid people in the country. By all reports, the demand for more money is what was behind all the port disruption this week and last.

The Disruption for Higher Pay

In a news flash email today, All-Ways summed up the situation pretty well:

The ILWU wants to raise their wages to increase more than 100% over the 6-year contract, so they’re holding up cargo across the West Coast?

Yes, you heard that right!

Wage disparity is the root of this past week’s job actions.

The ILWU wants a $7.50/hour increase for each year of the new contract but the PMA [Pacific Maritime Association] generally has only increased hourly rates by 50 cents to $1.50! Plus, the ILWU wants all longshore workers to be paid 2 hours overtime for any 8-hour shift worked.

1️⃣ After negotiations were suspended on Tuesday following the death of an ILWU worker caused by a stroke, the Port of Oakland was shut for Wednesday’s morning shift.

2️⃣ Crane productivity at the Port of Seattle was at 30% of usual – so low that dockworkers were sent home.

3️⃣ Tacoma, on the other hand, remained in operation even with their crane productivity of 50%.

4️⃣ The ILWU’s refusal to send lashers, workers who secure the top row of containers to the vessel, caused the ports of Los Angeles and Long Beach to experience delays in vessel departures. At least 6 vessels that were worked on and scheduled for departure were anchored because the final step could not be completed.

5️⃣ This is causing disruptions to other parts of the supply chain. Union Pacific Railroad reported that service at 3 marine terminals in Los Angeles-Long Beach was temporarily suspended because of freight backups at their inland terminals.

In a FreightWaves article, Greg Miller reported how the labor action “over the size of dockworkers’ next pay raise” is affecting ship operations:

“We got a rash of vessel movements canceled overnight,” said Kip Louttit, executive director of the Marine Exchange of Southern California, on Wednesday.

Departures of six ships berthed in Los Angeles or Long Beach have been delayed: the Cosco Portugal, Cosco Oceania, Cosco Shipping Rose, CMA CGM Amerigo Vespucci, CSCL Yellow Sea and YM Unicorn. Arrivals of four ships to the ports are delayed: the Aitolikos, Cosco Denmark, Cosco Netherlands and Cosco Taicang. Yet another ship, the MSC Jeongmin, had its arrival in Los Angeles delayed Tuesday.

Shippers Exasperated

Of course, it all ultimately means costly delays for shippers importing and exporting cargo. That’s become the expectation whenever it’s time for the ILWU to negotiate a new contract. To describe this as frustrating for shippers would be a massive understatement.

Maybe it would be understandable if ILWU workers were poorly paid. But they’re not. In fact, they’re among the best paid workers in the country.

For shippers watching, the slowdowns and shutdowns ILWU workers cause as they demand more money feels like watching Dudley Dursley throw a tantrum because he only got 36 presents for his birthday this year, which is two less than last year. Nevermind that this year’s lot – including a computer, a gold wristwatch, and a cinema-level camera – is more expensive. It’s not enough, so everyone has to pay.

Wait, How Much Do ILWU Members Make?!

Miller’s FreightWaves article, without comparing the ILWU to Harry Potter’s fat cousin, is quite scathing by simply sharing detailed ILWU compensation data that the PMA publishes annually. Here are some highlights:

Full-time registered longshore workers earned an average of $197,514 in 2022, not including benefits, according to the PMA. Clerks earned an average of $220,042 and foremen and walking bosses averaged $306,291. (Full time is defined as working 2,000 hours or more per year, or 38.4 hours per week.)

The PMA also paid $100,534 per ILWU registrant in benefits costs. Benefits include full insurance coverage, a 401(k) and a pension with a maximum yearly retirement benefit of $95,460.

The average 2022 ILWU registrant base rate — $46.23 per hour — doesn’t sound that steep for skilled labor. But as the PMA explained in its annual report, worker earnings also include an additional component based on skill level. Skill bonuses range from $2.40 to $5.80 per hour and were added in 80.7% of hours paid last year.

Pay also increases for the second shift (eight hours starting at 6 p.m.) and third shift (five hours starting at 2:30 a.m.) to $61 to $83 per hour. Work on these shifts accounted for 38.5% of total hours paid last year.

Then there is overtime, which accounted for 36.4% of hours paid in 2022. Overtime pay rates range from $69 to $93 per hour. Altogether, the PMA said the effects of skills bonuses, work shifts and overtime brought the effective average rate for all hours paid to $64.10.

Perspective by Comparison

Most Americans would be thrilled by getting ILWU pay. But Miller really puts it in perspective when he compares those numbers to what people in other professions in the U.S. make:

The U.S. Bureau of Labor Statistics compiles data on average annual wages by profession. West Coast dockworkers rank toward the top when compared to the government stats.

Full-time dock foremen earned 24% more than the average CEO’s base salary in 2022 and 20% more than neurologists. ILWU clerks earned just $5,600 per year less than airline pilots. Full-time dockworkers came in 21% higher than lawyers and 9% above dentists.

Average earnings in 2022 for all full-time ILWU registrants — $211,000 — were 3.4 times higher than the average wage for all professions calculated by the Bureau of Labor Statistics.

When Miller showed the data in a graph, how much ILWU workers make really jumps out at you:

(Chart: FreightWaves. U.S. salaries as of May 2022 from U.S. Bureau of Labor Statistics. ILWU earnings data from PMA 2022 annual report.)

Incredibly, only surgeons, pro athletes, and cardiologists rank ahead of ILWU foremen on how much they make.

Conclusion

I have no problem with people making money, dockworkers in particular. Working on the docks is important and even relatively dangerous work. They deserve to be well-paid. However, when you’re highly paid, as ILWU members are, I do have a problem with you damaging other people’s livelihood in demands to make more.

Additionally, the ILWU damages the future security of its own jobs with the disruption it creates every time a contract expires or when the union tries to take jobs away from other unions. Cargo gets diverted from West Coast ports, some of it never to return. That can mean fewer hours, fewer jobs for ILWU members. Importers and exporters who shipped through the Port of Portland won’t likely forget cargo ships ceasing to call on the port altogether because ILWU members slow-timed it so much over not getting two jobs that had always belonged to another union. How many dockworker jobs did that cost?

The union seems to want to create a narrative that its workers are somehow mistreated. Their greedy employers made billions during the pandemic, taking advantage of the poor workers. Well, those workers are far from poor. The ILWU wants the next contract to be much bigger because of how much was made during the shipping boom of the pandemic. Well frankly, ILWU members were, of course, paid well during that boom:

The PMA paid ILWU registrants at all U.S. West Coast ports total wages of $2.31 billion in 2022, up $371 million or 19% versus 2019, pre-pandemic. The effective hourly rate rose 7% over the three-year period. Straight time was 22,895,230 hours in 2022, up 8% from 2019. Overtime came in at 13,084,540 hours, up 16%.

–Miller’s FreightWaves article

But surprise, surprise, Dudley didn’t get enough. So let’s just shut down the ports until Uncle Vernon runs out and buys twice as many gifts. Shippers should be fed up.

Since this has been a harsh post on the ILWU, I’ll include one more bit from Miller’s article because it includes a caveat on the ILWU compensation data:

The caveat on the PMA data is that a portion of union registrants are under the full-time threshold. Of longshore workers, 42% worked less than 2,000 hours in 2022. The bulk of longshore workers (including non-full-time workers) earned in the $100,000-$200,000 range.

Among clerks, 19% worked less than 2,000 hours, with overall earnings bunched in the $150,000-$225,000 range. Of walking bosses and foremen, only 10% did not meet the full-time definition. Salaries were grouped in the $250,000-$325,000 range. Some foremen earned over $400,000 and a few topped a half-million.

Even the caveat isn’t that strong in the union’s favor, unfortunately. Even more unfortunate is that the ILWU and PMA seem far apart on this pay issue, and that likely will continue to be costly for shippers.

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ILWU Disrupts West Coast Ports Friday & Continues Labor Action This Week https://www.universalcargo.com/ilwu-shut-down-west-coast-ports-friday-continue-labor-action-this-week/ https://www.universalcargo.com/ilwu-shut-down-west-coast-ports-friday-continue-labor-action-this-week/#respond Wed, 07 Jun 2023 00:29:48 +0000 https://www.universalcargo.com/?p=12096 International Longshore & Warehouse Union (ILWU) labor action shut down port terminals up and down the West Coast on Friday. The labor action actually started on Thursday evening and has continued this week.

While labor action continues to disrupt cargo flow, there has been improvement. Terminals that were basically shut down by the union have reopened. Slowdowns are being addressed, including some union employees getting fired for intentionally decreasing port efficiency during this labor action.

Of course, what we've seen since Thursday night is not even close to the first ILWU labor action over the long course of contract negotiations that began in May of 2022 before the previous contract expired July 1st, 2022. Many slowdowns from labor action taking place over the last year, plus a bad history of the ILWU disrupting cargo flow during contract negotiations, leave shippers knowing things can get worse at any moment.

Unfortunately, negotiations don't look even close to reaching resolution as we're reaching the international shipping peak season.

Find out more by reading the full post in Universal Cargo's blog.

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International Longshore & Warehouse Union (ILWU) labor action shut down port terminals up and down the West Coast on Friday. The labor action actually started on Thursday evening and has continued this week.

While labor action continues to disrupt cargo flow, there has been improvement. Terminals that were basically shut down by the union have reopened. Slowdowns are being addressed, including some union employees getting fired for intentionally decreasing port efficiency during this labor action.

Of course, what we’ve seen since Thursday night is not even close to the first ILWU labor action over the long course of contract negotiations that began in May of 2022 before the previous contract expired July 1st, 2022. Many slowdowns from labor action taking place over the last year, plus a bad history of the ILWU disrupting cargo flow during contract negotiations, leave shippers knowing things can get worse at any moment.

Unfortunately, negotiations don’t look even close to reaching resolution as we’re reaching the international shipping peak season.

Catching Up on Last Week’s Disruption

The disruption last week was big enough it made mainstream news headlines rather than just international shipping news outlets’ stories.

Paul Berger reported in the Wall Street Journal:

A new wave of job actions halted cargo operations across major West Coast ports, with dockworkers effectively shutting down the Port of Oakland for a time and hampering handling at some of the country’s busiest trade gateways in an escalating confrontation with employers over long-running contract talks.

The Pacific Maritime Association, which represents West Coast terminal operators, said Friday that dockworkers were “staging concerted and disruptive work actions” that had stopped or severely disrupted operations stretching from terminals at Southern California’s big container port complex at Los Angeles and Long Beach to Seattle. 

Shipping industry officials said dockworkers failed to show up for work and slowed operations at the ports starting Thursday evening and continuing into Friday morning. 

“We are moving at half of the velocity that we normally operate with,” an official at one cargo-handling terminal at Los Angeles-Long Beach said Friday. Some terminals in Southern California opened Friday morning and then stopped accepting trucks a few hours later as traffic built up because of the slowed operations.

A spokeswoman for the Port of Oakland, the eighth-busiest container port in the U.S., said the port’s international operations were closed Friday morning and that it was unclear if they would open for the afternoon.

ABC 7 Eyewitness News Los Angeles reported:

The industry group representing shippers announced Friday that operations at some marine terminals at the Ports of Los Angeles and Long Beach were “effectively shut down” following staged concerted and disruptive work actions from the union representing West Coast dockworkers.

The Ports of Los Angeles, Long Beach, and Oakland get more attention because of their size, but similar reports came from other ports, including Tacoma, Seattle, and Hueneme.

Continuing Disruption

Disruptions continued at some terminals in Seattle, Long Beach, and Los Angeles on Monday. Although not as bad as Friday when several terminals from Seattle to Long Beach were closed.

ILWU PMA meet about contract extension
Dockworker and shipping container

In an update email on the situation I received from All-Ways, they stated:

Disruptions continued at some terminals in Seattle, Long Beach, and Los Angeles on Monday. Although not as bad as Friday when several terminals from Seattle to Long Beach were closed.

Job actions continued sporadically throughout the weekend. This included ship-to-shore crane productivity slowdown. Cranes were operating at 20 lefts per hour or lower when each crane can normally lift about 25 to 26 times per hour.

Low productivity by labor gangs who were working four vessels in Seattle caused them to be fired on Monday, an SSA Marine spokesperson said. The SSA also operates three terminals in Long Beach. Since Saturday, two of the SSA terminals haven’t worked on an international ship.

“Union leaders are implementing many familiar disruption tactics from their job action playbook, including refusing to dispatch workers to marine terminals, slowing operations, and making unfounded health and safety claims,” the PMA said on Monday. “The ILWU’s coast-wide work actions since June 2 are forcing retailers, manufacturers, and other shippers to shift cargo away from the West Coast in favor of ports on the Atlantic and Gulf coasts. Much of the diverted cargo may never return to the West Coast.”

Again, even mainstream media had to report on the continuing labor action. Vanessa Yurkevich reported in a CNN Business article:

Two of the six marine terminals at the Port of Long Beach remained closed during the day shift Monday, as “operators of those terminals made the decision to close based on operational needs, and will reopen for the evening shift,” the port said in a statement.

Many similar reports were published yesterday and today.

Bad Sign for Negotiations

During this latest bout of labor action up and down the coast, the ILWU has said it’s not union-wide action. The union has also said that negotiations have not broken down. However, anything the union says has to be taken with a grain of salt. Sudden, simultaneous labor action at various ports from Los Angeles to Seattle can’t be taken as a good sign for negotiations.

I made a big point of the importance of paying attention to the ILWU’s actions over its words back in April, when the union said in a brief statement that agreement had been reached “on certain key issues.” That statement made headlines too. At the time, I said it didn’t mean much, if anything at all. I provided several reasons shippers shouldn’t put much stock in the statement, including its suspicious timing. However, I missed something big about its timing that Greg Miller pointed out this weekend in a FreightWaves article about the current disruption:

… some handicappers [of the odds of contracts devolving into extended labor disruptions similar to 2014-15] would have noticed the timing [of ILWU’s statement]. That announcement came the very day the Biden administration’s pick to lead the Department of Labor, Julie Su, had her Senate nomination hearing. The progress announcement allowed her to tell lawmakers she had obtained positive results after engaging the parties.

Oddsmakers who placed little weight on the April 20 announcement look like they’re right. The betting line just shifted in favor of the large-scale disruption scenario.

Unfortunately, the timing for the increased likelihood of large-scale disruption from the ILWU contract negotiations couldn’t be much worse. We’re coming into the peak season, when importers typically stock for the big Christmas shopping season. This year’s peak season is not expected to be as large as it could be because of economic uncertainty and many retailers still being overstocked, but this is still problematic timing.

At least many shippers have been stocking early or diverting cargo through the East and Gulf Coasts to avoid what has seemed like inevitable labor disruption from the ILWU. I’ve been consistently suggesting such strategies since before negotiations even began because of the sad history of disruption during ILWU contract negotiations.

One problem for West Coast ports is some of that cargo getting diverted to the East and Gulf Coast won’t return to the Pacific side of the country in the future. Investments have and are being made to increase volume capabilities moving through the opposite coast of the country.

Biden Administration Monitoring Situation Is a Joke

This labor action has again caused shippers to plead with the Biden Administration to step in. The All-Ways update email reported:

The National Retail Federation (NRF) sent its third letter to the White House on Monday following the port disruptions over the weekend, urging for intervention.

Universal Cargo’s blog published at least one of the previous letters. However, these letters seem to have fallen on deaf ears. Or blind eyes. Maybe that’s because the head of the administration is an 80-year-old. Or maybe it’s an unwillingness for the Democrat party, with such strong union ties, to prevent union action from happening.

Instead of action, we got Press Secretary Karine Jean-Pierre giving the empty words on Monday that the situation is being carefully monitored. Apparently, it’s being closely monitored the way the Southern border is being closely monitored as millions enter the United States illegally under this administration.

Jean-Pierre echoed the empty words of the ILWU from April that certain undisclosed key issues were tentatively agreed upon. Hey, you’ve got to repeat lines when creating a narrative. Jean-Pierre added the White House is “going to continue to encourage all parties to work in good faith toward a mutually beneficial resolution that ensures that workers get fair benefits, equality of life, and the wages they deserve.”

No worry of losing those union contributions to the Democrats’ political campaigns with statements like that. But shippers can go ahead and keep worrying about their cargo getting held up at the ports.

What’s Holding Up Negotiations?

It’s likely many things are slowing negotiations and increasing labor action from dockworkers. Automation has been talked about since long before negotiations even started as the most likely cause of contention for these negotiations. However, during this round of labor action, wages is what people have been pointing at. While union dockworkers are broadly considered to be very well-paid, the ILWU is looking for quite large wage increases to the point of almost doubling hourly wages, according to All-Ways email:

Over 2021 and 2022, carriers gained record-breaking profits and the ILWU is looking to cash in on some of that. While over the last 20 years wage increases ranged between 50 cents to $1.50 per hour for each year of the contract, the ILWU is demanding a $7.50 per hour for each year of the proposed six-year contract. This would increase the longshore worker’s salaries by nearly 100% over the course of the contract….

The ILWU reportedly wants certain cargo-handling equipment, such as yard tractors, to be handled by two dockworkers. The demand would mean that each assigned longshoreman would work for four hours and get paid for eight. This has been the case for ship-to-shore cranes which require a higher level of skill.

Some have speculated the issue of automation has been worked out between the parties as one of the “key issues” the ILWU said it had reached with the PMA. While I would hope such speculation to be correct, I find it unlikely. The PMA and ILWU have had moments of public debate on the topic, and I think it would be likely to see a joint announcement revealing such agreement on that issue, though they have agreed not to discuss the negotiations with the press.

Still, someone seems to be leaking information as the above wage information isn’t the only tidbit All-Ways shared about the negotiations. The email included this bit on the PMA pressuring the ILWU to come to agreement:

There is usually an unspoken agreement that the PMA will backpay the ILWU to the expiry of the previous contract once the agreement is reached. While the negotiations have been going on under these presumptions, the PMA has reportedly decided not to honor the usual retroactive pay if a tentative agreement isn’t reached by July 1. The PMA is attempting to pressure the ILWU to reach an agreement as negotiations have been going on for more than a year.

There was recent optimism of negotiations reaching resolution within a couple weeks. Well, a couple weeks passed. Then a couple more. That optimism has turned to pessimism. Now instead of questioning if an agreement could be reached in a couple weeks, most are wondering just how damaging these negotiations are going to get.

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Decoding OSRA – Section 2. Purposes https://www.universalcargo.com/decoding-osra-section-2-purposes/ https://www.universalcargo.com/decoding-osra-section-2-purposes/#respond Thu, 01 Jun 2023 22:17:50 +0000 https://www.universalcargo.com/?p=12091 What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We'll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

In Universal Cargo's last blog post, I announced this series and quickly covered Section 1, which only gives a citation for OSRA. Now we start covering the rest of the sections, where the meat of OSRA's shipping law reform lies.

This series will be mixed in with Universal Cargo's blog posts, so we'll still be talking about international shipping news rather than having the next 18 posts be this decoding OSRA series. Let us know if you'd like a post with the entire text of Title 46, and we'll post that too.

Now let's see what Section 2 of OSRA has to say for itself...

Check it out in Universal Cargo's blog.

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Introduction

What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.

We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.

Decoding OSRA

In Universal Cargo’s last blog post, I announced this series and quickly covered Section 1, which only gives a citation for OSRA. Now we start covering the rest of the sections, where the meat of OSRA’s shipping law reform lies.

This series will be mixed in with Universal Cargo’s blog posts, so we’ll still be talking about international shipping news rather than having the next 18 posts be this decoding OSRA series. Let us know if you’d like a post with the entire text of Title 46, and we’ll post that too.

Now let’s see what Section 2 of OSRA has to say for itself…

Quick Overview

Section 2 of OSRA adjusts the goals of U.S. shipping law in Title 46. It makes three changes. Two paragraphs (which are really more like long sentence fragments) are completely removed from the code and replaced. One other paragraph is changed by adding a phrase to it.

Section 2 Text

SEC. 2. PURPOSES.

    Section 40101 of title 46, United States Code, is amended--
            (1) by striking paragraph (2) and inserting the following:
            ``(2) ensure an efficient, competitive, and economical 
        transportation system in the ocean commerce of the United 
        States;'';
            (2) in paragraph (3), by inserting ``and supporting 
        commerce'' after ``needs''; and
            (3) by striking paragraph (4) and inserting the following:
            ``(4) promote the growth and development of United States 
        exports through a competitive and efficient system for the 
        carriage of goods by water in the foreign commerce of the United 
        States, and by placing a greater reliance on the marketplace.''.

Portion of Title 46 Section 2 Amends

§40101. Purposes

The purposes of this part are to—

(1) establish a nondiscriminatory regulatory process for the common carriage of goods by water in the foreign commerce of the United States with a minimum of government intervention and regulatory costs;

(2) provide an efficient and economic transportation system in the ocean commerce of the United States that is, insofar as possible, in harmony with, and responsive to, international shipping practices;

(3) encourage the development of an economically sound and efficient liner fleet of vessels of the United States capable of meeting national security needs; and

(4) promote the growth and development of United States exports through competitive and efficient ocean transportation and by placing a greater reliance on the marketplace.

(Pub. L. 109–304, §7, Oct. 6, 2006, 120 Stat. 1523.)
Historical and Revision Notes Revised

Section
	Source (U.S. Code)	Source (Statutes at Large)
40101 	46 App.:1701. 	Pub. L. 98–237, §2, Mar. 20, 1984, 98 Stat. 67; Pub. L. 105–258, title I, §101, Oct. 14, 1998, 112 Stat. 1902.
Effects on Certain Agreements and Contracts

Pub. L. 98–237, §20(d), Mar. 20, 1984, 98 Stat. 90; Pub. L. 105–258, title I, §117(1), Oct. 14, 1998, 112 Stat. 1914, provided that: “All agreements, contracts, modifications, licenses, and exemptions previously issued, approved, or effective under the Shipping Act, 1916 [former 46 U.S.C. App. 801 et seq., see Disposition Table preceding section 101 of this title], or the Shipping Act of 1984 [former 46 U.S.C. App. 1701 et seq., see Disposition Table preceding section 101 of this title], shall continue in force and effect as if issued or effective under this Act, as amended by the Ocean Shipping Reform Act of 1998 [Pub. L. 105–258, Oct. 14, 1998, 112 Stat. 1902], and all new agreements, contracts, and modifications to existing, pending, or new contracts or agreements shall be considered under this Act, as amended by the Ocean Shipping Reform Act of 1998.”

1st Change

The code no longer states “[to] provide an efficient and economic transportation system in the ocean commerce of the United States that is, insofar as possible, in harmony with, and responsive to, international shipping practices” as one of its purposes. That purpose is replaced by the goal “[to] ensure an efficient, competitive, and economical transportation system in the ocean commerce of the United States.”

Key Difference

The new goal gets rid of the ideas of being “in harmony with” and “responsive to” international shipping practices. Instead, the focus is on the U.S. being “efficient, competitive, and economical” with its ocean shipping system.

This does seem like a clearer and wiser goal for the country’s ocean freight system. At the very least, it is more proactive and less reactive. The previous goal almost sounded passive in responding to what’s happening in global shipping and somehow being in harmony with that. Efficiency and being economical were previously part of the goal. The new purpose keeps those and adds competitive to them, making the new goal at least sound more aggressive with the U.S. ocean freight system.

2nd Change

The second change tweaks the third paragraph. Here’s how it originally reads:

“encourage the development of an economically sound and efficient liner fleet of vessels of the United States capable of meeting national security needs; and”

Here’s how it reads after OSRA change it:

“encourage the development of an economically sound and efficient liner fleet of vessels of the United States capable of meeting national security needs and supporting commerce; and”

Key Difference

This is a small but important change in the goals of the U.S. shipping code. Now, not only is it the goal of the U.S. to create liner fleet vessels for national security but also to support commerce. This adds an economic focus to U.S. ship and fleet building.

The major ocean container carriers of the world are from countries other than the U.S. Perhaps this will result in more U.S. flag container ships in the future.

3rd & Final Change

Section 2 of OSRA removes Title 46’s following purpose paragraph:

“[to] promote the growth and development of United States exports through competitive and efficient ocean transportation and by placing a greater reliance on the marketplace.”

That paragraph is replaced by:

“[to] promote the growth and development of United States exports through a competitive and efficient system for the carriage of goods by water in the foreign commerce of the United States, and by placing a greater reliance on the marketplace.”

Key Difference

Despite this being a replacement paragraph, most of it remains the same. What’s really changing is “ocean transportation” is being replaced by “the carriage of goods by water in the foreign commerce of the United States”.

The paragraph gets a little more specific. It’s making it clear that we’re talking about ocean shipping in trade with other countries. Perhaps this could have been assumed from the fact the paragraph is explicitly talking about promoting the growth and development of U.S. exports. However, the change does likely indicate that lawmakers have a specific focus on U.S. exports as they’re reforming the country’s shipping laws.

Additional Observation

Despite OSRA and other legislation targeting ocean freight shipping and other aspects of U.S. supply chains, the goal of creating regulation or a “regulatory process” for ocean shipping “with a minimum of government intervention and regulatory costs” remains untouched.

Hopefully, that is still a goal of our regulators. Usually, when the government increases regulation and involvement in a sector, such as has happened with healthcare and education, those sectors become much more expensive. Obviously, that would be a bad result in the ocean shipping sector.

Conclusion

Section 2 deals with the goals and focus of the law changes OSRA makes. While we don’t have changes here that make tangible changes at the governance or operational levels of ocean shipping, we get an idea of what OSRA is trying to accomplish. There’s a clear commerce focus in the Purpose paragraph changes. Lawmakers want U.S. ocean shipping to efficient, economical, and competitive. And they seem to have an eye specifically on U.S. exports.

We’d love to hear your thoughts on these changes in the comments section below.

Stay tuned for when Decoding OSRA continues, examining Section 3….

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Decoding OSRA… New Series https://www.universalcargo.com/decoding-osra-new-series/ https://www.universalcargo.com/decoding-osra-new-series/#respond Wed, 31 May 2023 02:10:07 +0000 https://www.universalcargo.com/?p=12084 Approaching a year after the bipartisan Ocean Shipping Reform Act of 2022 (OSRA) was signed into law, we've only barely begun to see its impact. It's been loftily described as crucial and the most extensive maritime reform legislation in decades. Indeed, it is the biggest reform of Title 46 of U.S. Code - Shipping. Indeed, OSRA casts a wide net over the ocean shipping sector of international shipping, and needs unpacking.

International shipping news story after news story – whether about carriers and their alliances, detention and demurrage fees, or shippers filing complaints with the Federal Maritime Commission (FMC) – refers to OSRA. But there seems to be disagreement about exactly what OSRA does, and there's definitely conflict over whether it will ultimately be good or bad for the international shipping industry.

Sometimes, there's debate over things like the power OSRA grants to the FMC. It appears that will become a prominent part of the fight OOCL has with the bankrupt Bed, Bath & Beyond, which filed a complaint with the FMC against the carrier for tens of millions of dollars.

Unfortunately, there's a great deal of confusion over OSRA right now. What exactly does it do? What are its implications? It's not surprising shippers and industry stakeholders have questions or arguments over the law changes brought on by OSRA. There is quite a bit to the legislation: 18 sections to wade through that have to be cross referenced with Title 46 and Title 49....

Keep reading in Universal Cargo's blog.

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Approaching a year after the bipartisan Ocean Shipping Reform Act of 2022 (OSRA) was signed into law, we’ve only barely begun to see its impact. It’s been loftily described as crucial and the most extensive maritime reform legislation in decades. Indeed, it is the biggest reform of Title 46 of U.S. Code – Shipping. Indeed, OSRA casts a wide net over the ocean shipping sector of international shipping, and needs unpacking.

International shipping news story after news story – whether about carriers and their alliances, detention and demurrage fees, or shippers filing complaints with the Federal Maritime Commission (FMC) – refers to OSRA. But there seems to be disagreement about exactly what OSRA does, and there’s definitely conflict over whether it will ultimately be good or bad for the international shipping industry.

shipping containers

Sometimes, there’s debate over things like the power OSRA grants to the FMC. It appears that will become a prominent part of the fight OOCL has with the bankrupt Bed, Bath & Beyond, which filed a complaint with the FMC against the carrier for tens of millions of dollars.

Unfortunately, there’s a great deal of confusion over OSRA right now. What exactly does it do? What are its implications? It’s not surprising shippers and industry stakeholders have questions or arguments over the law changes brought on by OSRA. There is quite a bit to the legislation: 18 sections to wade through that have to be cross referenced with Title 46 and Title 49.

It could be years before we see whether the bill will accomplish its goals, like that of improving maritime shipping for the U.S. and growing the country’s exports, or if it will be detrimental to the economy, making the pivotal shipping industry more expensive because of increased regulation.

I attempted to have AI help me sort through it, analysing OSRA and cross referencing it with Title 46. What AI spat out sounded good. But as I examined it, I quickly discovered that AI got all kinds of details scrambled. If OSRA confuses the mind of a computer, what chance do us mere mortals have?

Much, much more. Despite terms like intelligence, computers don’t have actual intelligence. They simply do what they are programmed to do. Their computational skills are great, but limited by a lack of consciousness that anyone who’s watched 80’s sci-fi movies pray they’ll never develop.

Disappointed, I had to give up on AI’s ability to sift through the mess that is Congressional writing. That means, I’m going to have to sift through it. In an upcoming series, I’ll go through all the sections of OSRA, giving an overview of how the section reforms U.S. shipping law.

Before diving into the rest, I’ll go ahead and give you the overview of Section 1 right now. Don’t get too excited. I’m doing so because there’s not much to see here but also to make the point that I won’t be skipping over any sections of the legislation.

Section 1: Short Title

Like I said, there’s really not much to see here. This section establishes an official citing for the bill, which is “Ocean Shipping Reform Act of 2022.” Of course, I’m going to keep referring to it as OSRA in the upcoming series. OSRA is how most politicians and shipping industry professionals say it – sounded out rather than spelling out the letters of the acronym – when talking about the law.

Much Bigger and Better to Come…

After Section 1, things get much more complicated, as the legislators went about amending Title 46 and a bit of 49. Hopefully, we’ll be able to get a good grasp of just what our legislators have done with the shipping laws in the process. And maybe, we’ll gain insight into the possible implications, both good and bad, of the changes they’ve made.

So keep your eyes peeled for Universal Cargo’s upcoming blog series… Decoding OSRA.

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The Present Struggle of the International Shipping Industry https://www.universalcargo.com/the-present-struggle-of-the-international-shipping-industry/ https://www.universalcargo.com/the-present-struggle-of-the-international-shipping-industry/#respond Wed, 24 May 2023 01:39:05 +0000 https://www.universalcargo.com/?p=12054 It's no secret that the international shipping industry, even for all the supply chain disruptions and bottlenecks, did very well during the pandemic. There was a shipping demand boom, but now the industry is seeing a reversal. Demand has plummeted, and with it, so have freight rates. Ocean freight carriers raked in billions upon billions during the demand boom, so they're not exactly hurting too badly even as they report major drops in revenue and profit, even to the point of losses for some. For freight forwarders and other third party logistics (3PL) companies, however, it's another story.

Freight forwarders and 3PLs generally did well during the shipping demand boom too. However, these companies tend to have a much smaller profit margin and weren't at all likely to amass windfalls in the billions of dollars like the big shipping lines were able to do. Now that the economic realities of largely poor governmental policies through the pandemic have set in with the resulting economic uncertainty and a low demand international shipping period, many 3PLs are struggling. Their struggles are a reflection of the economy as a whole.

"Having seen several cycles in this industry for the past 38 years, we are deep into yet another cycle of feast and famine," seasoned international shipping veteran and Universal Cargo CEO Devin Burke described it.

Last week, the publicly traded 3PL broker C.H. Robinson Worldwide Inc. made international shipping headlines by laying off hundreds of employees.

Find out more by reading the full post in Universal Cargo's blog.

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Feast and Famine

It’s no secret that the international shipping industry, even for all the supply chain disruptions and bottlenecks, did very well during the pandemic. There was a shipping demand boom, but now the industry is seeing a reversal. Demand has plummeted, and with it, so have freight rates. Ocean freight carriers raked in billions upon billions during the demand boom, so they’re not exactly hurting too badly even as they report major drops in revenue and profit, even to the point of losses for some. For freight forwarders and other third party logistics (3PL) companies, however, it’s another story.

Freight forwarders and 3PLs generally did well during the shipping demand boom too. However, these companies tend to have a much smaller profit margin and weren’t at all likely to amass windfalls in the billions of dollars like the big shipping lines were able to do. Now that the economic realities of largely poor governmental policies through the pandemic have set in with the resulting economic uncertainty and a low demand international shipping period, many 3PLs are struggling. Their struggles are a reflection of the economy as a whole.

“Having seen several cycles in this industry for the past 38 years, we are deep into yet another cycle of feast and famine,” seasoned international shipping veteran and Universal Cargo CEO Devin Burke described it.

C.H. Robinson Lays Off Hundreds

Last week, the publicly traded 3PL broker C.H. Robinson Worldwide Inc. made international shipping headlines by laying off hundreds of employees.

According to a FreightWaves article by Mark Solomon, C.H. Robinson laid off approximately 300 people across the company. And this is its second workforce cut in the past seven months! In November, the company laid off about 650 people. Solomon also reported the company has been in turmoil since the beginning of the year.

That’s not surprising either, given the fact the last time I saw C.H. Robinson in the news, it was about the company’s highly negative Q1 financial results.

In a FreightWaves article back in April, John Kingston wrote how C.H. Robinson had reported double-digit declines in gross profits, operational income, earnings per share, and adjusted EPS. It seemed everything was pointing down for C.H. Robinson, and the company was already in the midst of a restructuring plan that had resulted in hundreds of lost jobs with hundreds more to come.

Shipping Line Zim Suffering Losses

Container Ship Zim Virginia
Container Ship Zim Virginia by Daniel Ramirez

The latest articles I’ve seen on the larger companies of the industry – the ocean freight carriers – focus in on the world’s tenth largest shipping line, Zim. The headlines are similar to ones I’ve seen in recent months for even bigger carriers like Maersk, MSC, and Hapag-Lloyd. That is to say the articles are about falling revenue and profits for the companies.

Yesterday, Greg Miller wrote in a FreightWaves article that Zim reported a net loss of $58 million for the first quarter of 2023. That is in stark contrast to the net income of $1.71 billion reported for the first quarter of 2022. This was driven by a 64% year-on-year decrease in average freight rates. Despite a 36% increase in rates compared to the first quarter of 2019, net losses were still over twice as large in the latest period than those prepandemic ones. Miller doesn’t fail to report that despite the losses, Zim still has a large cash cushion to fall back on, with total liquidity of $3.5 billion. This was a result of the windfall profits during the pandemic that I mentioned at the top of this post. Zim’s exposure to freight rates is a double-edged sword. The carrier is more exposed to the spot market and has a higher percentage of its capacity in the trans-Pacific than its competitors, which allowed it to outperform its rivals during the boom but likely causes it comparatively higher losses when spot market freight rates sink.

In fact, Miller went so far as to title his article, “Shipping line Zim gets hammered by high spot-rate exposure.”

Getting Past the “Doom and Gloom”

Overall, it’s a hard time for the international shipping industry. But those outside of it have been feeling hammered over the last couple years by high inflation. That has affected consumer spending and many retailers are still overstocked even as we’re coming to the peak season of international shipping. Companies like Zim and C.H. Robinson are hoping for a stronger second half to the year, spurred by the peak season. However, peak season projections are a mixed bag, and it’s hard to tell how long it will take for us to get past the period of famine, as Burke put it.

He expounded on the situation with a view that we are in for some tough times in the shipping industry and economy as a whole but also with a sense of optimism in the strength and resilience of the American people to get through this:

Question is, how long and how deep are we headed into famine.  Of course it’s indicative of the overall sickness in our economy.  With the current debt ceiling crisis that our idiot POTUS is now leading us into, we can either kick the can down the road with more debt, more bailouts, and – God forbid – more throwing away our tax dollars to the corrupt Ukraine money laundering machine, or we as a country can face our reckoning and allow this house of cards to topple.

Either way we are in for rough times ahead.

The silver lining is that despite this doom and gloom, America is made up of Americans, and we are fundamentally strong people who will navigate through this and learn and be a better country for it. But it’s going to be painful, and a lot of people need to go to prison before that happens.

Meanwhile, this industry will continue to operate as the wheels of this economy. Weak or strong, we will always need to ship stuff. So basically, now is the time to be lean, work smart, and explore different revenue streams. Because things will never be the same. 

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Full Text of Maritime Act of 2023, Which Could Help Open Up & Protect Ocean Shipping Through Middle East https://www.universalcargo.com/full-text-of-maritime-act-of-2023-which-could-help-open-up-protect-ocean-shipping-through-middle-east/ https://www.universalcargo.com/full-text-of-maritime-act-of-2023-which-could-help-open-up-protect-ocean-shipping-through-middle-east/#respond Wed, 17 May 2023 01:11:11 +0000 https://www.universalcargo.com/?p=12046 H. R. 2973, titled the Maritime Architect and Response to International Terrorism In the Middle East Act of 2023 or more simply the Maritime Act of 2023, passed both the House and Senate to be signed into law by President Biden. It's a small bill, but it builds upon the Abraham Accords ushered in by the Trump Administration, and could be a step to help shippers smoothly and securely import from and export to the Middle East.

The bill is more of a fact-finding and strategy-building piece of legislation than anything else. However, its assessment of threats to maritime in the Middle East, development of strategy for U.S. interdiction to protect it and the people of the region, and its goal "to develop a Middle East integrated maritime domain awareness" with a particular emphasis on the inclusion of America's ally Israel could prove to be important for the future of shipping through the region.

Lately, there's been quite a bit of new U.S. regulation, proposed regulation, and general regulatory reform when it comes to international shipping and the maritime sector in particular. It's not surprising this bill would go through relatively unnoticed, when larger bills with more sweeping and immediate ramifications like the Ocean Shipping Reform Act (OSRA) rightfully pull the spotlight.

Still, we like to share the text of bills that affect international shipping here in Universal Cargo, like we did with OSRA when it was still working its way through Congress.

Go to Universal Cargo's blog to read the full text of the Maritime Act of 2023.

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H. R. 2973, titled the Maritime Architect and Response to International Terrorism In the Middle East Act of 2023 or more simply the Maritime Act of 2023, passed both the House and Senate to be signed into law by President Biden. It’s a small bill, but it builds upon the Abraham Accords ushered in by the Trump Administration, and could be a step to help shippers smoothly and securely import from and export to the Middle East.

House of Representatives
Photo of House of Representatives by Ted Eytan

The bill is more of a fact-finding and strategy-building piece of legislation than anything else. However, its assessment of threats to maritime in the Middle East, development of strategy for U.S. interdiction to protect it and the people of the region, and its goal “to develop a Middle East integrated maritime domain awareness” with a particular emphasis on the inclusion of America’s ally Israel could prove to be important for the future of shipping through the region.

Lately, there’s been quite a bit of new U.S. regulation, proposed regulation, and general regulatory reform when it comes to international shipping and the maritime sector in particular. It’s not surprising this bill would go through relatively unnoticed, when larger bills with more sweeping and immediate ramifications like the Ocean Shipping Reform Act (OSRA) rightfully pull the spotlight.

Still, we like to share the text of bills that affect international shipping here in Universal Cargo, like we did with OSRA when it was still working its way through Congress.

With that, here’s the full text of the Maritime Act of 2023:

H. R. 2973

To require the Secretary of Defense to develop, in cooperation with allies and partners in the Middle East, an integrated maritime domain awareness and interdiction capability, and for other purposes.


IN THE HOUSE OF REPRESENTATIVES April 27, 2023

Mrs. Rodgers of Washington (for herself, Mr. Schneider, Mr. Trone, Mrs. Wagner, Mr. Bacon, and Mr. Panetta) introduced the following bill; which was referred to the Committee on Foreign Affairs, and in addition to the Committee on Armed Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


A BILL

To require the Secretary of Defense to develop, in cooperation with allies and partners in the Middle East, an integrated maritime domain awareness and interdiction capability, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. Short title.

This Act may be cited as the “Maritime Architecture and Response to International Terrorism In the Middle East Act of 2023” or the “MARITIME Act of 2023”.

SEC. 2. Middle East integrated maritime domain awareness and interdiction capability.

(a) In general.—The Secretary of Defense, in consultation with the Secretary of State, shall seek to build upon the historic opportunities created by the Abraham Accords and the incorporation of Israel into the area of responsibility of the United States Central Command to develop a Middle East integrated maritime domain awareness and interdiction capability for the purpose of protecting the people, infrastructure, and territory of such countries from—

(1) manned and unmanned naval systems, undersea warfare capabilities, and anti-ship missiles of Iran and groups affiliated with Iran; and

(2) violent extremist organizations, criminal networks, and piracy activities that threaten lawful commerce in the waterways within the area of responsibility of the United States Naval Forces Central Command.

(b) Strategy.—

(1) IN GENERAL.—Not later than 60 days after the date of the enactment of this Act, the Secretary of Defense, in consultation with the Secretary of State, shall submit to the appropriate committees of Congress a strategy for the cooperation described in subsection (a).

(2) MATTERS TO BE INCLUDED.—The strategy required by paragraph (1) shall include the following:

(A) An assessment of the threats posed to ally or partner countries in the Middle East by—

(i) manned and unmanned naval systems, undersea warfare capabilities, and anti-ship missiles of Iran and groups affiliated with Iran; and

(ii) violent extremist organizations, criminal networks, and piracy activities that threaten lawful commerce in the waterways within the area of responsibility of the United States Naval Forces Central Command.

(B) A description of existing multilateral maritime partnerships currently led by the United States Naval Forces Central Command, including the Combined Maritime Forces (including its associated Task Forces 150, 151, 152, and 153), the International Maritime Security Construct, and the Navy’s Task Force 59, and a discussion of the role of such partnerships in building an integrated maritime security capability.

(C) A description of progress made in advancing the integration of Israel into the existing multilateral maritime partnerships described in subparagraph (B).

(D) A description of efforts among countries in the Middle East to coordinate intelligence, reconnaissance, and surveillance capabilities and indicators and warnings with respect to the threats described in subparagraph (A), and a description of any impediment to optimizing such efforts.

(E) A description of the current Department of Defense systems that, in coordination with ally and partner countries in the Middle East—

(i) provide awareness of and defend against such threats; and

(ii) address current capability gaps.

(F) An explanation of the manner in which an integrated maritime domain awareness and interdiction architecture would improve collective security in the Middle East.

(G) A description of existing and planned efforts to engage ally and partner countries in the Middle East in establishing such an architecture.

(H) An identification of the elements of such an architecture that may be acquired and operated by ally and partner countries in the Middle East, and a list of such elements for each such ally and partner.

(I) An identification of the elements of such an architecture that may only be provided and operated by members of the United States Armed Forces.

(J) An identification of any challenge to optimizing such an architecture in the Middle East.

(K) An assessment of progress and key challenges in the implementation of the strategy required by paragraph (1) using the metrics identified in accordance with paragraph (3).

(L) Recommendations for improvements in the implementation of such strategy based on such metrics.

(M) An assessment of any capabilities or lessons from the Navy’s Task Force 59 that may be leveraged to support an integrated maritime domain awareness and interdiction capability in the Middle East.

(N) Any other matter the Secretary of Defense considers relevant.

(3) METRICS.—The Secretary of Defense shall identify metrics to assess progress in the implementation of the strategy required by paragraph (1).

(4) FORMAT.—The strategy required by paragraph (1) shall be submitted in unclassified form but may include a classified annex.

(c) Feasibility study.—

(1) IN GENERAL.—The Secretary of Defense shall conduct a study on the feasibility and advisability of establishing a fund for an integrated maritime domain awareness and interdiction capability to protect the people, infrastructure, and territory of ally and partner countries in the Middle East from—

(A) manned and unmanned naval systems, undersea warfare capabilities, and anti-ship missiles of Iran and groups affiliated with Iran; and

(B) violent extremist organizations, criminal networks, and piracy activities that threaten lawful commerce in the waterways of the Middle East.

(2) ELEMENT.—The study required by paragraph (1) shall include an assessment of funds that could be contributed by ally and partner countries of the United States.

(3) REPORT.—Not later than 90 days after the date of the enactment of this Act, the Secretary of Defense shall submit to the appropriate committees of Congress a report on the results of the study conducted under paragraph (1).

(d) Protection of sensitive information.—Any activity carried out under this section shall be conducted in a manner that appropriately protects sensitive information and the national security interests of the United States.

(e) Appropriate committees of Congress defined.—In this section, the term “appropriate committees of Congress” means—

(1) the Committee on Armed Services, the Committee on Appropriations, the Committee on Foreign Relations, and the Select Committee on Intelligence of the Senate; and

(2) the Committee on Armed Services, the Committee on Appropriations, the Committee on Foreign Affairs, and the Permanent Select Committee on Intelligence of the House of Representatives.

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Shipping News: Peak Season & Detention/Demurrage Battle https://www.universalcargo.com/shipping-news-peak-season-detention-demurrage-battle/ https://www.universalcargo.com/shipping-news-peak-season-detention-demurrage-battle/#respond Fri, 12 May 2023 00:16:22 +0000 https://www.universalcargo.com/?p=12042 As always, we here at Universal Cargo are keeping an eye on international shipping news, so you don't have to. Two big items in shipping news right now are the upcoming peak season and the fight over detention and demurrage fees.

Here's the 411...

Peak Season 2023

We're coming right up on peak season. Some have said there won't be one this year. I've been saying (in posts like this linked one here or this other linked one over here) that we will have a 2023 peak season. It won't be like the last couple years where cargo volumes have been so bloated that it's basically felt like perpetual peak season all year. I've expected, despite economic uncertainty and inflation dampening spending and still some reports of retailer overstock, movement back toward traditional seasonal patterns in the international shipping industry and and an actual peak season in 2023, probably resembling that of a below-average economic year.

This week, a Journal of Commerce (JOC) article by Bill Mongelluzzo points toward my expectations being correct:

"US imports during peak shipping season this year will be down from 2022, but settle closer to the more typical peak volumes seen prior to the pandemic, US retailers indicated Monday."

Find out more by reading the full post in Universal Cargo's blog.

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As always, we here at Universal Cargo are keeping an eye on international shipping news, so you don’t have to. Two big items in shipping news right now are the upcoming peak season and the fight over detention and demurrage fees.

Here’s the 411…

Peak Season 2023

We’re coming right up on peak season. Some have said there won’t be one this year. I’ve been saying (in posts like this linked one here or this other linked one over here) that we will have a 2023 peak season. It won’t be like the last couple years where cargo volumes have been so bloated that it’s basically felt like perpetual peak season all year. I’ve expected, despite economic uncertainty and inflation dampening spending and still some reports of retailer overstock, movement back toward traditional seasonal patterns in the international shipping industry and and an actual peak season in 2023, probably resembling that of a below-average economic year.

This week, a Journal of Commerce (JOC) article by Bill Mongelluzzo points toward my expectations being correct:

US imports during peak shipping season this year will be down from 2022, but settle closer to the more typical peak volumes seen prior to the pandemic, US retailers indicated Monday.

“Consumers are still spending and retail sales are expected to increase this year, but we’re not seeing the explosive demand we saw the past two years,” Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation (NRF), said in the latest Global Port Tracker (GPT).

Consumer spending in the coming months will be compromised somewhat by high inflation, while retailers are being conservative in placing purchase orders with factories in Asia because of bloated inventories, according to GPT.

“Year-over-year import volumes have been on the decline at most ports since late last year and declining exports out of China highlight the slowdown in demand for consumer goods,” said Ben Hackett, founder of Hackett Associates, which publishes GPT monthly with the NRF. “Our view is that imports will remain below recent levels until inflation rates and inventory surpluses are reduced.”

With a little peak season surge, freight rates should be expected to increase some in the upcoming months. However, the dampening factors mentioned above plus the growing TEU capacity in the industry with new ships that have been entering the waters, extreme spikes freight rates are not overly likely.

Battle of the Fees

Detention and demurrage fees have long been a contentious issue for shippers. I’ve rehashed arguments about unfair fees so many times before in Universal Cargo’s blog, I won’t do it again now. Lately, it seems that things have moved in shippers’ favor. However, there’s still a battle being fought, and shippers shouldn’t suppose they’ve won the war on the issue.

Nick Savvides reported in the Loadstar that, under new U.S. regulation, over $1 million in disputed fees have been returned to or waived for shippers:

The US Federal Maritime Commission (FMC) said that, in the 10 months since the Ocean Shipping Reform Act (OSRA) was passed, more than $1m of disputed charges to shippers and forwarders have been waived or refunded.

The commission said “the milestone” was passed on 1 May.

Freight Rates

While shippers are happy to finally see action taken against unfair detention and demurrage fees, port operators argue the FMC is getting things wrong with its new regulation and rulings on these fees. In a House hearing on “Maritime Transportation Supply Chain Issues,” Ports America’s CEO argued as such while an MSC executive warned of the risk that the zealous maritime regulation reform we’ve been seeing lately in the U.S. could unintentionally make shipping more expensive.

In the lead-up to new rule-making the FMC has to do on fees, ocean carriers like MSC have been announcing left and right the dropping of per diem fees at U.S. terminals on days they’re closed. The latest to do so is the Ocean Network Express (ONE), following the trend unsurprisingly started by Maersk. Of course, the FMC making a ruling against Evergreen assessing such on days the ports were closed was probably the inciting incident for the trend.

But just when it seemed like shippers were winning on this issue, terminal operators started opening gates for limited times on weekends, so those won’t become free days. Announcements are also popping up that while demurrage charges won’t be assessed when gates are closed, daily fees are increasing when the gates are open.

One way or another, they’re trying to keep that fee money rolling in from shippers, who are frustrated by it all. This new strategy may backfire on terminal operators and shipping lines though, causing the FMC and lawmakers to come in stricter with their rules on fees.

Peter Tirschwell wrote an excellent article in the JOC about the battle of detention and demurrage fee battle if you want to find out more about it.

We’ve Got You Covered

If you want to know what’s happening in the international shipping business and how it will affect your business, Universal Cargo’s blog is a great place to look. Every Tuesday and Thursday, we post international-shipping-related articles, most relating to the latest news in the industry, to help your business succeed. Even better, we’re always ready to help your business with its importing and exporting needs.

Click Here for Free Air Freight PricingClick here for free freight rate pricing

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Could an ILWU Tentative Agreement Happen in Next Couple Weeks? https://www.universalcargo.com/could-an-ilwu-tentative-agreement-happen-in-next-couple-weeks/ https://www.universalcargo.com/could-an-ilwu-tentative-agreement-happen-in-next-couple-weeks/#respond Thu, 04 May 2023 20:10:18 +0000 https://www.universalcargo.com/?p=12025 For the first time in a long time, real positive news on the International Longshore & Warehouse Union (ILWU) contract negotiations broke yesterday. It was a localized agreement I'll talk about in a bit because buried in the story, well below the headlining news, was a statement that possibly deserves more attention than the headline.

Bill Mongelluzzo reported in the Journal of Commerce:

Sources close to the coastwide negotiations say they are increasingly optimistic that a tentative agreement could be reached in the next couple of weeks.

Find out more, including the ILWU news that did make the headline, by reading the full post in Universal Cargo's blog.

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For the first time in a long time, real positive news on the International Longshore & Warehouse Union (ILWU) contract negotiations broke yesterday. It was a localized agreement I’ll talk about in a bit because buried in the story, well below the headlining news, was a statement that possibly deserves more attention than the headline.

Bill Mongelluzzo reported in the Journal of Commerce:

Sources close to the coastwide negotiations say they are increasingly optimistic that a tentative agreement could be reached in the next couple of weeks.

This is the first time since contract negotiations began almost a year ago (May 10th, 2022) that a possible resolution to talks could be in sight. Was this buried in the article because it seemed unlikely to Mongelluzzo? Because it’s just optimism about a possible resolution? Has he heard similar statements of optimism in the past that made this one feel like it was worthy of little more than a footnote? Or was he just more focused on the tangible news?

ILWU, PMA Agree on Manning Non-Automated LA-LB Terminals

ILWU PMA meet about contract extension

The solid news item Mongelluzzo reported was “longshore labor and employers at the ports of Los Angeles and Long Beach have reached agreement on manning requirements for non-automated terminals.”

Yes, this is a localized issue to the San Pedro Bay port complex, but the issue was reportedly holding up talks. Until that issue was settled, negotiations reportedly were not going to move on to the broader coastwide issues the master contract has to cover.

Stacking Positives

Mongelluzzo stated in his article that the ILWU and Pacific Maritime Association (PMA) made an agreement on manning needs for the three automated terminals at the Ports of Los Angeles and Long Beach weeks ago. Perhaps that’s what the ILWU was referring to when it said in a brief statement a couple weeks ago that it had reached “tentative agreement” on “certain key issues.” With the statement being vague, not in tandem with the PMA, and coming off disruptive ILWU labor action, I was quick to conclude the statement didn’t mean much.

Perhaps the statement still doesn’t mean much, and neither does the statement of optimism for a tentative deal in the next couple weeks, but stacking little positives on top of little positives can give reason for a bit of optimism.

Negotiations no longer being held up by the local union jurisdictional fight at the Port of Seattle or the local manning issues at the Ports of Los Angeles and Long Beach are certainly positives.

“Coastwide negotiations in San Francisco will now turn in earnest to the two major issues yet to be settled — wages and pension benefits,” Mongelluzzo reported.

Wages and pension benefits, however, are not likely the only issues the ILWU and PMA need to work through.

Automation Still Looms

From long before the negotiations began (on May 10th, 2022), automation was expected to be a major sticking point in talks that would likely hold them up and create contention. History has taught us that contention in ILWU talks tends to lead to congestion at the West Coast ports. Shippers still have cause to be wary.

While the PMA and ILWU have generally kept details of negotiations away from the media, the automation fight did go public early in the process with the sides arguing their point of views on the issue. The ILWU also tied automation into the Terminal-5 drama at the Port of Seattle.

Neither the PMA nor the ILWU has indicated agreement on the larger issue of automation; however, perhaps the reported resolution of manning issues of automated terminals at Southern California’s ports is a good omen on the automation fight. Though shippers probably shouldn’t count on that until a tentative agreement is reached.

One can only hope that happens in the next couple weeks rather than things turning ugly on what the union considers an existential issue as the peak season approaches.

Click Here for Free Air Freight PricingClick here for free freight rate pricing

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Shipping News Roundup – Freight Rates, Carrier Reliability, & ILWU https://www.universalcargo.com/shipping-news-roundup-freight-rates-carrier-reliability-ilwu/ https://www.universalcargo.com/shipping-news-roundup-freight-rates-carrier-reliability-ilwu/#respond Wed, 03 May 2023 02:01:52 +0000 https://www.universalcargo.com/?p=12009 Want to know what's happening with international shipping right now? You're in the right place.

Today's post hits top international shipping news stories affecting shippers' import and export operations and bottom lines right now.

This post will hit two of shippers' biggest concerns – freight rates and ILWU contract negotiations – and more.

Find out what's happening by reading the post in Universal Cargo's blog.

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Want to know what’s happening with international shipping right now? You’re in the right place.

Today’s post hits top international shipping news stories affecting shippers’ import and export operations and bottom lines right now.

Freight Rates Hit Bottom?

After the meteoric rise in freight rates during the pandemic, which had shippers asking how much higher freight rates could possibly get, those freight rates finally started falling. Falling freight rates has been the overall trend for the last year. As freight rates on many routes hit pre-pandemic levels and some even dropped under that, the new recurring question is when will freight rates bottom out?

The answer may be that they already have bottomed out. Lars Jensen points to data to support idea we’ve already hit bottom in a Journal of Commerce (JOC) article:

global business

Looking at freight rate developments over the past couple of months, the data supports that we might have reached the bottom of the market. Of course, there are no guarantees that carriers will not suddenly lapse into a more destructive price war, but the present data does not support that this is currently happening.

The China Containerized Freight Index (CCFI) is useful when looking at long-term trend developments….

As the market was reaching a crescendo in early 2022, I presented an outlook at the Journal of Commerce’s TPM22 conference in Long Beach pointing out that when the market normalized, we should expect a reversal to the long-term trend from before the pandemic. The CCFI index showed a gradual slow decline in the period from 1998-2014. This was abruptly lowered as a result of the great price war of 2015-16, but the consolidation in the industry meant that by the end of 2019 the rate levels were gradually reversing to the long-term trend. At that TPM22 conference, it was also predicted that the return back to normality would likely undershoot in the sense that rates would drop too far and then rebound back up. 

Fast forward to the end of April 2023. The overall CCFI index was back to the long-term trend in the first week of March 2023 and bottomed out in mid-April with, potentially, a slight increase in the last week of April. 

If this analysis is narrowed specifically to the Pacific trade from China to the US West Coast, the long-term trend line was reached in the first week of January 2023 and the bottom was reached in the third week of March, having stayed more or less stable at that level since. 

But then it should be noted that the CCFI includes contracts, and this index tends to lag the changes seen in the more volatile spot rates. 

If we stay with the China to US West Coast market, the Drewry WCI spot index has seen a rate decline from January to April which is mainly in line with what one could expect from the seasonal impact from Chinese New Year. The increase seen in recent weeks also matches the Chinese New Year seasonality as there is typically a pre-peak season bump at exactly the timing and magnitude that we are currently seeing….

Fundamentally, the data presently supports the notion that the market has, overall, reached the low point and is about to rebound slightly to be brought back in line with the long-term trend. 

However, Jensen does point to two factors that could still lead to a drop and, thus, a bottom yet to be seen. One is a price war between carriers, which he believes the data supports is not happening. The other is “a severe undermining of the supply/demand balance,” which he admits is already the case “to some degree.”

I’ve written about the supply/demand imbalance quite a bit in this blog. With economic uncertainty and remaining overstock of goods for many retailers, shipping demand remains much lower than it was in the wake of lockdowns and stimuli checks. Add to that an infusion of capacity in the industry with new ships being delivered to the industry, and there remains downward pressure on freight rates.

I have written that I expect demand to tick up a bit during peak season. For Jensen, the litmus test for the international shipping industry is whether or not there will be a 2023 peak season. As I’ve predicted previously in this blog, I believe there will be a peak season this year. However, I expect it to be that of a weaker year’s peak season. Therefore, I expect freight rates to increase some in the upcoming months. However, that doesn’t mean the overall downward trend in freight rates would have to be over.

If the economy does as poorly as many expect it to through 2023 and into 2024, then the freight rate market likely hasn’t actually bottomed out yet.

Reliability Continues to Improve with Declining Cargo Volumes

Part of me wanted to add “duh” to the above subtitle. The reliability of cargo ships arriving when and where they’re supposed to has continued to improve with lower demand and less port congestion. Still, goods arriving to ports when they are supposed to is an important thing for shippers and a news story worth including in this roundup.

Here’s the gist from a JOC article published yesterday:

The on-time performance of container ships improved globally and on the North American trades in March as cargo volumes declined and supply chain bottlenecks continued to ease, according to Sea-Intelligence Maritime Analysis. 

Global schedule reliability increased 2.4 percentage points to 62.6% month over month and was a “staggering” 26.8 percentage points higher compared with March 2022, according to the Global Liner Performance report released over the weekend by Sea-Intelligence.

Let’s be clear, reliability from ocean freight carriers in the international shipping industry isn’t good. I don’t know of a time when it has been good. Ocean freight carriers are notoriously unreliable when it comes to ships arriving on time. Of course, there are many factors beyond carriers’ control that contribute to that. When there is a bottleneck or congestion at one port, it can easily delay ships and ripple through global supply chains.

However, there is plenty of responsibility shipping lines carry for this problem too, but accountability is lacking in the ocean freight sector of the international shipping industry. I doubt there are many industries where the expectations and bar for reliability are so low that just managing to deliver on time more than half the time is considered good. But that’s basically what we’re looking at when it comes to ocean shipping.

The JOC gave more reliability data that would likely be of interest to U.S. importers and exporters:

In the Asia-US West Coast trade lane, month-over-month schedule reliability in March increased 12.2 percentage points to 42.3%. That was also up from the 19.6% on-time performance in March 2022. 

On the Asia-East Coast trade lane, month-over-month reliability was up 5.4 percentage points to 44.5% and significantly higher than the 19.8% on-time performance recorded in March 2022. 

Of course, this increased reliability correlates with decreased cargo volumes and the clearing up of supply chain bottlenecks, which is pointed out in the JOC article.

Trans-Atlantic Freight Rates Falling

One area where freight rates have not fallen as much this year as everywhere else is on trans-Atlatic routes. However, that is now changing, according to a FreightWaves article by Greg Miller.

Freight rates are coming down there too, which could lend toward the argument we haven’t really bottomed out when it comes to freight rates yet.

Here’s some of what Miller shared Friday on the topic of trans-Atlantic freight rates:

The trans-Atlantic westbound trade has been a star performer for container lines over the past year, a bright spot amid a global slide. Europe-to-U.S. rates have been an outlier, staying far higher than those in the trans-Pacific trade and — until recently — far exceeding pre-COVID levels.

That premium is still there, but it’s shrinking fast. Europe-East Coast spot rates continue to steadily decline, following the same pattern previously seen in the other mainline trades. The only difference is a time lag.

Import data explains the belated fall of the trans-Atlantic. The Asia-U.S. trade is dominated by consumer goods. These fell first. The Europe-U.S. trade is primarily driven by building supplies and secondarily by beverages, furniture and mechanical equipment (including auto parts).

Construction-goods demand held up longer than consumer-goods demand. Now the construction side is sinking.

The Freightos Baltic Daily Index (FBX) put average Europe-East Coast rates at $3,081 per forty-foot equivalent unit on Thursday, down 44% year to date.

The premium versus pre-COVID rates on this trade has shrunk to $1,022 per FEU.

At the beginning of this year, the spread was over triple that. In early October, the premium versus pre-COVID rates was six times higher than it is now, according to FBX data, at over $6,100 per FEU.

A comparison of the five-year FBX Europe-East Coast rate curve to the FBX global composite (a composite of all trades covered by FBX) shows how the trans-Atlantic westbound trade crested later during the boom era and is almost exactly paralleling the global trend downward with a delay.

If the trans-Atlantic rates are really following the same path just later that the trans-Pacific ones have gone through, we should see those rates coming down for a while. However, shippers are still diverting goods from West to eEast Coast ports whenever possible because there is no end in sight yet for the ILWU contract negotiations on the West Coast ports. That increase in cargo going through East Coast ports, especially if we do see a legitimate peak season, could put some upward pressure on Trans-Atlantic mitigating some of the downward pressure from falling volumes from Europe. However, that downward pressure from reduced demand should be significantly greater.

ILWU Negotiations Latest

The week before last, the ILWU tried to put some positive spin on its contract negotiation situation by putting out a brief statement saying tentative agreements had been made between the union and its employers’, represented by the PMA. I wrote a full post about why that meant nothing. There was, however some meaningful news on the ILWU front last week.

Bill Mongelluzzo reported in a JOC article that a meeting took place between the ILWU and PMA last Monday:

A meeting taking place Monday between West Coast longshore labor and employer representatives to discuss a key issue involving nonautomated terminals at the ports of Los Angeles and Long Beach could result in a major hurdle being cleared on the road to a new coastwide contract. The gathering is taking place as negotiations over a new deal near the one-year anniversary of their May 10, 2022 start.     

Sources told the Journal of Commerce that Local 13 of the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), which represents marine terminals and shipping lines, were meeting Monday to discuss the union’s manning demands for conventional terminals in Southern California. Coming to an agreement on that issue would enable the ILWU and PMA to move on to other big issues such as wages and retirement benefits, the sources said.  

Talks between the two sides are being held up by the insistence of Local 13 to increase manning on top-handlers and other equipment that is used primarily at conventional container terminals in Los Angeles–Long Beach, sources said. Although the manning requirements will apply only to Southern California, they must be agreed to by the ILWU and the PMA in the coastwide contract. 

After effectuating a full halt at the Ports of Los Angeles and Long Beach leading into Easter Weekend, ILWU Local 13 continued labor action slowing operations at the nation’s busiest port complex. Mongelluzzo’s article included that the ILWU finally stopped this labor action before the meeting happened:

Several sources with knowledge of port operations in Los Angeles–Long Beach said recent ILWU job actions ceased over the weekend in advance of Monday’s negotiations….

The job actions taken by Local 13 over the past three weeks affected cargo handling and resulted in late vessel arrivals and departures at many of the 12 container terminals in Los Angeles–Long Beach, terminal operators said. According to the Marine Exchange of Southern California, vessel arrivals and departures at some terminals last week were running 12 to 24 hours late. 

Unfortunately, there are no indications of serious progress being made between the ILWU and PMA, leaving shippers to worry negotiations will drag into the peak season and cause port disruption at the worst possible time of the year.

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New Bill Introduced to Give FMC More Power to Halt Carrier Alliances https://www.universalcargo.com/new-bill-introduced-to-give-fmc-more-power-to-halt-carrier-alliances/ https://www.universalcargo.com/new-bill-introduced-to-give-fmc-more-power-to-halt-carrier-alliances/#respond Tue, 25 Apr 2023 22:12:17 +0000 https://www.universalcargo.com/?p=12001 Democrat and Republican lawmakers seem to have found something they can agree on: the international shipping industry, and ocean freight sector in particular, needs regulatory change. On Monday, Representative John Garamendi, D-California, introduced another bipartisan bill to the House zeroing in on the industry. This one focuses on the Federal Maritime Commission's (FMC's) ability to stop what could be collusive shipping agreements without having to go to the courts to seek injunctions.

If this bill goes through, it could seriously impact the amount of vessel sharing agreements allowed in the industry. Vessel sharing agreements between ocean freight carriers are pervasive. The most prominent such deals form the basis for the three major carrier alliances that dominate worldwide ocean shipping.

Because the supply chain with its ocean shipping sector is one of very few areas where Democrats and Republicans seem able to agree, we're likely on the verge of the FMC's authority over shipping agreements increasing.

Find out more by reading the full post in Universal Cargo's blog.

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Democrat and Republican lawmakers seem to have found something they can agree on: the international shipping industry, and ocean freight sector in particular, needs regulatory change. On Monday, Representative John Garamendi, D-California, introduced another bipartisan bill to the House zeroing in on the industry. This one focuses on the Federal Maritime Commission’s (FMC’s) ability to stop what could be collusive shipping agreements without having to go to the courts to seek injunctions.

If this bill goes through, it could seriously impact the amount of vessel sharing agreements allowed in the industry. Vessel sharing agreements between ocean freight carriers are pervasive. The most prominent such deals form the basis for the three major carrier alliances that dominate worldwide ocean shipping.

Because the supply chain with its ocean shipping sector is one of very few areas where Democrats and Republicans seem able to agree, we’re likely on the verge of the FMC’s authority over shipping agreements increasing.

John Gallagher reports in a FreightWaves article:

The Ocean Shipping Competition Enforcement Act … would allow the Federal Maritime Commission to block any agreements among carriers and marine terminal operators found to be unduly anticompetitive without having to first obtain a federal court order.

The FMC currently cannot on its own block an agreement that it determines to be unreasonably anticompetitive. Instead, it must petition the U.S. District Court for the District of Columbia and persuade the court to do so. If the court disagrees with the FMC’s assessment, the agreement automatically becomes effective.

House of Representatives
Photo of House of Representatives by Ted Eytan

Representative Says Carriers Openly Collude in Alliances

For years, I’ve argued that carrier alliances shrink competition in the ocean freight industry. However, I don’t think I ever used as strong of words as Representative Garamendi did when introducing this bill. On the House floor, He accused carriers of open collusion. In his article, Gallagher quoted the representative:

“The ocean shipping industry was the last transportation sector deregulated by Congress in 1984,” Garamendi said in introducing his bill. “Because of that, today the industry is now dominated by nine foreign-flagged ocean liners that openly collude under three carrier alliances handling some 80% of cargo. After reforming our nation’s ocean shipping laws for the first time in nearly a quarter century, Congress must ensure that the Federal Maritime Commission can do its job and fully enforce the law.

“Americans expect fair, competitive markets with good government, and that is exactly what our bipartisan bill would ensure,” he added.

Under the laws that the carrier alliances came into existence under, carriers are allowed to share vessels but not cooperate when it comes to things like pricing. However, many have worried that the temptation to talk shipping prices would be too great for carriers as they discuss the operations and sharing of their ships. Especially since there have been numerous times carriers have been found guilty and fined over colluding on freight rates.

Adding to suspicion of price collusion is how common it is for carriers to announce things like general rate increases (GRIs) and peak season surcharges (PSSes) practically simultaneously and in similar if not identical amounts and commencement dates.

Even if carriers do manage to resist all collusion temptation on rates, competition still drops with carrier alliances as the carriers are able to work together to reduce capacity (supply) in the industry when demand reduces or they think it is about to decrease.

Will the Bill Ensure Good Government?

The words “good government” stand out to me in Garamendi’s statement about what this bill will ensure. The founding fathers were so convinced that any government could turn tyrannical, they gave us the second amendment. I’m not suggesting the FMC is or would turn tyrannical, but good government is an extremely difficult thing to promise.

We’ve seen in the past, as the government gets more involved in an industry, that industry gets much more expensive for the consumers. And without service getting better. Obvious examples in the U.S. include education and health care. It would not be illogical to worry that the increase of government involvement we’re seeing right now in the international shipping industry could turn out to be detrimental and make importing and exporting more expensive.

For years, I’ve argued that the government should reconsider its allowance of carrier alliances and that it should crack down on unfair detention and demurrage fees shippers face. Now that we’re seeing the government make moves on those issues and more in the supply chain, I’m hoping this doesn’t turn out to be one of those “be careful what you wish for” situations.

The courts do have a valuable place in checking the overreach of government authority. For example, the federal courts just blocked a horrible Californian ban on natural gas appliances. The Golden State already has a severe housing shortage, an enormous homelessness problem, and skyrocketed rents that commonly make it difficult or impossible for even people with incomes over $100,000 a year to be able to afford to live in the same cities where they work. Forcing homeowners and landlords to replace gas appliances, an expensive undertaking, would only exacerbate those problems. Plus, the electric appliances would further tax a power grid that is already unable to meet the state’s needs. And that’s only the beginning of the issues with this particular law.

Removing the courts from the FMC’s process of halting shipping agreements certainly increases the commission’s power and streamlines the process to stop collusive deals. But how well will that power be checked? That’s a question that will likely only be answered for good or naught once the bill and time passes.

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ILWU Claiming “Tentative Agreement” on “Certain Key Issues” Doesn’t Mean Much https://www.universalcargo.com/ilwu-claiming-tentative-agreement-on-certain-key-issues-doesnt-mean-much/ https://www.universalcargo.com/ilwu-claiming-tentative-agreement-on-certain-key-issues-doesnt-mean-much/#respond Thu, 20 Apr 2023 20:39:31 +0000 https://www.universalcargo.com/?p=11996 The International Longshore & Warehouse Union (ILWU) claimed today to have reached a "tentative agreement" with the Pacific Maritime Association (PMA) on "certain key issues." Immediately, it made headlines, tweets, and posts all over the international shipping news portions of the internet. However, shippers shouldn't get too excited. The statement means very little, if anything at all.

When you look at the details of the statement, or lack thereof, the union's need for putting forward positive news, and the lack of a coinciding statement from the PMA, this big news item feels more like a big flop. It even has that fake news spin smell to it.

The announcement also feels stale as ILWU Local 13 reportedly continues to slow operations at the Ports of Los Angeles and Long Beach.

Read the full post in Universal Cargo's blog for 6 reasons ILWU's statement means nothing and learn about what's happening at the ports.

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The International Longshore & Warehouse Union (ILWU) claimed today to have reached a “tentative agreement” with the Pacific Maritime Association (PMA) on “certain key issues.” Immediately, it made headlines, tweets, and posts all over the international shipping news portions of the internet. However, shippers shouldn’t get too excited. The statement means very little, if anything at all.

ILWU PMA meet about contract extension

When you look at the details of the statement, or lack thereof, the union’s need for putting forward positive news, and the lack of a coinciding statement from the PMA, this big news item feels more like a big flop. It even has that fake news spin smell to it.

The announcement also feels stale as ILWU Local 13 reportedly continues to slow operations at the Ports of Los Angeles and Long Beach.

Here are 6 reasons shippers shouldn’t be taken in by the statement:

1. This Is NOT a Tentative Contract Agreement Announcement

Some of the headlines and tweets on the PMA’s announcement almost make it sound like the ILWU and PMA have reached a tentative contract agreement. This is clearly not the case.

In fact, the ILWU said in the short statement, “Talks are continuing on an ongoing basis until an agreement is reached.”

By all indications, the parties still appear to be far from reaching a new tentative master contract.

2. What Key Issues…? Crickets

The ILWU didn’t bother to specify in its statement what “key issues” this “tentative agreement” includes.

All the articles from major international shipping news sources, those whom the ILWU would be most likely to respond to when asked for comment, said the ILWU did not respond to inquiries about the statement.

With the lack of detail, the union could simply be referring to the tentative agreement made between the ILWU and PMA all the way back in July on healthcare benefits. That was the last time any kind of actual progress in contract negotiations was announced.

And it was announced very differently…

3. PMA Did Not Make Announcement with ILWU

The ILWU and PMA announced the tentative agreement on healthcare benefits in a joint statement. Where’s the PMA in the ILWU’s statement about agreement today? Suspiciously absent.

If there was real news about progress in the talks between the PMA and ILWU, it would likely come from both parties. As with the ILWU, major international shipping news outlets have gotten no comment from the PMA on the giant union’s statement.

Are you smelling that stale, fake scent yet?

4. Labor Action Makes Timing Suspicious

This statement comes right off the heels of ILWU labor action closing the Ports of Los Angeles and Long Beach for a couple days and more labor action slowing those ports afterward.

ILWU Local 13 suddenly refusing to work the Thursday night shift before and the day shift of Good Friday and then slowing dispatch of dockworkers the following Monday was not the end of disruptive labor actions at the country’s busiest port complex. Bill Mongelluzzo reported in the Journal of Commerce (JOC) that the local faction of the ILWU began “red-tagging” perfectly fine cargo-handling equipment at the ports’ automated terminals. This slows operations by forcing the equipment to be inspected before it can continue to be used. Additionally, the ILWU Local 13 has executed sporadic labor action at the non-automated terminals.

It’s also been reported that the slow dispatching of workers has been continuing.

Probably not coincidentally, this latest series of labor action began right after the decision on the jurisdictional dispute at the Port of Seattle’s Terminal-5 came down harshly against the ILWU.

Yeah, the ILWU could really use a positive headline right now. This certainly could be seen as motive to put out a statement rehashing “tentative agreement” on “key issues,” making it sound like new, positive news.

5. Negotiations Didn’t Even Happen Last Week

Shrinking even more the likelihood of new tentative agreements having been reached is the fact there weren’t even negotiations last week.

Mongelluzzo reported:

Coastwide negotiations were not held this week because some ILWU officers were attending a convention, sources said.

So no new agreements were reached last week. Are we then to believe that the ILWU and PMA had a breakthrough this week, but only the ILWU wants to announce it? If new “tentative agreement” on issues had been reached before last week, why wouldn’t a statement go out during the week when no negotiations were happening? Was that convention just so consuming that no one in the whole ILWU would have time to write (or agree to if the PMA was actually involved) an extremely short statement?

When exactly did “tentative agreement” on “key issues” happen? Oh yeah, we already covered that. No details, no comment from the ILWU.

6. New Tentative Agreement Wouldn’t Mean New Contract Is Close

Let’s give the ILWU the benefit of the doubt for the moment. Let’s say this week they made a tentative agreement on some key issues. Would that mean we’re close to seeing a new master contract and ending this year-long (so far) negotiation period? No.

The last time the ILWU announced tentative agreement on an issue (and actually in conjunction with the PMA) nine months went by with no news of any progress in negotiations. That’s long enough for a woman to conceive, grow a baby in her womb, and give birth at full term. But apparently that’s not long enough for the ILWU and PMA to reach terms on a new contract.

Conclusion

ILWU’s statement of “tentative agreement” on “key issues” is not news. It sounds like spin, simply stating something that has happened at some point along the way in the negotiation process. If called out, the ILWU can say they didn’t lie because they didn’t. No details were provided, so if you thought the statement meant new agreements were reached on “key issues” you were making an assumption.

What is news is the port disruption the union creates through labor action, though that’s not unexpected.

Shippers have had enough of costly port congestion and cargo delays each time the ILWU master contract expires. That’s why shippers have diverted cargo to East and Gulf ports whenever possible over the last year and a half. That’s why some of that market share won’t come back to West Coast ports. That’s why shippers are writing letters to the president.

But in the end, shippers will still get more disruption. We’ve seen it over and over again. When it’s time for the ILWU to negotiate a new contract, shippers can count on disruptive labor action from the union, usually in the form of slow downs. ILWU’s actions speak much louder than its words.

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Strong Ruling Against ILWU in Seattle T-5 Jurisdictional Dispute Could Be Motivation Behind Labor Action that Closed Ports of LA-LB https://www.universalcargo.com/strong-ruling-against-ilwu-in-seattle-t-5-jurisdictional-dispute-could-be-motivation-behind-labor-action-that-closed-ports-of-la-lb/ https://www.universalcargo.com/strong-ruling-against-ilwu-in-seattle-t-5-jurisdictional-dispute-could-be-motivation-behind-labor-action-that-closed-ports-of-la-lb/#respond Thu, 13 Apr 2023 18:24:22 +0000 https://www.universalcargo.com/?p=11985 Patrick E. McLean wrote in his book How to Succeed in Evil, "There is no such thing as coincidence, Topper. It is always, always your enemies conspiring against you." Shippers may feel that's an apt quote when they connect the dots of last week's events.

The US National Labor Relations Board (NLRB) ruled against the International Longshore & Warehouse Union (ILWU) in its jurisdictional dispute with the International Association of Machinists & Aerospace Workers (IAM) at Terminal 5 (T-5) of the Port of Seattle. ILWU's labor action that closed the port last week happened immediately afterward.

The timing couldn't be more suspicious.

Find out more by reading the full post in Universal Cargo's blog.

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Coincidence?

Patrick E. McLean wrote in his book How to Succeed in Evil, “There is no such thing as coincidence, Topper. It is always, always your enemies conspiring against you.” Shippers may feel that’s an apt quote when they connect the dots of last week’s events.

The US National Labor Relations Board (NLRB) ruled against the International Longshore & Warehouse Union (ILWU) in its jurisdictional dispute with the International Association of Machinists & Aerospace Workers (IAM) at Terminal 5 (T-5) of the Port of Seattle. ILWU’s labor action that closed the port last week happened immediately afterward.

ILWU PMA meet about contract extension

The timing couldn’t be more suspicious.

On April 6th, NLRB’s decision against the ILWU dropped quietly in terms of news coverage. However, it was that very same day that the ILWU Local 13 began its labor action to shut down the Ports of Los Angeles and Long Beach during the Thursday night shift and Friday morning shift, which the union followed up with slow labor dispatching on Monday. The labor action and shutdown seemed to take everyone by surprise.

Sudden labor action taking place later in the same day that this decision went against the ILWU, if not related, would be incredibly coincidental.

The ILWU should certainly not be considered an enemy of shippers, but shippers have often paid heavily for disruptive labor action from the union during negotiation periods when the union’s master contract has expired in the past. Ultimately, the events of last week and early this week increase shippers’ anxiety that they will suffer more costly cargo delays from labor action as contract negotiations between the ILWU and the Pacific Maritime Association (PMA), representing employers at the docks, continue to drag out.

ILWU Made T-5 Decision Central Issue in Negotiations

One might think a jurisdictional dispute at one terminal in one port wouldn’t be that big of a deal in contract negotiations that cover dockworkers coast-wide. One would be wrong.

The ILWU put this dispute front and center in labor talks. For a long period, the union even refused to negotiate until the matter was resolved.

In fact, the T-5 jurisdictional dispute held up contract negotiations between the ILWU and the PMA for months. Finally, the ILWU agreed to engage in talks with the PMA before the dispute at the Port of Seattle was resolved. However, by all reports, the at-last-resumed talks haven’t resulted in much up to this point.

However, it should be noted that the parties have agreed not to talk to the media about what’s happening in the negotiations. That leaves much of what the media has to say about negotiation progress to speculation. It is possible there has been more progress in negotiations than those on the outside realize. One can only hope.

What we do know is the ILWU aggressively goes after jobs at the ports to which other unions have claims. The ILWU claims that in concession for being granted the right to update individual terminals with automation in the 2008 master contract with the ILWU, the PMA promised to back the union in any jurisdictional disputes it has with other unions. The ILWU claimed the PMA failed to follow through with that when it came to the T-5 dispute at the Port of Seattle.

By implication, if not directly, the union has called into question all terminal automation updates that have been done since that contract agreement. Leading up to this negotiation cycle, automation was the issue most worried would turn talks contentious. The ILWU linked the T-5 dispute right to the automation issue.

Ruling Says ILWU Engaged in Unfair Labor Practices

If you want to read the ruling against the ILWU, click here for the NLRB’s published PDF of its decision.

international shipping federal antitrust law

Not only did the NLRB rule against the ILWU in the T-5 matter, but its board members also had “strong words” for the ILWU. Bill Mongelluzzo reported in the Journal of Commerce (JOC):

Sources told the Journal of Commerce Friday they were surprised by the strong words that NLRB Chairman Lauren McFerran and two of the board’s members used in the ruling. The NLRB instructed the ILWU to “cease and desist from threatening, coercing or restraining” SSA Marine from assigning maintenance and repair work to members of the IAM. The order also instructed the ILWU to cease “pursuing lost work opportunity claims” at T-5. 

Thursday’s NLRB ruling said that the ILWU, by continuing to pursue its “lost work opportunity claims” under the 2008 ILWU-PMA coastwide contract, “has engaged in unfair labor practices in violation of … the National Labor Relations Act.” 

The NLRB in Thursday’s ruling ordered the ILWU to notify the PMA-ILWU Joint Coast Labor Committee established by the 2008 coastwide contract that it will no longer pursue its lost work opportunity claims, and to post notices “in conspicuous places, including all places where notices to employees are customarily posted” indicating that it will no longer pursue those claims with the ILWU-PMA coast arbitrator. 

Something that really stood out to me as I read the NLRB decision was when Chairman McFerran and members Kaplan and Prouty wrote in the short Amended Conclusion of Law section, “By pursuing lost work opportunity claims… in order to force the Employer to assign the maintenance and repair work at Terminal 5 in the Port of Seattle to ILWU-represented employees, rather than employees represented by IAM, ILWU has engaged in unfair labor practices…”

Then, immediately following that came the Order section in which the NLRB ordered the ILWU to:

Cease and desist from

(a) Threatening, coercing, or restraining SSA Terminals, LLC, or any other person engaged in commerce or in an industry affecting commerce, where an object of their actions is to force or require SSA Terminals, LLC to assign maintenance and repair work at Terminal 5 in the Port of Seattle to employees who are members of, or represented by the [ILWU] and [ILWU], Local 19, rather than to employees who are members of, or represented by, [IAM], District Lodge 160, Local Lodge 289.

The ILWU is also ordered to cease and desist from:

Pursuing lost work opportunity claims and seeking to enforce the arbitration award of the Coast Arbitrator in order to obtain maintenance and repair work performed at Terminal 5 in the Port of Seattle by employees represented by the [IAM], District Lodge 160, Local Lodge 289.

In other words, stop engaging in unfair labor practices and tactics and stop trying to use this bad lost opportunity claim to take jobs away from the IAM.

Obviously, the ILWU is unhappy with the ruling. It announced it will appeal. The appeals process could potentially drag on for years.

Meanwhile, shippers just want to have their goods move smoothly through the ports. Unfortunately, while the ILWU fights over jurisdiction, especially during a time of negotiations when the union’s master contract is expired, shippers can’t be confident labor action won’t disrupt West Coast ports at any moment.

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ILWU Action Closed Ports of LA & LB Last Week, Slowed Opening This Week https://www.universalcargo.com/ilwu-action-closed-ports-of-la-lb-last-week-slowed-opening-this-week/ https://www.universalcargo.com/ilwu-action-closed-ports-of-la-lb-last-week-slowed-opening-this-week/#respond Tue, 11 Apr 2023 06:44:28 +0000 https://www.universalcargo.com/?p=11971 The Ports of Los Angeles and Long Beach suddenly shut down Thursday night. The closure of the country's busiest port complex continued Friday.

"Terminals noted they closed due to labor shortage," Universal Cargo Senior Account Manager Jenny Chang wrote to team members in an internal email Friday. "But news did suggest a possible strike," she added.

A full-blown strike complete with picket lines didn't happen, but labor action from the ILWU Local 13 had the same effect: all terminals closed at the Ports of Los Angeles and Long Beach. Of course, anyone calling the dockworkers, in coordination, not going to work and shutting down the port a strike would sound an awful lot like someone calling a spade a spade.

The closure came suddenly and unexpectedly (as unexpectedly as such a thing can be when the ILWU is negotiating a new contract). Chang has a contact who usually gives her a heads up when this sort of thing is about to happen, "but not this time," she noted in her email.

Find out more by reading the full article in Universal Cargo's blog.

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Sudden Closure Thursday and Friday

The Ports of Los Angeles and Long Beach suddenly shut down Thursday night. The closure of the country’s busiest port complex continued Friday.

“Terminals noted they closed due to labor shortage,” Universal Cargo Senior Account Manager Jenny Chang wrote to team members in an internal email Friday. “But news did suggest a possible strike,” she added.

A full-blown strike complete with picket lines didn’t happen, but labor action from the ILWU Local 13 had the same effect: all terminals closed at the Ports of Los Angeles and Long Beach. Of course, anyone calling the dockworkers, in coordination, not going to work and shutting down the port a strike would sound an awful lot like someone calling a spade a spade.

The closure came suddenly and unexpectedly (as unexpectedly as such a thing can be when the ILWU is negotiating a new contract). Chang has a contact who usually gives her a heads up when this sort of thing is about to happen, “but not this time,” she noted in her email.

Friday morning, ITS Terminal Management sent out a bulletin email, which read as follows:

Dear Trucking Community,

Due to unforeseen circumstances throughout the harbor which resulted in ILWU labor unavailability today, all ITS terminal operations will be closed.

Normal gate operations are expected to resume Monday 04/10 1st shift.

We apologize for the inconvenience and wish everyone a Good Friday and Happy Easter weekend.

Please plan accordingly,

ITS Terminal Management

The situation was an obvious problem for shippers and their agents. There was no time to plan around the closure. The interruption required changing plans already in action. Universal Cargo Operations Manager confirmed Friday, “Yes, we had appointments to outgate today, and they were cancelled.”

Work reportedly resumed during the Friday night shift, but for most shippers it was too late for last week. With it being a holiday weekend, shippers planning to get their import cargo from the ports or export cargo to the ports by the end of the week were stuck having to wait until this week. This week didn’t have the strongest start at the Ports of Los Angeles and Long Beach either, but more on that later.

Port of Long Beach

ILWU’s Labor Action Excuse

So what were the “unforeseen circumstances” that made ILWU labor unavailable Thursday and Friday?

The Pacific Maritime Association (PMA) called it a “concerted action to withhold labor” by the ILWU Local 13.

In a Freight Waves article published Easter Sunday, Greg Miller reported ILWU Local 13’s claim about its labor action:

The ILWU Local 13 said members didn’t show up Thursday night because they happened to be busy at a monthly membership meeting, where a new president was appointed. It said workers’ absence Friday was due to union members spending time with families for the religious holiday.

Reporting on it Monday in the Journal of Commerce (JOC), Bill Mongelluzzo fills out ILWU’s justification claim for its work stoppage, along with the details that show its reasoning to be shaky:

ILWU Local 13 said in a statement Friday that it held its monthly membership meeting Thursday evening for the swearing in of incoming Local 13 President Gary Herrera, noting that the membership meeting is a “contractual right.” 

A source close to the matter said that although the ILWU is allowed to call a stop-work meeting each month under the coastwide contract to discuss union issues, Thursday’s meeting was not previously arranged according to the terms of the agreement. 

In addition, ILWU Local 13 said union members who observe religious holidays “took the opportunity to celebrate with their families” on Friday. Good Friday is not a recognized holiday under the coastwide contract. 

Whenever the ILWU master contract expires and a new one has to be negotiated, labor action disrupts West Coast ports. I can’t remember the ILWU ever saying they were engaging in labor action related to such talks. Instead, when labor action clearly takes place, the union tends to make an excuse, which can be extremely hard to believe and contradictory to reports on the situations. Additionally, local factions of the union tend to engage in disruptive slowdowns over seemingly small issues of discontent or whatever pretense opportunity might pop up during periods when protections against such actions are unavailable to employers due to expired contracts.

After Miller described in his Freight Waves article the ILWU’s claim, he wrote the following about the union’s port disruption in general:

Labor action at West Coast ports does not have a history of being explicitly confirmed; rather, it takes the form of passive-aggressive behavior that escalates with increasingly implausible deniability.

I can’t help but be reminded of when about a hundred ILWU members refused to cross truckers’ AB 5 protest lines, helping screech the Port of Oakland to a halt less than a month after the ILWU’s contract expired. ILWU members who refused to work said their labor action was to “support” or “stand with” the independent truckers. One ILWU member was even quoted as saying, “We are working without a contract right now, so we support the owner-operators and understand what they are trying to do.” However, Farless Dailey III, president of ILWU Local 10, claimed afterward in a statement, “The workers stood by on health and safety, as is permitted in our contract when conditions at the terminals present a risk.”

That statement was hard to swallow. Likewise, few people seem to think the current situation is about a meeting and a holiday but rather the contract negotiations that have almost reached a full year since they began.

ILWU Local 13 Executes Slowdowns on Monday

I said earlier this week hasn’t started well either. ILWU Local 13 followed up last week’s disruption last week with slowdowns to start this week. See, I told you I’d give you more on that later.

Mongelluzzo reported in his above-quoted JOC article:

The International Longshore and Warehouse Union (ILWU) Local 13 on Monday delayed work at most of the marine terminals at the ports of Los Angeles and Long Beach by slowing the dispatch of workers, after union job actions closed nearly all of the port complex’s terminals Thursday night and Friday morning.  

According to three sources close to the matter who asked not to be identified, ILWU Local 13 also refused to allow a representative of the Pacific Maritime Association (PMA), which represents employers, to observe the dispatching process. The dispatch hall is jointly operated by the ILWU and the PMA. 

West Coast Risks for Shippers Reaffirmed

Regular readers of Universal Cargo’s blog know we’ve been suggesting shippers divert cargo from West to East and Gulf Coast ports as a way to protect themselves from ILWU risks since about a year before the master contract expired. Economic downturn and shippers diverting cargo have helped mitigate labor disruption at West Coast ports by significantly reducing cargo volume there. Still, I’ve continued to suggest in this blog the strategy of diverting goods.

In fact, a few weeks ago, when international shipping news headlines warned of dockworker talks spanning the continent, I suggested again that shippers continue the strategy of diverting from West to East and Gulf Coast ports because the risk for port disruption and delays were much greater at West Coast ports. I even doubled down on this in the return of our Universal Shipping News videos. It was easy to double down, as ILWU-related disruption happened at the Ports of Los Angeles and Long Beach about a week after I said to keep diverting because of the higher risk on the West Coast.

Still, there was some doubt out there. Someone even commented on the Universal Shipping News video, “Diverting cargo from west to east is causing more problems then [sic.] solutions.”

Thursday, Friday, and Monday’s ILWU labor actions should remove the remaining doubt of high cargo movement risk through the West Coast as these ILWU contract negotiations continue to drag.

Miller wrote in his Easter Sunday Freight Waves article:

The Port of Los Angeles’ sales pitch to importers in recent months has been: We have plenty of capacity now. No more ship queues. The port labor contract expired July 1, 2022, but there has been no major disruption to imports during negotiations on the new contract. No need to ship your goods all the way through the Panama Canal to the East or Gulf coasts. Come back to LA!

That sales pitch, to the extent it ever worked, died on Friday.

The National Retail Federation (NRF), which already has written letters to President Biden about the ILWU contract negotiation situation, issued a statement on Friday that pleads for action from the administration. The NRF press team forwarded me the statement, which includes the following:

“NRF is closely monitoring the situation in California and has reiterated its concerns to the White House. It is essential that the ongoing labor negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association are resolved immediately. We again call on the administration to engage and prevent any further disruption to port operations and cargo fluidity.”

Here at Universal Cargo, we continue to monitor the situation, and the international shipping industry as a whole, closely too. We inform shippers on news that affects their imports and exports here in this blog. One way you can keep informed is by subscribing.

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What the Freight Is Happening with Freight Rates – Experts Mixed – ’23 Prediction https://www.universalcargo.com/what-the-freight-is-happening-with-freight-rates-experts-mixed-23-prediction/ https://www.universalcargo.com/what-the-freight-is-happening-with-freight-rates-experts-mixed-23-prediction/#respond Fri, 07 Apr 2023 00:14:27 +0000 https://www.universalcargo.com/?p=11972 One of the things we often do in Universal Cargo's blog is give shippers an outlook for how the international shipping freight rate market is behaving and looks to behave. Over the years, shippers have been able to use this information to prepare their businesses for cost influxes associated with importing goods and materials. In general, this is a good time, cost-wise, for shippers to import or export goods. However, the international shipping industry, including its experts and analysts, is giving mixed signals on how freight rate markets will behave throughout the rest of 2023.

In this post, we'll sift through these signals and see how the rest of the year is shaping up for freight rates and shippers.

Find out all about it by reading the post in Universal Cargo's blog.

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One of the things we often do in Universal Cargo’s blog is give shippers an outlook for how the international shipping freight rate market is behaving and looks to behave. Over the years, shippers have been able to use this information to prepare their businesses for cost influxes associated with importing goods and materials. In general, this is a good time, cost-wise, for shippers to import or export goods. However, the international shipping industry, including its experts and analysts, is giving mixed signals on how freight rate markets will behave throughout the rest of 2023.

In this blog post, we’ll sift through these signals and see how the rest of the year is shaping up for freight rates and shippers.

Analysts Saying ’23 Carrier Profits Down & Shippers’ Savings Up

Many international shipping experts and analysts see 2023 as a year of freight rate relief for shippers and plunging profit for ocean freight carriers.

Greg Knowler opened a Journal of Commerce (JOC) article on the subject with:

Sharply correcting container shipping markets will result in plunging profitability for carriers this year, but massive savings in transport costs for importers and exporters in major markets, according to analysts.

Cargo ship fully loaded with freight

Such predictions a quarter of the way into the year aren’t particularly hard to make, as cargo levels along with freight rates tumbled during the second half of last year and have continued to do so to this point in 2023. Knowler shares the stark contrast in what shippers are paying to move their cargo over the ocean:

By the start of April, spot rates on the trans-Pacific and Asia-Europe trade lanes were down by up to 90 percent compared with the same time last year, according to various rate indices tracked by the Journal of Commerce

Contract rates on both trades have also fallen sharply, with data from rate benchmarking platform Xeneta showing Asia-North Europe long-term rates of 90 days or longer are down 45 percent year over year, while Asia-US West Coast rates are down 80 percent from this time last year. 

Freight Rate Increases & Fees About to Hit?

While it still seems we haven’t seen the bottom of freight rates yet, Mike Wackett reports in the Loadstar that the bottom may be within sight, and we’re just weeks away from carriers launching rate correction programs that will include an “onslaught” of increases in freight rates and fuel-related fees:

A definite end to rock-bottom freight rates could be in sight, as carriers take advantage of tight capacity management to launch rate restoration programmes across their networks in the next few weeks.

Moreover, shippers can expect an increase in bunker surcharges, as the shipping lines ramp up BAFs to mitigate the impact of higher fuel costs.

The ocean carriers are preparing to unleash a barrage of GRIs this spring, in order to shore-up freight rates ahead of the peak season, and Hapag-Lloyd has led the charge with a shock [sic.] $1,000 per 40ft increase on shipments from Asia to the US from 1 May.

There are definitely some mixed messages for shippers here regarding how good freight rates will look for them through the year, especially when it comes to the spot rate market. But carriers do have a number of weapons at their disposal to increase rates. These include general rate increases (GRIs), fuel adjustment factors (BAFs), peak season surcharges (PSS), and blanked (cancelled) sailings.

Sometimes, carriers have trouble getting surcharges and fees to stick because other carriers undercut them. We saw blank sailings be very effective in bringing up freight rates early in the pandemic by dropping capacity well below the initial dip in demand right before demand skyrocketed. However, blanked sailings during the current plunge of demand haven’t been enough to keep freight rates from falling. Perhaps they have kept rates from going as low as they could have though.

Often, especially in this age of carrier alliances, fees, surcharges, and blanked sailings from carriers feel coordinated, giving at least initial boosts to freight rates. Next month will likely see at least an initial freight rate boost. However, it’s hard to know if carriers will be able to maintain freight rate gains they achieve or if the fees and surcharges on the way will only show up as a little blip on the radar.

Industry Mixed Signals

There are “mixed signals” in the container shipping industry in general right now according to a Freight Waves article by Greg Miller:

Spot container freight indexes are still falling. Cargo shippers are signing annual contracts at sharply lower rates than last year. Import demand continues to be crippled by high inventories. A massive wave of new container ships is now hitting the market in full force.

And yet, the container shipping industry does not appear to be battening down the hatches for a looming storm. It is not behaving like an industry facing an imminent crisis.

The rates paid by liner companies to charter container ships bottomed out earlier this year and are now increasing. The duration of charters is rising as well.

The number of idle container ships has decreased in recent weeks. Liner companies continue to buy more vessels in the secondhand market.

The expected tsunami of ship recycling has yet to occur. The number of older ships demolished year to date is lower than expected. And container lines continue to place orders at shipyards for more vessels.

Are ocean freight carriers still riding high on their incredible hundreds-of-billion-dollar-profits over the last few years that they’re being reckless? Or do they see the plummeting market turning around soon? Maybe they’re just confident in their massive profits carrying them through a tough period into the next up season for which they’re now preparing.

Markets in general have a way of going up and down. Economic downturn has greatly reduced cargo volumes, creating heavy downward pressure on freight rates. This created supply chain relief from record-breaking high freight rates and port congestion that were largely due to incredibly high cargo volumes spurred by consumer goods buying, which were in turn spiked by lockdown policies and government stimuli. Despite economic uncertainty, no one would expect the economy to remain at the lows we’ve been seeing forever.

In a House hearing I wrote about in Universal Cargo’s last blog post, American Cotton Shippers Association President and CEO William Allen said, “This reprieve is temporary. Our economy will strengthen. Cargo volumes will increase.”

It would appear ocean freight carriers are counting on that recovery to happen soon.

What It All Adds Up to for 2023

Now it’s prediction time.

I think we will see an increase in volume this upcoming peak season. While I obviously don’t think it will be as strong of a peak season as we’ve seen in the last few years, which basically had continuous peak season, I would expect freight rates to rise some during it with the increase that is seen. Reports still talk of businesses flush with overstock, and there’s still obviously economic uncertainty. However, I believe we’re falling back toward the typical international shipping industry’s seasonal ebbs and flows, just that of a below-average economic year at the moment.

Unfortunately, there are risks that could make this year’s peak season freight rates spike higher than seasonal patterns would normally cause. In particular, there’s a good chance the ILWU contract situation won’t be resolved by then. If labor action, which tends to accompany contract negotiations, takes place during the peak season, we could see serious congestion on the West Coast and upward pressure on freight rates.

Shippers continuing to divert cargo to East and Gulf Coast ports should help to give some mitigation to disruptive labor action along with the economy still being on the slower side.

As for next month and the lead-in to the peak season, increases that carriers try to implement will likely be limited by the increase in capacity hitting the industry and perhaps a bit more of a competitive spirit from carriers with alliance uncertainty brought by Maersk and MSC splitting the 2M Alliance. However, as April ends, we could very well hit the bottom of falling freight rates, with leveling out and modest increase to follow.

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Witness Positions at House Hearing on “Maritime Transportation Supply Chain Issues” https://www.universalcargo.com/witness-positions-at-house-hearing-on-on-maritime-transportation-supply-chain-issues/ https://www.universalcargo.com/witness-positions-at-house-hearing-on-on-maritime-transportation-supply-chain-issues/#respond Wed, 05 Apr 2023 02:20:41 +0000 https://www.universalcargo.com/?p=11964 Last week, four witnesses representing U.S. and international supply chain stakeholders appeared before the House's Coast Guard and Maritime Transportation subcommittee to speak and be questioned on maritime transportation supply chain issues.

The witnesses were executives from MSC, the world's largest ocean freight carrier; Ports America, the largest port operator and stevedore in the U.S.; the American Cotton Shippers Association; and the Port of Long Beach.

Lately, U.S. regulators have been showing a great deal of interest in changing and creating laws around the international shipping industry. Perhaps the biggest instance of this so far is the passage of the Ocean Shipping Reform Act of 2022 (OSRA). The jury will be out for a while on how positive or negative the results of OSRA and other U.S. regulatory action will be on the supply chain. But that doesn't mean there aren't strong opinions on the matter.

The witnesses varied in the positions they took before Congress. This post quickly gives you the positions the four witnesses presented in their opening remarks.

Check it out in Universal Cargo's blog!

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Witnesses at House Hearing on Maritime Transportation Supply Chain Issues
Witnesses at House Hearing on Maritime Transportation Supply Chain Issues

Last week, four witnesses representing U.S. and international supply chain stakeholders appeared before the House’s Coast Guard and Maritime Transportation subcommittee to speak and be questioned on maritime transportation supply chain issues.

The witnesses were executives from MSC, the world’s largest ocean freight carrier; Ports America, the largest port operator and stevedore in the U.S.; the American Cotton Shippers Association; and the Port of Long Beach.

Lately, U.S. regulators have been showing a great deal of interest in changing and creating laws around the international shipping industry. Perhaps the biggest instance of this so far is the passage of the Ocean Shipping Reform Act of 2022 (OSRA). The jury will be out for a while on how positive or negative the results of OSRA and other U.S. regulatory action will be on the supply chain. But that doesn’t mean there aren’t strong opinions on the matter.

The witnesses varied in the positions they took before Congress. This post quickly gives you the positions the four witnesses presented in their opening remarks.

If you want more, here’s a Youtube video of the House hearing:

YouTube Video

1. MSC Warns of Government Intervention Potentially Making Shipping More Costly

We’ll start with the end of MSC Group’s Executive Vice President Bud Darr’s opening statement. As government looks to impose more and more new regulation on the international shipping industry, Darr points out the potential for making the cost of international shipping more expensive:

“The last point I’ll leave you with for your consideration is about caution in government intervention in the market at this moment. OSRA 22 was just enacted not too many months ago. The FMC [Federal Maritime Commission], I don’t believe, has actually completed yet the first of numerous rule makings they have to do, and I think that we would all benefit from seeing where that lands and how it goes. But this was a market system that functioned quite well and delivered extraordinarily low cost shipping services worldwide pre-pandemic. And I think it can do so again, but we do need to be somewhat cautious to make sure that well-intentioned efforts do not have the opposite effect of perhaps from what’s intended.”

Darr brings up a good point here. Before writing and implementing new regulation after new regulation on the industry, we may want to see how things turn out with the newest regulations that are still being worked on and brought to the industry. This warning echoes something I wrote in just the last Universal Cargo blog post:

… there is a great deal of risk when seeing the government increase regulation in an industry. Typically, the more the government gets involved in an industry, the more expensive that industry becomes. See education and health care for examples….

The risk of increased port congestion and costly delays for shippers is something worth considering when it comes to both regulatory and carrier policy around the topic of detention and demurrage fees.

In addition, the FMC funding has gone way up, as have the number of recent legislative proposals around the international shipping industry in general. It seems we are in a legislative boom when it comes to the supply chain. The worry is that boom will blow up into a much more expensive climate for shippers.

2. Ports America Criticizes FMC’s Recent Detention & Demurrage Action

Ports America President and CEO Matthew Leech, in his opening statement, claimed the FMC is getting it wrong when it comes to regulation changes on detention and demurrage fees.

Leech says new rules as drafted threaten to penalize multimodal transport operators (MTOs) and stop them from charging terminal demurrage, which MTOs consider to be a storage fee. He also criticized the FMC’s recent decision to declare unreasonable under the new “incentive rule” of the Shipping Act carriers charging detention fees on shippers who still possess carriers’ equipment on holidays and weekends, when terminals are normally closed. He claims the decision is inconsistent with the FMC’s own incentive principle, as the one dissenting commissioner wrote in his opinion on the ruling.

Leech says the shippers in the case had every opportunity to return the equipment before the holiday weekend, but the FMC still deemed the detention unreasonable. Leech expressed there are some in the industry who worry this same logic will be applied to terminal demurrage or storage, “even though the terminal demurrage or storage is qualitatively different from equipment detention.”

“The analysis under the incentive rule should consider both the actual differences in the charges as well as the cost associated with the services the fees are compensating,” Leech stated. “In this industry, fees for storage of goods are and always have been a time based service, irrespective of the day of the week.”

3. ACSA Doesn’t Think OSRA Does Enough to Protect Exporters

American Cotton Shippers Association (ACSA) President and CEO William Allen looked to bring the plight of U.S. exporters before Congress in the House hearing. A number of times, I’ve written in Universal Cargo’s blog about U.S. exporters, particularly agricultural exporters, getting refused shipping containers and service by ocean carriers in favor of sending empty containers to Asia and prioritizing the more lucrative import market to the U.S. During the pandemic was not the first time this has happened, although it may have been largest level of this disparity we’ve seen. Allen made it clear in his opening statement, he doesn’t think OSRA does enough to prevent this from happening again.

After giving an overview of how ACSA sees the supply chain situation, he got to his opinion that appears to be in stark contrast to Darr and Leech’s:

“Our view is that the current relief in our supply chain is solely based on global economic downturn that curtailed consumption of goods and related volumes of inbound cargo. Inundation has been replaced with elasticity in our supply chain. This reprieve is temporary. Our economy will strengthen. Cargo volumes will increase. And we must capitalize on this opportunity to prepare for renewed cargo saturation within our supply chain.”

Allen said ACSA applauds Congress and the FMC for the passage and aggressive implementation of OSRA; however, he added the results of its different rules are pending and appear to be of varying value. Then came the more pointed statement:

“We believe that OSRA will likely fall short of providing the needed assurance exporters seek concerning the availability of service when economic conditions favor empty sailing or imports.”

To really bring out the contrast between ACSA’s position and Ports America’s, Allen endorsed the FMC decision on detention that Leech criticized.

Port of Long Beach Focused on Government Funding

The last witness appearing before the House was the Port of Long Beach Executive Director Mario Cordero.

In his opening statement, he was briefly complimentary and uncritical of OSRA. Perhaps that was because his objective was calling for governmental funding, particularly the Port Infrastructure Development Program (PIDP) and its grants. Cordero even presented a list of recommendations for Congress:

“I have six recommendations as follows:

One. Encourage investment in technology so the shippers, ocean carriers, container terminal operators, and truck companies are able to efficiently plan and schedule their operations to prevent bottlenecks. In essence, maximizing digital transformation.

Two. Encourage the supply chain to operate within a 24/7 framework when needed to reduce bottlenecks and promote efficiency.”

Number two is funny as the Biden Administration bragged about getting the Ports of Los Angeles and Long Beach to operate 24/7 when the “supply chain crisis” was near its peak. Of course, the ports never did actually go to 24/7 operations. But crediting Cordero, the idea for 24/7 operations has been credited to the Port of Long Beach and goes back to them before the pandemic ever hit.

Cordero continued his list with:

“Three. Direct federal funding to projects that will facilitate goods’ movement and reduce greenhouse gas emissions such as the Mega [Grant] Program.

Four. I ask Congress to fully fund the PIDP at 750 million in authorization level. It would take more than 2 billion to achieve our goals of zero emission cargo handling equipment by 2030 and zero emission drayage trucks by 2035.

Five. Likewise funds in the IIJA [The Infrastructure Investment and Jobs Act] and IRA directed to reducing emissions at the ports are invaluable, will spur investments to expedite port electrification.

And last [six], continue to support the required resources to the FMC to ensure a competitive and reliable international ocean transportation supply system.”

What’s Your Opinion?

Is the federal government intervening too much in the international shipping industry to the point that shippers will eventually pay heavily with higher costs in their supply chains? Or does the government need to do more to protect shippers from unfair practices in ocean freight shipping?

We’d love to hear your opinion. Let us know if you like this kind of blog in the future or want us to cover issues that came up in the questions and answers between the subcommittee members and the witnesses.

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Under FMC Pressure, Carriers Ending Detention & Demurrage Fees When Ports Are Closed https://www.universalcargo.com/under-fmc-pressure-carriers-ending-detention-demurrage-fees-when-ports-are-closed/ https://www.universalcargo.com/under-fmc-pressure-carriers-ending-detention-demurrage-fees-when-ports-are-closed/#respond Thu, 30 Mar 2023 23:42:25 +0000 https://www.universalcargo.com/?p=11951 Shippers have long complained about unfair detention and demurrage fees at the ports. A particular point of contention is getting charged for days when port terminals are closed, and it's literally impossible for shippers to pick up or drop off containers. Shippers are getting some good news on this point. Carriers are finally starting to end the practice of charging detention and demurrage fees on those days when port terminals are closed.

This is not an across-the-industry policy. However, there's a growing list of carriers that have announced they will stop charging detention and demurrage when U.S. port terminals are closed.

Maersk, unsurprisingly, started the trend. That the Danish shipping giant is ceasing to charge these fees is not what is unsurprising. That Maersk leads the way and is followed by other major ocean freight carriers is what I'm talking about here. I've long blogged about Maersk being the big dog in international shipping that other carriers watch and follow. Despite slipping to number two, behind MSC, on the list of largest ocean carriers by capacity, Maersk still tends to lead the way in the industry.

In fact, Eric Johnson reported today in the Journal of Commerce (JOC) that MSC is latest carrier to follow Maersk's lead when it comes to this demurrage and detention practice...

Find out more by reading the full post in Universal Cargo's blog.

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Shippers have long complained about unfair detention and demurrage fees at the ports. A particular point of contention is getting charged for days when port terminals are closed, and it’s literally impossible for shippers to pick up or drop off containers. Shippers are getting some good news on this point. Carriers are finally starting to end the practice of charging detention and demurrage fees on those days when port terminals are closed.

This is not an across-the-industry policy. However, there’s a growing list of carriers that have announced they will stop charging detention and demurrage when U.S. port terminals are closed.

Ship at dock of port full of shipping containers.

Maersk, unsurprisingly, started the trend. That the Danish shipping giant is ceasing to charge these fees is not what is unsurprising. That Maersk leads the way and is followed by other major ocean freight carriers is what I’m talking about here. I’ve long blogged about Maersk being the big dog in international shipping that other carriers watch and follow. Despite slipping to number two, behind MSC, on the list of largest ocean carriers by capacity, Maersk still tends to lead the way in the industry.

In fact, Eric Johnson reported today in the Journal of Commerce (JOC) that MSC is latest carrier to follow Maersk’s lead when it comes to this demurrage and detention practice:

Mediterranean Shipping Co. has joined a growing list of ocean carriers that will cease charging container detention and demurrage fees to consignees on days a US marine terminal is closed.

MSC, the world’s largest container line, said in a statement Thursday to the Journal of Commerce it is working with the US Federal Maritime Commission (FMC) and US regulators “on best practices and requirements for our industry.”  

FMC & Congress Scrutinizing Shipping Fees & Practices

Again, it’s not surprising to hear MSC bring up the FMC in connection to detention and demurrage fees.

The Federal Maritime Commission has been looking into these fees for a while now, and appear to be increasing regulation on them. To give a little idea as to the recent progression of the FMC on detention and demurrage, here are a few of the blogs Universal Cargo posted over the last five years on the topic:

In March of 2018 – FMC Investigating Detention, Demurrage & Per Diem Charges

In September of 2019 – FMC Finally Addresses Unfair Demurrage & Detention Charges

In April of 2022 – FMC Finally Acts on Unfair Fees with Hapag-Lloyd Fine

Perhaps that last story, where the FMC actually fined Hapag-Lloyd for violating the Shipping Act with unfair detention fees, is part of what has caused carriers to start changing their policy relating to these kinds of fees.

Maybe, it’s the fact that Congress and the FMC have been targeting the international shipping industry for major regulation increases, not only in going after fees but also adjusting antitrust regulation that could break up carrier alliances by halting their vessel sharing agreements.

The commission will soon be issuing new rules around detention and demurrage fees, which may have carriers adjusting policies now to show a fairer way to implement the fees, so the FMC doesn’t set restrictions at levels the shipping lines would consider too extreme.

Johnson touches on the regulatory situation in his JOC article:

The fast-moving developments around changes to detention and demurrage billing are happening amid an ongoing rulemaking process by the FMC around the assessment of such charges to consignees and their drayage representatives. The agency has until mid-June to issue final rules on detention and demurrage billing, a process mandated by the passage of the Ocean Shipping Reform Act of 2022 (OSRA-22) last June

Risks of Government Involvement in the International Shipping Industry

I’ve long been an advocate for some regulatory changes in the international shipping industry.

Perhaps the two things I’ve most persistently brought up in Universal Cargo’s blog are carrier alliances and detention and demurrage fees. However, there is a great deal of risk when seeing the government increase regulation in an industry. Typically, the more the government gets involved in an industry, the more expensive that industry becomes. See education and health care for examples.

In his article, Johnson did include an opposition voice to ending the practice of charging shippers detention and demurrage fees on days port terminals are closed:

Earlier this week, the head of the US’ largest marine terminal operator (MTO), Ports America, decried the idea that shippers should not be assessed demurrage fees if a terminal is closed on a holiday or weekend and allowable free time has ended. 

“The costs borne by the MTO in storing a container at the terminal that has improperly exceeded its free time remain constant, whether or not the terminal is open,” Ports America President and CEO Matthew Leech said in testimony Tuesday during a House committee hearing on maritime and supply chain issues. “A marine terminal is not intended to be used as a warehouse.” 

The risk of increased port congestion and costly delays for shippers is something worth considering when it comes to both regulatory and carrier policy around the topic of detention and demurrage fees.

In addition, the FMC funding has gone way up, as have the number of recent legislative proposals around the international shipping industry in general. It seems we are in a legislative boom when it comes to the supply chain. The worry is that boom will blow up into a much more expensive climate for shippers.

 

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238 Trade Associations Write Biden to Mediate ILWU Negotiations (Read Full Letter) https://www.universalcargo.com/238-trade-associations-write-biden-to-mediate-ilwu-negotiations-read-full-letter/ https://www.universalcargo.com/238-trade-associations-write-biden-to-mediate-ilwu-negotiations-read-full-letter/#respond Tue, 28 Mar 2023 19:19:47 +0000 https://www.universalcargo.com/?p=11947 A group of 238 state, local, and federal trade associations sent a letter to President Biden, imploring him and his administration to mediate the International Longshore & Warehouse Union (ILWU) contract negotiations to help the parties reach a new agreement quickly and prevent cargo fluidity disruption at the ports. The Senior Director of Media Relations […]

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YouTube Video

A group of 238 state, local, and federal trade associations sent a letter to President Biden, imploring him and his administration to mediate the International Longshore & Warehouse Union (ILWU) contract negotiations to help the parties reach a new agreement quickly and prevent cargo fluidity disruption at the ports.

The Senior Director of Media Relations for the National Retail Federation, Danielle Inman, sent me an email yesterday with a link to the letter the trade associations sent.

The urgency of the situation was just punctuated by disruption at the Ports of Los Angeles and Long Beach, where ILWU Local 13 members refused to stagger their lunch breaks, causing terminal delays and truck backups from those terminals, according to the Pacific Maritime Association (PMA), representing the employers at the West Coast ports.

Labor action, disrupting port operations, has become a regular occurrence at West Coast ports during ILWU contract negotiations. And it’s a very costly occurrence for shippers and the U.S. economy in general. When the 2014-15 contract negotiations turned contentious and caused agricultural exports to rot on the docks and kept import goods from reaching shelves in time for the holiday shopping season, it cost the economy billions of dollars. Many U.S. exporters permanently lost international trade partners.

As talked about in previous posts, the disruptions during these current contract negotiations have been mitigated by reduced cargo at West Coast ports because of economic downturn and shippers diverting cargo from the West Coast to East and Gulf Coast ports when possible. However, if a new contract isn’t reached as cargo volumes see increase, particularly during the upcoming peak season, it could easily turn very costly for shippers and the economy.

In their letter, the trade associations point out that it has been over 8 months since the ILWU master contract expired and over 10 months since negotiations began. All the while, there has been “little to no progress towards a new long-term agreement.”

Diplomatically in the letter, the trade associations “applaud the engagement from former Secretary of Labor Marty Walsh through the negotiations” despite the lack of progress that has been made in the talks. The associations show concern that there is no longer a point person from the White House for the negotiations since Walsh departed the administration:

… it is critical that a new administration point person be named to continue engagement with the parties as they negotiate. With the lack of progress to date, we would also encourage the administration to offer mediation services to the parties in their negotiations.

Ultimately, the trade associations’ message is that the PMA and ILWU must remain at the negotiating table until a new contract is reached. They ask for leadership from the president of the United States to ensure that happens. Through the course of these negotiations, there has been a great deal of time where talks have been completely stalled out and suspended. The risk and uncertainty this presents to supply chain stakeholders, who are already dealing with a great deal of economic uncertainty and massive inflation, is incredibly high.

Below is the full text of the letter to President Biden, including all the names of the associations that signed it.

Full Text of Letter

March 24, 2023

The Honorable Joseph R. Biden
President
The White House
1600 Pennsylvania Ave NW
Washington, DC 20500

Dear President Biden,

On behalf of the undersigned organizations, and the millions of businesses and employees we represent, we are writing to you once again regarding the ongoing West Coast port labor negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association. The labor contract has now been expired for over eight months. Negotiations have been ongoing for over ten months, with little to no progress towards a new long-term agreement. It is imperative that the administration work with the parties to quickly reach a new agreement and ensure there is no disruption to port operations and cargo fluidity.

We previously shared our concerns on July 1, 2022 when the contract initially expired. At that time we called upon the administration to engage with the parties as well as urged the parties to agree to a contract extension while negotiations continued. We applaud the engagement from former Secretary of Labor Marty Walsh through the negotiations. Now that he has departed the administration it is critical that a new administration point person be named to continue engagement with the parties as they negotiate. With the lack of progress to date, we would also encourage the administration to offer mediation services to the parties in their negotiations.

As we have witnessed, significant cargo flows have shifted away from the West Coast ports because of the uncertainty related to the labor negotiations. While there certainly are other issues impacting the West Coast ports, many cargo interests have expressly stated that they shifted cargo as a result of the negotiations. That cargo will not return to the West Coast until after a contract is final and approved by both parties. The longer there is no ratified contract only increases the probability that some portion of the freight will never return to the West Coast ports.

Businesses have already made their shipping decisions for the all-important peak shipping season, which will begin this summer. Even though cargo volumes have dropped, we continue to experience supply chain stress and challenges. While many continue to recover from pandemic related issues, the ongoing stress of inflation and economic uncertainty continues to impact supply chain stakeholders as well.

The lack of a labor contract adds to this uncertainty. While we appreciate that the parties agreed not to engage in a strike or a lockout, we are aware of several instances of activities that have impacted terminal operations. We need the administration to ensure these activities do not continue or escalate.

We know that significant issues remain for both parties to resolve. However, the only way to resolve these issues is for the parties to remain at the bargaining table and actually negotiate. We encourage the administration to provide any and all support to the parties in their negotiations to reach a final agreement.

As we have said previously, the only way the parties can reach an agreement that will ensure the continued competitiveness of the ports and the supply chain stakeholders who rely upon them is to remain at the table until a new agreement is finalized. Thank you for your leadership on this important issue.

Sincerely,

Agribusiness Council of Indiana
Agricultural Retailers Association
Agriculture Transportation Coalition – AgTC
Air-Conditioning, Heating, and Refrigeration
Institute
Airforwarders Association
Alliance for Automotive Innovation
Almond Alliance
Amcot
American Apparel & Footwear Association
(AAFA)
American Association of Exporters and
Importers
American Bakers Association
American Chemistry Council
American Clean Power Association
American Composites Manufacturers
Association
American Cotton Shippers Association
American Down and Feather Council
American Farm Bureau Federation
American Feed Industry Association
American Forest & Paper Association
American Foundry Society
American Herbal Products Association
American Home Furnishings Alliance
American International Automobile Dealers
Association
American Lighting Association
American Pyrotechnics Association
American Seed Trade Association
American Spice Trade Association
American Trucking Associations
Arizona Retailers Association
Arizona Trucking Association
Associated Builders and Contractors
Associated Equipment Distributors
Associated General Contractors of America
Association of American Railroads
Association of Food Industries
Association of Home Appliance Manufacturers
Auto Care Association
Autos Drive America
Bay Area Council
Beer Institute
California Alfalfa and Forage Association
California Association of Wheat Growers
California Bean Shippers Association
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Citrus Mutual
California Cotton Ginners and Growers Association
California Grain and Feed Association
California Hotel + Lodging Association
California Retailers Association
California Rice Commission
California Seed Association
California State Floral Association
California Trucking Association
California Warehouse Association
Can Manufacturers Institute
Cascade Shippers Association
CAWA – Representing the Automotive Parts Industry
Coalition of New England Companies for Trade
Colorado Motor Carriers Association
Columbia River Customs Brokers & Forwarders Association
Computing Technology Industry Association (CompTIA)
Consumer Brands Association
Consumer Technology Association
Corn Refiners Association
Cotton Growers Warehouse Association
Council for Responsible Nutrition
Council of Fashion Designers of America (CFDA)
Council of Supply Chain Management Professionals
CPMA
Customs Brokers & Forwarders Association of Northern California
Customs Brokers & International Freight
Forwarders Association of Washington State
Distilled Spirits Council of the U.S.
Fashion Accessories Shippers Association, Inc.
Fashion Jewelry & Accessories Trade Association
Florida Trucking Association
FMI – The Food Industry Association
Footwear Distributors & Retailers of America (FDRA)
Foreign Trade Association
Forest Resources Association
Fresh Produce Association of the Americas
Gemini Shippers Association
Georgia Motor Trucking Association
Glass Packaging Institute
Global Cold Chain Alliance
Grain and Feed Association of Illinois
Greenabl Shippers Association
Halloween & Costume Association
Harbor Trucking Association
Hawaii Transportation Association
Home Fashion Products Association
Household & Commercial Products Association
ICSC
Idaho Retailers Association
Illinois Retail Merchants Association
Independent Electrical Contractors
Indiana Motor Truck Association
Institute of Scrap Recycling Industries, Inc.
Intermodal Motor Carriers Conference
International Casual Furnishings Association
International Dairy Foods Association
International Foodservice Distributors Association
International Franchise Association
International Fresh Produce Association
International Housewares Association
International Warehouse Logistics Association
Iowa Motor Truck Association
ISSA, The Worldwide Cleaning Industry Association
Juvenile Products Manufacturers Association
Kansas Chamber
Kansas Motor Carriers Association
Kansas Retail Council
Kentucky Retail Federation
Littler Workplace Policy Institute
Los Angeles Area Chamber of Commerce
Los Angeles County Business Federation
Los Angeles Customs Brokers and Freight Forwarders Association
Louisiana Retailers Association
Maryland Retailers Association
MEMA, The Vehicle Suppliers Association
Michigan Retailers Association
Minnesota Grain and Feed Association
Minnesota Retailers Association
Minnesota Soybean Growers Association
Mississippi Trucking Association
Missouri Retailers Association
Montana Retail Association
Motorcycle Industry Council
NAIOP Inland Empire Chapter
NAIOP of California
NAIOP SoCal
National Association of Beverage Importers
National Association of Chemical Distributors
National Association of Manufacturers
National Association of Wholesaler-Distributors
National Confectioners Association
National Corn Growers Association
National Cotton Council
National Council of Farmer Cooperatives
National Customs Brokers and Forwarders Association of America
National Electrical Manufacturers Association
National Federation of Independent Business
National Fisheries Institute
National Hay Association
National Industrial Transportation League
National Lumber & Building Material Dealers Association
National Milk Producers Federation
National Pork Producers Council
National Potato Council
National Restaurant Association
National Retail Federation
National Sorghum Producers
National Sporting Goods Association
National Wooden Pallet & Container Association
Natural Products Association
Nebraska Retail Federation
Nebraska Trucking Association
New Hampshire Motor Truck Association
New Jersey Retail Merchants Association
New Mexico trucking Association
New York New Jersey Foreign Freight
Forwarders and Brokers Association Inc.
North American Association of Food Equipment Manufacturers (NAFEM)
North American Home Furnishings Association
North American Meat Institute
North American Renderers Association
North Carolina Retail Merchants Association
North Dakota Grain Growers Association
Northwest Horticultural Council
Ohio Council of Retail Merchants
Orange County Business Council
Oregon Retail Council
Oregon Trucking Association
Outdoor Industry Association
Outdoor Power Equipment Institute
Pacific Coast Council of Customs Brokers and
Freight Forwarders Assns. – PCC
Pacific Coast Renderers Association
Pacific Seed Association
Pennsylvania Retailers AssociationPlant
California Alliance
Plumbing Manufacturers International
Portland Cement Association
PRINTING United Alliance
Promotional Products Association International (PPAI)
Railway Supply Institute
Recreational Off-Highway Vehicle Association (ROHVA)
Renewable Fuels Association
Retail Association of Nevada
Retail Council of New York State
Retail Industry Leaders Association
Retail Merchants of Hawaii
Retailers Association of Massachusetts
Rhode Island Trucking Association, Inc.
RV Industry Association
San Diego Customs Brokers Association
San Gabriel Valley Economic Partnership
SNAC International
Snowsports Industry America
Society of Chemical Manufacturers & Affiliates (SOCMA)
South Dakota Association of Cooperatives
South Dakota Soybean Association
Southern California Leadership Council
Specialty Crop Trade Council
Specialty Equipment Market Association
Specialty Soya & Grains Alliance
Specialty Vehicle Institute of America (SVIA)
Sports & Fitness Industry Association (SFIA)
Tag and Label Manufacturers Institute
Tea Association of the U.S.A., Inc.
The Fertilizer Institute
The Game Manufacturers Association
The Hardwood Federation
The Nevada Trucking Association
The Sulphur Institute
The Toy Association
Transportation Intermediaries Association (TIA)
Travel Goods Association (TGA)
U.S. Apple Association
U.S. Chamber of Commerce
U.S. Dairy Export Council
U.S. Fashion Industry Association
U.S. Forage Export Council
U.S. Meat Export Federation
United States Council for International Business
USA Rice
Utah Retail Merchants Association
Vermont Truck & Bus Association
Virginia Retail Federation
Washington Retail Association
Washington State Potato Commission
Washington State Tree Fruit Association
Washington Trucking Associations
West Virginia Retailers Association
Western Agricultural Processors Association
Western Growers
Window & Door Manufacturers Association
Wine and Spirits Shippers Association, Inc.
Wisconsin Agri-Business Association

CC: The Honorable Pete Buttigieg, Secretary, Department of Transportation
The Honorable Julie Su, Acting Secretary, Department of Labor
The Honorable Gina Raimondo, Secretary, Department of Commerce
The Honorable Tom Vilsack, Secretary, Department of Agriculture
The Honorable Lael Brainard, Director, National Economic Council
General Stephen Lyons, Supply Chain and Ports Envoy
Mr. Willie Adams, President, International Longshore and Warehouse Union
Mr. James McKenna, Chairman and CEO, Pacific Merchants Association

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ILWU Labor Action Creates Disruption at the Ports of Los Angeles & Long Beach https://www.universalcargo.com/ilwu-labor-action-creates-disruption-at-the-ports-of-los-angeles-long-beach/ https://www.universalcargo.com/ilwu-labor-action-creates-disruption-at-the-ports-of-los-angeles-long-beach/#respond Thu, 23 Mar 2023 20:26:26 +0000 https://www.universalcargo.com/?p=11943 The Pacific Maritime Association (PMA) released an images to the media of trucks backed up on Friday from a terminal at the Port of Los Angeles. Labor action by the International Longshore & Warehouse Union (ILWU) Local 13 has been causing terminal gate delays at both the Port of L.A. and the Port of Long Beach.

Bill Mongelluzzo reported on the situation in the Journal of Commerce (JOC):

“Significant delays” have hit some marine terminals at the ports of Los Angeles and Long Beach since the middle of last week, the [PMA] said Monday, in the latest job action by dockworkers linked to ongoing West Coast contract negotiations.

Find out more by reading the full post in Universal Cargo's blog.

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The Pacific Maritime Association (PMA) released an images to the media of trucks backed up on Friday from a terminal at the Port of Los Angeles. Labor action by the International Longshore & Warehouse Union (ILWU) Local 13 has been causing terminal gate delays at both the Port of L.A. and the Port of Long Beach.

Bill Mongelluzzo reported on the situation in the Journal of Commerce (JOC):

Image from the PMA of trucks backed up from the Fenix Marine Terminal at the Port of Los Angeles on Friday as a result, PMA says, of labor action by ILWU Local 13.

“Significant delays” have hit some marine terminals at the ports of Los Angeles and Long Beach since the middle of last week, the [PMA] said Monday, in the latest job action by dockworkers linked to ongoing West Coast contract negotiations.

PMA, which represents terminal employers in the talks that have dragged on for more than 10 months, said longshore workers represented by Local 13 of the [ILWU] have since last Wednesday refused to stagger their meal breaks as required, resulting in periods when no work is being done on the docks. 

“As a result, longshore workers at the Ports of LA and Long Beach are not working the terminals between 12 pm-1 pm and 10 pm-11 pm, creating significant delays,” PMA said in a statement. “Because the contract is not in place, there is no option for PMA to arbitrate the matter and require the union to man the terminals continuously without interruption.” 

This sort of thing is exactly why many shippers have been diverting cargo from West Coast ports to East and Gulf Coast ports whenever possible for the last year.

When contract negotiations happen between the ILWU and PMA, they’re almost always accompanied by port disruption and costly delays for shippers. Though the current ILWU contract negotiations have really dragged on, the labor disruptions seen so far have been mitigated by reduced cargo volume moving through the ports. That decrease in volume comes not only from shippers diverting discretionary cargo but also from economic downturn.

Just because damage has been mitigated doesn’t mean there hasn’t been labor action and disruption during this extended negotiation (and often suspended negotiation) period. We’ve posted a few times here in Universal Cargo’s blog about labor action and disruption that has taken place since the contract expired.

For shippers, there is much worry that as cargo volumes increase, particularly in a few months when peak season arrives, disruption and congestion could be disastrous if negotiations still aren’t resolved. So far, there have been no indicators that contract negotiations between the ILWU and PMA are anywhere close to reaching a new contract. This situation at the Ports of Los Angeles and Long Beach certainly doesn’t make anyone feel better about negotiations.

It wouldn’t be surprising to see shippers importing their peak season cargo early to ensure labor action during peak season doesn’t keep their goods from hitting store shelves in time for the holiday, particularly Christmas, shopping season.

It’s important to note that the “lunch break dispute,” as Edwin Lopez dubbed it in a Supply Chain Dive article, is being executed by a single local chapter of the ILWU rather than the larger union as a whole. However, that is typically how disruptions during contract negotiations work.

The idea is labor continues working as if under contract after one expires until the next one is negotiated and ratified, but that obviously doesn’t always happen. When there is no contract in place, PMA loses its ability to bring in arbitration on ILWU labor action. It makes it easy for local factions of the ILWU to cause large disruptions at ports. As Lopez puts it, “the lunch hour issue highlights how the lack of a longshore contract has left the door open for small disputes to raise national attention, alter shipper behavior, and escalate into targeted disruptions.”

Speaking of small disputes rising in attention and coming with risk of escalation, the lunch break dispute has not only gained media attention as the PMA claims it is action in violation of contract terms, but the ILWU’s International President gave support to the Local 13 by refuting PMA’s claim that the action would be in violation of the previous contract. In his Supply Chain Dive article, Lopez laid out the argument from the two sides’ statements:

“The West Coast longshore contract provides employers the right to assign staggered shifts during meal periods to ensure labor is available at all times to deliver and receive containers. Beginning last week, ILWU Local 13 has stopped complying with that contract provision,” the statement reads.

Willie Adams, ILWU’s International President, responded directly to those claims in his own statement, saying: “The ILWU-PMA contract allows dockworkers to take a lunch break just like everyone else. Longshore workers in Los Angeles and Long Beach are working every day according to the terms agreed upon with the PMA.”

One of those statements is untrue. Which one doesn’t really matter that much to shippers. For them, it’s port disruption either way. Ultimately, it gives more reason for lost market share from West Coast ports to stay at East and Gulf Coast ports.

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What Do Shippers Do When Longshore Negotiations Happen Across the Continent? https://www.universalcargo.com/what-do-shippers-do-when-longshore-negotiations-happen-across-the-continent/ https://www.universalcargo.com/what-do-shippers-do-when-longshore-negotiations-happen-across-the-continent/#respond Thu, 16 Mar 2023 22:43:09 +0000 https://www.universalcargo.com/?p=11925 Shippers may find themselves uneasy when they realize North American dockworker unions coast to coast will be negotiating contracts at the same time.

As port disruption from labor slowdowns is common during contract negotiations, shippers may feel like they're low on options when the International Longshore & Warehouse Union's (ILWU's) contract negotiations are still dragging on at West Coast ports and the International Longshoremen's Association's (ILA's) contract negotiations throttle up at the East and Gulf Coast ports. After all, shippers have already been diverting cargo through East and Gulf Coast ports to avoid potential labor-related delays at West Coast ones.

Falling overall shipping demand and diverted cargo have helped mitigate disruption from labor action so far this negotiation cycle. However, if volumes rise during peak season, as they traditionally do, and ILWU negotiations are not resolved (or worse – become increasingly contentious), things could get ugly on the West Coast for shippers.

But if contract negotiations are happening at East and Gulf Coast ports with the ILA, won't there be a similar risk for shippers there?

Find out by reading the full post in Universal Cargo's blog

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Shippers may find themselves uneasy when they realize North American dockworker unions coast to coast will be negotiating contracts at the same time.

As port disruption from labor slowdowns is common during contract negotiations, shippers may feel like they’re low on options when the International Longshore & Warehouse Union’s (ILWU’s) contract negotiations are still dragging on at West Coast ports and the International Longshoremen’s Association’s (ILA’s) contract negotiations throttle up at the East and Gulf Coast ports. After all, shippers have already been diverting cargo through East and Gulf Coast ports to avoid potential labor-related delays at West Coast ones.

Dockworker and cargo containers
Dockworker and cargo containers

Falling overall shipping demand and diverted cargo have helped mitigate disruption from labor action so far this negotiation cycle. However, if volumes rise during peak season, as they traditionally do, and ILWU negotiations are not resolved (or worse – become increasingly contentious), things could get ugly on the West Coast for shippers.

But if contract negotiations are happening at East and Gulf Coast ports with the ILA, won’t there be a similar risk for shippers there? We’ll get into that, but shippers should know the ILWU and ILA aren’t even the only two dockworker unions in North America that will be simultaneously negotiating.

Longshore Contract Negotiations All Over the Continent

If you were thinking maybe I can import through Canada and avoid ports with labor negotiation risk, think again.

Mark Szakonyi reported yesterday (March 15th) in a Journal of Commerce (JOC) article on all the North American longshore negotiations happening at once:

By the second half of the year, barring any negotiating breakthroughs, there will be six port worker unions in contract talks with waterfront employers, their turf stretching across the North American West Coast and US East and Gulf coasts.

With a remit of Seattle to Southern California, the International Longshore and Warehouse Union (ILWU) has been in formal talks with employers for more than 10 months….

Separately, clerical workers at the ports of Los Angeles and Long Beach are negotiating to replace a six-year contract expiring at the end of June. Talks between the ILWU’s Local 63 Office Clerical Unit and employers likely won’t conclude until the West Coast longshore workers have a deal, Stephen Berry, lead negotiator for the Los Angeles-Long Beach Harbor Employers Association, told the Journal of Commerce

With ILWU negotiations dragging on, the International Longshoremen’s Association (ILA) sees an opportunity to work with East and Gulf coast employers to hammer out a new six-year deal ahead of the current contract’s expiration at the end of September 2024. But talks at the local and coastwide level have been paused, and no formal discussions are scheduled in the near term, according to sources familiar with negotiations. 

Even so, ILA President Harold Daggett has expressed confidence in swiftly negotiating a 2024 contract with the US Maritime Alliance, similar to what the union did in 2018, but wage demands could delay an early settlement. At the local level, longshore and maritime employees are said to be looking into stricter policies regarding absenteeism. A multiyear deal could help solidify cargo shifting away from the US West Coast due to labor uncertainty there coupled with improved infrastructure along the East and Gulf coasts….

In British Columbia, negotiations between ILWU Canada and employers at the ports of Vancouver and Prince Rupert have just begun. In beginning formal talks in early March, both sides were still far apart on wages, according to two sources familiar with discussions. Based on past contract cycles, it could take 16 to 18 months to hammer out a deal. 

At Montreal, Canada’s second-busiest container port, employers and port workers will be under pressure to begin negotiating a new contract to replace the existing one expiring at the end of this year. The existing deal — forced into place via federal arbitration at the end of 2022 — has just one year left, given that the prior contract expired at the end of 2018 and the new one is retroactive.

Labor and employers at Halifax, meanwhile, have been negotiating a contract to replace the three-year deal that originally expired at the end of 2020.

ILA Negotiations a Positive

The above certainly contains enough longshore contract negotiations to make any importer or exporter uneasy. However, it’s not as bad as it sounds. In fact, the ILA negotiations can even be looked at as a positive for shippers. That’s because the negotiations that started between the ILA and the United States Maritime Alliance (USMX) are early talks. ILA’s master contract doesn’t expire until September of next year.

The pause in contract talks between the ILA and USMX is very different from the stalls we’ve seen in the contract negotiations between the ILWU and the Pacific Maritime Association (PMA). The ILWU has been working without a contract since July 1st of last year. Without a contract, there is little to protect the ports and, of course, shippers from labor strikes or slowdowns.

Traditionally, the ILA (like the ILWU) has been against reaching a new contract before the previous one ends. As we’ve talked about in previous posts and alluded to above, that increases the unions’ leverage weapons of slowdowns, strikes, and threats of strikes. In fact, one of the biggest storylines I covered in my early years of writing about international shipping over 10 years ago was an ILA strike watch in the lead-up to Christmas 2012, which wasn’t resolved until February of 2013.

ILA contract negotiations have been less dramatic since then. In part, that’s due to how disruptive the 2014-15 ILWU contract negotiations were. With imports not making it to shelves in time for the holiday shopping season and agricultural exports rotting on the docks, the contentious ’14-15 negotiations and labor action around them cost the economy billions and left many shippers bitter. It was an opportunity that East and Gulf Coast ports and the ILA seized upon.

They moved toward early contract talks, working on new or extended contracts before expiration to gain and retain market share. It was a smart move. And these early talks happening more than a year before the current contract expires aim to figure out tricky negotiation points to be able to work through them before the current contract expires.

Paul Berger reported in a Wall Street Journal article:

”We’re not doing this for practice, so the intention is to get it done,” said John Nardi, president of the Shipping Association of New York and New Jersey, which represents ocean carriers and terminal operators at the East Coast’s busiest port.

[James McNamara, an ILA spokesman] said the aim was to resolve or identify local issues by the middle of February so that the ILA can move on to negotiating a master agreement with the United States Maritime Alliance, which represents ocean carriers and terminal operators across Gulf Coast and East Coast ports….

Shipping industry officials say the talks covering Gulf Coast and East Coast ports face fewer stumbling blocks.

Meanwhile, investment continues to be poured in to East Coast ports and infrastructure to strengthen their ability to handle more import volume.

Conclusion for Shippers

Ultimately, even with contract negotiations happening from coast to coast, shippers are still safer choosing East and Gulf Coast ports with discretionary cargo. There is much more risk with the ILWU negotiations than there is with the ILA negotiations right now.

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Freight Rates Haven’t Bottomed Out Yet https://www.universalcargo.com/freight-rates-havent-bottomed-out-yet/ https://www.universalcargo.com/freight-rates-havent-bottomed-out-yet/#respond Thu, 09 Mar 2023 23:55:19 +0000 https://www.universalcargo.com/?p=11907 What goes up must come down. Despite many experts saying we would never see pre-pandemic-level freight rates again when the cost of ocean shipping skyrocketed out of control during and after the pandemic, those rates did finally plummet back to earth. While freight rates are no longer falling as fast as they had been over the last year, they're still dropping.

Overcapacity is a big factor in the falling freight rates, so the incredible amount of capacity being added to the industry right now through new ships should continue to put downward pressure on freight rates for some time. Add to that economic uncertainty, and you have low demand to go with high capacity, helping freight rates to bottom out.

But exactly where that bottom is, no one knows. What we do know is freight rates are still sinking.

Find out more by reading the full post in Universal Cargo's blog.

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What goes up must come down. Despite many experts saying we would never see pre-pandemic-level freight rates again when the cost of ocean shipping skyrocketed out of control during and after the pandemic, those rates did finally plummet back to earth. While freight rates are no longer falling as fast as they had been over the last year, they’re still dropping.

Overcapacity is a big factor in the falling freight rates, so the incredible amount of capacity being added to the industry right now through new ships should continue to put downward pressure on freight rates for some time. Add to that economic uncertainty, and you have low demand to go with high capacity, helping freight rates to bottom out.

But exactly where that bottom is, no one knows. What we do know is freight rates are still sinking.

Indices Show Freight Rates Still Falling

Cargo ship fully loaded with freight

Thanks to a Freight Waves article by Greg Miller, various freight rate indices are compiled in one place to make it easy for American shippers to see what’s happening with freight rates at this moment. For those who like data, you’ll love this from Miller’s article:

Different spot indexes post different rate assessments, but the directional trends are generally the same.

The Freightos Baltic Daily Index (FBX) assessed spot rates in the China-West Coast lane at $1,040 per forty-foot equivalent unit on Friday, down 94% year on year (y/y) and down 30% versus March 2019, pre-COVID.

FBX put Friday’s China-East Coast rate at $2,286 per FEU (minus-87% y/y, minus-17% versus pre-COVID).

Meanwhile, the trans-Atlantic market continues to far outperform the trans-Pacific. FBX’s westbound Europe-East Coast assessment was at $4,418 per FEU on Friday, down only 36% y/y and up 89% versus March 2019.

The year-to-date (YTD) changes show the pace of rate declines in the trans-Pacific has decelerated versus last year, but rates are still headed lower.

The FBX China-West Coast index rate is down 25% YTD, China-East Coast 21% and Europe-East Coast 20%.

The Drewry World Container Index (WCI) assessed Shanghai-Los Angeles spot rates for the week ending Thursday at $1,948 per FEU.

That’s down 2% YTD, 82% y/y and — in contrast to what the FBX says — up 23% since March 2019, pre-pandemic.

The WCI assessed Shanghai-New York spot rates at $2,772 per FEU, down 29% YTD, 79% y/y and 1% versus March 2019.

The Shanghai Containerized Freight Index, which gauges spot levels on all mainline routes from that Chinese port, fell to 931 points in the week ending Friday. That’s down 12% YTD and 66% y/y but still up 16% from March 2019.

Xeneta’s short-term index, the XSI-C, was at $1,259 per FEU for the Far East-U.S. West Coast lane as of Wednesday, down 4% week on week and 10% month on month.

The Platts index for North Asia-North America was unchanged in the week ending Friday. Sources told Platts “volumes are too weak to make a dent in rates” and “margins are terrible.”

For those of you who don’t like looking at data and jumped ahead to here, the indices support the opening of this post. After big freight rate falls in 2022, we’re seeing slower declines now. But we’re still seeing declines.

There is one data point I left out in the above because how strong freight rates are on the shipping lane it covers seemed worth separating out. Miller reports:

In the still-strong Rotterdam, Netherlands-to-New York market, the WCI assessed spot rates at $5,573 per FEU, down 20% YTD and 14% y/y, but up 179% versus March 2019.

Like the other trade lanes to the U.S., freight rates are moving in a downward direction for the Rotterdam, Netherlands-to-New York market. Unlike the rest, freight rates are still very high there compared to pre-pandemic levels (I suppose that gives plenty of room to keep falling). Still, the general story remains the same. Freight rates continue to get lower.

Dangers of Freight Rates Falling Too Low

Overall, news stories of low freight rates are positive for shippers, who obviously need reasonable rates that help their businesses make profits. However, rock-bottom rates can become problematic for shippers.

When rates get too low for too long, carrier reliability often goes down. Blanked (cancelled) sailings are just the beginning of issues that can make it hard for shippers to count on exactly when their cargo will arrive. Not only does the risk of cargo being rolled to later sailings increase, but carriers may utilize transhipment more to combine cargo from various ships and save costs, as was a planned strategy carriers had for dealing with the increased cost of the IMO’s clean fuel mandate.

Cargo delays are often very costly for shippers. Blanked sailings are bad news on that front. Transhipments are usually worse. On top of delays, cargo can travel through extra ports, extra countries, wait on docks for long periods before being loaded to the next ship… Transhipment adds risk, and often shippers have no idea where their cargo is.

Then there’s the risk of carrier competition shrinking in the industry, which I’ve talked about many times in Universal Cargo’s blog. It makes rooting for rock-bottom freight rates look short-sighted, as the risk of buyouts, mergers, even bankruptcy make freight rates likely to be pushed higher in the lIdeally, shippers should be looking for stability in the ocean shipping market when it comes to freight rates. Healthy rates that are neither too high nor too low would increase service reliability and allow shippers to better financially prepare for the future. Unfortunately, stability has never been what the international shipping industry has been known for.

Freight rates tend to swing up and down, sometimes wildly. Unfortunately, service suffers and delays increase when there are extremes on either end of the spectrum, with incredibly high freight rates or rock-bottom ones. We’re on the way to rock-bottom ones. At least, shippers can take advantage of the lower costs while they’re here.

 

 

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COSCO Predicted to Take Down Ocean Alliance https://www.universalcargo.com/cosco-predicted-to-take-down-ocean-alliance/ https://www.universalcargo.com/cosco-predicted-to-take-down-ocean-alliance/#respond Fri, 03 Mar 2023 01:52:31 +0000 https://www.universalcargo.com/?p=11891 Shippers, get ready for the freight rate war saga of the ocean carriers to continue. Perhaps the biggest reason for shippers to pay attention to what's happening with carriers is because it directly affects how much importers and exporters pay for their international shipping.

One of the first analysts to predict the breakup of the 2M Alliance now thinks the Ocean Alliance could be the "next domino to fall."

In Universal Cargo's last blog post, about the sword of Damocles hanging over ocean freight carriers, I talked about how dangerous it could be for shipping lines if they fall into freight rate wars. The prominent analyst mentioned above says with the plummeting freight rates we're seeing, carriers are already in a rate war. And if what he says about China's massive shipping line is right, COSCO, the fourth largest carrier in the world, could be a fateful warrior that brings down one of the two major alliances remaining after Maersk and MSC announced the splitting of their alliance.

The analyst is Lars Jensen, CEO and Partner at Vespucci Maritime. In a Journal of Commerce (JOC) article, Mechael Angell reported on Jensen speaking at the JOC's TPM23 conference in Long Beach. Jensen had a great deal to say about the industry that is facing an uncertain moment, but what he said about COSCO and the Ocean Alliance really stands out with its potential ramifications.

Find out more by reading the full post in Universal Cargo's blog.

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Shippers, get ready for the freight rate war saga of the ocean carriers to continue. Perhaps the biggest reason for shippers to pay attention to what’s happening with carriers is because it directly affects how much importers and exporters pay for their international shipping.

One of the first analysts to predict the breakup of the 2M Alliance now thinks the Ocean Alliance could be the “next domino to fall.”

In Universal Cargo’s last blog post, about the sword of Damocles hanging over ocean freight carriers, I talked about how dangerous it could be for shipping lines if they fall into freight rate wars. The prominent analyst mentioned above says with the plummeting freight rates we’re seeing, carriers are already in a rate war. And if what he says about China’s massive shipping line is right, COSCO, the fourth largest carrier in the world, could be a fateful warrior that brings down one of the two major alliances remaining after Maersk and MSC announced the splitting of their alliance.

The analyst is Lars Jensen, CEO and Partner at Vespucci Maritime. In a Journal of Commerce (JOC) article, Mechael Angell reported on Jensen speaking at the JOC’s TPM23 conference in Long Beach. Jensen had a great deal to say about the industry that is facing an uncertain moment, but what he said about COSCO and the Ocean Alliance really stands out with its potential ramifications.

Why & How COSCO Could Break Up the Ocean Alliance

Here’s what Jensen had to say, according to Angell’s reporting:

… at the time that Mediterranean Shipping Co.’s  large orderbook of new vessels allowed it to operate on a standalone basis across many trade lanes, without having to share space on Maersk vessels. A similar dynamic could play out with Ocean Alliance member Cosco Shipping, which has the second-largest orderbook of new ships behind MSC, Jensen said.   

Cosco faces renewed urgency to fill those new vessels due to a loss of market share over the last two years that Jensen attributed to China’s COVID-19 lockdowns and the resulting shipping delays out of the country.  

“I’m going to expect Cosco to be very aggressively going after market share,” Jensen said. “Who’s the easiest prey to go after? That would be customers already on your ships through your alliance partners.” 

“That’s not going to sit well with [Ocean Alliance members] CMA CGM and Evergreen Marine,” Jensen said…

Return of the Freight Wars

We’ve seen freight rate wars in the past between carriers. While it’s happening, rates are fantastic for shippers, importing and exporting their goods. However, when you go back to the last time rate wars got out of control, alliances, buyouts, mergers, and even bankruptcy shrank competition in the industry. As we move from a time of excess profits for carriers and exorbitantly high freight rates to a time of plummeting freight rates and a return of competition in the industry, there’s a danger of competition really thinning again.

This is a cyclical industry.

The rate wars video Universal Cargo posted five years ago, explaining the situation of falling then rising freight rates and ocean carriers through a Star-Wars-eque crawl could very well be describing the period the international shipping industry is moving into now:

YouTube Video

Alliance Fallout from 2M Breakup Is Extremely Possible

When Maersk and MSC announced they’re dissolving the 2M Alliance, there was much speculation as to the fallout for the other two carrier alliances. After all, we’re talking about an industry that has been dominated in these recent years by just three major alliances. One of the three coming to an end is a major change. How could it not affect the others, right?

However, Maersk quickly stated it didn’t think any of the carriers in the other alliances were big enough to stand alone. The implication was clearly that the other two carrier alliances would remain as they are. I pushed back on that a bit, citing the size of the next few largest carriers, including CMA CGM, Hapag-Lloyd, Evergreen, and COSCO. Jensen obviously thinks the other carrier alliances are in danger of a major shakeup too.

In fact, all of the carriers I mentioned above factor into Jensen’s thinking on the situation. Angell reports:

[Jensen added] that Taiwan’s Evergreen faces the additional tension of working with a China-based carrier.  

Indeed, Cosco recently upsized capacity on an Asia to US Gulf service it operates on a standalone basis, but that is also offered through the Ocean Alliance. The new capacity on that Cosco service now evenly matches one that CMA CGM also offers on a standalone basis to the US Gulf. 

Likewise, CMA CGM is pursuing a strategy not similar to Maersk’s, “but somewhere in the same direction,” Jensen said.  

As does Maersk, CMA CGM looks to own US terminal assets after striking acquisition deals on the US East and West coasts. CMA CGM’s North American President Peter Levesque said during his appearance at TPM23 Tuesday that owning terminals allows the carrier to “determine our own destiny.” 

The Ocean Alliance’s agreement is set to expire in 2027, Jensen said, but he noted the current market uncertainty and the pending breakup of 2M could hasten a decision not to renew the Ocean Alliance in 2023.

Seeing the Ocean Alliance decide against renewing this year would be a big and fast shakeup of the remaining alliances. But now is the moment of plummeting freight rates, of rate war according to Jensen, and possibly the moment carriers are most likely to look around the international shipping oceanscape to decide how they want or need to position themselves for the future.

If the Ocean Alliance splits, it would be hard to imagine THE Alliance not getting swept up in all the reshuffling. Here’s what Jensen had to say about the third alliance, according to Angell:

 Regarding THE Alliance, Jensen said “it’s slightly stable” due to similar operating strategies and less aggressive ship ordering. However, he said the changing carrier landscape may make THE Alliance’s two biggest members, Hapag-Lloyd and Ocean Network Express (ONE), reconsider their partnerships. Jensen even posited that the two could decide to merge as a way to take on ever-larger ocean carriers.  

“This is not the first time we’ve seen alliances break up and get re-formed,” he said. “The challenge is once everyone’s dance card is open, Hapag and ONE will have some thinking to do about who do we actually want to be lined up with now that everything is shifting.” 

Conclusion

It appears there will be quite a bit of drama to watch with the carrier alliances. In the meantime, shippers will likely be paying lower freight rates for a while until the cycle of competition moves back to the cycle of reduced competition. Perhaps the biggest problem with these cycles for shippers, is overall competition contracts each time around like a spiral.

The spiral goes down in terms of number of carriers on the ocean, meaning that conversely the overall cost of shipping over time likely moves in an upward direction with that loss of competition.

Shippers should hope for a healthy level of competition in the industry. As I’ve said a number of times over the years, when competition gets too unhealthy and freight rates get too low, the risks of buyouts, mergers, bankruptcies, and alliances rise, likely costing shippers more over the long run.

 

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Overcapacity & the Sword of Damocles in Ocean Freight Shipping https://www.universalcargo.com/overcapacity-the-sword-of-damocles-in-ocean-freight-shipping/ https://www.universalcargo.com/overcapacity-the-sword-of-damocles-in-ocean-freight-shipping/#respond Wed, 01 Mar 2023 02:57:36 +0000 https://www.universalcargo.com/?p=11860 With great capacity comes great responsibility. And the international shipping industry is about to have a giant influx of ocean freight capacity. With the arrival of March, new container ships will start hitting the industry in quantities never before seen. Greg Miller reported in a Freight Waves article:

An unprecedented flood of new container ships is about to enter service. The pace of deliveries will pick up in earnest next month, surge much higher in the second quarter, go higher still in the second half, even higher throughout 2024, and stay strong in 2025.
“The colossal orderbook is like a sword of Damocles hanging over the market, with a raft of new ship deliveries in the next months inevitably triggering a return of overcapacity,” warned Alphaliner in a new report on Tuesday.

Alphaliner's reference to the sword of Democles is an excellent one, but many may not know the story that dates back thousands of years. So let's revisit the tale that provides a good analogy to what's happening in the industry.

There once, as the tale tells, a man in King Dionysius II's court named Damocles. He tried to flatter the king by raining compliments about how luxurious was his highness's palace, how beautiful the king's servants, how luscious the royal banquets... "Yours, oh king, must be the most blissful life."

But King Dionysius was not blissful. He was deeply unhappy, for he was a tyrant. So ruthless was his rise to power and so many enemies the king had made, he wouldn't even dare be shaved by the most trusted royal barber for fear of his throat slit in vengeance. He would only allow his daughters to shave him in a guarded and locked room. What little sleep he got was in a bedchamber surrounded by a moat.

“Since this life delights you,” King Dionysius told Damocles, “do you wish to taste it yourself and make a trial of my good fortune?”

Keep reading in Universal Cargo's blog.

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With great capacity comes great responsibility. And the international shipping industry is about to have a giant influx of ocean freight capacity. With the arrival of March, new container ships will start hitting the industry in quantities never before seen. Greg Miller reported in a Freight Waves article:

An unprecedented flood of new container ships is about to enter service. The pace of deliveries will pick up in earnest next month, surge much higher in the second quarter, go higher still in the second half, even higher throughout 2024, and stay strong in 2025.

The colossal orderbook is like a sword of Damocles hanging over the market, with a raft of new ship deliveries in the next months inevitably triggering a return of overcapacity,” warned Alphaliner in a new report on Tuesday.

Alphaliner’s reference to the sword of Democles is an excellent one, but many may not know the story that dates back thousands of years. So let’s revisit the tale that provides a good analogy to what’s happening in the industry.

The Sword of Damocles – a Short Retelling

There once, as the tale tells, a man in King Dionysius II’s court named Damocles. He tried to flatter the king by raining compliments about how luxurious was his highness’s palace, how beautiful the king’s servants, how luscious the royal banquets… “Yours, oh king, must be the most blissful life.”

But King Dionysius was not blissful. He was deeply unhappy, for he was a tyrant. So ruthless was his rise to power and so many enemies the king had made, he wouldn’t even dare be shaved by the most trusted royal barber for fear of his throat slit in vengeance. He would only allow his daughters to shave him in a guarded and locked room. What little sleep he got was in a bedchamber surrounded by a moat.

“Since this life delights you,” King Dionysius told Damocles, “do you wish to taste it yourself and make a trial of my good fortune?”

Damocles did indeed wish to taste it. The king had a golden couch brought for Damocles to lounge upon, the finest food fed to him by the most beautiful servants, and the most precious perfumes and ointments lavished upon the court flatterer. As Damocles looked up to the heavens in pleasure, he saw – dangling by a single, thin strand of horsehair – a sharper than the sharpest razor’s edge sword was hung over his neck.

Damocles quickly became agitated and full of fear. The perfumes no longer smelled sweet. He could not even eat the fine food. The beauty of the servants waiting upon him paled in the reflection of the blade. And the golden couch felt like shackles holding him for imminent execution. Damocles begged King Dionysius to be excused. “I no longer wish to be so fortunate.”

Fortune of the Carriers Brings Danger

While making billions upon billions of dollars over the last few years, many carriers invested in new ships. In July of 2021, as freight rates soared at ridiculous heights with no end of the rise in sight, I wrote in Universal Cargo’s blog about how maritime research firm Drewry warned new ships arriving in 2023 could finally bring down freight rates. Well, freight rates plummeted before the arrival of the new ships. Yet, the ships are still coming.

The result could be a major overcapacity crisis for carriers.

In the past, carriers have lost billions of dollars while struggling with overcapacity. In fact, when I first started writing about international shipping – in January of 2011 – overcapacity had freight rates so low they were unprofitable, and carrier losses would go on to measured in the billions that year. In 2018, I wrote a tongue-in-cheek article headlining with Sherlock Holmes looking into whether ocean freight carriers were bad at business because they still hadn’t learned to manage capacity.

A commenter and shipping industry expert, Gary Ferrulli, mentioned at the time that carriers had lost money in 6 of the previous 7 years.

After that, and especially in 2020, carriers finally gained control over capacity, utilizing their alliances. That played a large role in freight rates and carrier profits shooting up, particularly near the beginning of the pandemic. Carrier alliances have not been able to blank (cancel) sailings fast enough to get current capacity to fall to the reduced level of demand economic downturn has brought. If carriers are cursing overcapacity right now, they’ll be cussing like sailors real soon.

How Much Capacity Is on the Way?

With the low demand in shipping right now and the additional capacity on the way, there will likely be a stark rise in overcapacity.

Miller shares some details on how much capacity is heading toward the industry:

“The change will be obvious from mid-March,” Alphaliner analyst Stefan Verberckmoes told American Shipper, adding: “This newbuilding wave is coming at a time of shrinking demand.”

Maritime Strategies International (MSI) estimates that deliveries will total 717,900 twenty-foot equivalent units in Q2 2023, up 62% sequentially from the current quarter, with deliveries rising to 764,800 TEUs in Q3 2023.

The overall orderbook stood at 7.69 million TEUs as of Feb. 1, just under 30% of the on-the-water fleet capacity, according to Alphaliner.

Of the total, 2.48 million TEUs (32%) was set for delivery this year, 2.95 million TEUs (38%) next year, and 2.26 million TEUs (30%) thereafter.

Discipline Needed to Stop the Sword Falling

It will take a great deal of discipline from carriers to keep overcapacity from getting out of control and freight rates falling to quite unhealthy and unprofitable lows. The breakup of the 2M Alliance, creating some uncertainty in the balance of the carrier alliances, adds more danger for carriers. There are industry experts who think we are heading into a period of not just freight rates getting sucked down a whirlpool of overcapacity but also a return of freight rate wars between carriers.

The image of the sword of Damocles hanging over carriers becomes an even stronger metaphor if carrier behavior reverts to what it was before they managed to finally gain discipline over capacity. Bankruptcy, mergers, and buyouts shrinking carrier competition dominated the picture of the ocean freight industry for a while. That’s where we could be headed again if experts predicting freight rate wars are correct.

The story of the sword of Damocles has often, especially in medieval times, been used to promote the moral more recently put so famously as “with great power comes great responsibility” by Uncle Ben in the origin story of Spider-Man. Perhaps carriers were first tested in this with great profits. Their actions of ordering so many ships may have been a short-sighted fail in this department with the rise of capacity they now face. Test two will be what they do with all this new capacity.

There is much updating of fleets that must take place, particularly with the new carbon emission rules and goals of the industry. I do expect to see big upticks in ship scrapping. But can carriers actually manage the capacity on the way? Will the sword of Damocles fall, eventually leading to the thinning out of the industry’s carrier competition?

I know shippers wouldn’t want to see the prediction Maersk made before the pandemic hit and carriers started pulling in profits by the billions of competition shrinking to only 3 global companies. But at least shippers can expect downward pressure on freight rates for a while. But how carriers handle the coming capacity influx will have to be watched carefully. With great capacity comes great responsibility under a dangerously dangling sword that some carriers may see beneficial in making fall on their competition.

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U.S. Exporters May Be Most Vulnerable Shippers from Delayed ILWU Contract https://www.universalcargo.com/u-s-exporters-may-be-most-vulnerable-shippers-from-delayed-ilwu-contract/ https://www.universalcargo.com/u-s-exporters-may-be-most-vulnerable-shippers-from-delayed-ilwu-contract/#respond Fri, 24 Feb 2023 00:13:33 +0000 https://www.universalcargo.com/?p=11851 When the International Longshore & Warehouse Union (ILWU) master contract expires, it tends to be bad news for U.S. shippers. Often, a great deal of the focus is on retailers importing from China, but U.S. exporters, particularly agricultural exporters, could wind up with very negative long-term ramifications from dragged out negotiations. The current contract negotiations, […]

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When the International Longshore & Warehouse Union (ILWU) master contract expires, it tends to be bad news for U.S. shippers. Often, a great deal of the focus is on retailers importing from China, but U.S. exporters, particularly agricultural exporters, could wind up with very negative long-term ramifications from dragged out negotiations.

ILWU PMA meet about contract extension

The current contract negotiations, which are about 10 months in already and 8 months removed from contract-expiration, could easily drag into this year’s peak season and turn contentious like the 2014-15 negotiations that kept imports from shelves during the Christmas shopping season and agricultural exports rotting on the docks.

Many U.S. exporters permanently lost international business partners during that fiasco, which had an ongoing impact, but there’s another danger for exporters this time that Friedmann brought up in the interview. The risk is shifted cargo volume from West to East and Gulf Coast ports could get locked in, changing vessel voyage patterns in a way that would be detrimental for U.S. agricultural exporters.

How Dragged Out Negotiations Could Hurt Exporters

Here’s how he explained it in the interview, which can be seen and read about in an Freight Waves article by John Gallagher:

“… bit by bit this uncertainty continues. Investment decisions have to be made, capital is being raised, and it is going to be deployed where there’s less uncertainty.

“That means if [an investor] is putting a multimillion-dollar transload or cold storage facility in a port on the East Coast, that’s where the cargo is going to go. It takes years to get through the permitting and financing, so once those investments are made, that locks in a trade route or distribution network to that location.”

“Our exports are soybeans, hay, almonds, meat — it’s low value compared to what we import. That means exports originating from the U.S. Midwest or West Coast need to move in the most direct and cost-efficient way to those markets,” he said, such as through Oakland, California, or Seattle.

“But if they can’t go that way because carriers are shifting vessel capacity to accommodate imports that now want to go to the East Coast — now we have a problem. You can’t drive a truckload of hay from Washington state to Savannah or Charleston or Norfolk, which is why we need to keep West Coast ports fully utilized by the ocean carriers providing those services.”

History, and Carriers, Often Unkind to Exporters

agricultural export

We’ve often seen carriers prioritize U.S. imports over exports. We’ve even seen agricultural exporters denied containers and service in order to prioritize more profitable import cargo. There’s no reason to believe carriers would make agricultural exporters a priority now if shifting services at exporters’ expense is more profitable.

Luckily, West Coast disruptions during these negotiations have been mitigated by reduced cargo moving through West Coast ports. However, as negotiations drag on, increasing tensions and more significant disruption become more and more likely.

As Friedmann said in the interview:

“Over the past 25 years it’s been more common than not to see some sort of work slowdowns or stoppages that have held up shipping for maybe only a couple of days. But even a three-day stoppage would take weeks to unwind and cost companies a significant amount of money.”

Frankly, that’s putting it mildly.

Update on the Negotiations

It’s hard to know how the finally resumed contract talks are going as the parties have decided not to discuss negotiations with the media. However, they did give a joint update, posted on Twitter, just today:

Remaining “hopeful of reaching a new deal soon,” as the statement says the ILWU and PMA are, at least has a touch of optimism to it. However, it doesn’t give much for shippers hang their hats on.

The statement the parties make that “news articles purporting to know what is happening at the bargaining table are speculative at best” is certainly true. But there probably is a little something that can be deduced from the total statement and put in articles.

ILWU and PMA saying “the parties have reached a tentative agreement on certain key issues, including health benefits” makes it almost a certainty that they have not yet reached agreement on the issue of automation. That’s the topic many fear will turn negotiations contentious. If they had reached agreement on that issue, the PMA and ILWU likely would say so to relieve fears over the negotiations. Relieving fears on the automation battle would likely help some to reduce pressure being placed on the parties to resolve talks quickly.

Of course, nothing will entirely resolve pressure on the ILWU and PMA to reach a new master contract agreement. The stakes and potential costs of dragged out and contentious negotiations are too high.

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Legislation & Regulatory Spending Increasing in Ocean Freight Shipping https://www.universalcargo.com/legislation-regulatory-spending-increasing-in-ocean-freight-shipping/ https://www.universalcargo.com/legislation-regulatory-spending-increasing-in-ocean-freight-shipping/#respond Wed, 22 Feb 2023 00:07:30 +0000 https://www.universalcargo.com/?p=11821 While the Federal Maritime Commission (FMC) seems to still be figuring out how to enforce the Ocean Shipping Reform Act of 2022 (OSRA), it seems more shipping reform is on the way.

John Gallagher reported in a Freight Waves article on bipartisan ocean shipping reforms U.S. representatives plan to introduce to Congress:

"Speaking at a media roundtable earlier this month, U.S. Rep. Dusty Johnson, R-S.D., confirmed that curbing China’s ability to exploit proprietary cargo shipping data would be included among new ocean shipping reforms he and colleague John Garamendi, D-Calif., want to introduce in May as a part of a larger supply chain legislative package.

"...

"In addition to addressing data security concerns for companies using the Shanghai Shipping Exchange, a major container freight-rate benchmark for U.S. imports, Johnson wants to disincentivize companies from using the National Transportation and Logistics Public Information Platform, a Chinese state-sponsored shipment tracking data exchange that China has branded as LOGINK.

"China’s government, according to U.S. authorities, is encouraging ports, ocean carriers and freight forwarders to adopt LOGINK by providing it for free."

There's obviously a large focus on the competitive advantage LOGINK could give to China, which is already the largest exporting country in the world in terms of volume. Not only are U.S. representatives worry about a competitive advantage for China in the shipping industry, but they also see a potential national security threat that is more direct...

Find out more by reading the full post in Universal Cargo's blog.

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While the Federal Maritime Commission (FMC) seems to still be figuring out how to enforce the Ocean Shipping Reform Act of 2022 (OSRA), it seems more shipping reform is on the way.

Planned Regulation Focused on “Adversary” China

John Gallagher reported in a Freight Waves article on bipartisan ocean shipping reforms U.S. representatives plan to introduce to Congress:

Speaking at a media roundtable earlier this month, U.S. Rep. Dusty Johnson, R-S.D., confirmed that curbing China’s ability to exploit proprietary cargo shipping data would be included among new ocean shipping reforms he and colleague John Garamendi, D-Calif., want to introduce in May as a part of a larger supply chain legislative package.

In addition to addressing data security concerns for companies using the Shanghai Shipping Exchange, a major container freight-rate benchmark for U.S. imports, Johnson wants to disincentivize companies from using the National Transportation and Logistics Public Information Platform, a Chinese state-sponsored shipment tracking data exchange that China has branded as LOGINK.

China’s government, according to U.S. authorities, is encouraging ports, ocean carriers and freight forwarders to adopt LOGINK by providing it for free.

There’s obviously a large focus on the competitive advantage LOGINK could give to China, which is already the largest exporting country in the world in terms of volume. Not only are U.S. representatives worry about a competitive advantage for China in the shipping industry, but they also see a potential national security threat that is more direct:

“China’s state-funded effort to obtain first mover advantage could enable LOGINK to shape how the market evolves, setting the rules of the road in a way that favors Chinese firms and otherwise advances China’s interests,” according to an issue brief published in September by the U.S.-China Economic and Security Review Commission.

“It could also give China’s government access to sensitive data, including commercial transport of U.S. military cargo, insight into supply chain vulnerabilities, and critical market information,” the issue brief warns.

The perspective Johnson and Garamendi embrace with the “OSRA 2.0” legislation is seeing China, particularly the Chinese Communist Party, as an adversary. Johnson is quoted in the article as saying provisions in the updated OSRA they’re proposing “really make sense” from this perspective.

Legislation Targeting Carrier Alliances

Freight Rates

Beyond its focus on China, the new shipping reform legislation would target carrier alliances. Or at least the formation of carrier alliances.

It doesn’t matter whether it’s considered pro-competition or not, or whether it’s good or bad for the economy,” [Peter Friedmann, executive director of the Agriculture Transportation Coalition] told FreightWaves. “The FMC can’t stop it unless it gathers its resources and goes to federal court and convinces a judge, who may know nothing about ocean transportation, to enjoin the agreement.”

But a provision to be included in the new ocean reform legislation, according to Friedmann, would give the FMC the authority to block such an agreement upon it being filed. The carriers filing the agreement would have to convince the federal court to allow it to go into effect.

I’ve long warned here in Universal Cargo’s blog that carrier alliances would weaken competition in the industry, eventually causing freight rates to rise. When the three carrier alliances dominating ocean freight shipping used their coordinated power to reduce capacity below market demand at the beginning of the pandemic, we really saw that come to fruition.

Often, I’m a smaller government kind of guy, but when it comes to carrier alliances, I’ve often said regulatory bodies should reconsider them. According to Friedmann in the Freight Waves article, the potential legislation could be “‘momentous’ in terms of boosting FMC oversight authority.”

Addressing Trucking

According to the article, also on these lawmakers’ radar with the legislation they intend to propose are truckers, of whom the industry has struggled with shortages for years:

Johnson, who is a member of the House Supply Chain Caucus, revealed that along with OSRA 2.0, the chamber’s Republican leadership is looking to include in the upcoming supply chain legislative package a bill introduced in January that provides tax credits to help recruit new truck drivers and funding for boosting truck parking capacity, and work-rule relief for agriculture haulers, among other things.

FMC Investigating Demurrage & Detention Complaints

In the meantime, the FMC is trying to catch up on enforcement of the already passed OSRA, especially in terms of unfair demurrage and detention fees shippers face when importing and exporting goods. According to a Supply Chain Dive article by Alejandra Salgado:

The agency saw close to $2 billion in detention and demurrage complaints in 2022, and [Commissioner Carl Bentzel] said that carriers have already refunded $700,000.

That appears to be just the tip of the iceberg. The commission has more than a couple hundred complaints to investigate against carriers alone from over the last couple years, according to the article:

The nation’s top ocean regulator is preparing to ramp up investigations into carriers this year following a tumultuous two years of congestion and high fees in the shipping industry.

The Federal Maritime Commission is currently working through more than 200 complaints against carriers, [Bentzel] said in an interview with Supply Chain Dive.

The article highlights how despite congestion finally being cleared, shippers are still being hit hard by detention and demurrage fees:

And despite easing congestion at U.S. ports, shippers continue to note that they are being denied cargo space and facing rising detention and demurrage fees.

“When [a] delay is manageable, it tends to take away a lot of the issues related to both detention and demurrage and other issues,” said Bentzel. “But we haven’t seen it yet.”

Millions Headed for the FMC

Often, shippers have complained that the FMC has been ineffectual in protecting them from unfair fees or practices from carriers and terminal operators in the industry. Part of that could be due to how small the FMC is. Salgado reports how OSRA could change that:

While the FMC has received over 200 charge complaints from shippers, it only has six investigators. The agency had struggled to address an influx of complaints during the pandemic when shipping congestion created ripple effects throughout global supply chains.

To support the agency’s staffing constraints, the Ocean Shipping Reform Act is adding approximately $6 million more a year to the FMC’s budget, which will help it reach its goal of hiring about 128 to 170 more personnel. Many of those hires will be for investigators, attorneys and other enforcement positions.

We should see over the next few years if the increased regulation and influx of money into the international shipping’s U.S. regulatory body improves conditions in the industry or has poorer, unintended consequences.

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ILWU & PMA Finally Resume Contract Negotiations https://www.universalcargo.com/ilwu-pma-finally-resume-contract-negotiations/ https://www.universalcargo.com/ilwu-pma-finally-resume-contract-negotiations/#respond Fri, 17 Feb 2023 01:21:26 +0000 https://www.universalcargo.com/?p=11657 At last there’s news about the International Longshore & Warehouse Union (ILWU) contract negotiations. After months of being completely stalled, negotiations have reportedly resumed. Bill Mongelluzzo reported in the Journal of Commerce (JOC): West Coast dockworkers and marine terminal employers resumed negotiations this week on a new contract after agreeing to set aside, for now, […]

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At last there’s news about the International Longshore & Warehouse Union (ILWU) contract negotiations. After months of being completely stalled, negotiations have reportedly resumed. Bill Mongelluzzo reported in the Journal of Commerce (JOC):

West Coast dockworkers and marine terminal employers resumed negotiations this week on a new contract after agreeing to set aside, for now, a controversial jurisdictional issue involving Terminal 5 in Seattle that has kept talks at a standstill for nine months.

Crawling Negotiations

Back on July 1st of last year, ILWU’s master contract with the Pacific Maritime Association (PMA), the union’s employers at the West Coast ports, expired. Though contract negotiations technically started in May, there has been virtually no progress.

ILWU PMA meet about contract extension

No one expects much progress in the initial months of negotiations. The ILWU has no real interest in reaching new agreements before the previous contracts expire because that would weaken its bargaining position. Once the contract expires, the ILWU has much more ability to utilize slowdowns, threats of strike, and even actual strikes to gain leverage in negotiations.

The ILWU’s lack of interest in real negotiations in May and June was evident in shipping industry news reporting. In fact, the union even initiated a suspension of negotiations in May. That suspension was just a tiny glimpse into how these negotiations would go. Even after July’s expiration of the contract, no serious effort from the ILWU to negotiate a new contract became evident, but the parties had agreed not to communicate with the press about negotiations. All that did was make negotiations even more opaque from the outside.

Halting Issues

There was high expectation for these negotiations to become contentious over the issue of automation. The automation dispute did surface publicly early on. However, it was the jurisdictional fight in Seattle that the JOC quote above alluded to that has really halted negotiations so far.

That jurisdictional issue does relate to automation. The ILWU says it allowed some port automation in 2008’s master contract in a quid pro quo deal where the PMA would support the ILWU in any union jurisdictional matters. It claims that the PMA failed to do so in Seattle, making even what automation the ports have put in place illegitimate.

There have been some port slowdowns and disruptions executed by branches of the ILWU during these months of negotiations, but shippers diverting cargo from West Coast ports along with cargo volume reduction from economic downturn have mitigated the labor disruption. The biggest story of the ILWU contract negotiations has been the union suspending talks over the Seattle terminal jurisdictional dispute. Previously, the union said it would resume talks once a decision has been made on the legal case over the issue there. There’s no telling how long that could take.

Resumed Talks Sound Real

It’s definitely good news to see reporting that the parties are back at the negotiating table. It sounds like they’re discussing real issues, even the one at the top of the difficulty list according to Mongelluzzo’s JOC article:

Several sources close to the negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) told the Journal of Commerce the two sides discussed terminal automation, health and safety, and wages, issues that have received little attention since the coastwide contract negotiations began last May 10.  

What Caused Negotiations to Resume?

The longer negotiations drag on, the more pressure comes to get a deal done. That includes increasing chances of federal intervention coming into play. Mongelluzzo hits on that in his article:

The resumption of negotiations can also be viewed as a case of both sides feeling external pressure to get a deal done, especially with recent talk of bringing in Secretary of Labor Marty Walsh to oversee the talks. Potentially complicating matters further, Walsh is reportedly leaving his post to head the players union of the National Hockey League, according to several media outlets.

Perhaps, however, it’s another thing Mongelluzzo writes about that has finally gotten the ILWU and PMA to start negotiating the real issues of the contract. Mongelluzzo says the parties have made progress on how to handle these union jurisdictional issues:

The ILWU and PMA have reportedly made progress on an arbitration process that would discourage future T-5-type incidents by requiring terminal operators to declare a preference for the ILWU when union jurisdiction is being challenged. It is not clear yet how this would differ from language in the 2008 contract that also required employees to state a preference for the ILWU over other unions, a clause the ILWU argues was the quid pro quo in return for it agreeing to allow automation at West Coast terminals. It was the union’s view that SSA Marine was not faithful to this clause, allowing the IAM to staff the jobs at the T-5 terminal and triggering the dispute that has dragged out the current coastwide negotiations. 

Since that jurisdictional issue is what has been reportedly stalling negotiations, it would make sense that reaching some kind of agreement there would allow contract negotiations to resume.

Things Just Getting Started?

Unfortunately, we’re now in the tenth month since negotiations began with seemingly little real negotiation having taken place. It’s almost like going back to the beginning of negotiations almost a year after they start. That means contention over issues like automation remain high. The threat of labor disruption at West Coast ports remains high. And there’s no telling how long things will drag on.

If you want to dive deeper on how these negotiations have progressed (or not progressed), here are Universal Cargo posts covering the ILWU contract talks from most recent to before they even started:

ILWU Negotiations Help NY/NJ Surpass LA/LB as Busiest U.S. Port

Strap In Shippers: ILWU Contract Negotiations Look to Be Long & Bumpy Road

More ILWU Port Disruption & Terminals Cutting Man-Hours as Contentious Contract Negotiations Drag

ILWU Contract Negotiations Suspended

ILWU Slows Oakland & Seattle Port Operations

ILWU Labor Action Occurs as Contract Negotiations Look Bad

ILWU Contract Negotiations Stalled Over Union Jurisdiction

Slowing Economy Should Lower Freight Rates But 3 Factors Could Keep Them High

Truckers, with ILWU Assist, Disrupt Port of Oakland Over AB 5

What’s Happening at Ports During ILWU Negotiations?

ILWU & PMA Speak About Contract Negotiations

Shippers Beg Biden to Help Make ILWU Contract Negotiations Go Smoothly

UH-OH – ILWU Contract Negotiations Suspended Till June

SHIPPERS BEWARE: ILWU & PMA Automation Fight Already Starting

3 Ways To Protect Your Supply Chain from Likely ILWU Port Disruption

ILWU & PMA Likely Heading for Fight that Will Cost Shippers

 

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Check Out What Maersk Said About the Aftermath of the 2M Split https://www.universalcargo.com/check-out-what-maersk-said-about-the-aftermath-of-the-2m-split/ https://www.universalcargo.com/check-out-what-maersk-said-about-the-aftermath-of-the-2m-split/#respond Fri, 10 Feb 2023 01:52:43 +0000 https://www.universalcargo.com/?p=11639 Maersk doesn't believe any of the ocean freight carriers outside of itself and Mediterranean Shipping Company (MSC) have the ability to stand alone. For this reason, the company doesn't believe there will be a shakeup of the Ocean and THE alliances in the wake of 2M's split.

Greg Knowler quoted Maersk CEO Vincent Clerc in a Journal of Commerce article:

“'The situation 2M was in was unique…it was an alliance of the two largest carriers and both of us had reached a size where we could stand alone if we wanted to,' Clerc told analysts on the carrier’s 2022 earnings call Wednesday.

“'I don’t think any of the other carriers today have the comprehensiveness of coverage that is required to be competitive, or the cost base to say, ‘I could stand alone,’' he added."

That Maersk CEO quote is very interesting. There are some other extremely large ocean freight carriers out there. Rounding out the top five right behind MSC and Maersk are CMA CGM, COSCO, and Hapag-Lloyd. None of those giant shipping lines could stand on its own?

Using slightly old data (from June of 2021) Visual Capitalist has ocean freight carriers ranked by size, listing their capacity by TEU and number of ships. At that point, CMA CGM had capacity of 3.2M TEU with 542 ships, COSCO had 497 ships with a capacity of 2.9M TEU, and Hapag-Lloyd had 1.7M TEU of capacity with its 259 ships. Even when you go to numbers 6 and 7 on the list, Ocean Network Express (ONE) – formed by the merging of Japan's three largest shipping lines – and Evergreen, each had 1.5M TEU of capacity and over 200 ships.

All of these ocean freight carriers made billions over the last couple years and have been able to increase their size....

Find out more by reading the full post in Universal Cargo's blog.

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Maersk doesn’t believe any of the ocean freight carriers outside of itself and Mediterranean Shipping Company (MSC) have the ability to stand alone. For this reason, the company doesn’t believe there will be a shakeup of the Ocean and THE alliances in the wake of 2M’s split.

Greg Knowler quoted Maersk CEO Vincent Clerc in a Journal of Commerce article:

“The situation 2M was in was unique…it was an alliance of the two largest carriers and both of us had reached a size where we could stand alone if we wanted to,” Clerc told analysts on the carrier’s 2022 earnings call Wednesday.

“I don’t think any of the other carriers today have the comprehensiveness of coverage that is required to be competitive, or the cost base to say, ‘I could stand alone,’” he added.

These Carriers Aren’t Big Enough to Stand Alone?

That Maersk CEO quote is very interesting. There are some other extremely large ocean freight carriers out there. Rounding out the top five right behind MSC and Maersk are CMA CGM, COSCO, and Hapag-Lloyd. None of those giant shipping lines could stand on its own?

Using slightly old data (from June of 2021) Visual Capitalist has ocean freight carriers ranked by size, listing their capacity by TEU and number of ships. At that point, CMA CGM had capacity of 3.2M TEU with 542 ships, COSCO had 497 ships with a capacity of 2.9M TEU, and Hapag-Lloyd had 1.7M TEU of capacity with its 259 ships. Even when you go to numbers 6 and 7 on the list, Ocean Network Express (ONE) – formed by the merging of Japan’s three largest shipping lines – and Evergreen, each had 1.5M TEU of capacity and over 200 ships.

All of these ocean freight carriers made billions over the last couple years and have been able to increase their size. But none of them have the ability to be competitive and stand alone like Maersk and MSC are doing? Not even China owned COSCO that would get state help from the biggest exporter of goods in the world?

Clerc is obviously a bigger expert on the running of gigantic ocean freight carriers than I am, or I would be the CEO of one of these shipping lines, but I have to wonder if there isn’t another carrier with the ability to at least try what Maersk and MSC are doing.

There was a time when carrier alliances certainly seemed a necessity for these shipping lines to survive. The industry was struggling with overcapacity, which – combined with freight rate wars – pushed freight rates so low they were unprofitable, even causing losses in the billions of dollars, and were, thus, unsustainable. Carriers turned to megaships and alliances to fill those ships in solving the problem.

For the last few years, carrier profits have been through the roof. But unbelievably long-sustained levels of near-record to record shipping volumes (demand) were artificially created by pandemic policies. Now that demand has fallen with the onset of economic downturn and uncertainty, shipping looks to be going back to more pre-pandemic patterns. Certainly, ocean freight carriers have built up some cushion with those billions upon billions in profits, but if they’re going to continue to be profitable now that “the party is over” as Hapag-Lloyd’s CEO put it, they probably do need those alliances.

Why Maersk Thinks Other Alliances Won’t Change

Many have speculated that a big reshuffling of the other two alliances could happen as a result of 2M splitting, but Maersk’s CEO obviously doesn’t think that will be the case. Knowler quoted Clerc on his reasoning:

“Ocean Alliance is going on into 2027, so there will be a few more years of stability there, and it is hard to see how THE Alliance will make a significant change, given that both Maersk and MSC will have standalone networks,” he said. 

“I see this as a clear transition from three to four networks, which is not as much of a change as has been made out,” Clerc added. “I don’t expect this round of musical chairs that is being talked about where everyone is trying to find new partners.” 

Another Carrier Trying to Go Alone Is Still a Possibility

As I stated in a blog about how the 2M split will affect shippers, going from three alliances dominating ocean shipping to four networks is still a major shakeup. It creates more competition in the waters and increases the risk to any other shipping line considering going on its own.

However, as I’ve talked about many times in this blog over the years, Maersk has served as the leader for ocean freight carriers. As it did, so did other carriers. Obviously, its size allows Maersk to do things many other carriers could not. But might one of the larger carriers see what Maersk is doing in expanding its shipping services across the logistics process, rather than focusing just on ocean freight, and do likewise?

Surely, Maersk is not unique in how it sees the international shipping industry. The company sees it as moving into a more unpredictable and volatile place than it was pre-pandemic. That’s saying something as international shipping, along with its freight rates for shippers, has always been a volatile industry.

In an article for the Loadstar, Mike Wackett also reported on Clerc’s answers to questions after presenting Maersk’s profits and picked a interesting statement from the CEO to quote:

“The quicker we get there [not to have ocean as a separate business to logistics] the more it allows us to accelerate the integration and move away from this commodity game we are in, which, we can see very clearly now, doesn’t lead anywhere.”

It’s that “doesn’t lead anywhere” bit that stands out to me. Maersk seems to see clearly that ocean freight as a stand-alone business doesn’t lead anywhere. If Maersk sees things that way, there would be reason to think some of the other major ocean freight carriers see things similarly.

Others on the list of top ocean freight carriers have been acquiring other logistics businesses. Hapag-Lloyd acquired shares in J M Baxi Ports & Logistics Limited; COSCO has been acquiring port terminals and logistics company shares for years; and CMA CGM acquired GEFCO, a European leader in automotive logistics, and terminals at the Port of New York and New Jersey (the company boasts owning 7 U.S. port terminals) within the last year. That’s to name just a handful of acquisitions that have recently happened.

All it would take is for one of these shipping lines to try to step away from its alliance to cause the remaining two alliances to likely scramble and reshuffle. That’s something that could leave a carrier out on its own that would struggle to be competitive that way.

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How Long Will this Downward Pressure on Freight Rates Last? https://www.universalcargo.com/how-long-will-this-downward-pressure-on-freight-rates-last/ https://www.universalcargo.com/how-long-will-this-downward-pressure-on-freight-rates-last/#respond Wed, 08 Feb 2023 02:47:25 +0000 https://www.universalcargo.com/?p=11637 After a couple years of out of control, skyrocketing freight rates, ocean freight pricing finally came tumbling down. Freight rates have gone from peaks, including cargo routes getting carriers more than 5 times pre-pandemic rates, all the way back down to pre-pandemic numbers. These much lower freight rates are obviously good news for shippers, but how long will this downward pressure on freight rates last?

Economic downturn reducing shipping demand is the largest factor in dropping freight rates. Judging by retailers' projections, it looks like we can expect lower demand putting downward pressure on freight rates at least through the first half of the year. Economic uncertainty means it could last much longer.

Kevin Saville reported in a Journal of Commerce article titled "US retailers offer little optimism in gloomy H1 import forecast" on falling amidst economic worries:

"US imports through the first half of 2023 will fall almost 20 percent from the same period last year as “worried” consumers dial back their purchasing in a slowing economy, a major retail group forecast Tuesday.
 
"That softening of freight demand will keep downward pressure on trans-Pacific spot rates that have tumbled more than 80 percent since last February and should result in continued improvements in vessel schedule reliability for shippers. But for carriers, it will likely lead to much lower profit levels in 2023."

Find out more by reading the full post in Universal Cargo's blog.

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After a couple years of out of control, skyrocketing freight rates, ocean freight pricing finally came tumbling down. Freight rates have gone from peaks, including cargo routes getting carriers more than 5 times pre-pandemic rates, all the way back down to pre-pandemic numbers. These much lower freight rates are obviously good news for shippers, but how long will this downward pressure on freight rates last?

Economic downturn reducing shipping demand is the largest factor in dropping freight rates. Judging by retailers’ projections, it looks like we can expect lower demand putting downward pressure on freight rates at least through the first half of the year. Economic uncertainty means it could last much longer.

U.S. Retailers’ Gloomy Outlook

Kevin Saville reported in a Journal of Commerce article titled “US retailers offer little optimism in gloomy H1 import forecast” on falling amidst economic worries:

US imports through the first half of 2023 will fall almost 20 percent from the same period last year as “worried” consumers dial back their purchasing in a slowing economy, a major retail group forecast Tuesday. 

That softening of freight demand will keep downward pressure on trans-Pacific spot rates that have tumbled more than 80 percent since last February and should result in continued improvements in vessel schedule reliability for shippers. But for carriers, it will likely lead to much lower profit levels in 2023. 

Silver Linings

The improved vessel schedule reliability for shippers is certainly a silver lining type of line in those paragraphs from Saville. Weakened demand means less cargo going through ports, making congestion less likely with the much more manageable cargo levels. That keeps ships from getting delayed at anchor, waiting for berth. However, the decline in volume also means more blank (cancelled) sailings. That impacts schedule reliability negatively, but overall, Saville should be right in that reliability will be improved from the extremely low reliability experienced during all the port congestion seen over the last few years.

Freight Rates

Still, the real silver lining for shippers is paying lower freight rates.

Falling Profits for Carriers

We’re only starting to see carriers’ profit levels dive with the change in the international shipping outlook. There are still reports like Kim Link Wills writing a Freight Waves article last week about Hapag-Lloyd’s “extraordinarily strong result” in 2022 earnings. But now we’re also seeing reports like another Freight Waves article last week from Wills covering that the Ocean Network Express’s (ONE’s) quarterly profits plunged by $2.75 billion according to ONE’s latest reporting.

There should be many more multi-billion-dollar profit plunges for ocean freight carriers in 2023 with such lower demand and lower freight rates. Market conditions could create more competition between carriers, adding another downward pressure on freight rates.

Freight Rates in the 2nd Half of 2023

Could demand and freight rates rise after the first half of 2023? That’s where things get very murky, but generally things are not trending in a positive way in terms of demand or economy as a whole.

The falls we’re seeing in demand are even bigger than previously estimated, according to Saville’s reporting:

“With the US economy slowing and consumers worried by rising interest rates and still-high inflation, retailers are importing less merchandise,” Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation (NRF), said in a statement accompanying the Global Port Tracker (GPT) for February. 

The latest GPT report, produced by the NRF and Hackett Associates, further downgraded monthly import expectations through June. January imports are now expected to fall 17.6 percent from January 2021; last month, GPT forecast the year-over-year drop at 11.5 percent. February imports are now projected to be 25.5 percent lower than a year ago, a downgrade from last month’s projection of a 23 percent drop. 

If the economy takes a turn for the better as the year goes on, demand could begin rising again, reducing the largest downward pressure on freight rates. There are mixed signals on that. In the JOC article, Saville gave a good feeling of that economic uncertainty by quoting Ben Hackett, founder of Hackett Associates, who “said the uncertainty surrounding the direction of the global economy in 2023 is reminiscent in some ways of the early months of the pandemic in 2020.”

“Cargo volumes are down, and the economy is in a contradiction of rising employment and wages that promise prosperity at the same time high inflation and rising interest rates threaten a recession,” Hackett said in the statement. “The economy is far from shut down, but the degree of uncertainty is very similar.”

2023 Not So Similar to 2020

Those early months of the pandemic were accompanied by extreme levels of blank sailings, which dropped capacity (supply) below demand, bringing the initial rise in freight rates. We’re seeing a great deal of blank sailings now, but it’s hard to imagine the economic situation that’s about to hit mirroring what we saw after all those blank sailings in 2020.

Then, lockdowns hit followed by government issued stimuli. These things created a boom in goods buying as spending shifted from services, traveling, and entertainment with extra money hitting people’s pockets from government checks adding to that spending.

That’s nothing we’re seeing right now. There has been a recent gain in jobs, which is generally a good thing economically. However, according to a Market Watch article by Greg Robb, January’s job growth slowed from the previous month and was over in service side of things rather than the goods side:

All the job gains were in the service-producing sectors. The goods -producing sector lost jobs in the month.

That’s obviously very different from what we saw in 2020, giving little reason to believe there would be any kind of shipping boom like we saw beginning in 2020.

Economists Give Mixed Readings

With the recent bit of job growth the economy has seen slowing last month, there’s higher concern that we are still a long way from economic recovery. However, some, like payroll services firm ADP’s chief economist, have blamed slowed job growth in January on the weather. Many economists aren’t buying the excuse according to Robb’s Market Watch article:

What ADP said: “In January, we saw the impact of weather-related disruptions on employment during our reference week,” said Nela Richardson, chief economist of ADP. “Hiring was stronger during other weeks of the month, in line with the strength we saw late last year.”

What economists are saying: “On balance, we are skeptical this slowdown is primarily a temporary weather-related issue. Added to the weakness in activity, and the downturn in some forward-looking employment indicators like temporary employment and hours worked, it suggests that the easing in labor market conditions is gathering momentum,” Paul Ashworth, chief North America economist at Capital Economics.

Conclusion

Personally, I wouldn’t expect much rise, if any, in shipping demand until the peak season when retailers traditionally increase imports in preparation for the holiday shopping season. Of course, that is around the halfway point of the year. And how much demand increases will depend upon consumer confidence in the economy and retailers’ confidence in consumer shopping. The murky picture should become somewhat clearer as spring and summer months draw near. Overall confidence in the economy is far from strong, but whether it moves in a positive or negative direction in the upcoming months should have a large effect on the behavior of freight rates.

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Transpacific Freight Rates East, West Coast Spread Is Back to Pre-Pandemic Levels https://www.universalcargo.com/transpacific-freight-rates-east-west-coast-spread-is-back-to-pre-pandemic-levels/ https://www.universalcargo.com/transpacific-freight-rates-east-west-coast-spread-is-back-to-pre-pandemic-levels/#respond Fri, 03 Feb 2023 01:49:57 +0000 https://www.universalcargo.com/?p=11632 Ocean freight rates have fallen, for which U.S. importers can rejoice. Readers of Universal Cargo's blog certainly don't need a recap of how freight rates skyrocketed during the pandemic, thanks more to international shipping industry conditions leading up to it and bad policy reactions to COVID-19 than the actual pandemic itself. Through it all, shippers were simply figuring out how to make sure their businesses survived the outrageous ocean freight costs. And many in the industry had the nerve to call the situation the new normal, saying rates would never return to pre-pandemic levels.

Thank God they were wrong.

At the end of 2022, I wrote in Universal Cargo's blog how 2023 freight rates would be back to or below pre-pandemic levels. Many Asia to U.S. West Coast rates were already hitting those levels. A big holdout on getting to pre-pandemic freight rates has been Asia to East Coast rates. Helping to keep those rates higher was shippers diverting cargo from West to East Coast ports in order to avoid likely slowdowns stemming from the International Longshore & Warehouse Union (ILWU) contract negotiations on the Pacific side of the country.

There's still a threat from the stalled ILWU negotiations, but plummeting demand has brought cargo levels so low, congestion has been able to clear and the slowdowns we've seen so far from West Coast dockworkers have been mitigated. The thing that keeps going without saying is an economic downturn is the main cause of freight-rate-reducing falling demand, which is another whole challenge for businesses that import and export goods.

But, for now, let's stick with the good news. The wide gap between transpacific West and East Coast freight rates has now fallen to pre-pandemic levels. And yes, that means falling freight rates on the East Coast.

Find out more by reading the full post in Universal Cargo's blog.

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Ocean freight rates have fallen, for which U.S. importers can rejoice. Readers of Universal Cargo’s blog certainly don’t need a recap of how freight rates skyrocketed during the pandemic, thanks more to international shipping industry conditions leading up to it and bad policy reactions to COVID-19 than the actual pandemic itself. Through it all, shippers were simply figuring out how to make sure their businesses survived the outrageous ocean freight costs. And many in the industry had the nerve to call the situation the new normal, saying rates would never return to pre-pandemic levels.

Thank God they were wrong.

At the end of 2022, I wrote in Universal Cargo’s blog how 2023 freight rates would be back to or below pre-pandemic levels. Many Asia to U.S. West Coast rates were already hitting those levels. A big holdout on getting to pre-pandemic freight rates has been Asia to East Coast rates. Helping to keep those rates higher was shippers diverting cargo from West to East Coast ports in order to avoid likely slowdowns stemming from the International Longshore & Warehouse Union (ILWU) contract negotiations on the Pacific side of the country.

There’s still a threat from the stalled ILWU negotiations, but plummeting demand has brought cargo levels so low, congestion has been able to clear and the slowdowns we’ve seen so far from West Coast dockworkers have been mitigated. The thing that keeps going without saying is an economic downturn is the main cause of freight-rate-reducing falling demand, which is another whole challenge for businesses that import and export goods.

But, for now, let’s stick with the good news. The wide gap between transpacific West and East Coast freight rates has now fallen to pre-pandemic levels. And yes, that means falling freight rates on the East Coast.

Bill Mongelluzzo reports in the Journal of Commerce:

The spread between ocean spot rates to the East and West coasts in the eastbound trans-Pacific has narrowed to its pre-pandemic level of about $1,200 per FEU amid declining import volumes and stagnant freight rates.

Industry sources expect spot rates to both coasts to remain in a tight range during the post-Lunar New Year cargo lull that will last into March. 

The East Coast premium that importers paid in 2021 and through the first half of 2022 to avoid West Coast port congestion and labor uncertainty has largely dissipated, Alan Murphy, CEO of Sea-Intelligence Maritime Analysis, said in his Sunday Spotlight newsletter. 

Are Seasonal Freight Rate Behaviors Back to Normal?

Whether or not rates will start rising in March is yet to be seen.

Traditionally, with the exception of a little surge right before the Chinese New Year, this is a very slow season for international shipping. The U.S. holidays, with their big shopping seasons, have past. China’s factories shut down to celebrate the Chinese Spring Festival. And freight rates tend to drop. By March, Chinese factories are back in full force and inventory stocking, along with freight rates, start increasing again.

The last few years, with their seemingly perpetual peak season shipping, obviously didn’t play out as normal. Though we finally are looking at a more traditional pre-pandemic outlook for the international shipping industry, we still may not see the normal seasonal ebbs and flows. Many retailers are still overstocked and there is much uncertainty over economic recovery and consumer spending in the face of still problematic inflation and recession.

Outrageous government spending has been a driving force behind inflation and economic downturn. With Republicans taking a majority in the House, Democrat spending bills in the trillions will likely be curbed. That should help, but it’s hard to say economic recovery will be sudden or even fast.

Additionally, China’s terrible Covid Zero policies are still wreaking a great deal of uncertainty when it comes to importing goods from the country.

Carriers Know the International Shipping Market Has Shifted

Ocean freight carriers are publicly sharing uncertainty about when shipping demand will increase again.

CEO Rolf Habben Jansen of Hapag Lloyd, the world’s fifth largest ocean carrier by capacity, was quoted in a Reuters article on when orders for goods and shipping services would pick up like he hopes they will:

“Whether that will happen in March or in June, I don’t know,” he said.

Jansen has certainly accepted the soaring freight rates, which caused carriers like Hapag Lloyd to rake in billions upon billions, is over.

“The party is over. We are back to a normal shipping business,” CEO Rolf Habben Jansen told reporters at a briefing late on Tuesday on the state of the market, in which his company reported sky-high profits for three years running.

“Now we have to fight for every box again to get our ships full,” he said.

However, he expects freight rates will not fall below costs, which were being kept high by expensive charter rates, high fuel costs and the need to adjust fleets to running on low carbon fuel.

That last bit about rates not falling below costs is important. Something I often wrote during the years of record low freight rates, when carriers were struggling with profitability, is there’s a point when freight rates get lower than is even good for shippers. Obviously, shippers want costs to be as low as possible to help them make profits as high as possible. However, when freight rates get unhealthily low for carriers, there’s a risk of bankruptcies and buyouts shrinking competition in the industry. Shrinking competition means rates are likely to rise again and be harder to come back down.

In the meantime, low demand has carriers turning to blank (cancelled) sailings, often last minute ones, in attempt to reduce capacity and fight falling rates. Some reports put blank sailings as high as 50% of scheduled sailings at the moment. Many blank sailings are happening last minute too. That can bring with it delays for shippers on getting their goods, as the cargo doesn’t leave port until a later sailing.

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How MSC and Maersk’s 2M Alliance Split Will Affect Shippers https://www.universalcargo.com/how-msc-and-maersks-2m-alliance-split-will-affect-shippers/ https://www.universalcargo.com/how-msc-and-maersks-2m-alliance-split-will-affect-shippers/#respond Wed, 01 Feb 2023 03:10:06 +0000 https://www.universalcargo.com/?p=11627 On Thursday, Universal Cargo's blog was about MSC and Maersk announcing they're ending the 2M Alliance. The world's top two shipping lines said they're doing this to "pursue individual strategies." I promised at the end of the post to get into the strategies Maersk and MSC are pursuing and what the end of 2M likely means for shippers. Now it's time to make good on that promise....

Find out about the carriers' strategies and how this will likely affect you by reading the full post in Universal Cargo's blog.

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On Thursday, Universal Cargo’s blog was about MSC and Maersk announcing they’re ending the 2M Alliance. The world’s top two shipping lines said they’re doing this to “pursue individual strategies.” I promised at the end of the post to get into the strategies Maersk and MSC are pursuing and what the end of 2M likely means for shippers. Now it’s time to make good on that promise….

MSC and Maersk’s Divergent Strategies

The outlook of the international shipping industry changed dramatically during the pandemic. Yes, there were shutdowns, problematic restrictions, disruptions, congestion, delays… but perhaps the biggest shifting factor for the permanent landscape, or oceanscape if you will, was the billions upon billions of dollars ocean freight carriers made. This allowed shipping lines, which have often struggled with profitability, to change their business strategies with major spending.

Maersk Cargo Ship
Maersk Cargo Ship pic: Maersk Line

Maersk and MSC were both major spenders, but the alliance partners clearly had divergent strategies with their spending.

MSC was all about building its already significant fleet. As mentioned in the last blog, MSC continued to build up its ship orders but also bought “anything that floats.”

While MSC focused on becoming the biggest ocean freight carrier in the world in terms of container ship capacity, Maersk looked to expand beyond the water and become an end to end service provider. In its pursuit of becoming an integrated provider of logistics services for its customers, Maersk has been aggressive in acquiring other logistics companies, including Martin Bencher Freight Forwarders, Senator International Freight Forwarding, Pilot Freight Services, HUUB, Li & Fung Logistics, and Logistics Holdings.

MSC has moved beyond the water a bit too. Its inland network and services have expanded, and it opened an air cargo division. However, MSC’s clear focus is its ocean freight shipping, whereas Maersk clearly seems to be turning its ocean freight shipping into a piece of its larger logistics focus. The billions Maersk has spent acquiring logistics companies makes this very clear.

In a Journal of Commerce article about the 2M Alliance split, Greg Knowler quoted Maersk’s Executive Vice President Johan Sigsgaard in talking about the carrier’s strategy change:

msc mia
Photo of MSC Mia by Farid mernissi

“Our strategy now is very different, and we are in a very different place to where we were back in 2015 when we formed this alliance with MSC,” Sigsgaard said. “We didn’t have an integrated strategy, and at the same time, we were all facing the arrival of ships of 20,000-plus TEU, so having the alliances was a good tool to make sure the ships were fully utilized.”  

Sigsgaard said the carrier’s executives have concluded that a standalone Maersk network will put the company in a more advantageous position for the coming years, hinging on control of cargo across its end-to-end logistics.  

“We have come to a point in our integrated strategy where we have a much stronger connection between the ocean and land-based network,” he said. “We need an ocean network that has critical connection points where we have control and can provide agility and flexibility to customers when demand goes up and down quickly.”

As I brought up last time, MSC’s focus on fleet growth made it appear for some time that MSC was positioning itself to go it alone, without an alliance partner. With the biggest fleet size in the world, perhaps MSC’s ambition is to be the most dominant ocean freight carrier in the water.

Having some understanding of why the carriers are ending the alliance, what shippers are likely even more concerned with is how this will affect them….

An Alliance Shakeup

Even with the complete end of the 2M Alliance two years off, we’re seeing a carrier alliance shakeup.

There are three carrier alliances that dominate ocean shipping: the 2M Alliance, THE Alliance, and the Ocean Alliance.

There’s much speculation over whether Maersk or MSC would try to join one of the other alliances or pull any carriers from one of those alliances to form a new carrier alliance. However, Sigsgaard’s quote made it sound like Maersk is looking have its own standalone network for increased agility and flexibility while MSC has grown a fleet bigger than the combined one it had with Maersk at the time 2M formed, making it unlikely to need any alliance partners. The latter is, of course, assuming MSC doesn’t struggle selling space on its ships.

Ultimately, I don’t think either Maersk or MSC will be looking for new alliance partners, at least not right away. As long as their strategies are successful.

Even if there is no alliance change outside of the 2M Alliance ending, that’s still a major shakeup with one of the three major alliances that dominate all of ocean shipping splitting into two completely independent and very large on their own carriers on the trade lanes.

Traditionally, Maersk has been the leader in the ocean freight industry. As it did, so did other major shipping lines. It’s possible larger carriers may think they can go back to going it alone, without their alliances like Maersk and MSC are doing. If a couple carriers decide to go this way, it would be disruptive for their left behind alliance(s). Even if none of the carriers try to strike it out on their own, there’s a good chance the change in shipping’s oceanscape could cause a reshuffling of the remaining alliances, with each carrier wanting to position itself as best as possible. However, there’s risk that a carrier or carriers could get left out in the cold. Picture Jack dying in the ocean as Rose keeps alive on the floating wood at the end of Titanic.

Maersk and MSC do already have vessel sharing agreements (VSAs) outside of 2M. There’s some wonder about whether these will continue. For now, there’s indication such VSAs will continue but not all of them. Knowler reports:

Maersk currently has 40 to 50 [VSAs] outside the 2M Alliance and many of those will continue, Sigsgaard said.  

“But they will be a bit more targeted and more dynamic in nature than a 10-year agreement,” he said. “We see VSAs as beneficial, and they will supplement the backbone network that we control ourselves.” 

Shippers Could Gain Some Risk Reduction

If in the end there are fewer alliances and VSAs, shippers will have more control and knowledge of whose ships their cargo is on. This could help importers, exporters, and cargo insurers reduce risk.

One of the early criticisms of the carrier alliance, along with the megaship, craze in international shipping was shippers had less ability to spread their cargo out to different ships belonging to different carriers, which is one way shippers can reduce their risk when importing and exporting.

For many shippers, the worry over this risk became a stark reality when the major shipping line Hanjin went bankrupt. Its ships got stranded at sea, but they carried a great deal of cargo shipped through Hanjin’s carrier alliance partners. Many shippers who owned some of that cargo had no idea their cargo was onboard Hanjin ships until it got majorly and expensively delayed.

Increased Competition & Downward Pressure on Freight Rates

I’ve always been critical of carrier alliances, though I understood carriers’ argument for them when they were struggling with overcapacity, profitability, and needed to cooperate to fill the megaships they’d become obsessed with. My biggest critique of carrier alliances is that they decrease competition and increase cooperation among competitors in an industry that has long been marred by collusion.

I warned that freight rates would eventually significantly rise thanks in large part to carrier alliances and their cooperative control over capacity, even if they did resist the seemingly increased opportunity and temptation of (illegal) cooperation on pricing. That warning turned out to be a true portend when the pandemic hit. Initially, demand was expected to drop and carriers to lose billions of dollars. The carrier alliances blanked (cancelled) hundreds of sailings, reducing capacity (supply) well below demand, and freight rates surged despite an initial decrease in demand. Of course, lockdowns and stimuli caused spending on goods, and thus shipping demand, to soar, helping to skyrocket freight rates.

A reduction in alliances means an increase in competition and less cooperative control over capacity (supply) in the market. That should mean downward pressure increases on freight rates. At least, the ability to relieve downward pressure on freight rates decreases.

Additionally, Maersk is a very interesting player in this game.

With the Danish carrier moving to an integrated, end to end logistics provider strategy, it likely won’t have to lean on the ocean freight portion of its operations making the bulk of its profits. It needs the overall logistics services to make a profit and could use other portions of the transit and its services to make up for lower profits or even what would be losses for a strictly ocean freight carrier on the ocean freight portion of its services.

This could give Maersk the ability to undercut its competition. Not many years ago, Maersk’s publicly announced strategy was going after its competition and buying out carriers that couldn’t compete. There’s no reason to think Maersk would be above this kind of strategy now. This is the same company that only a little over 5 years ago said carrier competition would shrink to just three global companies.

If things did go to an extreme with freight rate wars, as happened in the years of financial struggles for carriers, it could lead to increased competition and low freight rates giving way to less competition as carriers go under and get bought out, and then freight rates rising. If Maersk’s prediction of only three carriers remaining came true, I’d still have Maersk and MSC on my list of those to survive. But I don’t think shippers should root for an outcome with such little competition.

 

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2M Alliance Coming to an End as Maersk and MSC Finally Split https://www.universalcargo.com/2m-alliance-coming-to-an-end-as-maersk-and-msc-finally-split/ https://www.universalcargo.com/2m-alliance-coming-to-an-end-as-maersk-and-msc-finally-split/#respond Fri, 27 Jan 2023 00:13:27 +0000 https://www.universalcargo.com/?p=11621 Like a bad hairstyle fad, the 2M Alliance is coming to an end. But that end won't be abrupt. The process is not as simple as combing hair along a part, sending this section of hair that way and that section of hair this way. The 2M Alliance has a complex network of container ship and service sharing that Maersk and MSC have given themselves two years to untangle.

That ratted mess of a metaphor may not have been worth it, so here's the straightforward way Greg Knowler reported the news in a Journal of Commerce article:

"Mediterranean Shipping Co. and Maersk will terminate their 10-year 2M Alliance in January 2025 as the carriers “pursue individual strategies” and focus on integrated networks, they announced Wednesday."

Find out all about it by reading the full post in Universal Cargo's blog.

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Like a bad hairstyle fad, the 2M Alliance is coming to an end. But that end won’t be abrupt. The process is not as simple as combing hair along a part, sending this section of hair that way and that section of hair this way. The 2M Alliance has a complex network of container ship and service sharing that Maersk and MSC have given themselves two years to untangle.

That ratted mess of a metaphor may not have been worth it, so here’s the straightforward way Greg Knowler reported the news in a Journal of Commerce article:

Mediterranean Shipping Co. and Maersk will terminate their 10-year 2M Alliance in January 2025 as the carriers “pursue individual strategies” and focus on integrated networks, they announced Wednesday.

MSC, Maersk Split a Long Time Coming

Regular readers of Universal Cargo’s blog won’t be surprised to hear the news that Maersk and MSC are parting ways. A matter of months ago I asked even in the headline of a post if MSC was positioning itself to ditch Maersk and the 2M Alliance.

At that time, Lars Jensen, CEO and Partner at Vespucci Maritime, was pointing out all the ship buying and ordering MSC had been doing as evidence that the carrier could be preparing to leave its alliance with Maersk to go on its own. I’d already written about MSC ordering ships and buying “anything that floats” even after it was already on its way to overtake Maersk as the world’s largest carrier by capacity. Jensen pointed out that between the ships MSC had acquired and the ones it had on order, its fleet was on its way to be larger than the combined fleets of Maersk and MSC when they formed 2M.

2M Bitterness Maersk & MSC

Jensen thought that was enough evidence to suggest a 2M split was on the way, but there was already evidence that Maersk and MSC were headed in that direction. In November of 2019, I posted in Universal Cargo’s blog about things getting bitter between Maersk and MSC in their 2M Alliance.

MSC had poached an executive from Maersk. It was reported that the executive poaching had left a “bitter taste” in the 2M working relationship between the shipping lines. But I believed there already was bitterness growing from MSC’s moves to exceed Maersk’s size. The previous month, I’d written about MSC being on its way to usurp Maersk’s throne, in which I shared a Loadstar reported quote from a senior Maersk manager that sounded quite bitter indeed. The Maersk manager had said, “MSC are getting too big for their boots and we have a fight on our hands to stop them.”

Bitterness might not even have been a strong enough word. That quote sounded like full-on enmity between the shipping lines. But even this wasn’t the beginnings of troubles between the shipping lines.

In fact, all the way back in 2016 I headlined a Universal Cargo blog post with, “Is There Trouble in 2M Alliance?

2016 was the early days of the 2M Alliance. While it had gained maritime authority approval in 2014, 2M had only begun operating in 2015. The honeymoon after the shipping lines’ alliance certainly didn’t last long. The first public trouble in the marriage was around disunity over what was supposed to be a joint service turning into an exclusive service from Maersk. This happened right after Maersk had announced a bold new business strategy.

It was unknown at the time what MSC thought of Maersk’s aggressive business strategy, but the two went in different directions strategy-wise since. That they’ve now announced the 2M split is to “pursue individual strategies” certainly rings true as part of why they’ve decided to part ways. But as the history of the 2M Alliance seems as messy as my kids’ hair when they get out of bed in the morning, it definitely seems to be only part of the story.

I’ve long speculated we’d see an end to this alliance in Universal Cargo’s blog. Finally, it’s happening.

Next Week – What This Means for Shippers

In Tuesday’s post, I’ll get into the strategies Maersk and MSC are pursuing and what all this likely means for shippers.

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ILWU Negotiations Help NY/NJ Surpass LA/LB as Busiest U.S. Port https://www.universalcargo.com/ilwu-negotiations-help-ny-nj-surpass-la-lb-as-busiest-u-s-port/ https://www.universalcargo.com/ilwu-negotiations-help-ny-nj-surpass-la-lb-as-busiest-u-s-port/#respond Wed, 18 Jan 2023 00:45:56 +0000 https://www.universalcargo.com/?p=11588 It's become something of a habit when talking about the sister ports of Los Angeles and Long Beach to mention they're the busiest port complex in the U.S. in terms of cargo volume brought in through them. I don't go looking up the stat when I routinely write approximately 40% of U.S. imports come through the Ports of Los Angeles and Long Beach. However, something has changed that should make us writers who cover the international shipping sector think twice before calling the San Pedro Bay port complex the busiest in the country.

The Port of New York and New Jersey has recently taken the crown as the busiest port by imported container volume.

Michael Angell reports in the Journal of Commerce:

The Port of New York and New Jersey became the busiest US port by container import volumes in late 2022 thanks to new services and cargo diversions stemming from congestion and longshore labor negotiations on the West Coast.

Find out more by reading the full post in Universal Cargo's blog.

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It’s become something of a habit when talking about the sister ports of Los Angeles and Long Beach to mention they’re the busiest port complex in the U.S. in terms of cargo volume brought in through them. I don’t go looking up the stat when I routinely write approximately 40% of U.S. imports come through the Ports of Los Angeles and Long Beach. However, something has changed that should make us writers who cover the international shipping sector think twice before calling the San Pedro Bay port complex the busiest in the country.

A New King of the Ports

The Port of New York and New Jersey has recently taken the crown as the busiest port by imported container volume.

Michael Angell reports in the Journal of Commerce:

The Port of New York and New Jersey became the busiest US port by container import volumes in late 2022 thanks to new services and cargo diversions stemming from congestion and longshore labor negotiations on the West Coast.

ILWU Hands Market Share to East and Gulf Coast Ports

Shippers have been diverting cargo from West Coast ports for the better part of a year because they know labor slowdowns have become a standard part of International Longshore & Warehouse Union (ILWU) contract negotiations. 2002 and 2014-15 were extremely costly examples of this both for shippers and the U.S. economy in general.

The last ILWU master contract expired July 1st of last year. Here we are six-and-a-half months later, and the ILWU looks no closer to reaching a new contract than the day the previous one expired.

Of course, there have been labor disruptions at West Coast ports during this negotiation period, but shippers’ diversion of cargo from West Coast ports to East and Gulf Coast ports, something they began doing in the months leading up to the expiration of the ILWU master contract, helped mitigate the labor disruptions.

Shippers moving discretionary cargo away from the West Coast gave East and Gulf Coast ports significant market share increases. Bill Mongelluzzo reports numbers in another JOC article:

The West Coast’s share of imports coming from Asia dropped to 58.8 percent in 2022, down from 61 percent in 2021, according to PIERS, a Journal of Commerce sister product within S&P Global. The East Coast share rose to 34.2 percent, up from 32.9 percent, while the Gulf Coast share rose to 6.7 percent from 5.8 percent.

The shift in market share continued as US imports from Asia fell overall, with cargo moving through the West Coast plummeting more than 20 percent in November from the year-earlier period. The East and Gulf coasts saw lesser declines. 

Dockworker and cargo containers
Dockworker and cargo containers

Cargo Not Shifting Back Soon

There’s no reason to think this market share will go back to West Coast ports anytime soon. That’s because there’s no reason to think the ILWU contract negotiations will come to resolution anytime soon.

By all accounts, the ILWU is slow-playing negotiations until a ruling is made on a union jurisdiction dispute at the Port of Seattle’s Terminal 5. According to Mongelluzzo, that ruling is expected to be a month or two away.

Luckily, congestion at the ports has been largely cleared away. Unfortunately, that is because of economic downturn with demand returning to pre-pandemic levels. At least for shippers, that’s good news in terms of falling freight rates and cargo flowing through the ports much more smoothly. It also means already existent congestion isn’t there to amplify labor action that disrupts operations at the ports.

My expectation is that things between the ILWU and their Pacific Maritime Association (PMA) employers will remain rather quiet until the jurisdiction ruling comes in. After that is when contention is likely to ramp up as the parties have to work through difficult issues, with automation likely to make things ugly. My worry is if the ILWU loses its jurisdiction battle with the International Association of Machinists and Aerospace Workers (IAMAW), tensions could escalate quickly.

There’s no reason to think shippers will bring discretionary cargo back to the West Coast until after a new contract is reached between the ILWU and PMA. That contract appears to be months away. I wouldn’t be surprised in the least to see us heading into this year’s peak season with no contract in place.

Market Share Could Remain Away from West Coast Even After ILWU Resolution

It is expected once a contract is finally reached, cargo will return to the West Coast and the Ports of Los Angeles and Long Beach will retake their place as the busiest port complex in the country in terms of imported cargo volume. However, some of the market share East and Gulf Coast ports have gained will likely not return. Not only are shippers tired of the cycle of contentious contract negotiations on the West Coast costing them money, but East and Gulf Coast ports are investing in services and capability to keep more cargo volume with them.

Angell shared a number of things the Port of NY/NJ is doing to support more cargo moving through it:

Maher Terminals has added three new super-post-Panamax cranes to an existing berth that are expected to be in service some time in 2023, while GCT Bayonne will add a new berth and cranes for super-post-Panamax ships by 2025 and Port Newark Container Terminal is studying adjacent land to add capacity. The first bids for a $100 million project to improve a three-mile truck corridor through the port are also expected to be submitted by next year, and PANYNJ is moving forward with a study on additional rail track extending from the port that will reduce delays for intermodal service, but there is no timeline at present for when those projects will be completed.

Meanwhile, reasons for businesses to continue to move away from China with their sourcing could support the Port of NY/NJ and others on the East and Gulf Coasts in their bids to hold more market share that has traditionally belonged on the West Coast and at the Ports of Los Angeles and Long Beach in particular.

Certainly, the Port of NY/NJ doesn’t just want to be king for a day.

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Government Threatens Independent Trucker System in U.S. Supply Chains & Update on Potential O’Hare Disruption https://www.universalcargo.com/government-threatens-independent-trucker-system-in-u-s-supply-chains-update-on-potential-ohare-disruption/ https://www.universalcargo.com/government-threatens-independent-trucker-system-in-u-s-supply-chains-update-on-potential-ohare-disruption/#respond Fri, 13 Jan 2023 03:06:08 +0000 https://www.universalcargo.com/?p=11538 The federal government is threatening to put its thumb on the scales of the trucking portion of the nation's supply chain. With a proposed rule reminiscent of California's AB5, the government goes after the system of independent truckers that the country's supply chains depend upon.

Bill Mongelluzzo reports in a Journal of Commerce (JOC) article:

The Labor Department’s proposed rule under the Fair Labor Standards Act, as currently written, would make it much more difficult for companies to protect the independent contractor status of the owner-operators who contract with them, Gregory Feary, president and managing partner at the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary, told the Journal of Commerce.
If the proposed rule becomes law, it will effectively replace the decades-long dominance of the independent contractor model in trucking with an employee-driver model that some trucking companies feel is more costly and less efficient. Feary said there are currently about 350,000 independent truckers in drayage and over-the-road trucking in the US.

Find out more about this and the situation for shippers at O'Hare Chicago airport, read the full post in Universal Cargo's blog.

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The federal government is threatening to put its thumb on the scales of the trucking portion of the nation’s supply chain. With a proposed rule reminiscent of California’s AB5, the government goes after the system of independent truckers that the country’s supply chains depend upon.

End of Truckers?

Bill Mongelluzzo reports in a Journal of Commerce (JOC) article:

The Labor Department’s proposed rule under the Fair Labor Standards Act, as currently written, would make it much more difficult for companies to protect the independent contractor status of the owner-operators who contract with them, Gregory Feary, president and managing partner at the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary, told the Journal of Commerce.

If the proposed rule becomes law, it will effectively replace the decades-long dominance of the independent contractor model in trucking with an employee-driver model that some trucking companies feel is more costly and less efficient. Feary said there are currently about 350,000 independent truckers in drayage and over-the-road trucking in the US.

After a long legal fight to stop AB5 in California failed, many truckers took to protesting at ports. There was some disruption, but we’re still a long way from seeing what the full fall-out of AB5 will be. Of course, whenever the government gets overly involved in an industry, the result tends to be the same: increased cost and less efficiency, often to extreme degrees. Consider the increased costs of healthcare and education with increased government involvement as examples.

This proposed federal rule under the Fair Labor Standards Act could easily cause disruptions from truckers like those in California over AB5, but on a national scale. And, of course, it is expected by industry professionals to increase costs while decreasing efficiency. In a time of high inflation, economic downturn, and trucker shortages, this proposed rule is a bad risk to take with national supply chains.

However, there are differences between this rule and AB5 highlighted in Mongelluzzo’s article:

The requirements in the proposed Labor Department rule, which could be finalized in the next three to six months, differ somewhat from the AB5 regulation that became law in California last summer, Feary said. AB5, which is based on the “ABC test,” contains three criteria involving the scope of work performed by drivers and the amount of control a trucking company exerts over the drivers. Feary said all three elements of the ABC test must be proven to demonstrate the worker’s status. 

The rule proposed in the 184-page Labor Department document contains five criteria to be met to demonstrate independent contractor status. Those criteria involve company control over the driver; the investment made by the worker in the tool of the trade (truck); whether technology, such as safety or tracking technology, allow the company to exert control over the worker; the extent of managerial decision-making afforded to the independent driver; and whether the driver engages in “exclusivity” if they contract with the same company for years. 

The proposed rule would not require that all five criteria be met, but rather that the majority of the five lean in that direction, Feary said. 

Like with AB5, how this rule would end up getting applied is unclear. There’s always the fear of increased strictness and escalating regulation over time, as is often the case with government involvement in industries. The potential threat to independent truck owner/operators remaining independent, which is often very important to those truckers – even something they pride themselves on – is high.

O’Hare Disruption Avoided

Speaking of government putting its thumb on the scales of the supply chain, the coercion of cargo handling companies at O’Hare Chicago Airport to make a deal with the powerful union Service Employees International Union (SEIU), which wants to represent the companies’ employees, was successful. A city mandate pushed by Mayor Lori Lightfoot and SEIU required cargo handling companies at O’Hare to make a deal with SEIU by January 20th or get their licenses revoked.

A week ago, I shared with Universal Cargo blog readers the potential cargo disruption at O’Hare because of this mandate. As an update, the cargo handling companies signed deals with SEIU, as reported by Eric Kulisch in a Freight Waves article:

A final ground handling agent at Chicago O’Hare International Airport has reached a required labor agreement and will continue cargo operations, sparing several cargo airlines from potential service interruptions.

The Chicago Department of Aviation (CDA) on Tuesday notified freighter operators that cargo handler Swissport has signed an agreement with the Service Employees International Union (SEIU) establishing parameters for the union to mount a membership drive. The development eliminates the potential for a supply chain disruption.

Alliance Ground International, another major airport service provider, on Friday agreed on a plan for the SEIU to access its facilities and meet with workers. Worldwide Flight Services reached a resolution with the union much earlier. 

More and more, Democrat-run cities are forcing companies to sign labor peace agreements, as Chicago required airport service companies to do last summer. Kulisch sums up these deals, if you can call them that, well as “controversial agreements” that “force employers to be neutral during union organizing campaigns and unions not to engage in picketing, work stoppages or other economic interference for a period of time.”

In reality, businesses aren’t getting anything from these deals. They’re forced to allow big unions to swoop in and recruit their workforces without interfering or arguing the benefits of not joining said unions. The businesses end up with a workforce more likely and organized to take labor action, including strikes and slowdowns, against the employers for higher wage and benefit demands with the time unions’ time of not being able to engage in such labor action very limited. It’s also a bad deal for workers who do not wish to join and pay dues to these unions.

In the end, the goal is to unionize everything possible. This makes the powerful unions even more millions upon the millions they collect in dues. In turn, these unions can spend even more millions on Democrat candidates, whom they lobby heavily.

While it’s easy to get pessimistic with the big picture, this story is good news for air shippers in the immediate moment. Shippers do not need to avoid O’Hare at the present.

key takeaway

Key Takeaway

If the goal is a stronger economy through healthier businesses able to thrive and employ more people, the proposed rule in the Fair Labor Standards Act and labor peace agreements seem are bad moves. However, for Democrats, if the goal is to maintain and increase power through labor feeding their campaigns and policy pushes with money through unions, both labor peace agreements and the proposed rule in the Fair Labor Standards Act seem to fit nicely into that.

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Major Air Cargo Disruption at Chicago O’Hare Threat from Pro-Union Mandate https://www.universalcargo.com/major-air-cargo-disruption-at-chicago-ohare-threat-from-pro-union-mandate/ https://www.universalcargo.com/major-air-cargo-disruption-at-chicago-ohare-threat-from-pro-union-mandate/#respond Fri, 06 Jan 2023 02:01:12 +0000 https://www.universalcargo.com/?p=11528 Air freight shippers may want to consider avoiding Chicago O'Hare until a bad and potentially very disruptive situation there is resolved.

A Chicago mandate pushed forward by the city's unpopular Mayor Lori Lightfoot and the Service Employees International Union (SEIU) Local 1 could revoke the licenses of contractors who handle air cargo at the major hub if they don't reach a signed agreement with SEIU by January 20th. This would create massive disruption for air cargo at O'Hare.

Find out all about it by reading the full post in Universal Cargo's blog.

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Air freight shippers may want to consider avoiding Chicago O’Hare until a bad and potentially very disruptive situation there is resolved.

A Chicago mandate pushed forward by the city’s unpopular Mayor Lori Lightfoot and the Service Employees International Union (SEIU) Local 1 could revoke the licenses of contractors who handle air cargo at the major hub if they don’t reach a signed agreement with SEIU by January 20th. This would create massive disruption for air cargo at O’Hare.

In an excellent Freight Waves article about the situation, Eric Kulisch reports:

Cargo airline executives warn it could take months to find replacement ground handling agents, leading to long backlogs at other overstretched facilities and forcing them to hunt for alternative airports that might permanently retain some of the $200 billion worth of annual imports and exports moving through O’Hare.

“There is no good short-term solution if this happens and there will be a massive airfreight disruption in the region impacting many businesses,” said Shawn McWhorter, Americas president for Nippon Cargo Airlines, in an email message.

Image: Scenes from O'Hare International Airport (Chicago, Illinois) - Tuesday April 10th, 2018 by Corey Seeman
Image: Scenes from O’Hare International Airport (Chicago, Illinois) – Tuesday April 10th, 2018 by Corey Seeman

The companies in danger of losing their licenses are Alliance Ground International (AGI) and Swissport Cargo, according to the article. They “control 65% of the cargo processed at O’Hare after AGI in the past 14 months acquired independent Maestro Cargo International and Total Airport Services,” Kulisch reports.

Big Unions and Big Government Flex Their Power

Outrageous to me about this situation is it’s not even about these companies making a deal with a union that represents their employees. SEIU approached these companies about unionizing and representing their employees, and the companies are being coerced to work with the union under very pro-union terms. The whole point is to force the giant union into a position where it controls the jobs and represents those workers.

According to Kulisch’s article, SEIU represents almost 2 million workers in the U.S. and Canada. With Mayor Lightfoot’s help, the powerful union looks like it will now also represent cargo handlers at O’Hare. If the contractors who handle that work don’t go along, they’re out. And, yeah, shippers get to see their air cargo get stuck.

Kulisch gives information on “labor peace agreements” that employers are basically forced to sign and cause this kind of situation:

Labor peace agreements, increasingly pursued by local and state governments as a way to increase union ranks, are contracts in which employers waive certain rights under federal law during a union organizing campaign. Concessions can include staying neutral during union recruiting, and allowing workplace access. In exchange, the union agrees not to engage in picketing, work stoppages, boycotts or other economic interference for a period of time. Most business groups don’t like being coerced into making it easier for unions to be recognized.

The Deck Is Stacked Against Employers, Shippers, and Workers Who Don’t Want the Union

The SEIU makes hundreds of millions of dollars every year off of dues. The SEIU Local 1 alone collected $28 million in dues and fees from its members in 2020, according to reports the union must file with the U.S. Department of Labor. The SEIU has more than 150 local affiliates, according to the union’s website. Americans for Fair Treatment (AFFT) reports the SEIU collected $255 million in dues (not mentioning fees) in 2020 and spent 1 out of every 5 of those dollars on partisan politics “toward progressive candidates and causes.”

That $55 million on progressive candidates and causes is just the beginning. SEIU also “spent more than $60 million in dues on ‘political activities and lobbying,’ which is 20% of its total annual expenditures,” AFFT reports.

It’s no wonder the union can lobby politicians into passing a mandate like the one in Chicago.

It’s also no wonder why many workers might not want to be forced to join the union, especially since the union spends the largest amounts of its money on organizing new members, like it’s trying to do at O’Hare, and politics, while in 2020 “only 12% of total spending went toward representational activities for existing members, like negotiating contracts or handling grievance claims,” according to AFFT. Workers who disagree with the policies and politics of the politicians the SEIU supports likely wouldn’t want to be paying into election efforts for those politicians with their dues either.

The chance that workers might not vote to pay SEIU dues and let the union represent them without a coercive voting system could be the biggest issue keeping AGI and Swissport reaching a written agreement with SEIU. Kulisch reports:

The primary sticking point appears to be the SEIU’s insistence that it be allowed to use signature cards instead of a secret ballot vote to secure recognition as the workers’ bargaining representative, according to a letter AGI sent to customers explaining the situation and seeking their support.

Getting workers to sign cards, a process called card check, saying they support becoming dues-paying union members is easier and less risky than a traditional vote. If organizers can persuade more than 50% of workers at a facility to sign cards, they win the right to form a union. Businesses advocates argue card check is not a reliable sign of someone’s true interest in joining a union because there is no opportunity to hear opposing information, and people often will sign cards under pressure or false promises to stop being harassed.

AGI and Swissport may not have much choice but to let SEIU get it wants. The cards are stacked against the companies. Krulisch reports, “The airport authority notified them early last month that they had until 5 p.m. on Jan. 19 to” agree on terms of engagement with workers for SEIU.

Bad Situation for Airliners, Air Cargo Companies, and Shippers

Airlines and air cargo companies will have to scramble if AGI and Swissport lose their licenses, Krulisch reports, and are urging airport officials to extend the deadline on these cargo handling companies. There is great fear that getting new cargo handling agents will be extremely expensive. A Krulisch quoted a carrier executive who asked for anonymity because of the politics involved:

“We’re going to get done over on price,” he said. “We expect the prices to go up and the service to go down. And we worry about the safety implications of moving to another agent very quickly.”

“The city needs to be helping us find alternative agents and make sure that other agents don’t rip us off pricewise,” he said.

With pressure from the city helping to create this problem, I doubt airlines will find much help from the city resolving it.

Ultimately, if AGI and Swissport lose their licenses, air shippers will likely being paying more for their cargo shipments through O’Hare while suffering delays from congestion. If SEIU gets the companies employees under its union umbrella, it likely won’t be long before the union pushes for higher pay, where workers already receive competitive wages and benefits. This would push air freight prices up for shippers. And SEIU has shown repeatedly in its history that it’s not afraid to organize labor action, so delays for shippers during negotiations, like are regularly seen at West Coast ports during ILWU contract negotiations, wouldn’t be a surprise either.

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2023 Freight Rates, Likely Below Pre-Pandemic Pricing, Great for Importers https://www.universalcargo.com/2023-freight-rates-likely-below-pre-pandemic-pricing-great-for-importers/ https://www.universalcargo.com/2023-freight-rates-likely-below-pre-pandemic-pricing-great-for-importers/#respond Thu, 29 Dec 2022 21:32:41 +0000 https://www.universalcargo.com/?p=11499 2022 is just days away from being over, so it's time to look forward to 2023. We'll probably have a few posts focused on what the year will have in store for international shipping, but today we focus on 2023 freight rates. And the outlook is positive for shippers.

2023 should not only see freight rates back to pre-Covid levels, but will likely see international shipping pricing below 2019 levels.

This is an easy prediction to make as freight rates are already near 2019 levels and have even fallen below those levels with some Asia to West Coast spot rates. Most industry experts seem to agree things won't bottom out until well into 2023 when it comes to falling cargo volumes and freight rates, which should have shippers encouraged when it comes to what they'll be paying to import goods in the new year.

Find out more, including where freight rates are still high, by reading the full post in Universal Cargo's blog.

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2022 is just days away from being over, so it’s time to look forward to 2023. We’ll probably have a few posts focused on what the year will have in store for international shipping, but today we focus on 2023 freight rates. And the outlook is positive for shippers.

Freight Rates Back to or Below Pre-Covid Levels

2023 should not only see freight rates back to pre-Covid levels, but will likely see international shipping pricing below 2019 levels.

shipping containers supply chain
Shipping Containers Picture: https://unsplash.com/photos/tjX_sniNzgQ

This is an easy prediction to make as freight rates are already near 2019 levels and have even fallen below those levels with some Asia to West Coast spot rates. Most industry experts seem to agree things won’t bottom out until well into 2023 when it comes to falling cargo volumes and freight rates, which should have shippers encouraged when it comes to what they’ll be paying to import goods in the new year.

Current Low Asia-West Coast Freight Rates

In an American Shipper article, Greg Miller reports on Asia to West Coast ports:

The Freightos Baltic Daily Index (FBX) assessed China-West Coast rates at $1,378 per forty-foot equivalent unit on Monday. The index has been relatively unchanged since Nov. 23 and is down 93% from its all-time high in September 2021.

It has now done a full round trip since the beginning of the COVID-induced consumer boom — it’s back where it was at this time of year in 2019.

Container shipping spot rates are also assessed by Platts, a division of S&P Global Commodities. Platts put North Asia-West Coast spot rates at $1,300 per FEU as of Monday, $50 per FEU below its assessment at this time in 2019.

Current Asia-East Coast Rates

When it comes to Asia to East Coast routes, Miller reports:

FBX put China-East Coast spot rates at $2,905 per FEU on Monday, down 87% from the peak in September 2021, albeit still up $295 per FEU or 11% from pre-COVID levels. Unlike FBX’s West Coast index, which plateaued this month, the FBX East Coast index has slid 16% since Dec. 1.

The Drewry WCI Shanghai-New York index was at $3,889 on Thursday, down 76% from the all-time high in September 2021. According to the WCI, spot rates in this lane are still $1,391 per FEU or 56% above where they were at this time in 2019.

What Held Asia-East Coast Rates Year-on-Year Higher Than West Coast Rates

Asia to East Coast rates would likely be at or possibly just below 2019 levels if not for all the cargo that’s been diverted from West Coast ports to East Coast ports in order to avoid labor slowdowns because of the International Longshore & Warehouse Union (ILWU) contract negotiations.

It’s likely the Asia to West Coast rates would be a little bit higher right now if not for the ILWU contract negotiations causing cargo diversion, and I doubt Asia to East Coast freight rates would be all the way at or under 2019 rates, but both would be close and moving in that downward direction because of falling demand.

What’s Dropping Freight Rates

Summer of last year, I was predicting big drops in ocean freight rates in 2022 (and possibly starting earlier) largely because of out-of-control inflation from government overspending and printing of money while consumer expendable cash and government stimuli were running dry. Meanwhile, industry experts were still expecting another great year for carriers in 2022, with continued high freight rates, even if some saw a fairly significant drop in them happening at some point during the year.

I actually thought bad government policies in response to the pandemic would catch up to us sooner than they did. But when inflation finally did hit, it hit hard. And now, economic downturn plummeted shipping demand, having at least the one positive result of falling freight rates. But there are a couple other benefits for shippers, which we’ll mention at the end.

There was also a great deal of investment made by carriers in capacity that would put some downward pressure on freight rates in 2022. Carrier alliances mitigated that some with blanked (cancelled) sailings this year. However, unlike at the beginning of the pandemic, carriers weren’t able to blank enough sailings to make capacity fall under market demand and stop freight rates from dropping. There’s more capacity injection set to put downward pressure in the major trade lanes to the U.S. that are still well above pre-pandemic levels.

Transatlantic Importing Still Triple Pre-Pandemic Freight Rates But Set to Fall

Miller reports transatlantic to the U.S. to be nearly triple what they were in 2019:

The FBX Europe-East Coast assessment was at $5,693 per FEU as of Monday, 2.9 times its level at this time in 2019. The latest Drewry WCI Rotterdam-New York assessment was $6,989 per FEU, also 2.9 times pre-pandemic levels.

Miller quickly got into the increase of capacity poised to hit these trade lanes:

[Sea-Intelligence CEO Alan Murphy] explained, “From mid-December 2022, operated capacity on North Europe-North America East Coast will shift from being roughly at the same level as in 2019 to being 20% higher. And as we get into mid-February 2023, this is poised to jump even further, to 30% [higher]. Capacity from the Mediterranean will grow at an average of 25% over 2019 in January-February 2023.”

Combining this increase of capacity with the economic downturn, these trade lanes that are still boasting freight rates high above pre-pandemic are poised to tumble.

Other Benefits of Reduced Shipping Demand for Importers

It’s true that consumer projections and an uncertain economic picture has retailers who import goods pulling back on those shipments. However, just because there are negative factors at play doesn’t mean there aren’t positives for shippers to look at.

Beyond reduced freight rates, reduced demand is helping clear port congestion and increase shipment reliability, which has been a major problem over the last few years. West Coast ports are as clear of congestion as they’ve been since the pandemic hit.

With the ILWU contract negotiations looking likely to drag on for months, reduced cargo will help mitigate congestion created by labor slowdowns that has unfortunately become a regular part of the negotiation process over the last couple decades.

Ships not getting stuck at anchor outside of ports also brings cargo arrivals more consistently on schedule. There will be (and have been) plenty of blank sailings from carriers to fight overcapacity in attempts to keep freight rates as high as possible, but overall reliability is still improving with reduced demand.

Ultimately, if your business is successful within its niche, 2023 could be a good year for you with favorable shipping conditions despite an economy that has many less than optimistic. Happy New Year to you, yours, and your business from all of us here at Universal Cargo!

Click Here for Free Air Freight PricingClick here for free freight rate pricing

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What Is a Freight Forwarder, and Do You Need One? https://www.universalcargo.com/what-does-a-freight-forwarder-do-do-you-need-one/ https://www.universalcargo.com/what-does-a-freight-forwarder-do-do-you-need-one/#comments Wed, 28 Dec 2022 23:43:47 +0000 https://www.universalcargo.com/?p=7327 The post What Is a Freight Forwarder, and Do You Need One? appeared first on Universal Cargo.

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Importing and exporting are critical components for many lucrative businesses. International shipping offers numerous opportunities for American companies to expand. However, the complexities of international shipping might hold your company back from expanding globally. Working with a freight forwarder can make international shipping easier for you.

They will take on many of the burdens involved in shipping your goods worldwide, including tracking, sorting our documentation and more. Partnering with an international air freight forwarder will create new opportunities for your business without investing significant time and resources into understanding the global logistics industry.

This guide will take you through what a freight forwarder does and the benefits of working with one.

What is a freight forwarder?

Here are the most commonly asked question about freight forwarding and their answers:

What Is a Freight Forwarder?

A freight forwarder is a company that arranges the shipping and storage of stock on behalf of its clients. Freight forwarders provide a comprehensive range of services, including tracking onshore transport, warehousing, arranging cargo insurance, securing cargo space, working out freight charges, filling out shipping and export documentation and freight consolidation. Freight forwarders will ship merchandise on their waybills, either by sea or air. They also work with third-party associates at various destinations worldwide to provide documentation, transport and other necessary services.

At their core, freight forwarders handle the commercial shipping of goods for other companies.

Freight forwarding crew checking on cargo

So what does that mean in terms of what a freight forwarder does?

What Does a Freight Forwarder Do?

Arranging international shipping is complex, with significant documentation and coordination required to handle it successfully. While freight forwarders handle all of the details, it is essential that you understand the role of a freight forwarder.

Freight forwarders act as intermediaries between a shipper and transportation services that might include ocean shipping, trucking, rail and expedited air freight. They work with several transport partners across multiple regions, countries and continents to ship merchandise.

A freight forwarding service will use already-established relationships with carriers to determine transport costs and shipping routes. They aim to choose economical routes that balance speed, price and reliability.

Transport is only part of the service that freight forwarders provide. They also have extensive knowledge of transport costs, banking practices, documentation and other regulations associated with shipping goods internationally. Forwarders leverage this knowledge to advise their clients on the most efficient and economical transportation route. Forwarders also handle tasks that would cause a considerable burden for clients, such as the logistics involved with shipping goods from one international destination to another.

Partner with international freight forwarders for success worldwide

Why Should I Work With a Freight Forwarder?

You can import and export goods on your own. However, importing and exporting merchandise involve a substantial amount of documentation and regulation that varies between countries. Partnering with international freight forwarders company ensures you can successfully ship goods worldwide.

Knowing the shipping companies, the documentation and the customs laws of various countries is a freight forwarder’s job. Working with an experienced freight forwarding company can help you save time and money and provide reliable product transportation at competitive rates.

Any company dealing in the international transportation of goods could benefit from a freight forwarder. It is advantageous, especially when in-house team members and resources are not fully equipped to handle international shipping procedures.

Some of the benefits of working with a freight forwarder include the following:

  • Accountability
  • Experience
  • Knowledge of shipping seasons
  • Ancillary services like tracking
  • Relationships with global partners
  • Cargo tracking
  • Compliance
  • Excellent customer service
  • Warehousing
  • Risk management and assessment
  • International payment methods

Types of global freight forwarding

 

Global Freight Forwarding

Freight forwarders rely on four types of transport when shipping freight around the world: air, ocean, rail and road freight. Each type of transport is necessary when exporting and importing goods.

Global freight forwarders make use of each type of freight to ship goods around the world. The type of freight will depend on the country being exported from or imported to. In many cases, a combination of all four is used to ensure that goods arrive on time and in the most economical way.

Some common countries that American businesses import from include:

  • Vietnam
  • Thailand
  • Singapore
  • China
  • Indonesia
  • Malaysia

Air Freight

Air freight forwarding ships cargo by air over large distances. Everyday items in air freight shipments include vehicles, food, manufacturing parts, clothes, electronics and more. The use of air freight is growing around the world as it is seen as port delays and other challenges impact ocean freight. Air freight is the fastest of all shipping methods.

Common air export destinations from the U.S. include:

  • Germany
  • United Kingdom
  • Spain
  • Netherlands
  • Asia

Ocean Freight

Shipping cargo over the ocean is known as ocean or sea freight. Ocean freight is the most versatile of the shipping methods as it can handle large amounts of goods of varying sizes. It is more cost-effective than air freight but takes longer for goods to be shipped.

Rail Freight

More oversized items or bigger loads that aren’t suitable for trucks are transported via train on railway systems. Rail freight is cheaper than air and ocean freight but takes longer to transport goods. It is a good alternative for transporting goods over large land distances without incurring high costs.

Road Freight

Road or ground freight is used to deliver goods within a country, to neighboring countries and between ports and distribution centers. Road freight is also the cheapest of all the freight methods. This specialized form of trucking regularly carries high-value goods and stock that requires refrigeration.

Get complete B2B shipping with us today

Get Complete Business-to-Business Shipping With Universal Cargo

Being able to safely and economically transport your goods worldwide can significantly impact your company’s operations. At Universal Cargo, we leverage over 30 years of transporting experience to provide you with expert shipping services. We work with experienced partners such as Dr. Drayage to ensure we can offer comprehensive freight forwarding services. We will provide you with a dedicated account executive team to develop a robust shipping strategy for your business to export and import goods into and out of America.

Let us do the hard work for you. Contact Universal Cargo today for commercial oceanair or truck freight forwarding!

 

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Top 10 International Shipping News Storylines of 2022 https://www.universalcargo.com/top-10-international-shipping-news-storylines-of-2022/ https://www.universalcargo.com/top-10-international-shipping-news-storylines-of-2022/#comments Tue, 27 Dec 2022 21:10:23 +0000 https://www.universalcargo.com/?p=11468 2022 is nearly over, so it's time to look back on the year and digest what happened. Here at Universal Cargo, we like to count down the top international shipping news stories we covered from number ten to one a la David Letterman. We realize we may now have readers who don't remember Letterman and his Top 10 List. Let me assure you, it was much funnier and more entertaining than this list.

Our list has evolved a bit over the years. It has gone from top blogs to top stories to now top storylines, as international shipping news items often tend to be ongoing things through the year (and beyond). We're also not above reverting to most popular, most entertaining, or most viewed posts at the end of the year either. But I digress. Let's get into the top international shipping news storylines of the year as we say goodbye to 2022...

See the top 10 list in Universal Cargo's blog!

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2022 is nearly over, so it’s time to look back on the year and digest what happened. Here at Universal Cargo, we like to count down the top international shipping news stories we covered from number ten to one a la David Letterman. We realize we may now have readers who don’t remember Letterman and his Top 10 List. Let me assure you, it was much funnier and more entertaining than this list.

Our list has evolved a bit over the years. It has gone from top blogs to top stories to now top storylines, as international shipping news items often tend to be ongoing things through the year (and beyond). We’re also not above reverting to most popular, most entertaining, or most viewed posts at the end of the year either. But I digress. Let’s get into the top international shipping news storylines of the year as we say goodbye to 2022…

#10 Port Fees Keep Piling Up

Just squeaking onto the list is ports implementing more fees. Because of the big international shipping news stories happening, all the new port fees of 2022 didn’t make it into Universal Cargo blog posts. Plus, it seems like shippers are always seeing new, and sometimes unfair, fees at ports. Still, port fees are impactful for U.S. importers and exporters, so the couple fees that managed to get blog posts this year manage to sneak onto the top 10 list while other fees did get mentioned in other posts, though not their own, throughout the year.

NY-NJ Port Terminal Taking Away Weekend/Holiday Free Time

map of Africa Suez Canal vs Cape Route
Map of Africa by mapswire with Suez Canal and Cape Route markings added.

New Fee at the Ports of Los Angeles & Long Beach to Fund Zero Emissions Trucks

#9 Suez Canal Toll Increase

Sticking with fees, next on the list is a significant story for international shipping that got majorly overshadowed in 2022. This is an impactful cost increase in international shipping that affects not only U.S. importers but shippers around the world. It seems everything got more expensive in 2022 with out-of-control inflation, but freight rates actually went down. That will be talked about later, but decreased freight rates also helped bury the story of a toll hike at the Suez Canal.

A major toll increase at one of the top gateways for ocean freight shipping will impact international shipping moving forward. Thus, it managed to earn a spot on the top 10 list.

New Suez Toll Hike Significant for U.S. Importers

#8 Carriers Hit with Fines

For years, shippers have complained about unfair fees from carriers. Finally, there seems to be some momentum in curbing these as the FMC levied a fine against Hapag-Lloyd over unfair detention fees. 2022 also saw carriers get hit with price collusion fines (which is certainly something that has happened in previous years too). However, carriers seemed able to shrug off even millions in fees as over the pandemic, they made billions.

FMC Finally Acts on Unfair Fees with Hapag-Lloyd Fine

Carriers Fined Millions for Price Collusion Call Fines Insignificant as They Make Billions

#7 Blame Lies with Bad Government Policy Not Supply Chain

Those in charge of government policy pushed narratives that supply chain problems were causing the economic problems we’ve been seeing, inflation in particular. However, examining the causes of the supply chain crisis and inflation quickly make it clear that narrative was, and still is, a lie. Lockdowns and government stimuli were the biggest factors in surging shipping demand to levels ports and the supply chain couldn’t handle. Massive spending and money printing by the government has also been the biggest factor in pushing up inflation. The narrative of high freight rates causing inflation really fell apart when there wasn’t even correlation between rising and falling freight rates and inflation levels to try to support a causation argument.

High Ocean Freight Rates Are Not the Cause of Inflation

Government Making Supply Chain Crisis Worse

#6 AB 5 Goes Into Effect

The full implications of this story may not be known for quite some time. In 2022, California’s Assembly Bill 5 (AB 5) made it through legal challenges to go into effect. The bill basically makes the use of independent truckers illegal in California, forcing them to become employees of trucking companies or stop trucking in the state. This upends the trucking system in the supply chain, at least through California, where approximately 40% of U.S. imports enter the country through the Ports of Los Angeles and Long Beach alone and there are 70,000 independent truck owner-operators.

Trucker strikes and protests over AB 5 created some port disruption, particularly at the Port of Oakland. Trucking has become a bit more difficult in California, but there is still dispute happening over the bill and uncertainty on its enforcement. California tends to lean in the direction of overregulation, which has caused many businesses to leave the state. My expectation is AB 5 will be another net negative for the state, adding to the list of regulation that has turned out to be problematic. It would have been nice if AB 5 ended up #5 on this list, but it just missed it, landing at #6.

Port of Oakland Operating But AB 5 Supply Chain Threat Continues

Truckers, with ILWU Assist, Disrupt Port of Oakland Over AB 5

Truckers Strike Over AB 5!

19 Legislators Call on Gov. Newsom to Stop AB 5 from Hurting Truckers & Supply Chain

Californian Law Attacks Truckers & Supply Chain

#5 Threat of Rail Strike

This storyline was high drama in international shipping news in 2022, and I believe it got more Universal Cargo blog posts than anything else this year. The U.S. faced a rail strike threat that would have screeched supply chains to a halt across the country. This storyline would have gone even higher on the list, except the rail strike never happened. Still, the threat was very real and narrowly avoided.

Rail Strike Averted as Senate Passes Bill & Biden Signs

House Acts to Avert Rail Strike That Would Halt U.S. Supply Chains

Rail Strike Watch: SMART-TD Rejects Tentative Labor Agreement

Rail Strike Watch: Another Union Rejects Tentative Labor Agreement

Rail Strike Watch: Potential Strike Pushed Back to December

7th Union Ratifies Rail Worker Deal, But Strike Threat Still Looms

November Rail Strike Looks Likely After Railroads Rejects Union Offer

Major Rail Union Rejects Tentative Agreement, But If Strike Happens it Won’t Be Until After Elections

Threat of Rail Strike Is Not Over

Railroads & Unions Reach Tentative Agreement Preventing Strike

Railroad Unions May Strike This Week w/ $2B-a-Day Consequences

Railroads Reach Deal w/ 3 Unions – More to Do to Avoid Strike

How Likely Is a Rail Strike?

#4 Russia Ukraine Conflict Impacts Shipping

Russia invading Ukraine was obviously a huge news story in 2022. Of course, it would make it into the top international shipping news storylines of the year. Resulting embargoes as well as carrier decisions to remove services from Russia certainly impacted international shipping. China seemingly helping shippers get around sanctions on Russia also has significant political implications. It’s no surprise this storyline made it pretty high on the list.

The Russia and Ukraine War’s Impacts on Imports to the U.S.

Is China Helping Shippers Get Around Russian Sanctions?

What?! Russia/Ukraine Conflict Could Ease U.S. Port Congestion & Freight Rates?

Russia Invading Ukraine Likely Means Shippers Paying Even More for Their International Shipping

#3 Cargo Shipping Boom Ends and Rates Finally Fall

Man Looking Up at Shipping Containers

The international shipping boom finally ran out of steam in 2022. This is something I predicted as likely at the beginning of the year with soaring inflation helping to bring down shipping demand. With a fall in cargo volume came a fall in freight rates that even carrier alliances blanking (cancelling) sailings couldn’t stop.

With shipping demand and freight rates skyrocketing to record highs over the previous couple years, seeing those things come back to earth is a big deal, making the storyline of freight rates and demand a top three item on this year’s list.

What Does International Shipping Look Like for Importers Right Now?

Ocean Imports Drop, Trucking Jobs Plummet, Air Freight Peak Season Disappears

Freight Rates Down, Blank Sailings Up, Inflation – Yikes

Has the International Shipping Bubble Finally Popped?

Post-COVID Outlook on Ocean Shipping

Congestion, Delays, & Blank Sailings, Oh My

What’s Actually Happening with Freight Rates Right Now

Slowing Economy Should Lower Freight Rates But 3 Factors Could Keep Them High

Ports Get Congestion Relief But It May Be Only Momentary

Freight Rates Falling – But How Far & How Long?

2022 Supply Chain Outlook for U.S. Shippers

#2 ILWU Negotiations Stall & Turn Disruptive

Number two on the list is an international shipping news story that will continue on into the new year. International Longshore & Warehouse Union (ILWU) contract negotiations have a history of bringing disruption to West Coast ports. The current negotiations are no different.

Shippers diverted a great deal of cargo from West Coast ports to East and Gulf Coast ports in anticipation of the inevitable disruption of labor slowdowns that are now a traditional part of ILWU negotiations. That increased cargo to East and Gulf Coast ports brought some congestion there, but union actions at West Coast ports proved shippers right in diverting cargo.

The big issue that was expected to hold up and turn negotiations contentious was automation. However, the real issue that stalled negotiations was union jurisdiction, particularly a fight over jobs at the Port of Seattle’s Terminal 5 (T5). There is a relationship between this union jurisdiction fight and automation. The ILWU claims it conceded the Pacific Maritime Association (PMA) the right to automate for backing in all job jurisdiction fights it has with other unions. The union says the PMA has not followed through on this, claiming employers don’t even have the legitimate right for the automation already done at ports.

Negotiations don’t look even close to resolution six months after the ILWU master contract expired. Expect this to drag on for months into 2023.

Strap In Shippers: ILWU Contract Negotiations Look to Be Long & Bumpy Road

More ILWU Port Disruption & Terminals Cutting Man-Hours as Contentious Contract Negotiations Drag

ILWU Slows Oakland & Seattle Port Operations

ILWU Labor Action Occurs as Contract Negotiations Look Bad

ILWU Contract Negotiations Stalled Over Union Jurisdiction

ILWU Contract Negotiations Suspended

What’s Happening at Ports During ILWU Negotiations?

ILWU & PMA Speak About Contract Negotiations

Shippers Beg Biden to Help Make ILWU Contract Negotiations Go Smoothly

UH-OH – ILWU Contract Negotiations Suspended Till June

SHIPPERS BEWARE: ILWU & PMA Automation Fight Already Starting

#1 China’s Crazy Covid Zero Policy Hurting People & Supply Chain

When most of the world finally accepted the fact that lockdowns and shutdowns don’t help save lives from COVID-19, China continued these kinds of practices in the extreme. At the beginning of the year, it looked like the country might finally be letting up on its Covid Zero, or Zero-Covid, policy, but quickly it became apparent that was not the case. This ended up being a major story in both international shipping and human rights throughout the year.

The Chinese Communist Party (CCP) locked down whole cities, welding people into their apartment complexes, kicking others out of theirs to turn their homes into Covid camps, leaving people shouting from their balconies for a lack of food, arresting other people, and, of course, disrupting the supply chain.

People in China often showed resistance to these authoritarian acts of the CCP only to be met with violence. When people, who likely could have been saved if not for Covid Zero policy, died in a fire, outrage spread to massive protests, the size of which haven’t been seen since the Tiananmen Square massacre. China’s government did appear to pull back a little on the Covid Zero policy immediately after the massive protests, but only a little bit while the CCP deflected blame to local authorities for some of the outrageous actions perpetrated against its people.

It’s hard to imagine putting a storyline ahead of this one the list.

China’s Covid Zero Policies Worsen Supply Chain Problems

China’s Wrong Covid Zero Policy, Protestors Risking Everything, & Supply Chain Situation for Shippers

Shanghai Lockdown Not Really Over

WARNING: 4 Major Fallouts from China’s Contemptible Covid Zero Lockdowns

Shanghai Lockdown Causing Outrageous Disruption

It’s Time to Look at What China’s “Covid Zero” Really Is (with Videos)

Now China Locks Down Shanghai

Massive Chinese Lockdowns Present More Supply Chain Disruption

Perhaps China Is Loosening Its Insane Covid Zero Policies… a Little

Ocean & Air Shipping Delayed by China’s COVID Restrictions

Click Here for Free Air Freight PricingClick here for free freight rate pricing

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Air Freight Sees Overcapacity & Shipper-Friendly Conditions Heading into 2023 https://www.universalcargo.com/air-freight-sees-overcapacity-shipper-friendly-conditions-heading-into-2023/ https://www.universalcargo.com/air-freight-sees-overcapacity-shipper-friendly-conditions-heading-into-2023/#respond Fri, 23 Dec 2022 02:19:01 +0000 https://www.universalcargo.com/?p=11463 Air freight conditions for shippers are now starkly different from what they were during the pandemic. For the most part, this difference is positive for shippers. Air space and availability is up while air freight rates are falling.

For two-and-a-half years, demand way outpaced capacity in the air freight sector.

Things got so bad, freight forwarders and other logistics intermediaries would often lose their air cargo space in the time it took to quote rates to customers and get confirmation to book it.

Not only did a lack of capacity compared to demand make it difficult for shippers to find airplane space for their goods, but it also put upward pressure on air freight rates. However, air freight rates did not rise at the same astronomical level that ocean freight rates did, causing air freight to grab some market share from ocean freight.

Major congestion at ports on the ocean freight side also helped push market share in air freight's direction. But things have been changing on the ocean freight side too.

Find out more by reading the full post in Universal Cargo's blog.

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Air freight conditions for shippers are now starkly different from what they were during the pandemic. For the most part, this difference is positive for shippers. Air space and availability is up while air freight rates are falling.

For two-and-a-half years, demand way outpaced capacity in the air freight sector.

Things got so bad, freight forwarders and other logistics intermediaries would often lose their air cargo space in the time it took to quote rates to customers and get confirmation to book it.

Not only did a lack of capacity compared to demand make it difficult for shippers to find airplane space for their goods, but it also put upward pressure on air freight rates. However, air freight rates did not rise at the same astronomical level that ocean freight rates did, causing air freight to grab some market share from ocean freight.

Major congestion at ports on the ocean freight side also helped push market share in air freight’s direction. But things have been changing on the ocean freight side too.

Ocean freight rates have been falling for several months. Ocean freight pricing rose to more than five times pre-pandemic rates during the pandemic, but many experts now think they will fall below pre-pandemic levels. That is bringing market share back to ocean freight shipping from air freight. And so is easing of the congestion at the world’s ocean ports.

Simultaneously, passenger flights are increasing as confidence to fly continues to rise with falling fears of COVID-19 and fewer Covid-related restrictions around the world. That creates much more capacity in air freight, as air cargo is often transported below deck on passenger flights.

Unfortunately, the economic outlook doesn’t look good. That’s feeding into dropping demand from shippers to import and export goods in general. Add it all up, and we’re seeing demand and supply moving in opposite directions in air freight.

All that extra space compared to demand puts downward pressure on rates, making this a good time for shippers to consider air freight.

Despite space and pricing both moving in excellent directions for shippers, not everything in the air freight market outlook is positive for shippers.

Greg Knowles looked forward to the new year in an air cargo article for the Journal of Commerce (JOC) that points out potential air freight issues for shippers from China’s Covid Zero policies and potential congestion issues that could spawn from labor shortages:

Another factor to keep an eye on is China’s “zero-COVID” strategy. While Beijing is easing some of the more drastic measures, such as lockdowns at short notice, any widespread outbreak could test this more “relaxed” approach. Labor shortages among ground handlers and air crew pose another growing problem that will be felt well into 2023, with the potential to overwhelm airport operations at both origin and destination hubs, again raising the specter of lengthy delays.

The “greatest challenge” Knowles points out for the air freight sector in 2023 is lack of demand. He lists “a potential global recession, soaring energy prices, runaway inflation, and geopolitical issues like the Russia–Ukraine war and the ongoing US–China trade spat” as factors undermining consumer spending and freight demand. But as already discussed in this post, that low demand issue is more of a problem for carriers than for shippers. Of course, it stems from problems facing us all.

Ultimately, a healthy international shipping sector, both on the ocean and air freight sides, increases reliability for shippers. But after the last few years of exceptionally high rates, it’s good to see shippers get a period where ocean and air freight rates are falling, even if they go below sustainable rates for carriers.

Click Here for Free Air Freight PricingClick here for free freight rate pricing

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What Does International Shipping Look Like for Importers Right Now? https://www.universalcargo.com/what-does-international-shipping-look-like-for-importers-right-now/ https://www.universalcargo.com/what-does-international-shipping-look-like-for-importers-right-now/#respond Wed, 14 Dec 2022 02:29:10 +0000 https://www.universalcargo.com/?p=11431 Importers, and shippers in general, had a rough couple of years when it came to international shipping after the pandemic hit. But the landscape, or ocean-scape, looks quite different now. Unfortunately, economic downturn is a large reason international shipping conditions have improved for importers. However, let's focus on the positive. Right now, conditions for importing are better than they've been in some time.

I wasn't going to start here, but freight rates tend to be top on the list of things shippers want to know about. Who can blame them? A business needs to know its costs in order to be successful. And there was a point over the last couple years when ocean freight rates had skyrocketed to more than 500% pre-pandemic shipping prices. Over the last year, freight rates have been coming back down.

Keep reading in Universal Cargo's blog.

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Importers, and shippers in general, had a rough couple of years when it came to international shipping after the pandemic hit. But the landscape, or ocean-scape, looks quite different now. Unfortunately, economic downturn is a large reason international shipping conditions have improved for importers. However, let’s focus on the positive. Right now, conditions for importing are better than they’ve been in some time.

Freight Rates Down

I wasn’t going to start here, but freight rates tend to be top on the list of things shippers want to know about. Who can blame them? A business needs to know its costs in order to be successful. And there was a point over the last couple years when ocean freight rates had skyrocketed to more than 500% pre-pandemic shipping prices. Over the last year, freight rates have been coming back down.

Freight Rates

There have been stalls in the decline where rates held fairly steady for a bit as well as blips of increases, but the overall trajectory this year has been downward. Even during the traditionally freight-rate-increased peak season, which ended up being rather muted this year, freight rates were coming back down to earth instead of rising. Here are a few posts where we looked at freight rates from the time period surrounding this year’s would-be peak season:

Freight Rates Falling – But How Far & How Long?

What’s Actually Happening with Freight Rates Right Now

Freight Rates Down, Blank Sailings Up, Inflation – Yikes

Ocean Imports Drop, Trucking Jobs Plummet, Air Freight Peak Season Disappears

Post peak season, the trajectory of freight rates has not changed.

While ocean freight rates aren’t all the way down to pre-pandemic levels, they have plummeted with no bottom in sight. Many experts think freight rates will bottom out sometime in 2023, possibly even reaching prices below pre-pandemic levels. Such freight rates would be great news for shippers, paying much less to import goods, but would be unsustainable for carriers, which would start seeing losses if rates held that low for a long period of time.

Of course, carriers made billions upon billions over the course of the pandemic as freight rates soared, so they should have a cushion to handle such a period, should freight rates get stuck in the unprofitable zone for shipping lines. Even before rates get that low, what we’ve been seeing is a relief for shippers.

Just over a week ago, Greg Miller, in a FreightWaves article, compiled numbers from different freight rate indexes, showing the kind of pricing decline importers have been seeing in international shipping this year:

The pace of spot-rate declines did slow in some trade lanes in October versus August and September. However, rate losses picked up again in many lanes in November, causing global averages to fall further….

Different spot-rate indexes provide different numbers but show the same downward trend. 

The weekly Drewry World Container Index shows a 78% decline in the global composite rate between Sept. 16, 2021, and Thursday. Drewry’s Shanghai-Los Angeles index fell 84% over that period and its Shanghai-New York index dropped 73%.

The Drewry rate assessments show a gradual decline in the first half of this year, followed by a more precipitous fall starting in August. Despite the huge drop from last year’s record peak, the global index is still 61% higher than the 2019 average, pre-pandemic.

The article is a good read for people who enjoy data and would be hard to be seen as anything but good news for shippers when considering the freight rate front.

Volume Down

A large reason for the decrease in shipping rates is a decrease in freight volume, which represents the demand side of the international shipping industry.

Right now, many reports describe freight volumes as plummeting. Let’s stick with Miller, as he’s often data-driven in his articles. Yesterday, he wrote in a FreightWaves article:

Descartes reported Monday that 1,954,179 twenty-foot equivalent units of containerized cargo were imported in November. That’s down 12% month on month (m/m) and 19.4% year on year (y/y). It’s only 2.8% higher than imports in November 2019, pre-COVID, and down 37% from the May peak.

Imports typically decline in November versus October — but not by this much. This year’s m/m November drop is the steepest recorded by Descartes since 2016.

Volumes, according to the article, are getting close to pre-COVID levels, “before the pandemic-induced spending splurge.”

Besides lockdowns and stimuli checks no longer injecting extra spending into the goods markets, inflation and general economic downturn have helped reduce the volume of shipping containers of goods heading to the U.S. This decline in goods helped U.S. ports finally get congestion under control after months upon months upon months of record to near-record volumes that were beyond ports’ ability to handle.

Longer Wait Times on East Coast But Less Predictability on West Coast

For a long time, congestion was a widespread problem but at its worst at the West Coast ports of Los Angeles, Long Beach, and Oakland. Currently, the wait time for ships berthing with goods at East Coast ports is longer than at West Coast ports.

… there continues to be a wide disparity in ship wait time between the coasts. West Coast ports are under much less pressure, with much shorter wait times.

According to Descartes data, the average wait times at the top five West Coast ports in November was 6.94 days, down 15% m/m and less than half the peak wait times recorded in February.

The average wait time at the top five ports on the East and Gulf coasts was 9.96 days, down 6% m/m and 29% from the February peak. This is still 44% higher than the West Coast average, underscoring how far some ports remain from pre-COVID normalcy.

Volume has declined lately at West, East, and Gulf Coast ports, but shippers are still diverting a good portion of freight from the West Coast to East and Gulf Coasts because of the uncertainty ILWU contract negotiations create at the West Coast ones.

West Coast ports have managed to clear the queues of ships waiting at anchor to berth, but there is still less predictability at these ports. Contract negotiations between the International Longshore & Warehouse Union (ILWU) and Pacific Maritime Association (PMA) remain stalled, and much labor disruption has been seen at the ports over the course of negotiations.

Air Freight Loses Market Share to Ocean Freight

When ocean freight rates soared to record rates, it gave shippers incentive to do more importing and exporting through air. After all, one of the biggest reasons shippers choose ocean freight over air freight is often price. Now that ocean freight rates are falling, much of the market share air freight gained is now returning to ocean freight.

Alex Lennane reported on this in the Loadstar.

Much like demand reduction put downward pressure on ocean freight rates, shrinking demand in air freight right now is causing air freight pricing to drop. That makes right now a good time for shippers who need faster, more agile importing of goods to utilize air freight.

Still, those who want to import in greater volume and do not need the speed air freight brings will likely be better served by the ocean freight sector.

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Rail Strike Averted as Senate Passes Bill & Biden Signs https://www.universalcargo.com/rail-strike-averted-as-senate-passes-bill-biden-signs/ https://www.universalcargo.com/rail-strike-averted-as-senate-passes-bill-biden-signs/#respond Tue, 06 Dec 2022 20:51:38 +0000 https://www.universalcargo.com/?p=11422 Nearly three full years after the railroad unions went into negotiations with the railroads for new contracts, resolution has been reached. Last week, I blogged about the House of Representatives acting to prevent a strike that would have shut down supply chains across the country and could have started this Friday. The Senate followed by passing the House's bill that made a potential rail worker strike illegal, forcing the rail worker unions to accept a tentative agreement that was rejected by 4 of 12 of the unions.

Not everything the House sent to the Senate passed, however. Rail workers' biggest grievance holding up the ratification of the contract was over the issue of sick leave. Rail workers demanded more sick leave days, so the House tried to have their cake and eat it too by forcing the contract on the unions but also giving them their sick leave. That measure didn't pass nearly as strongly in the House, and it failed to pass in the Senate.

Find out more by reading the full post in Universal Cargo's blog.

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Nearly three full years after the railroad unions went into negotiations with the railroads for new contracts, resolution has been reached. Last week, I blogged about the House of Representatives acting to prevent a strike that would have shut down supply chains across the country and could have started this Friday. The Senate followed by passing the House’s bill that made a potential rail worker strike illegal, forcing the rail worker unions to accept a tentative agreement that was rejected by 4 of 12 of the unions.

Sick Leave Resolution Fails

U.S. Senate Building picture by Ted Eytan
U.S. Senate Building picture by Ted Eytan

Not everything the House sent to the Senate passed, however. Rail workers’ biggest grievance holding up the ratification of the contract was over the issue of sick leave. Rail workers demanded more sick leave days, so the House tried to have their cake and eat it too by forcing the contract on the unions but also giving them their sick leave. That measure didn’t pass nearly as strongly in the House, and it failed to pass in the Senate.

Democrats were in a difficult position. The party bolsters itself as being pro-union, receiving heavy campaign contributions from unions. President Biden even claims to be the most union-friendly president in history, which is hard to square with him calling on Congress to make a strike illegal and force unions to take a contract they don’t want. But that’s the right call, which is something I’m rarely able to say about action from the Biden Administration, even if there really is no choice.

Meanwhile, the Democrats still control Congress, which was the only thing to stand in the way of a disastrous strike that a U.S. economy already on the downturn could not afford. With it being just weeks before Christmas, it’s hard to imagine a worse time for the railroads to stop moving and supply chains to screech to a halt. Democrats had to act against a union strike – even though it could be viewed as union-busting action and the second highest ranking Democrat in the Senate, Senator Richard Durbin, previously told CNN, “I don’t think it’s likely we will intervene.”

Republicans have been ready to act to stop the strike, so Democrats had no worries of getting the bipartisan action required to avert the supply chain disaster. Interestingly, there was even bipartisan support for the sick leave measure. Li Zhou reported in a Vox News article that conservative senators Ted Cruz and Josh Hawley had an unlikely alliance with the wildly left socialist Senator Bernie Sanders in calling to adopt the sick leave language.

However, it wasn’t enough. Zhou reported that only six Republicans senators voted to force more sick leave into the contract while one Democrat senator voted against it. Thus, Democrats fell short of the 60 votes they needed to have their cake and eat it too.

Ultimately, I believe the Senate did the right thing in passing the bill to stop the strike but not the measure to add sick leave to the contract. As I said in the last post, Congress both forcing the acceptance of a contract and determining the terms of that contract could be a bad precedent.

Did It Hold Up?

The threat of a U.S. rail strike has been a very serious one for much of this year. Negotiations between rail worker unions and the railroads had dragged on for over two years and reached an impasse by the time summer hit this year. Unions were moving toward strike, so it became a serious topic we here at Universal Cargo needed to talk about for shippers. Along the way, I made a couple predictions. Let’s see how they held up.

The most recent prediction was last week when the House passed the bills to halt the strike and force more sick leave into the contract. Here’s what I predicted to follow:

I am confident the Senate will approve the bill that averts the strike by forcing the unions to take the tentative agreement. However, the sick leave passing by a small margin in the House may mean there’ll be some drama over whether or not it will pass in the Senate. If I had to put money on it, I’d go with it passing but by a slim margin. However, it may set a bad precedent for Congress to not only force acceptance of contracts but also to determine terms of those contracts.

I was right about the bill to avert the strike passing, but I was wrong about the sick leave measure passing the Senate. Maybe I get a little mitigation by expecting some drama over it and it to only to pass by a slim margin. Maybe.

For the other major prediction I made, you have to go back half a year to when I really started covering this topic with a post entitled, “How Likely Is a Rail Strike?” This was a long post, laying out the situation for shippers who read this blog. Here’s what I predicted in the conclusion section of that post:

There are enough factors to make me think a rail strike is not as likely to happen as it seemed even a week or two ago. If a rail strike does indeed happen, I think it would be more symbolic than anything as Congress couldn’t afford not to use its powers to shut the strike down right away.

A situation where the unions did strike against the railroads would, however, put the Democrats in a tough situation. Unions tend to be big campaign contributors to the Democratic Party, and they couldn’t afford to be seen as anti-union or, worse, union-busting. However, they also can’t afford to let the economy get stuck on the tracks.

I wouldn’t be surprised to see President Biden’s PEB produce rather union-friendly recommendations and congress implement them if the two sides didn’t agree.

In the end, this prediction held up pretty well. The Presidential Emergency Board recommendations that the tentative agreement was based on did give the unions quite a bit, but obviously rail workers would have liked it to be even more union-friendly, particularly concerning the issue of sick leave. In the end, Congress did have to implement the contracts and the country avoided its supply chains shutting down because of a rail strike.

Related Posts

House Acts to Avert Rail Strike That Would Halt U.S. Supply Chains

Rail Strike Watch: SMART-TD Rejects Tentative Labor Agreement

Rail Strike Watch: Another Union Rejects Tentative Labor Agreement

Rail Strike Watch: Potential Strike Pushed Back to December

7th Union Ratifies Rail Worker Deal, But Strike Threat Still Looms

November Rail Strike Looks Likely After Railroads Rejects Union Offer

Major Rail Union Rejects Tentative Agreement, But If Strike Happens it Won’t Be Until After Elections

Threat of Rail Strike Is Not Over

Railroads & Unions Reach Tentative Agreement Preventing Strike

Railroad Unions May Strike This Week w/ $2B-a-Day Consequences

Railroads Reach Deal w/ 3 Unions – More to Do to Avoid Strike

How Likely Is a Rail Strike?

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House Acts to Avert Rail Strike That Would Halt U.S. Supply Chains https://www.universalcargo.com/house-acts-to-avert-rail-strike-that-would-halt-u-s-supply-chains/ https://www.universalcargo.com/house-acts-to-avert-rail-strike-that-would-halt-u-s-supply-chains/#respond Thu, 01 Dec 2022 18:46:21 +0000 https://www.universalcargo.com/?p=11412 The House of Representatives passed two bills yesterday (Wednesday, November 30th) to prevent a rail strike by forcing rail worker unions to accept the tentative rail worker agreement while also trying to appease union members' biggest grievance with the deal. The bills will still need to be passed by the Senate and signed into law by President Biden.

Ari Ashe reported in a Journal of Commerce (JOC) article:

"Major shippers applauded the House of Representatives passing a bill Wednesday that would avert a crippling rail strike by forcing all unions to accept terms of a tentative contract agreement brokered by the Biden administration in mid-September.

"...

"The House also approved a second, separate bill that would require US railroads to grant seven days of paid short-term sick leave to union workers, and force binding arbitration on both sides if details cannot be hammered out within 30 days."

There's a bit of a "have your cake and eat it too" aspect to this story. Four railroad unions rejected the tentative agreement, and we were fast moving toward a likely strike. Congress had to take action, which was granted to it by the Railway Labor Act, to stop the strike. However, forcing an agreement they didn't want on unions to stop them from striking seems awfully close to union-busting action. Thus, the House created the second bill to give the unions more sick leave, which was the biggest sticking point on getting the remaining unions to ratify the contract.

Find out more by reading the full post in Universal Cargo's blog.

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The House of Representatives passed two bills yesterday (Wednesday, November 30th) to prevent a rail strike by forcing rail worker unions to accept the tentative rail worker agreement while also trying to appease union members’ biggest grievance with the deal. The bills will still need to be passed by the Senate and signed into law by President Biden.

House of Representatives
Photo of House of Representatives by Ted Eytan

Ari Ashe reported in a Journal of Commerce (JOC) article:

Major shippers applauded the House of Representatives passing a bill Wednesday that would avert a crippling rail strike by forcing all unions to accept terms of a tentative contract agreement brokered by the Biden administration in mid-September.

The House also approved a second, separate bill that would require US railroads to grant seven days of paid short-term sick leave to union workers, and force binding arbitration on both sides if details cannot be hammered out within 30 days.

There’s a bit of a “have your cake and eat it too” aspect to this story. Four railroad unions rejected the tentative agreement, and we were fast moving toward a likely strike. Congress had to take action, which was granted to it by the Railway Labor Act, to stop the strike. However, forcing an agreement they didn’t want on unions to stop them from striking seems awfully close to union-busting action. Thus, the House created the second bill to give the unions more sick leave, which was the biggest sticking point on getting the remaining unions to ratify the contract.

Ashe reported this second bill did not pass by nearly as wide a margin as the first. In fact, the sick leave bill passed by a pretty slim margin: 221-207 as compared to a 290-137 vote for the bill forcing the unions to accept the terms of the tentative agreement.

I am confident the Senate will approve the bill that averts the strike by forcing the unions to take the tentative agreement. However, the sick leave passing by a small margin in the House may mean there’ll be some drama over whether or not it will pass in the Senate. If I had to put money on it, I’d go with it passing but by a slim margin. However, it may set a bad precedent for Congress to not only force acceptance of contracts but also to determine terms of those contracts.

There’s no reason to think President Biden wouldn’t sign both bills into law upon them reaching his desk. Especially given the administration was already encouraging Congress to act on this issue. That’s not to mention allowing a strike to happen would be economically disastrous when excessive government spending and executive actions have been major drivers of inflation and increased gas and oil prices.

If you missed the lead-up to Congress having to act to prevent a rail strike, Universal Cargo’s blog has you covered:

Rail Strike Watch: SMART-TD Rejects Tentative Labor Agreement

Rail Strike Watch: Another Union Rejects Tentative Labor Agreement

Rail Strike Watch: Potential Strike Pushed Back to December

7th Union Ratifies Rail Worker Deal, But Strike Threat Still Looms

November Rail Strike Looks Likely After Railroads Rejects Union Offer

Major Rail Union Rejects Tentative Agreement, But If Strike Happens it Won’t Be Until After Elections

Threat of Rail Strike Is Not Over

Railroads & Unions Reach Tentative Agreement Preventing Strike

Railroad Unions May Strike This Week w/ $2B-a-Day Consequences

Railroads Reach Deal w/ 3 Unions – More to Do to Avoid Strike

How Likely Is a Rail Strike?

 

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China’s Wrong Covid Zero Policy, Protestors Risking Everything, & Supply Chain Situation for Shippers https://www.universalcargo.com/chinas-wrong-covid-zero-policy-protestors-risking-everything-supply-chain-situation-for-shippers/ https://www.universalcargo.com/chinas-wrong-covid-zero-policy-protestors-risking-everything-supply-chain-situation-for-shippers/#respond Wed, 30 Nov 2022 01:08:43 +0000 https://www.universalcargo.com/?p=11406 The people of China are standing up against the tyrannical Covid Zero a.k.a Zero Covid policies their government continues to enforce on them. These policies have disrupted supply chains through major Chinese cities and ports over the last few years, but more importantly, they have disrupted (likely costing many) lives of the Chinese people, putting on display the lack of freedom citizens have under the Chinese Communist Party (CCP).

Seeing uprisings in cities all over the country where people gather, chant, hold up blank signs to represent the things the communist government doesn't allow them to say, and fight back against the police sent to suppress them inspires hope that China could see change. It also creates fear of a repeat of the massacre of Tiananmen Square.

The current uprisings in China are being called unprecedented by the press. It seems to be getting that descriptor because of the size of the protests and the number of cities in which it's happening. However, it should be remembered that the student protest in 1989 grew beyond students to over a million people in Tiananmen Square and included hunger strikes through many Chinese cities.

Unprecedented or not, this is definitely the most significant act of civil disobedience in China in the decades since the Tiananmen Square massacre. The inciting incident was the death of people in a fire, which fellow citizens believe could have been prevented if not for Covid Zero policy.

Find out more by reading the full post in Universal Cargo's blog.

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The people of China are standing up against the tyrannical Covid Zero a.k.a Zero Covid policies their government continues to enforce on them. These policies have disrupted supply chains through major Chinese cities and ports over the last few years, but more importantly, they have disrupted (likely costing many) lives of the Chinese people, putting on display the lack of freedom citizens have under the Chinese Communist Party (CCP).

Seeing uprisings in cities all over the country where people gather, chant, hold up blank signs to represent the things the communist government doesn’t allow them to say, and fight back against the police sent to suppress them inspires hope that China could see change. It also creates fear of a repeat of the massacre of Tiananmen Square.

The current uprisings in China are being called unprecedented by the press. It seems to be getting that descriptor because of the size of the protests and the number of cities in which it’s happening. However, it should be remembered that the student protest in 1989 grew beyond students to over a million people in Tiananmen Square and included hunger strikes through many Chinese cities.

Unprecedented or not, this is definitely the most significant act of civil disobedience in China in the decades since the Tiananmen Square massacre. The inciting incident was the death of people in a fire, which fellow citizens believe could have been prevented if not for Covid Zero policy.

Sam Whelan reported in The Loadstar:

A fire which killed 10 people in Urumqi, capital of the western Xinjiang region, appears to have triggered the widespread unrest, and strong-arm reprisals from the authorities.

The city had been under lockdown for more than 100 days and protesters took to the streets, blaming Covid-restrictions for delaying the response to the tragedy by emergency services and calling for an end to the lockdown.

Similar protests broke out over the weekend in cities including Shanghai, Beijing, Guangzhou, Wuhan and Chengdu, with videos on social media showing largely peaceful protests and vigils outside universities.

YouTube Video

Imagine if the deadly fire happened in a building Chinese authorities welded people inside. Yes, that’s something Chinese authorities have done during these Covid Zero lockdowns that I’ve been vocally critical of inside this blog:

China’s Covid Zero Policies Worsen Supply Chain Problems

Perhaps China Is Loosening Its Insane Covid Zero Policies… a Little

Ocean & Air Shipping Delayed by China’s COVID Restrictions

Shanghai Lockdown Not Really Over

Shanghai Lockdown Causing Outrageous Disruption

Now China Locks Down Shanghai

Massive Chinese Lockdowns Present More Supply Chain Disruption

It’s Time to Look at What China’s “Covid Zero” Really Is (with Videos)

WARNING: 4 Major Fallouts from China’s Contemptible Covid Zero Lockdowns

Those are just a handful of posts in which I criticized the horrific actions the CCP has been committing against its people. But it’s easy for me to criticize from across the ocean. For Chinese people to stand up against their government’s actions, with many even calling for Democracy, they’re putting their very lives on the line. And the CCP is cracking down on them.

Michael Lee reported in a Fox News article:

While protests continued in the more free “Special Administrative Region” of Hong Kong, Chinese police in major cities, including Shanghai and Beijing, worked to put an end to protests that had been intensifying across the country since last week.

Videos from the country have emerged in recent days showing both angry protesters and the attempted police crackdown, with protesters overturning tents at the nucleic acid testing site in Guangzhou City Monday. Meanwhile, police arrived at protests in a fire truck in Southern China and attempted to disperse protesters with a fire hose.  

The show of force has largely worked to quiet the cities, with no word of additional protests in Shanghai or Beijing on Tuesday, according to the Associated Press.

Chinese universities sent students home on Tuesday in addition to the increased police presence in the streets, with police making checks on people’s phones in the streets and in subway stations. One Shanghai resident, who did not give the Associated Press his name over fears of retribution, said his phone was checked at a subway station while he was on the way to a protest he read about online, but he was unable to find the protest.

Meanwhile, those who took part in protests over the weekend have reported that authorities are trying to hunt them down, according to a BBC report. Several Beijing residents told the outlet police had called them to demand information about their whereabouts.

Even if the authoritarian strong-arming of the Chinese citizens succeeds in quelling the protests in China, the people did at least have some measure of success. Lee reported:

Authorities have responded by easing some of the COVID restrictions in an attempt to relax some of the anger but have refused to back down from the country’s larger anti-COVID strategy.

Of course, while some Covid restrictions have been eased, there have still been new ones imposed in the wake of protests, as Whelan reported in the Loadstar article:

Shanghai-based Thomas Gronen, head of Greater China at Fibs Logistics, told The Loadstar: “The protests are very local actions. What will impact the supply chain, sooner or later, are newly imposed Covid restrictions. We have lockdowns in Beijing, Wuhan, Chongqing and a ‘work from home’ recommendation in Shenzhen.

Still, in perhaps an oddly positive result of the protests, the CCP has gone so far as to blame some of the bad policy resulting in these protests on local authorities rather than take responsibility:

Chinese authorities have claimed that the unrest over the country’s COVID policies were not the fault of the national government, instead pinning the blame on local districts for sometimes having “arbitrary measures” that have angered residents.

How is this blaming possibly a positive result of the protests? While we’re not seeing an end to Covid Zero policy in China, this blame game response may indicate the CCP will think twice about some extreme restrictions placed on its people and is trying to convince them it is not to blame for their largest grievances.

Unfortunately, blaming others for the disastrous results of bad policies is reminiscent of political leaders we have in this country. We’ve also seen rather authoritarian actions from our government since the onset of the pandemic. Shutdowns and lockdowns, masking requirements lacking scientific justification, and executive order to vaccinate regardless of legitimate reasons not to at the threat of losing your livelihood are a few. Add censorship of dissenting voices – even those of experts in the virology and vaccination fields of medicine – shows a need to be vigilant of the hard-fought-for rights we have in the U.S.

Bad inflation and the current negative economic outlook in the U.S. have helped to greatly reduce shipping demand. Importing from China in particular is down. The continued disruption from China’s Covid Zero policies likely are part of the reason for the reduced importing from the country. This time of civil unrest could easily add to the disruption to supply chains. However, the reduced demand likely also reduces how disruptive China’s Covid Zero policies and the backlash to them are and will be during this season.

This season is shaping into a rather abnormal one with plummeting demand. As Whelan also quoted Gronen as saying:

“… we’re not seeing any Christmas or Chinese New Year peak season anytime soon.”

Probably the best piece of news for shippers among all this is that at least freight rates have been falling.

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Rail Strike Watch: SMART-TD Rejects Tentative Labor Agreement https://www.universalcargo.com/rail-strike-watch-smart-td-rejects-tentative-labor-agreement/ https://www.universalcargo.com/rail-strike-watch-smart-td-rejects-tentative-labor-agreement/#respond Tue, 22 Nov 2022 18:18:08 +0000 https://www.universalcargo.com/?p=11373 Things moved closer to a rail strike on Monday after the International Association of Sheet Metal, Air, Rail, and Transportation Workers-Transportation Division (SMART-TD) voted to reject the tentative labor agreement, as was reported in the Journal of Commerce (JOC) by Ari Ashe.

Ashe did report a piece of good news as well. The Brotherhood of Locomotive Engineers and Trainmen (BLET) ratified the agreement.

Of course, the bad news overshadows the good here. All it will take is for one union to go on strike for railroads and, thus, supply chains across the country to halt. None of the other eleven rail worker unions is expected to cross the picket lines should one rail union strike.

There are now four rail worker unions that have rejected the deal the Biden Administration pressured the railroads and union leadership into accepting back in September. The other three unions that rejected the deal are the Brotherhood of Maintenance of Way Employes Division (BMWED), the Brotherhood of Railroad Signalmen (BRS), and the International Brotherhood of Boilermakers (IBB).

Find out more by reading the full post in Universal Cargo's blog.

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Things moved closer to a rail strike on Monday after the International Association of Sheet Metal, Air, Rail, and Transportation Workers-Transportation Division (SMART-TD) voted to reject the tentative labor agreement, as was reported in the Journal of Commerce (JOC) by Ari Ashe.

truckers strike Port of Los Angeles Long Beach

Ashe did report a piece of good news as well. The Brotherhood of Locomotive Engineers and Trainmen (BLET) ratified the agreement.

Of course, the bad news overshadows the good here. All it will take is for one union to go on strike for railroads and, thus, supply chains across the country to halt. None of the other eleven rail worker unions is expected to cross the picket lines should one rail union strike.

There are now four rail worker unions that have rejected the deal the Biden Administration pressured the railroads and union leadership into accepting back in September. The other three unions that rejected the deal are the Brotherhood of Maintenance of Way Employes Division (BMWED), the Brotherhood of Railroad Signalmen (BRS), and the International Brotherhood of Boilermakers (IBB).

However, more focus has been on whether or not SMART-TD and BLET would ratify the agreement, as they are the two biggest rail worker unions, representing over 100,000 rail workers. These two unions were also both ready to strike before the tentative agreement was reached.

As a matter of fact, back in July, BLET membership voted to authorize a strike almost unanimously with over a 99% approval vote. It’s a relief to see the union now vote for contract ratification. SMART-TD leadership around that time indicated it had unanimous support to authorize a strike from its general committees. It seems more than likely its membership would be more than willing to strike if a new tentative agreement can’t be reached by the end of its cooling-off period on December 9th.

During the cooling-off period, it’s agreed that no strike and no lockout will occur. While Ashe reported “it is not known whether the Brotherhood of Maintenance of Way Employees Division (BMWED) and Brotherhood of Railroad Signalmen (BRS)… will grant an extension to negotiate in unison with SMART-TD and the International Brotherhood of Boilermakers (IBB),” it should be expected they will.

When the BMWED announced an extension of its cooling-off period to line up with BRS’s, it said if either BLET or SMART-TD rejected the agreement, BMWED would back up the date it could start a strike to line up with the larger union’s cooling-off period. That doesn’t guarantee BRS will do likewise, but it should also be expected. IBB’s cooling-off period already lines up with SMART-TD’s.

cargo train BNSF

Ultimately, this all points to December 9th as the potential date a strike could happen if agreement between the railroads and these four unions cannot be reached.

Shippers are looking to Congress to make sure supplies chains don’t shut down. And at this point, so are the railroads. Ashe quoted a statement from Association of American Railroads CEO Ian Jefferies as saying, “Let’s be clear, if the remaining unions do not accept an agreement, Congress should be prepared to act.”

It’s looking very likely that things will come down to Congress having to act to prevent the economy taking a major hit just weeks before Christmas. The International Association of Machinists and Aerospace Workers (IAM) did end up narrowly ratifying a deal after initially rejecting September’s tentative agreement, but there’s little hope all four of these remaining unions to reject the deal will do likewise. Additionally, the railroads outright rejected BMWED’s last deal offer, in which the union tried to get their biggest remaining demand, more sick leave, met. So it’s not only a question of the unions accepting a deal. It goes both ways.

It has generally been assumed that Congress, having no real choice, would use its powers to stop a strike from shutting down the nation’s supply chains. Republican leaders have been ready with legislation to do so since September, but Democrat leadership comments have put some doubt on if Congress will actually act. Adding to the worry is the fact that BMWED said it would take this extended cooling-off period to lobby Congress not to shut down a union strike.

So now the strike watch continues with the fast approaching December 9th date looming large…

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Related Posts

Rail Strike Watch: Another Union Rejects Tentative Labor Agreement

Rail Strike Watch: Potential Strike Pushed Back to December

7th Union Ratifies Rail Worker Deal, But Strike Threat Still Looms

November Rail Strike Looks Likely After Railroads Rejects Union Offer

Major Rail Union Rejects Tentative Agreement, But If Strike Happens it Won’t Be Until After Elections

Threat of Rail Strike Is Not Over

Railroads & Unions Reach Tentative Agreement Preventing Strike

Railroad Unions May Strike This Week w/ $2B-a-Day Consequences

Railroads Reach Deal w/ 3 Unions – More to Do to Avoid Strike

How Likely Is a Rail Strike?

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Strap In Shippers: ILWU Contract Negotiations Look to Be Long & Bumpy Road https://www.universalcargo.com/strap-in-shippers-ilwu-contract-negotiations-look-to-be-long-bumpy-road/ https://www.universalcargo.com/strap-in-shippers-ilwu-contract-negotiations-look-to-be-long-bumpy-road/#respond Fri, 18 Nov 2022 00:13:17 +0000 https://www.universalcargo.com/?p=11365 There was more port disruption this week as the International Longshore & Warehouse Union (ILWU) contract negotiations drag on. And shippers can expect this to continue for some time.

By all reports, the ILWU is refusing to do any serious negotiating until the jurisdiction issue at the Port of Seattle is resolved. However, according to a Journal of Commerce (JOC) article by Bill Mongelluzzo, it could be mid-2024 before that dispute reaches resolution. So as they say, "something's gotta give."

Find out all the details by reading the full post in Universal Cargo's blog.

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There was more port disruption this week as the International Longshore & Warehouse Union (ILWU) contract negotiations drag on. And shippers can expect this to continue for some time.

By all reports, the ILWU is refusing to do any serious negotiating until the jurisdiction issue at the Port of Seattle is resolved. However, according to a Journal of Commerce (JOC) article by Bill Mongelluzzo, it could be mid-2024 before that dispute reaches resolution. So as they say, “something’s gotta give.”

More Labor Action Disrupting the Port of Oakland

ILWU PMA meet about contract extension
Dockworker and shipping container

The Port of Oakland has seen quite a bit of disruption since the ILWU master contract expired July 1st. So it’s not a surprise more was seen Monday. Mongelluzzo reported the details:

The Port of Oakland’s largest container terminal was fully operational Tuesday after the loading and unloading of vessels was halted Monday due to job action taken by members of the International Longshore and Warehouse Union (ILWU) linked to coastwide contract talks and an ongoing jurisdictional dispute in Seattle.

The Port of Oakland’s largest container terminal was fully operational Tuesday after the loading and unloading of vessels was halted Monday due to job action taken by members of the International Longshore and Warehouse Union (ILWU) linked to coastwide contract talks and an ongoing jurisdictional dispute in Seattle.

This labor action adds to a long list disruption we’ve been seeing at West Coast ports.

Other Union Offers ILWU a Concession to Keep West Coast Market Share

For months, shippers, knowing port disruption and congestion is the norm with ILWU contract negotiations, have been diverting cargo to East and Gulf Coast ports. That means while the ILWU fights with the International Association of Machinists and Aerospace Workers (IAM) over which union controls jobs at the Port of Seattle’s T-5 terminal, West Coast work opportunity is diminishing.

One of the unions in this jurisdiction battle holding up ILWU’s contract talks is smart enough to see the market share loss problem. The IAM have offered an olive branch, as Mongelluzzo puts it, to the ILWU in order to protect West Coast market share and, thus, union jobs. Mongelluzzo reports in his JOC article:

During a National Labor Relations Board (NLRB) hearing last week, the IAM offered to not stand in the way of SSA employing ILWU labor at T-5 until a final NLRB decision on the jurisdictional matter is reached, probably next spring. IAM believes if there is a thaw in the T-5 matter — even a temporary one — it would provide an opening for the ILWU and PMA to hammer out a new coastwide contract, Don Crosatto, the IAM’s area director in Oakland, told JOC.com Tuesday.

“We said we’ll let it go for a while. We don’t want cargo fleeing the West Coast,” Crosatto said. The IAM has a valid contract with SSA for its terminals in Seattle, Oakland, and Long Beach that has been in effect for 70 years now, Crosatto noted.

Such wisdom has typically not been shown by the ILWU in the past. During the lead-up to and negotiations of 2014-15, ILWU members executed such slowdowns at the Port of Portland for jurisdiction over only two jobs, carriers stopped calling on the port with container ships. How many union jobs and man-hours were lost by the ILWU in flexing its muscle for job jurisdiction then?

So far, it doesn’t seem the ILWU learned the obvious lesson from its actions and their results at the Port of Portland. Perhaps a spark of wisdom will be shown by the ILWU in accepting the IAM’s olive branch and returning to the negotiating table. Unfortunately, we’re not seeing that yet. In fact, Mongelluzzo quoted a veteran industry source as saying, “The ILWU is stalling this time more than they ever have before.”

Does that mean these negotiations could last longer than any before?

T-5 Jurisdiction Issue Could Last Years

As mentioned at the beginning of the article, the fight over T-5 jurisdiction at the Port of Seattle could go on for a long time. Mongelluzzo reports:

Crosatto added that if the ILWU continues to delay contract negotiations with the PMA until the T-5 issue is permanently resolved, the ILWU will likely be working without a contract for the duration of the NLRB’s deliberations and the subsequent appeals process, which could take two years.

“We’re looking at mid-2024 for true finality,” in the T-5 dispute, Crosatto said.

Two years of the ILWU refusing to negotiate and executing slow-downs at West Coast ports would obviously be unacceptable. How long would that go on before the Pacific Maritime Association (PMA) would execute a lockout? How much would the likelihood of a full-blown strike increase?

Despite the IAM offering an olive branch, the union shows no intention of giving up its job jurisdiction to the ILWU. Pointing to its 70-year-old contract for West Coast port work, the IAM seems confident it will win the battle. And there’s no guarantee that battle will be over in two years. What is certain is when the ILWU goes to battle, shippers tend to be the losers, paying in port congestion and costly delays.

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Rail Strike Watch: Another Union Rejects Tentative Labor Agreement https://www.universalcargo.com/rail-strike-watch-another-union-rejects-tentative-labor-agreement/ https://www.universalcargo.com/rail-strike-watch-another-union-rejects-tentative-labor-agreement/#respond Tue, 15 Nov 2022 21:08:39 +0000 https://www.universalcargo.com/?p=11361 Another union has voted to reject the tentative labor agreement the White House pressured union and railroad negotiators to reach back in September, at the last moment before unions could, and likely would, have gone on strike. Members of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers (IBB) voted against ratifying the agreement, Ari Ashe reported in the Journal of Commerce (JOC).

The threat of a rail strike – which, shutting down supply chains across the U.S., would have been disastrous for Democrats trying to maintain political power – was effectively pushed back until after the midterm elections. Now we're past the elections and moving dangerously close to a strike lining up with the Christmas season.

Find out more by reading the full post in Universal Cargo's blog.

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Another union has voted to reject the tentative labor agreement the White House pressured union and railroad negotiators to reach back in September, at the last moment before unions could, and likely would, have gone on strike. Members of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers (IBB) voted against ratifying the agreement, Ari Ashe reported in the Journal of Commerce (JOC).

The threat of a rail strike – which, shutting down supply chains across the U.S., would have been disastrous for Democrats trying to maintain political power – was effectively pushed back until after the midterm elections. Now we’re past the elections and moving dangerously close to a strike lining up with the Christmas season.

From the moment the tentative agreement was announced, union members have shown displeasure with it. The main area of complaint has been that it fails to meet union demands for more sick leave. However, there have also been many rumblings about the lack of transparency with the deal in general and a feeling that some union members have expressed that this deal is being forced on them.

Still, seven of the dozen unions that rail workers are split into have ratified their agreements with the railroads. But it only takes one to refuse ratifying and then to go on strike to shut down the railroads and freight from moving across the country.

truckers strike Port of Los Angeles Long Beach

There is still some time for the railroads and this latest union to reject the deal to work out their differences. Ashe wrote in her JOC article:

Negotiators representing the IBB and US rail management will now return to the table to hammer out their differences, with both sides having agreed to a “cooling off” period — i.e., no strikes or lockouts — until Dec. 9.

Last week, the The Brotherhood of Maintenance of Way Employes Division (BMWED) extended its cooling off period to end at the same time as the Brotherhood of Railroad Signalmen’s (BRS) cooling off period, on December 4th. Those are the other two unions that rejected the tentative agreement.

It is likely these two unions will now line up their cooling off period with IBB’s because BMWED already announced it would move its cooling off period’s end to December 9th if either the Brotherhood of Locomotive Engineers and Trainmen (BLET) or the Sheet Metal, Air, Rail and Transportation Workers-Transportation Division (SMART-TD) voted down the contract.

BLET and SMART-TD are the two largest rail worker unions and the last two to vote on ratifying their tentative labor agreements.

Many retailers who import their goods stocked up for the holidays early because of all the supply chain turmoil there has been and the threat of further disruption by the International Longshore & Warehouse Union (ILWU) contract negotiations at West Coast ports. Those negotiations have indeed turned contentious and disruptive. However, that early stocking only brings a very limited amount of mitigation to the damage a rail strike would do. An estimate on the damage to the U.S. economy is $2 billion per day.

It is expected that if the rail unions go on strike, Congress will act within its power to stop the strike. However, some doubt has crept in. When a strike seemed evident in September, Democrats refused to join Republicans in acting to block the potential strike, according to reporting from Chris Isidore in a CNN Business article. Isidore went on to give a quote from Democrat leadership that shippers would likely find alarming:

Sen. Richard Durbin, the second highest ranking Democrat in the Senate, told CNN at that time that “I don’t think it’s likely we will intervene.” He said that avoiding a strike “depends on the parties in negotiations stepping up to the plate.”

It’s disturbing to think Congress would let such a blow just happen to the U.S. economy. But then again, Congress has been dealing blows to the U.S. economy already with trillions of dollars in spending that sends inflation soaring.

Meanwhile, BMWED is using this extended cooling off period to lobby congress not to interfere with a strike. The union stated in a release:

This will also provide an opportunity to increasingly educate Members of Congress – who have been out of session and consumed by the mid-term elections – about the railroad workers’ state of despair that management has created, and the railroad workers’ need for paid sick time off.

That leaves us moving ever closer to a potential rail strike that would shut down U.S. supply chains with a chance that Congress will be unwilling stop it. Of course, we’ll be keeping an eye on the situation with our rail strike watch here at Universal Cargo.

Related Posts

Rail Strike Watch: Potential Strike Pushed Back to December

7th Union Ratifies Rail Worker Deal, But Strike Threat Still Looms

November Rail Strike Looks Likely After Railroads Rejects Union Offer

Major Rail Union Rejects Tentative Agreement, But If Strike Happens it Won’t Be Until After Elections

Threat of Rail Strike Is Not Over

Railroads & Unions Reach Tentative Agreement Preventing Strike

Railroad Unions May Strike This Week w/ $2B-a-Day Consequences

Railroads Reach Deal w/ 3 Unions – More to Do to Avoid Strike

How Likely Is a Rail Strike?

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Rail Strike Watch: Potential Strike Pushed Back to December https://www.universalcargo.com/rail-strike-watch-potential-strike-pushed-back-to-december/ https://www.universalcargo.com/rail-strike-watch-potential-strike-pushed-back-to-december/#respond Thu, 10 Nov 2022 21:18:39 +0000 https://www.universalcargo.com/?p=11359 The can keeps getting kicked down the road on the potential rail strike that would cripple U.S. supply chains. The Brotherhood of Maintenance of Way Employes Division (BMWED) has extended its cooling off period, during which a status quo of no strike and no lockout will be maintained, from November 19th to December 4th.

This move aligns the date BMWED could go on strike with the date set for the other union, the Brotherhood of Railroad Signalment (BRS), that rejected the tentative agreement the Biden Administration pressured the railroads and union leaders into back in September.

However, BMWED said the date is dependent on whether or not the two largest rail worker unions, the Brotherhood of Locomotive Engineers and Trainmen (BLET) and the Sheet Metal, Air, Rail and Transportation Workers-Transportation Division (SMART-TD), ratify the agreement. If either of those unions vote to reject the agreement, as BMWED and BRS have done, BMWED will set its status quo period to end on December 9th, which would line up with the larger unions' date.

To see more, including the full text of BMWED's announcement, check out the full post in Universal Cargo's blog.

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The can keeps getting kicked down the road on the potential rail strike that would cripple U.S. supply chains. The Brotherhood of Maintenance of Way Employes Division (BMWED) has extended its cooling off period, during which a status quo of no strike and no lockout will be maintained, from November 19th to December 4th.

truckers strike Port of Los Angeles Long Beach

This move aligns the date BMWED could go on strike with the date set for the other union, the Brotherhood of Railroad Signalment (BRS), that rejected the tentative agreement the Biden Administration pressured the railroads and union leaders into back in September.

However, BMWED said the date is dependent on whether or not the two largest rail worker unions, the Brotherhood of Locomotive Engineers and Trainmen (BLET) and the Sheet Metal, Air, Rail and Transportation Workers-Transportation Division (SMART-TD), ratify the agreement. If either of those unions vote to reject the agreement, as BMWED and BRS have done, BMWED will set its status quo period to end on December 9th, which would line up with the larger unions’ date.

It is expected BRS would also line up its cooling-off period’s end with that of the other unions should either BLET or SMART-TD fail to ratify the agreement.

One of the reasons BMWED gives for this extended time before a portential strike is that Republican Senators Richard Burr and Roger Wicker have already introduced a bill to prohibit a rail strike.

Among the union’s strategy of actions with the extended time before a strike is the plan to lobby Congress:

“This will also provide an opportunity to increasingly educate Members of Congress – who have been out of session and consumed by the mid-term elections – about the railroad workers’ state of despair that management has created, and the railroad workers’ need for paid sick time off,” BMWED stated in its release yesterday about the moving back the end of its cooling-off period.

Obviously, if Congress immediately stops a strike, that strike would hardly be effective.

The International Association of Machinists and Aerospace Workers (IAM) used this threat of Congress shutting down a strike to pressure its membership into ratifying the tentative agreement with a re-vote, which barely passed after initially being rejected.

While the administration hailed the tentative agreement as a great rail-strike-averting victory, what it really did was push back a potential strike to after the midterm elections. Rail workers have been dissatisfied with the deal. Many workers complained about its lack of transparency. However, the biggest sticking point is the failure of the agreement to meet union demands for more sick leave.

“The railroads continue to reject all BMWED and BRS proposals for paid sick leave,” BMWED said in its release. It seems as long as this demand is not met, these two unions, at the least, plan to initiate a strike.

Here’s the full text of BMWED’s announcement:

BMWED Joins BRS and Possibly Other Rail Unions in Our Struggle to Get More in Our Contract.

Published: Nov 9 2022 10:11AM

The BMWE has joined the BRS and possibly the BLET and SMART-TD Crafts subject to the outcome of their respective ratifications, with the same status quo period for the following reasons:


1. Republican Senators Richard Burr and Roger Wicker have already introduced a bill that would prohibit us from striking and further impose the National Tentative Agreement without the railroad-specific agreements for away from home expenses.

2. There is no other bill in congress at this time to allow us to strike; Congresspersons have been consumed with the mid-term elections.  We will now have an opportunity to educate Congress and obtain a better bill written for Railroad Workers, not the railroads.

3. Joining with the BRS and possibly the operating crafts will also improve our chances of not having Congress intervene on the railroads behalf and instead allow us to strike if necessary. This ultimately strengthens our chances to get paid sick leave.  

The railroads continue to reject all BMWED and BRS proposals for paid sick leave.  There are reports indicating the railroads intend to begin ceasing various rail operations within the next few days, in anticipation of a strike on November 20, even though in September they did not start taking such action until five days before the date of potential exercise of self-help. These service shutdowns would be a premature exercise of self-help by the railroads and a violation of their common carrier obligations to provide services to their customers.  These shutdowns would also represent a blatant attempt to cause panic and economic harm to the railroads’ customers and the U.S. economy right before the Thanksgiving holiday.  They would also be a manipulative attempt to instigate Congress to intervene against the interests of railroad workers.  The railroad workers are not the problem here and are not to blame for the current situation.  The American public and the railroads’ customers deserve better.  They cannot be held hostage to protect the immense wealth of the railroads’ greedy executives and shareholders. 

Therefore, the BMWED National Division Bargaining Committee has determined to extend its status quo period to synchronize with our Brothers and Sisters in the BRS Union if the BLET or SMART-TD Unions ratify their tentative agreements.  However, if the BLET or SMART-TD fail to ratify their agreement, BMWED’s status quo period will then end at the same time as either the BLET or SMART-TD, which is at 0000:01 Eastern time on December 9, 2022.

With this extension, BLET and SMART-TD will have the opportunity to finish their ratification procedures for any tentative national agreements without disruption.  If these Unions do not ratify, then we will have the opportunity to bring all of Rail Labor together, under a single deadline, to finish national negotiations.  This is most appropriate given that we entered into the PEB together and we should continue through the final stages of this process together.  This will also provide an opportunity to increasingly educate Members of Congress – who have been out of session and consumed by the mid-term elections – about the railroad workers’ state of despair that management has created, and the railroad workers’ need for paid sick time off.

More importantly, with this extension, there is absolutely no reason for the railroads to discontinue services or threaten to discontinue their services causing intentional economic harm to their customers and the U.S. economy.  Such a tactic by the railroads is completely unnecessary.  There is now more than adequate time for the railroads to come to the bargaining table, engage in good-faith negotiations with us and reach a voluntary Agreement to provide all railroad workers with paid sick leave.  BMWED’s proposal would literally cost one penny of every dollar of the railroads’ record profits assuming full use by every single member.  It is less than 2 percent of the $11.5 BILLION that CSX, NS and UP have spent alone on stock buybacks through the third quarter of 2022. Stock buybacks that simply enhance the wealth of investors and do absolutely nothing to improve the railroads’ infrastructure or lackluster services.  

This is the railroads’ last chance to do the right thing by voluntarily agreeing to provide paid sick leave to all employees.  If the railroads fail to give up one penny of every dollar of profit for paid sick leave for their highly valued employees by December 8th, and there is either a strike or lockout or both, then the railroads will be responsible for the imposition of a shutdown of their operations and the economic harms to its customers, the country’s economic supply chain and the entire U.S. economy. 

Congress should not intervene and rescue the railroads if they continue to refuse to provide railroad workers with paid sick leave.  But, if Congress does intervene, then we demand that Congress must side with the workers by imposing the tentative national agreement and carrier specific agreements along with paid sick leave for all railroad workers

Railroads, the clock is ticking!  Come to the table now and do the right thing: provide all railroad workers with paid sick leave and we can spare the country a shutdown. Your failure to do so is at your own behest.   

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7th Union Ratifies Rail Worker Deal, But Strike Threat Still Looms https://www.universalcargo.com/7th-union-ratifies-rail-worker-deal-but-strike-threat-still-looms/ https://www.universalcargo.com/7th-union-ratifies-rail-worker-deal-but-strike-threat-still-looms/#respond Wed, 09 Nov 2022 01:50:34 +0000 https://www.universalcargo.com/?p=11354 Twelve is the magic number. All twelve rail worker unions have to ratify agreements with the railroads to ensure a rail strike doesn't screech U.S. supply chains to a halt. The count is now to seven ratifying unions. But there are also two unions that have voted to reject the tentative agreements reached with the railroads.

All it takes is for one union to strike for all the rail worker unions to stop working, and close to a third of cargo in the U.S. will be without a service used to transport it.

Find out all about it and why Congress may not stop a strike by reading the full post in Universal Cargo's blog.

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Twelve is the magic number. All twelve rail worker unions have to ratify agreements with the railroads to ensure a rail strike doesn’t screech U.S. supply chains to a halt. The count is now to seven ratifying unions. But there are also two unions that have voted to reject the tentative agreements reached with the railroads.

All it takes is for one union to strike for all the rail worker unions to stop working, and close to a third of cargo in the U.S. will be without a service used to transport it.

IAM Ratifies New Deal

Teri Errico Griffis reported yesterday in a Journal of Commerce (JOC) article:

The International Association of Machinists and Aerospace Workers (IAM), representing 5,000 rail members, on Saturday ratified the agreement the White House helped broker in mid-September after rejecting the deal in an initial vote in October, the National Carriers Conference Committee (NCCC) said Sunday in a statement.

It’s not exactly the same deal that the White House pressured the railroads and unions to get done to avert a strike in September. After the deal was rejected by the IAM rank-and-file vote, leadership was sent back to the negotiating table. However, very little change in the deal seems to have been done before union leadership pushed hard to get membership to vote for the deal.

Chris Isidore reported in a CNN Business article published by KION 5/46 News that the contract was only ratified by a 52% vote. “Such a narrow margin is another sign of the widespread anger among rank-and-file rail workers with the current labor agreements,” Isidore writes.

Tom Hall, obviously biased toward wanting the contract to be rejected and a strike to happen, wrote in a World Socialist Web Site article that there is a lack of transparency in reporting the results of the vote to ratify:

There is every reason for railroaders to be suspicious of the IAM ratification. According to the union, it was approved by only 52 percent of voters on a turnout of 59 percent. This would imply a margin of victory of around 90 votes. However, while the IAM released fairly extensive information on the first vote in September, including vote totals broken down by local, no such information has been released this time around.

Bottom line is there’s controversy over the ratification of an agreement that, with little change, managed to get pushed through on a vote so quickly after being initial rejection. Despite its controversial nature, it would still be surprising for the IAM’s ratification not to hold up. The IAM ratification leaves 5 unions keeping the rail strike threat level high.

Strike Could Still Happen in Less Than 2 Weeks

cargo train BNSF

While there are three unions yet to vote on the tentative agreements with the railroads, two have voted to reject. At the time of this writing, we’re only 11 days away from the first possible date a rail strike could hit.

Teri Errico Griffis’s JOC article offers details:

Two of the 12 unions — The Brotherhood of Maintenance of Way Employees Division (BMWED) and The Brotherhood of Railroad Signalmen — rejected the deal in October, while three unions have yet to vote.

The Brotherhood of Locomotive Engineers and Trainmen and the Sheet Metal Workers Air, Rail, and Transportation Workers Transportation Division — two of the nation’s largest rail unions — will announce the results of their voting between Nov. 17 and Nov. 21.

The BMWED has the earliest strike deadline and could initiate a work stoppage as early as Nov. 19, the NCCC said.

Again, it takes only one union going on strike to shut down the railroads, as none of the other unions would be expected to cross picket lines that one puts up.

Might Congress Not Immediately Shut Down Strike

I’ve repeatedly written in this blog that Congress has the power to shut down a rail strike if one were to occur. The last time a rail strike occurred, all the way back in 1991, Congress shut it down within a day. But will that happen this time?

A few times, I’ve written Congress would have to act to shut down the rail strike. They couldn’t allow the country’s supply chains to shut down when the economy is already struggling with raging inflation and recession. I also wrote how a strike would put Democrats who are in control of Congress, pending the outcome of today’s election, between a rock and a hard place.

While Democrats can’t allow the economic hit on the country a rail strike would be, unions also represent a large campaign fund source for the party. Being pro-union has long been a campaign position for the Democrats, and forcing a contract unions don’t want on them would hardly seem pro-union. Some would even classify breaking up a union strike by forcing them to accept a contract they don’t want as union-busting behavior.

Isidore reported in his CNN Business article that, as a potential strike approached in September, Republicans prepared a bill to halt it, but Democrats were not cooperating to stop a strike:

Many business groups were urging Congress to act before the Sept. 16 strike deadline, and two Republican senators, Roger Wicker of Mississippi and Richard Burr of North Carolina, had introduced legislation that would have imposed a contract on the unions.

“Republicans were prepared to pass something then,”Baldwin said. “They have that ability.”

But at that time Democrats refused to act to block a potential strike. Sen. Richard Durbin, the second highest ranking Democrat in the Senate, told CNN at that time that “I don’t think it’s likely we will intervene.” He said that avoiding a strike “depends on the parties in negotiations stepping up to the plate.”

Even if Republicans win majorities in Congress today, Democrats will still control it when a strike could hit this month. Durbin’s comments give me my first real doubt of Congress acting quickly to halt a strike, should one occur.

As Isidore points out, we’ll have a “Lame Duck Congress” for the rest of the year before the newly elected members are sworn in. He also points out that it will need to act with some level of bipartisanship to stop a potential strike. Bipartisanship seems more and more rare these days.

Congress and the White House have done little that’s actually been in the interest of the U.S. economy and people over the last two years. There’s no guarantee they will move quickly to stop a crippling rail strike.

However, I still find it hard to believe Congress would allow a strike estimated to cost the economy $2 billion a day to carry on. But then again, it’s also hard to believe they have no problem spending and printing money by the trillions of dollars on a completely partisan basis, which is something we have witnessed.

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More ILWU Port Disruption & Terminals Cutting Man-Hours as Contentious Contract Negotiations Drag https://www.universalcargo.com/more-ilwu-port-disruption-terminals-cutting-man-hours-as-contentious-contract-negotiations-drag/ https://www.universalcargo.com/more-ilwu-port-disruption-terminals-cutting-man-hours-as-contentious-contract-negotiations-drag/#respond Thu, 03 Nov 2022 20:15:31 +0000 https://www.universalcargo.com/?p=11351 More International Longshore & Warehouse Union (ILWU) disruption is happening at West Coast ports, particularly at the Port of Oakland, as contract negotiations don't appear to be getting anywhere.

This was, of course, a predictable outcome, as labor slowdowns and disruption at the ports has been a typical part of the contract negotiation process over the last couple decades. Among the strategies we, here at Universal Cargo, recommended shippers take when negotiations were still on the horizon was routing cargo through East and Gulf Coast ports.

Yesterday (Wednesday, November 2nd), an article in the Journal of Commerce (JOC) by Bill Mongelluzzo validated the decision many shippers indeed made to route away from West Coast Ports:

"Cargo-handling operations were disrupted at the Port of Oakland Wednesday, providing fresh vindication for importers who are diverting growing volumes of cargo to the East and Gulf coasts amid contentious longshore contract talks on the West Coast. That shift is likely to continue until a labor deal is reached, which some believe won’t happen anytime soon."

Find out more by reading the full post in Universal Cargo's blog.

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More International Longshore & Warehouse Union (ILWU) disruption is happening at West Coast ports, particularly at the Port of Oakland, as contract negotiations don’t appear to be getting anywhere.

Diverting Cargo from West Coast Ports Was a Good Choice

This was, of course, a predictable outcome, as labor slowdowns and disruption at the ports has been a typical part of the contract negotiation process over the last couple decades. Among the strategies we, here at Universal Cargo, recommended shippers take when negotiations were still on the horizon was routing cargo through East and Gulf Coast ports.

Yesterday (Wednesday, November 2nd), an article in the Journal of Commerce (JOC) by Bill Mongelluzzo validated the decision many shippers indeed made to route away from West Coast Ports:

Cargo-handling operations were disrupted at the Port of Oakland Wednesday, providing fresh vindication for importers who are diverting growing volumes of cargo to the East and Gulf coasts amid contentious longshore contract talks on the West Coast. That shift is likely to continue until a labor deal is reached, which some believe won’t happen anytime soon.

The Latest Labor Disruption

Mongelluzzo goes on to detail the fresh disruption we’re seeing:

In the latest disruption linked to the contract talks, marine clerks from the International Longshore & Warehouse Union (ILWU) picketed at Oakland over a travel pay issue for dockworkers who come into the port from outlying locations. That forced three of Oakland’s four container terminals to halt operations for Wednesday’s first shift, a port spokesperson told JOC.com.

Terminal operators that shut their facilities for the entire first shift intend to reopen for the evening shift Wednesday. “Our international marine terminals are closed today and will try to reopen tonight,” the spokesperson said.

This can be added to a long and growing list of labor slowdowns and disruptions happening at West Coast ports. I’ve written about the slowdowns in this blog with posts like ILWU Slows Oakland & Seattle Port Operations and ILWU Labor Action Occurs as Contract Negotiations Look Bad. Last week, we even saw contract negotiations get suspended over the union jurisdiction issue happening at the Port of Seattle as a hearing on the issue takes place.

Work-Hours Falling, Pressurizing Situation

News outlets have pointed out that the ILWU hasn’t been getting much pressure from its members to quickly reach resolution with the contract negotiations because work hours have generally been up. Surprised to read work hours were still up and worried that trend would soon change because of the economic downturn and decrease in shipping demand, I wrote:

Amidst an uneasy economy, shipping demand is rapidly falling right now. Let’s hope that doesn’t cause labor hours to start falling, turning the situation ugly at West Coast ports.

Well, work hours are falling. Partially because of the decrease in demand and, according to Mongelluzzo’s article, because of the labor slowdowns and work stoppages:

Such ad-hoc work stoppages and slowdowns, which have hit all West Coast ports since the previous contract between the ILWU and the Pacific Maritime Association (PMA) expired on July 1, are contributing not only to declining cargo volumes, but also to a large drop in man-hours worked by West Coast longshoremen this fall.

Judging by the information, including current data and a projection, Mongelluzzo shares in his article, it’s reasonable to expect man-hours to continue to fall.

According to the PMA, despite declining cargo volumes at West Coast ports, ILWU paid man-hours this year were running about 3 percent higher than last year until September. In September, man-hours turned negative, declining 3.9 percent from September 2021. The drop in man-hours has accelerated since then, falling 7.6 percent in the first three weeks of October year over year. Terminal operators say they are being told by carriers to expect cargo volumes to continue moving lower through the first quarter of 2023.

Combine falling man-hours with contentious negotiations that by all reporting look very far away from resolution, I would expect labor action and disruption to continue to worsen at West Coast ports.

Market Share Shifting

As happened during the contentious 2014-15 ILWU contract negotiations, East and Gulf Coast ports are gaining market share from West Coast ports. Mongelluzzo provided numbers on that as well:

The West Coast’s market share of US imports from Asia fell to 57.5 percent through the first nine months of the year, down from 61.2 percent in the same period last year. The share for East Coast ports increased to 35.1 percent from 32.8 percent, while the Gulf Coast’s share ticked up to 7.1 percent from 5.7 percent, according to PIERS, a JOC.com sister product within S&P Global.

If things continue as they have been going, I would expect East and Gulf Coast ports to continue making gains in the market share department. It also is likely that a portion of that market share gained could be kept even after a new agreement between the ILWU and the PMA is reached.

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ILWU Contract Negotiations Suspended https://www.universalcargo.com/ilwu-contract-negotiations-suspended/ https://www.universalcargo.com/ilwu-contract-negotiations-suspended/#respond Thu, 27 Oct 2022 23:16:31 +0000 https://www.universalcargo.com/?p=11333 By all reports, the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) are still far away from reaching terms on a new master contract. And now negotiations are suspended.

Peter Tirschwell reports in the Journal of Commerce (JOC):

"Contract negotiations between West Coast dockworkers and marine terminal employers — ongoing for more than five months — have been put on hold pending resolution of a hearing to determine jurisdiction of cold-ironing work at an SSA-run terminal at the Port of Seattle, sources tell JOC.com."

A couple months ago, contract negotiations stalled over this issue of union jurisdiction. The problem only appears to be getting worse.

Find out more by reading the full post in Universal Cargo's blog.

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By all reports, the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) are still far away from reaching terms on a new master contract. And now negotiations are suspended.

Peter Tirschwell reports in the Journal of Commerce (JOC):

Contract negotiations between West Coast dockworkers and marine terminal employers — ongoing for more than five months — have been put on hold pending resolution of a hearing to determine jurisdiction of cold-ironing work at an SSA-run terminal at the Port of Seattle, sources tell JOC.com.

A couple months ago, contract negotiations stalled over this issue of union jurisdiction. The problem only appears to be getting worse.

The big issue most people were expecting to cause contention in the ILWU contract negotiations was automation. However, the union and employers won’t even get to that, nor the large (40%) wage increases the union reportedly initially demanded for dockworkers, until the parties get past this jurisdiction issue. However, this issue is actually related automation in a way.

The ILWU says they gave the PMA language for automation in the 2008 master contract under the understanding the PMA would back the union over others in jurisdictional disputes. If they weren’t already, the ILWU became very aggressive in going after jobs controlled by other unions after the 2008 agreement.

In the lead-up to and during the 2014-15 contract negotiations, the local chapter of the ILWU at the Port of Portland hard-timed the port so much over two jobs always held by the Brotherhood of Electrical Workers that carriers stopped calling on the port with container ships.

Another union, the International Association of Machinists and Aerospace Workers (IAMAW) has jurisdiction on equipment maintenance and repair jobs at a terminal, T5, at the Port of Seattle. The ILWU wants the PMA to back it in the union’s jurisdiction fight to get those jobs. However, the PMA says it can’t do anything there because a court ruling has already been made in IAMAW’s favor.

Now, there’s a hearing on union jurisdiction over these cold-ironing jobs at the Port of Seattle that could turn out the same way the T5 jurisdiction ruling turned out.

It all adds up to the ILWU claiming the PMA hasn’t sufficiently backed the union on jurisdiction to have the right to automate. Not only are we talking about further automation but also what automation has already been done in recent years.

There’s a big disconnect here. The ports need automation to keep up with the amount of cargo that pours through the ports. The ILWU views automation as an existential threat where machines take jobs from people. The PMA has produced evidence that automation, as it increases efficiency and brings attracts more business to terminals, creates more union work and jobs. The union rejects that evidence.

I wouldn’t want to have to arbitrate fights over the issue at the negotiation table.

Despite being 5+ months into contract negotiations already, there seems to be no one who expects agreement to be reached this year. Tirschwell writes in his JOC article:

The inability to get past the jurisdictional issue in Seattle has now led some observers to conclude that the contract negotiations between the International Longshore and Warehouse Union (ILWU) and Pacific Maritime Association (PMA) are unlikely to be resolved this year. Talks began May 10 in San Francisco.

“I don’t see it getting resolved in the next couple of weeks,” Gene Seroka, executive director of the Port of Los Angeles, told JOC.com this week. “We’re probably months away.”

Being months away from resolution is very bad news for shippers, as the ILWU as already executed slowdowns during these negotiations. Here are a couple posts we published on the labor action that has happened:

ILWU Slows Oakland & Seattle Port Operations

ILWU Labor Action Occurs as Contract Negotiations Look Bad

One piece of good news, which Tirschwell points out, currently keeping labor contention from boiling over is the amount of work longshoremen are getting:

… the union’s negotiators are not under any pressure from the rank and file to rush into a contract. That’s because West Coast longshore workers have worked more hours year to date this year than during the same period last year.

According to numbers provided by the PMA, the ILWU working hours paid through the first week of October totaled 29.3 million, up 4 percent from the 28.2 million working hours paid during the same period last year. Working hours are up even though US imports from Asia to the West Coast were down 1.7 percent in January through September compared with the first nine months last year, according to PIERS, a JOC.com sister product within S&P Global.

Amidst an uneasy economy, shipping demand is rapidly falling right now. Let’s hope that doesn’t cause labor hours to start falling, turning the situation ugly at West Coast ports.

 

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November Rail Strike Looks Likely After Railroads Rejects Union Offer https://www.universalcargo.com/november-rail-strike-looks-likely-after-railroads-rejects-union-offer/ https://www.universalcargo.com/november-rail-strike-looks-likely-after-railroads-rejects-union-offer/#respond Wed, 26 Oct 2022 01:07:34 +0000 https://www.universalcargo.com/?p=11326 Shippers are preparing themselves for the more and more likely outcome of a rail strike in November. Union Pacific CEO Lance Fritz went on CNBC, laughing off the idea of a perspective strike on November 19th; however, the events of the week make the risk of that strike very high. The strike threat is no joke as it is estimated to carry an economic cost of $2 billion per day as it shuts down national supply chains.

Fears of a strike had already risen back up after members of the Brotherhood of Maintenance of Way Employes Division (BMWED), the third largest of the dozen rail workers union, voted to reject the tentative agreement the White House applied pressure on the railroads and unions to reach in order to avert a strike before the midterm elections.

Those fears of strike were legitimately stoked last week after the railroads flat out rejected the BMWED's offer of a new agreement.

Find out more by reading the full post in Universal Cargo's blog.

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Shippers are preparing themselves for the more and more likely outcome of a rail strike in November. Union Pacific CEO Lance Fritz went on CNBC, laughing off the idea of a perspective strike on November 19th; however, the events of the week make the risk of that strike very high. The strike threat is no joke as it is estimated to carry an economic cost of $2 billion per day as it shuts down national supply chains.

What Happened Last Week?

Fears of a strike had already risen back up after members of the Brotherhood of Maintenance of Way Employes Division (BMWED), the third largest of the dozen rail workers union, voted to reject the tentative agreement the White House applied pressure on the railroads and unions to reach in order to avert a strike before the midterm elections.

Those fears of strike were legitimately stoked last week after the railroads flat out rejected the BMWED’s offer of a new agreement.

Vanessa Yurkevich and Chris Isidore reported in a CNN Business article:

US freight railroads rejected a new sick leave proposal from a union of track maintenance workers that is threatening to go on strike in less than 30 days without a new labor deal.

BMWED proposed seven paid sick days — up to 56 hours per year — as part of a new contract agreement, which the railroads outright rejected, according to Peter Kennedy, BMWED’s director of strategic coordination and research.

Shippers & Railroads Preparing For Disruption

Of course, no business wants to see its supply chain disrupted. And obviously, a rail shutdown caused by a strike would be extremely disruptive. With the threatened rail strike only a few weeks away, many importers have shipments arranged that would arrive just in time to get delayed by this threat. They have to find ways to prepare.

Despite trying to laugh off the strike threat on TV, Union Pacific, along with the other railroads, is preparing for a strike disruption too.

In a CNBC article, Lori Ann LaRocco outlines how railroads and shippers, many of whom were already preparing for a potential strike to hit a month ago, are again making plans to deal with the potential strike:

Tom Nightingale, CEO of AFS Logistics, tells CNBC that logistics managers are fielding calls from customers in anticipation of a possible strike.

“Prudent shippers already had a plan in place a month ago, and most who did not have now ramped up their contingency planning after the wakeup call last month,” Nightingale said. “Proactivity is the key to supply chain success.”

For many intermodal shipments — shipments that use multiple modes of transport such as ocean, trucking and freight rail — there can be a week between when cargo is picked up and when it makes it onto the rail lines, according to Nightingale.

“That lag time will exacerbate the effects of delays and service interruptions, so effectively managing the risk of intermodal disruption means you must plan early and often,” he said.

In anticipation of a strike in September, Norfolk Southern, Berkshire Hathaway subsidiary BNSF, CSX, and Union Pacific all began ramping down freight approximately five days ahead of the strike date in an effort to move critical hazmat materials, such as chlorine and ethanol. That freight took priority over common freight.

“Shippers had a lot of sensitivity to the potential rail strike,” Nightingale said. “No shipper wants to lose their job or risk losing a customer when they have had this much advance notice to a looming disruption.”

As a result, AFS saw a significant uptick in customers looking to shift loads away from intermodal to other modes like truckload and even less-than-truckload shipping (LTL).

Congress Will Likely Make Strike Short-Lived

A strike by one rail worker union is bigger than that one union going on strike. If one union goes on strike, none of the others are expected to cross its picket lines. However, if a rail worker strike does happen, it is not likely to last long. Congress has the ability to shut it down.

The last time a rail strike happened was all the way back in 1991, and Congress shut it down within a day.

Congress can order more cooling off periods, order arbitration, and even force the unions to accept a contract with the recommendations from the Presidential Emergency Board that was appointed to look at the dispute. That would basically mean putting into effect the tentative agreement that BMWED’s rank-and-file rejected.

Congress couldn’t simply sit back and do nothing as the nation’s supply chains shut down. I would expect Congress to act quickly if a strike does happen on November 19th. There is a bit of a timing problem with that date being so soon after the midterm elections. It means the newly configured Senate and House will have to hit the floor running or the country’s economy could screech to a halt.

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Is MSC Positioning Itself to Ditch Maersk & 2M Alliance? https://www.universalcargo.com/is-msc-positioning-itself-to-ditch-maersk-2m-alliance/ https://www.universalcargo.com/is-msc-positioning-itself-to-ditch-maersk-2m-alliance/#respond Wed, 19 Oct 2022 01:11:08 +0000 https://www.universalcargo.com/?p=11319 Mediterranean Shipping Company (MSC), the world’s largest ocean freight carrier by capacity, has been making moves that could position itself to leave the 2M Alliance it has with Maersk, formerly the largest shipping line by capacity, and potentially shake up the three carrier alliances that dominate ocean shipping. Eyeing Ocean Freight Capacity For years, we’ve […]

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Mediterranean Shipping Company (MSC), the world’s largest ocean freight carrier by capacity, has been making moves that could position itself to leave the 2M Alliance it has with Maersk, formerly the largest shipping line by capacity, and potentially shake up the three carrier alliances that dominate ocean shipping.

Eyeing Ocean Freight Capacity

For years, we’ve kept an eye on ship orders by major carriers, often sharing that information in Universal Cargo’s blog. According to Lars Jensen, CEO and Partner at Vespucci Maritime, this development of carriers’ vessel fleets is something that should garner more attention than it does. But not for the main reason we’ve done so here at Universal Cargo.

My focus on ship orders has mainly been to keep an eye on overall capacity. Capacity, after all, represents the supply end of international shipping’s supply/demand dynamic. As such, it greatly impacts the freight rates shippers pay when importing and exporting goods. For example, carriers struggled with overcapacity for years, resulting in unsustainably low freight rates and losses in the billions of dollars. On the other hand, when the pandemic hit, carrier alliances used blanked (cancelled) sailings to cut capacity below demand, and freight rates soared, resulting in profits in the billions.

However, rather than freight rates, Jensen, in an article for the Journal of Commerce (JOC), focused in on ship ordering and fleet building, and MSC’s ship orders specifically, to highlight the competition between carriers and the potential turbulence on the way to the international shipping industry. MSC very well could be about to make major waves in ocean shipping, tossing Maersk aside and making the other two major carrier alliances adjust to the wake.

MSC’s Fleet Suggests It May Dump the 2M Alliance

Regular readers of Universal Cargo’s blog may remember a post in 2020 about MSC buying “anything that floats” as the carrier was poised to surpass Maersk in terms of capacity. Well, the amount of capacity MSC accumulated and has on order is remarkable.

Jensen reports:

MSC has not only grown its fleet to become the largest in the world, but it also has the largest orderbook ever seen. The carrier has ships totaling 1.8 million TEU on order, equal to approximately 40 percent of its current operating fleet.

To put those figures in perspective, MSC’s fleet by the end of 2024 will have a total capacity approximately equal to that of MSC and Maersk combined when the two carriers formed the 2M Alliance in 2015. This is likely a signal that MSC is preparing to operate as a stand-alone carrier in the major deep-sea trades, as they will have a fleet that is large enough to create a sufficiently broad competitive network on their own.

2M Bitterness Maersk & MSC

History of Trouble in the 2M Alliance

MSC hasn’t announced any plan to end the 2M Alliance, and Jensen makes no claim that the carrier has. However, there is more evidence than just capacity MSC has built up to suggest this is the direction the carrier is headed.

Turbulence has already been building between the 2M partners, especially as MSC built up its fleet to take the mantle of world’s largest carrier by capacity away from Maersk. Things were getting downright bitter between the carriers in 2019, when MSC was approaching that top spot among carriers and even poached one of Maersk’s executives. A senior Maersk manager was quoted at the time as saying, “MSC are getting too big for their boots and we have a fight on our hands to stop them.”

The troubled waters of the carriers’ relationship actually go back much further. You could say the carriers got engaged in 2014, when MSC and Maersk proposed the 2M Alliance to regulators after China’s Ministry of Commerce rejected as anti-competitive the P3 Network – an alliance that would have also included the third largest ocean carrier, CMA CGM. The 2M Alliance’s operational marriage officially launched in January 2015. The honeymoon was over by 2016 when troubles surfaced over services they were offering.

Consequences of MSC Leaving 2M

What would happen if the 2M Alliance does split?

Jensen writes:

This would give MSC full operational autonomy, as opposed to making operational compromises as for the sake of the larger vessel-sharing alliance.

Maersk, by contrast, has a very small orderbook. Furthermore, the company is on a fast track toward decarbonization, which means any attempt at aggressive fleet growth will be tempered by the lack of green fuels.

There are obviously advantages to being part of one of these carrier alliances. High on the advantage list is having more than one carrier sell ship space to customers, helping carriers avoid unused space on sailings, ideally increasing profitability. If MSC decides it doesn’t need this advantage anymore, it could be very problematic for Maersk, according to Jensen:

If MSC pulls out of the 2M Alliance to go it alone, Maersk would be left without an alliance. The carrier could, of course, field its own network, but it would be smaller and, therefore, would have fewer direct port-to-port connections and less flexibility than the alliances with which it would compete.

This is not only a problem for Maersk as an ocean carrier; a more limited network also leads to problems in offering end-to-end transport solutions, making this scenario a potential threat to Maersk’s entire integrated logistics strategy.

Maersk’s growth in terms of market share has for more than 20 years solely been through acquisitions, but that game is almost over. And given the injection of capital all carriers have gotten from the freight rate bonanza of the last two years, it is difficult to see Maersk making a quantum leap in the short term by buying another major global carrier.

And this is where a big shakeup could happen with the carrier alliances. Jensen continues:

Instead, the logical move for Maersk would be to try to get one or two other large carriers to join a new alliance, which would break up at least one of the other agreements in the process. The ripples of this would likely reshape all three alliances, unless the other major carriers see this as a strategic opportunity to gain a competitive advantage on the Danish carrier by sticking with their current groupings.

In other words, because MSC and Maersk already operate 34 percent of the global fleet, actions taken by these alliance partners will end up forcing all major carriers to engage on this battlefront in the coming years as well.

Could MSC Be Preparing for Forced Carrier Alliance Breakups?

MSC may be preparing for a threat on the horizon while riding out its 2M Alliance, with all the advantages it offers, for as long as possible in the meantime.

Something Jensen didn’t mention in his article is increased governmental scrutiny on carrier alliances, especially from the FMC, has been happening lately. For years, I’ve voiced my concerns with regulators allowing carrier alliances to operate as they have. The practice undermines competition in an industry already wrought with collusion. MSC may be preparing for a possible regulatory breaking up of the carrier alliances, getting into a better situation to handle that outcome than any of its competitors.

We here at Universal Cargo will be watching this situation. It carries connotations for shippers as the competition between ocean freight carriers could soon see significant change. You can be sure we’ll share any major developments in this blog.

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Major Rail Union Rejects Tentative Agreement, But If Strike Happens it Won’t Be Until After Elections https://www.universalcargo.com/major-rail-union-rejects-tentative-agreement-but-if-strike-happens-it-wont-be-until-after-elections/ https://www.universalcargo.com/major-rail-union-rejects-tentative-agreement-but-if-strike-happens-it-wont-be-until-after-elections/#respond Fri, 14 Oct 2022 01:03:45 +0000 https://www.universalcargo.com/?p=11317 Fears are rising again over a supply-chain-halting potential rail strike as the third largest rail worker union voted to reject the tentative agreement reached just weeks ago. More and more, it looks like the pressure the Biden Administration laid on the railways and unions to come to a tentative agreement merely pushed the problem back to after the midterm elections rather than actually preventing a strike.

Josh Funk of the Associated Press reported in an article published by PBS:

"The U.S.’s third largest railroad union rejected a deal with employers Monday, renewing the possibility of a strike that could cripple the economy. Both sides will return to the bargaining table before that happens.

"Over half of track maintenance workers represented by the Brotherhood of Maintenance of Way Employes Division who voted opposed the five-year contract..."

Find out all about it by reading the full post in Universal Cargo's blog.

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Fears are rising again over a supply-chain-halting potential rail strike as the third largest rail worker union voted to reject the tentative agreement reached just weeks ago. More and more, it looks like the pressure the Biden Administration laid on the railways and unions to come to a tentative agreement merely pushed the problem back to after the midterm elections rather than actually preventing a strike.

Josh Funk of the Associated Press reported in an article published by PBS:

The U.S.’s third largest railroad union rejected a deal with employers Monday, renewing the possibility of a strike that could cripple the economy. Both sides will return to the bargaining table before that happens.

Over half of track maintenance workers represented by the Brotherhood of Maintenance of Way Employes Division who voted opposed the five-year contract…

Jonah Furman reported in a Labor Notes article:

Just under 12,000 of the union’s 23,900 freight rail workers voted, the union announced October 10, with 56 percent voting against the deal.

Strike Would Be Extremely Damaging

All it would take is for one of the dozen unions of rail workers to strike to halt the railroads, as it is widely believed none of the unions would cross another’s picket lines.

The stakes are incredibly high when it comes to a railroad shutdown due to a rail workers’ strike. In a Politco article touting President Biden and his administration for “narrowly avoided an economic and political debacle” by helping “salvage a tentative, last-minute deal”, Ben White and Eleanor Mueller described the stakes as follows:

… the prospect of dormant freight trains leaving fall crops to rot in the fields, livestock to die of starvation and grocery shelves to go empty…

A rail strike affecting 40 percent of the nation’s freight traffic at a cost of $2 billion a day could have severely damaged an economy already suffering from supply chain snarls, the highest inflation in four decades and a Federal Reserve pumping hard on the brakes to bring prices down.

Yes, it could have. And it still might, as regular readers of Universal Cargo’s blog already know.

Push for Strike

While the Biden Administration bragged about the tentative agreement as a great victory, there’s a contingency of rank-and-file rail union members who have called it a betrayal. That contingency, led by the Rail Workers Rank-and-File Committee (RWRFC) – a vocal and heavily socialist-leaning group within the rail workers’ rank – held a public meeting yesterday (Wednesday, October 12th) entitled, “No more delays! Organize the rank-and-file to fight for strike action!”

The RWRFC is calling for a strike as soon as possible, pushing for it to happen before the midterm elections. In its announcement for Wednesday’s meeting the committee wrote:

For it to be maximally effective, a strike must take place as soon as possible, before the midterm elections. Any delay only plays into Congress’ hands and makes it easier for it to prepare anti-strike legislation.

Fortunately for the country’s supply chain and economy, as well as for Democrats trying to hold on Congressional majorities, the RWRFC appears to be in the minority of workers when it comes to pushing for an immediate strike. However, the RWRFC is not the only group within the unions pushing for a strike.

Furman reported in the Labor Notes article:

BMWE Rank and File United, a caucus in the union, released a statement encouraging members to organize informational pickets and push for a stronger agreement. “We must stand together in showing the carriers, politicians, and the world that we are not done. Our demands have not been met,” read the statement.

“Our union leadership only has power at the bargaining table if we give it to them.”

Are a Majority of Union Members Against This Agreement?

While the groups within the unions looking to strike right now may be in the minority, that may not be the case when it comes to rail workers’ general unhappiness with the tentative agreement. The Brotherhood of Maintenance of Way Employes Division’s members voting to reject the contract gives evidence that the majority of rail workers may be against this agreement.

Furman also reports:

In a statement, BMWE President Tony Cardwell attributed the rejection to members’ feeling that “management holds no regard for their quality of life, illustrated by their stubborn reluctance to provide a higher quantity of paid time off, especially for sickness.”

Strike Unlikely Before Midterms

Funk’s article in PBS highlighted the contract negotiators saying there’s no immediate threat of strike from the union that voted to reject the tentative agreement “because the union agreed to keep working for now.” Further in the article, Funk wrote:

The Brotherhood of Maintenance of Way union said it agreed to delay any strike until five days after Congress reconvenes in mid-November to allow time for additional negotiations.

All the timelines appear to be around the election. Funk reports the International Association of Machinists and Aerospace Workers, a union that initially rejected a tentative deal with the railroads but has since renegotiated a new one, won’t see voting on whether or not to ratify completed until mid-November. Union members have called the weeks of delay in getting the tentative contract in front of the members of the two largest unions, SMART-TD and BLET, a delaying tactic to make sure no rejection and strike could ensue before the elections.

Entangled in Politics

Photo of Joe Biden by Gage Skidmore
Photo of Joe Biden by Gage Skidmore

Funk wrote, “President Joe Biden pressured the railroads and unions to reach a deal last month ahead of a mid-September deadline to allow a strike or walkout.”

Biden got his initial political victory of stopping a strike from happening in September. It looks like he’s succeeded in keeping it from happening before the midterm elections. However, he may have overdone it with his “highly visible victory lap” as Mueller and Snyder called it in Politico. Even the heavily Democratic-Party-supporting Washington Post had to report that union members were skeptical of the Biden-pushed tentative agreement from the start and that they told the news outlet the deal’s “details were opaque.”

Some political pundits along with the RWRFC have gone so far as to say there was no real completed tentative agreement on September 15th. It was announced only to prevent a strike that was about to ensue and the final details would be figured out in the following weeks, which is why its details were opaque and it was announced it would be weeks before it would be shared with and voted on by members of the two largest union.

The ending of Mueller and Snyder’s Politco article shows how sadly mixed up with politics this whole situation is:

“Even this threat of an upcoming strike is enough to really hurt Democrats at the polls for now — because everybody thought this was done. They thought it was over,” said Wheaton, the Cornell professor. The White House “made a good showing of saying, ‘Yeah, look, we solved this problem. We fixed this.’” But “no, they just pushed the can down the road a little bit.”

The question is, will kicking the can down the road make the situation worse? Will Congress have to step in to stop a devastating strike as one of its first actions post election?

 

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Ocean Imports Drop, Trucking Jobs Plummet, Air Freight Peak Season Disappears https://www.universalcargo.com/ocean-imports-drop-trucking-jobs-plummet-air-freight-peak-season-disappears/ https://www.universalcargo.com/ocean-imports-drop-trucking-jobs-plummet-air-freight-peak-season-disappears/#respond Tue, 11 Oct 2022 22:08:45 +0000 https://www.universalcargo.com/?p=11314 Imports for the end of the year were already expected to decline, but at the end of last week the expected decline for October basically doubled. November and December's expected decline increased too. Truck transportation jobs in September fell so much, the numbers are being reported as historic. And as for the air freight peak season, when last minute goods are imported for the holiday shopping season... well, what air freight peak season?

Sometimes when you round up the international shipping news stories of the day, they paint a pretty bleak picture on the horizon. We are in a recession, so it's not surprising to see such declines. However, not everything is bad. The silver lining on the cloudy horizon is reduced freight rates. And maybe November's elections will get rid of some of the bad leadership in government that has been hurting the U.S. economy.

But let's focus on what's happening with ocean freight, trucking, and air cargo, and how it impacts shippers by reading the full post in Universal Cargo's blog.

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Imports for the end of the year were already expected to decline, but at the end of last week the expected decline for October basically doubled. November and December’s expected decline increased too. Truck transportation jobs in September fell so much, the numbers are being reported as historic. And as for the air freight peak season, when last minute goods are imported for the holiday shopping season… well, what air freight peak season?

Sometimes when you round up the international shipping news stories of the day, they paint a pretty bleak picture on the horizon. We are in a recession, so it’s not surprising to see such declines. However, not everything is bad. Perhaps the silver lining on the cloudy horizon is reduced freight rates. And maybe November’s elections will get rid of some of the bad leadership in government that has been hurting the U.S. economy.

Falling Import Expectations

Let’s start with the import forecast for the end of 2022. Bill Mongelluzzo reports in the Journal of Commerce (JOC):

cargo ship internationa shipping

US retailers Friday said they now expect October imports to fall 9.4 percent year over year – essentially doubling their prior projection for the month’s decline.

In the Global Port Tracker (GPT) published a month ago, the National Retail Federation and Hackett Associates predicted October imports would be down 4.8 percent from the year-ago month.

“The growth in US import volume has run out of steam, especially for cargo from Asia,” Ben Hackett, founder of Hackett Associates, said in the latest report. “Recent cuts in carriers’ shipping capacity reflect falling demand for merchandise from well-stocked retailers even as consumers continue to spend.”

Retailers also downgraded expectations for November and December imports. The GPT forecasts that November imports at the 12 ports it surveys will now be down 4.9 percent from November 2021, versus last month’s projection of a 3.3 percent decline. And December imports will fall 6.1 percent from the year-ago month; last month’s projection was for a 4 percent drop.

Imports in December are expected to be the lowest since February 2021.

What Happened to the Peak Season?

The peak season for international shipping this year really fizzled out. Part of that has to do with shippers importing their goods early.

Over the last few years, shippers have faced a great deal of international shipping disruption, to say the least. That caused many to import goods early rather than risk goods not making it to retailers in time for the major back to school and holiday shopping seasons. The International Longshore & Warehouse Union (ILWU) master contract expired July 1st, which added major risk of increased disruption to the peak season. This only added to shippers importing goods early.

It didn’t take prescience to predict the ILWU contract negotiations would become contentious and result in slowdowns at the ports. That’s basically become common practice whenever the master contract expires. This year is no different as negotiations drag on, if they’re moving at all. And, of course, the ILWU has executed slowdowns. Another very real threat to the supply chain was happening at the same time.

This peak season, there was a high risk of a rail strike. Actually, a rail strike remained a possibility even after a last-minute tentative agreement was announced. That threat just went up again. Josh Funk reported in an Associated Press article published by PBS on Monday that one of the large rail unions rejected the tentative agreement. Funk headlines the article with this rejection renewing strike possibility. We’ll probably get more into this story in Thursday’s blog.

Despite Imports Down & Inflation Up, Holiday Shopping Season Still On

No matter what is happening in the world, Christmas and other major holidays still happen. Out of control inflation will have many being careful with their spending, but retailers still expect spending to be up.

Mongelluzzo ended his JOC article with:

GPT forecasts that US imports in the second half of the year will be down 4 percent from the same period last year. Nevertheless, the NRF forecasts retail sales, which were up 7.5 percent through August, will increase between 6 and 8 percent this year over 2021.

Spending habits, which were pushed up during the pandemic by lockdowns and stimuli are likely hard to break. I wouldn’t doubt NRF’s sales forecasts to be close to the mark. However, I wouldn’t be surprised to see inflation result in disappointing sales numbers for retailers either.

Trucking Jobs Plummet

Trucking and Shipping

Let’s move to trucking jobs. As previewed John Kingston, in an American Shipper article, uses the word historic to Septembers describe September’s fall of truck transportation jobs:

Truck transportation jobs in September suffered a decline that could be viewed as historic.

September jobs declined 11,400 jobs to a seasonally adjusted total of 1,580,800 jobs. That is only the third month since the pandemic began in which truck transportation jobs dropped.

Where the decline could be seen as historic comes from looking at data that the Bureau of Labor Statistics provides on its website going back to 2010. In most months, truck transportation jobs since then have increased. Since the start of 2010, there have been about 130 monthly reports. Before this month, only 28 had recorded declines. 

And of those 28 months, the only month with a larger decline in truck transportation jobs was April 2020, when the pandemic was sending the economy crashing and the sector lost more than 78,000 jobs. The job loss in September was significantly bigger than the third-biggest decline, which was 7,000 jobs recorded in March 2020, when pandemic-related job losses were starting to be felt. 

There’s a great deal more data to check out in Kingston’s article, but the feeling that data gives is not great.

Truckers are obviously essential to the economy. That’s why California’s AB5, with its elimination of independent truckers, was such a big deal. A downturn in trucking jobs is a pretty good indicator of a downturn in the economy. We’re seeing that downturn not only on the roads but in the sky.

Air Freight Peak Season Nonexistent

As the ocean freight peak season slows down, the air freight peak season picks up. Typically. This year, if you call the ocean freight peak season, you’d call the air freight peak season dead.

Eric Kulisch reports in American Shipper:

It’s the time of year when retailers typically make their final push to ship goods from abroad in time for holiday shopping and freight rates are highest, but so far signs of peak season in air cargo are difficult to find. Instead, rates continue to slide as global economic clouds dampen demand and airlift supply rises with the recovery of passenger travel.

Air freight spot rates tumbled 9% year over year in September to below the 2021 level for the first time this year, Xeneta, an ocean and air freight rate benchmarking and data analytics firm, reported Wednesday. 

The cost to ship by air lowered another 2.8% in the past week and is now 21.6% less than a year ago, according to the Baltic Air Index. A year ago rates were up about 80% on a yearly basis.

Again, the silver lining for shippers are reduced freight rates. Of course, that’s largely because shippers, by and large, don’t need to ship as much right now. Of course, there still is importing as well as exporting to be done by companies right now. This opportunity for much improved air freight rates is a glass half full way of looking at the situation.

The basic economic principle of supply and demand is working in shippers’ favor right now. Kulisch continues:

Analysis by WorldACD, another provider of air freight data, also shows tonnage and prices slipping marginally again in the second half of September. More notable, however, is that volume is down 12% from last year despite a 6% increase in capacity. Its data also reflects a 10% decline in spot rates to an average of $3.46 per kilogram.

And the International Air Transport Association (IATA) on Thursday provided lagging data for August that reinforced earlier evidence, including front-line reports from logistics companies, of muted demand. IATA said cargo throughput on airlines fell 8.3% year over year, an improvement from the 9.7% contraction in July. Xeneta previously reported that August volumes contracted 5% year over year and 4% compared to pre-pandemic levels.

Drilling down to specific trade lanes demonstrates how the market has stalled. Slowing demand for goods out of China in has caused trans-Pacific air cargo rates to drop 32% since September $5.12/kg – half the level of a year ago – and China-to-Europe rates fell 19% to $4.13/kg, 43% lower than last year, according to Freightos. Trans-Atlantic rates were more stable, but are 25% lower than a year ago as passenger capacity on the lane has increased.

Kulisch’s article is an excellent one with much more data and detail to read. But the portion above is enough to see the patterns happening in international shipping right now.

Conclusion

Ocean, truck, air… they’re all pointing in the same direction right now. We’re in an economic downturn, but that also means opportunity.

For smart investors able to afford it, when the stock market drops down, they swoop in and buy up assets. Likewise, for some businesses, this could be a good time to take advantage of lower freight rates than we’ve seen in a while.

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Freight Rates Down, Blank Sailings Up, Inflation – Yikes https://www.universalcargo.com/freight-rates-down-blank-sailings-up-inflation-yikes/ https://www.universalcargo.com/freight-rates-down-blank-sailings-up-inflation-yikes/#respond Wed, 05 Oct 2022 01:23:21 +0000 https://www.universalcargo.com/?p=11303 There are lines in current news outlet articles that shippers, importers in particular, will actually be happy to read:

"Trans-Pacific shipping rates have plummeted roughly 75% from year-ago levels."
-- Wall Street Journal

Spot rates from Asia to the West Coast have fallen rapidly over the past month and are expected to approach the pre-pandemic level of $2,000 per FEU soon, according to forwarders.
-- Journal of Commerce

Shippers are seeing big drops in ocean freight rates right now. To many, this is a surprise. It's peak season. That's when freight rates usually rise. However, freight rates have been on a downward trend, though not without bumps, for a while now.

Read all about it in the full post in Universal Cargo's blog.

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There are lines in current news outlet articles that shippers, importers in particular, will actually be happy to read:

Trans-Pacific shipping rates have plummeted roughly 75% from year-ago levels.

–Wall Street Journal

Spot rates from Asia to the West Coast have fallen rapidly over the past month and are expected to approach the pre-pandemic level of $2,000 per FEU soon, according to forwarders.

— Journal of Commerce (JOC)

Shippers are seeing big drops in ocean freight rates right now. To many, this is a surprise. It’s peak season. That’s when freight rates usually rise. However, freight rates have been on a downward trend, though not without bumps, for a while now.

In May, I wrote about the downward trend in freight rates with a Universal Cargo blog post titled, “Freight Rates Falling – But How Far & How Long?” Inflation was certainly a big factor I talked about hurting demand and causing freight rate decline to occur at the time.

In June, with “What’s Actually Happening with Freight Rates Right Now,” I got into how the downward trend had plateaued. But I reassured shippers not to panic; we weren’t at the end of the rate decline about to see freight rates skyrocket again.

We had yet to see a big, dramatic drop in freight rates, like shippers had been hoping for, at the time of those articles. Factors like port congestion and still-higher than prepandemic demand kept freight rates from plummeting as we’ve seen since. Another factor I talked about was blank sailings (or cancelling ship voyages).

Carriers Using Blank Sailings & Suspended Services to Fight Freight Rate Fall

Carriers, particularly since organizing into three major alliances that dominate ocean shipping, can manipulate capacity (supply) through blank sailings or even suspending whole services. They blanked hundreds of sailings at the beginning of the pandemic when it seemed like shipping demand was about to fall. Now that poor economic conditions, including high inflation, are cutting down demand, carriers are turning to removing capacity from shipping lines.

While it slowed freight rate decline, especially at first, the reduction of capacity hasn’t been enough to stop falling freight rates yet. However, carriers are ramping up the blanked sailings and service suspensions.

Costas Paris reports the WSJ:

Ocean carriers are canceling dozens of sailings on the world’s busiest routes during what is normally their peak season, the latest sign of the economic whiplash hitting companies as inflation weighs on global trade and consumer spending.

In September, container capacity offered by ship operators in the Pacific was down 13%, dropping the equivalent of 21 ships that can each move 8,000 containers in a single voyage, from a year earlier, according to shipping-data providers Xeneta and Sea-Intelligence.  

For the two weeks starting Oct. 3, a total of about 40 scheduled sailings to the U.S. West Coast from Asia and 21 sailings to the East Coast from Asia have been scrapped, according to the data companies as well as customer advisories viewed by The Wall Street Journal. Typically at this time of year, an average of two to four sailings a week are blanked…

While blanked sailings initially slowed and delayed the falling freight rates we’re seeing, they obviously didn’t stop the fall. Michael Angell reports that blank sailings failing to stem the rate slide, carriers have turned to cutting services.

Angell writes in the JOC:

Mediterranean Shipping Co. Maersk, and CMA CGM are cutting three trans-Pacific services in response to a sharp drop in import demand and spot ocean freight rates.

2M Alliance members MSC and Maersk said last week in separate statements that their jointly run Sequoia/TP3 post-Panamax service will be suspended because of “significantly reduced demand” in the trans-Pacific. The Sequoia/TP3 service offers about 14,000 TEU in weekly capacity from Ningbo and Shanghai to Los Angeles.

The service will be merged into 2M’s 13,600-TEU Jaguar/TP2 service that calls Long Beach, Maersk said. Sea-Intelligence Maritime Analysis said the last sailing on the Sequoia/TP3 service, which was introduced in 2016, will be on the MSC Savona, which is scheduled to arrive in Los Angeles on Oct. 5.

Maersk also said two standalone services into the US East and Gulf coasts would be merged into one. The TP28 service, which the carrier debuted in 2022, would be merged into the TP20 service, which debuted in 2021, as of the final sailing of the Merkur Archipelago from Vietnam’s Vung Tau port on Oct. 13.

Calls at the ports of Norfolk, Charleston, and Houston on both services will be dropped, with the TP20 only calling New York-New Jersey and Mobile, Maersk said. Origin ports on the TP20 will include Jakarta, Vung Tau, Shanghai, and Ningbo. Both services use Panamax-size vessels of about 5,000 TEU.

Separately, CMA CGM ended its Golden Gate Bridge service, which called the ports of Oakland and Seattle, according to Sea-Intelligence. The last sailing of the service, which offered about 8,500 TEU in weekly capacity, was on the CMA CGM Medea, which is currently berthed at Seattle.

Outside of the major ocean carriers, smaller lines have also been pulling ships from the trans-Pacific. Independent carrier CULines has ended a trans-Pacific express service that it jointly ran with Shanghai Jin Jiang Shipping since July 2021, after closing its TPN service in August, maritime consultancy Alphaliner said in a report. CULines has a second trans-Pacific express service that it still operates, Alphaliner said.

Falling Freight Rates Do Not Mean an End of Inflation

President Biden and the Democrats have blamed inflation on supply chain disruptions and high freight rates over and over again. Last year, they were saying inflation was “transitory” as they kept pointing fingers at the supply chain crisis. Eventually, they had to stop saying inflation was transitory, but they kept blaming international shipping.

In fact, in June, I had to write a whole post on how high freight rates are not the cause of inflation when Biden claimed the Ocean Shipping Reform Act of 2022 “will solve a big piece of [inflation].” However, there likely are some who still believe the scapegoating of inflation on high ocean shipping rates. They should read Greg Miller’s new American Shipper article, “If supply chain crunch is finally easing, why is inflation so high?

The article shares data that shows as the supply chain, including its freight rates, has improved, inflation has gotten worse:

The GSCPI (data here), which roughly tracked inflation trends in 2021, has fallen sharply in 2022. The monthly measure has plunged 66% from its peak, from 4.31 standard deviations above average in December to 1.47 standard deviations above average in August.

The monthly U.S. inflation measure (headline Consumer Price Index) has gone in the opposite direction over the same period, up 17%, from 7.04% (year-over-year increase) in December to 8.26% last month.

It’s not just the GSCPI that’s unmoored from inflation.

Flexport created a measure of supply chain pressures called the Ocean Timeliness Indicator (OTI). The OTI measures the average number of days cargo takes from the time it leaves a factory in Asia to the time it exits the terminal gates in the U.S. or Europe.

The curve of the trans-Pacific eastbound OTI roughly mirrors the GSCPI. After peaking at 113 days in the week ending on Jan. 23, it fell 24% to 86 days on the week ending on Sept. 25.

Spot freight rate indexes have likewise trended in the opposite direction from inflation in 2022. The weekly Drewry World Container Index peaked at $10,377 per forty-foot equivalent units (excluding premiums) in the week ending on Sept. 23, 2021. It has since fallen 61% to $4,014 per FEU.

Yet another example: Container bookings have followed a similar downward slope as the GSCPI, OTI and Drewry World Container Index. FreightWaves SONAR’s Container Atlas features a proprietary index of bookings based on scheduled date of departure to the U.S. This index saw a sharp decline starting in May. Between its late April high and Sunday, it has fallen 35%.

It’s quite clear that inflation is not tethered to the supply chain in the causal relationship politicians have claimed. If you want a cause, look to the irresponsible spending and printing money by the trillions of dollars along with shutting down schools and businesses in response to COVID-19 (too often with the pandemic merely being an excuse for completely unrelated spending and disruptive, ineffective, but controlling regulations).

Will There Be Any Positive Impact on Inflation?

One would think that the cost of imported goods should come down some when the cost of importing those goods reduces, even though we haven’t really seen it yet. In his article, Miller does get into how the supply chain crunch, while sharply improved, is still far from over. When considering the question of why the improved supply chain hasn’t helped ease inflation, he considers the option that improvement just won’t come until even more improvement happens or the crunch is completely over:

One theory [as to why so many indicators point to an easing of supply chain pressures at the same time inflation remains exceptionally high] is that the supply chain was at least something of a red herring. Another is that supply chain pressures are indeed easing, but they’re still way above pre-COVID levels. In other words, the supply chain crunch is not over yet, so the positive payoff for inflation is yet to come.

Freight rates significantly reducing could have some impact on easing inflation, but that impact is extremely limited, as high freight rates are not the cause of inflation. Many factors have to come together to stop inflation.

Despite apparently popular belief, inflation doesn’t feed on itself. The opposite, really. It tightens budgets, shrinking how much people can spend, and, thus, reduces demand. Reduced demand puts downward pressure on prices. We’re seeing that with freight rates. We’ll see it with the prices of goods in general if enough inflationary pressures are reduced.

The Fed raising interest rates should help inflation some. Our government also needs to be more responsible with spending and better at avoiding overregulation. In the “High Freight Rates Are Not the Cause of Inflation” post, and several before that, I got into how governmental action caused inflation as well as played an enormous role in the supply chain crisis. The country needs better than what we’ve been getting from the politicians controlling policy right now. Hopefully, we’ll get it soon.

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ILWU Slows Oakland & Seattle Port Operations https://www.universalcargo.com/ilwu-slows-oakland-seattle-port-operations/ https://www.universalcargo.com/ilwu-slows-oakland-seattle-port-operations/#comments Tue, 27 Sep 2022 22:08:43 +0000 https://www.universalcargo.com/?p=11298 As shippers expected, more International Longshore & Warehouse Union (ILWU) slowdowns are happening at West Coast ports as contract negotiations lag on. Labor action is creating slowdowns at the Ports of Oakland and Seattle.

Bill Mongelluzzo reports in the Journal of Commerce (JOC):

"Members of the International Longshore and Warehouse Union (ILWU) last week engaged in job actions in Oakland and the Northwest Seaport Alliance of Seattle and Tacoma that slowed down cargo-handling operations and prevented some terminal operators from working night shifts, waterfront sources told JOC.com.

"... The moves are seen as a way for the union to flex its muscle to press the PMA for concessions."

Find out what slowdowns have been happening and more by reading the full post in Universal Cargo's blog.

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As shippers expected, more International Longshore & Warehouse Union (ILWU) slowdowns are happening at West Coast ports as contract negotiations lag on. Labor action is creating slowdowns at the Ports of Oakland and Seattle.

Bill Mongelluzzo reports in the Journal of Commerce (JOC):

Members of the International Longshore and Warehouse Union (ILWU) last week engaged in job actions in Oakland and the Northwest Seaport Alliance of Seattle and Tacoma that slowed down cargo-handling operations and prevented some terminal operators from working night shifts, waterfront sources told JOC.com.

… The moves are seen as a way for the union to flex its muscle to press the PMA for concessions.

The powerful union, along with the International Longshoremen’s Association (ILA) on the East Coast, have a history, generally considered a policy, of refusing to negotiate a new contract before the previous contract expires so as to flex its muscles by using slowdowns and threats of strike to gain leverage at the bargaining table. Slowdowns have been the union’s top weapon of choice since the 1990’s, and shippers tend to be the ones who pay with expensive delays.

In 2014, those delays meant goods not getting to store shelves in time for the holiday shopping season, agricultural exports rotting on the docks, and exporters permanently losing international trade partners. The port congestion as a result of labor action during those contentious 2014-15 negotiations cost the U.S. economy billions of dollars.

2022 ILWU Contract Negotiations Labor Action

Coming back to the present, here are the Oakland and Seattle labor actions Mongelluzzo reports in his article:

Dockworker and cargo containers
Dockworker and cargo containers

Environmental protestors set up pickets last week at Terminal 5 in Seattle, demanding that machinists plug in vessels at berth and operate from shoreside power during vessel loading and unloading. The ILWU refused initially to cross the picket lines, citing health and safety reasons, but the pickets were later removed and the vessel was worked and departed the terminal.

T-5 is equipped to work vessels at berth from shoreside electrical power, but no vessels have been plugged in yet, according to a port spokesperson. T-5 for the past two years has been experiencing a jurisdictional dispute between the ILWU and the International Association of Machinists and Aerospace Workers over maintenance and repair work. The dispute is ongoing, although IAM machinists have been performing the M&R work without incident.

In Oakland, dockworkers last week started the day shift about 20 to 30 minutes late at Oakland International Container Terminal (OICT) and the TraPac and Everport terminals. According to waterfront sources, rather than showing up about 7:30 am to be ready to begin the shift at 8 am, which is the normal practice, ILWU dockworkers showed up at the gate at 8 am, delaying the start of the workday by about a half-hour.

Also in Oakland, ILWU equipment operators normally plan their breaks when their replacements are standing by to take over so there is no interruption in cargo handling. But last week, according to sources, the workers instead took “unit breaks,” which meant they all took their breaks at the same time, resulting in an interruption of cargo handling for the length of the break.

And ILWU Local 34 in Oakland last week was dispatching only about half of the normal marine clerks needed to work a shift, according to sources, so OICT was not able to work the night shift.

Collectively, the work slowdown tactics by the ILWU at the Oakland terminals resulted in a 25 percent reduction in productivity at the port, a source told JOC.com.

These are not the first labor actions during the current ILWU contract negotiations. Just last week, I was writing in Universal Cargo’s blog about ILWU slowdowns. This ILWU negotiation cycle’s labor actions I wrote about last week include:

  • Refusing to work the automated side of Pier 400 at the Port of Los Angeles
  • Refusing to work a ship in Tacoma as union locals demanded mechanics be trained in CPR
  • ILWU Local 26, security guards on a separate contract from the master one, authorizing a strike
  • About 100 ILWU members refused to cross trucker picket lines, shutting down the largest terminal at the port of Oakland

Apparently, the ILWU is slowing negotiations as well, as Mongelluzzo continues:

The sources also said that coastwide negotiations in San Francisco were not held after Tuesday of last week because the daughter of an ILWU negotiator was getting married — which employers viewed as an obvious delay tactic.

A daughter’s wedding is certainly a significant moment in a person’s life. I wouldn’t blame someone at all for missing a day or two of negotiations over that. Though one would think other ILWU negotiators would be able to continue on without one member for a day or two. However, if by some chance this negotiator is the ILWU’s best one, I could see the union wanting to postpone. It does, however, give more time for the union to effectuate slowdowns, and it would not be the first time the union has stalled negotiations, if that is the case.

Indeed, the ILWU initiated a suspension of negotiations back in May, as shippers worried about the then upcoming July 1st expiration of the union’s master contract. We’re now approaching three months of union members working without a contract, and negotiations have stalled over a union juridictional dispute at the T5 terminal at the Port of Seattle.

Midterm Elections Playing a Role

Mongelluzzo wrote something interesting at the end of his article:

This year’s contract negotiations are being viewed differently than in past years because the Biden administration has maintained regular contact with both parties throughout the process as the White House does not want the US’ already stressed supply chain further disrupted by labor unrest on the West Coast.

I don’t see this set of negotiations being viewed any differently than previous iterations by shippers, many of whom diverted goods to East and Gulf Coast ports in anticipation of labor action causing disruption and delay. Just like in 2014, 2008, and going back to the 90’s, we’re seeing labor slowdowns during negotiations dragging past the previous contract’s expiration.

However, because of the politically charged moment in the run-up to midterm elections, I do see the media covering the situation differently and the White House getting involved earlier – only one of which is a bad thing.

Much of mainstream media leaning left means ILWU slowdowns are getting very little legacy media attention, as supply chain disruption is a negative for Democrats trying to stave off a red wave and keep control of Congress. When negotiations do get covered in mainstream news outlets, they’re often even covered in a positive light. For example, a week ago Augusta Saraiva wrote in an article for Bloomberg:

Dockworkers and their employers at 29 West Coast ports will keep cargo at the busiest US maritime operations moving as they negotiate a new labor contract, avoiding a repeat of the stoppages and delays that plagued supply chains in the 2014 talks, the head of the port of Long Beach said. 

“I do believe that we’re not going to have a prolonged negotiation much less any slowdown or strike — so I’m very comfortable with how we are right now at the nation’s largest and most significant gateway,” Executive Director Mario Cordero said in an interview at Bloomberg News’ New York office Monday. “This is not what we saw in 2014, by no means.”

Some might consider negotiations dragging on for three months after the master contract expired with no apparent progress to be a prolonged negotiation. Notwithstanding, the article makes no mention of any slowdowns or labor action that had taken place up to the point of its publication.

The article does talk about the White House staving off a rail strike through Labor Secretary Marty Walsh brokering a tentative agreement. Again, the article makes no mention that a rail strike is still a very real threat with two unions voting to reject the tentative agreement and many union members viewing the tentative agreement negatively, to say the least.

Indeed, I’ve seen little but unadulterated praise from mainstream media for the Biden Administration over the tentative agreement, with no regard to the problems that still remain. Reaching a tentative agreement that has at least delayed a rail strike is certainly a victory for the Biden Administration, and I’m happy to see it trying to help deals get done both at the rails and the docks.

Rail stoppage or major port disruption from either of these negotiations would not only be disastrous for Democrats’ midterm election hopes but for the nations’ supply chains and already-in-recession economy. Luckily, midterm elections give the current administration extra motivation to get involved in seeing negotiation resolution than it took the Obama Administration to step in during the 2014-15 negotiations. Unfortunately, there’s been a lack of results so far with these current ILWU negotiations. Hopefully, the Biden Administration doesn’t botch this like it’s done with Afghanistan, oil policies, the lead-up to Russia’s invasion of Ukraine, the southern border, overspending pumping up inflation, et cetera, et cetera…

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Threat of Rail Strike Is Not Over https://www.universalcargo.com/threat-of-rail-strike-is-not-over/ https://www.universalcargo.com/threat-of-rail-strike-is-not-over/#respond Fri, 23 Sep 2022 00:15:46 +0000 https://www.universalcargo.com/?p=11294 News broke on Thursday of last week that a tentative agreement had been reached between the railroads and the two largest rail worker unions, BLET and SMART-TD, preventing a supply-chain-disrupting strike that looked likely to happen on the following day.

However, the tentative agreement may have only postponed a strike. Indeed, a rail strike remains a very real threat.

Heralded as a great victory by the Biden Administration and much of legacy media, the tentative agreement is not being met with such approval by rank-and-file members of the unions. Some union members even feel betrayed by their union leaders for making a tentative agreement.

The recently formed Rail Workers Rank-and-File Committee (RWRFC) issued a statement on Tuesday (September 20th) that was published on the World Socialist Web Site (WSWS) that goes so far as to say making this tentative agreement shows the union leaders don't represent the rail workers:

The rail unions’ agreement of September 15, worked out behind our backs in the dead of night, is not only a betrayal of railroaders that seeks to enforce the Presidential Emergency Board report with only minor tweaks. It is also a flagrant violation of the democratic will of the membership and the bedrock principles of the labor movement. By their own actions, the bureaucrats that run the BLET, SMART-TD and the other 10 unions have shown that they don’t represent us, but the railroads, the government and Wall Street.

Keep reading in Universal Cargo's blog.

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News broke on Thursday of last week that a tentative agreement had been reached between the railroads and the two largest rail worker unions, BLET and SMART-TD, preventing a supply-chain-disrupting strike that looked likely to happen on the following day.

However, the tentative agreement may have only postponed a strike. Indeed, a rail strike remains a very real threat.

Committee of Union Members Call Tentative Agreement Betrayal

truckers strike Port of Los Angeles Long Beach

Heralded as a great victory by the Biden Administration and much of legacy media, the tentative agreement is not being met with such approval by rank-and-file members of the unions. Some union members even feel betrayed by their union leaders for making a tentative agreement.

The recently formed Rail Workers Rank-and-File Committee (RWRFC) issued a statement on Tuesday (September 20th) that was published on the World Socialist Web Site (WSWS) that goes so far as to say making this tentative agreement shows the union leaders don’t represent the rail workers:

The rail unions’ agreement of September 15, worked out behind our backs in the dead of night, is not only a betrayal of railroaders that seeks to enforce the Presidential Emergency Board report with only minor tweaks. It is also a flagrant violation of the democratic will of the membership and the bedrock principles of the labor movement. By their own actions, the bureaucrats that run the BLET, SMART-TD and the other 10 unions have shown that they don’t represent us, but the railroads, the government and Wall Street.

In its founding statement issued on September 1, the RWRFC called the Presidential Emergency Board’s (PEB) report “a slap in the face” and called on workers at all Class 1 railroads in the United States “to organize now to prepare for strike action.”

Mixed Results in Rejection and Acceptance of Agreements

Whenever tentative contract agreements are reached between employer groups and major unions, there are usually factions within the unions who oppose the agreement. Such groups, for example, rose within the ILWU when it came time to vote for ratifying the agreement that was finally reached in the contentious 2014-15 contract negotiations. Usually, these groups don’t represent the majority of workers, and agreements get ratified. However, there are indicators that ratification may not happen with this rail agreement.

Rail workers in smaller unions that reached tentative agreements with the railroads after recommendations were given from the PEB already voted to reject the agreements. At least one of those unions is only delaying strike action until a week from now to see if a better agreement can be reached in that time.

Nick Savvides reported in a Loadstar article titled “Biden hails US rail agreement – but unions are not on board yet“:

The International Association of Machinists (IAM) and the Brotherhood of Railroad Signalman (BRS) have both rejected the deal and with rail workers not expected to cross picket lines, the possibility of delays and cancellations remains very real.

In a statement published on 14 September IAM said that 4,900 of its members had voted to reject the deal reached with the employers’ side, the National Carriers’ Conference Committee (NCCC).

According to IAM, its members had agreed to delay any strike action until 29 September in the hope that the union can negotiate changes with the NCCC.

Not all unions rejected the new agreements. The Transportation Communications Union and Brotherhood Railway Carmen Division saw their members vote to ratify.

RWRFC’s Complaints Against Agreement & Union Leadership

It’s hard to know how many railroad workers in BLET and SMART-TD, as well as the other rail worker unions, support the sentiments of the RWRFC, but the committee says it sponsored a meeting on September 14th that was attended by over 500 workers to plan a nationwide strike.

Here are the complaints the committee published against the tentative agreement and the union leadership:

The deal between the unions, the companies and the White House, which was worked out as railroaders were meeting, is a flagrant and deliberate violation of all three points:

First, it is a de-facto injunction, enforcing through the collaboration of the unions and the White House a ban on a national strike that both the Democrats and Republicans were prepared to pass in Congress on September 16.

Second, it includes pay increases below the rate of inflation, maintains Hi Viz, PSR and other punitive attendance policies, would give us only four sicks for an entire year (only one of which would be paid) and does nothing to end the push for one-man crews.

Third, it keeps us working while the unions work to delay a strike. The unions have admitted that a contract does not even exist yet. This is a violation of the basic principle of the labor movement, “no contract, no work.” The unions are now stretching the voting process out for weeks in a bid to demoralize us and soften us up so that they can pass a contract we do not support.

The agreement is only the latest in a long train of violations of our most basic, elemental rights, including:

– Hoarding our dues money to finance their salaries while paying $0 in strike pay;
– Loyally enforcing court injunctions and threatening to expose workers to legal action;
– Ignoring a 99.5 percent strike vote in July, and instead calling for Biden to appoint the PEB;
– Censoring us on social media and suppressing discussion at local meetings;
– Dividing us up by union, announcing separate deals in a bid to break our unity and solidarity.

Union Chiefs May Override Member Votes

We know Congress has the power to stop a strike by forcing the unions to accept the contract. but it appears that union leadership could also force the contract on their members, overriding votes to reject the tentative agreements.

cargo train BNSF

Daniella Genovese reported in a Fox Business article:

[Mark Mix, president of the National Right to Work Committee] said there is nothing in the Railway Labor Act that requires that rank-and-file workers vote to ratify union contracts, meaning union bosses can bypass such votes.

“They’ve also been known to impose a contract even after workers vote overwhelmingly to reject it,” he said. 

In a Railway Age article, Frank N. Wilner gave a couple examples of union chiefs overriding member votes:

In 1996, the leadership of the United Transportation Union—now the Transportation Division of the Sheet Metal, Air, Rail and Transportation Workers (SMART-TD)—overrode its members’ rejection of a tentative agreement on wages, benefits and work rules. Rather than return to the negotiating table or order a work stoppage, either of which was sought by members, the union’s leadership made a deal with carriers to send the member-rejected tentative contract to binding arbitration, where a carrier-friendly award was imposed.

In 2018, the leadership of the Teamsters Union, of which the Brotherhood of Locomotive Engineers and Trainmen (BLET) is an affiliate, overrode a vote of members rejecting a tentative wage pact with UPS…. Note that Teamsters agreements are negotiated under provisions of the National Labor Relations Act, not the Railway Labor Act (RLA), although neither speaks directly to the membership ratification process.

Economic & Political Pressure

I don’t have to tell shippers who read this blog how important the railroads are to supply chains and the U.S. economy. There’s also a great deal of political impact these agreements versus rail shutdowns have with midterm elections coming up.

Wilner reports there’s talk about the political investment of union leaders in the Democratic Party might be more likely to override members votes:

Notwithstanding the Biden Administration basking in the political sunlight of tentative agreements being reached, the threat of an economy-jolting nationwide rail shutdown remains—and will be pinned on Biden and Democrats if it occurs prior to mid-term elections in November. Hence, there’s chatter as to whether rail labor leaders, very much invested in Democratic success in mid-term elections, might override a membership rejection of the tentative agreement or, alternatively, seek binding arbitration so as to avoid a work stoppage damaging to Democratic candidates.

Mix, quoted in the Fox Business article, talks about the political pressure being put on union members:

Still, “given the political headache it would create for the Biden administration for this deal to fall apart now, if the union officials do allow a vote, rank-and-file workers will be under tremendous pressure to ratify the deal,” Mix added. 

This means “agreeing to a contract they otherwise wouldn’t because it will advance the political goals of Big Labor at this critical moment just before the Midterms,” he said.

That there is political pressure on the union members, and that pressure is also applied by media that often acts as the PR arm of the political parties, is clear in the RWRFC’s statement when the committee writes:

We cannot be intimidated by the threat of Congressional intervention or by media attempts to demonize us as “selfish.” As far as American workers are concerned, railroaders have far more legitimacy than Congress or the corporate media.

Clearly, the rail worker fight hasn’t ended with the tentative agreements, keeping us on alert for potential strike that is still very possible.

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ILWU Labor Action Occurs as Contract Negotiations Look Bad https://www.universalcargo.com/ilwu-labor-action-occurs-as-contract-negotiations-look-bad/ https://www.universalcargo.com/ilwu-labor-action-occurs-as-contract-negotiations-look-bad/#respond Tue, 20 Sep 2022 21:18:59 +0000 https://www.universalcargo.com/?p=11288 Labor action from West Coast dockworkers is looking more and more likely to disrupt supply chains. In fact, local action, including a port security guard strike authorization, have already taken place.

The potential of a rail strike pulled attention away from the International Longshore & Warehouse Union's (ILWU) contract negotiations with the Pacific Maritime Association (PMA). On Thursday last week, a tentative contract agreement between the railroads and the two largest rail worker unions relieved the fear of U.S. supply chains shutting down on the following day, allowing focus to turn back to the ILWU's stalled contract talks. Things are not fully resolved on the rails, but the situation there has generally moved in a positive direction while the situation on the docks is trending in a negative one.

Find out all about it by reading the full post in Universal Cargo's blog.

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Labor action from West Coast dockworkers is looking more and more likely to disrupt supply chains. In fact, local action, including a port security guard strike authorization, have already taken place.

The potential of a rail strike pulled attention away from the International Longshore & Warehouse Union’s (ILWU) contract negotiations with the Pacific Maritime Association (PMA). On Thursday last week, a tentative contract agreement between the railroads and the two largest rail worker unions relieved the fear of U.S. supply chains shutting down on the following day, allowing focus to turn back to the ILWU’s stalled contract talks. Things are not fully resolved on the rails, but the situation there has generally moved in a positive direction while the situation on the docks is trending in a negative one.

Concerning Situation

Peter Tirschwell, Vice President, Maritime & Trade, S&P Global Market Intelligence, has not surprisingly been keeping a close eye on the situation at the docks, writing articles about what’s going on with the ILWU and their contract negotiations in the Journal of Commerce (JOC) and the Wall Street Journal (WSJ).

As I’ve done in Universal Cargo’s blog, Tirschwell has warned of the supply chain disruption threat the ILWU poses at West Coast ports. Days before the July 1st expiration of the ILWU’s master contract, Tirschwell wrote in a WSJ article:

An actual strike isn’t probable. More than half a century has passed since the last dockworker strike on the West Coast. Much more likely are local labor disruptions. There was no strike at West Coast ports in 2014 and 2015, when the contract was last up for negotiation (it was extended in 2019). But there were nearly six months of labor disruption, leading to billions of dollars in losses for agricultural exporters. Local units of the ILWU disrupted individual ports over local grievances they felt weren’t being addressed in the negotiations. Port employees’ main tactic—which they’ve employed since the 1990s—was to work “to the letter of the contract,” loading and moving containers very slowly. It’s not possible to stop a dockworker from driving equipment at a snail’s pace, and it can severely disrupt cargo flow.

These labor slowdowns weren’t just costly for agricultural exporters, whose produce rotted on the docks. Importers couldn’t get their goods in time to get them on the shelves for the holiday shopping season. Shippers certainly haven’t forgotten about the costly port congestion resulting from the 2014-15 contentious contract negotiations and diverted cargo this summer to East and Gulf Coast ports in case a repeat happens.

Union Jurisdiction & Automation

Initially, the most talked about concern for making ILWU contract negotiations contentious was automation. However, union jurisdictional issues pertaining to the T5 terminal at the Port of Seattle has reportedly kept negotiations from even getting to the problem of automation, which ports need to keep up with modern shipping volumes but the union views as an existential threat.

Pointing back to the 2008, the Union says a quid pro quo was reached where the unions would allow the ports to automate if management would support the ILWU in union jurisdiction matters. Maybe so. The ILWU was also well compensated in pay and benefits. But now, court ruling on the union jurisdiction fight the ILWU has been having at T5 went against the union, and the ILWU is calling into question the ports’ right to automate at all.

Contract-Related Local ILWU Labor Action

Among other local labor action, Tirschwell reported in the JOC last week that dockworkers were refusing to work at an automated terminal:

In Los Angeles, dockworkers as of this week were continuing to refuse to work ships on the automated side of Pier 400…

He reported the union cited safety concerns as the reason for this action. Of course, when truckers picketed the Port of Oakland over AB 5 and dockworkers refused to cross the picket line, the union said that was because of safety concerns too. Dockworkers who refused to work then never mentioned safety issues when they told reporters how they were standing with the truckers.

It’s amazing how these unspecified safety concerns always seem to coincide with other issues that appear to inspire labor action.

In addition to the dockworkers refusing to work the automated side of Pier 400 in Los Angeles, Tirschwell reports:

In Tacoma, a Matson ship recently wasn’t worked due to a demand by union locals for mechanics to be trained in CPR, sources said. Sources said both issues were directly tied to the coastwide negotiations, indicating unrest is once again emerging at the local level.

With no contract in place, the ports can’t call in an arbitrator to decide if the labor action is legal.

ILWU Local 26 Strike Threat

The member-authorized strike of port security guards, associated with the ILWU but separate from the master dockworker contract negotiations we’ve been talking about, represents a serious threat to Port of Los Angeles operations. Tirschwell reports in another JOC article:

West Coast terminal employers also remained on alert for a possible strike by ILWU Local 26, a security guard local affiliated with the longshore union that voted on Sept. 1 to authorize a strike, although two sources said they thought the chance of a strike was relatively low. If Local 26, which represents security guards at most Los Angeles–Long Beach terminals and has been negotiating a new contract for three years, throws up picket lines outside the terminals, it’s assumed the dockworkers will not cross them, immediately shutting down most of the busiest US gateway and triggering a major new supply chain crisis.

ILWU Contract Negotiations Impasse

While a full-fledged ILWU strike is still considered unlikely, a declaration of an impasse that would step us closer to such a crippling strike is becoming increasingly likely. Tirschwell reports:

Sources close to the negotiations told JOC.com that although no impasse has been declared — a formal designation that could precipitate a strike, an option the union has disavowed — no solution has yet emerged after weeks of discussion centered on Seattle and the broader related issues. The highly contentious jurisdictional issue that originated in 2018 at Seattle’s Terminal 5 (T5) has become a coastwide contract issue. The longer the give-and-take over T5 drags on without progress, the greater the likelihood that an actual impasse could be declared, possibly as soon as Sept. 19, sources say.

At the time of this writing, September 19th was yesterday. No news of an official impasse has been announced, but there has also been no sign of progress either.

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Railroads & Unions Reach Tentative Agreement Preventing Strike https://www.universalcargo.com/railroads-unions-reach-tentative-agreement-preventing-strike/ https://www.universalcargo.com/railroads-unions-reach-tentative-agreement-preventing-strike/#respond Thu, 15 Sep 2022 18:05:22 +0000 https://www.universalcargo.com/?p=11283 Just a day ahead of a potential rail strike that would have crippled U.S. supply chains, the railroads and the last two rail worker unions reached a tentative agreement. Shippers, and anyone paying attention to this situation, can breathe a sigh of relief. Strike averted.

Find out all about it by reading the full post in Universal Cargo's blog.

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Just a day ahead of a potential rail strike that would have crippled U.S. supply chains, the railroads and the last two rail worker unions reached a tentative agreement. Shippers, and anyone paying attention to this situation, can breathe a sigh of relief. Strike averted.

The Journal of Commerce reported today:

US freight railroads and unions reached a tentative contract agreement early Thursday brokered by the Biden administration, averting a strike that would have crippled the country’s already fragile supply chain.

The leadership of the country’s two largest rail unions — the Brotherhood of Locomotive Engineers and Trainmen (BLET) and Sheet Metal Air, Rail, and Transportation Workers (SMART-TD) — said in a statement Thursday they will submit the tentative agreement to their rank and file for a vote. No specific timeline was provided, though a spokesperson for SMART-TD told JOC.com it will be “a matter of weeks.”

The tentative deal came after a 20-hour marathon negotiating session was held all day Wednesday and into Thursday at the Department of Labor, with Labor Secretary Marty Walsh hosting leadership from railroads and the unions.

A Presidential Emergency Board (PEB) that was created in July recommended a compounded 24 percent wage increase covering 2020 through 2024 and a total of $5,000 in bonus payments for workers. But sources had told JOC.com that work conditions and lifestyle concerns, rather than compensation, were the main obstacle to a deal.

BLET and SMART-TD were the holdouts to accepting a deal. And things looked even bleaker early Wednesday when a third union, the International Association of Machinists and Aerospace Workers (IAM) District 19, announced that its 4,900 members had voted to reject a tentative agreement.

Indeed, a strike was looking likely after negotiations last week failed to make progress, railroads announced contingency plans on Friday in preparation for a strike, and weekend negotiations continued to bear no fruit.

Averting the strike is a big deal. The Association of American Railroads predicted a strike would have cost 2 billion dollars per day. Shippers and retailers have been urging the two sides to make an agreement, fearful of already congested supply chains shutting down altogether. And, just weeks before the midterm elections, Democrats needed a deal to be reached for political reasons.

As discussed in Tuesday’s blog, Democrat-Party-controlled Congress could put an end to the strike by forcing the sides to accept a recommended contract, ordering more cooling-off time, or mandating arbitration. They couldn’t sit and do nothing as the country’s supply chains shut down, but breaking up a union strike when the Democrats count on union contributions in election campaigns would be problematic for them to say the least. This outcome saves the party from a major political dilemma.

Additionally, the last thing President Biden needed was another disaster to add to the list of disasters his presidency has racked up in just two years in office. Instead, he gets a much needed and timely political win.

Now it’s just a matter of SMART-TD and BLET members voting to ratify the agreement. IAM District 19’s vote to reject the tentative agreement that union made with the railroads shows ratification isn’t guaranteed. Still, the expectation is the unions will vote to ratify it. Even if they don’t, that doesn’t mean a strike immediately gets executed. But that would bring back the possibility of a strike hitting the rails.

In the meantime, this is good news for the nation’s supply chains. Attention now turns to the West Coast ports where contract negotiations between the International Longshore & Warehouse Union and the Pacific Maritime Association are becoming more and more concerning. But more on that next week…

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Railroad Unions May Strike This Week w/ $2B-a-Day Consequences https://www.universalcargo.com/railroad-unions-may-strike-this-week-w-2b-a-day-consequences/ https://www.universalcargo.com/railroad-unions-may-strike-this-week-w-2b-a-day-consequences/#respond Tue, 13 Sep 2022 19:24:50 +0000 https://www.universalcargo.com/?p=11280 On Friday, September the 16th, the mandatory cooling-off period on negotiations between U.S. railroads and their employees' unions ends, and the unions will be able to strike. That's just three days from the time of this writing. Such a strike would screech supply chains across the country to a halt and is estimated to cost the economy billions of dollars per day.

Shiyin Chen and Keith Laing report in a Bloomberg article:

"With freight railroads serving agricultural, industrial, wholesale, retail and other parts of the US economy, a nationwide shutdown could cost up to $2 billion a day, the Association of American Railroads predicts. At a time of elevated inflation, the stoppage could result in plant shutdowns, lost jobs and higher costs for consumers and businesses, the group said."

Railroad workers in the U.S. are split into a dozen different unions. The majority of the unions have reached contract agreements with the railroads; however, the two biggest unions have not.

The Brotherhood of Locomotive Engineers and Trainmen (BLET) and the Sheet Metal Air, Rail, and Transportation Workers-Transportation Division (SMART-TD) represent close to 100,000 railroad workers. Negotiations last week and over the weekend failed to reach agreement. Both unions took preparatory steps for strike months ago. Now it's looking more than likely we will actually see a strike hit on Friday.

Find out more by reading the full post in Universal Cargo's blog.

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On Friday, September the 16th, the mandatory cooling-off period on negotiations between U.S. railroads and their employees’ unions ends, and the unions will be able to strike. That’s just three days from the time of this writing. Such a strike would screech supply chains across the country to a halt and is estimated to cost the economy billions of dollars per day.

truckers strike Port of Los Angeles Long Beach

Shiyin Chen and Keith Laing report in a Bloomberg article:

With freight railroads serving agricultural, industrial, wholesale, retail and other parts of the US economy, a nationwide shutdown could cost up to $2 billion a day, the Association of American Railroads predicts. At a time of elevated inflation, the stoppage could result in plant shutdowns, lost jobs and higher costs for consumers and businesses, the group said. 

Railroad workers in the U.S. are split into a dozen different unions. The majority of the unions have reached contract agreements with the railroads; however, the two biggest unions have not.

The Brotherhood of Locomotive Engineers and Trainmen (BLET) and the Sheet Metal Air, Rail, and Transportation Workers-Transportation Division (SMART-TD) represent close to 100,000 railroad workers. Negotiations last week and over the weekend failed to reach agreement. Both unions took preparatory steps for strike months ago. Now it’s looking more than likely we will actually see a strike hit on Friday.

Last Friday, with no progress being made in negotiations, railroads sent advisories to customers about contingency plans the carriers are putting in place in anticipation of labor action. Among the contingency moves, the railroads are securing hazardous materials, halting some services, reducing operations, and warning of potential delays and disruptions.

Here are three rail road advisories from Norfolk Southern, Association of American Railroads, and CSX:

Norfolk Southern’s Advisory


Labor negotiations and service update

Although the rail industry has reached tentative agreements with 10 of the 12 unions involved in current negotiations, two holdouts have been unwilling to come to an agreement based on the recommendations of President Joe Biden’s Presidential Emergency Board.  

As a result, Norfolk Southern must now begin to prepare for the possibility of a strike at the conclusion of the current cooling-off period on September 16. Most importantly, we must ensure that hazardous and other security-sensitive freight is properly secured so it is not left stranded in the event of a sudden strike. 

We have communicated to our customers that we will temporarily halt certain types of shipments beginning September 12. In addition, to safely ramp down our network and enable us to bring service back quickly, certain other customers will see a preliminary curtailment of service before September 16.

Should the two remaining unions commit not to strike, we will resume full operations. We have communicated to all parties in the negotiations that we will not lock out union employees. Our goal is to keep our nation’s economy moving, serve our customers, and reach agreements with the remaining unions.

Association of American Railroads’ Advisory

Other Service Disruptions Possible Over Next Week

Washington, D.C. – September 9, 2022 – In light of the possibility of a rail labor strike, the six Class I freight railroads participating in national bargaining will begin to take steps to manage and secure the shipments of hazardous and security-sensitive materials, such as chlorine used to purify drinking water and chemicals used in fertilizer, starting as early as Monday, September 12. Railroads are taking all measures necessary to handle sensitive cargo in accordance with federal regulations to ensure that no such cargo is left on an unattended or unsecured train in the event of a work stoppage due to an impasse in labor negotiations. Additionally, other freight customers may also start to experience delayed or suspended service over the course of next week, as the railroads prepare for the possibility that current labor negotiations do not result in a resolution and are required to safely and securely reduce operations.

While these preparatory actions are necessary, they do not mean a work stoppage is certain. Railroads will continue meeting throughout the weekend with the remaining unions to work toward tentative agreements. The railroads want, and continue to advocate for, a prompt resolution that would provide historic wage increases to rail employees – and allow the railroads to continue servicing customers and prevent further disruption to the struggling supply chain.

CSX’s Advisory

CSX Customer Advisory: High Hazardous TIH/PIH Shipment Embargo

September 9, 2022

CSX is taking steps to ensure the safety of high hazardous, toxic by inhalation and poisonous by inhalation (TIH/PIH), materials in the event of a potential rail labor strike. We remain hopeful that agreements will be reached, but to prepare for the possibility of a work stoppage the company will take action by issuing an embargo on all TIH/PIH shipments and other safety-sensitive freight effective Monday, Sept. 12.

CSX will work to ensure compliance with federal regulations and avoid the potential of safety-sensitive and hazardous materials being left unsecured or unprotected. In addition, we are advising all customers that delays and service suspensions are possible if the impasse in labor negotiations continues.

The CSX Customer Solutions team is available to provide details and answer questions regarding shipments. Call the Customer Solutions team at 1-877-ShipCSX (1-877-744- 7279). For Carload assistance choose option 2 from the sub-menu and then 1, 5 to speak with a representative. For Intermodal assistance, choose 2 from the sub menu and then 2, 2 to speak with a representative. You may also submit a Shipment Problem Resolution request via www.shipcsx.com.

CSX remains steadfast in our commitment to supporting businesses across the nation, and continuing to help meet the supply chain needs of America’s economy. We will keep you updated as this matter continues to evolve.

Congress in a Tough Spot

cargo train BNSF

If the unions do strike, Congress can immediately step in to stop it. Congress did just that in 1991, as we discussed in our blog on how likely a rail strike is posted back at the beginning of August.

Congress could force the unions to accept the recommended deal made by President Biden’s Presidential Emergency Board (PEB), order further cooling-off time, or mandate arbitration to stop the strike. Especially with midterm elections here, Congress can’t simply sit back and let the nation’s supply chains shut down.

The Bloomberg article I quoted at the beginning of this post puts it pretty well:

“In this moment where there’s so much public concern about supply chain and inflation I think there’s going to be a lot of pressure on Congress to step in,” said Sharon Block, a former senior adviser to the Biden transition team and current executive director of Harvard Law School’s Labor and Worklife Program. “It’s a tough call because the economy is in such an unusual posture right now.”

Perhaps Block doesn’t want to say it because she’s a former Biden senior advisor, but it’s not simply “an unusual posture” we’re seeing right now; the economy is in a recession. A rail shutdown would be a disaster. But here’s where the decision to stop the strike gets tough for Congress:

Democrats control both the House and the Senate. Unions, whether individual members agree with it or not, are often major financial backers of the Democrat Party. The last thing Democrats want to do is look like they are going against their union election bankrollers. This is especially true now when so many police unions and even some other labor unions have moved to supporting Republican candidates because of poor policies from the Democrats.

Breaking up a union strike and forcing the unions to take a contract they don’t want sounds an awful lot like union-busting actions. That’s why I find it more likely Congress would try ordering further cool-off periods and more arbitration to stop a strike. However, any move to stop the strike rather than support it could be seen by unions as a betrayal.

SMART-TD and BLET obviously don’t want to see congressional action. Their leaders are quoted in another Bloomberg article, this one by Josh Eidelson and Augusta Saraiva, as saying the railroads’ moves, which were highlighted above, as being “no more than corporate extortion,” accusing the rail freight carriers of “harming the supply chain in an effort to provoke congressional action.”

Since Congressional action would be to stop a strike, it certainly sounds like the unions plan to execute one.

The supply chain is definitely in a precarious spot, along with Congress. Would ordering more cooling-off time or arbitration even help? Those things haven’t worked so far. Even without a full-fledged strike, labor slowdowns and reduced services from the railroads could do plenty of supply chain and economic damage, aggravating major congestion already happening on the rails.

 

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Is Philadelphia Airport the Cargo Field of Dreams? https://www.universalcargo.com/is-philadelphia-airport-the-cargo-field-of-dreams/ https://www.universalcargo.com/is-philadelphia-airport-the-cargo-field-of-dreams/#respond Thu, 08 Sep 2022 22:04:48 +0000 https://www.universalcargo.com/?p=11278 Apparently, if Kevin Costner built an airport, it would be the Philadelphia Airport.

Alex Lennane reports in an article for the Loadstar:

"Philadelphia Airport is hoping to lure cargo from other east coast airports, particularly New York, in a ‘build it, and they will come’ strategy.

"The airport has partnered with Menzies Aviation, Kale Logistics and airport investor AFCO to build new facilities and a cargo community system, which it believes will boost its freight credentials and bring in air cargo carriers.

"Jim Tyrrell, chief revenue officer for PHL airport, said the partnership would help it achieve the goal of becoming 'the airport of choice for logistics on the east coast'."

Find out more by reading the full post in Universal Cargo's blog.

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Apparently, if Kevin Costner built an airport, it would be the Philadelphia Airport.

Alex Lennane reports in an article for the Loadstar:

Philadelphia Airport is hoping to lure cargo from other east coast airports, particularly New York, in a ‘build it, and they will come’ strategy.

The airport has partnered with Menzies Aviation, Kale Logistics and airport investor AFCO to build new facilities and a cargo community system, which it believes will boost its freight credentials and bring in air cargo carriers.

Jim Tyrrell, chief revenue officer for PHL airport, said the partnership would help it achieve the goal of becoming “the airport of choice for logistics on the east coast”.

Becoming the airport of choice for logistics on the East Coast is quite the goal. But it’s not as crazy as Kevin Costner building a baseball field in his backyard for ghosts to come play because a voice told him to do so. In case you’ve somehow never seen or heard of Field of Dreams, it’s a movie. Kevin Costner is not, as far as I’m aware, crazy. And neither are the people who run the Philadelphia Airport.

It appears, they’re not exactly building in the hopes that business will just come. It seems the opportunity is already there. The airport just hasn’t been prepared to capitalize on the existing demand.

The article continues:

[Tyrrell] added that the airport’s catchment area was ripe, with some 70% of local traffic bypassing PHL for other hubs.

“We have been turning down opportunities because of a lack of facilities. We have never had the capacity to attract new business.”

Here’s what Lennane reports the airport is building:

AFCO will develop a 150,000 sq ft building for Menzies.

“It was an older building that wasn’t performing, but had widebody access,” explained Mr Tyrrell on the sidelines of the Air Cargo Handling & Logistics conference in Athens today. “We will repurpose that and will have six widebody parking positions from next month.”

The airport, which has a 135-acre plot to develop, and will also build a 1m sq ft warehouse, as well as capacity for 24 widebodies, in a longer-term plan, which will take about 2.5 years to complete.

“The building is just one part,” explained Mr Tyrrell. “[Our partnerships] will help all logistic stakeholders in the region. And the technology will be powered by Kale to help ensure the transparency and efficiency that stakeholders need.”

An interesting tidbit from Lennane’s article is something Alex quoted Menzies (I won’t make any jokes about the company’s name, but I will say watch the New Girl episode titled Menzies) as saying:

“We don’t want traditional cargo gateways, we want airports that are willing to invest…”

The company’s head of cargo said PHL “hit the sweet spot.”

Obviously, any company is going to talk up its new ventures, but from the outside looking in, PHL really does look like it could have an advantage with new investment to grab market share from airports that are more established in terms of being air cargo gateways.

At the very least, PHL’s air freight building moves have caught the attention of the Loadstar, which is a UK-based international shipping news source. Now it’s caught our attention here at Universal Cargo. We’ll be keeping an eye on the airport for when it is the best option for customers who use our air freight services.

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Has the International Shipping Bubble Finally Popped? https://www.universalcargo.com/has-the-international-shipping-bubble-finally-popped/ https://www.universalcargo.com/has-the-international-shipping-bubble-finally-popped/#respond Tue, 06 Sep 2022 19:06:01 +0000 https://www.universalcargo.com/?p=11274 The Wall Street Journal headlined an article yesterday with "Ocean Shipping Rates Have Plunged 60% This Year."

Costas Paris reports in the article:

"The cost to ship a 40-foot container from China to the U.S. West Coast now stands around $5,400 a box, down 60% from January, according to the Freightos Baltic Index. A container shipped from Asia to Europe costs $9,000, 42% less than at the start of the year. The rate for both routes, while still above prepandemic levels, peaked at more than $20,000 last September."

Find out more, including what experts are saying about the freight rates bubble and the future of shipping prices by reading the full post in Universal Cargo's blog.

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The Wall Street Journal headlined an article yesterday with “Ocean Shipping Rates Have Plunged 60% This Year.”

Costas Paris reports in the article:

The cost to ship a 40-foot container from China to the U.S. West Coast now stands around $5,400 a box, down 60% from January, according to the Freightos Baltic Index. A container shipped from Asia to Europe costs $9,000, 42% less than at the start of the year. The rate for both routes, while still above prepandemic levels, peaked at more than $20,000 last September.

Freight Rates

Part of what makes decreased rates right now remarkable is the fact we’re in the peak season shipping, when freight rates typically go up. And it’s not as though there have been no increases.

For you regular readers of this blog, who read last week’s post about why this is a good time for many shippers to look at air freight as an ocean freight alternative, you know Hellenic Shipping News reported that ocean shipping rates rose in August. The data showed ocean freight rates up 4.1% month-on-month and 121.2% higher than that time last year. Thus, rates are still very far away from prepandemic levels.

Frankly, I’m amazed at how sustained skyrocketed freight rates have been. Since the end of 2020, I’ve been expecting, as well as warning in this blog, that the damage of the lockdowns and other Covid policies and the trillions overspending by the U.S. government would result in inflation and that combined with spending moving away from goods with the end of lockdowns would cause a sharp decline in shipping demand. Inflation hit like a hammer, but shipping demand managed to remain incredibly high for a very sustained amount of time.

Add that demand to carrier alliances’ ability to control capacity, chronic port congestion, maldistribution of shipping containers and equipment (to start with because of hundreds of blanked – cancelled – sailings), and a series of disruptive accidents and incidents, and you get out-of-control, rising freight rates.

But now shipping experts are saying that bubble has popped.

Experts Now Saying It’s Over

In fact, The Loadstar headlined an article last week with, “Freight rate bubble bursts, pushing smaller opportunists out of the transpacific.”

The focus of that article is obviously on small players, who tried to jump into transpacific shipping to make a quick fortune, now getting forced to leave because there’s no more money there. However, the bigger story within the story to me is how it takes it as a given that the freight rate bubble has popped. Sam Whelan, who wrote the article, did supply some data for that:

Indeed, Drewry’s WCI US west coast rate fell to $6,127 per 40ft last week, and is now 46% lower than a year ago.

Freight rates are still very high, but we are seeing a significant drop. Now, experts all over the place are saying we’ve come to the end of these skyrocketing freight rates.

Paris, in his WSJ article, quotes such an expert as he looks at freight rates now and into the future:

“For spot rates, the party is over,” said Jonathan Roach, a container shipping analyst at London-based Braemar. “The backdrop of a potential global recession, driven by surging energy prices and rapid inflation, is driving down the market. The pandemic boom in demand for consumer products has calmed and spending on travel, leisure, and services made a revival in 2021.”

Shipping rates are set to further ease for the remainder of the year and in 2023, according to shipowners and analysts. A series of new ships will hit the water over the next two years with net fleet growth expected to exceed 9% next year and in 2024. By comparison, container volume growth will be marginally negative next year and rise around 2% in 2024, according to Braemar.

Mike Wackett report a similar outlook from another expert in an article on The Loadstar:

The capacity shortage that underpinned skyrocketing ocean freight rates for the past two years has ended and rates will continue to fall, according to Vespucci Maritime CEO Lars Jensen.

“The available data shows that the fundamental support for very high freight rates has now fully disappeared and further weakening is to be anticipated,” he said.

The analyst added: “Even though small bumps in the road, in the form of a sudden short demand spike or unexpected bottlenecks, could cause temporary upward rate movements, the overall rate development will continue down towards more normal market levels.”

Conclusion

It does indeed look like the international shipping freight rate bubble has popped. However, there are still just three carrier alliances that dominate all of ocean shipping. They made billions upon billions during this boom and learned just how well they can control capacity in the process. I wouldn’t expect them to allow freight rates to tumble as fast as falling demand would cause on its own. Expect blanked sailings to be heavily utilized to reduce capacity and ease the fall of freight rates.

 

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Why Air Freight May Be a Better Option for Many Shippers https://www.universalcargo.com/why-air-freight-may-be-a-better-option-for-many-shippers/ https://www.universalcargo.com/why-air-freight-may-be-a-better-option-for-many-shippers/#respond Fri, 02 Sep 2022 00:18:10 +0000 https://www.universalcargo.com/?p=11268 For more than a year, many shippers who have always shipped by sea have turned to air freight for their heavy lifting.

There's a reason 90% of goods are transported around the world by ship. It's cheaper. Well, let's say more cost efficient. There, doesn't that sound better? Actually, it's much, much more cost effective. But lately, that hasn't been as much of the case.

When comparing the two methods of cargo transport, Freightos still has on its site:

... a medium size 2000 lbs box from Shenzhen, China to Los Angeles, USA, can cost $1,500 by ocean but a whopping $8,000 or more by air.

However, ocean freight rates have skyrocketed since the COVID-19 pandemic struck in 2020. For a while, we were talking about ocean freight rates at more than 500% what they were prepandemic. Multiply $1,500 by five and you're getting awfully close to that $8,000 number. ($1,500 x 5 = $7,500 in case you really hate doing math)

Air freight rates went up too, but didn't increase nearly as much as ocean freight rates did.

Find out more by reading the full post in Universal Cargo's blog.

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For more than a year, many shippers who have always shipped by sea have turned to air freight for their heavy lifting.

Air Freight, Ocean Freight Price Gap

There’s a reason 90% of goods are transported around the world by ship. It’s cheaper. Well, let’s say more cost efficient. There, doesn’t that sound better? Actually, it’s much, much more cost effective. But lately, that hasn’t been as much of the case.

When comparing the two methods of cargo transport, Freightos still has on its site:

International Shipping air, ocean, truck, van
International Shipping air, ocean, truck, van

… a medium size 2000 lbs box from Shenzhen, China to Los Angeles, USA, can cost $1,500 by ocean but a whopping $8,000 or more by air.

Skyrocketing Ocean Freight Rates Shrink Gap

However, ocean freight rates have skyrocketed since the COVID-19 pandemic struck in 2020. For a while, we were talking about ocean freight rates at more than 500% what they were prepandemic. Multiply $1,500 by five and you’re getting awfully close to that $8,000 number. ($1,500 x 5 = $7,500 in case you really hate doing math)

Suddenly, the price gap is not so pronounced. In some cases, costly delays caused by the basically endemic port congestion seen since the pandemic and unfair detention and demurrage fees caused air freight to actually be the cheaper, ahem, more cost effective for shippers.

It’s far from the case that air freight is now the less expensive option all around, but the cost gap is smaller, and in some cases air may actually be more cost effective.

Air Freight Rates Did Increase Too

It is not as though air freight didn’t become more expensive too. In late 2021, international shipping news outlets were reporting air freight to be twice as expensive as it was prepandemic. However that was about the time ocean freight rates were starting to average over 5 times more expensive than they were prepandemic.

Here’s some crazy data from around that time published in a November, 2021 American Shipper article by Eric Kulisch:

Spot tariffs — for immediate transactions not subject to more favorable long-term contracts — can cost upwards of $20,000 for a forty-foot equivalent unit from China to the West Coast when a host of premiums and surcharges are included. That’s 10 times greater than pre-pandemic rates and doesn’t even include domestic transportation to move a shipment across the country.

Pre-pandemic, the average price to move air cargo was about 13 to 15 times higher than ocean, but now it is only three to five times more expensive, according to the International Air Transport Association and industry experts. 

Gap Wasn’t Done Shrinking

The gap between air and ocean freight continued shrink in 2022, but there is, of course, plenty of fluctuation.

A great deal of air cargo is moved on passenger flights. Covid restrictions really reduced the number of those flights happening, so it isn’t surprising that cost went up in 2020 and 2021 with that decrease in supply, especially as demand was still soaring. All the Covid flight restrictions in the world are not now gone, but there has been a great deal of reduction in that. With the hopefully continuing restriction reduction, there is also a reduction in upward pressure on air freight rates.

Upward pressure on ocean freight rates has finally seen reduction as well. In fact, ocean freight rates did come down some in recent months. However, ocean freight rates have now gone back up again. A Hellenic Shipping News article published today reports August shipping rate growth in both the short- and long-term:

Long-term ocean freight rates climbed yet again in August, edging up 4.1% month-on-month to stand 121.2% higher than this time last year.

This adds up to it still being a good time for shippers to check air freight rates rather than just assuming ocean freight rates are lower enough to make it the best option.

More Factors then Freight Rates

Of course, there’s more to compare when deciding between ocean shipping and air freight. Several years ago, Universal Cargo put out calls to ask people what we should cover with our videos and blogs. Jamie Hill inquired about air freight vs. sea freight on Twitter:

Ocean_Freight_vs._Air_Freight.png

I wrote up a blog and made a video covering 8 things to consider when deciding between air and ocean freight. Here’s the now practically vintage video:

YouTube Video

The biggest advantage air freight offers is speed. When shippers need their goods fast, that’s when they typically look to the skies. But now it’s time to look up not only as a last resort.

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Railroads Reach Deal w/ 3 Unions – More to Do to Avoid Strike https://www.universalcargo.com/railroads-reach-deal-w-3-unions-more-to-do-to-avoid-strike/ https://www.universalcargo.com/railroads-reach-deal-w-3-unions-more-to-do-to-avoid-strike/#respond Tue, 30 Aug 2022 21:01:41 +0000 https://www.universalcargo.com/?p=11264 A few of the smaller unions of rail workers reached a deal on Monday (August 29th) with the U.S. railroad carriers. This is a good step toward avoiding a rail strike that would cripple supply chains across the U.S. However, the biggest unions, which have been ready to strike, have not yet reached a resolution with their employers. And the clock to a potential strike is ticking down.

Ari Ashe reported in the Journal of Commerce (JOC):

US freight railroads reached a contract agreement with the leadership of three smaller unions Monday, an encouraging development ahead of a Sept. 16 deadline to avert a massive nationwide railroad strike.
The agreement with the Brotherhood of Railway Carmen, International Association of Machinists and Aerospace Workers, and the Transportation Communications Union follows the recommendations of the Presidential Emergency Board (PEB) formed in July: a 22 percent wage increase covering 2020 through 2024 and $5,000 in bonus payments.
The three unions represent 15,000 rail employees who will vote on the agreement.

Find out more, particularly about the two biggest unions threatening to strike, by reading the full article in Universal Cargo's blog.

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A few of the smaller unions of rail workers reached a deal on Monday (August 29th) with the U.S. railroad carriers. This is a good step toward avoiding a rail strike that would cripple supply chains across the U.S. However, the biggest unions, which have been ready to strike, have not yet reached a resolution with their employers. And the clock to a potential strike is ticking down.

Deal with 3 Smaller Unions

Ari Ashe reported in the Journal of Commerce (JOC):

US freight railroads reached a contract agreement with the leadership of three smaller unions Monday, an encouraging development ahead of a Sept. 16 deadline to avert a massive nationwide railroad strike.

The agreement with the Brotherhood of Railway Carmen, International Association of Machinists and Aerospace Workers, and the Transportation Communications Union follows the recommendations of the Presidential Emergency Board (PEB) formed in July: a 22 percent wage increase covering 2020 through 2024 and $5,000 in bonus payments.

The three unions represent 15,000 rail employees who will vote on the agreement.

Only About 10% of Workers

In a blog that examined the freight rail and worker situation, I considered how likely a rail strike is. This week’s news about a deal between these three unions is positive in the direction of not seeing a rail strike. However, 15,000 workers are a small fraction of the total number of workers represented in the long and contentious contract negotiations that have been going on.

As Ashe points out in the JOC article, there are 12 unions representing a total of 145,000 employees in these negotiations.

That means despite agreement being reached with a fourth of the unions, the deal only covers a little over 10% (10.34) of the rail workers looking for a new contract from the railroads.

Eyes on BLET and SMART-TD

The two largest rail worker unions are The Brotherhood of Locomotive Engineers and Trainmen (BLET) and the Sheet Metal Air, Rail, and Transportation Workers-Transportation Division (SMART-TD). Ashe points out that these two unions represent almost 100,000 employees.

That means that of the rail workers still needing a deal (approximately 90% of the total freight rail workers), these two unions represent about 77% of them.

Those of you who read the blog about the likelihood of a rail strike know that over 99 percent of BLET members voted to authorize a strike and the SMART-TD chairpersons took steps toward a strike. These two unions would not need any of the remaining 10 unions to join them to effectively execute a strike.

PEB Recommendations Not Enough for Biggest Unions

The bargaining process when it comes to U.S. rail is quite possibly the most complex and legally defined negotiating process in the country. That factors into why a rail strike in the U.S. is so rare. It’s deep in the process that the president is forced to appoint a PEB, as Joe Biden has had to do. The hope is that board, after analyzing the situation with negotiations, comes up with agreement recommendations to which both sides can agree.

It doesn’t seem like the biggest rail worker unions are happy with the PEB’s recommendation. Ashe writes:

… union leaders have expressed disappointment because they believe the PEB recommendations failed to fully address the lifestyle concerns of union workers, and how precision scheduled railroading has led to the layoffs of tens of thousands of workers in recent years.

However, we’re still barely more than a week from the unions resuming negotiations with the railroads to consider the PEB recommendations.

Carolina Worrell reported in Railway Age:

[SMART-TD] and [BLET], along with the other 10 unions involved in national bargaining, met on Aug. 22 via Zoom, followed by in-person meetings held on Aug. 25 and Aug. 26 in Chicago, to “determine if Presidential Emergency Board (PEB) No. 250’s recommendations could serve as a basis for a tentative agreement,” SMART-TD President Jeremy Ferguson and BLET President Dennis Pierce announced in an Aug. 27 joint statement.

Of course, shippers would likely have hoped for immediate resolution and acceptance of the PEB, which didn’t happen. Worrell continues:

According to the unions, no tentative agreement was reached, but Ferguson and Pierce said SMART-TD and BLET “remain committed” to negotiate over issues most important to its members, including wages, quality of life and attendance, as well as voluntary time off issues. Additionally, the unions said they are “seeking clarification” on certain aspects of PEB 250’s recommendations concerning health and welfare.

It was later the same day that Worrell’s Railway Age article was published that the three smaller unions agreed to terms laid out by the PEB, which rightly adds optimism to the situation. That the unions are “seeking clarification” on aspects of the recommendations suggests they are giving the recommendations serious consideration. Of course, it also suggests the appointed board could have been clearer in laying out recommended terms. We could see more unions agree to the recommendations; however, the two biggest unions’ words on it did not sound positive:

“Unfortunately, the meetings [listed above] did not result in any tentative agreement language that operating crafts would accept, or that could be presented to our members for ratification,” the unions’ presidents said in their joint statement.

Countdown to When Strike Could Happen

September 16, just over two weeks from now, is when the mandatory cooling off period ends and the unions could move to strike.

Even the unions that reached a tentative deal could strike if the deal is not ratified by their members.

By reading the end of SMART-TD and BLET’s presidents’ statement, it certainly sounds like those unions are as willing as ever to go on strike:

We will continue to keep our members updated as the cooling-off period countdown clock to 12:01 a.m. (eastern time) on September 16th approaches. Our goal is and always has been to reach a voluntary agreement that is worthy of our membership’s consideration. As we approach the final stages of the steps of the Railway Labor Act, we appreciate our members’ continued support. We have made it abundantly clear to the Carriers that we are prepared and willing to exercise every legal option available to us, to achieve the compensation and working conditions that we and our families rightfully expect and deserve.

It is important to remember that if the unions do strike, Congress could step in stop it, as happened in 1991. Congress’s options include ordering more cooling-off periods or even forcing the parties to accept the PEB recommendations. Of course, it’s hard to imagine a Democrat-led Congress forcing unions to accept a deal the unions find unacceptable. Ordering more cooling-off periods or mandating arbitration sounds more likely.

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Congestion, Delays, & Blank Sailings, Oh My https://www.universalcargo.com/congestion-delays-blank-sailings-oh-my/ https://www.universalcargo.com/congestion-delays-blank-sailings-oh-my/#respond Thu, 25 Aug 2022 20:24:49 +0000 https://www.universalcargo.com/?p=11261 West Coast ports, East Coast ports, Gulf Coast ports... we're seeing congestion all over. A great deal of the focus lately has been on congestion at East and Gulf Coast ports as many shippers are diverting cargo there over fear of labor disruption at the West Coast ports.

Lori Ann LaRocco reports in a CNBC article:

According to MarineTraffic data, Port of Savannah has 39 vessels at anchor. In the Gulf, at the Port of Houston, there are 22 cargo ships at anchor.

LaRocco probably chose to site the number of ships waiting at anchor at those ports because they have now exceeded the number of ships waiting at anchor to get into the Port of New York and New Jersey, which has been notably congested.

Find out more about the congestion and sailings being backed up and blanked (cancelled) by reading the full post in Universal Cargo's blog.

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Pervasive Port Congestion

West Coast ports, East Coast ports, Gulf Coast ports… we’re seeing congestion all over. A great deal of the focus lately has been on congestion at East and Gulf Coast ports as many shippers are diverting cargo there over fear of labor disruption at the West Coast ports.

Lori Ann LaRocco reports in a CNBC article:

According to MarineTraffic data, Port of Savannah has 39 vessels at anchor. In the Gulf, at the Port of Houston, there are 22 cargo ships at anchor.

LaRocco probably chose to site the number of ships waiting at anchor at those ports because they have now exceeded the number of ships waiting at anchor to get into the Port of New York and New Jersey, which has been notably congested.

For last week, the Port Authority NY NJ reports the following data concerning ships waiting at anchor there:

Weekly Average Container Ships Waiting at Anchor Per Day18
Number of Container Ships that Departed the Anchorage20
Weekly Average Wait time at Anchor (in Days)6.53
Year-to-date Average Wait time at Anchor (in Days)4.23

We haven’t gotten into the topic in Universal Cargo’s blog yet, but the union strike at the Port of Felixstowe building up a backlog of cargo could end up creating a problematic influx of cargo at East Coast ports in the future. The disruption at that major English port reportedly could last until Christmas.

Previously, most of the U.S. port congestion talk has been more oriented on the West Coast, usually centering at the Ports of Los Angeles and Long Beach. Thankfully, it doesn’t appear that the International Longshore & Warehouse Union (ILWU) has been executing port slowdowns since its contract expired on July 1st. However, contract negotiations have reportedly stalled over union jurisdiction concerning some jobs at the Port of Seattle.

The union damagingly slowed operations at the Port of Portland over a similar issue before and during the contract negotiations of 2014-15. Labor disruption in general and resulting port congestion during those negotiations was so severe it cost the U.S. economy billions of dollars. Unfortunately, labor disruption at the ports during contract negotiations has been the norm rather than the exception. Unfortunately, with this union jurisdiction issue and the automation issue still to be hashed out, labor disruption making West Coast congestion worse is still a serious threat.

Congestion Backing Up Sailings

Ocean freight carriers, unfortunately, have never been known for their reliability when it comes to transporting cargo on schedule. Port congestion obviously makes that problem much worse.

shipping containers at port

Mediterranean Shipping Co. (MSC) announced to shippers that sailings next month will be backed up because of all the congestion. Michael Angell reported in the Journal of Commerce (JOC):

Mediterranean Shipping Co. is telling customers that ship departures next month on a host of Asia services to the US and Western Canada will be a week or more behind schedule due to berth congestion and a backlog of ships at anchorage that still need to unload at key North American ports.

MSC on Monday adjusted September departure schedules for two East Coast services, two Gulf Coast services, and four West Coast services “due to the ongoing challenging market situation generating congestion and schedule delays across the supply chain.”

If shippers’ cargo through MSC is being delayed, you know that also means shippers whose cargo is moving with its 2M partner Maersk is also being delayed. That’s how things work with these vessel sharing carrier alliances.

Angell, in his article, lists off announced sailing slides from MSC:

The East Coast services include MSC’s Elephant and America services, which 2M Alliance partner Maersk brands as TP17 and TP11, respectively. The Elephant/TP17 sailing for mid-September will slide one week, while the America/TP11 sailing at the end of September will leave two weeks later.

The Gulf Coast services affected include the Lone Star/TP18 and Pelican/TP88. An early September sailing for both services will fall behind one week due to the schedule change.

MSC’s West Coast services will also see departure delays. Those include the Orient/TP8 and Sequoia/TP3 services to Southern California, which will fall behind a week. Also affected are MSC’s Eagle/TP9 service into Seattle and Vancouver and the Maple/TP1 service to Canada’s West Coast ports.

Don’t expect such delays to only be happening with the two biggest ocean carriers in the world. As they do, so tends to do the rest.

Blank Sailings Because of Reduced Demand

Ocean freight carriers have also been blanking (cancelling) many sailings recently. Carriers have put the blame for this on congestion as well; however, while congestion may factor in a little, as carriers can try to blank sailings to get schedules back on track, reduced demand is the real reason for the blanked sailings.

The slowing U.S. economy is reducing the amount of importing retailers are doing. Many experts have even predicted a muted peak season because of the decrease in demand. Usually, decreased demand means decreased prices. However, carriers proved at the beginning of the pandemic how capable they are of reducing capacity (supply) through their carrier alliances to keep freight rates more profitable. Carrier alliances’ chief tool in this is blank sailings.

When initially the pandemic looked like it would reduce shipping demand, carrier alliances blanked hundreds of sailings. Demand initially dipped but not nearly as low as carriers cut supply, so freight rates surged. Then demand exploded, with lockdowns and stimuli fueling consumer ordering of goods, and freight rates skyrocketed. But the whole supply chain was in a mess with shipping containers and equipment maldistributed because of all the blanked sailings and ports, truckers, and rail not able to handle the prolonged, record-breaking cargo surge.

Now we’re seeing a rise in blank sailings. You know it’s reduced demand not congestion actually causing the blank sailings because congestion has been out of control for the last two years. Schedule reliability from carriers has been ridiculously low. We’re talking single percentage points of ships delivering cargo on time at points. However, we weren’t seeing blank sailings like we’re seeing now. Demand was high, so carriers packed their ships and sent them out.

LaRocco’s article touches on reduced demand increasing blank sailings:

Ocean booking levels from China to the major West and East Coast ports remain well off their two year highs according to Tony Mulvey, senior analyst at FreightWaves.

“As booking levels, which indicate future import volumes, continue their descent, peak season demand on the ocean looks muted,” Mulvey said. “Softer demand on the ocean is leading to carriers increasing the number of blank sailings in an effort to slow the rapid decline in Trans-Pacific spot rates.”

Unlike last year, and even just months ago, when space was in extreme shortage, currently space is open for all lanes and ocean carriers are pushing for more bookings with freight adjustment weekly and some daily, according to OrientStar Group.

Now that demand is finally reducing, carriers are reverting back to the strategy of reducing capacity. Freight rates are still coming down some, but the strategy protects from sudden, massive declines.

Click Here for Free Freight Rate Pricing

 

 

 

 

 

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ILWU Contract Negotiations Stalled Over Union Jurisdiction https://www.universalcargo.com/ilwu-contract-negotiations-stalled-over-union-jurisdiction/ https://www.universalcargo.com/ilwu-contract-negotiations-stalled-over-union-jurisdiction/#respond Tue, 23 Aug 2022 22:52:12 +0000 https://www.universalcargo.com/?p=11255 There's an issue holding up contract negotiations at the West Coast ports, and it's not automation.

Paul Berger reports in the Wall Street Journal (WSJ):

Labor talks between West Coast dockworkers and their employers are at a standstill because of a fight between two unions over who maintains equipment at a cargo-handling terminal at the Port of Seattle, according to people familiar with the talks.

Things have gotten ugly in the past when the ILWU has claimed jurisdiction over another union.

Find out more by reading the full post in Universal Cargo's blog.

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There’s an issue holding up contract negotiations at the West Coast ports, and it’s not automation.

Paul Berger reports in the Wall Street Journal (WSJ):

Labor talks between West Coast dockworkers and their employers are at a standstill because of a fight between two unions over who maintains equipment at a cargo-handling terminal at the Port of Seattle, according to people familiar with the talks.

No News Is Good News

We haven’t blogged very much lately about the International Longshore & Warehouse Union (ILWU) and its negotiations with the Pacific Maritime Association (PMA). That’s generally a good thing.

One reason there hasn’t been much news is the ILWU and PMA agreed not to talk about negotiations with the media. But negotiation news being quiet also means we haven’t been seeing a bunch of disruption at the West Coast ports due to labor slowdowns, which have basically been a standard part of the negotiation process every time the union’s master contract expires.

In an article for the Journal of Commerce (JOC), Peter Tirschwell went so far as to say disruption “has accompanied every West Coast longshore labor negotiation going back to the 1990s.” However, he also reported, “The union has been working without a contract since July 1, but according to several sources there has been no evidence of slowdowns or other industrial actions at the ports since that time.”

Of course, anyone saying there have been no slowdowns or industrial action would have to ignore one very notable incident. ILWU members did help screech operations at the Port of Oakland to a halt in late July. However, that was from about one hundred ILWU workers at the port’s largest terminal standing with truckers, who were picketing and demonstrating over Assembly Bill 5, not over the ILWU’s own grievances. For that reason, I can understand people not counting that industrial action.

However, the lack of a contract does make it easier for the ILWU to execute secondary strike and labor actions in support of other groups who may have issues with the ports. That’s just one more factor that will make shippers breathe easier once these contract negotiations are concluded.

With the ports already suffering plenty of congestion in the lead-up to contract negotiations, the last thing shippers need to see is more disruption because of labor slowdowns at West Coast terminals. Many shippers preemptively shifted cargo movement to East and Gulf Coast ports, as they anticipated a high likelihood of history repeating itself with labor slowdowns creating or adding to port disruption. Problematically, East Coast ports are also experiencing congestion, which is exacerbated by more cargo being diverted that way.

The Union Jurisdiction Battle Holding Up Negotiations

Port of Seattle cranes on a sunny October day
Image: Port of Seattle cranes on a sunny October day, Seattle, WA by Ron Clausen.

Reportedly, it’s a battle of union jurisdiction at a Port of Seattle terminal, T5, that’s stopping negotiations from moving forward.

Berger sums it up in his WSJ article as follows:

The ILWU, which represents more than 22,000 West Coast dockworkers, wants its next labor contract to ensure that a cargo-handling terminal at Seattle uses ILWU workers to maintain and repair equipment.

The Pacific Maritime Association says it can’t award that work to the ILWU because the National Labor Relations Board ruled in 2020 that the International Association of Machinists and Aerospace Workers has jurisdiction at the terminal.

People familiar with the talks say the union won’t turn to other significant issues, such as wages and the right for employers to bring more automation to the docks, until the Seattle disagreement is resolved.

For over a year, the automation issue is the big one that people have been talking about being the most likely source of contention when it comes to these negotiations. However, there have been a few in the know who knew this T5 issue was festering and could impact negotiations. Apparently, at least one warned about it. Tirschwell reported in his JOC article:

When a well-placed source was asked at TPM22 in early March what factor he thought could most likely trigger a breakdown during this year’s West Coast longshore labor negotiations, he said, “Watch T5 in Seattle.”

ILWU Executed Slowdowns Over Union Jurisdiction in the Past

The ILWU gets very serious when it comes to jurisdiction over jobs.

Regular readers of this blog likely know about the massive slowdowns the ILWU executed at the Port of Portland over just two jobs. The ILWU wanted jurisdiction over these two jobs, plugging and unplugging reefer containers. However, those jobs had been worked by members of the International Brotherhood of Electrical Workers (IBEW) since the 1930’s.

The ILWU thought the stipulations of its 2008 master contract agreement meant those two jobs should no longer belong to the IBEW but belong to the ILWU. The Port of Portland did not agree. So the ILWU slowtimed the port to the point that the major carrier, the now defunct Hanjin, calling on the port with the most shipping containers stopped calling on the port altogether.

In 2014, the ILWU really took advantage of the its master contract expiring to slow the Port of Portland. At the time, 30 moves per crane per hour was considered the standard to strive for at U.S. ports. The Port of Charleston had productivity of over 40 moves per crane per hour. The ILWU took crane productivity at the Port of Portland all the way down to 7.5 moves per hour.

There were judge and jury rulings against the ILWU for their actions, but the damage to the port, and shippers for that matter, had already been done. Here are some posts on the topic, if you want more details:

Judge Rules ILWU Purposefully Slowed Import/Export @ Port of Portland

ILWU Takes Advantage of No Contract, Slowing Down Port of Portland

Why Is This International Shipping Story So Sad?

ILWU Local 8 Should Pay Damages to Portland Shippers

Jury Hits ILWU with $93M Verdict for What Union Did to Port of Portland

Bottom line is that the union hasn’t been afraid to flex its power, even illegally abuse it, over the topic of job jurisdiction in the past. And that was when talking about only two jobs. It’s not surprising that T5 job jurisdiction would be a holdup now. Let’s just hope we don’t see it develop into slowdowns or other industrial action while the ILWU is working without a master contract.

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NY-NJ Port Terminal Taking Away Weekend/Holiday Free Time https://www.universalcargo.com/ny-nj-port-terminal-taking-away-weekend-holiday-free-time/ https://www.universalcargo.com/ny-nj-port-terminal-taking-away-weekend-holiday-free-time/#respond Thu, 18 Aug 2022 21:10:56 +0000 https://www.universalcargo.com/?p=11239 Shippers have more fees – or at least faster racking-up fees – to worry about at the Port of New York and New Jersey. Michael Angell reports in the Journal of Commerce (JOC):

"The largest marine terminal at the Port of New York and New Jersey will cut weekends and holidays from the period during which an ocean container can linger before it racks up storage charges.

...

"In a tariff published last Friday, Maher Terminals eliminated Saturdays and Sundays from the “free time” period allowed for import containers. Along with no weekend grace period, the new tariff also cut the grace period for non-working holidays outlined in the International Longshoremen’s Association (ILA) contract. The changes go into effect Sept. 23. The move also affects refrigerated containers, which will still have two days of free time."

Find out more by reading the full post in Universal Cargo's blog.

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Shippers have more fees – or at least faster racking-up fees – to worry about at the Port of New York and New Jersey. Michael Angell reports in the Journal of Commerce (JOC):

The largest marine terminal at the Port of New York and New Jersey will cut weekends and holidays from the period during which an ocean container can linger before it racks up storage charges.

In a tariff published last Friday, Maher Terminals eliminated Saturdays and Sundays from the “free time” period allowed for import containers. Along with no weekend grace period, the new tariff also cut the grace period for non-working holidays outlined in the International Longshoremen’s Association (ILA) contract. The changes go into effect Sept. 23. The move also affects refrigerated containers, which will still have two days of free time.

Port of New York and New Jersey
The island of Manhattan and areas of the New York / New Jersey Port seen from aboard a plane in July, 2005 by Maureen on flickr.

Shippers have long complained about unfair detention and demurrage fees, and this makes the problem worse.

Angell reports that the actual number of free days before shipping containers start accruing demurrage fees doesn’t change from four. However, for many shippers, if their cargo is at the port during the weekend, especially if it arrived close to or during the weekend, Maher might as well be subtracting two days of free time.

More than once, the article states the removal of these free days is to boost utilization of weekend, Saturday in particular, gate hours for moving containers. The port terminal is obviously trying to show this change falls within the FMC’s new(ish) guidelines, through the interpretive rule that came into play in 2020, that demurrage and detention fees and implementation policies must be aimed at inducing quicker retrieval and return of shipping containers, not just a punishment or means for making more money.

Several factors work against shippers for getting their shipping containers of goods from port terminals over the weekend. Angell shares the National Industrial Transportation League’s (NITL) argument for concerning how these factors make Maher’s new policy unfair:

… it said the free time policy change is unfair because Maher doesn’t offer the same hours on Saturday as it does on weekdays, with the Saturday gates closing at 3 pm rather than the 7 pm closing time on weekdays.

Truck drivers are more likely to have run out of their driving time limits, NITL said, adding that many drayage drivers are not interested in weekend work and cargo receivers are not open.

“When extra hours are offered on a weekend or holiday, it is difficult to get drivers and staff members to work on those days,” NITL said. “There is a significant increase in costs associated with asking people to work on a holiday. In addition, customers are not open for receiving.”

… NITL said truckers unable to access a cargo receiver’s warehouse on the weekend will be forced to store imports in their own yards, which are already choked with empty containers in many instances.

“Charging fees as stipulated under [Maher’s] proposed tariff would penalize motor carriers and shippers under circumstances over which they do not have any control,” NITL said. “Assessing fees in a way that is punitive, not incentivizing.”

The removal of weekend free time is more than a little problematic, as NITL points out. That the International Longshoremen’s Association’s (ILA) non-working holidays are to no longer be included as free days is downright ridiculous.

How are shippers going to get their truckers to pick up shipping containers on holidays when the port terminals aren’t even operating because the dockworkers have the day off?

It’s hard to argue that could fall under incentivizing and not incentivizing to meet the FMC’s fairness standards when assessing demurrage and detention fee policies.

The Port of New York and New Jersey has been facing serious congestion problems for a while now, but this is not the way to fix them.

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FMC Wants Your Input on Whether to Issue Congestion Emergency Order – Here’s How to Submit Comments https://www.universalcargo.com/fmc-wants-your-input-on-whether-to-issue-congestion-emergency-order-heres-how-to-submit-comments/ https://www.universalcargo.com/fmc-wants-your-input-on-whether-to-issue-congestion-emergency-order-heres-how-to-submit-comments/#respond Tue, 16 Aug 2022 19:17:15 +0000 https://www.universalcargo.com/?p=11235 Afer two years of port congestion and supply chain disruption and with new powers from the Ocean Shipping Reform Act of 2022 (“OSRA 2022”), the Federal Maritime Commission (FMC) is considering issuing an emergency order on the congestion. Recently, port congestion has improved a bit; however, with the onset of the peak shipping season, congestion […]

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Afer two years of port congestion and supply chain disruption and with new powers from the Ocean Shipping Reform Act of 2022 (“OSRA 2022”), the Federal Maritime Commission (FMC) is considering issuing an emergency order on the congestion.

Recently, port congestion has improved a bit; however, with the onset of the peak shipping season, congestion has gotten worse again.

FMC is seeking feedback from the public on whether or not this is an emergency situation. Who better to respond to this question than shippers, like the average reader of Universal Cargo’s blog.

Ocean Freight Port

Questions FMC Is Asking

Here are the questions the FMC want you to answer as they determine whether or not to treat this as an emergency situation:

  • Whether congestion of the carriage of goods has created an emergency situation of a magnitude such that there exists a substantial, adverse effect on the competitiveness and reliability of the international ocean transportation supply system. If so, please explain why and provide examples or data to support your view. If not, please explain why and provide examples or data to support your view;
  • Whether an emergency order pursuant to Section 18 of OSRA 2022 would alleviate or improve such an emergency situation – and if so, why, and if not, why not; and
  • The appropriate scope (duration and geographic) of such an emergency order, if the Commission were to issue such an order and the basis for that scope.

How and Where to Submit Answers

Your comments should be inside a Microsoft Word of PDF document.

Email that document to secretary@fmc.gov.

Use “Docket No. 22-19, Request for Information” as the email’s subject.

For more information, contact Secretary William Cody
Phone: (202) 523- 5908 Email: secretary@fmc.gov

Comment Submission Due Date

In order to be considered, your comments must be submitted by September 14th, 2022.

The FMC’s document (the full text of which is below) requesting comment on the congestion situation states comments must be submitted on or before 30 days after publication of the docket in the Federal Register. This docket (No. 22-19) was published in the Federal Register yesterday, August 15th. That gives you 29 days from now to get your comments submitted.

Full Text of FMC’s Request for Information

FEDERAL MARITIME COMMISSION
[Docket No. 22-19]

Request for Information

AGENCY: Federal Maritime Commission.

ACTION: Request for Information.

SUMMARY: The Federal Maritime Commission seeks public comment on whether congestion of the carriage of goods has created an emergency situation causing a substantial, adverse effect on the competitiveness and reliability of the international ocean transportation supply system. Information received in response to this request will help inform the Commission’s decision on whether an emergency situation exists, and whether to issue an emergency order to address any such situation.

DATES: Submit comments on or before [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].

ADDRESSES: You may submit comments, identified by Docket No. 22-19, by email to: secretary@fmc.gov. For comments, include in the subject line: “Docket No. 22-19, Request for Information.” Comments should be attached to the email as a Microsoft Word or text-searchable PDF document.

• Instructions: For detailed instructions on submitting comments, including requesting confidential treatment of comments, see the Public Participation heading of the Supplementary Information section of this document. Note that all comments received will be posted without change to the Commission’s website unless the commenter has requested confidential treatment.

FOR FURTHER INFORMATION CONTACT: William Cody, Secretary; Phone: (202) 523- 5908; Email: secretary@fmc.gov.

SUPPLEMENTARY INFORMATION:

I. Background

On June 16, 2022, the Ocean Shipping Reform Act of 2022 (“OSRA 2022”) becamelaw. [footnote 1] Section 18 of OSRA 2022 authorizes the Federal Maritime Commission (the Commission) to issue an emergency order requiring any common carrier or marine terminal operator to share certain information with shippers and other specified entities when the Commission unanimously determines that congestion of the carriage of goods has created an emergency situation of a magnitude such that there exists a substantial, adverse effect on the competitiveness and reliability of the international transportation supply system. [footnote 2]

If the Commission determines that cargo congestion has created an emergency situation, it may issue an order requiring any common carrier or marine terminal operator to share directly with relevant shippers, rail carriers, or motor carriers information relating to cargo throughput and availability. Such information sharing among industry participants is to improve the efficient transportation, loading, and unloading of cargo to or from (1) any inland destination or point of origin, (2) any vessel, or (3) any point on a wharf or terminal. [footnote 3]

Any Commission-issued emergency order must be tailored in terms of duration and geographic scope; consider the likely burdens on common carriers and marine terminal
operators; and consider the likely benefits on congestion relating to the purposes of the Shipping Act stated in 46 U.S.C. 40101. [footnote 4]

An emergency order issued under OSRA 2022 would remain in effect for a period of not
longer than 60 days and may be renewed by a unanimous vote of the Commission. The authority
to issue an emergency order under Section 18 of OSRA 2022 terminates 18 months after the date
of enactment of the Act. [footnote 5]

A common carrier or marine terminal operator subject to a Commission-issued emergency order may file a petition for exception from one or more requirements of the
emergency order. Petitions for exception must be based on a showing of undue hardship or other condition rendering compliance with such a requirement impracticable. Not later than 21 days from the petition filing date, the Commission is required to determine whether to grant the petition. [footnote 6]

Section 18 of OSRA 2022 requires that, not later than 60 days after the effective date of the Act, the Commission must issue a request for information seeking public comment regarding specific criteria – namely, (1) whether congestion of the carriage of goods has created an emergency situation of a magnitude such that there exists a substantial, adverse effect on the competitiveness and reliability of the international ocean transportation supply system, (2) whether an emergency order under Section 18 would alleviate such an emergency situation, and (3) the appropriate scope of such an emergency order, if applicable. [footnote 7] During this process, the Commission may also consult (as it deems appropriate) with other Federal departments and agencies and persons with expertise relating to maritime and freight operations. [footnote 8] This notice fulfills this OSRA 2022 requirement.

II. Request for Information

At the beginning of the COVID-19 pandemic, the demand for worldwide ocean transportation services decreased significantly as lockdowns were imposed globally and people
were hesitant to engage in normal economic activities. Accordingly, ocean common carriers cancelled many voyages, and the supply of ocean transportation services decreased.

Within a few months, however, U.S. consumer spending shifted markedly. Spending on services decreased significantly, while consumer spending on goods increased considerably – leading to a renewed and increased demand for ocean transportation services. Carriers responded with increases in vessel capacity, however this rapid shift in cargo volumes driven by consumer demand led to bottlenecks throughout the U.S. supply chain system. In particular, increased container dwell times at marine terminals led to inefficiencies, including delays in vessel berthing and motor carrier services at U.S. ports.

Over the last 2 years, there have been a variety of strategies employed by industry participants to reduce congestion throughout the U.S. ocean transportation system. For example, some carriers have diverted vessel services away from the most congested port areas in an effort to alleviate severe cargo congestion at major U.S. ports. This shift, however, has often resulted in increased congestion at previously non- or less-congested U.S. port areas or regions. Total U.S. port congestion, measured by the number of containers on ships waiting to berth, average ship waiting time at key U.S. ports, and container dwell time have all decreased in recent months.
Relevant metrics, however, remain higher than pre-pandemic levels.

In view of these factors and consistent with the requirements set out in Section 18 of OSRA 2022, the Commission is seeking public comments on the following:

(1) Whether congestion of the carriage of goods has created an emergency situation of a magnitude such that there exists a substantial, adverse effect on the competitiveness and reliability of the international ocean transportation supply system. If so, please explain why and provide examples or data to support your view. If not, please explain why and provide examples or data to support your view;

(2) Whether an emergency order pursuant to Section 18 of OSRA 2022 would alleviate or improve such an emergency situation – and if so, why, and if not, why not; and

(3) The appropriate scope (duration and geographic) of such an emergency order, if the Commission were to issue such an order and the basis for that scope.

III. Public Participation

How do I prepare and submit comments?

Your comments must be written and in English. To ensure that your comments are correctly filed in the docket, please include the docket number of this document in your
comments.

You may submit your comments via email to the email address listed above under ADDRESSES. Please include the docket number associated with this notice and the subject matter in the subject line of the email. Comments should be attached to the email as a Microsoft Word or text-searchable PDF document.

How do I submit confidential business information?

The Commission will provide confidential treatment for identified confidential information to the extent allowed by law. If your comments contain confidential information,
you must submit the following by email to the address listed above under ADDRESSES:

• A transmittal letter requesting confidential treatment that identifies the specific information in the comments for which protection is sought and demonstrates that the information is a trade secret or other confidential research, development, or commercial information.

• A confidential copy of your comments, consisting of the complete filing with a cover page marked “Confidential-Restricted,” and the confidential material clearly marked on each page.

• A public version of your comments with the confidential information excluded. The public version must state “Public Version—confidential materials excluded” on the cover page and on each affected page and must clearly indicate any information withheld.

Will the Commission consider late comments?

The Commission will consider all comments received before the close of business on the comment closing date indicated above under DATES. To the extent possible, we will also consider comments received after that date.

How can I read comments submitted by other people?

You may read the comments received by the Commission at the Commission’s Electronic Reading Room at https://www2.fmc.gov/readingroom/.

By the Commission.

William Cody
Secretary

[footnotes:]

1 Ocean Shipping Reform Act of 2022 (“OSRA 2022”), Public Law 117-146 (June 16, 2022).
2 See generally, OSRA 2022, sec. 18(c)-(d).
3 See OSRA 2022, sec. 18(c).
4 See 46 U.S.C. 40101. See also OSRA 2022, sec. 18(d)(2) (detailing the criteria for the Commission to consider when issuing an emergency order under Section 18).
5 See OSRA 2022, sec. 18(f)(1)-(2).
6 See OSRA, sec. 18(e)(1)-(2).
7 See OSRA 2022, sec. 18(b)(1)(A)-(C).
8 See OSRA 2022, se. 18(b)(2).

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What’s Actually Happening with Freight Rates Right Now https://www.universalcargo.com/whats-actually-happening-with-freight-rates-right-now/ https://www.universalcargo.com/whats-actually-happening-with-freight-rates-right-now/#respond Thu, 11 Aug 2022 23:11:44 +0000 https://www.universalcargo.com/?p=11231 In the last blog, we looked at how – with the slowing economy – retailers and shippers are decreasing their imports and expected to keep doing so in 2023. As discussed, that should mean decreasing freight rates, but there are a few factors that could stop them from falling. Today, instead of projecting, let's look at what is actually happening with freight rates right now.

I've mentioned in a number of recent blogs that freight rates have finally started coming down a bit. Unfortunately, there hasn't been a big, sudden drop. Rather, freight rates have simply been trending downward in recent months.

Ocean freight rates for container shipping are no longer more than 500% higher than they were pre-pandemic. I remember vividly, in October of 2021 first having to painfully write that freight rates were more than five times what they were before the pandemic hit. The way freight rates had skyrocketed was downright scary – appropriate for the month of Halloween.

Frankly, freight rates are still incredibly high. They're still multiple times higher than pre-pandemic freight rates. But at least they've been moving in the right direction and are now significantly lower than when freight rates were at their peak.

While freight rates have been trending down, here in the last month or so, container shipping rates have leveled off. In fact, some even just went back up a bit. However, we're in international shipping's peak season, and port congestion is still a problem. Peak season's demand typically increases freight rate as does port congestion by limiting capacity.

Therefore, shippers shouldn't panic, thinking the decline in freight rates is over and now we're going to watch them skyrocket higher and higher again.

Keep reading in Universal Cargo's blog.

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In the last blog, we looked at how – with the slowing economy – retailers and shippers are decreasing their imports and expected to keep doing so in 2023. As discussed, that should mean decreasing freight rates, but there are a few factors that could stop them from falling. Today, instead of projecting, let’s look at what is actually happening with freight rates right now.

General Downward Trend

I’ve mentioned in a number of recent blogs that freight rates have finally started coming down a bit. Unfortunately, there hasn’t been a big, sudden drop. Rather, freight rates have simply been trending downward in recent months.

Ocean freight rates for container shipping are no longer more than 500% higher than they were pre-pandemic. I remember vividly, in October of 2021 first having to painfully write that freight rates were more than five times what they were before the pandemic hit. The way freight rates had skyrocketed was downright scary – appropriate for the month of Halloween.

Frankly, freight rates are still incredibly high. They’re still multiple times higher than pre-pandemic freight rates. But at least they’ve been moving in the right direction and are now significantly lower than when freight rates were at their peak.

Downward Trend Plateaued, But Don’t Worry

While freight rates have been trending down, here in the last month or so, container shipping rates have leveled off. In fact, some even just went back up a bit. However, we’re in international shipping’s peak season, and port congestion is still a problem. Peak season’s demand typically increases freight rate as does port congestion by limiting capacity.

Therefore, shippers shouldn’t panic, thinking the decline in freight rates is over and now we’re going to watch them skyrocket higher and higher again.

Why No Big Drop in Freight Rates?

Of course, what shippers keep hoping to see is a big drop in container freight rates. And why not? The dry bulk shipping sector seems to have gotten one.

For an MSN article on Sunday (August 7th), Anish Mondal even used the phrase “freight falls steeply” in the headline. Mondal reports:

Freight Rates

The Baltic Dry index, which provides a benchmark for sea freight of moving major raw materials stood at 1,560 points on Friday, its lowest point since February as demand remained weak across all vessel categories amid the uncertainty around global economic growth. The index, which takes into account 23 different shipping routes, has declined by 23% in [the] last one month and 53% in a year.

If dry bulk shipping can steeply fall, why not container shipping?

As if in response to this very question, Greg Miller wrote the following in an excellent American Shipper article, published Monday (August 8th), about freight rates:

There’s an old Greek shipping saying that goes: “Ninety-eight tankers and 101 cargoes, boom. Ninety-eight cargoes and 101 tankers, bust.” This doesn’t translate so well into modern-day container shipping because the consolidated liner sector manages the number of ships in service a lot better than the fragmented tanker business.

Tanker spot rates can plunge violently lower when supply exceeds demand. One of the big questions for container shipping has been: Will spot rates plunge precipitously after demand pulls back, as it has in the past in bulk commodity shipping? Or will there be a gradual decline toward a soft landing?

So far, it looks gradual. Trans-Pacific rates have steadied in July and early August. In fact, some indexes show spot rates ticking higher again.

Spot rates are at least temporarily plateauing because U.S. import demand remains above pre-COVID levels, some U.S. ports remain extremely congested, and ocean carriers are “blanking” or “voiding” (i.e., canceling) sailings, both because their ships are stuck in port queues and because they’re matching vessel supply with cargo demand to avert the fate of Greek tanker owners.

Carriers blanking sailings was one of the factors I talked about in the last blog that can stop freight rates from dropping. Since all the major ocean freight shipping lines banded together into carrier alliances, they’ve really been able coordinate and control the amount capacity in shipping lanes. They blank sailings, avoid demand falling below supply, and keep freight rates from tumbling.

Back when carriers struggled with overcapacity, carriers dealt with losses in the billions of dollars. Now, their profits are in the billions of dollars. And shippers pay more to import and export.

Freight Rate Data

One of the nice things about Miller’s article is it contains data from different freight rate indices together in one place. There’s variation between indices as they gather their data differently. The biggest difference often has to do with whether they use base level freight rates or include various fees carriers add to those rates. The more of these rate indices you look at, the easier it is to see the trends in freight rates.

Miller often shares this kind of data in his articles and even gives some analysis by comparing current freight rates to previous ones, as he does here:

The Freightos Baltic Daily Index (FBX) Asia-West Coast assessment was at $6,692 per forty-foot equivalent unit on Friday.

The good news for shippers booking spot cargo: That’s just one-third of the all-time peak this index reached in September. The bad news: Friday’s assessment is up 2.7% from the low of $6,519 per FEU hit on Aug. 2, and it’s still 4.5 times higher than the rate at this time of year in 2019, pre-COVID.

The FBX Asia-East Coast spot rate assessment was at $9,978 per FEU on Friday, less than half the record high in September. However, it was up 3.5% from the recent low of $9,640 on Aug. 2 and still 3.6 times higher than 2019 levels.

The weekly index from Drewry portrays a gentler descent than the FBX, because Drewry did not include premium charges in its spot assessments at the peak.

Unlike the FBX, Drewry’s Shanghai-Los Angeles assessment does not show a recent uptick. It was at $6,985 per FEU for the week announced last Thursday, its lowest point since June 2021. It was down 44% from its all-time high in late November 2021, albeit still 4.2 times higher than rates at this time of year in 2019.

Drewry’s weekly Shanghai-New York assessment was at $9,774 per FEU on Friday. Rates were relatively stable over the past two week, yet the latest reading is the lowest since June 2021 and down 40% from the peak in mid-September.

Drewry’s Shanghai-New York assessment on this route is still 3.5 times pre-COVID levels.

Gap Growing Between East Coast & West Coast Rates

Shipping from Asia to the East Coast is always more expensive than Asia to the West Coast, but the cost gap is growing.

We’ve touched on East and Gulf Coast port congestion a number of times lately in Universal Cargo’s blog. It has gotten pretty severe. East and Gulf Coast ports have seen significant influxes in cargo as shippers have diverted cargo there from West Coast ports for a couple of reasons.

Severity of congestion that has been seen for so long at West Coast ports is one of the reason shippers moved entry points. Uncertainty over the International Longshore & Warehouse Union (ILWU) contract negotiations is another. Now there is also the issue of truckers in California demonstrating and striking over Assembly Bill 5 that increases risk of disruption at ports like those of Los Angeles, Long Beach, and Oakland.

As previously stated, port congestion tends to limit capacity and increase freight rates. Just yesterday, Teri Errico Griffis reported in the Journal of Commerce on Hapag-Lloyd and Maersk extending restrictions on a joint service to the East Coast because of the congestion there.

Here’s the data on the rate gap Miller shares in his article:

Daily assessments from S&P Global Commodities (formerly Platts) show a widening divergence between North Asia-West Coast and North Asia-East Coast Freight All Kinds (FAK) rates.

S&P Global assessed Friday’s North Asia-East Coast FAK rate at $9,750 per FEU, up 2.6% from the recent low hit on July 29. Spot rates on this route have roughly plateaued since late April, according to this index.

S&P Global put Friday’s North Asia-West Coast rate at $6,500 per FEU, still gradually falling and at the lowest point since late June 2021. The gap with East Coast assessments has been widening since May, with the East Coast rates now 50% higher than West Coast rates.

Conclusion

Freight rates are slowly coming down and experts expect them to continue to do so. But gradually. Between the current port congestion and peak season, there won’t likely be much freight rate decline at the moment. There may even be some increases similar to those seen last week.

Labor strife from the ILWU during the current contract negotiations, the risk of rail stoppage or slowdown (discussed in previous posts), and carrier alliances’ control of capacity could significantly hinder freight rates from dropping. In fact, these factors even have the potential of pushing rates up.

Click Here for Free Freight Rate Pricing

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Slowing Economy Should Lower Freight Rates But 3 Factors Could Keep Them High https://www.universalcargo.com/slowing-economy-should-lower-freight-rates-but-3-factors-could-keep-them-high/ https://www.universalcargo.com/slowing-economy-should-lower-freight-rates-but-3-factors-could-keep-them-high/#respond Tue, 09 Aug 2022 20:18:01 +0000 https://www.universalcargo.com/?p=11226 It's kind of a good news, bad news situation. Or more accurately, bad news, good news situation. Because of the slowing economy (bad news), freight rates should see decline (good news) in the latter part of 2022 and in 2023. However, the good news part is not exactly guaranteed.

You'd have trouble finding someone, outside the White House press secretary, who would tell you the economy looks good right now. We're in a recession, unless – again – you listen to the White House press secretary as the Biden Administration does its best to redefine what it means to be in a recession. Retailers are planning and projecting to import fewer goods than the previous year in the second half of 2022 and in 2023.

Bill Mongelluzzo reports in the Journal of Commerce (JOC):

US retailers forecast imports will decline 1.5 percent year over year in the second half of 2022 and will decelerate further in 2023 as the US economy slows.
...
GPT forecasts that August imports will be down 3 percent from August 2021, September imports up 0.4 percent, October imports down 3.9 percent, November imports down 2.7 percent, and December imports down 3 percent year over year.
“The heady days of growth in imports are quickly receding,” said Ben Hackett, founder of Hackett Associates and co-publisher of GPT. “The outlook is for a decline in volumes compared with 2021 over the next few months, and the decline is expected to deepen in 2023.”

Economy 101 would tell us reduced demand should mean lower prices. With shipping demand reducing, the result should be lower freight rates.

However, there are a few factors that could throw a monkey wrench into the old reduced demand means lower freight rates machine: carriers' ability to control capacity, the International Longshore & Warehouse Union's (ILWU's) contract negotiations, and the rail workers' contract negotiations.

Read the full post in Universal Cargo's blog.

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It’s kind of a good news, bad news situation. Or more accurately, bad news, good news situation. Because of the slowing economy (bad news), freight rates should see decline (good news) in the latter part of 2022 and in 2023. However, the good news part is not exactly guaranteed.

You’d have trouble finding someone, outside the White House press secretary, who would tell you the economy looks good right now. We’re in a recession, unless – again – you listen to the White House press secretary as the Biden Administration does its best to redefine what it means to be in a recession. Retailers are planning and projecting to import fewer goods than the previous year in the second half of 2022 and in 2023.

Bill Mongelluzzo reports in the Journal of Commerce (JOC):

US retailers forecast imports will decline 1.5 percent year over year in the second half of 2022 and will decelerate further in 2023 as the US economy slows.

GPT forecasts that August imports will be down 3 percent from August 2021, September imports up 0.4 percent, October imports down 3.9 percent, November imports down 2.7 percent, and December imports down 3 percent year over year.

“The heady days of growth in imports are quickly receding,” said Ben Hackett, founder of Hackett Associates and co-publisher of GPT. “The outlook is for a decline in volumes compared with 2021 over the next few months, and the decline is expected to deepen in 2023.”

Economy 101 would tell us reduced demand should mean lower prices. With shipping demand reducing, the result should be lower freight rates.

However, there are a few factors that could throw a monkey wrench into the old reduced demand means lower freight rates machine: carriers’ ability to control capacity, the International Longshore & Warehouse Union’s (ILWU’s) contract negotiations, and the rail workers’ contract negotiations.

Let’s get into those factors….

1. Carrier Alliances Control Supply

Freight Rates

When it comes to looking at demand and prices, the supply side of the equation can’t be ignored. When supply exceeds demand, prices fall. When demand exceeds supply, prices rise. For years, ocean freight carriers struggled with overcapacity, too much space on ships for cargo compared to the demand from shippers. As a result, freight rates fell. They went all the way down to unsustainable levels for carriers.

Carriers managed a solution: vessel sharing agreements. By forming these alliances, where multiple carriers fill the same ships with goods, carriers put themselves in a position to control the amount of capacity on the international trade lanes, especially once only three alliances dominated all of ocean freight shipping. I’ve been warning in Universal Cargo’s blog for years that carrier alliances reduce competition in international shipping and would lead to higher freight rates.

Boy, did we ever see that come to fruition in 2020. When Covid-19 hit, carriers were projected to lose billions that year. Demand was supposed to drop, so the alliances blanked (cancelled) sailings by the hundreds. There was an initial dip in shipping demand, but because carriers apparently overestimated how much demand reduction there would be, they’d dropped supply well below demand, and freight rates shot up.

It’s possible, as shipping demand is reducing and being projected to reduce next year that carrier alliances could again use blanked sailings to reduce capacity enough to stop freight rates from falling as demand suggests they should. It’s even possible that an overreaction, like the carriers made in 2020, could even push capacity below demand and make freight rates rise despite the lower demand.

2. ILWU Negotiations Could Turn Contentious

The congestion that has been seen at the ports over the last couple of years was a factor in pushing freight rates up to unprecedented heights. Disruptions and reductions in trade lanes and hubs add to upward pressure on rates. Unfortunately, whenever the ILWU and Pacific Maritime Association (PMA) go into contract negotiations, there’s a risk of port congestion.

If negotiations turn contentious, which has long been feared as a likely outcome because of the issue of automation, history suggests there will be a negative impact on the movement of goods through the ports. Slowdowns and strikes from the ILWU could cause port congestion, and so would lockouts from the PMA. We’ve seen too much of these happen in the past.

There are plenty of shippers who remember how bad things got during the contentious negotiations from 2014-15, when ILWU slowdowns and eventually retaliatory mini-lockouts from the PMA resulted in such congestion that goods didn’t make it to shelves in time for the holiday shopping seasons, agricultural exports rotted on the docks, and exporters permanently lost international trade partners.

If the current negotiations turn half as ugly as 2014-15’s, the resulting congestion would obstruct freight rates from dropping.

3. Rail Workers’ Negotiations Could Halt Rail Freight

The rail workers’ contract negotiations with the railroads has even more potential disruptiveness than the ILWU’s negotiations turning contentious. However, the likelihood of a long rail work-stoppage is lower.

I detailed the likelihood of a rail strike a week ago, and even compared it to the likelihood of an ILWU strike. If rail freight movement slows or stops, it obviously majorly impacts supply chains throughout the U.S. and disrupts ports across the country.

For over two years, negotiations have dragged on between rail worker unions and the railroads. They’ve stalled to the point of President Biden having to appoint a Presidential Emergency Board to examine the dispute and make recommendations for settling it. It appears the biggest point of contention, the railroads reducing the required number of crew members on a freight train from two to one, may be taken off the table.

The US Federal Rail Administration (FRA) has proposed a rule that would require two crew members. A similar rule was previously proposed but ultimately rejected during the years of the Trump Administration. Under the Biden Administration, the law may be more likely to be made simply because its the opposite of what happened during the years of the former administration.

I wouldn’t be surprised to see the PEB recommend the crew requirement stay at two people. I don’t see the railroads accepting that recommendation unless they were forced to by Congress or by the FRA making it a federal regulation. The unions seem willing to strike rather than accept that crew member reduction.

If the rails do get significantly slowed or stopped, the resulting congestion would likely delay significant drops in freight rates.

Click Here for Free Freight Rate Pricing

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How China’s Missile Strikes Around Taiwan Impact Shipping https://www.universalcargo.com/how-chinas-missile-strikes-around-taiwan-impact-shipping/ https://www.universalcargo.com/how-chinas-missile-strikes-around-taiwan-impact-shipping/#respond Thu, 04 Aug 2022 21:10:45 +0000 https://www.universalcargo.com/?p=11220 The big news of the day is China firing missiles around Taiwan in response to U.S. Speaker of the House Nancy Pelosi visiting the island nation over which China claims sovereignty. The story is a big deal politically, but also economically, particularly when it comes to international shipping. The Taiwan straight, where China fired missiles, is one of the busiest trade lanes in the world. China's military action disrupted the flow of ships through the area, and could have a continued impact on world supply chains.

Find out all about it by reading the full post in Universal Cargo's blog.

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The big news of the day is China firing missiles around Taiwan in response to U.S. Speaker of the House Nancy Pelosi visiting the island nation over which China claims sovereignty. The story is a big deal politically, but also economically, particularly when it comes to international shipping. The Taiwan straight, where China fired missiles, is one of the busiest trade lanes in the world. China’s military action disrupted the flow of ships through the area, and could have a continued impact on world supply chains.

China’s Military Actions Around Taiwan

In case you missed the story, here are a couple news source recaps. Kevin Varley, Stephen Stapczynski, Ann Koh, and Sharon Cho reported in Bloomberg:

Image: People's Liberation Army/Navy Operated Chinese Cruise Missiles by Salah Rashad Zaqzoq
Picture: People’s Liberation Army/Navy Operated Chinese Cruise Missiles by Salah Rashad Zaqzoq

Taiwan said China fired 11 missiles in waters around the island as of 4 p.m. local time Thursday. The maneuvers, in response to US House Speaker Nancy Pelosi’s visit to the island this week, are taking place in six areas surrounding Taiwan, and China advised ships and aircraft not to go near the regions.

A statement by the Eastern Theater Command of the People’s Liberation Army said it had completed live-fire training and lifted relevant air and sea controls. It didn’t clarify whether that meant all exercises had ended, but the state-run People’s Daily later said controls off the eastern coast of Taiwan have been lifted. The drills began at noon on Thursday and were set to last until Sunday.

In the run-up to the missile launches, Lara Seligman and Paul McLeary reported in Politico:

The Chinese navy is positioning warships around the island, including its two aircraft carriers that have left port in recent days, in what officials described as a blockade. The Chinese defense ministry released a map of six zones surrounding the island where it plans to conduct the drills, some of which potentially overlap with Taiwan’s territorial waters. The live-fire exercises will begin at noon local time on Thursday and last three days.

Meanwhile, Taiwan was forced to scramble fighter jets on Wednesday to respond to 27 Chinese military aircraft that flew through its air defense zone, a large area that includes Taiwan’s airspace and extends over mainland China, according to its defense ministry, following a similar incursion on Tuesday. Twenty-two of those crossed the median line in the Taiwan Strait, which sits 12 nautical miles from the shore and separates the island from mainland China.

Both China, in its aggression toward Taiwan, and Russia, in its aggression toward Ukraine, were emboldened after President Biden’s botched Afghanistan withdrawal. China’s rhetoric and threats of military action have been intense since the announcement that Pelosi would visit Taiwan. As many news outlets have reported, she’s the first U.S. Speaker of the House to do so in 25 years.

China launching missiles around Taiwan and flying military aircraft over Taiwan’s air defense zone was to make good on the threats and rhetoric it had been spouting. We’ll see what kind of response comes from Washington, but a strong response is not expected from the Biden Administration. The administration has repeatedly recognized – even changed official language to strengthen that recognition of – the One China Policy, which labels Taiwan as part of China rather than its own, independent country.

Impact on International Shipping

As for the impact this incident has had on shipping, the Bloomberg article quoted above includes some detail:

Shippers rerouted vessels as China began its most provocative military drills in decades around Taiwan, with at least one owner barring ships from transiting the strait. 

Some vessels are being rerouted around the eastern side of the island, which will create delays of as much as three days, shipbrokers estimate. Delays of that duration aren’t uncommon, and the long-term impact may be minimal if tensions ease next week. 

However, the risks for ships traveling through Chinese waters may be compounded by bad weather, threatening further delays. Shenzhen city, which hosts the Yantian container port and lies directly west of Taiwan’s southern tip, issued a tropical cyclone warning, citing a low-pressure system about 117 kilometers (73 miles) away as of Thursday morning.

Ships are also being diverted to Chinese seas, and the Taiwan Strait hasn’t yet been designated a war risk zone for insurance purposes, said a trader and an insurance broker.

Taiwan’s Maritime Port Bureau issued a notice warning ships to avoid the areas where drills are taking place as there is no fixed route for sea transportation, according to Taiwan’s transportation minister Wang Kwo-tsai.

Greg Miller reported on the threat this situation is to global supply chains. He points out how the straight being closed to commercial traffic would obviously be bad for shippers but would actually be a boon for ship owners and operators.

“Delays would push up transit time and reduce effective vessel capacity, boosting freight rates,” Miller writes. That is something we’ve seen quite a bit of in the international shipping industry over the last couple years. With government stimuli running out and inflation flying high, dampening demand has finally helped freight rates to come down a bit; it would be unfortunate for this to put more upward pressure on them.

Obviously, an extended interruption to shipping through the Taiwan straight would have a very large impact on supplies because of the sheer volume of ships that transit the area. Miller writes:

Bloomberg calculated that almost half of the world’s container ships and 88% of larger container ships transited the Taiwan Strait this year. It also reported that some liquefied natural gas (LNG) carriers have already rerouted or slowed speed in response to the coming military exercises. [This American Shipper article was published the day before China executed its missile launches.]

Miller’s article goes on to analyze potential disruptions:

According to Peter Williams, trade flow analyst at VesselsValue, “With China conducting significant military drills and military tests around Taiwan … there is potential for substantial disruption to trade in the region.”

VesselsValue analyzed location data on commercial ships currently in Taiwanese waters, as well as those en route to Taiwan. As of Wednesday, it found 256 container ships, tankers and bulkers in Taiwanese waters, with another 308 destined to arrive. Of inbound container ships, tankers and bulkers, 60 are scheduled to arrive before the Chinese military drills conclude on Sunday.

For Now, Impact Looks Limited

As China’s missile launching seems to be over for now, the disruption it caused should be limited. If China’s “military drills” were to go on through Sunday, as originally reportedly scheduled, the impact felt across shipping would obviously be larger. Right now, it seems China is displaying its power, but doesn’t plan to continue to disrupt shipping through the area.

However, China has clearly displayed its willingness to flex its military powers in the Taiwan Straight. They have missiles, ships, and planes on the ready. If political posturing escalates, more and longer-sustained disruptions are very possible in the area.

Most seem to think that won’t be happening at this time. Miller quotes Maersk CEO Soren Skou on the subject:

“Obviously, if [the Taiwan Strait] were to close, it would have a dramatic impact on shipping capacity, in the sense that everybody would have to divert around Taiwan and add to the length of the voyages,” Skou said. “That would absorb significant capacity. But I have to say that there seems to be no suggestion that this is where we’re going.”

Let’s hope this incident was just China flexing, as appears to be the case, and doesn’t escalate into a full-blown crisis.

Click Here for Free Freight Rate Pricing

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How Likely Is a Rail Strike? https://www.universalcargo.com/how-likely-is-a-rail-strike/ https://www.universalcargo.com/how-likely-is-a-rail-strike/#respond Wed, 03 Aug 2022 01:53:44 +0000 https://www.universalcargo.com/?p=11217 Strike, strike, strike! The U.S. supply chain is in a triple strike threat from truckers, dockworkers, and rail workers. Normally, it's three strikes and you're out, but this is no game. Any one of these potential strikes threatening the supply chain could permanently close businesses people depend on for their livelihoods. Perhaps the biggest and least talked about threat of the three is the potential rail strike.

If trains are stopped from moving goods around the country, it would be devastating for a U.S. supply chain already suffering major difficulties for the last couple years and a U.S. economy already in a recession – unless you change the definition of recession as some are trying to do for political reasons.

Many have said we will see a rail strike by the end of September, if not earlier. How likely is that strike to happen?

Find out by reading the full post in Universal Cargo's blog.

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Strike, strike, strike! The U.S. supply chain is in a triple strike threat from truckers, dockworkers, and rail workers. Normally, it’s three strikes and you’re out, but this is no game. Any one of these potential strikes threatening the supply chain could permanently close businesses people depend on for their livelihoods. Perhaps the biggest and least talked about threat of the three is the potential rail strike.

If trains are stopped from moving goods around the country, it would be devastating for a U.S. supply chain already suffering major difficulties for the last couple years and a U.S. economy already in a recession – unless you change the definition of recession as some are trying to do for political reasons.

Many have said we will see a rail strike by the end of September, if not earlier. How likely is that strike to happen?

Is a Rail Strike as Likely as a Truckers Strike?

It can’t be said a rail strike is more likely than a truckers strike because, already, truckers in California executed a strike over Assembly Bill 5 (AB5) that basically shut down the Port of Oakland for a week.

cargo train BNSF

While things could continue to get worse on the truckers front, we’re currently left with many questions there. Will 70,000 truckers be forced off the roads and away from the ports in California when a trucker shortage already exists? Will most independent truckers just be forced to become employees while we face a tricky transition time. Will more legal action stop this law from altering the supply chain’s trucking model? Will truckers strike more? Could they similarly to Oakland disrupt the country’s busiest entry point for goods, the Ports of Los Angeles and Long Beach?

Over 100 International Longshore & Warehouse Union (ILWU) members assisted the truckers in disrupting the Port of Oakland by refusing to work in honor of the picket lines of independent truck owner and operators who don’t want to be forced to become employees or possibly forced off the roads in California altogether. Despite these union members talking about standing with the truckers, the ILWU officially supports AB5 because a major goal of the law is to unionize drivers. While ILWU members at the Port of Oakland’s biggest terminal stood with the independent truckers, ILWU members ignored the pickets at other terminals.

It’s likely ILWU members at the Southern California ports will ignore future strikes and convoys from truckers at the Ports of Los Angeles and Long Beach. That’s what would be wanted by union leadership, which in official statements spun members standing with the truckers in Oakland as refusing to work over safety issues. Indeed, the union has already ignored demonstrations by truckers at the Ports of LA and LB.

Rail workers striking would not need an assist from other industry unions to be effective. However, rail workers are themselves separated into several unions, so those unions would likely have to organize together to execute an effective wide rail strike. Those unions do appear prepared to do so. They do not have the dividing hindrance that truckers do in that AB5 directly impacts independent truckers but doesn’t affect the status of truckers who are already employees of trucking companies. Grievances rail workers have with rail carriers generally impact the workers regardless to which union they belong.

Additionally, rail grievances are nation-wide rather than localized to one state. While we’ll certainly see continued action from Californian truckers on AB5, if we do see work-stoppage from rail workers, it will have a bigger impact.

Is a Rail Strike as Likely as a Dockworkers Strike?

A bigger fear at the Ports of Los Angeles and Long Beach than truckers striking has been over whether the dockworkers will strike or execute slowdowns. Many shippers have diverted their cargo to East and Gulf Coast ports to avoid this risk, even to the point of adding to congestion issues (or causing the congestion according to some experts) at those ports.

Shippers diverting cargo speaks to the likelihood of seeing labor action from the ILWU. There’s an expectation from shippers that every time the master contract between the ILWU and Pacific Maritime Association expires, as it did on July 1st, contract negotiations will get contentious and the ILWU will execute labor slowdowns, threaten to strike, and/or actually strike.

This fear doesn’t exist in the minds of shippers over rail workers because it’s been since 1991 that a wide rail strike has taken place in the U.S. Plus, Congress stepped in and stopped that strike within a day, preventing the severe impact it could have made. However, shippers have suffered a great deal of damage from dockworkers disputing with their employers in recent memory.

There’s the 2014-15 negotiations, when things got so contentious between the ILWU and PMA that there were debilitating labor slowdowns (and eventually mini-lockouts) preventing goods from getting to store shelves for the holiday shopping seasons, agricultural exports rotting on the docks, exporters permanently losing international trade partners, and the U.S. economy losing billions of dollars. The local ILWU at the Port of Portland took advantage of that same break in contract to accelerate its slow-timing of the port (which had already been found in court to be illegal) they’d been doing over a couple electrical jobs that never belonged to the union in the first place. That got so bad ocean freight carriers ceased calling on the Port of Portland with container ships. In 2012, the ILWU clerical workers executed a strike, also causing major congestion. In 2002, amid contentious contract negotiations, the ILWU executed organized slowdowns and the PMA locked them out of the ports, resulting in, you guessed it, major port congestion.

That’s just a handful of ILWU labor action examples from the top of my head, without even mentioning the International Longshoremen’s Association (ILA) on the other side of the country, that happened since there’s been a rail worker strike. While actual, full-blown ILWU strikes are pretty rare, slowdowns have happened much more often. It’s enough to think slowdowns, if not an actual strike, from the ILWU would be much more likely than a strike from rail workers.

It’s easier for dockworkers to strike or execute slowdowns too. Though you have many local factions, all the dockworkers on the West Coast belong to the same overarching union. As mentioned before, rail workers are split into multiple unions, and there are strictly – even complicatingly – set legal processes in place for rail workers’ negotiations.

However, while the ILWU has been negotiating for a new contract for a matter of months, contract negotiations between rail carriers and rail workers have been dragging on for over two years. Rail workers have had enough. While the ILWU views the issue of automation as an existential one, the rail workers, because of how long they’ve waited to secure a new contract, see their issues as more pressing. In fact, a couple of the rail workers’ unions have already approved or moved toward the approval of a strike.

Jeff Schuhrke reported last week in an In These Times article:

Earlier this month, BLET [Teamsters-affiliated Brotherhood of Locomotive Engineers and Trainmen] members voted to authorize a strike with over 99 percent approval. Meanwhile, SMART-TD’s [Sheet Metal, Air, Rail and Transportation Workers-Transportation Division’s] general chairpersons have taken the first step towards authorizing a work stoppage.

Rail workers were even set to strike last month. Given this information, I would say a strike is more likely from the rail workers if not for the following mitigating factor…

Governmental Intervention

Photo of Joe Biden by Gage Skidmore
Photo of Joe Biden by Gage Skidmore

A rail worker strike almost happened a couple weeks ago, but the Biden Administration stepped in at the last moment, reported Ian Putzger in an article in the Loadstar:

US president Biden stepped in at the eleventh hour to avert a work stoppage that could paralyse the severely strained rail system.

With the possibility of industrial action as early as today (18 July), he signed an executive order on Friday for a board of arbitrators to seek a solution to the railway contract dispute simmering since January 2020.

During the 60 days given to the board to develop a compromise, no industrial action can happen.

This was no surprise action by the president. It is a prescribed step in the complicated legal process I mentioned above for rail workers’ negotiations. Schuhrke lays out nicely what happens after direct bargaining between the unions and railroads fail, then they enter mediation and that too comes to an impasse, which it did in June:

In accordance with the Railway Labor Act’s cumbersome process, the next step was a mandatory 30-day ​“cooling-off” period, at the end of which either party could have entered into ​“self-help” (meaning a strike or lockout) unless President Joe Biden appointed a Presidential Emergency Board (PEB) to examine the dispute and produce recommendations on a settlement within another 30-days.

The PEB’s recommendations are expected by mid-August, after which there will be yet another 30-day cooling-off period during which the parties can either accept or reject those recommendations. If an agreement still has not been reached by then, which would be mid-September, the Railway Labor Act allows for the unions to go on strike. 

If President Biden hadn’t appointed a PEB, he wouldn’t have been doing his job and would have had to add one more disaster to his list that already includes how he’s handling the Southern Border; his botched Afghanistan withdrawal; attacking the oil industry, causing record high gas prices; basically inviting Russia to invade Ukraine… But I digress.

So we now know there won’t be a rail strike until at least mid-September. If the rail unions did go on strike at that point, Congress could step in.

I already mentioned Congress stepping in and stopping the 1991 strike within a day. Schuhrke shared some of how Congress could put a quick end to a strike in September:

…Congress could quickly stop the strike by intervening in any number of ways, including ordering further cooling-off periods, mandating arbitration or implementing the PEB’s recommendations.

There is one more governmental intervention that could reduce the chance of a rail strike, but it’s deserving of its own section…

FRA Proposes Two-Man Minimum Crew Rule

It may not sound like a big issue from the outside, but a huge topic of contention between the rail carriers and the rail workers is the difference of one crew member on a freight train. The railroads want the minimum number of crew members on a freight train to be one instead of two. A strike happening could hinge on this one issue, or <ahem> one crewman.

Check this out from Schuhrke’s article:

“I really, really think that this may actually lead to a legitimate strike,” Lindsey, who is a member of the BLET, told In These Times. ​“The reason why is the railroad has chosen this as their hill to die on: they want one-man crews. They’ve made it clear they are not bowing down.”

The Federal Rail Administration (FRA) may take this issue off the table altogether.

In another article for the Loadstar, Ian Putzger reports:

The US Federal Rail Administration (FRA) is set to reject the push from rail carriers to bring down the minimum crew requirement for freight trains from two people to one.

With a proposal for a rule to that effect, the administration is also shifting the stakes in contract negotiations between the railways and unions.

“This proposed rule will improve safety for America’s rail passengers – and rail workers – across the country,” said US transport secretary Pete Buttigieg.

When Pete Buttigieg says something, my gut instinct is to suspect the opposite is true. Indeed, a similar rule to this one had previously been proposed but later dumped for a lack of evidence that it actually improved safety. Putzger adds:

This move reverses the stance taken by the FRA under its previous head, during the Trump administration. The authority had proposed a similar rule back in 2016, but abandoned it three years later, saying there was not enough evidence that two-person crews made train operations safer.

It seems the debate has become more about politics than anything else, with a few Democrat-led state legislatures putting similar rules in place seemingly because this federal rule was rejected under the Trump Administration. I’d need to see a great deal more evidence and arguments for and against before taking a side on the law. Generally, before endorsing a federal law, I’d want to see strong evidence the law is needed and it won’t have negative consequences that would equal or outweigh the positive ones. The more the federal government gets involved in an industry, the more the costs of that industry tend to spiral out of control (see education and healthcare).

You can read Putzger’s article to see arguments against the proposed rule. It may ultimately be bad law, but if it is pushed through, it would significantly decrease the chance a rail strike happens because the biggest thing for which the railroads are fighting will be taken off the table.

Conclusion

There are enough factors to make me think a rail strike is not as likely to happen as it seemed even a week or two ago. If a rail strike does indeed happen, I think it would be more symbolic than anything as Congress couldn’t afford not to use its powers to shut the strike down right away.

As locomotive engineer Ron Kaminkow was quoted as saying in Schuhrke’s article:

“Whether or not we actually go on strike, we need to utilize everything at our disposal to impress upon the rail carriers that we are ready, willing, able, mobilized, educated and vehement in our determination. Even if we do not strike, or if we do strike and are ordered back to work in a matter of hours, just knowing that we have that power, that we have the ability to stop the trains from moving — it shows us that we’re the ones that really run the railroad, not them.”

A situation where the unions did strike against the railroads would, however, put the Democrats in a tough situation. Unions tend to be big campaign contributors to the Democratic Party, and they couldn’t afford to be seen as anti-union or, worse, union-busting. However, they also can’t afford to let the economy get stuck on the tracks.

I wouldn’t be surprised to see President Biden’s PEB produce rather union-friendly recommendations and congress implement them if the two sides didn’t agree. I hope the recommendations end up being a suitable compromise to which both sides can agree because the former resolution is an amount of government flexing that displays a level of control of government over the governed that is undesirable to say the least.

 

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Port of Oakland Operating But AB 5 Supply Chain Threat Continues https://www.universalcargo.com/port-of-oakland-operating-but-ab-5-supply-chain-threat-continues/ https://www.universalcargo.com/port-of-oakland-operating-but-ab-5-supply-chain-threat-continues/#respond Tue, 26 Jul 2022 17:54:28 +0000 https://www.universalcargo.com/?p=11200 The Port of Oakland is back to full operation after truckers, with an assist from ILWU members, screeched the port to a halt last week over Assembly Bill 5 (AB 5).

The port says it will take days to recover from last week's disruption. I suspect, with the congestion that was already taking place at the port, effects could be felt for longer.

Find out all about it, including what Governor Newsom is doing – or not doing – about the supply-chain-threatening situation and more in Universal Cargo's blog.

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Fully Operational Port of Oakland Will Take Days to Recover

The Port of Oakland is back to full operation after truckers, with an assist from ILWU members, screeched the port to a halt last week over Assembly Bill 5 (AB 5).

You can catch up on AB 5 by reading these previous posts:

The port says it will take days to recover from last week’s disruption. I suspect, with the congestion that was already taking place at the port, effects could be felt for longer.

Bill Mongelluzzo reported in the Journal of Commerce (JOC):

All four of the Port of Oakland’s marine terminals were fully operational Monday following disruptions last week caused by truckers protesting California’s new AB5 worker classification law.

Protesting truckers on Monday confined their demonstrations to free-speech zones established Friday by the port that are located away from key terminal infrastructure, allowing dockworkers to process gate moves without incident.

It will take Oakland International Container Terminal (OICT), which handles approximately 70 percent of the port’s container volume, about three days to clear out the import containers that built up last week, and to receive all the export loads that couldn’t be delivered to the vessels, said Ed DeNike, president of SSA Containers, which operates OICT.

Truckers Faced Legal Threats If They Continued

Truck, shipping containers, plane

Those “free-speech zones” mentioned above were set up Friday as threats were laid upon protesting truckers the day before. Clarissa Hawes reported Friday in a FreightWaves article:

Nearly 200 port drivers attended a meeting in Oakland on Thursday after receiving the letters from the port and governor’s office. Harpeet Singh Sandhu, executive director of the American Sikh Congressional Caucus, urged the truckers at the meeting to find an attorney to represent them if they wanted to continue to protest Monday.

That’s because the port has established “designated safe protest areas” at the four terminals — Oakland International Container Terminal, also known as SSA, TraPac, Everport and Matson. No vehicles may obstruct any entrances or exits to terminal operations or any maritime business areas.

“Owner-operators must comply with all vehicular and local regulations,” Wan said in the letter. “Any protester who does not comply with the law may be cited and penalized by the responsible law enforcement agencies.”

Truckers Were Looking for Action from the Governor

Initially, independent truckers’ demonstration and strike over AB 5, which takes away their right to operate as independent truck owners and operators and forces them to become employees, grew in duration as truckers received no response on the issue from Governor Gavin Newsom, who signed the bill into law. Originally, the AB 5 protest was expected to last a day, then was expected to last three, but continued to grow in duration.

When Governor Newsom finally did respond, but only in the form of a written statement, it was in affirmation of AB 5 and ignored truckers’ plea to be made exempt from AB 5. Hawes reported:

In a statement, California Gov. Gavin Newsom affirmed AB5, a controversial law he signed in 2019 that seeks to limit the use of independent contractors and largely classify them as employee drivers.

… Newsom said independent truck drivers have had “sufficent time … to understand the requirements of the law.”

Unfortunately, no one really seems understands the full requirements of the law. How it will be enforced is extremely unclear, which is something on which truckers have also been seeking clarification.

Rules for Thee But Not for Me

The governor could choose to make truckers exempt from AB 5, since he has already shown the ability and willingness to make exemption. Well, if you’re his friend. Not surprisingly, AB 5 can be added to the list of Governor Newsom’s rules for thee but not for me (or my friends). The law was going to impact a mentor of Newsom’s, so he made the mentor exempt with an “urgent” bill. Protesting truckers have been pointing out this hypocrisy from the governor.

Hawes reported:

Some of the protesters carried signs reading, “If Gavin Newsom can give an exemption to Willie Brown to write a news article … Gavin Newsom can issue an exemption for the most vital industry in the USA.”

Their signs referenced a September 2020 article in Politico in which Newsom signed a bill lifting the limit on submissions by freelance writers, photographers and musicians after his mentor, Brown, the former San Francisco mayor and state assembly speaker, was told he had reached the 35-article submission cap under AB5 for his weekly column appearing in the San Francisco Chronicle. 

The article stated the law, exempting Brown and others from AB5, went into effect immediately because “it was written as an urgency measure and received two-thirds support.”

According to the Politico article, Newsom later texted Brown, “I signed the bill, write the damn column!”

Of course, Newsome is the same governor whom the Democratic Party spent millions to save from a recall election. Among the many complaints leading up to the recall was the draconian COVID measures he enforced on the people of California while being caught on camera ignoring the rules himself.

AB 5 Exemptions Have Been Made for Others

When it comes to AB 5, many exemptions have already been made for other independent contractors. Hawes lists lawyers, real estate agents, and accountants among those made exempt. And Prop 22 made drivers of Uber and Lyft exempt. However, there is a legal challenge to Prop 22, so there could be drama on that front in the near future.

Amidst this uncertainty, real estate experts navigate the evolving legal terrain, seeking clarity and strategic guidance to mitigate potential risks and capitalize on emerging opportunities. Here, the expertise of a seasoned mentor like coach Uhlir becomes invaluable, offering insights tailored to the intricacies of the real estate industry and the evolving legal landscape. By staying abreast of developments and leveraging expert counsel, real estate professionals can navigate regulatory complexities with confidence, ensuring continued success in an ever-changing environment.

Independent truck drivers, of which there are approximately 70,000 in California, are a crucial part of the supply chain. If there was a group to urgently make exempt from this law, it’s them.

It is important to note, that there are millions more people in California who will be impacted directly by this law. In another FreightWaves article by Hawes (this one published on Thursday), she reported:

The independent contractor law not only affects California truckers but millions of freelance writers, translators, artists and consultants in the state. Many are supporting the truckers’ protest on social media, urging Newsom and the legislature to repeal AB5 or exempt them as well.  

ILWU Supports AB 5 Despite Members Striking in Support of Truckers

Despite all the backlash on the bill and its devastating potential for truckers and the supply chain, it does still have supporters.

I pointed out last week how it was interesting that while 100 ILWU members at Oakland’s largest terminal refused to cross truckers’ picket lines and work, dockworkers at other port terminals ignored the truckers’ picket lines. There seems to be ambivalence inside the ranks of the ILWU on the issue.

Officially, the ILWU has been in support of AB 5, as from the start, a goal of the bill has been the unionization of drivers. The ILWU reaffirmed its support of the law last week and put serious spin on its members’ respecting the truckers’ picket lines. Hawes reported in her Thursday article:

Late Wednesday, Bobby Olvera Jr., vice president of the International Longshore and Warehouse Union, issued a statement about its position on AB5. 

“The ILWU believes collective bargaining is fundamental to workplace fairness and safety, as well as a foundation of democratic society,” Olvera’s statement read. “That’s why we support AB5: It aims to stop employers from misclassifying workers in order to stop these workers from forming unions and improving their lives.”

Farless Dailey III, president of ILWU Local 10, also released a statement Wednesday addressing the incident at the SSA terminal after 100 members refused to cross the protest line as truckers showed up early to block the gates.

“The workers stood by on health and safety, as is permitted in our contract when conditions at the terminals present a risk,” Dailey said.

Dailey’s explanation does not align with the statements made by ILWU dockworkers who refused to work and told the press they stand with the truckers. In our last blog on this, we shared one such quote an ILWU member gave to FreightWaves:

“We are working without a contract right now so we support the owner-operators and understand what they are trying to do.”

Indeed, the ILWU’s master contract expired July 1st. That leaves employers at the ports with little legal recourse if the powerful union decides to strike over its own or someone else’s grievances. The last thing shippers want to see is a rise of contention between the ILWU and employers during this time of contract negotiations. That has been very costly for shippers and the U.S. economy in the past. And there’s already the problematic issue of automation, which the ports need to advance to keep up with ever-growing international shipping volumes and the ILWU sees as an existential threat to fight against.

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Truckers, with ILWU Assist, Disrupt Port of Oakland Over AB 5 https://www.universalcargo.com/truckers-with-ilwu-assist-disrupt-port-of-oakland-over-ab-5/ https://www.universalcargo.com/truckers-with-ilwu-assist-disrupt-port-of-oakland-over-ab-5/#respond Thu, 21 Jul 2022 12:00:00 +0000 https://www.universalcargo.com/?p=11186 The Port of Oakland can no longer claim operations have not been affected by truckers striking over the California's Assembly Bill 5 (AB 5), which ends the independent owner and operator model of trucking in California. The controversial law requires truckers to be classified as employees of trucking companies, threatening to remove from the roads and ports 70,000 independent truckers, who have invested a great deal of money and often pride themselves on being independent and self-employed.

On Tuesday, with an assist from ILWU dockworkers, truckers majorly disrupted the Port of Oakland and by Wednesday, operations at the port had basically screeched to a halt.

Last week, when we blogged about truckers striking over AB 5, the ports claimed there had been no effect on operations. There had been a couple terminal disruptions at the time, but they said those were unrelated.

One of the biggest fears with a strike, as independent truckers are doing over this law, is that the International Longshore & Warehouse Union (ILWU) will decide not to cross the picket lines, effectively shutting down operations at the port. With the previous master contract expired since July 1st, there is no longer a no strike provision in place to stop the union from striking, whether over their own grievances or in solidarity with another striking group.

On Tuesday, the ILWU chose to honor the truckers' picket line, refusing to cross and shutting down the Port of Oakland's largest terminal.

Find out more by reading the full post in Universal Cargo's blog.

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The Port of Oakland can no longer claim operations have not been affected by truckers striking over the California’s Assembly Bill 5 (AB 5), which ends the independent owner and operator model of trucking in California. The controversial law requires truckers to be classified as employees of trucking companies, threatening to remove from the roads and ports 70,000 independent truckers, who have invested a great deal of money and often pride themselves on being independent and self-employed.

truckers strike Port of Los Angeles Long Beach

On Tuesday, with an assist from ILWU dockworkers, truckers majorly disrupted the Port of Oakland and by Wednesday, operations at the port had basically screeched to a halt.

Last week, when we blogged about truckers striking over AB 5, the ports claimed there had been no effect on operations. There had been a couple terminal disruptions at the time, but they said those were unrelated.

One of the biggest fears with a strike, as independent truckers are doing over this law, is that the International Longshore & Warehouse Union (ILWU) will decide not to cross the picket lines, effectively shutting down operations at the port. With the previous master contract expired since July 1st, there is no longer a no strike provision in place to stop the union from striking, whether over their own grievances or in solidarity with another striking group.

On Tuesday, the ILWU chose to honor the truckers’ picket line, refusing to cross and shutting down the Port of Oakland’s largest terminal.

Clarissa Hawes reported in FreightWaves:

Approximately 100 members of the International Longshore and Warehouse Union Local 10 refused to cross the protest line Tuesday as owner-operators blocked the gates of the SSA terminal, which is the largest operator at the Port of Oakland, in opposition of California’s controversial independent contractor law, AB5.

FreightWaves interviewed some Longshoremen who refused to work, printing the kind of quote shippers have been afraid of seeing from union members:

“We are working without a contract right now so we support the owner-operators and understand what they are trying to do,” said George, a nine-year ILWU member.

The dockworker uses the expiration of the latest labor contract at West Coast ports as a cause for the ILWU members to support truckers and shut down Oaklands largest terminal. Thankfully, the quote doesn’t show a great deal of animus from the dockworkers toward their employers, members of the Pacific Maritime Association (PMA). Such enmity would increase fear that a strike based on the union’s own grievances is likely on the way.

However, there is a clear fight over the issue of automation playing out between the PMA and ILWU. Additionally, seeing 100 ILWU members basically executing a secondary strike in support of truckers that shuts down a major port terminal is more than enough to add to the worry shippers have over disruption at the ports from possible contentious contract negotiations.

AB 5 has generally had the backing of unions because, from the beginning, one of its stated goals by those supporting it, including unions and politicians, has been to unionize drivers. It makes ILWU members’ decision to stand with truckers opposing the bill an interesting choice. Shippers are left to wonder how much the ILWU’s contract negotiations played into union members honoring truckers’ picket lines.

There certainly does seem to be ambivalence from the ILWU on whether to support truckers protesting AB 5, as the dockworkers didn’t honor the picket lines at all the terminals at the Port of Oakland.

Bill Mongelluzzo reported in the Journal of Commerce (JOC):

A spokesperson for the port confirmed that OICT — Oakland’s largest container terminal — was closed, but said Oakland’s three other container terminals remained open into the daytime shift despite truckers also picketing those facilities. “Matson, TraPac, and Nutter [Evergreen] are all open,” the spokesperson said.

However, Hawes’s FreightWaves article adds more detail to the scene:

Nearly 1,000 owner-operators, who showed up early Tuesday, also blocked access to the TraPac and Everport terminals, basically shutting down most of the container movement at the port.

So while the port spokesperson was doing his or her best to downplay the impact truckers protesting AB 5 were having, they clearly disrupted those terminals the spokesperson said were open.

On Wednesday, truckers effectively continued their protest at the Port of Oakland.

Edwin Lopez reported in Supply Chain Dive:

A second day of protests at the Port of Oakland led to more widespread closures and business impacts, as hundreds of truckers and allies descended on the port to rally against AB5.

Somewhere between 500 and 1,000 people showed up for the second day of protests, though it was difficult to estimate the exact headcount. People were split across the various terminal gates and rail ramps at the Port of Oakland, with 50 to 100 people at each location, protesters told Transport Dive.

Still, their presence made an impact, as truck activity ground to a halt at some, if not all, port terminals.

Waterside activity continued at some terminals, but truck gate activity was “either minimal or shutdown depending on the terminal,” Roberto Bernardo, director of communications at the Port of Oakland, told Transport Dive in an email.

CBS San Francisco reported late on Wednesday:

Officials at the Port of Oakland said operations have been shut down due to ongoing protests by independent truckers over AB5, which may soon take effect.

The port said in a statement Wednesday that the shutdown will further exacerbate the congestion of containers at the port.

“We understand the frustration expressed by the protestors at California ports,” said Danny Wan, the port’s executive director. “But, prolonged stoppage of port operations in California for any reason will damage all the businesses operating at the ports and cause California ports to further suffer market share losses to competing ports.”

U.S. East Coast ports received a boost in market share recently due to shippers avoiding West Coast ports for fear of ILWU contract negotiations causing port disruptions. The shippers who made that choice are probably feeling very good about their decision right now. Still, there are plenty of shippers trying to move cargo through West Coast ports, including the Port of Oakland right now.

Mongelluzzo pointed out in his article the unfortunate timing of the disruption at the Port of Oakland, beyond that it coincides with the ILWU’s contract negotiations with the PMA:

The work stoppage at OICT, which handles about 70 percent of Oakland’s container volume, comes at an inopportune time for the Northern California port with the peak shipping season beginning to unfold. Imports from Asia to Oakland increased 1.3 percent in June over May, and were up 11.7 percent from June 2021, according to PIERS, a JOC.com sister product within S&P Global.

We’ll have to see how operations go at the Port of Oakland today. Originally, this was set to be a very short demonstration, but the truckers have already been talking about extending it to make their message of stopping AB 5 heard.

Lopez reported in his article:

…while originally the protests were meant to last only until Wednesday, [Navdeep Ngill, the president of Ocean Rail Logistics and a designated spokesperson for the movement] said the owner-operators had discussed extending the efforts through at least Friday.

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Related Articles

Californian Law Attacks Truckers & Supply Chain

19 Legislators Call on Gov. Newsom to Stop AB 5 from Hurting Truckers & Supply Chain

Truckers Strike Over AB 5!

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Truckers Strike Over AB 5! https://www.universalcargo.com/truckers-strike-over-ab-5/ https://www.universalcargo.com/truckers-strike-over-ab-5/#respond Thu, 14 Jul 2022 17:01:33 +0000 https://www.universalcargo.com/?p=11165 Yesterday (Wednesday, July 14th), truckers began protesting Assembly Bill 5, aka AB 5 or the gig worker bill, at and around the Ports of Los Angeles, Long Beach, and Oakland.

Not merely did truckers hold a strike, believed to be only a 24-hour one, but they also intentionally slowed traffic on freeways near the ports.

Jordan Okumura reported in an AndNowYouKnow article:

Labor issues in California grew increasingly complicated over the course of the previous few days, with a set of the independent truck drivers who service the ports of Los Angeles and Long Beach going on strike in protest of the actions of the trucking firms operating out of the ports.

Meanwhile, Bloomberg reported:

Truckers servicing some of the US’s busiest ports are staging protests Wednesday as state-level labor rules that change their employment status begin to go into effect, creating another choke point in stressed US supply chains.
Transport workers are demonstrating at the California port gateways of Los Angeles, Long Beach and Oakland, the Harbor Trucking Association said in a statement.

Find out more about how the truckers are protesting, including a freeway convoy to slow traffic around the ports, by reading the full post in Universal Cargo's blog.

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Yesterday (Wednesday, July 14th), truckers began protesting Assembly Bill 5, aka AB 5 or the gig worker bill, at and around the Ports of Los Angeles, Long Beach, and Oakland.

Not merely did truckers hold a strike, believed to be only a 24-hour one, but they also intentionally slowed traffic on freeways near the ports.

Jordan Okumura reported in an AndNowYouKnow article:

Labor issues in California grew increasingly complicated over the course of the previous few days, with a set of the independent truck drivers who service the ports of Los Angeles and Long Beach going on strike in protest of the actions of the trucking firms operating out of the ports.

Meanwhile, Bloomberg reported:

Truckers servicing some of the US’s busiest ports are staging protests Wednesday as state-level labor rules that change their employment status begin to go into effect, creating another choke point in stressed US supply chains.

Transport workers are demonstrating at the California port gateways of Los Angeles, Long Beach and Oakland, the Harbor Trucking Association said in a statement.

And NBC Los Angeles reported:

Truckers from the Port of LA protested on the northbound 110 freeway on Wednesday morning, causing delays as they demonstrated against a proposed California labor law.

That local NBC reporting is a little inaccurate as the truckers aren’t employed by the port nor is AB 5 merely a proposed California labor law. The truckers are independent contractors, though that categorization is now under legal challenge by the gig worker bill that is well beyond merely proposed. The bill was signed to law by Governor Newsom, and the California Trucking Association’s (CTA) legal fight against it hit a dead end when the U.S. Supreme Court refused to take the case after the 9th U.S. Circuit Court of Appeals overturned CTA’s initial win against AB 5 in the Superior Court of California in Los Angeles.

Fox 11 Los Angeles posted a video on Youtube of yesterday’s convoy protest of AB 5 going into effect after the Supreme Court rejected the case:

YouTube Video

Both the Bloomberg and NBC Los Angeles articles went on to talk about AB 5, which I’ve been writing about in Universal Cargo’s blog for the last two posts:

I certainly didn’t expect AB 5 to become a three part blog series when I wrote the first article; however, it is a very serious topic with the potential to do a great deal of harm to the supply chain. Still, I don’t want to be alarmist about the topic either.

While AB 5 has the potential to remove 70,000 independent truck owner-operators from California’s roads and ports, that’s the worst-case scenario with the bill. Enforcement of the law may not be as strict as its highest potential, and some truckers may embrace becoming employees of trucking companies for which they previously contracted, though it is believed that most independent truck owner-operators would not.

Of course, becoming employees rather than remaining independent contractors is a much more complicated issue than it sounds when just thrown in a sentence like above.

Companies can’t simply take control of truckers’ trucks and call the truckers employees. A trucker invests tens of thousands of dollars into buying his or her truck. Often, truckers do so with pride in being self-employed and enjoy the freedoms that entails. Many truckers have no interest in selling their trucks and becoming employees of trucking companies. Trucking companies may not be in a position to be able to buy those trucks and hire those truckers either. Buying the trucks from the truckers may not be necessary to classify them as employees, but Some companies may be happy to stay at the number of employees they have and simply not work with the independent truckers anymore because of the legal issues created by AB 5.

Another option is for independent truckers to form their own companies instead of contracting through other trucking companies. This, of course, creates new expenses and challenges for these truckers.

There are many questions and much uncertainty as AB 5 takes effect. It’s impossible to know how it will turn out. Unfortunately, right now, as things are at the peak of uncertainty with implementation of the bill and its effect on the supply chain, we’re at the peak of year for shipping. There’s a threat of strike from rail workers, which would be a major blow to the transportation of shipping containers from the ports. Backlogs of containers to be moved from the ports by rail is already a problem. Congestion in general at the ports is back to climbing with the peak season getting into full swing. And there’s the threat that negotiations between the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) could turn contentious and result in more congestion at the ports.

Additionally, there’s the worry that if the truckers strike more, the ILWU may honor their picket lines, which would have a profound effect on operations at the ports.

In her article, Okumura quoted an ILWU spokesman who responded to whether or not the ILWU would honor truckers’ picket lines:

According to ILWU spokesman Craig Merrilees, that is “a hypothetical that I’m steering clear of for now…[we] will deal with this when and if it happens.”

Obviously, that’s not a satisfying answer that would alleviate any shippers’ fears over the situation. The answer might as well have been, “No comment.” However, there is one thing important to note that may bring lower shippers’ worries over this situation a little bit:

The strike and demonstrations are not being orchestrated by all truckers. It is a small minority of truckers currently protesting. The ports have said operations have not been affected.

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19 Legislators Call on Gov. Newsom to Stop AB 5 from Hurting Truckers & Supply Chain https://www.universalcargo.com/19-legislators-call-on-gov-newsom-to-stop-ab-5-from-hurting-truckers-supply-chain/ https://www.universalcargo.com/19-legislators-call-on-gov-newsom-to-stop-ab-5-from-hurting-truckers-supply-chain/#respond Tue, 12 Jul 2022 16:21:37 +0000 https://www.universalcargo.com/?p=11161 Last week, we blogged about California's Assembly Bill 5, also known as AB 5 and the gig worker bill. After the U.S. Supreme Court decided not to hear the California Trucking Association's case against the bill, it is now set to be implemented and could take as many as 70,000 independent truck owner-operators off the road and away from the ports in California.

Obviously, that would be devastating for the supply chain.

Almost a score of California's legislators petitioned the man who signed AB 5 into law, Governor Gavin Newsom, to use his power to delay the implementation of the bill or exempt the trucking industry from it.

I wouldn't hold my breath on California's governor actually taking positive action, even though the bill threatens the supply chain right as we're hitting stride in international shipping's peak season, when imports increase in preparation for the back to school and holiday shopping seasons.

Read the full text of the letter and find out the best chance of AB 5 not deeply hurting the supply chain by reading the full post in Universal Cargo's blog.

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Last week, we blogged about California’s Assembly Bill 5, also known as AB 5 and the gig worker bill. After the U.S. Supreme Court decided not to hear the California Trucking Association’s case against the bill, it is now set to be implemented and could take as many as 70,000 independent truck owner-operators off the road and away from the ports in California.

Obviously, that would be devastating for the supply chain.

Almost a score of California’s legislators petitioned the man who signed AB 5 into law, Governor Gavin Newsom, to use his power to delay the implementation of the bill or exempt the trucking industry from it.

I wouldn’t hold my breath on California’s governor actually taking positive action, even though the bill threatens the supply chain right as we’re hitting stride in international shipping’s peak season, when imports increase in preparation for the back to school and holiday shopping seasons.

Legislators’ Arguments Against AB 5

The 19 assemblymembers who signed the letter did a few things in it to induce Governor Newsom to take action.

First, the legislators highlighted the importance of the trucking industry to California’s economy and the supply chain, emphasizing that “the independent owner-operator trucker has long been the backbone” of that trucking industry.

Second, the lawmakers emphasized how AB 5 will hurt those whom Democrats like Newsom make a big deal out of claiming they care about: minorities. The legislators write:

Within California, the driver workforce is comprised of a majority-minority demographic, with over 50% Latino, and an overwhelming percentage of small-business companies that operate 5 or fewer trucks within their fleet (91.8%). Sadly, these are the individuals who stand to lose the most as AB 5 takes effect within the state.

Finally, the assemblymembers argue that if nothing is done about AB 5, it will add to inflation in California.

Best Chance for AB 5 Not Damaging the Supply Chain

While the legislators don’t talk about it, the out of control inflation is a large factor that could have citizens voting sitting politicians out of office later this year and in the 2024 election. Newsom has shown that he has high political aspirations, with his eyes seemingly on the White House, as he recently ran unwise attack ads on Florida’s governor, Ron DeSantis. Perhaps seeing the political danger he is in if things get even worse with AB 5 could be the best chance of causing Newsom to take action.

The best chance, however, of the gig worker bill not deeply hurting the trucking industry in California and the larger supply chain is not from the potential of Newsom using his gubernatorial powers: the best chance of limited damage from AB 5 comes from how it will be implemented.

There are questions over how the bill will be enforced. If the legislation is enforced to its fullest, tens of thousands of truckers will be stopped from operating the way they currently do. With the fact we’ve already been facing a trucker shortage problem for many years, the damage this would do could be intense.

On the other hand, if implementation and enforcement of the law aren’t as strict as they potentially could be, the consequences obviously wouldn’t be as dire. Still, that’s a pretty big gamble, and so far, gambling on Democrat policies hasn’t been working out very well in California nor around the country.

Full Text of Letter to Governor

Here’s the full text of the letter the assemblymembers sent to Governor Newsom:

California Legislature

July 5, 2022


Honorable Gavin Newsom
Governor of California
1021 O Street, Suite 9000
Sacramento, CA 95814

RE: Request For Executive Action – AB 5 Implementation

Dear Governor Newsom,

We, the undersigned members, respectfully request that you utilize your executive powers to assist the trucking industry in California as they prepare for the imminent implementation of AB 5 (Chapter 296, Statutes of 2019). Due to the Supreme Court’s decision to not hear the California Trucking Association’s petition of the Ninth Circuit U.S. Court of Appeal’s ruling, the fate of California’s trucking industry is in question.

The importance of the trucking industry to the economy of California, let alone the United States as a whole, cannot be understated. California’s ranking as a world economy is due in part to its ability to move more than 40 percent of the nation’s products through its ports. However, the historic ongoing congestion felt at our State’s ports exposed the dire need for a stronger and more reliable supply chain infrastructure. To this end, the state has openly expressed the need for an increased workforce, yet the available supply of drivers, “owner-operator” or otherwise, will be drastically reduced given the imminent application of AB 5 to the trucking industry.

The independent owner-operator trucker has long been the backbone of the trucking industry. There are approximately 500,000 owner-operators nationwide, constituting about 15-20% of the entire driver workforce. Within California, the driver workforce is comprised of a majority-minority demographic, with over 50% Latino, and an overwhelming percentage of small-business companies that operate 5 or fewer trucks within their fleet (91.8%). Sadly, these are the individuals who stand to lose the most as AB 5 takes effect within the state.

Given the critical role of our truck drivers in maintaining our supply chain, we implore you to take any means within your authority to either delay the implementation of AB 5 or exempt the trucking industry altogether from the ABC test. Without immediate action, we can expect a devastating reduction in our driver workforce, especially among minority-operated businesses.

Furthermore, without immediate relief, the cost of products in stores will rise due to higher shipping costs. This will fuel inflation, since shipping is a key component in the price of products. Californians are already suffering heavily from inflation and should not be subjected to additional price rises as a result of AB 5. At this critical juncture, we ask that you utilize all resources at your disposal to prevent this looming disaster.

Sincerely,

Devon J. Mathis
Assemblymember, 26th District

James Gallagher, Republican Leader
Assemblymember, 3rd District

Randy Voepel
Assemblymember, 71st District

Heath Flora
Assemblymember, 12th District

Thurston “Smitty” Smith
Assemblymember, 33rd District

Kelly Seyarto
Assemblymember, 67th District

Steven Choi, Ph.D.
Assemblymember, 68th District

James Patterson
Assemblymember, 23rd District

Frank Bigelow
Assemblymember, 5th District

Marie Waldron
Assemblymember, 75th District

Vince Fong
Assemblymember, 34th District

Laurie Davies
Assemblymember, 73rd District

Kevin Kiley
Assemblymember, 6th District

Philip Chen, Ph.D.
Assemblymember, 55th District

Janet Nguyen
Assemblymember, 72nd District

Megan Dahle
Assemblymember, 1st District

Suzette Valladares
Assemblymember, 38th District

Tom Lackey
Assemblymember, 36th District

Jordan Cunningham
Assemblymember, 35th District

CC:
The Honorable Anthony Rendon, Speaker of the Assembly
Stuart Thompson, Office of Legislative Affairs – Governor Newsom
Suzane Sutton, Assembly Republican Caucus
Paul Dress, Assembly Republican Caucus
Lauren Prichard, Assembly Republican Caucus

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Californian Law Attacks Truckers & Supply Chain https://www.universalcargo.com/californian-law-attacks-truckers-supply-chain/ https://www.universalcargo.com/californian-law-attacks-truckers-supply-chain/#respond Thu, 07 Jul 2022 20:14:27 +0000 https://www.universalcargo.com/?p=11158 For years, we've talked about a trucker shortage that has been a problem for the international shipping industry and U.S. supply chains. Now, a law is going into effect in California that exacerbates the problem. California’s Assembly Bill 5, referred to as AB 5 for short or the "gig worker bill" because it was designed to force gig-based companies like Uber and Lyft to make independent contractors or "gig workers" into employees, is set to take a substantial number of truckers off the roads and away from the ports in California.

That's not something shippers want to hear, as they've been dealing with massive supply chain issues for the last couple years, particularly at the country's busiest ports, Los Angeles and Long Beach, located in Southern California.

The California Trucking Association tried to fight the problematic law all the way to the U.S. Supreme Court, but the country's highest court has refused to take the case. Katy Grimes writes in a California Globe article, "The decision could force California’s 70,000 independent truck owner-operators to stop driving in the state, which is already suffering from supply-chain backlogs."

Find out more by reading the full post in Universal Cargo's blog.

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For years, we’ve talked about a trucker shortage that has been a problem for the international shipping industry and U.S. supply chains. Now, a law is going into effect in California that exacerbates the problem. California’s Assembly Bill 5, referred to as AB 5 for short or the “gig worker bill” because it was designed to force gig-based companies like Uber and Lyft to make independent contractors or “gig workers” into employees, is set to take a substantial number of truckers off the roads and away from the ports in California.

End of Truckers?

That’s not something shippers want to hear, as they’ve been dealing with massive supply chain issues for the last couple years, particularly at the country’s busiest ports, Los Angeles and Long Beach, located in Southern California.

The California Trucking Association tried to fight the problematic law all the way to the U.S. Supreme Court, but the country’s highest court has refused to take the case. Katy Grimes writes in a California Globe article, “The decision could force California’s 70,000 independent truck owner-operators to stop driving in the state, which is already suffering from supply-chain backlogs.”

Though the decision is a blow to truckers in California, Grimes argues it was the right decision for the U.S. Supreme Court to let California deal with its own legal mess its lawmakers and even courts, which we’ll talk about later, created. And what a mess have they created that reaches far beyond truckers losing their livelihoods in California.

Essential Independent Truckers Outlawed

Independent truckers are an essential part of the supply chain. A shortage of truckers plays a role in backups and congestion that happens at the ports.

Often, when we think about port congestion, we think about the Ports of Los Angeles and Long Beach. They’re the busiest ports in the country, handling more cargo imports than any other ports in the U.S., and have been the focal point of port congestion news. However, there have been moments during the “supply chain crisis” of the last couple years when other major ports have managed to exceed even the congestion of the San Pedro Bay port complex.

Among those ports is the Port of Oakland, which John Ramos shares in a CBS News article is particularly dependent upon independently owned and operated trucks moving containers of goods:

“There’s 9,000 trucks that serve the [Port of Oakland] on a daily basis, and 90% of them are independent contractors.  So, this is a big, big impact,” said Bill Aboudi, owner of AB Trucking in Oakland.

Aboudi employs his own drivers, but also uses independent contractors to handle overflow business, which he just said became illegal.  Aboudi says he won’t be able to use trucks owned by the drivers anymore.

“It just doesn’t work. You own your own truck, it’s your truck. I can’t take possession of it and start using it,” he said. “In a case like my company, we just eliminate owner/operators and just reduce the workload.”

Ramos goes on in his article to chronicle what this means for a self-employed trucker who invested in himself by buying his own truck and would previously be contracted by AB Trucking (or other drayage companies):

That’s a disaster for Hedayatullah Abrahami, who just bought his own truck a month ago.

He, like other owner/operators, spent tens of thousands of dollars to not be someone’s employee, and feels a sense of pride in owning his own truck.

“Oh, yeah, why not?” said Abrahami. “Yeah. That’s my own truck, working for myself, that’s really good. I’m happy for that.”

Now his truck will be useless unless he wants to become his own trucking company, booking his own loads and dealing with the port bureaucracy. That kind of paperwork was always done for him by AB Trucking.

“They arrange everything,” he said. “They talk to the big companies, to the port and everything. They pick all the loads for us.”

Abrahami’s dream of being a truck driver just got a lot more complicated. 

[Paul Brashier, Vice President of ITS Logistics] predicts many won’t stay in California, which, he said, will only make the supply chain problems worse and the cost of everything in the state even more expensive.

Democrats’ Bad Regulation in California

It’s not surprising to see California regulation make problems worse. California is known for overregulation, which pushes up the cost of living and pushes businesses and people out of the state.

This particular law, AB 5, is a 2019 bill that Grimes shares in her article was “authored by Democrat Assemblywoman Lorena Gonzalez.”

[The gig worker bill] completely redefined independent contractors in California, as well as greatly reducing the number of contractors in the state by creating an “ABC test” that instead made them employees, or put them out of work.

AB 5 was passed by Democrats in the California Legislature and signed into law in 2019 by Gov. Gavin Newsom.

You could add signing this bill to a long list of bad moves by California’s governor, who completely neglected the proper care for the state’s forests that he signed agreement to do and blamed the resulting fires on global warming and then came under heat for not following his own draconian Covid rules he enforced on the people he governs. Thanks to millions spent on ads, campaigns, and support by Democrat leaders like Presidents Obama and Biden, none of whom could say the governor had done or was doing a good job, Governor Newsom managed to survive a recall election in 2021. Now he has presidential aspirations, so he can damage the country faster than just doing it through the state of California.

The Fight in the Courts

Immediately upon the governor signing AB 5, truckers went to work fighting the bill. Initially they struck a victory. Grimes reports:

Truckers sued right away, and in January 2021, they won in state court: The Superior Court of California in Los Angeles ruled that independent truckers were exempted from AB 5. The court found that the law violated the 1994 Federal Aviation Administration Authorization Act​ (FAAAA), effectively giving independent truckers the right to operate in every state to (1) make uniform federal laws possible for easy interstate commerce, and (2) to create fair competition, the Globe reported.

However, the victory was short-lived, as Grimes chronicles:

The California Attorney General promptly appealed the decision, and the 9th U.S. Circuit Court of Appeals ruled 2-1 in April 2021 that truckers would no longer be exempt from the state’s AB 5 worker classification law, forcing many to become employees rather than independent contractors.

Then the California Trucking Association appealed to the Supreme Court. As stated, the Supreme Court decided against taking the case and cleaning up the state of California’s mess, leaving us with a situation that the California Truckers Association described as follows:

In addition to the direct impact on California’s 70,000 owner-operators who have seven days to cease long-standing independent businesses, the impact of taking tens of thousands of truck drivers off the road will have devastating repercussions on an already fragile supply chain, increasing costs and worsening runaway inflation.

Irony & Power

In his article, Ramos points out the irony that companies like Uber and Lyft were exempted from AB 5 with the passage of Proposition 22. But he adds, “Brashier said he believes AB5 was always intended to force independent truckers into trucking companies, making them easier to unionize.” That would give the Democrats who run California motive for pushing this damaging law, as unions tend to financially support the Democratic Party, whether members who are forced to join and pay dues support the party and its policies or not.

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What’s Happening at Ports During ILWU Negotiations? https://www.universalcargo.com/whats-happening-at-ports-during-ilwu-negotiations/ https://www.universalcargo.com/whats-happening-at-ports-during-ilwu-negotiations/#respond Tue, 05 Jul 2022 23:30:10 +0000 https://www.universalcargo.com/?p=11154 As of Friday (July 1st), the master contract between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) for all the dockworkers at West Coast ports is expired. This is a nervous time for shippers, to say the least. At any moment, ILWU members, whether a small local contingent or the entire union, could organize slowdowns or even strikes that could disrupt the movement of goods and badly damage shippers, who have already suffered much over the last couple years.

During the 2014-15 contract negotiations, such slowdowns occurred. It cost the U.S. economy billions. The union and PMA have said they're planning to keep cargo moving through negotiations, but it's clear the issue of automation is a tough one, and many expect negotiations to turn contentious over it. There is no certainty that damaging labor slowdowns won't happen.

What is happening right now at both the East and West Coast ports? Read the full post in Universal Cargo's blog to find out.

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As of Friday (July 1st), the master contract between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) for all the dockworkers at West Coast ports is expired. This is a nervous time for shippers, to say the least. At any moment, ILWU members, whether a small local contingent or the entire union, could organize slowdowns or even strikes that could disrupt the movement of goods and badly damage shippers, who have already suffered much over the last couple years.

During the 2014-15 contract negotiations, such slowdowns occurred. It cost the U.S. economy billions. The union and PMA have said they’re planning to keep cargo moving through negotiations, but it’s clear the issue of automation is a tough one, and many expect negotiations to turn contentious over it. There is no certainty that damaging labor slowdowns won’t happen.

ILWU Steps Up Its Fight Against Automation

At the beginning of May, the automation fight went public as the PMA released a study showing automation made port terminals more productive, helped them handle more shipments, and actually created more union jobs. The ILWU immediately refuted that but not very convincingly.

ILWU PMA meet about contract extension

As June was reaching an end, the ILWU did a better job of publicly claiming automation costs union jobs by releasing a report the union commissioned on the topic.

Bill Mongelluzzo reported on the study in the Journal of Commerce (JOC):

According to the report, automation at TraPac and LBCT eliminated 535,848 annual person-hours of dock work and resulted in $41.8 million in annual wages not earned. The loss of income from dockworkers who are replaced by future automation projects at other terminals will have a knock-on impact in the communities close to the ports in the form of reduced spending on goods and services.

“The follow-on effects from automation would eliminate 3,818 year-round, non-port jobs that are currently supported by the consumer spending of dockworkers,” the study said. “This would be the result of $743.9 million in lost purchases in California’s economy.”

I don’t know the merit or accuracy of the ILWU’s report entitled “Someone Else’s Ocean“; however, the ILWU is at least presenting numbers. The report suggests a tax or fee on any new automation projects at the Ports of Los Angeles and Long Beach to offset the “public costs” from dockworker jobs lost because of automation, according to Mongelluzzo’s article.

Unfortunately, over the last couple years, we’ve all been suffering through the public costs of the unions’ long fight against automation. The lack of automation at U.S. ports has caused them to be less efficient than many of their counterparts around the world. This helped make U.S. ports unable to handle the long surge in imports caused by lockdowns and stimuli during the pandemic. The ILWU and ILA have a share in the responsibility for the supply chain disruptions of the last couple years.

Perhaps in an attempt to get shippers on their side, the ILWU’s report also “suggests that the San Pedro Bay ports levy a surcharge on containers that are returned empty to overseas ports rather than being filled with export cargoes, with the revenues to be used to offset public costs that result from underutilization of California’s export capacity,” reports Mongelluzzo.

That is actually an interesting idea that may be worth looking into. U.S. exporters, particularly U.S. agricultural exporters, have been treated unfairly over the course of the pandemic when it has come to being provided with shipping containers and services for their exports over the course of the pandemic.

East Coast Ports See Boom Amid Cargo Diversion from West Coast

Shippers have already been rerouting cargo through East Coast ports from the West Coast ones for fear of labor strife disruption.

Lori Ann LaRocco reports in American Shipper:

The East Coast ports are benefitting from the diversion of trade away from the West Coast out of fear of a labor strike.

Bethann Rooney, executive director for the Port Authority of New York and New Jersey, told reporters Friday the flow of trade originally bound for the West Coast and redirected to their port has been steady.

“Through April 2022, container volume was up 11.2% over the same period last year,” Rooney said. “Approximately 6.5% of the total volume during that period represented cargo that was rerouted from the West Coast.”

Rerouting to East and Gulf Coast ports was one of the three ways I suggested a year ago that shippers could protect their supply chains from likely ILWU port disruption on the West Coast. The other strategies were importing and exporting early and considering a change in goods sourcing to avoid West Coast ports.

All of these protective measures require early planning. At this juncture, rerouting to East and Gulf Coast ports is probably the most doable for shippers who have not yet implemented any of these ideas. However, simply moving goods through the East Coast is not a panacea.

Asia to East Coast Shipping Suffers Reliability Dip

Teri Errico Griffis reports in the JOC that reliability of shipping from Asia to US East Coast ports has suffered a dip in reliability amid cargo diversion from the West Coast. Interestingly, US WC shipments actually made gains in that department. Griffis writes:

Asia to the US West Coast showed a slight gain in on-time performance, rising to 21.9 percent in May from 21 percent in April, according to Sea-Intelligence Maritime Analysis’ latest liner performance report. Asia to the US East Coast, on the other hand, broke an upward trend since February and fell to 19.8 percent from 21.7 percent. Reliability is measured by vessels arriving within one day of their expected schedule.

Let’s not kid ourselves here. Carriers, which have been notorious for unreliability long before I started writing about them over a decade ago, are not killing it on either coast when it comes to delivering goods on time. If your business delivered when it said it would only a little over or a little under twenty percent of the time, you’d probably be out of business.

We’ve grown so accustomed to ocean freight carriers failing to be on time with deliveries that such low performance numbers are shrugged right off. Additionally, it’s not all on the carriers. Ports falling behind puts everything behind when it comes to delivering imports and exports. It’s certainly not comforting to see reliability go in the wrong direction at East Coast ports as they pick up extra market share from fear of more disruption at West Coast ports.

Griffis writes:

East Coast ports have grappled with increased anchorage over the last few months as the fear of West Coast labor disruption has led some shippers to shift their cargo elsewhere. The Port of New York and New Jersey, for example, reached a record high with 21 vessels at anchor June 20, while a total of 107 container ships needed to wait to dock at some point during the month, Bethann Rooney, port director at the Port Authority of New York and New Jersey, told JOC.com Friday.

“It is concerning,” Rooney said, noting ships waited an average 4.5 days in June.

New York-New Jersey import volume is up 9.7 percent year-to-date, according to PIERS, a sister company of JOC.com within S&P Global. Rooney said 6.5 percent of the cargo that landed in New York-New Jersey through the first five months of the year was typical West Coast cargo that has been rerouted.

The Port of Savannah, which by May had cleared out its backlog of approximately 30 ships at high, also saw its anchorage tally jump back up to 25 in recent weeks, according to Sea-Intelligence.

A little surprising is that ocean freight carriers’ global reliability actually improved month over month in May. That was up to 36.4 percent from 34.4 percent and, according to Sea-Intelligence per Griffis’s article, is the highest reliability level ocean freight carriers have had since June of 2021.

Watching and Hoping

We’re getting into the peak season for shipping now and are stuck with a very uneasy feeling about where things stand. Most shippers are watching the news when it comes to the ILWU contract negotiations and hoping they don’t go sideways. Inflation is out of control with no signs that it will be reeled in, adding more uncertainty to the future.

One thing you can know is that we here at Universal Cargo are always keeping a close eye on the events affecting international shipping and are always ready to do everything we can to help your business navigate it all successfully.

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ILWU & PMA Speak About Contract Negotiations https://www.universalcargo.com/ilwu-pma-speak-about-contract-negotiations/ https://www.universalcargo.com/ilwu-pma-speak-about-contract-negotiations/#respond Thu, 16 Jun 2022 18:06:57 +0000 https://www.universalcargo.com/?p=11041 Both the Loadstar and the Journal of Commerce (JOC) report the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) have broken media silence on their negotiations with a joint statement to reassure shippers that both parties are committed to negotiating a new contract without port disruption. One would certainly hope so.

“Cargo operations continue beyond the expiration of the contract. Neither party is preparing for a strike or a lockout, contrary to speculation in news reports. The parties remain focused on and committed to reaching an agreement,” the PMA and ILWU reportedly said.

I say reportedly because the statement does not appear on the PMA's nor the ILWU's website. Saying that neither party is preparing for a strike or a lockout is not the same as the parties committing not to execute a strike or lockout. The history of labor slowdowns, port disruption, strikes, and lockouts during contract negotiations along with the contract expiration meaning there's not an active agreement clause against strikes and slowdowns in place gives shippers and industry professionals plenty of reason to be worried.

Additionally, all the congestion, port disruption, and record-breakingly (yeah, I might have just made up that adverb) high freight rates over the last two years would make disruptions from contentious contract negotiations all the more devastating.

Find out more by reading the full post in Universal Cargo's blog.

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Both the Loadstar and the Journal of Commerce (JOC) report the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) have broken media silence on their negotiations with a joint statement to reassure shippers that both parties are committed to negotiating a new contract without port disruption. One would certainly hope so.

“Cargo operations continue beyond the expiration of the contract. Neither party is preparing for a strike or a lockout, contrary to speculation in news reports. The parties remain focused on and committed to reaching an agreement,” the PMA and ILWU reportedly said.

I say reportedly because the statement does not appear on the PMA’s nor the ILWU’s website. Saying that neither party is preparing for a strike or a lockout is not the same as the parties committing not to execute a strike or lockout. The history of labor slowdowns, port disruption, strikes, and lockouts during contract negotiations along with the contract expiration meaning there’s not an active agreement clause against strikes and slowdowns in place gives shippers and industry professionals plenty of reason to be worried.

Additionally, all the congestion, port disruption, and record-breakingly (yeah, I might have just made up that adverb) high freight rates over the last two years would make disruptions from contentious contract negotiations all the more devastating.

ILWU PMA meet about contract extension

Should Shippers Feel Reassured?

Should the PMA-ILWU statement make shippers optimistic that these negotiations won’t turn costly for them? Probably the most hopeful thing from the statement is that it came from the parties jointly. That shows some cooperation on the part of the union and employers. It’s also something that is somewhat rare during contract negotiations.

Getting this statement is definitely better than hearing news of negotiations being suspended as happened in May. The ILWU requested that suspension, and the union refused to comment afterward. The PMA also didn’t say why the negotiations had been suspended, but it was reported that the ILWU was in no rush to get negotiations for the new contract done.

President Biden Met With PMA & ILWU

On Friday, President Biden did have a sit-down with the PMA and ILWU. Shippers have sent a couple letters to the White House, requesting that the president do so – or at least do something to ensure port disruption like what took place during the contentious contract negotiations of 2014-15 doesn’t repeat itself. The latest such letter was sent last week on Wednesday.

Good on the president for meeting with the dockworker union and its members’ employers on the subject two days after the letter. “Good on the president” isn’t something I’ve gotten to say too much since Joe Biden took up the office.

The PMA and ILWU’s statement makes it clear there won’t be a new contract before the current one expires on July 1st, but we already knew there wouldn’t be. The statement probably didn’t give us any real new information, but at least it reportedly confirmed what the parties discussed with President Biden:

“The parties discussed with the president several issues, including supply chain congestion and their shared commitment to reach a collective bargaining agreement that is fair to both parties.”

PMA’s Posted Negotiations Comments

While the PMA’s website, at the time of this writing, does not share the joint statement made with the ILWU, it does have a popup that reads:

PMA’s negotiations with the ILWU for a new labor contract at the 29 West Coast ports are critically important for the health of jobs, businesses, and communities nationwide. As historic supply chain congestion continues, it is vital that both sides reach agreement without any disruption at the ports. We are proud of our collaboration with the ILWU during this extraordinary period, and hopeful that spirit of cooperation will continue as we pursue a new agreement.

The popup then supplies a link to a section of the website devoted to negotiations. There, you can find a video from PMA’s President and CEO Jim McKenna, in which he gets into the issue of collaboration with the ILWU.

Automation Talk

The above-mentioned video was released just before contract negotiations were about to get underway, and McKenna dedicated a significant amount of time in the video to what is thought to be the most heated issue between the parties: automation.

In fact, these negotiations have long been expected to become contentious over automation.

Here’s what McKenna had to say about automation:

We must modernize our terminals to achieve greater cargo throughput and accommodate growing cargo volumes. This is particularly important in the largest ports where there is no opportunity for physical expansion. Automation allows greater densification at existing port terminals, enabling greater cargo throughput and continued cargo growth over time.

ILWU members overwhelming agreed to automation dating back to 2008. It’s been a contractual right for PMA members for almost 15 years. We have seen through experience over the past 18 months that automated terminals were the most effective at handling historic volumes – while also expanding work opportunities for ILWU members.

… We will meet stringent environmental regulations to protect the health of our workers and the communities where West Coast ports are located. Automation has been – and will remain – an essential tool to reducing emissions and achieving environmental objectives approved by lawmakers in the major ports, particularly the nation’s largest port complex in Southern California.

Contention Over Automation

Spending so long on the topic of automation is significant. There is at least one point made in what McKenna said that the ILWU would take issue with: automated terminals expanding work opportunities for the ILWU. The PMA went public with a study supporting this claim. I haven’t studied this study, but the ILWU did refute the claim of increased ILWU opportunites, calling it a “shell game.”

The union said there might be more jobs at the automated terminals, but they took cargo movement away from the less automated terminals, meaning there weren’t really more job opportunities overall because of automation.

The ILWU, along with its East Coast counterpart – the ILA, has always seen automation as an existential threat. However, both unions have made agreements to allow ports to automate in return for substantial compensation. Dockworkers on both coasts are extremely well-paid with excellent benefits on top. McKenna didn’t fail to bring that up in his video:

We will continue to provide world-class wages and benefits to ILWU workers. Currently, ILWU members earn nearly $195,000 a year on average — roughly three times the U.S. median household income. ILWU members also enjoy fully employer-paid healthcare, generous pension and the best high yield savings account types, and pay guarantees.

Despite agreements to allow automation and the excellent compensation they receive, the unions have still fought automation. It’s hard to see the issue not becoming a sticking point during these negotiations. But hopefully, both parties will resist utilizing tactics like slowdowns, strikes, and lockouts and remain at the negotiating table until a new deal is worked out.

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High Ocean Freight Rates Are Not the Cause of Inflation https://www.universalcargo.com/high-ocean-freight-rates-are-not-the-cause-of-inflation/ https://www.universalcargo.com/high-ocean-freight-rates-are-not-the-cause-of-inflation/#respond Tue, 14 Jun 2022 14:01:00 +0000 https://www.universalcargo.com/?p=11037 President Biden is about to sign a piece of legislation into law: The Ocean Shipping Reform Act of 2022 (OSRA). The president claims that this "will solve a big piece of [inflation]."

The commander-in-chief said the above after making an understatement of Biblical proportions. "Inflation is a problem," he said. I haven't seen an understatement that big since reading Matthew 4:2, which states, "And when [Jesus] had fasted forty days and forty nights, afterward He was hungry."

The American people are hungry for answers to inflation and, I suspect, have lost their appetite for excuses. Unfortunately, Joe Biden is not only the president of the United States but also the king of excuses. Among the things he blames inflation on is the sky-high cost of importing goods:

"As you know," President Biden said, "one of the big reasons why prices are going up is the cost of shipping things across the Pacific, in particular."

Let me be clear. Shipping goods across the Pacific is extremely expensive right now (though freight rates have finally seen some improvement). Freight rates have soared over the last couple of years.

However, the price of ocean shipping is not causing inflation. Period. Allow me to illustrate with an analogous story.

Read the story and more in the blog at UniversalCargo.com!

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Biden Hypes Newly Passed Ocean Shipping Reform Act as Inflation Reducer

President Biden is about to sign a piece of legislation into law: The Ocean Shipping Reform Act of 2022 (OSRA). The president claims that this “will solve a big piece of [inflation].”

The commander-in-chief said the above after making an understatement of Biblical proportions. “Inflation is a problem,” he said. I haven’t seen an understatement that big since reading Matthew 4:2, which states, “And when [Jesus] had fasted forty days and forty nights, afterward He was hungry.”

The American people are hungry for answers to inflation and, I suspect, have lost their appetite for excuses. Unfortunately, Joe Biden is not only the president of the United States but also the king of excuses. Among the things he blames inflation on is the sky-high cost of importing goods:

“As you know,” President Biden said, “one of the big reasons why prices are going up is the cost of shipping things across the Pacific, in particular.”

Ocean Shipping Is Not Causing Inflation

Let me be clear. Shipping goods across the Pacific is extremely expensive right now (though freight rates have finally seen some improvement). Freight rates have soared over the last couple of years.

However, the price of ocean shipping is not causing inflation. Period. Allow me to illustrate with an analogous story.

What Calling Freight Rates the Cause of Inflation Is Like

You go to your friend Joe’s house to watch your favorite team win the championship game on his big screen TV. Go sports, right Joe? As you sit on Joe’s Italian leather sofa, you notice a draft. No, not a draft. Your hair, which you sprayed into a blue faux hawk to support your team, is being blown in all directions. It’s downright windy inside Joe’s house. “What’s going on,” you ask him as, to keep warm, you cling to the blue security blanket you never leave home without. “Why is there a cyclone blowing in your house?”

“It’s because the glass fell out of the front window,” Joe explains.

You look over, and, sure enough, there’s no pane in the front window. Then you look around more and notice something even stranger. “There’s no glass in any of your windows, Joe! How did this happen?”

“Well, you know how I can’t stand to look myself in the mirror. Last night, it was so dark outside and so bright inside that all the windows looked like mirrors. Naturally, I had to take a baseball bat to them all.”

“Naturally,” you agree. “But then wouldn’t you say the cause of the wind in your house is you shattering all the windows with a baseball bat?”

“Er, well, you know,” Joe angrily stutters in response, “the glass falling out of the front window is a big reason why it’s windy in here!”

The Glass Didn’t Shatter By Itself

Like the glass didn’t just fall out of Joe’s front window, ocean freight rates didn’t suddenly shoot up out of nowhere.

We closed schools and businesses, making everyone stay at home. Then, while no one could spend money on travel, entertainment, and services as they normally would, we started handing out stimulus checks like they were candy. All that extra money caused massive buying of goods. We exploded consumer spending, especially through online shopping, and sent shipping demand much higher than our ports could handle.

Not only does increased demand drive freight rates up, so does port congestion. For years, the powerful labor unions at this country’s ports have fought automation, causing U.S. ports’ efficiency to lag behind many of their counterparts around the world. We added limited hours and COVID restrictions to the dockworkers at the ports, further hurting efficiency when demand caused us to need efficiency the most. It was no freak thing that freight rates climbed and climbed.

Of course, it wasn’t only bad COVID-response policies in the U.S. that contributed to supply chain problems and rising freight rate costs. I’ve gone through this many times in Universal Cargo’s blog over the last couple years, and in great detail. Shrinking carrier competition through alliances, which I’ve been warning for years is a problem that will lead to higher freight rates, contributed to the problem as did other supply chain disruptions like the Ever Given clogging the Suez Canal; however, those factors didn’t impact freight rates nearly to the extent of our own policies.

Ocean Shipping Is Just One of the Glass Windows

Here’s the kicker. Freight rates are merely the shattered glass of the front window.

Printing and spending dollars like they’re Monopoly money devalues our currency across the board (and a deflated dollar also means higher freight rates). Declaring war on American oil and energy, as President Biden has done since entering office, raises gas prices and utilities bills. Those prices didn’t start going up when Russia invaded Ukraine. And President Biden didn’t stop putting in place policies that hurt U.S. oil production after that invasion added more pressure on oil prices. Would that invasion even have happened if Putin hadn’t been emboldened by Biden’s botching of Afghanistan and our president’s weak words basically inviting Russia to execute a “minor incursion” on Ukraine?

Either way, this is not “Putin’s price hike.” A baseball bat has been taken to the windows all around the house. It’s going to take an awful lot of repair work to slow these winds of inflation.

How Much Can OSRA Help Inflation?

Will the OSRA help? I certainly think ocean shipping laws could use reform, but I’m doubtful the OSRA will “solve a big piece of [inflation].”

As Mark Szakonyi writes in a Journal of Commerce article, this shipping reform act that passed the House with strong bipartisan support and is now headed to President Biden’s desk “doesn’t include any language that would rein in the record container rates that have driven historic profits for the industry.”

Szakonyi does acknowledge “OSRA may deter some storage fee billing by requiring carriers to provide more accurate information,” but I don’t see that putting a big dent in shipping costs, certainly not enough to create any noticeable impact on inflation.

After all, high freight rates aren’t the cause of inflation, they’re just part of the inflation our bad policies and out-of-control spending have caused.

Click Here for Free Freight Rate Pricing

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Shippers Beg Biden to Help Make ILWU Contract Negotiations Go Smoothly https://www.universalcargo.com/shippers-beg-biden-to-help-make-ilwu-contract-negotiations-go-smoothly/ https://www.universalcargo.com/shippers-beg-biden-to-help-make-ilwu-contract-negotiations-go-smoothly/#respond Thu, 09 Jun 2022 20:37:43 +0000 https://www.universalcargo.com/?p=11031 As the expiration of the International Longshore & Warehouse Union (ILWU) quickly approaches, shippers are getting more and more anxious about the potential of contentious negotiations throwing West Coast ports into gridlock like what happened during the 2014-15 negotiations. Back then, agricultural exports rotted on the docks and import goods never made it to store shelves for the holiday shopping season. The ILWU slowed ports down so much to gain leverage on the Pacific Maritime Association (PMA) that it cost the U.S. economy billions of dollars and permanently lost U.S. exporters international trade partners.

Shippers are so desperate not to see a repeat of this situation, they're reaching out to President Biden to step in. They must be desperate to call on quite possibly the least effective president in U.S. history, who has long depended, along with his political party, on the endorsement and financial backing of unions like the ILWU. Is there any chance this administration would be hard on the union if that was required to prevent more port congestion and resolve contentious contract negotiations?

Apparently some are holding out hope.

The American Apparel & Footwear Association (AAFA), Retail Industry Leaders Association (RILA), and Travel Goods Association (TGA) sent an open letter to President Biden and Vice President Harris yesterday as a follow up to a letter sent March 1st, which was "signed by 49 associations representing every part of the U.S. economy," to reiterate "support for a swift and timely conclusion" to the ILWU-PMA contract negotiations and emphasize how "crucial" it is for the administration "to engage in the negotiations to ensure the needs of both the workers and the ports are met and further backups, delays, and inflationary costs are avoided."

Find out more and read the full text of the letter to President Biden & Vice President Harris in Universal Cargo's blog.

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As the expiration of the International Longshore & Warehouse Union (ILWU) quickly approaches, shippers are getting more and more anxious about the potential of contentious negotiations throwing West Coast ports into gridlock like what happened during the 2014-15 negotiations. Back then, agricultural exports rotted on the docks and import goods never made it to store shelves for the holiday shopping season. The ILWU slowed ports down so much to gain leverage on the Pacific Maritime Association (PMA) that it cost the U.S. economy billions of dollars and permanently lost U.S. exporters international trade partners.

Shippers are so desperate not to see a repeat of this situation, they’re reaching out to President Biden to step in. They must be desperate to call on quite possibly the least effective president in U.S. history, who has long depended, along with his political party, on the endorsement and financial backing of unions like the ILWU. Is there any chance this administration would be hard on the union if that was required to prevent more port congestion and resolve contentious contract negotiations?

Apparently some are holding out hope.

Photo of Joe Biden by Gage Skidmore
Photo of Joe Biden by Gage Skidmore

The American Apparel & Footwear Association (AAFA), Retail Industry Leaders Association (RILA), and Travel Goods Association (TGA) sent an open letter to President Biden and Vice President Harris yesterday as a follow up to a letter sent March 1st, which was “signed by 49 associations representing every part of the U.S. economy,” to reiterate “support for a swift and timely conclusion” to the ILWU-PMA contract negotiations and emphasize how “crucial” it is for the administration “to engage in the negotiations to ensure the needs of both the workers and the ports are met and further backups, delays, and inflationary costs are avoided.”

In fact, the AAFA, RILA, and TGA are emphatic in the letter about how this threat of even more port congestion and supply chain disruption can be prevented and the Biden Administration needs to take action:

Much of the chaos of the last two years was unforeseen and largely unavoidable, but there is an opportunity to prevent additional disruptions if a PMA-ILWU agreement is made before the fast-approaching contract expiration on July 1st. We appreciate the Administration’s interest to lessen supply chain disruptions and we encourage you to continue to engage and act now.

The organizations even end the letter by trying to stroke the administration’s ego to induce action:

The Retail Industry Leaders Association, the American Apparel & Footwear Association, and the Travel Goods Association urge swift action and consistent attention to this matter, which will safeguard our shared economic gains and protect the progress your Administration has made in addressing supply chain disruption and port congestion.

That last bit about the progress the Biden Administration has made in addressing supply chain disruption and port congestion is actually hilarious. The one big accomplishment that the administration bragged and bragged about was getting the Ports of Los Angeles and Long Beach to move to 24/7 operations. They actually bragged about it like they’d already gotten the ports moving 24/7. That was almost a year ago, and those ports are still not operating 24/7.

Normally, I’d be onboard with the administration of an American president joining negotiations between the ILWU and PMA to make sure it goes smoothly and doesn’t turn costly for shippers and the U.S. economy as it often does. However, everything the Biden Administration touches seems to turn into a disaster: the Southern Border, Afghanistan, American oil production, the economy, reading from a teleprompter, not reading from a teleprompter… President Obama probably said it best as the Associated Press quoted him telling his political allies, “Don’t underestimate Joe’s ability to f**k things up.”

It’s hard both hard to imagine the ILWU agreeing to a new contract before the current one expires in a few weeks. And it’s equally hard seeing President Biden and Vice President Harris making the situation.

However, you can’t fault the RILA, TGA, and AAFA for reaching out to the Biden Administration for help in this situation. Their fears of port congestion and supply chain disruption from contentious contract negotiations are well-founded.

Full Letter

Here’s the full text of the RILA, TGA, and AAFA’s letter, dated June 8th, 2022:

Dear President Biden and Vice President Harris:

We write to reiterate our support for a swift and timely conclusion to the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) contract negotiations. As stated in the March 1, 2022, letter signed by 49 associations representing every part of the U.S. economy, it is imperative that a final contract is reached that avoids any supply chain disruptions. It is crucial for you to engage in the negotiations to ensure the needs of both the workers and the ports are met and further backups, delays, and inflationary costs are avoided.

We are concerned the contract discussions were recently suspended after only 10 days by the ILWU. While those talks have now resumed, there is less than a month before the contract expires and if both parties do not remain at the table and the current negotiations do not make meaningful progress toward an agreement, the consequences will exacerbate existing supply chain challenges. This will be to the detriment of the U.S. economy, American importers and exporters, the tens of millions of workers they employ, and the hundreds of millions of consumers they serve. We urge you to encourage both parties to remain at the table until an agreement is finalized because even a relatively brief port slowdown or shutdown would compound current supply chain challenges and cause long-lasting damage to consumer confidence and American businesses.

We also hope that the Administration, the PMA, and the ILWU will leverage this opportunity to address systemic operational challenges at U.S. ports, supporting infrastructure modernization and enabling transparency, data sharing, and interoperability to facilitate end-to-end visibility. These important issues must be addressed to strengthen U.S. competitiveness, to ensure our supply chains are fully prepared to support continued economic growth, and to mitigate potential disruptions in the future. As vocal supporters of the Bipartisan Infrastructure Act we hope the administration will prioritize those resources to help bolster America’s port infrastructure.

Much of the chaos of the last two years was unforeseen and largely unavoidable, but there is an opportunity to prevent additional disruptions if a PMA-ILWU agreement is made before the fast-approaching contract expiration on July 1st. We appreciate the Administration’s interest to lessen supply chain disruptions and we encourage you to continue to engage and act now.

The Retail Industry Leaders Association, the American Apparel & Footwear Association, and the Travel Goods Association urge swift action and consistent attention to this matter, which will safeguard our shared economic gains and protect the progress your Administration has made in addressing supply chain disruption and port congestion.

Sincerely,

Brian Dodge Michele Marini Pittenger Steve Lamar
President, RILA President & CEO, TGA President & CEO, AAFA

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Shanghai Lockdown Not Really Over https://www.universalcargo.com/shanghai-lockdown-not-really-over/ https://www.universalcargo.com/shanghai-lockdown-not-really-over/#respond Tue, 07 Jun 2022 18:54:56 +0000 https://www.universalcargo.com/?p=11007 Shippers who import from China were likely relieved to hear the months-long "Covid Zero" lockdown in Shanghai had been lifted last Wednesday. However, they shouldn't expect the supply chain to suddenly be running smoothly nor for the Chinese government to stop abusing its citizens there.

Find out what's happening by reading the post in Universal Cargo's blog.

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Shippers who import from China were likely relieved to hear the months-long “Covid Zero” lockdown in Shanghai had been lifted last Wednesday. However, they shouldn’t expect the supply chain to suddenly be running smoothly nor for the Chinese government to stop abusing its citizens there.

Continued Abuse of the Chinese People

It’s hard to even call the lockdown over when hundreds of thousands of people still haven’t been allowed to leave their homes and many who were initially allowed out have been locked back down. Voice of America (VOA) reported just yesterday:

… hundreds of thousands have not yet been allowed out of their homes, while others have immediately been placed back under local lockdowns after a brief liberation that triggered shopping sprees and booze-fueled street parties.

In downtown Xuhui district on Monday, an AFP reporter witnessed about a dozen people in one fenced-off housing compound shouting angrily at hazmat-clad officials.

From behind rows of fences, crowds chanted “Serve the people!” at officials standing on the other side.

One resident, who gave the surname Li, said tempers had flared after the community was suddenly put back into lockdown on Saturday.

“I’m very indignant,” he told AFP [Agence France-Presse]. “It’s been two months and we can’t cope anymore. We’re all negative [on COVID tests], why lock us in a cage?”

Throughout the lockdowns in China, citizens there have been forcefully taken from their homes while others have been locked in them. The horror show of power and control continues despite the massive lockdown being “lifted.” The VOA article continues:

Picture by Bruno Corpet

A local media outlet said in a swiftly deleted social media post that residents of the compound were angry at the threat of being sent to state-run quarantine facilities despite being designated “low-risk.”

Li said virus-negative people were being transferred to quarantine hotels every day, sometimes in the middle of the night.

“It’s had a huge impact on everyone’s lives,” he said. “Our mood is very bleak.”

As well it should be, Mr. Li, with this just being the tip of the iceberg of the abuses the Chinese Communist Party is committing against the people it governs.

Supply Chain Will Take Time to Normalize

It will take a while for the supply chain, with Shanghai as a major link, to recover from this lockdown. There are still restrictions in place to slow the movement of goods down in Shanghai as well as the risk of further setbacks with the threat of more lockdowns always present from China’s insane COVID Zero or zero-COVID policy.

Sam Whelan reports in the Loadstar:

… forwarders have warned that ‘business as usual’ remains a long way off for China’s biggest container port hub, given the ongoing restrictions and the inevitable supply chain hangover from two months of hard lockdown.

[Thomas Gronen, head of Greater China at Fibs Logistics] explained: “It will take weeks, if not months, to come back to anything considered as normal for the industrial output volumes, and then the shipping container volumes.”

Norman Global Logistics said Shanghai would remain a “high risk area, with limitations and controls for trucks to get in and out of the city,” thereby keeping a cap on available trucking capacity, which has been the biggest logistical challenge throughout the crisis.

According to Crane Worldwide Logistics, ocean carrier schedules will gradually return to normal in June, and the forwarder added: “However with all factories re-opened, we expect volumes will also increase gradually, especially from the middle of June onward.”

That gradual buildup that Crane Worldwide Logistics predicts is in a bit of contrast to what many in the industry have been prognosticating: there’ll be a glut of built-up cargo flooding the market, which could supercharge congestion again at U.S. ports that have just started making headway in reducing that problem.

Where Crane sees a sudden increase in cargo volume is on the air freight side:

As for airfreight, Crane noted: “Export volume will build up very quickly, and the market will become very dynamic in June.”

Hit on U.S. Ports May Not Be That Big

Despite the fact that Shanghai’s supply chain is reopening just in time for international shipping’s peak season, demand and backlog may not be enough to really flood U.S. ports with cargo.

With trillions in spending and money-printing as well as Biden Administration policy on the oil and energy sectors, inflation is soaring in the U.S. This dampens demand. Adding to that is the fact many shippers have been getting ahead of the peak season because of all the supply chain issues and the threat of ILWU slowdowns on the West Coast.

There will still be a peak season surge, as well as a surge simply from Shanghai’s reopening, but it’s also not as though no cargo moved during the lockdown. Other Chinese ports picked up some of the cargo that wasn’t able to move through the Port of Shanghai during the lockdowns, which should lessen the buildup of goods in Shanghai to a point. Additionally, many factories weren’t able to operate and produce goods at all, while others were limited in “closed-loop” systems, where employees weren’t allowed to ever leave – even to go home. Manufacturing also suffered from limitations in getting the raw materials needed to manufacture goods.

The surge that is on the way hopefully won’t spiral U.S. ports back into the full congestion mess they’ve been in. Avoiding a return to that mess also depends on the contract negotiations between the ILWU and PMA not turning so nasty that the dockworkers slow down the ports and/or the employers implement any lockouts.

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Ports Get Congestion Relief But It May Be Only Momentary https://www.universalcargo.com/ports-get-congestion-relief-but-it-may-be-only-momentary/ https://www.universalcargo.com/ports-get-congestion-relief-but-it-may-be-only-momentary/#respond Thu, 02 Jun 2022 23:42:06 +0000 https://www.universalcargo.com/?p=11001 U.S. ports are finally getting a period of time to recover from the unyielding demand and congestion that has plagued them since 2020. However, there are a few things that could make the relief short-lived: potential labor slowdowns from contentious ILWU contract negotiations, easing of Chinese lockdowns, and the impending peak season. On the other hand, skyrocketing inflation could keep demand in check, making the cargo levels moving through the ports manageable. If only inflation wasn't otherwise so damaging.

Find out all about it by reading the post in Universal Cargo's blog.

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U.S. ports are finally getting a period of time to recover from the unyielding demand and congestion that has plagued them since 2020. However, there are a few things that could make the relief short-lived: potential labor slowdowns from contentious ILWU contract negotiations, easing of Chinese lockdowns, and the impending peak season. On the other hand, skyrocketing inflation could keep demand in check, making the cargo levels moving through the ports manageable. If only inflation wasn’t otherwise so damaging.

Port Congestion Data

Congestion hasn’t completely gone away at U.S. ports. There are terminals, and even ports, that haven’t seen improvement yet, but things have gotten better overall. Greg Miller provided data in an American Shipper article published yesterday on the subject:

container ships at port

There were only 25 container ships waiting to berth in the ports of Los Angeles and Long Beach on Friday, according to data from the Marine Exchange of Southern California. That’s the lowest tally since July 28, 2021. As of Wednesday, there were 28 ships waiting. Current numbers are far below the all-time high of 109 ships waiting on Jan. 9.

The reduction in the Los Angeles/Long Beach ship queue is partially due to cargo being redirected to East Coast ports. Yet even East Coast ports are down from peaks.

In late February, ship-position data from MarineTraffic showed 70 container ships waiting offshore of East and Gulf Coast ports. By mid-May, the count had fallen to 45.

As of Wednesday, it had climbed back up to 58. Traffic jams off Virginia and Charleston, South Carolina, are down. The biggest queues now are off New York/New Jersey — 17 container ships — and Savannah, Georgia, where 25 vessels are waiting. Savannah’s numbers are the main driver of the recent East Coast uptick in recent days; Hapag-Lloyd reported only seven ships at anchor there on Friday.

Fewer Ships… But Why?

While ships waiting at anchor are not the only form or indicator of congestion levels at the ports, the drop in ship queues is significant. Some drop came from blanked (cancelled) sailings of ships from major lockdowns, particularly of Shanghai, in China. Some industry experts worry that with the easing of the outrageous “Covid Zero” lockdowns in China, more shipments – and ships carrying them – will head back to the U.S., causing the queues of ships waiting to dock to increase again.

In fact, Miller points out that a jump in trans-Pacific shipments has just taken place:

Sea-Intelligence said that offered trans-Pacific capacity jumped 21% from 535,200 twenty-foot equivalent units for departures in the week of May 15-21 to 646,500 TEUs this week.

We should see those shipments arrive at U.S. ports in late June. Miller pointed out how last year saw ship queues drop through the third week of June, only to rise again thereafter. It’s possible we could be about to see the same thing here in 2022.

China & Peak Season

There does tend to be an increase in shipments at the end of June because that’s when peak season really tends to ramp up, with shippers importing goods for the back to school and holiday shopping seasons.

Hopefully, the ports will take advantage of the moment they’re in right now to clear as much congestion as possible before the lifting of Chinese lockdowns and peak season shipping combine to increase cargo movement through them.

Dockworkers Union

There is a great amount of uncertainty in the shipping industry right now as to how well cargo will move this summer. The International Longshore & Warehouse Union (ILWU) and Pacific Maritime Association (PMA) just yesterday resumed negotiations for a new contract for West Coast dockworkers. This is after negotiations were suspended at the ILWU’s behest and the parties’ fight over automation went public in the lead-up to the negotiations.

We’ve been warning in this blog for a long time that negotiations are likely to become contentious over the automation issue. Many shippers have heeded that warning from us and others, moving their cargo ahead of the peak season to avoid any potential disruption that could be caused by labor slowdowns, strikes, or lockouts that could happen as a result of contentious negotiations.

The general level of congestion that has been present at ports has also caused some shippers to try to get ahead and move what would normally be peak-season-shipped goods early.

Conclusion

Early movement of goods and decreased demand because of inflation could make this peak season less strong than it might otherwise be. However, that doesn’t mean there won’t still be a peak season surge, and the 21% increased capacity jump Sea-Intelligence recorded is likely just the start of it.

If things do turn sour in the newly resumed contract negotiations, we could see a triple whammy of that combining with a release of Chinese exports and the peaks season to return port congestion right back to the bottlenecking mess for supply chains we’ve been seeing since the U.S. government locked people down and threw stimulus checks at them, resulting in a goods demand boom that the ports were in no way ready to handle.

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UH-OH – ILWU Contract Negotiations Suspended Till June https://www.universalcargo.com/uh-oh-ilwu-contract-negotiations-suspended-till-june/ https://www.universalcargo.com/uh-oh-ilwu-contract-negotiations-suspended-till-june/#respond Tue, 24 May 2022 22:20:26 +0000 https://www.universalcargo.com/?p=10971 Contract negotiations between the International Longshore & Warehouse Union (ILWU) and their employers at the West Coast ports, the Pacific Maritime Association (PMA), have been suspended until June 1st according to reporting by Bill Mongelluzzo in the Journal of Commerce (JOC).

Mongelluzzo reports the suspension of negotiations comes at the behest of the ILWU:

One source last week said little progress has been made since the talks began and that the ILWU, at this point, appears to be in no rush to secure a new contract prior to the July 1 expiration of the current deal.

Find out all about it by reading the full post in Universal Cargo's blog.

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Contract negotiations between the International Longshore & Warehouse Union (ILWU) and their employers at the West Coast ports, the Pacific Maritime Association (PMA), have been suspended until June 1st according to reporting by Bill Mongelluzzo in the Journal of Commerce (JOC).

Mongelluzzo reports the suspension of negotiations comes at the behest of the ILWU:

One source last week said little progress has been made since the talks began and that the ILWU, at this point, appears to be in no rush to secure a new contract prior to the July 1 expiration of the current deal.

ILWU PMA meet about contract extension

This is a return to normal from the ILWU, who traditional do not like to negotiate, at least in any serious manner, before the previous contract has expired. In fact, it has been the policy of both the ILWU and the International Longshoremen’s Association (ILA) to never extend or agree to a new contract before the expiration of the previous contract. Waiting for the expiration of the contract opens up the dockworkers’ unions’ ability to slow operations at the ports, threaten strikes, and actually strike in order to gain leverage in negotiations.

However, during the last new contract cycle, things went exceptionally smoothly, with the dockworker unions on both sides of the country negotiating and agreeing to a new contract before either saw their previous contract expire.

That exceptionally smooth transition came off the heals of a particularly bad contract transition when contentious negotiations between the PMA and ILWU in 2014-15 led to agricultural exports rotting on docks, import goods never making it to the shelves for the holiday season, billions in losses to the U.S. economy, as well as international trade partnerships for U.S. businesses being permanently dissolved.

Many shippers are worried about a repeat of that situation. While particularly damaging, the 2014-15 negotiations were much closer to the norm than the smooth contract negotiations that followed.

The hope was the latter, smoother contract negotiations would become the new norm, that perhaps a corner had been turned.

While early contract agreement certainly does not appear to be the new norm, the Port of Los Angeles’s director is trying to keep concerned parties calm and optimistic that we’re not returning to the old and damaging modus operandi. Mongelluzzo reports:

Gene Seroka, executive director of the Port of Los Angeles, told a Draytech seminar Friday in Long Beach that industry stakeholders should not rush to conclusions because of a temporary halt in the negotiations.

“Both sides have seasoned negotiators. There’s a lot on the table,” Seroka said. “Give them some space.”

Certainly, calling this suspension a breakdown of negotiations would be jumping to conclusions. However, it does not give reason for optimism. With the PMA deferring queries to the ILWU and the ILWU refusing to comment, shippers and other stakeholders have little reason to feel optimistic. Whenever it’s time for a new contract to be negotiated with one of the dockworker unions, it tends to be costly for shippers.

Mongelluzzo did report that individual committee meetings between the PMA and ILWU are continuing despite the suspension. The source he got that from said those committees are working on issues such as worker safety.

Of course, worker safety isn’t an issue that is likely to be a sticking point. Obviously, both parties care about the safety of the dockworkers. There could be differences in how the ILWU and PMA want to approach the issue, but there isn’t a fundamental conflict on the issue. There is, however, a fundamental conflict the parties have on the issue of automation.

The PMA sees automation, and rightfully so, as a necessity for the ports to be competitive and efficient in the moving of goods. The ILWU sees automation as an existential threat. Automation does mean having machines do work “automatically” which would have previously been performed by people. So there’s reason for the ILWU to have fear around the issue too.

We previously covered in this blog how this fight went public before the negotiations even started with the PMA releasing a study showing automation created jobs at the ports and the ILWU calling it a “shell game.”

Really, the fight has been raging for years. While the ports have made some progress in the area of automation, the ILWU (and the ILA on the East and Gulf Coasts) has greatly slowed the advancement of automation at the ports. So much so, in fact, that U.S. ports are much less efficient than many of their counterparts around the world.

When lockdowns and stimuli produced months upon months of surging demand of import goods at the ports, the lack of automation and efficiency was one of the large factors in creating the terrible congestion and bottlenecks suffered at the ports.

One piece of good news about the suspension is that it is scheduled to end, with negotiations planned to resume, a month before the July 1st expiration of the ILWU contract. That does give some time for progress to be made before the current contract expires. But I don’t think these negotiations started early enough to begin with to have any realistic chance of producing a new contract before the expiration of the old. And I don’t think the ILWU ever had any intention of completing negotiations before contract expiration would increase their negotiation leverage.

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Freight Rates Falling – But How Far & How Long? https://www.universalcargo.com/freight-rates-falling-but-how-far-how-long/ https://www.universalcargo.com/freight-rates-falling-but-how-far-how-long/#respond Thu, 19 May 2022 20:11:15 +0000 https://www.universalcargo.com/?p=10967 Ocean freight rates are falling. Yes, they're still extremely high, but they're moving in the right direction. Greg Miller reported this week in Freight Waves that global spot rates for ocean shipping is more than quadruple pre-pandemic levels. However, it wasn't that long ago that I was writing about shipping a container across the ocean costing more than five times pre-pandemic rates.

This isn't just a blip on the screen of a momentary dip. We really are seeing a trend of falling freight rates.

Miller writes, "... rates are now materially lower than they were a few months ago — and falling by the week. The Shanghai Containerized Freight Index (SCFI) logged its 15th consecutive weekly loss on Friday."

Read the full article in Universal Cargo's blog to find out more about what's happening with freight rates and what to expect in the future.

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Ocean freight rates are falling. Yes, they’re still extremely high, but they’re moving in the right direction. Greg Miller reported this week in Freight Waves that global spot rates for ocean shipping is more than quadruple pre-pandemic levels. However, it wasn’t that long ago that I was writing about shipping a container across the ocean costing more than five times pre-pandemic rates.

Falling Freight Rate Trend

This isn’t just a blip on the screen of a momentary dip. We really are seeing a trend of falling freight rates.

Miller writes, “… rates are now materially lower than they were a few months ago — and falling by the week. The Shanghai Containerized Freight Index (SCFI) logged its 15th consecutive weekly loss on Friday.”

While there have been mixed signals about freight rates coming down, Miller reports, “As of mid-May, indicators are much more aligned: pointing down.”

Freight Rates

All Indices Pointing Down

His article shared several indices showing significant drops in freight rates: the FBX Asia-West Coast assessment from May 2nd to 11th showed rates down 25%, and even after a little rise afterward is still down 33% from late September’s all-time high; the Drewry Shanghai-Los Angeles assessment as of last week was down 23% from the third week in January and 30% from its record in September; the FBX Asia-East Coast rate assessment dropped 15% between May 2nd and 13th, 28% down from its record high in late September; the Drewry Shanghai-New York rate assessment fell 22% from mid-January and 32% from its all-time high in September; and even the Platts Container Rate Index, which had been showing Asia-USEC rates rising while other indices showed decline, now shows rates to the East Coast down 11% per FEU from highs in April and to the West Coast, down 16% since its all-time high in February.

Yeah, that’s a lot of data to pack into a sentence, but it all adds up to the long-awaited falling of freight rates. But will it last?

Inflation Took Longer But Hit Harder

Since 2020, when lockdowns and stimuli first hit and freight rates started skyrocketing, I’ve been predicting that reopening spreading spending back to include travel, services, and entertainment again; stimulus checks running out; the damage of lost businesses; and inflation from massive, massive governmental spending would eventually hurt demand and make freight rates drop. It took longer than I expected for our damaging response to COVID-19 to really start taking its toll. I thought inflation would arrive sooner. But even as it took longer to hit, the inflation is worse than I expected. That’s partly because I also underestimated the amount of irresponsible spending, including stimuli, and money printing Washington would execute.

It’s unlikely we’re even close to seeing the worst of the economic fallout from our actions yet.

Factors that Could Prop Up Freight Rates

Freight rates have a great deal more falling to do. However, there are factors that threaten to stop the fall, even make rates surge again, before resuming the downward trajectory that it’s said all things that go up must have.

ILWU Contract Negotiations

The biggest and nearest threat to falling freight rates is contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). There has been a great deal of worry that the issue of automation will make these negotiations, which have only just begun, contentious. When negotiations between the West Coast dockworkers and their employers got contentious in 2014-15, the resulting port congestion was extremely costly for everyone. A repeat could clog the ports that are still recovering from horrendous congestion that came with all the months of surging imports that a lack of automation helped make too much for ports to handle.

Lately, I am starting to see more optimism that the current negotiations won’t interrupt port operations like the 2014-15 ones did, leaving agricultural exports rotting on the docks and keeping imported goods from reaching store shelves in time for the Christmas shopping season. For example, Bill Mongelluzzo wrote an article for the Journal of Commerce (JOC) last month with the headline, “Stakeholders growing confident ILWU contract talks won’t disrupt port operations.”

On the other hand, just before negotiations opened, the PMA released a study that claimed automation created jobs at the ports. The ILWU called the study self-serving and denied PMA’s claim. Obviously, here at Universal Cargo, we’ll be monitoring the contract negotiations and any labor strife slowdowns or interruptions that may ensue.

Peak Season

Another thing that could slow the fall of freight rates is the fast-approaching peak season. The peak season may be dampened some by inflation and the fact that some shippers imported early out of fear that ILWU contract negotiations may choke up ports when shippers import the most in preparation for the back to school and holiday shopping seasons. However, it’s still the time of year that demand is at its height for importing goods, and it’s hard to imagine there won’t be enough demand to make an impact.

China’s “Covid Zero” Lockdowns

The peak season is further complicated by China’s lockdowns, particularly in Shanghai, from the country’s insane “Covid Zero” policies. The disruption to Chinese manufacturing and exporting has some industry experts fearing a surge in exports there once the lockdowns are lifted. That could coincide with peak season, as China is reportedly aiming for June to lift lockdowns. Of course, any reported details of what the Communist Party of China is planning should be taken with a grain of salt.

Still, the interruption to factories and ports in China is massive and sending waves through global supply chains. Usually, a result of large disruptions to the supply chain is higher freight rates.

Conclusion

There are enough factors to put upward pressure on freight rates that we probably won’t see them fully implode in the upcoming months. However, the heights they’ve reached cannot be maintained forever. Additionally, inflation is hurting U.S. demand, which had been artificially inflated during the pandemic. Even if there’s a pause on this trend of falling freight rates – and there could even be some increase in the upcoming months – there is much more falling for the rates to do. We’re just seeing the beginning.

Of course, it’s hard to get too excited about that with the dollar becoming weaker and weaker under the weight of trillions in government debt. There does come a point when inflation’s downward pressure on the value of the dollar outweighs its reduced demand that creates downward pressure on freight rates. We do seem to be on a dangerous path toward that outcome.

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Biden Admin Discussing End to Trump’s China Tariffs https://www.universalcargo.com/biden-admin-discussing-end-to-trumps-china-tariffs/ https://www.universalcargo.com/biden-admin-discussing-end-to-trumps-china-tariffs/#respond Tue, 17 May 2022 20:37:30 +0000 https://www.universalcargo.com/?p=10961 Last week, there was an interesting exchange between President Biden and a reporter, during which the president said his administration is currently discussing dropping the tariffs that President Trump placed on China. The Tariff Exchange After delivering a speech largely focused on inflation – which has been so bad under this administration, people have started […]

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Last week, there was an interesting exchange between President Biden and a reporter, during which the president said his administration is currently discussing dropping the tariffs that President Trump placed on China.

YouTube Video

The Tariff Exchange

After delivering a speech largely focused on inflation – which has been so bad under this administration, people have started calling it “Bidenflation” – the president took a question from a reporter who asked, “Will you drop former President Trump’s China tariffs?”

“We are discussing that right now,” President Biden answered. As the president stumbled through adding, “We’re looking at what would have the most positive impact,” the reporter interjected, “So we’re never to erase them?”

“No, I didn’t say that.”

“I’m asking.”

“I’m telling you we’re discussing it, and no decision has been made on it.”

Photo of Joe Biden by Gage Skidmore
Photo of Joe Biden by Gage Skidmore

That was the last answer President Biden gave to the press before shuffling away from reporters shouting questions like, “How long should Americans be prepared to pay this much at the pump?”

Actual Answers Would Be Nice

Obviously, the president has no answer for that latter question. Americans should just expect gas prices to continue to climb, as the president has attacked American oil – and our fossil fuels in general – since taking office, and even now continues to do so. While the gas question is a more pressing issue for most Americans (heck, I paid $90 yesterday to fill my car’s gas tank even after using the Upside app to find a gas station that was 59 cents per gallon cheaper than what others were charging), shippers who import from China would love an answer on the tariff question.

Although President Biden’s answer on the tariffs on Chinese goods was something of a non-answer answer, it did drive many news outlets to publish stories about President Biden revealing it’s a possibility that a trade policy change could be on the way that many are surprised hasn’t already happened.

China Tariffs Appear a Biden Anomaly for Trump Era Policy

When Biden came into the Oval Office, he immediately got to work trying to do away with as much Trump era policy as possible. In the frenzy of executive orders, actions, and declarations, one area of Trump Administration policy the Biden Administration didn’t touch was the tariffs the previous president put in place against China, despite some people urging him to do so.

While the former president was certainly controversial, it was hard to criticize President Trump on economic policy. The U.S. economy flourished under Trump policies until a global pandemic brought national lockdowns to the U.S. and most of its trade partners around the world. However, there was one area of economic policy where economists really debated whether President Trump’s moves were good or bad for the U.S.

Obviously, that area was the trade war with China and the tariffs that came with it.

President-elect Trump w/ US & Chinese flags
Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

Of course, one of the people vocally critical of President Trump’s tariffs on China was Biden while running for president. After becoming president, Biden had no problem halting Trump policy on things like the southern border, where the Biden Administration thereby – and completely unsurprisingly – created a border crisis with more kids in cages than was ever seen under President Trump. Why wouldn’t Biden take the same cavalier attitude toward President Trump’s policy on China, which Biden said Trump was going about “all the wrong way” when the former vice president on the campaign trail was specifically asked about the tariffs?

From Tariffs to an Overshadowed Deal

Despite criticism of the tariffs on China, they were a success for President Trump. One of the winning issues that helped get Donald Trump into office in 2016 was promising to be tough on China. Since Bill Clinton ran and won, presidential candidates have promised to be tough on China, but President Trump was the first to actually follow through on that promise. Larger and larger tariffs on China helped garner him the Phase One Trade Agreement signed by President Trump and China’s chief trade negotiator, Vice-Premier Liu He on January 15th, 2020.

At that moment, China was trying to keep quiet a novel coronavirus that had been breaking out in Wuhan. The pandemic that ensued completely overshadowed the trade deal. Despite the deal, which I examined chapter by chapter in a three-part blog series, being very favorable for the U.S. and full of concessions by China, conditions like the amount of goods China agreed to import from the U.S. were not met, with COVID-19 providing more than enough excuse.

Biden’s Peril in Pulling the Tariffs

If President Biden were to now drop the tariffs on China, letting the country ignore the trade deal and not getting anything in return, he would look even weaker on China than he already does after his administration, also last week, changed the official language on China to say the United States “[acknowledges] the Chinese position that there is but one China and Taiwan is a part of China” and that the U.S. “does not support Taiwan independence.”

President Biden has the additional complication of federal investigations into the business dealings of his son Hunter Biden’s in China. President Trump’s trade war with China, and all its tariffs, was clearly worse for China than for the United States. Making a move that benefits China more than it benefits the U.S. would likely be another political blunder for President Biden.

Unfortunately, removing the tariffs on China wouldn’t alleviate the inflation problems in the U.S. despite a few pointing at the tariffs as a cause for the inflation. Even President Biden, who loves to blame anything bad on President Trump, doesn’t blame Trump’s tariffs for inflation. At the beginning of his speech, Biden blamed inflation on two “leading causes”: the pandemic and the war in Ukraine.

Of course, he did. And, of course, that’s also not true.

The biggest driving force behind inflation is the reckless and, frankly, out of control printing and spending of money by the trillions of dollars by the U.S. government. That’s killing the value of the U.S. dollar, causing the price of everything, including gas, to go higher and higher and, yes, higher still.

Despite all this, President Biden might remove the tariffs, but shippers who import from China shouldn’t hold their breath.

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SHIPPERS BEWARE: ILWU & PMA Automation Fight Already Starting https://www.universalcargo.com/shippers-beware-ilwu-pma-automation-fight-already-starting/ https://www.universalcargo.com/shippers-beware-ilwu-pma-automation-fight-already-starting/#respond Tue, 03 May 2022 21:23:53 +0000 https://www.universalcargo.com/?p=10854 Countdown ‘Til ILWU Slowdowns Contract Negotiations The countdown is at nine days. This isn’t an exciting countdown like counting down the days ’til Christmas or the seconds ’til the New Year, or the hours ’til the Super Bowl – which for Detroit Lions fans, like myself, is actually the NFL Draft, unless you count your […]

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Countdown ‘Til ILWU Slowdowns Contract Negotiations

The countdown is at nine days.

This isn’t an exciting countdown like counting down the days ’til Christmas or the seconds ’til the New Year, or the hours ’til the Super Bowl – which for Detroit Lions fans, like myself, is actually the NFL Draft, unless you count your quarterback winning the Super Bowl for another team. This is the countdown ’til the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) start contract negotiations, which tend to be even more disastrous for shippers than the draft has traditionally been for the Lions.

I’ve been warning shippers for close to a year that contract negotiations between the ILWU and PMA are likely to be contentious over the issue of automation. We all remember when the contentious contract negotiations of 2014-15 resulted in labor slowdowns causing such port congestion that goods didn’t make it to store shelves for the holiday shopping season, agricultural exports rotted on the docks, and the U.S. economy was damaged by the billions of dollars.

The last thing we need is a repeat of that kind of labor strife after all the supply chain disruption there has been for the last two years, but it sure looks likely that’s what we’re going to get.

Automation Fight News

Not surprisingly, I wasn’t happy to see news articles yesterday about the ILWU and PMA already fighting about automation with a bit more than a week still left before negotiations even open. Then again, anyone who regularly reads this blog would be expecting such news stories to surface anytime. And what else should anyone expect? After all, the ILWU, along with the International Longshoremen’s Association (ILA) on the East Coast, have fought against automation for years, causing U.S. ports to fall behind their counterparts around the world in efficiency, which greatly contributed to the supply chain bottlenecks we’ve been suffering.

automated container shipping

Yesterday, the PMA and ILWU went public with the automation fight, as the PMA released a study that it says shows automation helped increase ILWU jobs and the ILWU bit back with, Nuh-uh (paraphrased)!

Bill Mongelluzzo reported in the Journal of Commerce (JOC):

Terminal automation at the ports of Los Angeles and Long Beach has contributed to an increase in dockworker jobs since 2015 by expanding terminal capacity and improving cargo velocity, according to a study released Monday that was commissioned by West Coast waterfront employers.

However, ILWU Coast Committeeman Frank Ponce De Leon said automation has destroyed longshore jobs.

“Container volume has increased at the automated terminals, but this has been at the expense of other terminals that have had an offsetting drop in container volumes,” he said in a statement to JOC.com. “The increased productivity that the PMA is claiming at the two automated terminals has meant less work at other terminals and an overall loss of employment for longshore workers.

Wait a minute, Frank. Are you telling me more containers go through the more productive port terminals with automation than the less productive ones without it? That’s a shocking revelation.

Yes, ports and port terminals with more automation and, therefore, more productivity will attract more cargo than lower productivity ports and port terminals where the unions have succeeded in blocking or slowing automation. Maybe if you didn’t fight technological advancement and productivity at other port terminals, they wouldn’t fall so behind and would be competitive enough not to lose cargo volume to the more productive terminals.

ILWU Creates Bigger Threat to Itself Than Automation

The unions represent automation as an existential crisis for jobs at the ports. However, automation at the ports often means a shift in the jobs at the ports rather than elimination of the jobs. And, PMA argues with its study, automation can actually create more jobs by increasing the volume and speed of cargo containers shipped through a port terminal. I’m not going to dismiss the possibility of bias in PMA’s study’s findings. There is ample motivation for them to find positives in automation for dockworkers ahead of contract negotiations when by definition, automation means certain operations are being done automatically by machine rather than by a person, such as a dockworker. However, the much bigger crisis for jobs at the ports is the power games the unions play there.

Dockworker and cargo containers
Dockworker and cargo containers

The ILWU got mad about not controlling two jobs plugging and unplugging reefer (refrigerated) containers, which had always been handled by International Container Terminal Services Inc (ICTSI) at the Port of Portland, that the ILWU took advantage of its contract lapse in 2014-15 to slow operations at the port so much, carriers had to stop calling at Portland altogether with container ships.

The ILWU had actually already been slowing the import and export of goods through the Port of Portland before those slowdowns could blend in with the slowdowns at the rest of the West Coast ports during the contentious negotiations, and a judge ruled in June of 2014 they purposely slowed operations there.

Did these slowdowns hurt the port? Obviously. Did they hurt ocean carriers? Yes. Did they hurt shippers? Very much so. But here’s the kicker: it hurt ILWU jobs, destroying many. All the dockworkers who were part of loading and unloading container ships at the Port of Portland no longer had containers ships to load or unload. How many ILWU jobs were lost because the union decided to play power games over two jobs that never belonged to the union in the first place?

Frankly, if an employer could find any way to never work with the ILWU again after that, it would have to be out of its mind not to pursue that path.

Cause for Hope

Despite all the doom and gloom feelings the above might cause in shippers, there is good reason I can end this post on an optimistic note. Negotiations are scheduled to begin on May 12th. The current contract doesn’t expire until July 1st.

Traditionally, both the ILWU and ILA refused to start negotiating new contracts until the previous one expired. This really opened to the unions their leverage tactics of port slowdowns, strikes, and threats of strikes.

After there was so much shipper backlash because of the 2014-15 damaging labor strife at West Coast ports, sending container shipping market share to East and Gulf Coast ports, the last set of negotiations for both the ILA and ILWU and their respective employers went uncharacteristically smoothly.

Like ever-optimistic Lions fans, after Brad Holmes came into the organization and put together two good-looking draft classes, hope for a winning team but prepare themselves for the SOL (same old Lions), let’s hope we’ve turned a corner for into a future where dockworker union contract negotiations aren’t damaging to shippers, and everyone else, but prepare for ourselves for the SOS (same old – you know what the S stands for).

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WARNING: 4 Major Fallouts from China’s Contemptible Covid Zero Lockdowns https://www.universalcargo.com/4-major-fallouts-from-chinas-contemptible-covid-zero-lockdowns/ https://www.universalcargo.com/4-major-fallouts-from-chinas-contemptible-covid-zero-lockdowns/#comments Thu, 28 Apr 2022 22:28:33 +0000 https://www.universalcargo.com/?p=10847 There is still no end in sight to the horrific Shanghai lockdown, where the Chinese government has actually barricaded people inside their homes, worsening the struggle for citizens to get food and medicine. Now it looks like China's insane "Covid Zero" policy is spreading to Beijing itself, ironically, where the seat of power is from which these terrible policies originate. Despite confidence from many citizens that things won't get as bad in Beijing as they are in Shanghai, there are still reports of panic buying from the people who live there as the government sweeps through with mandatory testing of the millions of people in the city.

We're just starting to see the fallout on global supply chains from China's horrible Covid Zero policies. As it looks like the lockdowns in China are still getting worse rather than better, supply chain experts are analyzing the effects we are and will be seeing here in the U.S. In today's blog, I roundup four major fallout warnings gleaned from international shipping articles about the results from China's lockdowns to give you a picture of what to expect in the upcoming months.

Check them out by reading the full post in Universal Cargo's blog.

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There is still no end in sight to the horrific Shanghai lockdown, where the Chinese government has actually barricaded people inside their homes, worsening the struggle for citizens to get food and medicine. Now it looks like China’s insane “Covid Zero” policy is spreading to Beijing itself, ironically, where the seat of power is from which these terrible policies originate. Despite confidence from many citizens that things won’t get as bad in Beijing as they are in Shanghai, there are still reports of panic buying from the people who live there as the government sweeps through with mandatory testing of the millions of people in the city.

We’re just starting to see the fallout on global supply chains from China’s horrible Covid Zero policies. As it looks like the lockdowns in China are still getting worse rather than better, supply chain experts are analyzing the effects we are and will be seeing here in the U.S. In today’s blog, I roundup four major fallout warnings gleaned from international shipping articles about the results from China’s lockdowns to give you a picture of what to expect in the upcoming months.

1. After Brief Volume Relief, U.S. Ports Could Get Swamped with Cargo

I’ve brought this up in Universal Cargo’s blog before, but it’s a big enough concern that many industry experts warn about to make it worth talking about again. The lockdowns in China are causing decrease in the volume of goods hitting U.S. ports from China. That will actually be a motif in today’s blog. With the seemingly never-to-end congestion U.S. ports, especially the Ports of Los Angeles and Long Beach, have struggled with for the last two years, a decrease in volume is something of a relief. The fear is the decrease in volume will be followed by an enormous surge of goods from China at an incredibly inconvenient moment.

Eric Kulisch reports in an American Shipper article:

… snapshots of current throughput don’t measure how much deferred cargo is piling up in warehouses or will be churned out by factories working overtime to make up for lost time. A key reason cargo isn’t stacking up at the port is that the vast majority of truck drivers are restricted from freely moving around Shanghai and making deliveries at marine terminals.

Many logistics professionals remain concerned that a huge wave of cargo will be released once the lockdowns are lifted and swamp the handling capacity of local and overseas ports, compounding pressure on the traditional peak shipping season, according to logistics analysts. Shippers that haven’t placed orders yet could miss getting their goods in time for big shopping events such as back to school, Halloween and Christmas.

The last thing shippers, retailers in particular, want to see is a repeat of the 2014 Christmas and holiday shopping season, when port congestion kept goods from hitting shelves. That was due to the contentious contract negotiations between the dockworkers (ILWU) and employers at the West Coast ports (PMA). Unfortunately, the current ILWU contract is about to expire and the negotiations are expected to be contentious over the issue of automation. So even if reduced cargo from China right now offers the opportunity for ports to clear congestion, things might get worse before the feared volume surge hits because of the union using its favorite leverage tool, port slowdowns.

made in China

We could end up with a very similar situation to what we saw during the peak season of 2020, when the never-ending port bottlenecks started. Then, lockdowns and stimulus checks in the U.S. created a huge surge in spending on goods. That would have been bad enough on its own (partially because of how much dockworker unions have fought port automation in the U.S., resulting in less efficient ports than thir counterparts around the world), but making it much worse was carriers had blanked (cancelled) hundreds of sailings during previous months, which messed up the distribution of shipping containers and equipment throughout the world.

If things turn ugly with the labor at the ports and this enormous surge hits, congestion could be as bad or worse than anything we’ve seen up to this point.

There is a caveat. There is debate about whether this giant post-lockdown surge will happen. There are questions as to how many goods are being stockpiled by factories. Lockdowns have hampered factories’ ability to produce goods in Shenzhen, Shanghai – despite the 666 factories allowed to reopen so long as workers aren’t allowed to ever go home or anywhere else – and, it looks like soon, Beijing.

Additionally, many now think – not just me anymore – that U.S. demand will be hampered by inflation. This could decrease the size of the post-lockdown surge. Obviously, out of control inflation, as we have happening with the trillions in spending and money printing in Washington, doesn’t make for a better situation overall. I’ve been warning in this blog about inflation being a problem on the way since the government first started presenting lockdowns and stimulus spending. I had actually expected it to hit faster than it did, but now I think the addiction to spending, by both our government and citizenry, will probably keep inflation from really slowing import volumes for a while longer.

2. Shanghai Port Productivity Has Fallen and Carriers Decrease Callings, Creating a Container Shortage

Just a week ago, I went into depth about the disruption at the Port of Shanghai, so I’ll keep this section brief. Productivity is obviously down at the port and major carriers have started avoiding it and nearby ports. What we didn’t talk about last week was the container shortage that is resulting.

Kulisch reports on this in his article:

While the Port of Shanghai continues to operate, port productivity has decreased 20% to 30% and some carriers are not calling the port. Shipping delays are impacting intra-Asia trade, as well as North America and Europe trade lanes, according to international logistics and trade finance companies monitoring the situation. When the Yantian terminal in Shenzhen went under quarantine a year ago productivity was slashed by 80%, but in that case the restrictions applied specifically to the port and not the city itself.

On Monday, Maersk announced a dozen blank sailings for its AE1 service to the Port of Ningbo, citing accumulating bottlenecks on its Asia-North Europe network. It is also rerouting cargo cargo where possible to mitigate delays and avoid bunching and adjusting barge and rail capacity to help off-set landside issues. 

Several carriers are skipping Shanghai as a port of call until mid-May. 

The Alliance (ONE, Hapag-Lloyd and Yang Ming) had canceled 36 voyages to Shanghai as of April 14, according to Michael Zimmerman, partner and analytics practice leader for the Americas at consultancy Kearney. The lockdown has also led to significant shortages of 40-foot containers and diversion of 20-footers to other Chinese ports. 

Container shortages are always worth monitoring. Container shortages have been major contributors to congestion problems since the blanking of hundreds sailings at the beginning of the pandemic, which I talked about earlier. Maldistribution of shipping containers around the world never impacts only a single region but global supply chains overall.

3. Airport Impact Possibly Worse Than Ocean Port Impact

A great deal more of global shipping is done by sea than air; however, that doesn’t mean air freight is not significant. Universal Cargo’s air freight customers might like to see a little more attention on the air freight side in this blog, as I often focus on ocean freight because of its volume dominance. Unfortunately, this isn’t exactly a happy moment in the sun. Things actually might be worse right now at Chinese airports than at ocean ports.

Kulisch dedicates a section of his article to the airport congestion happening over there right now:

Freight shipments through airports arguably are being jammed more than at ports, but also are subject to rapidly shifting dynamics.

Since March, inbound airfreight has experienced 10 to 20 days delay due to airport customs closures in Shanghai and quarantine rules at other major airports….

Delta Air Lines (NYSE: DAL) has extended its embargo on all imports and exports at Shanghai Pudong International Airport until May 6 due to the local COVID restrictions that forced the airline to cancel all flights to the city. 

Many passenger and cargo airlines continue to cancel flights in and out of Shanghai.

Air cargo diverted from Shanghai is disrupting freight operations at other Chinese airports, causing a shortage of pallets for exports, Chicago-based AIT Worldwide Logistics reported.

Generally, air freight is a more expensive way to ship, but it’s often worth it for shippers because of the speed it offers. Right now, when it comes to China, that speed advantage has largely evaporated.

4. U.S. Truckers to Take Hit This Summer

Craig Fuller wrote an excellent American Shipper article about how China’s inhumane lockdowns will “pull the rug out from under from under U.S. truckers this summer.”

Often, when we talk about problems on the trucking side of international shipping, we’re talking about truckers not being able to get or return shipping containers from or to congested ports or we’re talking about the trucker shortage problem. Rather than a trucker shortage, truckers could see a shortage of goods to haul this summer.

Fuller writes:

… the slowdown is about to hit U.S. ports – and the trucking companies that service them – in a dramatic way. FreightWaves estimates that container imports from China represent approximately 16% of U.S. truckload volumes and an even larger percentage of U.S. dry van truckloads. After all, nearly half of the containers that come into the United States originate in China.

The three largest cities in China are going to be removed from the world market. According to analysts, at least 40% of China’s GDP has been taken offline and this was before lockdowns began in Beijing. The vast majority of this GDP is directly related to global manufacturing. Removing it means removing the flow of containers from the world economy.

Already, major drops in container volumes from China to the U.S. have happened. And Fuller shares a data forecast that shows it’s about to get much worse:

Container volumes from China to the United States started to fall on April 6. It hasn’t been a direct line down; more like a roller coaster. In the first 10 days, container volumes dropped by 31%. Volumes have since rebounded about halfway, to “just” a 16% drop. But according to FreightWaves SONAR’s volume booking forecast, volumes have started to drop once again and could fall to 50% of the April 6 number by May 9. This would be nearly the same level of a drop that China to U.S. exports saw during the Chinese New Year in 2022 and lower than any other point since July 2020.

…The temporary blip (dead cat bounce) was likely containers that were already in the queue at the port prior to the lockdowns.

According to SONAR’s ocean intelligence dashboard, it currently takes 27 days for a vessel to travel from a Chinese port to a U.S. port. Since the volume of containers from China to the U.S. started its drop on April 6, it will likely be May 3 before U.S. ports experience a drop in volume.

It takes approximately 10 days to three weeks after a vessel arrives in the U.S. before the containers that traveled on board enter the domestic surface freight market. This would put a slowdown in trucking freight volumes related to Chinese imports between May 13 and May 24.

The big drops seen in May could just be the tip of the iceberg. There’s no telling how long China’s lockdowns will last, and the last lines of Fuller’s article should be downright chilling for truckers:

… there is reason to believe that the Chinese lockdowns are far from over.  

FreightWaves’ Eric Kulisch reported on April 15, 2022, that BBVA suggested that the lockdowns in China could continue until June. 

If this prediction plays out, it will be a difficult summer for many U.S. trucking operators.

Conclusion: Expect Extended Disruption

It’s clear from all the fallout and expected fallout covered above that everything won’t snap back to normal the moment the lockdowns in China end. Supply chains don’t work that way. Plus, there are other disruptive events happening, like the Russian-Ukraine conflict, and likely disruptive events, like the aforementioned contentious ILWU contract negotiations.

We work hard at Universal Cargo to make shippers’ goods move as smoothly as possible, no matter what disruptions the industry is suffering. And you can always check out our blog to find out about what’s happening in the world of international shipping.

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FMC Finally Acts on Unfair Fees with Hapag-Lloyd Fine https://www.universalcargo.com/fmc-finally-acts-on-unfair-fees-with-hapag-lloyd-fine/ https://www.universalcargo.com/fmc-finally-acts-on-unfair-fees-with-hapag-lloyd-fine/#respond Tue, 26 Apr 2022 23:43:44 +0000 https://www.universalcargo.com/?p=10842 On Friday, the Federal Maritime Commission (FMC) served its initial decision, fining Hapag-Lloyd over $800,000 for violating the Shipping Act by assessing unfair detention fees against a drayage company called Golden State Logistics (GSL). Among the decision's orders are that:

"... Hapag-Lloyd, A.G. is liable to the United States for the sum of $822,220 as a civil penalty for fourteen willful and knowing violations of section 41102(c) of the Shipping Act of 1984. It is

"FURTHER ORDERED that Hapag-Lloyd, A.G. and its agents cease and desist, absent extenuating circumstances, from imposing demurrage or detention when there are insufficient appointments available..."

This feels like a big win for shippers, who have long complained about unfair demurrage and detention fees assessed by ocean freight carriers like Hapag-Lloyd, but will this be enough to deter carriers from continuing to charge these fees unfairly?

Find out all about it in Universal Cargo's blog.

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On Friday, the Federal Maritime Commission (FMC) served its initial decision, fining Hapag-Lloyd over $800,000 for violating the Shipping Act by assessing unfair detention fees against a drayage company called Golden State Logistics (GSL). Among the decision’s orders are that:

… Hapag-Lloyd, A.G. is liable to the United States for the sum of $822,220 as a civil penalty for fourteen willful and knowing violations of section 41102(c) of the Shipping Act of 1984. It is

FURTHER ORDERED that Hapag-Lloyd, A.G. and its agents cease and desist, absent extenuating circumstances, from imposing demurrage or detention when there are insufficient appointments available…

This feels like a big win for shippers, who have long complained about unfair demurrage and detention fees assessed by ocean freight carriers like Hapag-Lloyd, but will this be enough to deter carriers from continuing to charge these fees unfairly?

The Lead-Up of Unfair Detention and Demurrage Fees

Hapag-Lloyd Ship

The issue became especially pronounced during the pandemic. In November of 2020, when a strong and already extended peak season was seeing port congestion, I wrote in Universal Cargo’s blog about how that congestion was causing shippers to unfairly be hit with demurrage and detention fees. As cargo volume and disruptive Covid policies and events in the supply chain kept compounding port congestion, unfair demurrage and detention fees became something of a motif in Universal Cargo’s blog throughout the pandemic.

Unfair detention and demurrage fees always seem to become especially prevalent when there’s port congestion. Especially major port congestion.

Think back to when imported goods didn’t make it to store shelves and agricultural exports rotted on the docks because of the congestion caused by the 2014-15 contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). The economic impact on the country could be measured in the billions as U.S. shippers lost revenue and international business partnerships thanks to the costly delays of moving their goods through West Coast ports. And top of that, they were hit with unfair detention and demurrage fees.

These fees in 2014 and 2015 were so excessive and harmful that, in June 2015, the Los Angeles Customs Brokers and Freight Forwarders Association (LACBFFA), along with 94 other organizations, was petitioning the FMC to prohibit the unfair practice and I was covering it in this blog.

Among the many such blogs I wrote concerning detention and demurrage fees that have long plagued shippers, the FMC has played a featured but ultimately disappointing role. There was “FMC Investigating Detention, Demurrage & Per Diem Charges” in March of 2018 that had shippers hoping to finally see action from the commission on the issue.

After an 18-month fact finding investigation into detention and demurrage fees, Commissioner Rebecca Dye put forward an interpretative rule designed to make the assessment of detention and demurrage fees reasonable. Commissioner Dye wrote:

These financial incentives operate to ensure that cargo interests do everything customarily required to be positioned to retrieve cargo and return equipment within the time allotted. Absent extenuating circumstances, however, when incentives no longer function because shippers are prevented from picking up cargo or returning containers within time allotted, charges should be suspended.

I covered this in more detail in September of 2019 with a post entitled “FMC Finally Addresses Unfair Demurrage & Detention Charges.” It finally looked like shippers might have finally gotten some action from the FMC with this interpretative rule, but of course, within months they were being hit as hard or harder than ever with unfair demurrage and detention fees.

In October of 2020, complaints about the fees were so loud that the FMC invited shippers to comment on the fairness of ocean carrier billing. But that too just felt like the commission pacifying shippers as I was writing about shippers still awaiting action on fees in April of 2021.

However, Commissioner Dye’s work did result in a final Interpretive Rule on Demurrage and Detention under the Shipping Act (“demurrage and detention rule”). The over $800,000 fine on Hapag-Lloyd is a direct result of that, as the FMC wrote in its decision:

This proceeding is the Commission’s first enforcement proceeding alleging a violation of the demurrage and detention rule.

Deterrence of Future Unfair Fees?

Now the question is whether this decision will significantly decrease the implementation of unfair detention and demurrage fees against shippers in the future.

As a named party in the case, the FMC’s Bureau of Enforcement (BOE) acted like a prosecutor against Hapag-Lloyd and wanted a much higher penalty levied against shipping line. BOE requested a penalty of $16.5M to help deter future violations:

BOE calculates the requested penalty using the statutory maximum for a knowing and willful violation in 2022, for eleven containers, for a continuing violation of 228 days until the filing of BOE’s brief ($65,666 x 11 x 228=$164,690,328) and argues that ten percent is necessary to deter future violations and therefore requests a civil penalty of $16.5 million.

The FMC did not find it fit to fine Hapag-Lloyd that much. The commission said that though “a significant penalty is required to deter future violations and ensure compliance
with the demurrage and detention rule,” the “penalty must be proportional to the violation established, particularly where BOE did not establish a violation for all eleven shipments or for all days of detention.” Instead of $16.5M, the FMC went with $58,730 per violation for fourteen violations, which came to the aforementioned $822,220 penalty total.

While that much money would likely sink the average shipper’s business, the fine is rather negligible for Hapag-Lloyd. Major ocean freight carriers have been pulling in profits by the billions over the last couple years, and Hapag-Lloyd is no different.

Hapag-Lloyd itself reported, in a press release in January, about the billions the company took in last year:

On the basis of preliminary figures, Hapag-Lloyd’s earnings before interest, taxes, depreciation and amortisation (EBITDA) for the 2021 financial year increased to more than USD 12.8 billion (approximately EUR 10.9 billion). Earnings before interest and taxes (EBIT) rose to roughly USD 11.1 billion (approximately EUR 9.4 billion)….

Revenues increased to roughly USD 26.4 billion (approximately EUR 22.3 billion).

Looking at those numbers, Hapag-Lloyd could have paid the proposed $16.5M amount pretty easily. You’re guess is as good as mine as to whether the fine Hapag-Lloyd was hit with will actually deter the company or other ocean freight carriers from continuing their use of unfair detention and demurrage fees. Detention and demurrage fees won’t go away, but maybe carriers will be more careful about imposing unreasonable ones when shippers are unable to clear or return containers due to port congestion.

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Shanghai Lockdown Causing Outrageous Disruption https://www.universalcargo.com/shanghai-lockdown-causing-outrageous-disruption/ https://www.universalcargo.com/shanghai-lockdown-causing-outrageous-disruption/#respond Thu, 21 Apr 2022 23:38:11 +0000 https://www.universalcargo.com/?p=10838 China’s atrociously insane “Covid Zero” policies have Shanghai, a central hub for international shipping and the third most populous city in the world, in an indefinite lockdown. While Chinese authorities claim that the “closed loop” operations at the Port of Shanghai are keeping things operating normally there, anyone who takes even a glance at the […]

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China’s atrociously insane “Covid Zero” policies have Shanghai, a central hub for international shipping and the third most populous city in the world, in an indefinite lockdown. While Chinese authorities claim that the “closed loop” operations at the Port of Shanghai are keeping things operating normally there, anyone who takes even a glance at the related data knows that’s not true.

Lockdowns Have Already Basically Doubled Port Congestion in China

Yesterday, Universal Cargo’s CEO Devin Burke texted me the picture to the right, showing ships that were waiting outside the Port of Shanghai. You take a look at the picture and tell me if it seems a little congested.

According to Winward, a shipping analytics company, looking at the numbers from just days ago, 20% of the world’s active container ships are stuck waiting outside a congested port. 27.7% of those 1 in 5 of the world’s container ships are stuck outside of congested ports in China.

If you go back to February, before China’s massive lockdowns, only 14.8% of the world’s ships waiting outside of congested ports (and there were significantly fewer overall) were waiting at Chinese ports.

If you’re wondering if that comparison goes back too far, it doesn’t. Yes, the Shanghai lockdown didn’t start until early April, but remember that China locked down Shenzhen in March.

In a PDF document about the effects of China’s lockdowns, Winward shares:

As data pulled from Winward’s Maritime AI platform clearly shows, lockdowns in China are heavily impacting the congestion outside the country’s ports, as the number of container vessels waiting outside of Chinese ports today is 195% what it was in February.

… in the April and March snapshots, there were 506 and 470 vessels, respectively, stuck outside of Chinese ports. In February, that number was only 260. In essence, lockdowns in China have nearly doubled the congestion outside the country’s ports.

Living at Work

The same kind of super successful “closed-loop” system China is using to keep ports operating “normally” despite massive lockdowns is now being implemented to restart manufacturing in Shanghai.

“Closed-loop” means that employees have to stay at their place of employment rather than go home at the end of a workday. They may not have a home to go to anyway, as some Shanghai citizens who live in large apartment complexes have been forcibly removed from their homes to turn them into quarantine facilities. Plus, if workers are allowed to leave their workplaces, they may catch and/or spread a virus that has an incredibly low percentile chance of making that worker seriously ill, especially since China’s lockdowns are in no way stopping that virus from spreading.

Yeah, it all makes sense.

According to a Reuters article, the Chinese government has put together a “white list” of 666 firms prioritized for reopening under this “closed-loop” system.

Let’s just pretend that 666 number has no other significance in the world. It’s surely just coincidence. Eric Kulisch did a nice job of avoiding bad numerical associations in his American Shipper article about China trying to ease the lockdown’s supply chain crunch by calling it “more than 660 enterprises” China put on its “white list.”

Kulisch reports that of these enterprises, “many [are] in the automotive, semiconductor, consumer electronics and biopharma sectors” and they include “state-owned automaker SAIC Motor Corp., Volkswagen and Tesla’s electric car factory.”

The firms must follow this “closed-loop” model of keeping workers from leaving factories, living there until… well, who knows when.

Productivity Down – Obviously

If you couldn’t tell with only a cursory look at how congestion is doubling at Chinese ports, a “closed-loop” system inside of a lockdown is not going to be as productive as normal conditions.

Factories are and will have similar problems. Kulisch shares a good example in his article:

A major challenge for factories is getting raw materials and components needed to maintain production while access to the ports is sharply reduced and many supplies are stuck offshore on waiting vessels. 

The Tesla (NASDAQ: TSLA) plant opened with only one of its two shifts, cutting productivity in half, according to a tweet from Ming-Chi Kuo, an analyst at TF International Securities. At that output, Tesla has about 2.5 weeks of inventory and can produce 25,000 to 30,000 units per month, down significantly from pre-crisis levels. Kuo said Tesla’s hourly work rate won’t return to normal until mid-May, at the earliest. 

It doesn’t take much knowledge about supply chains to know that problems at any point in a supply chain effects the supply chain as a whole. In order for factories in China to have a chance at a return to normal by mid-May, this indefinite Shanghai lockdown would need to end extremely soon. For the moment, all we can do is watch disruption pile on top of disruption as China continues its horrible Covid Zero policy.

And, of course, those disruptions are spreading through the gobal supply chain, but that’s a blog for another day.

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It’s Time to Look at What China’s “Covid Zero” Really Is (with Videos) https://www.universalcargo.com/its-time-to-look-at-what-chinas-covid-zero-really-is-with-videos/ https://www.universalcargo.com/its-time-to-look-at-what-chinas-covid-zero-really-is-with-videos/#comments Tue, 19 Apr 2022 20:34:06 +0000 https://www.universalcargo.com/?p=10791 One of the biggest, most technologically advanced cities in the history of the world has empty streets. Its people are locked in their homes. Screams fill the air as citizens, running out of food, shout and cry out in desperation from their windows and balconies. It's been described as a post apocalyptic scene. But it's not. Yes, a virus has spread through the city, but Shanghai doesn't have an outbreak problem. It has a governance problem.

I've been critical of China's "Zero Covid" policy for a long time. I've generally stuck to its repercussions on global trade; how it shuts down port terminals and factories, sometimes for a single positive test; disrupts trucking; and negatively ripples across global supply chains. After all, this is an international shipping blog.

There is a great deal of international shipping and economic impact from Zero Covid policy, but it's hard to write about that side of things when people by the millions are being cruelly and violently mistreated.

Check out the post in Universal Cargo's blog to see videos from the Chinese people, showing just a taste of what's been happening to them.

Next time, we'll bring the focus back to international shipping.

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One of the biggest, most technologically advanced cities in the history of the world has empty streets. Its people are locked in their homes. Screams fill the air as citizens, running out of food, shout and cry out in desperation from their windows and balconies. It’s been described as a post apocalyptic scene. But it’s not. Yes, a virus has spread through the city, but Shanghai doesn’t have an outbreak problem. It has a governance problem.

YouTube Video

I’ve been critical of China’s “Covid Zero” policy for a long time. I’ve generally stuck to its repercussions on global trade; how it shuts down port terminals and factories, sometimes for a single positive test; disrupts trucking; and negatively ripples across global supply chains. After all, this is an international shipping blog.

There is a great deal of international shipping and economic impact from Covid Zero policy, but it’s hard to write about that side of things when people by the millions are being cruelly and violently mistreated.

And for what?

I know we’ve had over two years of fear porn crammed down our throats by media outlets and government agencies all over the world to make sure we have a healthy (or completely unhealthy) fear of COVID-19. But lockdowns don’t work in stopping its spread. Masking policies don’t work in stopping its spread. Even the Covid vaccines don’t work in stopping its spread. And while, yes, the virus can be deadly, it is also treatable, and for the vast majority of people who get it, they won’t even need treatment as they won’t have any symptoms, let alone get seriously ill or die.

Locking up 25 million people, as the Chinese government has done in Shanghai, separating positive but completely asymptomatic children from their parents, as the Chinese government has done in Shanghai, ripping people from their homes and forcing them into giant, inhumane quarantine facilities or ripping virus-free people from their homes to turn those homes into quarantine facilities, as the Chinese government has done in Shanghai, rather than simply treating the people who do get sick is a travesty.

The effects of these actions are far worse than just ignoring the virus altogether, letting it kill whomever it will and just leaving its sufferers to die, which would also be unconscionable.

Frankly, all the terrible acts and more that the Chinese government is doing in the name of Covid Zero are not even effective. Every day, despite these draconian measures, more cases are found in Shanghai. And, of course, the vast, vast majority of those cases are asymptomatic.

There’s an old joke about a doctor who fell into a well. He learned to tend the sick and leave the well alone. Perhaps this simple lesson expressed in a joke will finally be learned by the world from the horrific events that have been happening in China. How many must suffer or even die from our reaction to the virus?

The Chinese government enforces strict censorship. However, phone cameras are so prevalent that it’s been impossible for China to keep videos that show just a taste of what’s happening in Shanghai from leaking.

Some people in China are revolting against what’s being done to them, but they’re being met with violence.

In Thursday’s blog, I’ll get back to writing about international shipping, supply chains, global economy and the like. Perhaps I’ll even make it about the effects the Shanghai lockdown has had and is having on global trade, but today, let’s look at what’s been happening to people in China.

China’s starting to ease factories in Shanghai back to work and soon this unsustainable lockdown will disappear from the international consciousness. Before that happens I collected a few videos showing some of what’s been happening in China and imbedded them below. I tried to avoid videos with talking heads from news agencies, who tend to spin things. You may find some of what you see below disturbing, but know this is just the tip of the iceberg of what’s going on.

This is not about health. This is about power and control. Let it be a warning about the kinds of policies we tolerate here in the U.S. and elsewhere in the world.

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New Fee at the Ports of Los Angeles & Long Beach to Fund Zero Emissions Trucks https://www.universalcargo.com/new-fee-at-the-ports-of-los-angeles-long-beach-to-fund-zero-emissions-trucks/ https://www.universalcargo.com/new-fee-at-the-ports-of-los-angeles-long-beach-to-fund-zero-emissions-trucks/#respond Tue, 05 Apr 2022 21:28:05 +0000 https://www.universalcargo.com/?p=10716 It seems like every time you turn around there's a new fee announced at the Ports of Los Angeles and Long Beach. Sometimes those fees are merely threats in a less-than-successful attempt to speed the movement of long-dwelling containers. But sometimes, it just feels to shippers like the Ports of Los Angeles and Long Beach are nickel and diming them to death. In this case, it's diming.

The new fee is ten dollars per TEU (twenty-foot equivalent unit) loaded on trucks entering or leaving the ports. The ports started collecting on Friday, April 1st. And, no, this isn't an April Fool's joke. Otherwise, I would have posted this on Friday. And I don't post blogs on Friday. Unless my boss really wants me to.

Find out all about the new fee, what it's for, and more by reading the full post in Universal Cargo's blog.

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It seems like every time you turn around there’s a new fee announced at the Ports of Los Angeles and Long Beach. Sometimes those fees are merely threats in a less-than-successful attempt to speed the movement of long-dwelling containers. But sometimes, it just feels to shippers like the Ports of Los Angeles and Long Beach are nickel and diming them to death. In this case, it’s diming.

The new fee is ten dollars per TEU (twenty-foot equivalent unit) loaded on trucks entering or leaving the ports. The ports started collecting on Friday, April 1st. And, no, this isn’t an April Fool’s joke. Otherwise, I would have posted this on Friday. And I don’t post blogs on Friday. Unless my boss really wants me to.

Even though it sounds like this fee might be charged to truckers/trucking companies, it’s actually being assessed against shippers. Bill Mongelluzza reports in the Journal of Commerce (JOC):

[Matt Schrap, CEO of the Harbor Trucking Association] noted that truckers are not responsible for paying the fee. “The ports made it clear the fee is being assessed to the BCO [beneficial cargo owner],” he said.

Generally, when we use the term BCO, we’re talking exclusively about big shippers like your Home Depots, Walmarts, and Targets of the world that deal directly with ocean freight carriers. However, in this case, you could expect this fee to likewise apply to smaller shippers who need freight forwarders to set up their shipments. Freight forwarders would likely calculate the fee into their prices when quoting shippers on their imports and exports through the Ports of Los Angeles and Long Beach.

Usually, I’m not a big fan of fees ports lay on shippers. However, in the case of this one, I don’t find it offensive. The ultimate goal of the fee is good and a similar fee in the past was quite effective.

The fee will be used to set up a fund for zero emissions trucks that call upon the ports. The Ports of Los Angeles and Long Beach have “a goal of being serviced by a 100% zero-emission drayage truck fleet by 2035.” While ten dollars sounds like a fairly small fee, the ports expect to collect $90 million in this first year of implementation, according to a press release the Port of Los Angeles put out on Friday.

Here’s how the press release says the money of this Clean Truck Fund (CTF) program, as the Ports have dubbed it, will be used:

The Los Angeles Harbor Commission last week approved priority targets and pathways that will be used to disseminate the newly collected funds, including:

● Truck Voucher Incentive Program: To incentivize the purchase of ZE trucks that service the San Pedro Bay port complex, the Port of Los Angeles will provide first-come, first-served, point-of-sale ZE truck purchase vouchers for at least $150,000 to licensed motor carriers in the Port Drayage Truck Registry. Each truck funded will be obligated to provide drayage service to the San Pedro Bay Port complex for a period of three years.
 

● Infrastructure Funding Program: Modeled after existing federal, state and local grant programs and to be managed by a third-party administrator, this program provides funds to help drayage licensed motor carriers to install or obtain ZE charging and/or fueling infrastructure. Funding could also be used to support public charging and fueling infrastructure for zero emission drayage trucks.

The previous and similar fee I mentioned above was more than triple the size of this new one. At $35 per TEU, it had a significant impact on reducing pollution from trucks at the San Pedro Bay port complex. The press release gives details:

Phasing out older, more polluting trucks has been key to clean air gains the San Pedro Bay ports have made since the original Clean Truck programs were launched in 2008 as part of the Clean Air Action Plan.  Diesel emissions from trucks have been cut by as much as 97% compared to 2005 levels. Trucks remain the ports’ largest source of greenhouse gas emissions and the second highest source of nitrogen oxides, a contributor to regional smog formation. 

Sometimes companies spin the results of their programs to make them sound effective when they aren’t. However, in the case of the Clean Truck programs at the Ports of Los Angeles and Long Beach, there was a noticeable improvement of air quality around the ports. That’s why I’m okay with the ports implementing this new CTF program.

There are exemptions to the fees. Containers hauled by trucks that are already zero-emission-vehicles will not be subject to the fee. Additionally, the Port of Los Angeles’s press release says low-nitrogen oxide-emitting (low-NOx) trucks will be exempt for a limited time.

Of course, the biggest risk with ports adding new fees is shippers choosing to divert their cargo to alternative ports. According to Mongelluzzo’s JOC article, this fee is not expected to cause cargo diversion because of how high freight rates have soared over the last couple years. Before freight rates more than quadrupled, there was a study that showed a fee only half as big as this one would cause a significant diversion. Mongelluzzo writes:

A 2020 study by transportation consultant Philip Davies, completed before the current runup in trans-Pacific freight rates, found that a fee of $5 per TEU could result in a diversion of 17,000 TEU of discretionary cargo from Southern California….

Davies told JOC.com Thursday that the $10-per-TEU fee will have little diversionary impact in the current environment in the trans-Pacific, although in the longer term, if rates settle back into historical patterns, such fees would present opportunities for those ports that have addressed their terminal and inland supply chain congestion problems.

I suspect Davies is probably correct that there won’t be a great deal of diversion due to this fee. The much greater risk of diversion from the Ports of Los Angeles and Long Beach, as well as the rest of the West Coast ports, is the upcoming contract negotiations with the International Longshore & Warehouse Union (ILWU). In fact, many shippers have already begun diverting cargo, as there is expectation for things to get contentious over the issue of automation. If negotiations do get contentious, expect major slowdowns at ports that have already been struggling with severe congestion for the last two years.

But that’s a topic for future blogs…

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Now China Locks Down Shanghai https://www.universalcargo.com/now-china-locks-down-shanghai/ https://www.universalcargo.com/now-china-locks-down-shanghai/#respond Tue, 29 Mar 2022 23:11:39 +0000 https://www.universalcargo.com/?p=10710 Here we go again. Two weeks ago we were talking about China putting a whole province, millions and millions of people, on lockdown. This week, China put Shanghai on lockdown.

Keith Wallis reported in the Journal of Commerce (JOC):

Shippers in eastern China face weeks of disruption to freight movements after authorities imposed a two-stage lockdown in Shanghai beginning Monday to test all 26 million inhabitants for COVID-19 amid a continuing surge in cases.

Check out the article in Universal Cargo's blog as we get into the supply chain disruptive Shanghai lockdown.

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Here we go again. Two weeks ago we were talking about China putting a whole province, millions and millions of people, on lockdown. This week, China put Shanghai on lockdown.

Keith Wallis reported in the Journal of Commerce (JOC):

Shippers in eastern China face weeks of disruption to freight movements after authorities imposed a two-stage lockdown in Shanghai beginning Monday to test all 26 million inhabitants for COVID-19 amid a continuing surge in cases.

“Zero Covid” Madness

Before we go any further, can we now agree that “Covid Zero” is a completely impossible idea? No matter how stringent the measures you use, you can’t stop a virus from spreading. The idea that we won’t allow a single case of Covid-19 somewhere and will shut down everything if a positive test is found is – and I’ll go with the technical term here – wacko.

According to an Associated Press article by Ken Moritsugu:

Shanghai recorded 4,477 new cases on Monday, all but 96 of them asymptomatic. Gymnasiums and exhibition centers have been converted into sprawling centers to isolate positive cases under the zero-COVID approach.

According to these numbers, 98% of people China is finding to have contracted Covid have no symptoms whatsoever. That leaves 2% to have the spectrum from mild symptoms to getting serious ill. Rather than treat the incredibly minute amount of people getting seriously sick, China institutes massive lockdowns and forces isolation and giant sick-houses on people who test positive but aren’t actually sick.

This Shanghai lockdown is one more event in a long string of events to come out of China’s so-called “Covid Zero” policies. I would say you could add this to the long history of oppressive actions by the Chinese government, though it pales in comparison to many atrocities and human rights violations that have happened (and even still happen) in the country. Since this is a blog about international shipping, I’ll let you travel down that atrocity and human rights violation rabbit hole in your own research and focus on the supply chain.

“Covid Zero” and the Supply Chain Run Up

When it comes to “Covid Zero” policy and the supply chain, China’s policy has had quite a negative impact on international shipping already. And I’ve obviously been very critical of it. Here’s a handful of Universal Cargo’s Covid-Zero-related blog posts that have led up to now:

What’s Disrupting International Shipping Now?

Good News, Bad News: Yantian Port Back to Full; Freight Rates Rise Even Higher

Single COVID Case Shuts Down Major Chinese Port Terminal

Updates on the Port of Ningbo Terminal Closure

China’s Covid Zero Policies Worsen Supply Chain Problems

Ocean & Air Shipping Delayed by China’s COVID Restrictions

Perhaps China Is Loosening Its Insane Covid Zero Policies… a Little

Massive Chinese Lockdowns Present More Supply Chain Disruption

Shanghai Lockdown & Shipping

Obviously, Shanghai going into lockdown is a huge deal. Ask average people on the street to name a city in China, and Shanghai would probably be the number one answer, even over Beijing, despite the capital city just hosting the Olympics. I’d even wager a large contingent of people in the U.S. could only name one Chinese city, and Shanghai would be that city. It is a major world epicenter for trade, manufacturing, finance, and culture.

made in China

Anyone with any idea of what global supply chains are know this will have an impact on international shipping around the world. But what, more specifically, is being impacted right now?

It seems China is keeping the ports open and operating, but manufacturing and trucking are severely restricted. Obviously that impacts what actually gets to or from the ports.

Here are details from Wallis’s JOC article:

Carriers said while Shanghai’s main container terminals at Yangshan and Waigaoqiao remain open with vessel operations, yard handling, and gate-in/gate-out operating normally, many depots and warehouses are shut, and trucking is severely curtailed.

“Coming so soon after the lockdown in Shenzhen, Shanghai’s lockdown will effectively shutter the world’s largest container port for the next 10 days,” a senior executive at a Hong Kong-based freight forwarder told JOC.com. “While city authorities will be determined to keep the terminals operating, the restrictions to factories, warehouses, and truck movements means little cargo will go in or out of the port.”

“Shanghai has been beset by vessel delays, and the lockdown will likely lengthen vessel wait times,” the executive added.

Big Ports, Big Problems

Shanghai Port is the busiest port in the world. We’ve often talked in this blog about the impact of the congestion and bottlenecks at the busiest ports in the U.S. – those of Los Angeles and Long Beach – on supply chains not only in the U.S. but around the world. And the Ports of Los Angeles and Long Beach don’t even crack the top ten list of busiest ports in the world. Thankfully, the Shanghai Port is more efficient than the Ports of Los Angeles and Long Beach, improving its ability to recover, but it doesn’t take a rocket scientist to figure out congestion there is problematic for global supply chains.

“Shanghai handled more than 47 million TEU in 2021, up 8 percent year on year,” Wallis reports. It’s hard to grasp just how many goods China’s “Zero Covid” policies put in danger of gridlock.

Maersk in the Lockdown Zone

Wallis went on to share what Maersk, which was the world’s largest carrier by capacity until recently being supplanted by MSC, told his news outlet about how its operations in the lockdown area are being impacted:

“We have been notified that the Shanghai ports, Waigaoqiao and Yangshan, are currently working as per normal,” a Maersk China spokesperson told JOC.com Monday. “However, local depots [and] warehouses, including Maersk’s wholly owned OceanEast warehouse in the Lingang area, and trucking services have been impacted due to the lockdown and we expect landside transportation efficiency will be reduced.”

Lingang is the main free trade zone in Shanghai’s Pudong district and the closest trade zone to the Yangshan deepwater port.

Some facilities were open, though. Maersk listed about 12 dry freight depots and three reefer depots that remained open for empty container pick-up and returns Monday.

Luxembourg-based cargo airline Cargolux canceled flights to and from Shanghai for the rest of this week. Maersk said it’s likely many other airlines will be evaluating possible flight cancellations.

Maersk said handling of air cargo already in on-airport warehouses is likely to continue, but new cargo will be affected by labor shortages and delivery delays.

Trucking & Manufacturing

Still, manufacturing and trucking are the areas of the supply chain in China that are hit the hardest. The impact of that will ripple up through the rest of the supply chain.

Here’s what Wallis reports on trucking and warehouse restrictions there:

Freight forwarders said the restrictions on truckers traveling between Shanghai and cities in adjacent provinces including Jiangsu, Anhui, and Zhejiang will make it virtually impossible for manufacturers in those provinces to truck products to Shanghai’s port and airport until at least next week.

Highlighting the impact on cargo shipments, Crane Worldwide Logistics said there were very few trucks on the road in Pudong Monday morning.

“Trucking and container drayage service between Shanghai and adjacent cities and provinces are now also suspended,” Crane said in an advisory. “That means cargo cannot be delivered by suppliers to our air freight warehouses and ocean CFS. Factory loadings cannot be performed. Delivery from ocean terminals and air import warehouses to Shanghai’s Puxi area and to other cities has become impossible.”

Maersk said trucking capacity in Shanghai alone is expected to drop by 30 percent as drivers are either required to stay home to undergo testing or are unable to enter the port districts due to the lockdowns.

“Most truck companies and warehouses in Pudong have been locked down. This includes FCL and LCL warehouses,” FIBS Logistics said in a customer advisory Monday.

“Trucking to Yangshan port from Ningbo should be hard to impossible,” the company added.

Conclusion

This is yet one more disruptive event to hit the supply chain in what’s seemed like a never-ending stream of disruptive events over the last couple years. Perhaps the data China is collecting on how few people who contract Covid even get a sore throat, let alone seriously ill, will bring us closer to seeing an end to these over-aggressive and ultimately futile “Covid Zero” policies.

Things were still recovering in China from the Shenzhen lockdown when this lockdown was instituted. Perhaps a reduction of goods getting shipped to the U.S. as a result will help with attempts to relieve congestion here, particularly at the Ports of Los Angeles and Long Beach. Of course, that could mean some goods shortages as well.

As the world has found a new crisis to focus on with Russia and Ukraine, Covid hysteria has really taken a back seat. In “blue” states like California, where the Ports of Los Angeles and Long Beach are, Covid-related restrictions are finally lightening. That’s also helpful when it comes to relieving port congestion. Hopefully, we’ll be able to report some good news on that front real soon before contract negotiations with the ILWU threaten to ramp the congestion back up again.

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Is China Helping Shippers Get Around Russian Sanctions? https://www.universalcargo.com/is-china-helping-shippers-get-around-russian-sanctions/ https://www.universalcargo.com/is-china-helping-shippers-get-around-russian-sanctions/#respond Thu, 24 Mar 2022 22:46:19 +0000 https://www.universalcargo.com/?p=10706 I've been getting emails about shipping to and from Russia through China. Naturally, reading them raises questions. Here are a few: Is China providing a way around sanctions? Are these for shipments that wouldn't actually break sanctions? Do these emails show China is supporting Russia in the current conflict?

We get into that in the full post in Universal Cargo's blog.

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I’ve been getting emails about shipping to and from Russia through China. Naturally, reading them raises questions. Here are a few: Is China providing a way around sanctions? Are these for shipments that wouldn’t actually break sanctions? Do these emails show China is supporting Russia in the current conflict? Let’s get into it.

Sanctions

Sanctions are serious things that shippers should be careful not to break. Violators can face both criminal and civil penalties. However, just because someone is currently shipping to or from Russia, where many sanctions have been and are being placed, doesn’t automatically mean he or she is actually breaking sanctions. Sanctions are not necessarily restricting all trade of all goods. But with an escalating situation like we have since Russia invaded Ukraine, it can be difficult to keep track of exactly what has been sanctioned and what hasn’t.

Halted Services

2M Bitterness Maersk & MSC

Of course, it doesn’t matter what’s been specifically sanctioned if there’s no way to ship to a country. Major container lines and air cargo carriers have ceased service to Russia altogether. On March 1st, Reuters reported that the top three ocean freight carriers – MSC, Maersk, and CMA CGM – suspended shipping to and from Russia. And that was just the tip of the iceberg.

On March 2nd, the U.S. banned Russian aircraft from its airspace, and many airliners that deliver goods quickly stopped even flying over Russia at all, let alone shipping goods to and from the country. On March 7th, Doug Cameron and Paul Ziobro reported in the Wall Street Journal:

U.S. cargo carriers such as UPS, FedEx Corp., Atlas Air Worldwide Holdings Inc. and Kalitta Air LLC regularly flew over Russia before the invasion of Ukraine and continued for several days after. They have been almost absent since the U.S. banned Russian aircraft from its airspace on March 2.

FedEx, UPS and other cargo carriers including the DHL unit of Deutsche Post AG had already suspended delivery services to and from Russia.

Russia Through China Solicitations

Shortly after the above dates, I received an email with the subject line, “Railway transporation [sic.] won’t stop!” Working for a freight forwarder, I often get emails like this from companies that want Universal Cargo to partner with it, offering to set up such and such shipments at such and such rates. Normally, I just delete them, as Universal Cargo has a well-established global network for handling shippers’ cargo, and I move on to sharing what’s happening in international shipping through this blog. But something in that email gave me pause.

“At present more and more airlines have announced the suspension of shipping services from Asia to all ports in Russia. International transportation will be in trouble. But the ‘one belt, one road’ will not stop the service. China Railway will fully support your cargo transportation!” a section of the email read.

As I said at the top, this isn’t the only email I’ve received like this.

China Supporting Russia

Certainly, there are companies in China, as well as elsewhere in the world, that see opportunity in the international conflict happening right now. This could just be chalked up to companies trying to take advantage of a service they can offer that many others can’t or won’t. But there is something more to think about here.

For those of you not familiar with China’s One Belt, One Road initiative, it’s a massive trade route, modeled on the ancient Silk Road, linking China to Europe by going right across Russia. As Russia faces major and injurious sanctions from around the world, One Belt, One Road can serve as a lifeline from China.

From the moment President Biden botched the Afghanistan withdrawal, both Russia’s aggression toward Ukraine and China’s toward Taiwan increased. With the U.S. showing weakness abroad, there was worry these two countries would support each other in their imperial ambitions.

Within a week of another bumble from President Biden, when he basically invited Russia to make a “minor incursion” on Ukraine, Russia carried out massive military drills around Ukraine and performed joint navy drills with… wait for it… China!

Yes, China and Russia were performing joint naval drills in January. Somehow, it seemed to get very little press coverage.

China’s stance on Russia and Ukraine has become a bigger and bigger topic of controversy and confusion in recent days. There are arguments about what China has said about being neutral and China’s recent remarks about how the crisis should be ended through negotiation. As usual, though, actions tend to speak louder than words. Yet I’m sure there are many interpretations about what it means or doesn’t mean that China is keeping trade open to Russia.

Prudence Suggested

For importers and exporters who want to ship goods in and out of Russia, going through China may be a viable option. However, the option should be weighed very, very carefully.

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Another Evergreen Megaship Aground https://www.universalcargo.com/another-evergreen-megaship-aground/ https://www.universalcargo.com/another-evergreen-megaship-aground/#comments Wed, 23 Mar 2022 01:07:42 +0000 https://www.universalcargo.com/?p=10694 In case you haven't heard, Evergreen has had another costly and public debacle. No, this isn't a story about Hilary Clinton; Evergreen being her code name from the secret service is just coincidental. Evergreen is the same massive ocean freight carrier whose ship, the Ever Given, ran aground sideways in the Suez Canal last year. Now the shipping line has a megaship, ironically named Ever Forward, stuck in the Chesapeake Bay, where it ran aground after leaving the Port of Baltimore.

Find out all about it and check out video of the aground ship in Universal Cargo's blog.

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In case you haven’t heard, Evergreen has had another costly and public debacle. No, this isn’t a story about Hilary Clinton; Evergreen being her code name from the secret service is just coincidental. Evergreen is the same massive ocean freight carrier whose ship, the Ever Given, ran aground sideways in the Suez Canal last year. Now the shipping line has a megaship, ironically named Ever Forward, stuck in the Chesapeake Bay, where it ran aground after leaving the Port of Baltimore.

Cool Footage

We’ll give TickTocker (I don’t know if that’s what they call people on TickTock, but they should) Luke McFadden a chance to shine, as he posted a video that has great footage of the stuck ship. McFadden is a little off on his information at the top of the video. The now-stuck Ever Forward, at 11,850 twenty-foot equivalent units (TEUs) capacity according to an American Shipper article by Kim Link-Wills, is actually smaller than the Ever Given, which is one of the world’s most massive ships in the world at 20,124 TEU capacity according to an Economics Times article.

But don’t let that capacity size difference fool you – the Ever Forward is still a massive ship, as can be seen in McFadden’s cool video where he shows and talks about the aground ship:

[ In case you have trouble seeing the embedded video, here’s the link: https://www.tiktok.com/@fvsoutherngirl/video/7077353529970806062?is_copy_url=1&is_from_webapp=v1&q=evergreen%20baltimore&t=1647939491734 ]

How Long Will Ever Forward Be Stuck?

It’s not likely the Ever Forward will be stuck in the Chesapeake Bay all summer as McFadden speculates as a possibility. It took around a week to get the Ever Given unstuck from the Suez Canal. While it likely will be quite laborious to free the Ever Forward, I would expect it could be done in a similar time frame to how long it took to free the Ever Given. However, there are a couple holdups.

The biggest holdup will likely be getting whatever permission and permits will be required to dig the ship out from where it’s gone aground. Second is a lower sense of urgency. The Ever Forward is not blocking one of the world’s most important shipping lanes, like the Ever Given was. Blocking the Suez canal has enormous consequences. In fact, in an American Shipper article on the Ever Given last year, Link-Wills reported:

The International Chamber of Shipping said the blockage of the canal cost $5.1 billion in world trade per day.

There simply isn’t that kind of motivation to get the Ever Forward afloat again. Of course, shippers whose goods are stuck on the ship might not feel the same way. And Evergreen surely would like to get their ship unstuck as quickly as possibly.

I would also note that shippers shouldn’t have to worry about their shipping containers of goods being taken out of the ship and then needing to be reloaded once the ship is back afloat, as people McFadden spoke to apparently speculated.

Getting the kind of cranes required to remove those containers to the aground ship would be an incredible feat in and of itself. That alone, alone then moving the containers presumably onto another vessel to clear them, could easily be as or more difficult than actually digging and tugging the ship out.

Plan to Free Ever Forward

Link-Wills’s article on the Ever Forward outlines the plan for freeing the massive container ship:

“In terms of planning for rescue operations, dredgers will be used to excavate around the stranded vessel to remove part of the mud, increase the buoyancy of the hull and increase the space (clearance) between the rudder and the seabed to ensure the safety of the ship,” the Evergreen spokesman said. 

“The rescue team is mobilizing all available local tugboats to join in the refloating operation,” he continued. “After sufficient mud is excavated, the amount of ballast water on Ever Forward will be adjusted to reduce the ship’s weight and the refloating operation will begin using both the tugboats and the power of her main engine. The rescue team will carry out the plan utilizing the most beneficial high-tide period in the port area.”

Bigger Picture

While this story doesn’t carry the same interruptive weight to the international shipping industry as the Ever Given getting stuck or many of the other stories we cover in this blog do, it does give things for shippers and the industry to think about.

First, this adds fuel to the fire of the long-pondered question who do these megaships really benefit? About a decade ago in this blog I was bringing up arguments made by those questioning the wisdom of the industry’s trend to larger and larger ships. Many ports and waterways can’t support ships of the sizes commonly used now. Ever Given and Ever Forward are both evidence of added risk with larger ships.

Risk for shippers also increases as more of their goods are packed on to single ships, rather than being diversified across multiple ships. Carrier alliances add to this problem too. Certainly, this risk is one more thing that reminds shippers of the importance of cargo insurance. But it also likely puts upward pressure on those rates too.

There are other obvious questions. Universal Cargo’s CEO, Devin Burke, brought up the broad picture issue when we were discussing this that carriers overload their ships. He also texted me, “Why always Evergreen?” Is that company particularly bad about overloading their ships, making them heavier and more likely to run aground? Is there another issue from this company increasing the risk for the carrier?

It could be coincidental that these two biggest, most publicized recent stories about ships going aground are both Evergreen ships. There was a big Norwegian cruise ship that ran aground around a week ago, so this is something that sometimes happens, and not just to Evergreen. However, Evergreen may need to do a bit of self assessment to make sure the company is doing everything possible to avoid these situations in the future. Two of its megaships running aground in about a year’s time raises eyebrows. A third would be disastrous.

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Biden Administration Introduces FLOW to Improve Supply Chain – Exciting as a Visit from Aunt Flo https://www.universalcargo.com/biden-administration-introduces-flow-to-improve-supply-chain-exciting-as-a-visit-from-aunt-flo/ https://www.universalcargo.com/biden-administration-introduces-flow-to-improve-supply-chain-exciting-as-a-visit-from-aunt-flo/#respond Thu, 17 Mar 2022 20:50:55 +0000 https://www.universalcargo.com/?p=10693 On Tuesday (March 15th, 2022), the Biden Administration put out a "fact sheet" in announcing a freight data exchange program with the intention of improving the still badly congested supply chain. The information exchange is dubbed Freight Logistics Optimization Works or FLOW. Ah, I see what you did there, White House: it's called wishful thinking.

FLOW obviously won't be any kind of immediate fix to get the supply chain flowing, but more transparency in the supply chain is certainly a good thing. And who better to lead the way than the incredibly transparent Biden Administration? Even if a simple lack of transparency was the biggest or one of the biggest causes of the "supply chain crisis" we've been facing, which it's not, it won't be until the end of summer that the White House expects to even have a proof-of-concept.

Find out all about FLOW and read the full text of the White House's "fact sheet" on it by reading the post in Universal Cargo's blog.

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On Tuesday (March 15th, 2022), the Biden Administration put out a “fact sheet” in announcing a freight data exchange program with the intention of improving the still badly congested supply chain. The information exchange is dubbed Freight Logistics Optimization Works or FLOW. Ah, I see what you did there, White House: it’s called wishful thinking.

FLOW obviously won’t be any kind of immediate fix to get the supply chain flowing, but more transparency in the supply chain is certainly a good thing. And who better to lead the way than the incredibly transparent Biden Administration? Even if a simple lack of transparency was the biggest or one of the biggest causes of the “supply chain crisis” we’ve been facing, which it’s not, it won’t be until the end of summer that the White House expects to even have a proof-of-concept.

Photo of Joe Biden by Gage Skidmore
Photo of Joe Biden by Gage Skidmore

When I say more transparency in the supply chain would be a good thing, I particularly mean on the part of ocean freight carriers. Carriers notoriously lack transparency in their operations. It’s been a problem in the international shipping industry since long before I started writing about it over a decade ago, during which time I have made mention of carriers’ transparency issue several times in Universal Cargo’s blog.

The Actual Cause of the Supply Chain Crisis

While a lack of transparency on the part of carriers does add to their unreliability, which is something they are also notorious for, it is not one of the biggest factors in the major supply chain problems we’ve been experiencing for the last two years and that has gotten much worse over the last year. Repeatedly, I’ve gotten into the major causes of the supply chain disruption we’ve been experiencing, but let’s do it one more time for the Biden Administration, sitting in the back of the room.

Policy-Driven Demand Boom

The “supply chain crisis” was triggered by lockdowns and government stimuli creating a boom in consumer spending on goods that caused, in turn, shipping demand to boom with month after month after month after month of near-record to record-high volume hitting the ports. But there were years of other factors building up to make the demand increase such a problem.

Much-Reduced Carrier Competition

One factor was carriers consolidating into just three carrier alliances, which allowed them to manipulate capacity (supply), which they shrunk below market demand through hundreds of blanked (cancelled) sailings at the beginning of the pandemic when demand was expected to decrease. This caused shipping containers and equipment to be maldistributed around the world when demand boomed. These carrier alliances are all approved by federal regulators – something I’ve been calling out as a problem for years in this blog.

Unions Against Automation

Another factor is that the powerful dockworker unions have fought against automation at US ports for years. The result is ports in the US that are less efficient than their counterports (hey White House, I can play with words too) around the world. Who thought this would ever be a problem in the face of more and more goods being shipped every year? Oh, everyone? Everyone who knew about it thought it was problem?

Additional Factors

Additional factors creating the “supply chain crisis” are Covid restrictions and even closures at ports (further reducing efficiency and productivity) and other supply chain points and a trucker shortage that’s been an issue for years and was exacerbated by vaccine mandates. If you go really far down on the list, you’d eventually probably get to a lack of transparency in the industry contributing to the inefficiency of the supply chain.

Enter Flow

Luckily, we have FLOW to the rescue, where the Department of Transportation (DOT), headed by the incredibly experienced Pete Buttigieg, will lead the information exchange efforts. The White House’s “fact sheet” says, “DOT will lead this effort, playing the role of an honest broker and convener to bring supply chain stakeholders together to problem solve and overcome coordination challenges.”

Part of the Biden Administration being an honest anything certainly sounds like “playing a role” to me. But I certainly do hope FLOW is successful in creating more transparency and efficiency in the supply chain and doesn’t evolve into unnecessary regulations requiring compliance on players within the shipping industry that ends up causing even more inefficiency in the supply chain.

One thing I do like is that, of the 18 partners playing a leadership role in shaping this data exchange, there are two major ocean freight carriers recruited: CMA CGM and MSC. As stated above, ocean freight carriers lack transparency. Of course, if they’re shaping what information is shared, shippers may not see improvements in transparency where they’d like to see it with carriers. We’ll have to watch and see how it turns out.

Full Text of Biden Administration’s Announcement of FLOW

Here’s the full text of the White House’s “fact sheet” on FLOW:

Fact Sheet: Biden-⁠Harris Administration Announces New Initiative to Improve Supply Chain Data Flow

March 15, 2022 • Statements and Releases

Freight Logistics Optimization Works (FLOW) Will Speed Up Delivery Times and Reduce Consumer Costs

White House to Host Launch Event Today with Key Industry Stakeholders

Since taking office, the Biden-Harris Administration has been focused on addressing supply chain vulnerabilities and congestion, working to speed up the movement of goods, and lower costs for families. Last year, the ports and the private sector moved a historic amount of goods with record holiday sales and delivery times below pre-pandemic levels. Currently, real retail inventories excluding autos are six percent higher than at the end of 2019 and products at grocery and drug stores are 90 percent in stock, just 1 percentage point below pre-pandemic levels.

The Administration is also focused on addressing the longer-term weaknesses in our nation’s supply chains, the result of decades of underinvestment, outsourcing, and offshoring instead of investment in long-term security, sustainability, and resilience. The Bipartisan Infrastructure Law (BIL) is now making a generational investment in our ports, highways, and other parts of our physical infrastructure, which will help speed up the movement of goods and lower costs. But we can further strengthen our goods movement supply chains by making a similarly bold improvement in a digital infrastructure to connect the supply chain.

To take the first step toward addressing this challenge, the Biden-Harris Administration is announcing the launch of Freight Logistics Optimization Works (FLOW), an information sharing initiative to pilot key freight information exchange between parts of the goods movement supply chain. FLOW includes eighteen initial participants that represent diverse perspectives across the supply chain, including private businesses, warehousing, and logistics companies, ports, and more.  These key stakeholders will work together with the Administration to develop a proof-of-concept information exchange to ease supply chain congestion, speed up the movement of goods, and ultimately cut costs for American consumers. DOT will lead this effort, playing the role of an honest broker and convener to bring supply chain stakeholders together to problem solve and overcome coordination challenges. This initial phase aims to produce a proof-of-concept freight information exchange by the end of the summer.

A Novel Data Sharing Partnership

Recent supply chain disruptions have raised national awareness of the need for improved information exchange. Supply chain stakeholders deserve reliable, predictable, and accurate information about goods movement and FLOW will test the idea that cooperation on foundational freight digital infrastructure is in the interest of both public and private parties. FLOW is designed to support businesses throughout the supply chain and improve accuracy of information from end-to-end for a more resilient supply chain.

Resiliency—the ability to recover from an unexpected shock—requires visibility, agility, and redundancy. The lack of digital infrastructure and transparency makes our supply chains brittle and unable to adapt when faced with a shock. The goods movement chain is almost entirely privately operated and spans shipping lines, ports, terminal operators, truckers, railroads, warehouses, and cargo owners such as retailers. These different actors have made great strides in digitizing their own internal operations, but they do not always exchange information with each other. This lack of information exchange can cause delays as cargo moves from one part of the supply chain to another, driving up costs and increasing goods movement fragility.

This effort shows a strong and deliberate response by the Administration to tackle this challenge head-on and set the country on the right trajectory for a resilient and globally competitive 21st century goods movement chain. The Biden-Harris Administration is laser focused and creative in identifying ways to speed up the movement of goods from ships to shelves and cut costs for American consumers. With FLOW, the Biden Administration will play a leadership role in bringing companies together to problem solve for the American people. Initial partners in FLOW include:

Port Authorities:

  • Port of Long Beach
  • Port of Los Angeles
  • Georgia Ports Authority

Ocean Carriers:

  • CMA CGM
  • MSC

Terminal Operators:

  • Fenix Marine Terminal
  • Global Container Terminals

Business: 

  • Albertsons
  • Gemini Shippers
  • Land O’ Lakes
  • Target
  • True Value

Chassis:

  • DCLI
  • FlexiVan

Logistics and Warehousing:

  • FedEx
  • Prologis
  • UPS
  •  CH Robinson

These first partners are committed to working with the Biden-Harris Administration to identify and operationalize a first information exchange that will support a more resilient and fluid supply chain. They represent stakeholders throughout the supply chain including large BCOs (beneficial cargo owners) like Target, small and medium size businesses represented by True Value and Gemini Shippers, as well as agricultural producers such as Land O’Lakes. FLOW will be able to address issues such as ensuring early return dates are consistent across partners, measuring more accurate chassis availability and understanding aggregate dwell time throughout the supply chain. The principles of the pilot include the following: it is a voluntary, secure national exchange for freight information, it is available to participants who share data, and it is sustained by supply chain operational improvement.

For additional interested parties, the Biden-Harris Administration is launching a webpage to gauge additional stakeholder interest in supporting foundational freight infrastructure:

While starting with a limited pilot, DOT wants to hear from others who are interested in engaging as part of FLOW as a participant as the initiative grows. Within one month of the FLOW launch, DOT will launch a web page to gauge industry interest in participation and data sharing for a potential long-term FLOW effort.

Building on Ongoing Supply Chain Achievements

The FLOW initiative builds on previous successes of the Biden-Harris Supply Chain Disruptions Task Force to ensure cargo is getting from ship to shelf, including:

  • Reduced Dwell Time in Los Angeles and Long Beach. At the beginning of November, with support from the Administration, the Ports of Los Angeles and Long Beach proposed charging the ocean carriers for cargo that dwelled on the docks for nine days or more, which led to about a 60 percent reduction in the number of long-dwelling import containers on the docks to date.
  • Alleviated congestion at the Port of Savannah by funding the Georgia Port Authority pop-up container yards project. With this policy change, the Georgia Port Authority was able to reallocate more than $8 million to convert existing inland facilities into five pop-up container yards in both Georgia and North Carolina.  Since the temporary container yards opened in late November, the container yards have provided relief to about 5,000 containers over eight weeks and freed up more dock space, speeding goods flow in and out of the Port of Savannah.
  • Secured commitments to move towards 24/7 operations via a Presidential call to action to encourage every link in the goods movement chain to move towards a 24/7 pace to increase the volume and pace of products flowing through the system. The Ports of Los Angeles and Long Beach and International Longshore and Warehouse Union (ILWU) workers joined together to make the first commitment. Some of the countries’ largest companies joined in as well—including Walmart, Target, FedEx, UPS, Home Depot, Best Buy, The Gap, and Samsung—committing to try a new solution.

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Massive Chinese Lockdowns Present More Supply Chain Disruption https://www.universalcargo.com/massive-chinese-lockdowns-present-more-supply-chain-disruption/ https://www.universalcargo.com/massive-chinese-lockdowns-present-more-supply-chain-disruption/#respond Tue, 15 Mar 2022 22:02:27 +0000 https://www.universalcargo.com/?p=10691 China’s insane Covid Zero policies strike again. The country has shut down an entire province due to a rise of Covid-19 cases. This has millions of people locked in their homes, major manufacturing hubs shut down, and adds yet another large disruption to the global supply chain. But at least it follows a strategy proven […]

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China’s insane Covid Zero policies strike again. The country has shut down an entire province due to a rise of Covid-19 cases. This has millions of people locked in their homes, major manufacturing hubs shut down, and adds yet another large disruption to the global supply chain. But at least it follows a strategy proven to be effective in fighting coronavirus. Oh wait, lockdowns have been shown over and over again not to work. And China has been so strict with Covid regulation that a single positive test is enough to close a major port terminal. But maybe if China just follows failed tactics and policies on a larger scale…

Bloomberg reports:

China placed the 17.5 million residents of Shenzhen into lockdown for at least a week and forbade people from leaving Jilin, the first time the government has sealed off an entire province since the area surrounding Wuhan was isolated in early 2020.

China Sea Shipping

Joe McDonald of the Associated Press (AP) reports:

Chinese authorities on Tuesday tightened anti-virus controls at ports, raising the risk of trade disruptions after some auto and electronics factories shut down as the government fights coronavirus outbreaks.

Stock prices in China and Hong Kong sank for a second day following the shutdown on Monday of Shenzhen, a tech and finance hub adjacent to Hong Kong in the south, and Changchun, an auto center in the northeast. Bus service to Shanghai, China’s business capital and biggest city, was suspended.

“We can think of no risk to the global economy, excluding nuclear warfare, that is greater than the risk of a COVID outbreak in China that shutters industrial production,” said Carl B. Weinberg of High-Frequency Economics in a report. “Uncountable manufacturing supply chains pass through China.”

Economists say for now, smartphone makers and other industries can use factories and suppliers in other parts of China. But a bigger threat looms if business is disrupted at ports in Shenzhen, Shanghai or nearby Ningbo.

Are Ports Shutting Down?

How likely is it that the ports will be impacted? Well…

American Shipper published an article yesterday by Lori Ann LaRocco entitled, “Logistics companies warn clients lockdown in Shenzhen will impact port activity.”

That makes it sound not only likely but an absolute that ports will be impacted. It’s hard to imagine there will be no impact, but how much disruption will happen – and even is happening – is unclear.

Initially, LaRocco reported information from Seko Logistics that no cargo would load in Yantian because of the lockdowns. But Seko corrected itself later that cargo was being loaded at operational terminals in Yantian, so the article itself was updated:

With China locking down the port city of Shenzhen on Sunday in hopes of reducing a COVID-19 spread, Seko Logistics warned clients that the measure will impact the delivery of products from that region.

Other companies, including Worldwide Logistics Group and Orient Star Group, also issued advisories about a potential disruption.

Seko’s COVID-19 advisory note on Sunday explained that because of the weeklong lockdown in Shenzhen, “no cargo will be able to load in Yantian … and vessels most likely will omit the port.”

But on Monday afternoon, Seko issued a corrected advisory. “We have been advised that Yantian port terminals are operating and loading cargo,” the amendment stated.

Trucking restrictions for vehicles traveling in and out of Shenzhen remain in effect and could slow the supply chain, since no cargo from outside the restricted area can enter.

Risk of Repeat of Yantian Port Closure

LaRocco went on to provide a reminder of what bad news shutting down the Port of Yantian is for shippers, who have seen so many supply chain disruptions over the last two years they amazingly probably need the reminder:

China’s “zero-COVID” strategy was previously used in Yantian in 2021, when it was closed for a month between May and June. The move created havoc on the supply chain, and the clog took months to dissolve.

Greg Miller provided perspective on that shutdown in another American Shipper article:

When an outbreak hit the Yantian terminal in Shenzhen last June, twice as many vessels were delayed as in the Ever Given accident in the Suez Canal.

Even if the terminals at the Port of Yantian are not officially shut down, it’s hard to imagine the lockdown on Shenzhen not affecting the movement of goods. As LaRocco writes, “The issue is that trade and manufacturing take people. If workers cannot leave their houses, nothing can get made or transported.”

List of Current Lockdown Impacts

Seko, in its advisory, gave a bulleted update on the situation in Shenzhen, which LaRocco included an image of at the end of her article. Here are some highlights to know about China’s latest Covid Zero actions.

  • Shenzhen is locked down from March 14-20th.
  • Restrictions are now in effect across all of Shenzhen. For the next week, no one will be allowed to leave their apartment complex except to do three rounds of Nucleic Acid Testing.
  • For the following week, all public transportation in Shenzhen stops operating
  • All businesses in Shenzhen will be closed from March 14th-20th unless considered essential services.
  • Yantian Free Trade Zone will be closed from March 14th-20th.
  • All vessels at Yantian Port already loaded and departing this week will depart as planned.
  • No cargo will load in Yantian from next week and vessels most likely will omit the port.
  • There has not been an advisory of official restrictions to Shenzhen Airport; however, staff members are unable to leave their homes to work at the airport
  • Trucks from outside Shenzhen are unable to enter the city.
  • Cross border shipments from Shenzhen to Hong Kong will not move unless they carry essential goods to Hong Kong.

It’s impossible to know just how much disruption we’re going to see. But it is good news that initially movement of goods has happened at the ports, but it feels like everyone is just waiting for the other shoe to drop.

Greg Miller’s American Shipper article also provides updates on what’s happening with shipping during China’s “massive lockdowns”:

Liner giant Maersk reported Monday that all ports in China, including those in Shenzhen, were operating normally and “remain business as usual.” Warehouses in Shenzhen are closed through Sunday. Warehouses in Shanghai and Qingdao remain open, although truckers require negative COVID tests to pick up cargo.

Some Good News?

What’s interesting is that there are some projecting it would be good news if the ports remain open while manufacturers close for a little bit. Of course, if ports close, that’s bad news all around. Miller continues in his article:

Griffiths told American Shipper, “If no ports shut down but volumes coming out of factories are reduced [by lockdowns] that actually would be pretty good for ports.” It would allow more backlogs at Chinese export terminals to get loaded on ships, and help to normalize supply chain flows without forcing carriers to “blank” (cancel) sailings.

If Chinese ports do close, causing ships to drop calls or blank entire sailings, it would be short-term positive for U.S. ports — but they’d pay the piper later.

Demand Finally Falling

Of note, U.S. demand for Chinese goods is not as strong as it was a year ago when Yantian Port was closed. This could help the impact of the lockdowns in China not to be as bad for shippers and the supply chain as the previous disruption at the Yantian Port. Miller reports:

It was historically high in 2021 and appears to have at least temporarily slackened in 2022, beyond the normal Lunar New Year lull.

“We haven’t seen large volumes being booked for February or March, although April’s looking fairly tight. We’re seeing some improvement from where we were immediately post-Lunar New Year, but it’s still fairly tepid,” said Griffiths.

I’m still of a mind we’re going to see serious reduction in demand because of the running out of government stimuli and rampant inflation. For a long time, I’ve been predicting those two factors (along with more and more reductions to Covid restrictions keeping people from going out and traveling) to decrease demand. I’ve even been warning with this that there’s a risk of a serious crash. I expected to see these factors come into play and reduce demand well before now. In actuality, we’re just starting to really see it happen, though inflation has been a serious problem since our elected officials started pumping trillions of dollars into the demand side of the economy while hitting the supply side with heavy regulatory restrictions – most around Covid and climate change politics.

Key takeaway: strap in. Things could get real ugly.

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What?! Russia/Ukraine Conflict Could Ease U.S. Port Congestion & Freight Rates? https://www.universalcargo.com/what-russia-ukraine-conflict-could-ease-u-s-port-congestion-freight-rates/ https://www.universalcargo.com/what-russia-ukraine-conflict-could-ease-u-s-port-congestion-freight-rates/#respond Tue, 08 Mar 2022 23:59:56 +0000 https://www.universalcargo.com/?p=10680 It's generally accepted that World War II ended the Great Depression. Could the Russia conflict end America's supply chain crisis? Or at least mitigate it? Hmmm...

Greg Miller wrote an American Shipper article, How invasion of Ukraine could ease shipping logjam off US ports, which reports on an expert opinion that this current conflict could ease freight rates and improve the flow of bottlenecked supply chains for U.S. shippers.

The idea of war reducing freight rates is a bit counterintuitive. Usually war disrupts shipping routes while increasing goods and supplies that need to be shipped around the world. This increases demand on operating trade routes, which puts upward pressure on freight rates. Miller begins his article by addressing this:

"The traditional wisdom is that geopolitical chaos is good for shipping demand. Trade patterns are disrupted and become less efficient. Cargo must travel longer distances. Rates rise.

"But Niels Rasmussen, chief shipping analyst at BIMCO, the world’s largest shipping association, believes Russia’s invasion of Ukraine will be bad for shipping demand."

Find out more by reading the full article in Universal Cargo's blog.

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It’s generally accepted that World War II ended the Great Depression. Could the Russia conflict end America’s supply chain crisis? Or at least mitigate it? Hmmm…

Greg Miller wrote an American Shipper article, How invasion of Ukraine could ease shipping logjam off US ports, which reports on an expert opinion that this current conflict could ease freight rates and improve the flow of bottlenecked supply chains for U.S. shippers.

The idea of war reducing freight rates is a bit counterintuitive. Usually war disrupts shipping routes while increasing goods and supplies that need to be shipped around the world. This increases demand on operating trade routes, which puts upward pressure on freight rates. Miller begins his article by addressing this:

The traditional wisdom is that geopolitical chaos is good for shipping demand. Trade patterns are disrupted and become less efficient. Cargo must travel longer distances. Rates rise.

But Niels Rasmussen, chief shipping analyst at BIMCO, the world’s largest shipping association, believes Russia’s invasion of Ukraine will be bad for shipping demand.

The war “will hurt growth in all shipping segments,” he maintained in a report published Monday. Citing estimates that the conflict could shave 1% off global GDP growth, he said: “No matter the specific Russia and Ukraine export developments, this will hurt growth projections for all shipping sectors.”

Import Shipping Containers

Let’s say Rasmussen is correct and the conflict reduces global GDP by 1% and we further assume that 1% is evenly enough distributed that it reduces America’s GDP by 1%. Add to that a further reduction to U.S. importing and exporting demand (especially the former) thanks to record high inflation. Such a decrease in demand certainly would create downward pressure on freight rates.

However, would ocean freight carriers be able to compensate (even overcompensate) for the reduced demand by reducing capacity?

Think back to the beginning of the pandemic. Carriers were projected to lose billions with a reduction of shipping demand. We all know the exact opposite ended up happening, but in the beginning there was a dip in demand. That dip did not cause a drop in freight rates because the carriers utilized their alliances to blank (cancel) hundreds of sailings, reducing capacity well below market demand. Freight rates actually climbed. Then they soared with the explosion of demand due to lockdowns and government stimuli.

That explosion of demand is a massive piece to the puzzle of U.S. port congestion. Month after month after month after month of near-record to record-high cargo hitting U.S. ports that lack efficiency due to years of dockworker unions fighting automation and exasperated by COVID protocols; equipment and container maldistribution, thanks largely to all those blanked sailings; and trucker shortages add up to the bottlenecked ports we’ve been suffering for well over a year.

Now imagine the demand part of that puzzle was alleviated.

“When the traffic jam of ships off U.S. ports does finally clear, stranded shipping capacity will be injected back into the marketplace, creating more downward pressure on freight rates,” Miller writes in his article.

That quote followed Miller’s reporting of how Rasmussen (and another analyst) sees the war, including its energy inflation impact, reducing demand:

“The impact of the war on the global economy and consumer confidence may weaken growth prospects,” while the war’s effect on oil, wheat and corn prices could “lead to the destruction of demand as consumers and businesses prioritize spending.” Historically high prices for ship fuel “will only add to the inflationary pressure.”

Stifel analyst Ben Nolan made the same point in a new client note, cautioning that energy inflation could hit consumer spending and “the container industry … could be negatively impacted.”

Rasmussen said that demand destruction “could lead to an earlier ‘return to normal’ from the current elevated demand, which in turn could ease congestion in ports.”

Not only do the experts Miller is reporting on think West Coast congestion and freight rates will improve, but the war will also create downward freight rates specifically on U.S. imports through East Coast ports:

S&P Global Platts pointed to another potential negative for container rates in the trans-Atlantic. “As major shipping lines refuse to carry cargoes to Russian ports in the Baltic Sea, more space could become available for headhaul cargoes from North Europe to the East Coast of North America,” it said, adding that this may bring rates lower, or alternatively, compel carriers to cancel trans-Atlantic sailings to support rates.

There’s that blank sailing option from carriers again. They’ve had so much financial success after utilizing their alliances to reduce capacity through blank sailings when demand dips or looks like it’s about to dip, it’s hard to imagine they won’t continue this strategy.

In the short-term, downward pressure on freight rates to East Coast ports is not what’s being seen. The conflict is currently creating congestion at European ports, which is something that helps drive up freight rates. How that European congestion is being created by the Russia conflict does get a paragraph in Miller’s article:

Russia-bound container cargoes require increased inspections, slowing operations at European ports. Almost all shipping lines have now suspended service to Russia, dropping off Russia-bound boxes at other terminals en route. The result is increased congestion at European container ports — and congestion is a positive driver of freight rates.

Miller calls that “the immediate effect in one region” before launching into the further down the road stuff already quoted and discussed above.

Of course, I have trouble thinking of the congestion at European ports as only affecting one region. Disruptions at ports, canals, or other important international shipping points tend to ripple across the global supply chain. Congestion at European ports certainly will have a negative impact on cargo heading for U.S. East Coast ports.

When it comes to the really big impact on U.S. shipping (as well as the economy and everyday life of Americans) in this whole mess, I believe inflation is the top factor. The White House announced today a ban on Russian oil, liquefied natural gas, and coal by executive order from President Biden.

We’ve already felt it at the gas pumps. We see it our gas bills (my March PG&E bill is up over 75% from what it was in January without increasing the use of our gas heaters). We’re about to see it get even worse. Thomas Barrabi reported in the New York Post:

The US imported about 672,000 barrels per day of crude oil and petroleum products from Russia in 2021, according to data from the Energy Information Agency. That total accounted for roughly 8% of all US imports.

It’s hard to think of it as a positive that inflation may decrease demand enough to relieve port congestion and even bring down freight rates a little. It’s doubtful there’s a net gain there. In fact, it’s probably net loss for Americans. What’s worse is beyond carriers’ ability to manipulate capacity to prop up freight rates, higher oil prices is also an upward pressure on freight rates.

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Port Congestion Solution Highlight: Port of Wilmington https://www.universalcargo.com/port-congestion-solution-highlight-port-of-wilmington/ https://www.universalcargo.com/port-congestion-solution-highlight-port-of-wilmington/#respond Thu, 03 Mar 2022 21:27:59 +0000 https://www.universalcargo.com/?p=10678 To help shippers improve their international shipping, Universal Cargo’s blog often points out problems with, risks to, and likely disruptions in the supply chain. The goal of making shippers aware of problems, both current and potential, is to help shippers mitigate negative impacts on their businesses and even find solutions before problems strike. Port congestion […]

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To help shippers improve their international shipping, Universal Cargo’s blog often points out problems with, risks to, and likely disruptions in the supply chain. The goal of making shippers aware of problems, both current and potential, is to help shippers mitigate negative impacts on their businesses and even find solutions before problems strike.

Port congestion has obviously been a major problem for U.S. ports lately, especially – though not exclusively – on the West Coast. The most shipped-through ports, those of Long Beach and Los Angeles, represent the epitome of port congestion. With the high risk of things getting, as hard as it is to believe, worse at West Coast ports from contentious ILWU contract negotiations in the upcoming months, we want to focus on a solution instead of the problem in today’s post.

That’s right, a little positivity – something there’s precious little of in the current news cycle.

Today we highlight an East Coast port that shippers can use as an alternative to congested West Coast ones: the Port of Wilmington.

Medium-Sized, Deep-Water Port

Here are some specs of the Port of Wilmington from its own website:

Port of Wilmington

It offers a deep 42-foot navigational channel, nine berths with 6,768 feet of wharf frontage, four post-Panamax container cranes and three neo-Panamax container cranes.

Post- and neo-Panamax are terms that can be confusing – they almost sound like they should be the same thing. Neo-Panamax or New Panamax refers to the maximum size of ships that can fit through the Panama Canal since its expansion. Not remembering off the top of my head the specifications of how big these ships can be, I grabbed that information from Marine Insight:

These vessels have a load-carrying capacitance of about 13,000 Twenty-foot Equivalent Units (TEUs) with lengths up to 427 meters.

Post-Panamax, on the other hand, does not also mean Panamax ships after the expansion of the canal. Post-Panamax ships are those still too big to pass through the canal. I don’t love the term, as the prefix “post” generally means after not larger.

Ultimately, what all this adds up to is the Port of Wilmington is a medium-sized port that can handle very large ships.

Sometimes Overlooked

When shippers think about East Coast ports to consider as alternatives to West Coast ports like those of Los Angeles and Long Beach, Wilmington is not likely to be the first to come to mind.

The first place shippers likely think is the Port of New York/New Jersey. It’s the busiest port on the East Coast, and not surprisingly, it has suffered a great deal of congestion lately too. If shippers did a Google search for top East Coast ports, after NY/NJ, they’d likely find the Ports of Savannah, Norfolk, and Charleston. These too have been top picks for alternative ports to West Coast ones.

While Universal Cargo’s ops team would be very familiar with the Port of Wilmington, I’ve probably mentioned the port in fewer than ten of the more than a thousand blogs I’ve posted here over the last decade.

What really brought the Port of Wilmington to my attention is a recent a email that Universal Cargo’s CEO forwarded me that claimed going to Wilmington, NC as an entry point for goods is worth taking advantage of because there’s no congestion there. Not at berth and not at truck gates.

My curiosity was piqued enough to investigate.

Smooth Sailing

The first place I looked to find out if the claim that there is no congestion at the Port of Wilmington is true was shipping and news outlet write-ups to see if there was anything published about congestion at the port.

Surprisingly, there was a lack of articles talking about congestion at the Port of Wilmington. This doesn’t mean there is no congestion there. It could just be that it got overlooked by bigger news stories and more severe port congestion at larger ports. I wasn’t seeing any stories about a dearth of congestion there either.

An easier way to get an idea of the congestion, or lack thereof, at the Port of Wilmington was to look at how many ships were currently there and how many were on their way. Utilizing MarineTraffic.com’s vessel tracking at the port, there are at the time of writing 16 vessels at the Port of Wilmington and 9 expected arrivals. That’s a perfectly reasonable number of ships for the medium-sized port to handle.

Contrast that with 123 ships at the Port of Los Angeles with 74 expected arrivals and 79 vessels at the Port of Long Beach with another 74 expected arrivals, and you have a stark difference. That’s a total of over 200 ships docked or waiting to dock at the San Pedro Bay Port Complex with nearly another 150 expected to arrive.

It’s not a fair comparison to directly compare the number of ships at both ports, considering the Ports of Los Angeles and Long Beach are much bigger ports and are the busiest in the nation in terms of capacity shipped through them, but the number of ships there is well beyond what those ports can reasonably handle. That’s why, for months in this blog, we’ve been talking about queues of ships waiting to berth there as a major indicator of the ports’ congestion.

Things are so congested at the Ports of Los Angeles and Long Beach, the queue of container ships waiting to berth hit an all-time high of 109 last month.

When you look at the number of ships at the Port of Wilmington vs. what it can handle compared to doing the same at the Ports of Los Angeles and Long Beach, you’ll find the ports are on the opposite ends of the spectrum when it comes to congestion.

Wilmington as a Solution

Clearly, the Port of Wilmington is a much smaller port than the Ports of Los Angeles and Long Beach. You couldn’t solve the port congestion at Los Angeles and Long Beach just by shifting cargo movement from these ports to Wilmington. However, for some shippers it is a very viable option for improving their businesses’ supply chains while things are bad at West Coast ports.

Ocean freight carriers seem to be taking more notice of the Port of Wilmington too. CMA CGM, the world’s 3rd largest carrier by capacity, will be making its first call on the port this month, according to a press release it put out in January. Such moves by shipping lines means more opportunities for shippers to utilize the port as a solution for bottlenecks set to delay their shipments through other ports.

Of course, there are additional East Coast and Gulf Coast ports to consider as well, but the Port of Wilmington is worth highlighting and looking into.

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New Suez Toll Hike Significant for U.S. Importers https://www.universalcargo.com/new-suez-toll-hike-significant-for-u-s-importers/ https://www.universalcargo.com/new-suez-toll-hike-significant-for-u-s-importers/#respond Wed, 02 Mar 2022 01:08:51 +0000 https://www.universalcargo.com/?p=10659 There are many world events affecting current and upcoming ocean freight rates. Sanctions on Russia with its aggression on Ukraine obviously affects cargo movement to and from that region, and rippling across supply chains, and likely increases fuel/oil bunkers. Environmental mandates are set to add upward pressure on freight rates, dampening the effect of demand's return to more normalized levels in the upcoming months and even years. These widely publicized things we'll likely go into some depth on in future posts, but there's another event happening right now that seriously impacts ocean shipping that is flying under the radar.

The Suez Canal is upping its tolls. In double-dip fashion. This is the second toll increase within about a month's time at the crucial passageway for the international shipping industry. For U.S. shippers, it's not just those who import to the East Coast who are likely to feel the impact.

Get all the details by reading the post in Universal Cargo's blog.

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There are many world events affecting current and upcoming ocean freight rates. Sanctions on Russia with its aggression on Ukraine obviously affects cargo movement to and from that region, rippling across supply chains, and likely increases fuel/oil bunkers. Environmental mandates are set to add upward pressure on freight rates, dampening the effect of demand’s return to more normalized levels in the upcoming months and even years. These widely publicized things we’ll likely go into some depth on in future posts, but there’s another event happening right now that seriously impacts ocean shipping that is flying under the radar.

The Suez Canal is upping its tolls. In double-dip fashion. This is the second toll increase within about a month’s time at the crucial passageway for the international shipping industry. For U.S. shippers, it’s not just those who import to the East Coast who are likely to feel the impact. Let’s get the details…

How Big Is the Suez Canal Toll Increase?

Lori Ann LaRocco reports in American Shipper:

The increase for both full and empty vessels will be either 5%, 7% or 10%, depending on carrier type, and become effective Tuesday.

This is the second toll increase on all vessels, with the exception of LNG and cruise ships, in the last month. Those two vessel classes were spared when the Suez Canal Authority (SCA) announced in early November that it would increase transit tolls through the canal by 6% beginning in February.

… According to [Xeneta Chief Analyst Peter Sand], for a large container ship, this hike means a one-way transit goes from $625,000 to $675,000.

If you know anything about shipping lines, when they get hit with fees and cost hikes, they pass them on to their customers, the shippers.

Why Should West Coast Shippers Care?

Many of Universal Cargo’s customers import from Asia through the U.S. West Coast. If your importing practices are similar, you may be thinking why should I care about this toll increase? I don’t ship through the Suez Canal.

Well, if you’re a regular reader of this blog, you know that the International Longshore & Warehouse Union (ILWU) master contract expires this year. Because of that, there’s a high level of risk that there will be disruption at West Coast ports from contentious contract negotiations with the dockworkers’ union there.

One of the top ways to mitigate this risk is using alternate importing routes that will bring goods in through the East Coast. If the risk turns into reality, many will find themselves needing to divert their cargo to alternate ports. Either of these situations would lead to shippers who wouldn’t normally ship that way being forced through the Suez Canal and paying these heightened tolls.

For shippers who look to keep their imports on transpacific routes, going through the Panama Canal to Gulf and East Coast ports, disruption at West Coast ports could have a trickle effect to increased traffic and delays down there at the gateway through Panama too.

No doubt, carriers will likely increase rates and fees on transpacific shipping if the ILWU negotiations add another level of port congestion, which has already been a major problem for more than a year. Of course, as demand for East and Gulf Coast ports rises from shifting market share, freight rates will rise on those routes too.

map of Africa Suez Canal vs Cape Route
Map of Africa by mapswire with Suez Canal and Cape Route markings added.

Because of the long-standing port congestion at the Ports of Los Angeles and Long Beach, as well as other West Coast ports, there has already been a significant amount of the shipping market that has shifted to East and Gulf Coast ports, so some shippers are now already newly using this toll-increase route and have one more cost increase to add to their calculations.

Going the Long Way?

There’s another potential option for U.S. shippers whose goods look like they’re about to go through the now more expensive Suez Canal: going the long way around.

When the Ever Given turned sideways and ran aground, blocking the Suez Canal, many ships were rerouted to go down and around the Cape of Good Hope. Obviously, going all the way around the continent instead of cutting across along the north of Africa, as the Suez Canal allows, is a much longer trip that requires more fuel.

The trip around Africa is more than 10,000 nautical miles. It adds more 4,400 nautical miles to a cargo ship’s trip.

Does the longer time and higher fuel cost make it so this option of avoiding the increased toll cost of the Suez Canal worth it? According to LaRocco, “The Suez will be a less costly option.” For now, I’ll take her word rather than do the complex research of trying to average out the likely cost difference for shippers.

The increased time and fuel costs upping the freight rates shippers would pay is also a moot point, as ocean freight carriers would have to offer the sailings around the Cape of Good Hope. It’s not only shippers who are negatively impacted by longer transit times. The longer a ships’ route, the fewer sailings it can make to convert its capacity into dollars. However, if ocean freight carriers do the calculations and see there is a financial benefit to going around the continent, perhaps adding an African port or two to ships’ berthings, more such sailings could be offered to shippers as an alternate option.

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2022 Supply Chain Outlook for U.S. Shippers https://www.universalcargo.com/2022-supply-chain-outlook-for-u-s-shippers/ https://www.universalcargo.com/2022-supply-chain-outlook-for-u-s-shippers/#respond Thu, 24 Feb 2022 21:50:13 +0000 https://www.universalcargo.com/?p=10658 We may have seen a full shift in U.S. import patterns for 2022, particularly with an increase in cargo volumes through East Coast ports.

Bill Mongelluzzo reports in the Journal of Commerce:

"Import volumes in the first half of 2022 are expected to stabilize to the West Coast but continue growing to the East Coast, according to the weekly Sunday Spotlight newsletter from Sea-Intelligence Maritime Analysis."

I see the potential for West Coast shipping volumes to level out and East Coast volumes to attract what would normally be West Coast cargo movement through the second half of 2022 as well.

Find out all about that and more by reading the full post in Universal Cargo's blog.

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We may have seen a full shift in U.S. import patterns for 2022, particularly with an increase in cargo volumes through East Coast ports.

Bill Mongelluzzo reports in the Journal of Commerce:

Import volumes in the first half of 2022 are expected to stabilize to the West Coast but continue growing to the East Coast, according to the weekly Sunday Spotlight newsletter from Sea-Intelligence Maritime Analysis.

Not Only for the First Half of 2022

I see the potential for West Coast shipping volumes to level out and East Coast volumes to attract what would normally be West Coast cargo movement through the second half of 2022 as well.

Ocean Freight Port

Port congestion has been a major problem for well over a year, but it has been especially bad at West Coast ports, with the Ports of Los Angeles and Long Beach serving as the poster children for supply chain bottlenecks. Naturally, this would lead to diverting some imports to East Coast ports (as has been happening for months). But that’s not the only thing that could impact 2022 shipping behavior for U.S. importers and exporters.

Since August of last year, I’ve put warnings in this blog to shippers that there could be disruptive contract negotiations at West Coast Ports this year. In fact, that’s likely. The International Longshore & Warehouse Union (ILWU) master contract expires this year, and talks for a new one are expected to get contentious over the issue of automation.

Avoiding ILWU Congestion Makes Second Half of 2022 East Coast Cargo Shift Likely

One of the top ways shippers can protect their supply chains from likely ILWU strife-driven port congestion is to explore shipping through East Coast ports. For that reason, a continued trend through the end of the year of exceptionally strong East Coast performance and leveling off West Coast volume, as is expected for the first half of 2022, is likely. If things look like they’re getting really bad between the ILWU and Pacific Maritime Association (PMA), West Coast ports could see a real dip in volume while East Coast ports reap the benefits.

Inflation Could Impact Volume

It should be noted that it’s not at all improbable that overall import volume to the U.S. could be negatively impacted by the likely event that inflation continues to soar through 2022. Obviously, that would impact cargo volume at West, East, and Gulf Coast ports.

For a year and a half, shipping demand soared unnaturally because of government policies in the U.S. of lockdowns, COVID restrictions, and stimulus packages. This soaring demand obviously played a large role in the port congestion and supply chain bottlenecks and disruptions the U.S. has been struggling with. Those policy decisions, especially the trillions upon trillions in government spending (and money-printing spree that came with it) are also enormous factors in why we’re experiencing higher inflation than has been seen in 40 years.

There’s no reason to believe those currently in power in Washington will be able to fix the inflation problem anytime soon. Especially when it’s their policies that have been making inflation worse. Established spending patterns can prop up shipping demand, but it’s hard to believe inflation won’t eventually hurt overall shipping volume. If inflation is reigned in over the course of 2022, there could be a dramatic shift in shipping demand on the way.

Despite Misleading Improvement, Port Congestion Still a Massive Problem at West Coast Ports

Even with soaring inflation, we’re a long way from seeing real congestion relief at the ports. Thanks to the Chinese New Year that came this year on February 1st, we did see a significant drop in the number of ships waiting to dock at the Ports of Los Angeles and Long Beach. During the Lunar New Year celebrations in China, factories close down for a couple of weeks, which always results in a reduced number of ships and imports hitting U.S. West Coast ports. However, there is still an incredibly large queue of ships waiting to dock.

Greg Miller reported in American Shipper that there were 66 container ships waiting yesterday for berths at the sister ports of Los Angeles and Long Beach. Yes, that is an incredibly high number of ships. However, it’s an enormous improvement in the bottleneck of ships we’ve been seeing there. In January, Miller reported, there was an average of 102 waiting offshore per day. 66 container ships waiting to dock suddenly sounds like a great number when compared to last month’s average and the all-time high of 109 that Miller reported happened on January 9th.

The Ports of Los Angeles and Long Beach need to take advantage of the reduced numbers of ships and cargo as much as they can right now because those numbers are, of course, expected to surge again in the very near future. Miller reports:

The data shows that weekly scheduled departures plunged to 22% below the average during the week of Jan. 17 and to 30% below average in the week of Jan. 24. Given the trans-Pacific transit time, this would cut the queue in February.

The Sea-Intelligence numbers reveal that the scheduled departures have not only rebounded since then but are about to shoot much higher. Scheduled departures are up around 16% in February compared to the 2017-19 average. In the third week of March through the end of April, departures will be up 40% or more versus pre-COVID levels.

Unfortunately, that data does not bode well for port congestion recovery at the Ports of Los Angeles and Long Beach in the upcoming months. At that point, we’ll be getting dangerously close to the ILWU contract expiration and then the summer to fall international shipping peak season.

East & Gulf Coast Ports Not Immune to Congestion

Meanwhile, the diversion of cargo from the West Coast to East and Gulf Coast ports is having a toll that will likely only get worse as 2022 continues. Miller writes:

According to [Sea-Intelligence CEO Alan Murphy], “What is alarming is that there is a 60% increase in the number of vessels on the Asia-North America East Coast trade lane in the coming months, as carriers try to circumnavigate port congestion on the West Coast. This will severely increase pressure on the port infrastructure on the East Coast.”

That pressure is already high, particularly in Charleston. On Wednesday, there were 31 container ships anchored offshore, according to ship-positioning data from MarineTraffic. Project44 data shows that average container dwell time in Charleston this week is up 37% year on year.

Other East and Gulf Coast ports are seeing ship queues lengthen, as well. On Wednesday, there were 13 container ships anchored or loitering off New York/New Jersey, where Hapag-Lloyd said “high berth and terminal utilization are expected to continue into the second quarter.” There were another 13 container ships off Virginia, 12 off Houston and one off Mobile, Alabama, according to MarineTraffic data. 

Add it all up and there are 70 ships waiting to get into East/Gulf Coast ports, four more than there are waiting to get into Los Angeles/Long Beach. Over on the West Coast, add in another 10 ships waiting for berths in Oakland and one more off Seattle/Tacoma, and the grand total for the country’s ports rises to 147 — the same countrywide level as in early January, when the LA/LB queue was at its historic peak.

Port of Charleston Implements Short Export Embargo Because of Congestion

Because of how congested the Port of Charleston is, it’s not accepting export cargo at its Wando Welch Terminal this morning or tomorrow morning. Ari Ashe reports in the JOC:

The Port of Charleston will not accept loaded exports during the mornings this Thursday and Friday at its Wando Welch Terminal because the port is running critically low on space amid a deluge of import containers that cargo owners are failing to pick up in a timely fashion.

The embargo on export loads will run from 5:00 a.m. to noon on Thursday and Friday, the South Carolina Ports Authority (SC Ports) said in a statement late Wednesday. Empty containers and temperature-controlled loads will be accepted, but the port authority will turn away drivers with export loads in standard dry containers.

Unfortunately, when it comes to international shipping, U.S. exporters often get the short end of the stick when comparing them to their importing compatriots (who haven’t exactly had things easy since the pandemic hit). It’s the surge in imports that is really causing congestion that’s affecting exporters’ ability to deliver exports to the port right now.

While less publicized and visible, it will be interesting to see how much East and Gulf Coast congestion stories like this impact the shifting of cargo away from congested West Coast ports in 2022. What’s clear is it will be a while before the mess of the U.S. supply chain is cleaned up.

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Biden’s Port Envoy Stepping Down After Accomplishing Little to Nothing https://www.universalcargo.com/bidens-port-envoy-stepping-down-after-accomplishing-little-to-nothing/ https://www.universalcargo.com/bidens-port-envoy-stepping-down-after-accomplishing-little-to-nothing/#respond Fri, 18 Feb 2022 00:51:47 +0000 https://www.universalcargo.com/?p=10631 The Biden Administration's port envoy is stepping down reports Peter Tirschwell in the Journal of Commerce (JOC):

John Porcari, the White House’s port envoy, will step down from the role in March, he told JOC.com on Tuesday. Porcari has served as President Joe Biden’s chief liaison to US ports — particularly the country’s largest gateway of Los-Angeles-Long Beach – since August amid historic supply chain congestion that prompted rare intervention by the White House.

In a press release, the White House announced Porcari as the Port Envoy to the Biden-Harris Administration Supply Chain Disruptions Task Force on August 27th.

Surprise, surprise, there's been a lack of improvement when it comes to the supply chain problems the nation has been experiencing, particularly at the Ports of Los Angeles and Long Beach, between Porcari's appointment and the announcement of his stepping down. Actually, it is a little surprising, as this is the time of year the ports would typically be recovering from particularly busy and congested peak seasons.

However, the port congestion we've been seeing is much more than from a particularly busy peak season. Shipping levels at the ports remained strong, generally at near-record to record levels throughout last year, never giving the ports a lull season to recover from the previous peak season.

Find out more by reading the full post in Universal Cargo's blog.

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The Biden Administration’s port envoy is stepping down reports Peter Tirschwell in the Journal of Commerce (JOC):

John Porcari, the White House’s port envoy, will step down from the role in March, he told JOC.com on Tuesday. Porcari has served as President Joe Biden’s chief liaison to US ports — particularly the country’s largest gateway of Los-Angeles-Long Beach – since August amid historic supply chain congestion that prompted rare intervention by the White House.

Picture: John Porcari by flickr user Joe Loong
creative commons

Port Congestion Did Not Improve Under Porcari

In a press release, the White House announced Porcari as the Port Envoy to the Biden-Harris Administration Supply Chain Disruptions Task Force on August 27th.

Surprise, surprise, there’s been a lack of improvement when it comes to the supply chain problems the nation has been experiencing, particularly at the Ports of Los Angeles and Long Beach, between Porcari’s appointment and the announcement of his stepping down. Actually, it is a little surprising, as this is the time of year the ports would typically be recovering from particularly busy and congested peak seasons.

However, the port congestion we’ve been seeing is much more than from a particularly busy peak season. Shipping levels at the ports remained strong, generally at near-record to record levels throughout last year, never giving the ports a lull season to recover from the previous peak season.

No Real Accomplishments

Still, Porcari’s accomplishments as Port Envoy listed in Tirschwell’s article may be one of the worst accomplishment lists I’ve ever seen in my life:

Porcari is credited by many with bringing focus to the challenge of grappling with the worst container port congestion the country has ever seen, which continues to affect not just Los Angeles-Long Beach, but every major US port. His accomplishments include fashioning threatened fees on ocean carriers for long-dwelling containers and empties at LA-LB. Although neither fee has been implemented, the mere threat is credited with driving down the volume of on-terminal containers that are a root cause of the vessel backlog off Southern California. Inadequate space on terminals to offload containers means ships must remain at berth longer, which forces arriving ships to wait at anchor.

The threatened fees did seem to have some initial impact on reducing the long-dwelling containers at the Ports of Los Angeles; however, the numbers provided to support that were sparse and provided without context and comparison, breeding skepticism. Unfortunately, what initial impact there was stalled out, and the Port of Los Angeles and the Biden Administration spun the stats to exaggerate the effectiveness of the threatened fees. It is probably much closer to the truth than the administration’s brags about getting the ports to operate 24/7, which still isn’t actually the reality. Ultimately, the threatened fees did not help overall congestion at the ports.

Congestion Is Not the Root Cause of Congestion

Part of the reason the threatened fees, even if successful in reducing long-dwelling containers, wouldn’t do much to improve overall congestion at the Ports of Los Angeles and Long Beach is the fact that, without meaning any disrespect to Mr. Tirschwell, long-dwelling containers and empties are not a root cause of congestion at the ports. Long-dwelling and empty containers on the docks are part of the congestion. Congestion isn’t the root cause of congestion, though it certainly does build upon itself. Lack of space on the docks certainly can add to unloading times of ships, potentially making the long queue of ships waiting at anchor in the San Pedro even longer. That’s what Tirschwell is getting at, I’m sure, but even after initial reductions in long-dwelling containers, that queue of ships waiting to dock at the Ports of Los Angeles and Long Beach didn’t get shorter.

In fact, earlier this month, I was forced to write about how congestion at the Ports of Los Angeles and Long Beach have gotten worse instead of better.

Actual Root Causes of Port Congestion

If you want to look at root causes of the congestion, you have to look at governmental response to the pandemic. Implementing lockdowns and pumping out trillions of dollars in stimuli pushed demand well beyond what the supply chain could handle. COVID restrictions and vaccine mandates further exasperated the problem, reducing efficiency and negatively impacting the already existent trucker shortage.

Many factors beyond the trucker shortage have been building up through a period of years to make the supply chain unable to handle the governmental response to the pandemic and resultant surge in shipping demand. Those factors include dockworker unions fighting automation at the ports, making U.S. ports less efficient than comparable ports around the world; lack of equipment and shipping containers being where they need to be; and carrier competition shrinking with the emergence of just three alliances dominating all of ocean freight shipping.

That last factor is less obvious to someone outside the international shipping industry, but it’s a big one. Carrier alliances have given shipping lines the ability to control capacity (supply) in the industry. When the pandemic first hit, it was expected shipping lines would lose billions of dollars. So the carrier alliances blanked (cancelled) hundreds of sailings, shrinking supply well below demand, even as demand initially dipped a bit. Additionally, this created a massive problem of maldistribution of shipping containers, and other equipment like chassis, around the world. This helped create a perfect storm when lockdowns and stimuli skyrocketed demand.

Is Helping Lobbyists an Accomplishment?

There is one more piece of Tirschwell’s article that could be looked at as containing accomplishments of Porcari’s:

[Porcari] oversees meetings of the [Biden-Harris Administration Supply Chain Disruptions Task Force] and is in regular contact with key stakeholders at US ports.

His three-times-per-week conference calls on Mondays, Wednesdays, and Fridays, recently scaled back to twice a week, have become well-known forums for dialogue among the diverse group of stakeholders that comprise the US port ecosystem, with dozens participating on each call.

It’s probably a stretch to call holding or overseeing meetings as an accomplishment, but bringing together leaders in the supply chain to brainstorm solutions is certainly a good thing. Unfortunately, Lori Ann LaRocco reported in an American Shipper article that “the weekly calls between White House officials and port participants have turned into lobbying sessions, with some companies having government representatives on instead of CEOs or logistics management.”

Never Admit Failure

Despite the complete lack of success the Biden Administration has had with port congestion and the supply chain, Porcari’s stepping down is not being billed as him taking responsibility or being made the fall guy for failure. Tirschwell reports:

Porcari told JOC.com his departure comes as the port envoy role will shift to a more permanent structure under the new Federal Office of Multimodal Freight Policy, created as part of the $1.2 trillion bipartisan infrastructure bill signed into law in November.

I’m sure when the supply chain does get smoother and the port congestion is cleared, the Biden Administration will proclaim it achieved the victory. In the end, they may be partially right. There’s a good chance it will be inflation decreasing demand that will finally provide the supply chain with relief.

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2022 Shipping Contracts Astronomical: What That Means for Spot Rates https://www.universalcargo.com/2022-shipping-contracts-astronomical-what-that-means-for-spot-rates/ https://www.universalcargo.com/2022-shipping-contracts-astronomical-what-that-means-for-spot-rates/#respond Tue, 15 Feb 2022 20:35:09 +0000 https://www.universalcargo.com/?p=10630 Ocean freight carriers, which have been in the driver's seat for the last couple years when it comes to freight rates, are utilizing their leverage right now to negotiate enormous contracts with cargo shippers.

Most of Universal Cargo's blog readers are small to medium shippers, not BCOs (Beneficial Cargo Owners like your Walmarts and Home Depots of the world who negotiate directly with shipping lines). However, contract rates – which are traditionally year-long but longer-term contracts are now happening too – help indicate what to expect from the spot market, in which most shippers operate.

Obviously, large shippers negotiate contracts for importing and exporting their goods with the expectation those rates will save them money, probably significant money, against the spot market over the course of their contracts. When shipping contracts rise, it's usually off a trend of rising freight rates in the spot market. Especially when contract rates rise significantly, it indicates there's expectation for the spot market to continue to rise in the upcoming year.

And the rise being seen in shipping contracts right now is not only significant, it is staggering.

Find out all about it by reading the full post in Universal Cargo's blog.

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Ocean freight carriers, which have been in the driver’s seat for the last couple years when it comes to freight rates, are utilizing their leverage right now to negotiate enormous contracts with cargo shippers.

Most of Universal Cargo’s blog readers are small to medium shippers, not BCOs (Beneficial Cargo Owners like your Walmarts and Home Depots of the world who negotiate directly with shipping lines). However, contract rates – which are traditionally year-long but longer-term contracts are now happening too – help indicate what to expect from the spot market, in which most shippers operate.

Obviously, large shippers negotiate contracts for importing and exporting their goods with the expectation those rates will save them money, probably significant money, against the spot market over the course of their contracts. When shipping contracts rise, it’s usually off a trend of rising freight rates in the spot market. Especially when contract rates rise significantly, it indicates there’s expectation for the spot market to continue to rise in the upcoming year.

And the rise being seen in shipping contracts right now is not only significant, it is staggering.

If I was standing when I read the numbers, I might have fallen and hit my head like Heather McDonald after bragging about being triple vaccinated and saying Jesus loves her most.

YouTube Video

That’s a scary fall. Just like that fall was dangerous for McDonald’s health, the rise in freight rates and contract amounts is dangerous for the health of shippers’ businesses.

Yesterday was Valentine’s Day, but only shipping lines could have loved what Greg Miller reported in an American Shipper article on the day:

Freight Rates

Xeneta [a company that tracks both long- and short-term ocean shipping rates] data on long-term contracts shows a further rise this year on top of gains that built throughout 2021.

In the first half of last year, the average Asia-West Coast long-term rate was around $3,000 per forty-foot equivalent unit. By October, it was up to $6,000-$6,500 per FEU. “For 2022, we see $7,000-$8,000 as an early indicator,” said Berglund.

Pre-COVID, in 2019, Xeneta estimated that the average annual Asia-West Coast rate was around $1,500 per FEU. Rates have quintupled since then. The lower end of the long-term market — the largest shippers getting the best deals — is now at around $3,000 per FEU, the same as the average of the entire long-term market a year ago.

“We see an unprecedented spread,” Berglund added, pointing to the difference between the lowest long-term contract rates paid by the largest shippers and the highest rate in the spot market paid by the smallest shippers.

Xeneta currently puts the Asia-West Coast spot rate at just under $10,000 per FEU, with some cargoes paying additional priority shipment fees of $1,400-$7,500. That brings the max spot rate to around $17,500, and the spread versus the cheapest, lower end of contract rates to around $14,500 per FEU.

“These are ridiculous numbers,” said Berglund, noting that in 2019, pre-COVID, “the spread was $1,300-$1,800. The gap is 10 times bigger today.”

“What that means is that the ones being penalized the most and struggling the most are the smaller importers, and the longer this situation goes on, the more favorable it is — even though it’s painful — to the big-volume shippers.”

Obviously, these are bad numbers for shippers all around. But that gap between what big shippers are paying at the bottom of the spread and what smaller shippers have to pay at the top end significantly increases the price point advantage big companies have over their smaller competition.

What’s scary is those crazy max spot rate numbers of $17,500 aren’t even really max numbers. Shippers who are looking at those kinds of freight rates are not dealing with shippers directly, so there’s also what they pay freight forwarders to arrange their shipments as well as additional fees that could be charged by both the carriers and port terminals (which are sometimes owned by the same company). Additionally, there are costs like customs clearance, trucking, and rail to add in before shippers get to all-in prices.

Traditionally, freight rates are very volatile. It’s possible a big drop could happen in the spot market and the big shippers could be stuck with extremely unfavorable contracts.

However, with the rise of only three carrier alliances dominating all of ocean shipping, carriers have gained the ability to stabilize and even manipulate capacity (the supply side of the market). For years, shipping lines struggled with overcapacity in the market, causing freight rates to often fall to unprofitable lows. It wasn’t that many years ago that I was writing in Universal Cargo’s blog about carriers losing billions of dollars. Over the last couple years, that has reversed with stories about how carriers are making billions.

Judging by how things are looking with shipping contracts, it seems that industry expectations are for things to stay favorable for ocean freight carriers and extremely unfavorable for shippers through 2022. But let’s hope we get some balance back this year.

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Is a Trucker Freedom Convoy Protest Coming to the U.S.? https://www.universalcargo.com/is-a-trucker-freedom-convoy-protest-coming-to-the-u-s/ https://www.universalcargo.com/is-a-trucker-freedom-convoy-protest-coming-to-the-u-s/#respond Thu, 10 Feb 2022 22:19:25 +0000 https://www.universalcargo.com/?p=10627 We could soon be seeing even more disruption of the U.S. supply chain.

You've probably heard about the Freedom Convoy in Canada. In protest to draconian COVID-19 regulations and vaccine mandates, truckers traversed the provinces of the country and converged on Ottawa. There, they further disrupted the supply chain and commerce by creating blockade of the Ambassador Bridge, which is a major connection point between Canada and the U.S. The truckers were joined in their peaceful but effectively disruptive protest by masses of non-trucker citizens.

A similar protest is being planned for here in the U.S. Find out more by reading the full post in Universal Cargo's blog.

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We could soon be seeing even more disruption of the U.S. supply chain.

Truckers Protest in Canada

You’ve probably heard about the Freedom Convoy in Canada. In protest to draconian COVID-19 regulations and vaccine mandates, truckers traversed the provinces of the country and converged on Ottawa. There, they further disrupted the supply chain and commerce by creating blockade of the Ambassador Bridge, which is a major connection point between Canada and the U.S. The truckers were joined in their peaceful but effectively disruptive protest by masses of non-trucker citizens.

Somehow, they’ve been managing to have a peaceful protest without lighting any buildings or cars or even dumpsters on fire. Weird, Canada. If you watched CNN or MSNBC, you’d know protests are only applauded as peaceful or mostly peaceful when public and private property is being destroyed and a little violence is thrown in. The only thing being lit on fire in these protests are coals in grills to feed the people who have gathered to demand the removal of extreme COVID regulations.

Trudeau’s Failed Attempts to Thwart Protest

Canadian Prime Minister Justin Trudeau tried calling those in the protest racists, misogynists, and Nazis – as is instructed in the leftist politician handbook. He also called upon tow trucks to seize the Freedom Convoy trucks. Both strategies failed, as tow truck drivers refused to tow the trucks and it takes more willing suspension of disbelief to believe these politicians calling all of their opposition racists than it does to accept the plot of Star Wars: The Rise of Skywalker.

Similar Resentment Growing in America

Speaking of Star Wars, plenty of politicians have been doing their best Emperor Palpatine impressions since the pandemic hit – and certainly not just in Canada.

Thus, many American’s are growing angry over politicians’ policies that include imposing COVID vaccine mandates; forcing children to wear masks in school with no data that it does any good but growing evidence of social, emotional, and developmental damage; and even threatening to kick kids out of school altogether if they don’t get this vaccine despite statistically negligible risk to kids from COVID that is nearly impossible to argue outweighs the risks already associated with the vaccine for kids or its unknown long-term effects, let alone the fact that the vaccine is made for a strain of the virus that has been replaced by subsequent variants and shows little-to-no effectiveness in preventing the contraction or spread or omicron, the now dominant strain.

Not everyone agrees with those who are angry at governmental response to COVID. In fact, there are still many who trust the ever-shifting narrative from politicians and government agencies despite the fact they’ve been caught in lies and have often imposed rules on their constituents that they don’t follow themselves. However, there are more than enough people who have had enough to fuel a movement to replicate Canada’s Freedom Convoy in the U.S.

Freedom Convoy 2022 Ottawa February 4-19
Freedom Convoy 2022 Ottawa February 4-19 by ΙΣΧΣΝΙΚΑ-888.

Freedom Convoy Succeeds

Further filling the tank for the movement to have a freedom convoy in the U.S. is the fact that it seems to be working in Canada. Joseph Curl reports in the Daily Wire:

Four Canadian provinces have moved to lift their COVID-19 restrictions as a massive protest by truckers continued blockades Wednesday in Ottawa, paralyzing the capital city.

Freedom Convoy in U.S. Already Being Organized

Obviously, trucks, truckers, and trucking are vital to the supply chain. With a trucker shortage already existing in the U.S., a freedom convoy here could really exacerbate the supply chain crisis we’re already experiencing. And that’s the point. Plans for such a protest are already well underway.

Sheera Frenkel and Alan Feuer report in the New York Times:

Plans for a demonstration by truckers in the United States similar to the one in Canada appear to be gaining momentum, aided by online supporters.

The route and timing of the demonstration, meant to protest pandemic restrictions in the United States, was set to be announced on Tuesday evening, said Brian Brase, a trucker who is organizing the American effort. According to messages posted on social media, the route may start in Sacramento, Calif., and end in Washington, D.C., but Mr. Brase declined to comment on details of the convoy until an official announcement was made.

On Facebook, the hashtag #TruckersConvoy2022 has garnered almost 2 million interactions over the last two weeks, according to CrowdTangle, a data analytics tool owned by Meta, Facebook’s parent company. Private Facebook groups dedicated to the convoy have also seen fast growth, with the main group collecting nearly 150,000 members since it started two weeks ago. A second group, dedicated to the efforts in the United States, has gained 50,000 members in the last week.

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Government Making Supply Chain Crisis Worse https://www.universalcargo.com/government-making-supply-chain-crisis-worse/ https://www.universalcargo.com/government-making-supply-chain-crisis-worse/#respond Fri, 04 Feb 2022 00:01:41 +0000 https://www.universalcargo.com/?p=10624 You know all that bragging the Biden Administration has done over the last four months about getting the Ports of Los Angeles and Long Beach to go 24/7 to fight congestion? Yeah, the ports are congested as ever, despite this being the time of year that should be seeing recovery, and 24/7 is still not a real thing.

It's not getting headlines, but truckers know they can't go to the ports anytime they want to pick up and drop off cargo containers, and you can find the truth of the matter mixed through the body of reporting from shipping news outlets. Bill Mongelluzzo reported yesterday in a Journal of Commerce (JOC) article:

[Matt Schrap, CEO of the Harbor Trucking Association (HTA)] said while the ports have been cooperating with Biden administration port envoy John Porcari to expand gate hours, with the eventual goal of working 24/7, truckers would prefer that the terminals concentrate on running gates that open much earlier, even as early as 4 a.m. when traffic conditions are more favorable in the early hours.

You'd like to think with the Biden Administration getting involved with trying to decrease congestion at the ports, things have at least gotten better. Unfortunately, congestion has actually gotten worse.

Find out all about it by reading the full post in Universal Cargo's blog.

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24/7 Operation Still Not Happening at Ports of Los Angeles & Long Beach

You know all that bragging the Biden Administration has done over the last four months about getting the Ports of Los Angeles and Long Beach to go 24/7 to fight congestion? Yeah, the ports are congested as ever, despite this being the time of year that should be seeing recovery, and 24/7 is still not a real thing.

It’s not getting headlines, but truckers know they can’t go to the ports anytime they want to pick up and drop off cargo containers, and you can find the truth of the matter mixed through the body of reporting from shipping news outlets. Bill Mongelluzzo reported yesterday in a Journal of Commerce (JOC) article:

[Matt Schrap, CEO of the Harbor Trucking Association (HTA)] said while the ports have been cooperating with Biden administration port envoy John Porcari to expand gate hours, with the eventual goal of working 24/7, truckers would prefer that the terminals concentrate on running gates that open much earlier, even as early as 4 a.m. when traffic conditions are more favorable in the early hours.

Congestion Worse Instead of Better

You’d like to think with the Biden Administration getting involved with trying to decrease congestion at the ports, things have at least gotten better. Unfortunately, congestion has actually gotten worse. Check this out from Mongelluzzo’s article:

According to the HTA data, the average truck turn time in Los Angeles-Long Beach has increased from 78 minutes in July to 92 minutes in January. The last time the turn times exceeded 90 minutes was in December 2020.

There are plenty of current articles, including Peter Tirschwell’s JOC article US marine terminal acreage abuse cements port congestion or Greg Miller’s American Shipper article Supply chain chaos and port gridlock could drag on into 2023, showing nothing but bad news when it comes to port congestion, with the Ports of Los Angeles and Long Beach being prominent in them.

Thanks, Feds

Of course, is it surprising things are worse after the government gets involved? I don’t mean that as an indictment on the Biden Administration in particular, although pretty much everything it has touched from the southern border to Afghanistan to COVID policy to the economy has been disastrous, but when has the government getting more involved in an industry ever made that industry more efficient or less expensive?

Man Looking Up at Shipping Containers

On the other hand, what could be seen as a bit of an indictment on the Biden Administration is this tidbit from Lori Ann LaRocco in an American Shipper article from yesterday:

American Shipper has learned the weekly calls between White House officials and port participants have turned into lobbying sessions, with some companies having government representatives on instead of CEOs or logistics management.

Back in November, Freight Waves’ Washington Correspondent John Gallagher wrote up a fireside chat recap from day 2 of Freight Waves’ F3 Virtual Experience, which included this little nugget:

Lawmakers in the nation’s capital have never been more involved in decisions that affect freight supply chains than they have during the past year.

That’s an exciting thought. Think about how much healthcare and education costs skyrocketed after the government sunk its claws deeper and deeper into them. It’s not just coincidence that freight rates skyrocketed, even hitting more than 500% year-on-year increases, during 2021 when the government has “never been more involved in decisions that affect freight supply chains.”

Heck, the catalyst that triggered the supply chain crisis we’re experiencing was even governmentally caused. And that before the Biden Administration took office.

Government’s Role in the Start of the Supply Chain Crisis

The COVID reaction of the government to lock down the country and pass trillions in stimuli created a shipping boom as people were stuck at home, unable to spend money on services or travel or entertainment, with extra money to spend on goods, largely through online shopping. Add to that factors that have been building up for years – inefficiency at the ports where unions have fought automation (made worse by COVID restriction regulations), trucker shortage, carrier alliances able to manipulate capacity and having maldistributed shipping containers and equipment around the world through hundreds of blanked (cancelled) sailings – and we end up with the perfect storm for a shipping crisis.

Because this started before the Biden Administration took office doesn’t let the current administration off the hook. It, along with Congress, doubled down on bad policy, making the situation worse.

Democrats in power, particularly, pushed vaccine mandates, negatively affecting the workforce and pushed trillions more in stimuli, when previous stimuli hadn’t even been spent, that paid people to stay home, further creating a negative impact on the workforce.

Will 24/7 Ports Fix Things?

But if only the Biden Administration could reach that 24/7 port operation goal, which they’ve already bragged about as if it has happened, that will fix this mess, right? Well, no.

The Freight Waves fireside chat recap post includes a video of transportation policy expert Loren A. Smith, Jr. talking about the issue. He says, “Will the move by ports to 24/7 operations solve the supply chain problem? Definitely not.” Smith talks about the recognition of the ports needing to operate 24 hours being good, but that it would only be a small, incremental improvement, talking about the lack of workers, the lack of truckers, and regulatory/restriction issues being major factors in the congestion.

Further Reduce Dockworker Availability Helps Dash Recovery Hopes

Labor shortage at the Ports of Long Beach and Los Angeles – and West Coast ports in general – is an even bigger issue right now than when Smith was speaking two months ago. That shortage is actually what headlined Mongelluzzo’s earlier-quoted JOC article. With testing and quarantine protocols still in place to work when it comes to COVID, which is clearly endemic at this point, omicron variant breakouts are severely limiting availability of dock and warehouse workers.

Jim McKenna, president of the Pacific Maritime Association, which manages the West Coast labor contract with the International Longshore and Warehouse Union (ILWU), told JOC.com that more than 1,800 longshore workers on the West Coast tested positive for COVID in the first three weeks of January. That was more than the 1,624 cases for all of 2021.

Although the cases appear to have peaked last week and are starting to decline, the impact on skilled longshore workers who drive container-moving equipment in the yards has an outsized impact on labor availability because full gangs cannot be dispatched if there is a shortage of equipment operators.

Los Angeles and Long Beach – along with California in general – have among the strictest vaccine and mask requirements in the country. As we already knew, but these outbreaks at the ports further confirm, COVID vaccines are weak, at best, when it comes to blocking people from getting the omicron variant. While California pretends masks and lockdowns work to slow the spread of COVID, reality shows that to be false. Any hope that the Chinese New Year, when factories close in China and importing tends to slow, might result in progress against port congestion, especially at the Ports of Los Angeles and Long Beach, is dashed.

Ports of Los Angeles & Long Beach Congestion Spreads Supply Chain Issues Around the World

Meanwhile, Lori Ann LaRocco reports in her American Shipper article that global transport and logistics company Kuehne+Nagel released a disruption indicator data set that shows the Port of Los Angeles and Long Beach as ground zero for global container congestion, much like that congestion is a disease of pandemic proportion (which isn’t a bad analogy). It blames those top U.S. ports for 80% of global inefficiency.

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Are Ocean Freight Carriers Taking Control of Too Much of the Supply Chain? https://www.universalcargo.com/are-ocean-freight-carriers-taking-control-of-too-much-of-the-supply-chain/ https://www.universalcargo.com/are-ocean-freight-carriers-taking-control-of-too-much-of-the-supply-chain/#respond Wed, 02 Feb 2022 00:11:39 +0000 https://www.universalcargo.com/?p=10622 One of the top stories in the Journal of Commerce (JOC) yesterday (January 31st, 2022) was CMA CGM acquiring "a majority stake in European last-mile logistics specialist Colis Privé, a parcel delivery company part-owned by Amazon."

You might be thinking, what's the big deal? It's just a giant shipping company expanding its logistics business. There's a danger to these giant corporations taking over the entire supply chain, which these carriers seem to be systematically doing.

Ocean freight carriers have billions to spend and are expanding to the land, sky, and port terminals... find out all about it by reading the full post in Universal Cargo's blog.

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One of the top stories in the Journal of Commerce (JOC) yesterday (January 31st, 2022) was CMA CGM acquiring “a majority stake in European last-mile logistics specialist Colis Privé, a parcel delivery company part-owned by Amazon.”

CMA CGM container ship
CMA CGM Hydra

You might be thinking, what’s the big deal? It’s just a giant shipping company expanding its logistics business. There’s a danger to these giant corporations taking over the entire supply chain, which these carriers seem to be systematically doing.

Warning From Ocean Freight’s Recent Past & Present

I warned for years that allowing these giant shipping lines to join together in alliances that dominate all of ocean shipping meant shrinking competition and would eventually turn out very poorly for shippers. In 2020, we saw that come to fruition as the carrier alliances manipulated capacity by blanking (cancelling) hundreds of sailings, shrinking supply well below market demand, when they were afraid of losing money because of the onsetting pandemic. The action allowed carriers to hike prices during the initial demand dip but also caused major maldistribution of equipment and shipping containers around the world.

That maldistribution played a major role in the supply chain disruption that came after politicians locked down their constituents and pumped out trillions in stimuli packages, sending shipping demand (and inflation) soaring. Of course, freight rates have soared as well to the great benefit of ocean freight carriers.

Ocean Carriers Have Billions to Spend

Since 2020, ocean freight carriers have done nothing but rake in billions and billions of dollars. That trend of enormous profits hasn’t stopped yet. In fact, other top JOC stories right now include Full ships, port woes lead ONE to $6.7 billion net for fiscal H1 and Soaring rates, congestion drive Hapag-Lloyd to ‘extraordinary’ 2021 result. The extraordinary amount Greg Knowler reported about in that second article is $26.4 billion in revenue for Hapag-Lloyd in 2021 and a forecast of 12 to 13 billion dollars in profit.

Major ocean freight carriers across the board have been seeing these incredible profits in the billions of dollars, and its increasing their ability to seize control of more of the supply chain, as CMA CGM is doing with this last-mile logistics company purchase. As a shipper in the U.S., you might be thinking, well, Colis Privé is a European company, even if it is part-owned by Amazon. That won’t bring CMA CGM into last-mile logistics here.

Well consider what Knowler reports in the JOC article about the acquisition:

While the business of Colis Privé is currently confined to France, Belgium, Luxembourg, and Morocco, with activities soon to begin in the Netherlands, CMA CGM intends to expand outside Europe.

You don’t think those expansion ambitions would include the U.S.?

Ocean Carriers Expanding Reach All Through Supply Chain

Meanwhile, CMA CGM has also expanded from the ocean to the sky, which is another aspect of the carriers’ expansion across the supply chain that the Colis Privé acquisition supports:

The majority share will give CEVA Logistics access to a Colis Privé customer portfolio of more than 200 e-commerce companies, which CMA CGM said includes “international market leaders.”

It will also support air freight shipments as the carrier rapidly expands its CMA CGM Air Cargo business. The air cargo division was launched in February 2021 using two Airbus 330-200 freighters purchased from Qatar Airways; that was followed by orders for two new Boeing 777 freighters in September and for four Airbus 350 new generation freighter aircraft in November.

CMA CGM’s acquisition is not an isolated event. Ocean freight carriers are making plenty of moves with the billions they’re making to buy their way into more and more of the supply chain. Just weeks ago, Fresh Fruit Portal published an article about Maersk acquiring “LF Logistics, a Hong Kong-based contract logistics company for US$3.6 billion to boost the shipping giant’s presence across Asia.”

The article goes on to report:

The acquisition of LF Logistics will transform Maersk into a global integrator of container logistics, providing digital end-to-end logistics solutions to customers worldwide, Soren Skou, CEO of Maersk said in a statement.

Maersk will add 223 warehouses to the existing portfolio, bringing the total number of facilities to 549 globally, spread across a total of 9.5m square meters.

In December, Eric Krulisch wrote in an American Shipper article:

Consolidation across freight modes, and between non-asset and asset players, has become more common in recent years. Last month, giant container shipping line Maersk signed a deal to acquire German freight forwarder Senator International to complement its in-house airline Star Air. This year it also acquired three e-commerce companies.

These examples are just the tip of the iceberg.

Carriers Have Also Been Buying Port Terminals

Furthermore, when I talk about these shipping giants like Maersk and CMA CGM grabbing control of the whole supply chain, I mean the whole supply chain. I’m not just talking about ocean, air, and land shipping. For years, ocean freight carriers or their parent companies, have been buying their way into the ports themselves. And all over the world. China’s state-owned shipping giant COSCO is a big player when it comes to buying port terminals.

There are obvious national security implications to foreign entities controlling the supply chain to and through countries, but owning and operating port terminals – entryways into countries – is even more concerning.

Hanjin sells container terminal shares to MSC

In 2019, Universal Cargo published a blog about the Trump Administration forcing COSCO to sell its ownership of the Long Beach Container Terminal at, of course, the Port of Long Beach. That’s right, where along with its sister port, the Port of Los Angeles, approximately 40% the country’s imports enter the U.S. COSCO gained ownership of the terminal by buying Orient Overseas (International) Limited (OOIL) in 2017. OOIL, which was a Hong Kong based shipping company, had gained control of the terminal after the Obama Administration signed off on a 40-year container terminal lease at the Port of Long Beach in 2012.

Going back further, to 2016, I wrote a blog about the now defunct ocean carrier Hanjin selling its stakes in Total Terminals International, another Long Beach terminal, to a company largely owned by the ocean shipping giant MSC, giving MSC complete control of the terminal. What should give one pause is when I started writing for Universal Cargo a bit more than a decade ago, about 80% of U.S. terminals were owned by foreign entities. I’m not sure there’s been a great deal of change – I’ll have to do a deep dive on it – but there’s still a big push to buy up terminals. In September, Voice of America published an excellent article about China buying up port terminals and shipping control, particularly through COSCO, all arround the world.

Those stories were just a few examples to show how ocean freight carriers have been buying port terminals on top of air freight, warehousing, and last-mile logistics capabilities. Are there no conflicts of interest to be seen there? For example, wouldn’t a carrier that owns a terminal be more likely to prioritize its shipments over those of a competitor’s? What about competition with American logistics providers? Would these massive carriers be able to crush smaller logistics companies that try to compete with them or just buy them out altogether?

Do we really want to see these companies controlling that much of the supply chain?

One Scary Last Thing to Buy

Ocean freight carriers have a long history of unreliability, lack of transparency, and even antitrust violations. Now they have more money than they’ve ever possessed before. I would say the only thing they can’t buy is the governing bodies that regulate the industry, but it doesn’t take much watching of politics to think a little lobbying can’t buy even that.

Just think about how Pfizer announced their plan of boosters coming for all even though they didn’t have FDA approval. That ruffled regulators’ feathers. So Pfizer had a meeting with the Biden Administration. Then the Biden Administration announced the plan for boosters being administered ahead of approval and put pressure on the FDA to go along, leading to two top vaccine officials – Dr. Marion Gruber, the director of the FDA’s Office of Vaccines Research and Review, and her deputy, Dr. Philip Krause – to resign. Pfizer got it’s booster plan approval from the Biden Administration and the leaned-on FDA. So, yeah, ocean freight carriers could probably buy regulating bodies too.

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Russia Invading Ukraine Likely Means Shippers Paying Even More for Their International Shipping. https://www.universalcargo.com/russia-invading-ukraine-likely-means-shippers-paying-even-more-for-their-international-shipping/ https://www.universalcargo.com/russia-invading-ukraine-likely-means-shippers-paying-even-more-for-their-international-shipping/#respond Tue, 25 Jan 2022 21:08:29 +0000 https://www.universalcargo.com/?p=10613 Russia is prepared to invade Ukraine. They've built up troops on the border. They're running massive military drills. And most think it is not a question of if they'll attack but when they'll attack. If/when Russia does invade Ukraine, international shippers will likely see their already exorbitant importing and exporting costs increase.

Last week, President Biden held one of his rare press conferences. During his speech, he basically greenlighted Russia to execute a "minor incursion" on Ukraine:

"Russia will be held accountable if it invades. And it depends on what it does. It's one thing if it's a minor incursion, and then we have to fight about what to do and not do, etcetera. But if they actually do what they're capable of doing with the force amassed on the border, it is going to be a disaster for Russia if they further ingrade U–further i-i-invade Ukraine [sic.], and that our allies and partners are ready to impose severe cost and significant harm on Russia and the Russian economy."

What exactly is a minor incursion? Ukraine's president took to Twitter after the speech to say, "We want to remind the great powers that there are no minor incursions and small nations. Just as there are no minor casualties and little grief from the loss of loved ones."

Many tried to brush off President Biden's words as a gaffe or by claiming he misspoke. Indeed, the Biden Administration spent the following day trying to walk back and clean up what the president had said, but the damage was already done. And if what he said about Russia committing a minor incursion against the Ukraine was just a gaffe, it seems like when Alex Alper, reporter for Reuters, followed up on the remark, the exchange would have gone differently.

Alper asked President Biden, "You said Russia would be held accountable if it invades, and it depends on what it does. Are you saying that a minor incursion by Russia into Ukranian territory would not lead to the sanctions you threatened, or are you effectively giving Russia permission to make a small incursion into the country?" At which point both she and the president chuckled, as if giving Russia permission to invade Ukraine in any manner is a laughing matter.

Laughing, President Biden responded, "Good question. Um, that's how it did sound like, didn't it?"

Yes, Mr. President. That's exactly "how it did sound like." If the statement was just one of President Biden's many classic gaffes, this would be the moment to say something like, No. Any incursion Russia makes on the Ukraine will be met with swift retribution.

Read about what President Biden said instead, what's happening with Russia and Ukraine, and how an attack could make international shipping even more expensive for shippers by reading the full post in Universal Cargo's blog.

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Russia is prepared to invade Ukraine. They’ve built up troops on the border. They’re running massive military drills. And most think it is not a question of if they’ll attack but when they’ll attack. If/when Russia does invade Ukraine, international shippers will likely see their already exorbitant importing and exporting costs increase.

BACKGROUND: Tensions Increase After President Biden Basically Invites Russia to Attack Ukraine

Last week, President Biden held one of his rare press conferences. During his speech, he basically greenlighted Russia to execute a “minor incursion” on Ukraine:

“Russia will be held accountable if it invades. And it depends on what it does. It’s one thing if it’s a minor incursion, and then we have to fight about what to do and not do, etcetera. But if they actually do what they’re capable of doing with the force amassed on the border, it is going to be a disaster for Russia if they further ingrade U–further i-i-invade Ukraine [sic.], and that our allies and partners are ready to impose severe cost and significant harm on Russia and the Russian economy.”

YouTube Video

What exactly is a minor incursion? Ukraine’s president took to Twitter after the speech to say, “We want to remind the great powers that there are no minor incursions and small nations. Just as there are no minor casualties and little grief from the loss of loved ones.”

Many tried to brush off President Biden’s words as a gaffe or by claiming he misspoke. Indeed, the Biden Administration spent the following day trying to walk back and clean up what the president had said, but the damage was already done. And if what he said about Russia committing a minor incursion against the Ukraine was just a gaffe, it seems like when Alex Alper, reporter for Reuters, followed up on the remark, the exchange would have gone differently.

Alper asked President Biden, “You said Russia would be held accountable if it invades, and it depends on what it does. Are you saying that a minor incursion by Russia into Ukranian territory would not lead to the sanctions you threatened, or are you effectively giving Russia permission to make a small incursion into the country?” At which point both she and the president chuckled, as if giving Russia permission to invade Ukraine in any manner is a laughing matter.

Laughing, President Biden responded, “Good question. Um, that’s how it did sound like, didn’t it?”

Yes, Mr. President. That’s exactly “how it did sound like.” If the statement was just one of President Biden’s many classic gaffes, this would be the moment to say something like, No. Any incursion Russia makes on the Ukraine will be met with swift retribution. Instead, President Biden continued with:

“Big nations can’t bluff, number one. Number two, the idea that we would do anything to split NATO, which would be of, have a profound impact on one of, I think, probably have an impact on one of Putin’s objectives is to weaken NATO (sic.) would be a big mistake.

“And I want to be clear with you: The serious imposition of sanctions relative to dollar transactions and other things are things that are going to have a negative impact on the United States, as well as a negative impact on the economies of Europe as well, and a devastating impact on Russia.  And so, I got to make sure everybody is on the same page as we move along.

“I think we will, if there’s something that is — that — where there’s Russian forces crossing the border, killing Ukrainian fighters, et cetera — I think that changes everything.  But it depends on what he does, as to the exact — to what extent we’re going to be able to get total unity on the Rus- — on the NATO front.”

Mark Santora updated a New York Times Russia-Ukraine tensions report today about the massive military drills carried out by Russian forces deployed just to the north, south, and east of Ukraine. “They involved tanks and drones, troops from regular infantry and elite paratroopers,” Santora wrote. He also reported about Russia moving ballistic missiles into combat position and Russian navy ships participating in joint drills with the Chinese fleet in the Arabian Sea.

Seeing Russia and China perform joint navy drills is scary. China and Russia have both been emboldened in their aggression against Taiwan and Ukraine, respectively, since President Biden completely botched the military pullout of Afghanistan.

How Russia Attacking Ukraine Would Make Shipping Even More Expensive for Importers and Exporters

Greg Miller wrote an excellent American shipper article about how Russia attacking Ukraine could impact ocean shipping. Not surprisingly, most of it centers around gas and oil prices.

President Biden on backdrop of Russian flag.

Russia is obviously a major supplier of oil and natural gas. Sanctions on those resources from Russia is a major threat being used in attempt to deter the country from attacking Ukraine.

Ironically, President Biden has been something of a champion for Russia’s gas and oil, working to get Russia’s controversial natural gas pipeline, Nord Stream 2, completed by doing things like waiving sanctions to make it happen. This, hypocritically, after using executive order to revoke permits for the Keystone XL pipeline from Canada to the U.S., killing many, many thousands of American jobs and creating tension with one of our country’s closest allies while increasing negative environmental impact as the oil will now have to be trucked. Even Democrats criticized the president over his endeavors for Nord Stream 2, which plays into the Russia-Ukraine conflict.

In July, Andrew Desiderio and Alexander Ward reported in Politico:

President Joe Biden is facing bipartisan backlash to his administration’s agreement with Germany that allows a controversial Russian natural-gas pipeline to be completed, arguing that the deal is a boon to Moscow at the expense of Ukraine.

President Biden will no longer be such a champion of Russian oil and gas if the country attacks, supposing he doesn’t consider the attack a minor incursion and our president, in a rare act for him, actually follows through on what he says.

Miller reports the following concerning oil prices should sanctions be put on Russia for attacking the Ukraine:

If Russian exports are targeted by sanctions, the oil price effect could be extreme. “The major impact of any sanctions on Russia’s exports would be soaring crude prices, which could potentially exceed $100 per barrel,” wrote Alphatanker in a recent report. (Alphatanker was subsequently rebranded BRS Tanker.)

JP Morgan cautioned on Friday that oil prices could rise as high as $150 per barrel.

If there are sanctions, wrote Poten & Partners in a report on Friday, “Oil prices will skyrocket in the short term because Russia is such a big producer and the oil markets are already quite tight.”

… For container lines, fuel is one of the largest costs but is ultimately passed along to cargo shippers via bunker adjustment factor surcharges.

Ocean freight carriers are very good about passing expenses on to shippers. If fuel oil bunker prices rise, shippers can expect to pay for it. This is bad news for shippers who have been paying through the nose for their cargo shipments over the last two years and one more reason to hope Russia doesn’t attack Ukraine.

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Carriers Fined Millions for Price Collusion Call Fines Insignificant as They Make Billions https://www.universalcargo.com/carriers-fined-millions-for-price-collusion-call-fines-insignificant-as-they-make-billions/ https://www.universalcargo.com/carriers-fined-millions-for-price-collusion-call-fines-insignificant-as-they-make-billions/#respond Thu, 20 Jan 2022 23:56:35 +0000 https://www.universalcargo.com/?p=10611 Keith Wallis reported in a Journal of Commerce article this week that South Korea's Fair Trade Commission fined ocean freight carriers over $80 million for collaborating in setting freight rates:

"Cosco Shipping Lines, Evergreen Marine, and HMM are among 23 carriers that have been fined a total of $81 million for failing to fully adhere to South Korean maritime law involving collaboration in setting freight rates. The fines involve rates from South Korea to Southeast Asia, South Korea’s Fair Trade Commission (FTC) said Tuesday."

$81 million may sound like a lot of money. But apparently not when you're making billions of dollars off the high freight rates that shippers have accused carriers of profiteering with throughout the pandemic. In a Loadstar article, Martina Li reported that the shipping lines scoffed at Seoul's price fixing fines....

Find out more by reading the full post in Universal Cargo's blog.

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Over $80 Million in Price-Fixing Fines
international shipping federal antitrust law

Keith Wallis reported in a Journal of Commerce article this week that South Korea’s Fair Trade Commission fined ocean freight carriers over $80 million for collaborating in setting freight rates:

Cosco Shipping Lines, Evergreen Marine, and HMM are among 23 carriers that have been fined a total of $81 million for failing to fully adhere to South Korean maritime law involving collaboration in setting freight rates. The fines involve rates from South Korea to Southeast Asia, South Korea’s Fair Trade Commission (FTC) said Tuesday.

Carriers Shrug Off the Fines

$81 million may sound like a lot of money. But apparently not when you’re making billions of dollars off the high freight rates that shippers have accused carriers of profiteering with throughout the pandemic. In a Loadstar article, Martina Li reported that the shipping lines scoffed at Seoul’s price fixing fines:

Wan Hai Lines spokesperson Laura Su said in a Taiwan Stock Exchange filing the company had not yet received notification from the authority.

She added: “The reported fine of around $9.6m has no significant impact on the company’s finance and business. We will discuss the follow-up treatment with a lawyer to protect the company’s rights and interests.”

Yang Ming GM Du Shu-chin said his company was facing a fine of around $2m and added: “The company has appointed a lawyer to safeguard its rights and interests, and the penalty has no significant impact on our financial status.”

Evergreen is facing a fine of around $2.85m, its president, Eric Hsieh, said in a filing to the Taiwan bourse, while an HMM spokesperson told The Loadstar: “As soon as the KFTC provides HMM with official notification, we will review and decide to implement relevant measures.”

When and Where Did Carriers Go Afoul of Antitrust Laws

It’s important to note that these fines are not for price fixing during the pandemic. Wallis reports in his JOC article:

In a 32-page report, the competition watchdog said the carriers, including 11 foreign firms, held 541 meetings in which they set rates 120 times over a 15-year period between December 2003 and December 2018. While collaborating on prices is allowed under South Korea’s maritime shipping act, it must be done in discussion with shippers and details reported to the Oceans and Fisheries Ministry within 30 days. The FTC said the carriers did not abide by those two rules, and thus declared the price-setting “illegal.”

Wallis went on to detail the varying degree of fines while listing more carriers involved:

The highest fine of $25 million was imposed on local carrier Korea Marine Transport Co., while Taiwan’s Wan Hai Lines was slapped with a $9.6 million fine, the highest penalty levied on a foreign carrier.

Other carriers involved include Sealand Asia, OOCL, Hong Kong-listed SITC, Heung-A Line, Yang Ming Marine, and CNC, part of CMA CGM group. Sealand Asia, Maersk’s intra-Asia subsidiary, was fined $2 million, while HMM was fined $3 million.

Fines actually could have been much higher per previous fine threats made by the FTC according to Wallis’s article:

The fines are considerably less than the $672 million the FTC told carriers they could be fined in an interim report last May.

The article also included that the investigation called for a local lawmaker to call for the end of the antitrust protections carriers enjoy in Korean maritime law.

Freight rate collusion has long been a problem in the international shipping industry. It’s one of the reasons I’ve long argued against regulatory authorities allowing carrier alliances, which I believe add to the antitrust problems in the industry. To get a glimpse into the problem, here are a handful of related stories from over the years.

Carriers Defend Against Shipper’s Complaint to FMC

Are Ocean Freight Carriers Profiteering from Global Crisis?

DOJ Antitrust Probe of Ocean Freight Carriers Is Over

Are Carriers, Imposing Emergency Bunker Surcharges, Really Cartels?

Should Maritime Regulators Rethink Carrier Alliances?

China Fines Shipping Companies & Joins US & EU Antitrust Cooperation

International Shipping Fought the Law & the Law Won

Holy Cargo Collusion, Batman–Shipping Companies Under Investigation!

Conclusion

What’s unfortunate is that these price-fixing fines amount to little more than slaps on the wrists of ocean freight carriers. Consider Maersk having to shell out $2 million for its subsidiary Sealand Asia. Yes, $2 million is a lot of money. However, Greg Knowler reported in the JOC last week that Maersk added another $1 billion to its profit expectations for 2021:

The A.P. Moller-Maersk group expects to report full-year earnings before interest, taxes, depreciation and amortization (EBITDA) of $24 billion, up from the previous operating profit guidance of $22 billion to $23 billion announced in September.

Knowler said this profit increase was prompted by an “incredible 80 percent increase in freight rates through the fourth quarter.” For the last two years, we’ve been talking about stratospheric freight rates in the ocean freight industry, which started when carrier alliances manipulated capacity through hundreds of blank (cancelled) sailings to below market levels when they feared losing money because of the pandemic. Then freight rates really exploded when politicians decided the best response to the pandemic was to shut down businesses and schools and give everyone money through stimuli packages, which created a boom in online shopping and goods buying in general that the supply chain was unable to handle.

Carriers have never had such success in pushing freight rates up. It’s not just Maersk that’s making billions. Ocean freight carriers across the board have been raking in the money. Here are a few blog posts about the billions carriers have been making since the pandemic hit.

How Did Carriers Go From Looking at Billions in Losses to Billions in Profit in 2020?

12 Figure Profits for Carriers? Depends on How Peak Season Plays Out

Just How Much Are Carriers Earning with These High Freight Rates?

I’m all for businesses making money, but there tends to be something wrong when businesses’ services get worse – and ocean carriers’ services have tended to be much worse over the last couple years – yet their rates and profits soar. Especially when those companies are in an industry known for antitrust behavior and regulators allow them to work together to manipulate market conditions.

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Perhaps China Is Loosening Its Insane Covid Zero Policies… a Little https://www.universalcargo.com/perhaps-china-is-loosening-its-insane-covid-zero-policies-a-little/ https://www.universalcargo.com/perhaps-china-is-loosening-its-insane-covid-zero-policies-a-little/#respond Tue, 18 Jan 2022 22:40:21 +0000 https://www.universalcargo.com/?p=10609 Several news stories in recent days report COVID cases discovered in China and worry about port shutdowns and more disruption rippling through global supply chains. There's plenty of reason for this fear. All it takes is a single positive COVID test for China to shut down one of the busiest ocean freight terminals in the world. China has a more-than-a-little-problematic Covid Zero policy that we've talked about quite a bit in Universal Cargo's blog.

At this point, we know Covid-19 is endemic. There was once hope that with the vaccines, herd immunity could basically end the virus. However, it quickly became clear the vaccines didn't provide the protection from getting and spreading the virus that was initially promised, no matter how many doses or boosters you get. Dr. Anthony Fauci – Director of NIAID and America's most famous bureaucrat who told the public himself that if you criticize him or his policies, you criticize science itself – even admitted to lying to the public (and not for the first time during the pandemic) about the percentage of people vaccinated it would take to achieve herd immunity.

Here's what he told the New York Times (which is not unlike how when he changed his position on masks without new evidence, he told the public he was initially lying to them for their own protection):

“When polls said only about half of all Americans would take a vaccine, I was saying herd immunity would take 70 to 75 percent,” Dr. Fauci said. “Then, when newer surveys said 60 percent or more would take it, I thought, ‘I can nudge this up a bit,’ so I went to 80, 85.”

“We need to have some humility here,” he added. “We really don’t know what the real number is. I think the real range is somewhere between 70 to 90 percent. But, I’m not going to say 90 percent.”

Now with the omicron variant, evidence points to the vaccine having little if any efficacy in preventing infection, further stapling COVID as endemic. Luckily, while omicron is much more contagious, outpacing previous variants and taking over as the most prevalent form of the virus, it is also much less virulent, meaning it's not nearly as likely to land someone who contracts it in the hospital or, worse, kill him or her.

Perhaps the reduced virulence and increased transmissibility of omicron is what's causing the tiny ray of hope to crack through China's Covid Zero policies.

Find out about that ray of hope along with the disruptive actions the country's regulators are taking by reading the full article in Universal Cargo's blog.

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Several news stories in recent days report COVID cases discovered in China and worry about port shutdowns and more disruption rippling through global supply chains. There’s plenty of reason for this fear. All it takes is a single positive COVID test for China to shut down one of the busiest ocean freight terminals in the world. China has a more-than-a-little-problematic Covid Zero policy that we’ve talked about quite a bit in Universal Cargo’s blog. Here’s a handful of related posts:

China Sea Shipping

China’s Covid Zero Policies Worsen Supply Chain Problems

Ocean & Air Shipping Delayed by China’s COVID Restrictions

Airliner Suspends Air Cargo Flights and Port of Los Angeles Threatens Big Fees Again

Updates on the Port of Ningbo Terminal Closure

Single COVID Case Shuts Down Major Chinese Port Terminal

Good News, Bad News: Yantian Port Back to Full; Freight Rates Rise Even Higher

COVID Endemic But Less Virulent with Omicron’s Rise

At this point, we know Covid-19 is endemic. There was once hope that with the vaccines, herd immunity could basically end the virus. However, it quickly became clear the vaccines didn’t provide the protection from getting and spreading the virus that was initially promised, no matter how many doses or boosters you get. Dr. Anthony Fauci – Director of NIAID and America’s most famous bureaucrat who told the public himself that if you criticize him or his policies, you criticize science itself – even admitted to lying to the public (and not for the first time during the pandemic) about the percentage of people vaccinated it would take to achieve herd immunity.

Here’s what he told the New York Times (which is not unlike how when he changed his position on masks without new evidence, he told the public he was initially lying to them for their own protection):

“When polls said only about half of all Americans would take a vaccine, I was saying herd immunity would take 70 to 75 percent,” Dr. Fauci said. “Then, when newer surveys said 60 percent or more would take it, I thought, ‘I can nudge this up a bit,’ so I went to 80, 85.

“We need to have some humility here,” he added. “We really don’t know what the real number is. I think the real range is somewhere between 70 to 90 percent. But, I’m not going to say 90 percent.”

Now with the omicron variant, evidence points to the vaccine having little if any efficacy in preventing infection, further stapling COVID as endemic. Luckily, while omicron is much more contagious, outpacing previous variants and taking over as the most prevalent form of the virus, it is also much less virulent, meaning it’s not nearly as likely to land someone who contracts it in the hospital or, worse, kill him or her.

Janice Kew reported in Bloomberg:

South Africans contracting Covid-19 in the current fourth wave of infections are 80% less likely to be hospitalized if they catch the omicron variant, compared with other strains, according to a study released by the National Institute for Communicable Diseases.

Perhaps because all evidence and studies so far similarly show far less virulence when it comes to the omicron variant of COVID that there’s a ray of hope hidden in the gloom and doom stories of new cases found in China about to send new waves of supply chain disruption because of the country’s heavy-handed Covid Zero response.

The Hope of Loosening Covid Zero Policy in China

Here’s where the hope pops in. In a Fortune article about how Chinaa’s Covid Zero response to omicron could cause supply chain chaos, Grady McGregor and Eamon Barrett reported:

When ports in Shenzhen and Ningbo reported minor COVID outbreaks last year, authorities quickly closed shipping terminals, causing traffic jams of huge container ships and a backlog that eventually caused congestion elsewhere as ships rerouted to China’s other harbors.

But the outbreak in Tianjin has yet to prompt any port closures.

On Wednesday, when local authorities ordered workers in the city to take a day off to facilitate another round of testing, the Tianjin Port Authority announced it had tested 4,920 of its employees as of Sunday and that “all of the wharf companies are operating normally.”

China isn’t exactly known for its honesty when it comes to reporting, but the article goes on to say:

In an email to Fortune on Monday, shipping giant Maersk said the company had experienced zero disruption from the current outbreak in Tianjin.

I would say ordering a day off for testing is a little bit of a disruption, but there is some hope that China may be realizing a complete Covid Zero approach is not sustainable or beneficial, especially in light of omicron’s increased transmissibility and decreased virulence. That Tiajin Port hasn’t experienced major disruption is a sign that China may be loosening its Covid Zero policies a little bit. But only a little bit. Meanwhile, there has been disruption at another major Chinese port. Grady McGregor and Eamon Barrett went on in their reporting:

However, Maersk noted that a concurrent outbreak in Ningbo—a port just south of Shanghai—had snarled operations.

China’s Current Heavy-Handed Actions

China is still massively locking down its citizens while executing city-wide testings, which is both oppressive for its citizens and a problem for its manufacturers. Grady McGregor and Eamon Barrett give a taste of what’s happening there in their Fortune article:

In northern Xi’an, where residents have endured a bruising three-week lockdown that began in December, Samsung has suspended operations at its semiconductor factory since staff are unable to get to work. The group said it plans to “[leverage] our global manufacturing network, to ensure that our customers are not affected.”

In southern Zhengzhou, the home of major iPhone assembler Foxconn, the government discovered dozens of local cases this week after launching an effort to test all 12.6 million city residents last Friday. Foxconn told Chinese media this week that the cases in Zhengzhou have “not affected production capacity thus far,” even as authorities in Anyang, a city 100 miles from Foxconn’s campus, announced stay-at-home orders for all 5 million residents earlier this week.

Meanwhile in Tianjin, where authorities ordered residents into semi-lockdown so that health officials can test all 14 million residents, Japan’s Toyota and Germany’s Volkswagen have both suspended factory output.

Factories are fast approaching a time when they shut down anyway with the Chinese New Year festivities beginning on February 1st this year. Of course, celebrations will likely be curtailed as the government is not likely to let its citizens do much traveling to see family this year. But maybe, just maybe, in all of this madness, China is starting to recognize how problematic its Covid Zero policies are.

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As West Coast Port Congestion Helps Import Time Double, East & Gulf Coast Ports Boom https://www.universalcargo.com/as-west-coast-port-congestion-helps-import-time-double-east-gulf-coast-ports-boom/ https://www.universalcargo.com/as-west-coast-port-congestion-helps-import-time-double-east-gulf-coast-ports-boom/#respond Thu, 13 Jan 2022 21:30:31 +0000 https://www.universalcargo.com/?p=10608 Three-month-plus transit times for sailings goods across the Pacific? After more than a year of severe congestion at U.S. ports, especially at the Ports of Los Angeles and Long Beach and along the west coast, import times across the Pacific have expanded kind of similarly to how freight rates have soared (though not quite to the same degree).

Greg Miller reports in American Shipper:

"The trans-Pacific cargo move can now take over three months. According to multiple sources, average transit times have risen to double pre-COVID levels — and they’re still increasing."

And that's only the beginning!

See how crazy the time increase trend really is, how much cargo is going through East and Gulf Coast ports, and get a look at what to expect in 2022 by reading the full post in Universal Cargo's blog.

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Three-month-plus transit times for sailings goods across the Pacific? After more than a year of severe congestion at U.S. ports, especially at the Ports of Los Angeles and Long Beach and along the west coast, import times across the Pacific have expanded kind of similarly to how freight rates have soared (though not quite to the same degree).

shipping containers for import export

Greg Miller reports in American Shipper:

“The trans-Pacific cargo move can now take over three months. According to multiple sources, average transit times have risen to double pre-COVID levels — and they’re still increasing.”

Transpacific Import Time Data

Miller’s American Shipper article gets into the methodology and shares data from major international shipping research companies that show the severe increase in transit of cargo imports across the Pacific to the U.S. American Shipper even graphed the data, making it visual.

Here are the bottom line numbers and charts Miller shares for data from Flexport, Freightos, Shifl, and Sea Intelligence:

“Flexport’s Asia-U.S. OTI [Ocean Timeliness Indicator] reached an all-time high of 113 days last week. That’s 41 days or 57% higher than at the same time last year, and 62 days or 121% higher than in early January 2020, pre-COVID.”

Chart: American Shipper based on data from Flexport

“Freightos calculated that it took an average of 80 days in December for trans-Pacific cargo, with FCL at 72 days and LCL at 82 days. The average transit time is 51% or 27 days higher than in December 2020 and 86% or 37 days longer than in December 2019, pre-COVID.”


Chart: American Shipper based on data from Freightos

“As of the first half of December, Shifl calculated that the transit time was 34 days, more than double the pre-COVID average of 16 days and about two weeks more than transit times in the middle of last year.”

Chart: American Shipper based on data from Shifl

“Sea-Intelligence has developed an index, using data from carrier HMM, to quantify the level of terminal congestion on the North American side of the equation. That  index has doubled over the past year.” 

Chart: American Shipper based on data from American Shipper

As referred to earlier, these charts aren’t tracking exactly the same thing.

Flexport’s measures when cargo is ready to leave the exporters’ factory in Asia to when it leaves the destination port in the U.S., Freightos is looking at warehouse to warehouse from China to the U.S., Shifl is tracking ship transit times from major Chinese ports to arrival in the Ports of Los Angeles and Long Beach, and the Sea Intelligence chart tracks terminal congestion

But no matter whose data, you see an alarming upswing in time. As the old mantra goes, time is money, so this is all costly for businesses importing goods. Importers have been in a tricky place for a while when it comes to international shipping. Not only is it taking much longer to get their goods, as we’ve well-documented in Universal Cargo’s blog over the course of the last couple years, they’re paying a great deal more to get their goods.

East & Gulf Coast Ports Rake in the Cargo

Naturally, with such overwhelmingly large delays on shipping from China to the U.S. West Coast, there has been a major upswing in cargo shipped U.S. East and Gulf Coast ports. Of course, the overall increase in shipping demand that has been seen since early in the pandemic plays into this as well, but this is also not wholly unlike when severe West Coast port congestion caused by the contentious dockworker contract negotiations of 2014-15 caused ports on the opposite side of the country to gain market share.

Joanna Marsh reports in an American Shipper article:

“2021 proved to be a banner year for ports on the East and Gulf coasts as consumer demand remained brisk amid the waxing and waning COVID-19 pandemic.”

She reported how 2021 broke annual records for the amount of cargo moved through the Ports of Virginia, South Carolina, and Mobile:

“The Port of Virginia in Norfolk handled more than 3.5 million twenty-foot equivalent units in 2021, a 25.2% increase from 2020, at a time when the broader supply chain faced pandemic-related headwinds, according to Virginia Port Authority CEO and Executive Director Stephen A. Edwards. 

SC Ports said it handled an “unprecedented amount of cargo” in 2021, with the Port of Charleston processing 2.75 million TEUs at Wando Welch, North Charleston and Hugh K. Leatherman terminals. 

Within that total, SC Ports handled 1.53 million pier containers in 2021, which was an 18% gain from 2020 and an 11% increase from 2019. Pier containers consist of containers of any size.

Imports rose 25% to 1.29 million TEUs, while loaded exports increased 5% to 814,964 TEUs.

Containerized cargo volumes increased nearly 19% to a record 502,623 TEUs in 2021, according to the Alabama Port Authority

The port’s Intermodal Container Transfer Facility also saw volumes grow significantly in 2021, with volumes of 23,776 TEUs 139% higher than 2020 volumes. 

Looking Forward at 2022

With congestion at the Ports of Los Angeles and Long Beach far from resolved, East and Gulf Coast ports have an opportunity to keep grabbing market share. Traditionally, this would be the time for West Coast ports to really get clearing left over congestion from the peak and holiday seasons. Outside of a little surge that would normally happen right now during the approach of the Chinese New Year, this is when import traffic traditionally is slower.

Unfortunately, the ports never managed to recover last year after the peak season. Additionally, with the possibility of ILWU contract negotiations getting contentious over automation this year, we could see a repeat in 2022-23 of the severe congestion-causing fight at the docks we saw in 2014-15. Some shippers are already trying to get ahead of it by importing early. That could help turn 2022 into a repeat of 2021, where cargo movement doesn’t slow down enough for ports like Los Angeles and Long Beach’s to clear their congestion.

All of that points to a strong possibility that East and Gulf Coast ports could have an even better 2022 than 2021, even if inflation decreases overall shipping demand for the year.

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Ocean & Air Shipping Delayed by China’s COVID Restrictions https://www.universalcargo.com/ocean-air-shipping-delayed-by-chinas-covid-restrictions/ https://www.universalcargo.com/ocean-air-shipping-delayed-by-chinas-covid-restrictions/#respond Tue, 11 Jan 2022 21:07:30 +0000 https://www.universalcargo.com/?p=10574 Air cargo delays, ocean shipping delays, and bad COVID policies. What's new? Beijing Olympics! Wait, didn't Beijing host the Olympics just a couple cycles ago? Well, not in combination with Covid Zero policies creating more complication for international shipping. But I'm getting ahead of myself...

Let's start with a few COVID cases throwing another monkey wrench into people's shipping to and from China.

Eric Kulisch reports in an American Shipper article:

"Import and export operations in Tianjin are slowing after a small cluster of COVID cases was discovered over the weekend, according to third-party logistics providers in China. Meanwhile, in Shenzhen, authorities are blaming a contaminated import shipment infecting a cargo worker, who then spread the virus to three other people."

That's just the start of it. Find out more by reading the full post in Universal Cargo's blog.

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Air cargo delays, ocean shipping delays, and bad COVID policies. What’s new? Beijing Olympics! Wait, didn’t Beijing host the Olympics just a couple cycles ago? Well, not in combination with Covid Zero policies creating more complication for international shipping. But I’m getting ahead of myself…

Let’s start with a few COVID cases throwing another monkey wrench into people’s shipping to and from China.

Eric Kulisch reports in an American Shipper article:

Import and export operations in Tianjin are slowing after a small cluster of COVID cases was discovered over the weekend, according to third-party logistics providers in China. Meanwhile, in Shenzhen, authorities are blaming a contaminated import shipment infecting a cargo worker, who then spread the virus to three other people.

Really? An imported shipment, after traveling across the seas, infected a dockworker. Have we gone back in time to the beginning of this pandemic when they were trying to scare us that COVID was on the surface of our packages and we should leave them outside for 24 hours before touching them?

Accurate Freight Rates

All it takes is one positive COVID test for China to shut down a major port terminal. Of course, a small cluster of cases is going to slow import and export operations, to say the least. If you import from China or export from China, you have to know that at any time your cargo is subject to delay because of ridiculous Covid Zero policies.

Right now, China’s policies have healthy citizens locked in their homes, while others are only permitted to leave to get groceries, and others not allowed to leave their neighborhoods as the country prepares to host the 2022 Olympics next month, making these new (additional) slowdowns in importing and exporting to and from China only the tip of the iceberg, according to Kulisch’s article.

While port congestion is still being dealt with here in the U.S., full on operation suspensions in China add to the delays in cargo movement Krulisch reports, giving details:

The Port of Tianjin and the airport have suspended pickup operations for all import containers, freight management companies said in client advisories Monday. Seko Logistics said increased nasal swab testing of port and airport staff is causing delivery delays and more government restrictions could be forthcoming. Marine terminals at the port are operating normally, but inbound gates have reduced hours, and all truck drivers are required to register for access to the port after clearing their own health tests, according to Seko and global freight broker C.H. Robinson (NASDAQ: CHRW).

Beijing Airport is operating normally, but truck deliveries from Tianjin are restricted, Minneapolis-based C.H. Robinson said. Some factories are rejecting trucks from Tianjin, Seko reported.

Authorities in Hebei province have also suspended inbound and outbound trucking service to protect against spreading COVID, C.H. Robinson said.

Residents of Xi’an and Yuzhou, two cities further from Beijing, are also confined to their homes. Xi’an, with 13 million residents, has been under lockdown for two weeks, but there were only 15 cases on Monday, the AP reported. The airport in Xi’an remains closed, and rail and road freight is prohibited, Seko Logistics added. The closure is causing spillover congestion at nearby Chengdu airport, the Chicago-based freight company said.

Trucking operations at the Port of Ningbo slowed last week after health authorities imposed testing requirements on drivers and forced factories to close. Lower productivity circulating containers could eventually cause vessel delays. Hong Kong-based airline Cathay Pacific has scaled back by two-thirds all-cargo flights because of strict quarantine restrictions for pilots, while the city has banned flights from eight countries, including the U.S., for two weeks.

In Zhengzhou, hundreds of thousands of workers at iPhone maker Foxconn’s facilities and Huawei’s research campus in Dongguan are being tested as more COVID cases appear.  Zhengzhou is an air cargo hub and restrictions there could cause “massive” issues for shippers, Seko Logistics warned.

Yes, there’s a lot there, slowing air freight and ocean freight. I recommend reading Kulisch’s full article for more details about the way the people in China are being locked down and submitted to testing. However, it may affect your feelings as you’re watching the Olympics, especially if you continue down the rabbit hole of how China treats its people.

In the meantime, there’s no reason to expect shipping won’t continue to be negatively impacted in the upcoming weeks and months by China’s policies – Covid Zero in particular. That’s something we’ll keep our eye on for you here at Universal Cargo.

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Airliner Suspends Air Cargo Flights and Port of Los Angeles Threatens Big Fees Again https://www.universalcargo.com/airliner-suspends-air-cargo-flights-and-port-of-los-angeles-threatens-big-fees-again/ https://www.universalcargo.com/airliner-suspends-air-cargo-flights-and-port-of-los-angeles-threatens-big-fees-again/#respond Wed, 05 Jan 2022 00:31:42 +0000 https://www.universalcargo.com/?p=10567 There are two news stories worthy of shippers' attention today. The first pertains to air freight while the second has to do with ocean freight.

On the air side, we have a story about suspended air cargo flights by a major airline while on the ocean freight side, we have the Port of Los Angeles threatening big new fees. Yes, for our regular blog readers, this is a here we go again situation. As you'll see, these fees are very similar to ones they kept threatening and delaying through the final months of 2021.

Find out about both stories by reading the full post in Universal Cargo's blog.

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There are two news stories worthy of shippers’ attention today. The first pertains to air freight while the second has to do with ocean freight. On the air side, we have a story about suspended air cargo flights by a major airline while on the ocean freight side, we have the Port of Los Angeles threatening big new fees. Yes, for our regular blog readers, this is a here we go again situation. As you’ll see, these fees are very similar to ones they kept threatening and delaying through the final months of 2021.

Air Freight Story: Cathay Pacific Suspends Cargo Flights for a Week

The air freight story is bigger (probably), so we’ll start with it. Cathay Pacific, a major airline for transporting cargo, has suspended all cargo flights for a week because Hong Kong extended the quarantine period for air cargo crews, reducing the number of available pilots for the company.

Cathay Pacific plane photo by flickr user BriYYZ
Cathay Pacific plane photo by flickr user BriYYZ

Eric Kulisch provides details in an American Shipper article:

Cathay Pacific has suspended all long-haul freighter and cargo-only passenger flights for a week after Hong Kong authorities extended the quarantine period for arriving air cargo crews from three to seven days, the airline confirmed.

The decision is another gut punch to an airline reeling from a massive contraction in passenger business because of strict COVID-19 measures in the semiautonomous city and represents a loss of significant cargo capacity for shippers faced with tight supply approaching the export rush ahead of Chinese New Year in one month. 

The extra quarantine period reduces the number of available pilots, making it difficult for Cathay to operate its normal flight schedule. 

The South China Morning Post, which broke the news about Cathay’s grounding of the cargo fleet, said health officials tightened the quarantine requirements for air crews after a Cathay pilot tested positive for the coronavirus five days after returning to home base. Under the health protocols, crews must now stay in a designated hotel for seven days. 

“In light of additional and more stringent quarantine requirements for Hong Kong-based cargo crew, Cathay Pacific Cargo will pause all long-haul (trans-Pacific, Europe, Southwest Pacific, Riyadh and Dubai) freighter and cargo-only passenger flights with immediate effect for a period of seven days, up to Jan. 6,” Cathay Pacific said in a statement shared with FreightWaves. “We sincerely apologize for the disruption caused. We will be working with customers to mitigate the disruption as much as possible.”

The airline didn’t rule out the possibility that the suspension of cargo operations could be extended, depending on what stance authorities take in the coming days.

Continuation of Covid Fear Interrupting International Shipping

Once again, this is an instance of reaction to a positive Covid test creating disruption like we saw when Chinese authorities shut down a major terminal at the Port of Ningbo after a single positive Covid test.

While the extension of Hong Kong’s quarantine period seems like overkill to many, this situation is probably not as egregious an overreaction as was the Chinese terminal shutdown. Nor is it as extreme as China’s unhelpful Covid Zero policies in general, which have had returning Chinese seafarers stuck in quarantine for two month periods.

Cathay Pacific has recently had other positive Covid tests around flights to Hong Kong – even leading to the company firing a couple of its aircrew – so it seems there is more playing into the situation of the airline suspending cargo flights than Hong Kong’s extended quarantine and one lone positive test.

Kulisch continued in his article:

In a separate statement issued early Friday morning, Cathay Pacific said five of its aircrew recently tested positive for the omicron variant during their testing and isolation period following their return to Hong Kong and will be penalized for violating company safety rules. Two individuals were subsequently terminated on Saturday.

“Regrettably, our investigation into these cases has indicated a serious breach of protocols by some of those individuals. Failure to comply with medical surveillance regulations will lead to disciplinary procedures,” the statement said. “The actions of these individuals are extremely disappointing, as they undermine the otherwise exemplary dedication and compliance shown by our over 10,000 aircrew. Cathay Pacific is acutely aware of the critical importance of complying with anti-pandemic measures both in Hong Kong and overseas, and apologizes for the inconvenience and disruption caused by these noncompliant cases. Cathay Pacific will continue to work closely with the Transport and Housing Bureau as well as the health authorities to reinforce public health protection.”

It’s hard to judge these fired individuals’ actions without knowing the details. The rules imposed upon them could have been unreasonable or unjust. It’s possible they’re being used as skapegoats in their firings or being made examples of to induce fear in other employees to comply with unreasonable or unjust rules. It’s also possible they egregiously broke reasonable rules not only of the airline but also of Hong Kong authorities that could have contributed to Hong Kong extending the quarantine period for cargo crew members.

We do know Cathay Pacific is forcing employees to make mandated medical decisions when it comes to Covid vaccines at the threat of losing their jobs, which could also have contributed to their shortage of available pilots. Kulisch reports:

All Cathay crew members are fully vaccinated and subjected to multiple tests after every flight. The company said it is also requiring all eligible cockpit and cabin crews to receive a third dose of COVID-19 vaccine.

Omicron Response Worse than Variant

Unfortunately, the media and many in positions of governmental power continue to ratchet up fear with the omicron variant of Covid. While they emphasize the increased transmissibility of the variant, they tend to leave out or bury its much, much lower virulence. Reports put omicron at 65-80% less likely to cause hospitalization than previous strains of the virus. Omicron is extremely unlikely to land someone who contracts it in the hospital, let alone kill them.

The Wall Street Journal (WSJ) reports the death rate of omicron is similar to that of the flu when looking at numbers in South Africa, where the variant likely began. Of course, that’s not even the real death rate but taken from only actual known cases of the variant. More than 90% of people who contract omicron may show no symptoms according to the Institute for Health Metrics and Evaluation at the University of Washington’s School of Medicine Director Dr. Chris Murray, meaning the actual death rate is incredibly smaller than the 0.2% rate the WSJ referred to as “barely higher than the flu.”

Still, as long as the media and leaders emphasize the fear end of the spectrum, we can expect continued disruptions to businesses and people’s lives. As we’ve been seeing for the last two years, international shipping and logistics get particularly negatively impacted.

Ocean Freight Story: Port of Los Angeles Threatens Huge Fees on Empty Dwelling Containers

The Port of Los Angeles is back to threatening fees on shipping containers sitting on its congested docks. This time, however, the focus is on empty shipping containers that have been returned to the port rather than the full ones waiting to leave it. That, and it appears to be only the Port of Los Angeles instead of in conjunction with its sister port of Long Beach threatening the fees this time, seem to be about it when it comes to differences.

Ports threaten fees

Universal Cargo’s blog published several posts about the previously threatened fees – which were of an identical amount to these new ones being threatened. Over and over again, the ports held off on actually implementing the fees, citing a reduction in long-dwelling containers. While they did seem to be having an effect in reducing dwelling containers at first, as the threats became less and less likely to ever materialize, their effects stalled and turned out to be less effective than advertised by the ports and the Biden administration.

Unfortunately, the effect of whatever reduction of long-dwelling containers the threat of insanely high fees had on overall congestion at the ports was minimal at best.

Still, the Port of Los Angeles seems determined to go through this whole fee threat process all over again with empty containers. Eric Johnson reports in a Journal of Commerce (JOC) article:

The Port of Los Angeles on Thursday said it plans to begin charging container lines a fee next month for any empty boxes that dwell at the port’s terminals for nine days or longer.

Under the new empty box policy in LA, ocean carriers would be charged $100 for an empty container dwelling for nine days, increasing in $100 increments per container per day until the container leaves the terminal. Implementation of the fee would be at the discretion of the port’s executive director, Gene Seroka.

The Los Angeles Harbor Commission will vote on the empty container fee proposal at its Jan. 13 board meeting.

We’ll see if the Port of Long Beach joins in on this threat of fees. If the fees ever do become more than threats and are implemented on carriers, you can be sure that carriers will find a way to pass those costs off on shippers.

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Top 10 International Shipping News Storylines of 2021 https://www.universalcargo.com/top-10-international-shipping-news-storylines-of-2021/ https://www.universalcargo.com/top-10-international-shipping-news-storylines-of-2021/#respond Wed, 22 Dec 2021 00:38:57 +0000 https://www.universalcargo.com/?p=10565 This will be the last blog I post in 2021, so I can spend the holidays with family. What better time to do a look back at the year's top international shipping news stories?

This year, stories didn't tend to be one-off events, but rather ongoing storylines. Inspired by the great Late Night host David Letterman, we'll count down those storylines from 10 to 1.

Find out what made the list and what topped it by reading the full post in Universal Cargo's blog.

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Top 10 international shipping news stories 2016
pic: flickr iabusa

Top 10 List

This will be the last blog I post in 2021, so I can spend the holidays with family. What better time to do a look back at the year’s top international shipping news stories?

This year, stories didn’t tend to be one-off events, but rather ongoing storylines. Inspired by the great Late Night host David Letterman, we’ll count down those storylines from 10 to 1. Feel free to let us know in the comments if you think I got the order wrong or left something out that should have made the list.

#10 – Ocean Shipping Reform Act of 2021

This will likely be a bigger storyline in 2022, since the story – as Karen Carpenter would say – has only just begun. Thus, it sits at number 10 on our list of top international shipping news storylines of 2021. However, it’s still a big deal. Shippers have been begging the FMC, Congress, and even the president to do something about unfair practices in the international shipping industry. Here are a couple examples:

Posted March 2, 2021:

US Ag Exporters Urge President Biden Take Action Against Ocean Freight Carriers’ Practices

Posted April 20, 2021:

FMC Deregulates on Ocean Carrier Service Contracts – Shippers Await Action on Fees

Usually, shipper complaints seem to fall on def ears. But in 2021, Congress actually listened and, more amazingly, took action.

In a rare bipartisan effort, the House of Representatives quickly and overwhelmingly passed the Ocean Shipping Reform Act of 2021. The bill isn’t without criticism from the shipping industry, but it has advocates working within the industry too. If the bill makes it through the Senate, you can expect quite a few blog posts on the topic in 2022.

Last week, Universal Cargo shared the full text of the bill in our blog:

Posted December 16, 2021:

Full Text of the Ocean Shipping Reform Act of 2021 the House Just Passed

#9 – New Normal Narrative

I’ve come to hate the phrase “new normal.” Not only has it been used to try to get people to accept abnormal practices as normal and not resist intrusive government overreach into their lives, but the phrase has made it into the international shipping vernacular too.

There are probably few phrases I’ve read more in international shipping articles in 2021 than “new normal.” In international shipping it has been used to refer to carrier manipulation of capacity, made possible by carrier alliances, high freight rates, and even on occasion of port congestion.

Here’s a post on the subject from earlier this year.

Posted April 15, 2021:

Record Imports & No More Overcapacity – Are We Really Seeing a “New Normal” in International Shipping?

#8 – Dockworker Unions Fight Automation

This is an international shipping storyline that probably didn’t get enough attention in 2021. On both the east and west coasts, the dockworker unions have continued their fight against automation at the ports this year.

The International Longshoremen’s Association (ILA) and International Longshore & Warehouse Union (ILWU) have long fought automation at the ports, which has resulted in less efficient ports in the U.S. compared to others around the world and contributed to the terrible congestion U.S. ports have suffered throughout 2021. Spoiler alert: that congestion storyline will appear on this list.

The ILA put a stranglehold on a Port of Charleston terminal over automation, causing containerships not to call on it. The ILWU opposed automation at Total Terminals International at the Port of Long Beach, which was talked about in the “3 International Shipping News Stories Shippers Should Know About” post linked to below.

This issue of dockworker unions fighting automation could become a much bigger storyline in 2022. The ILWU master contract is set to expire and negotiations are expected to get ugly over this very issue. When dockworker union contract negotiations get contentious, serious port congestion is often the result, so that’s exciting for shippers who have suffered through more than a year of severe congestion at the ports.

Posted May 6, 2021:

ILA Strangling Port of Charleston’s New Terminal

Posted May 20, 2021:

3 International Shipping News Stories Shippers Should Know About

Posted on August 24, 2021:

ILWU & PMA Likely Heading for Fight that Will Cost Shippers

#7 – A Series of Disruptions Hit the Supply Chain

The supply chain has been in the news a great deal toward the end of of 2021. But it’s suffered problems all year long – and not just of the port congestion variety. There have been a series of disruptive events, slowing cargo and making congestion worse. On top of COVID protocols limiting productivity at the ports, there have been partial port shutdowns and rolling factory shutdowns in China among other disruptive events.

Here are a few posts about such disruptions:

Posted June 22, 2021:

What’s Disrupting International Shipping Now?

Posted June 24, 2021:

Good News, Bad News: Yantian Port Back to Full; Freight Rates Rise Even Higher

Posted September 28, 2021:

Now What’s Hitting Container Shipping? Power Shortages?!

Posted March 25, 2021

#6 – Megaship Clogs the Suez Canal

This storyline could be part of the previous item, but the story captured mainstream attention so fully, it deserves its own place on this list. The Ever Given is one of the largest containerships in the world. So it was a sight to see it stuck sideways in the Suez Canal.

Not only was it a majorly disruptive event for international shipping, rippling across the world’s supply chains, but it also inspired many memes. My favorite meme was Austin Powers trying to turn it around in Dr. Evil’s too narrow underground hallway because that was also my first thought when I saw images of the ship turned sideways in the canal.

Posted March 25, 2021:

Aground Megaship Could Block Suez Canal for Weeks

Posted March 30, 2021

Ever Given Free, Let the Fallout Begin

#5 – China’s Heavy-Handed COVID Policies Make Things Worse

China’s Covid Zero policies had them shutting down major port terminals at the drop of a hat. Or rather, at the drop of a single positive Covid test. I wish they had this kind of caution when it came to experimenting on or enhancing coronaviruses in laboratories. Their policies also create problems for ships changing crews, forcing many ships to reroute. Overall, China’s Covid policies have added to supply chain problems without creating any real benefits.

Here are some posts on the storyline:

Posted August 12, 2021:

Single COVID Case Shuts Down Major Chinese Port Terminal

Posted August 19, 2021:

Updates on the Port of Ningbo Terminal Closure

Posted November 30, 2021:

China’s Covid Zero Policies Worsen Supply Chain Problems

#4 – Ocean Freight Carriers Make Billions and Billions

This storyline requires little explanation. Since the pandemic hit last year, ocean freight carriers have cashed in to the tune of billions and billions of dollars. High demand, capacity manipulation, and skyrocketing freight rates are all good news for carriers. It’s quite the turnaround for these massive companies that for years struggled with overcapacity and profitability.

The only ones likely making more money than ocean freight carriers over the last year are pharmaceutical companies that sell Covid vaccines. ‘Nuff said.

Posted May 4, 2021:

Just How Much Are Carriers Earning with These High Freight Rates?

Posted July 8, 2021:

12 Figure Profits for Carriers? Depends on How Peak Season Plays Out

#3 Major Retailers Charter Ships Exclusively for Their Own Goods

Delays, congestion, high freight rates, cargo getting rolled over to later sailings, carriers not honoring contracts, and trouble getting space on ships had shippers so desperate that a trend started with major retailers big enough to follow it. They started chartering whole ships exclusively for their own goods. Home Depot was the first I remember doing it, but the practice soon caught on.

Here are some related posts:

Posted June 15, 2021

Could This Move Disrupt the Ocean Shipping Business?

Posted August 31, 2021

Dollar Tree Exemplifies Losses Shippers Facing & Solutions

Posted September 9, 2021

Big Shipping Trend – Retailers Book Their Own Ships

#2 – Sky-High Freight Rates

For shippers, freight rates have been outrageous the entirety of 2021. Rates started the year unbelievably high, and outside of occasional moments of holding fairly steady and the rare small decline, rates have mainly just climbed and broken more records.

Obviously, as is clear from earlier in this list, ocean freight carriers love these high rates. They’re raking it in. Overall though, I would say these astronomical freight rates are bad news for businesses and consumers in an economy already being choked by out-of-control inflation and suffocating overregulation fueled by fear and power grabbing in the midst of a pandemic.

Freight Rates

Here are posts you can revisit from over the year to tell the story of 2021 freight rates.

Posted January 7, 2021:

Transpacific Freight Rates Start Climbing Again to New Record Highs

Posted April 6, 2021:

What’s Happening With International Shipping Freight Rates

Posted April 13, 2021:

Shocker: Carriers Raise Ocean Freight Rates in April

Posted March 23, 2021:

US Importers’ Shipping Contracts Double: What Does That Mean for Spot Rates?

Posted April 22, 2021:

Transpacific Freight Rates Come Down a Little Bit

Posted April 29, 2021:

COVID-19 Did Not Cause These High Freight Rates

Posted May 11, 2021:

At Least 2 More Years of High Freight Rates Says Drewry

Posted May 18, 2021:

Freight Rates Manage to Climb Even Higher

Posted June 24, 2021:

Good News, Bad News: Yantian Port Back to Full; Freight Rates Rise Even Higher

Posted December 14, 2021:

Freight Rates Fell Last Month But Climb Again Now

#1 – Port Congestion

I think it would come as no surprise to anyone that port congestion is the number one international shipping news storyline of 2021. It may come as a surprise to many outside the industry – certainly not to regular readers of this blog – that this has been a problem literally all year long.

The supply chain disruption at the ports became a major political talking point but only just recently – probably because it helped push the news cycle away from President Biden’s disastrous pull-out from Afghanistan, the crisis at the southern border his administration has fostered, and terribly underperforming economic numbers – for some of which the supply chain has been used as a scapegoat.

Here in Universal Cargo’s blog, we’ve been talking about the port congestion before 2021 even began. However, let’s stick just with this year. Pulling headlines from a handful of our blogs over the year tells the story of port congestion. Unfortunately, this storyline still isn’t over. Port congestion is still bad.

Posted January 14, 2021:

Container Ship Backups Worse Than During 2014/15’s Devastating Labor Contract Negotiations

Posted February 11, 2021:

Chinese New Year Chinese Port Congestion

Posted March 11, 2021:

Congestion Looks Like It Will Snowball into Peak Season, But There’s Hope

Posted March 9, 2021:

Yes, Port Congestion Is Still Bad & Not Going Away Soon

Posted June 1, 2021:

Rail Shrinking Free Time to Fight Congestion – Shippers Pay the Price

Posted June 8, 2021:

Carriers Pause Transpacific Calls to Port of Oakland

Posted September 23, 2021:

How Bad Port Congestion Is & the Little Being Done About It

Posted October 14, 2021:

Port Congestion, 24/7 Gate Hours, Biden, & Inflation

Posted October 19, 2021:

Biden Finally Nominates Maritime Administrator

Posted October 21, 2021:

6 Reasons Biden Suddenly Cares About the Supply Chain

Posted November 2, 2021:

Fees, Fines, Fo Fum – Shippers Get Ready to Pay a Hefty Sum

Posted November 18, 2021:

UPDATE: Fees Delayed at Ports of Los Angeles & Long Beach

Posted November 22, 2021:

Ports of Los Angeles & Long Beach Delay Fees Again – Happy Thanksgiving!

Posted December 7, 2021:

Ports of LA & LB Keep Resetting Countdown Until You’re in Trouble

Posted December 10, 2021:

Biden-Backed Port Congestion Plan Not as Successful as Advertised

Click Here for Free Freight Rate Pricing

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Full Text of the Ocean Shipping Reform Act of 2021 the House Just Passed https://www.universalcargo.com/full-text-of-the-ocean-shipping-reform-act-of-2021-the-house-just-passed/ https://www.universalcargo.com/full-text-of-the-ocean-shipping-reform-act-of-2021-the-house-just-passed/#respond Thu, 16 Dec 2021 22:48:32 +0000 https://www.universalcargo.com/?p=10562 It's said that the United States Congress can't work together. It's said that Democrats and Republicans can't agree on anything – that all they do is fight with each other. If that's the rule, we've just seen the rule's exception.

Last week, the House of Representatives passed the quickly pushed through Ocean Shipping Reform Act of 2021. The bipartisan bill saw little debate before being overwhelmingly passed and sent to the Senate.

The bill addresses major concerns of U.S. shippers, such as refusal of service or shipping containers to exporters and unfair demurrage and detention fees. However, there are also concerns from within the industry about the legislation as well.

I expect several blogs in the future to be centered around what many are calling a once in a generation rewrite of U.S. shipping law. But before writing those, I wanted to make sure you shippers out there got a look at the law.

Check out the post in Universal Cargo's blog to read the full text of the legislation along with a bullet point provisions overview of it from Congress.

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House of Representatives
Photo of House of Representatives by Ted Eytan

It’s said that the United States Congress can’t work together. It’s said that Democrats and Republicans can’t agree on anything – that all they do is fight with each other. If that’s the rule, we’ve just seen the rule’s exception.

Last week, the House of Representatives passed the quickly pushed through Ocean Shipping Reform Act of 2021. The bipartisan bill saw little debate before being overwhelmingly passed and sent to the Senate.

The bill addresses major concerns of U.S. shippers, such as refusal of service or shipping containers to exporters and unfair demurrage and detention fees. However, there are also concerns from within the industry about the legislation as well.

I expect several blogs in the future to be centered around what many are calling a once in a generation rewrite of U.S. shipping law. But before writing those, I wanted to make sure you shippers out there got a look at the law.

Below are the bullet point provisions Congress gives as an overview of the bill along with the full text of the bill, which can also be seen at congress.gov.

Passed House (12/08/2021)

Ocean Shipping Reform Act of 2021

This bill revises provisions related to ocean shipping policies and is designed to support the growth and development of U.S. exports and promote reciprocal trade in the common carriage of goods by water in the foreign commerce of the United States.

Among other provisions, the bill

  • sets forth requirements for operating a shipping exchange involving ocean transportation in the foreign commerce of the United States;
  • requires ocean common carriers to report to the Federal Maritime Commission (FMC) each calendar quarter on total import and export tonnage and the total loaded and empty 20-foot equivalent units per vessel that makes port in the United States;
  • requires the FMC to publish and annually update all its findings of false certifications by ocean common carriers or marine terminal operators and all penalties assessed against such carriers or operators;
  • revises annual reporting requirements for the FMC on foreign laws and practices to include practices by ocean common carriers;
  • prohibits ocean common carriers and marine terminal operators from retaliating or discriminating against shippers because such shippers have patronized another carrier, or filed a complaint;
  • directs the FMC to establish rules prohibiting ocean common carriers and marine terminal operators from adopting and applying unjust and unreasonable demurrage and detention fees;
  • authorizes the FMC to initiate investigations of an ocean common carrier’s fees or charges and apply enforcement measures, as appropriate;
  • directs the Department of Transportation to seek to enter into an agrement with the National Academy of Sciences to study the U.S. supply chain industry, including data constraints that impede the flow of maritime cargo and add to supply chain inefficiencies; and
  • provides authority for the FMC to issue an emergency order requiring ocean common carriers or marine terminal operators to share directly with relevant shippers, rail carriers, or motor carriers information relating to cargo throughput and availability.

117th CONGRESS
1st Session

H. R. 4996


IN THE SENATE OF THE UNITED STATES December 9, 2021

Received; read twice and referred to the Committee on Commerce, Science, and Transportation


AN ACT

To amend title 46, United States Code, with respect to prohibited acts by ocean common carriers or marine terminal operators, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. Short title.

This Act may be cited as the “Ocean Shipping Reform Act of 2021”.

SEC. 2. Purposes.

Section 40101 of title 46, United States Code, is amended by striking paragraphs (2) through (4) and inserting the following:

“(2) ensure an efficient and competitive transportation system for the common carriage of goods by water in the foreign commerce of the United States that is, as far as possible, in harmony with fair and equitable international shipping practices;

“(3) encourage the development of a competitive and efficient liner fleet of vessels of the United States capable of meeting national security and commerce needs of the United States;

“(4) support the growth and development of United States exports through a competitive and efficient system for the common carriage of goods by water in the foreign commerce of the United States and by placing a greater reliance on the marketplace; and

“(5) promote reciprocal trade in the common carriage of goods by water in the foreign commerce of the United States.”.

SEC. 3. Service contracts.

Section 40502 of title 46, United States Code, is amended—

(1) in subsection (c)—

(A) in paragraph (7) by striking “; and” and inserting a semicolon;

(B) in paragraph (8) by striking the period and inserting “; and”; and

(C) by adding at the end the following:

“(9) any other essential terms or minimum contract requirements that the Federal Maritime Commission determines necessary or appropriate.”; and

(2) by adding at the end the following:

“(g) Service contract requirement.—With respect to service contracts entered into under this section, a common carrier shall establish, observe, and enforce just and reasonable regulations and practices relating to essential terms and minimum contract requirements the Commission determines are necessary or appropriate under subsection (c)(9).”.

SEC. 4. Shipping exchange registry.

(a) In general.—Chapter 405 of title 46, United States Code, is amended by adding at the end the following:

Ҥ 40504. Shipping exchange registry

“(a) In general.—No person may operate a shipping exchange involving ocean transportation in the foreign commerce of the United States unless the shipping exchange is registered as a national shipping exchange under the terms and conditions provided in this section and the regulations issued pursuant to this section.

“(b) Registration.—A person shall register a shipping exchange by filing with the Federal Maritime Commission an application for registration in such form as the Commission, by rule, may prescribe containing the rules of the exchange and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate in the public interest.

“(c) Exemption.—The Commission may exempt, conditionally or unconditionally, a shipping exchange from registration and licensing under this section if the Commission finds that the shipping exchange is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in the home country of the shipping exchange.

“(d) Regulations.—In issuing regulations pursuant to subsection (a), the Commission shall set standards necessary to carry out subtitle IV for registered national shipping exchanges, including the minimum requirements for service contracts established under section 40502, and issue licenses for registered national shipping exchanges.

“(e) Definition.—In this subsection, the term ‘shipping exchange’ means a platform, digital, over-the-counter or otherwise, which connects shippers with common carriers (both vessel-operating and non-vessel-operating) for the purpose of entering into underlying agreements or contracts for the transport of cargo, by vessel or other modes of transportation.”.

(b) Applicability.—The registration requirement under section 40504 of title 46, United States Code (as added by this section), shall take effect on the date on which the Federal Maritime Commission issues regulations required under subsection (d) of such section.

(c) Clerical amendment.—The analysis for chapter 405 of title 46, United States Code, is amended by adding at the end the following:
“40504. Shipping exchange registry.”.

SEC. 5. Data collection.

(a) In general.—Chapter 411 of title 46, United States Code, is amended by adding at the end the following:

Ҥ 41110. Data collection

“(a) In general.—Common carriers covered under this chapter shall submit to the Federal Maritime Commission a calendar quarterly report that describes the total import and export tonnage and the total loaded and empty 20-foot equivalent units per vessel (making port in the United States, including any territory or possession of the United States) operated by such common carrier.

“(b) Prohibition on duplication.—Data required to be reported under subsection (a) may not duplicate information—

“(1) submitted to the Corps of Engineers pursuant to section 11 of the Act entitled ‘An Act authorizing the construction, repair, and preservation of certain public works on rivers and harbors, and for other purposes’, approved September 22, 1922 (33 U.S.C. 555), by an ocean common carrier acting as a vessel operator; or

“(2) submitted pursuant to section 481 of the Tariff Act of 1930 (19 U.S.C. 1481) to U.S. Customs and Border Protection by merchandise importers.”.

(b) Clerical amendment.—The analysis for chapter 411 of title 46, United States Code, is amended by adding at the end the following:
“41110. Data collection.”.

SEC. 6. National shipper advisory committee.

(a) National shipper advisory committee.—Section 42502(c)(3) of title 46, United States Code, is amended by inserting “, including customs brokers or freight forwarders” after “ocean common carriers” each place such term occurs.

(b) Analysis.—The analysis for chapter 425 of title 46, United States Code, is amended by inserting before the item relating to section 42501 the following:
“Sec. ”.

SEC. 7. Annual report and public disclosures.

(a) Report on foreign laws and practices.—Section 46106(b) of title 46, United States Code, is amended—

(1) in paragraph (5) by striking “and” at the end;

(2) in paragraph (6)—

(A) by striking “under this part” and inserting “under chapter 403”; and

(B) by striking the period and inserting a semicolon; and

(3) by adding at the end the following:

“(7) an identification of any anticompetitive or nonreciprocal trade practices by ocean common carriers;

“(8) an analysis of any trade imbalance resulting from the business practices of ocean common carriers, including an analysis of the data collected under section 41110; and

“(9) an identification of any otherwise concerning practices by ocean common carriers, particularly such carriers that are—

“(A) State-owned or State-controlled enterprises; or

“(B) owned or controlled by, is a subsidiary of, or is otherwise related legally or financially (other than a minority relationship or investment) to a corporation based in a country—

“(i) identified as a nonmarket economy country (as defined in section 771(18) of the Tariff Act of ( U.S.C. 1677(18))) as of the date of enactment of this paragraph;

“(ii) identified by the United States Trade Representative in the most recent report required by section 182 of the Trade Act of 1974 (19 U.S.C. 2242) as a priority foreign country under subsection (a)(2) of that section; or

“(iii) subject to monitoring by the Trade Representative under section 306 of the Trade Act of 1974 (19 U.S.C. 2416).”.

(b) Public disclosure.—

(1) IN GENERAL.—Section 46106 of title 46, United States Code, is amended by adding at the end the following:

“(d) Public disclosures.—The Federal Maritime Commission shall publish, and annually update, on the website of the Commission—

“(1) all findings by the Commission of false certifications by common carriers or marine terminal operators under section 41104(a)(15) of this title; and

“(2) all penalties imposed or assessed against common carriers or marine terminal operators, as applicable, under sections 41107, 41108, and 41109, listed by each common carrier or marine terminal operator.”.

(2) CONFORMING AND CLERICAL AMENDMENTS.—

(A) CONFORMING AMENDMENT.—The heading for section 46106 of title 46, United States Code, is amended by inserting “and public disclosure” after “report”.

(B) CLERICAL AMENDMENT.—The analysis for chapter 461 of title 46, United States Code, is amended by striking the item related to section 46106 and inserting the following:
“46106. Annual report and public disclosure.”.

SEC. 8. General prohibitions.

Section 41102 of title 46, United States Code, is amended by adding by adding at the end the following:

“(d) Prohibition on retaliation.—A common carrier, marine terminal operator, or ocean transportation intermediary, either alone or in conjunction with any other person, directly or indirectly, may not retaliate against a shipper, a shipper’s agent, or a motor carrier by refusing, or threatening to refuse, cargo space accommodations when available, or resort to other unfair or unjustly discriminatory methods because the shipper has patronized another carrier, has filed a complaint, or for any other reason.

“(e) Certification.—A common carrier or marine terminal operator shall not charge any other person demurrage or detention charges under a tariff, marine terminal schedule, service contract, or any other contractual obligation unless accompanied by an accurate certification that such charges comply with all rules and regulations concerning demurrage or detention issued by the Commission. The certification requirement only applies to the entity that establishes the charge, and a common carrier or marine terminal operator that collects a charge on behalf of another common carrier or marine terminal operator is not responsible for providing the certification, except that an invoice from a common carrier or marine terminal operator collecting a charge on behalf of another must include a certification from the party that established the charge.”.

SEC. 9. Prohibition on unreasonably declining cargo.

(a) Unreasonably declining cargo.—Section 41104 of title 46, United States Code, is amended in subsection (a)—

(1) by striking paragraph (3) and inserting the following:

“(3) engage in practices that unreasonably reduce shipper accessibility to equipment necessary for the loading or unloading of cargo;”;

(2) in paragraph (12) by striking “; or” and inserting a semicolon;

(3) in paragraph (13) by striking the period and inserting a semicolon; and

(4) by adding at the end the following:

“(14) fail to furnish or cause a contractor to fail to furnish containers or other facilities and instrumentalities needed to perform transportation services, including allocation of vessel space accommodations, in consideration of reasonably foreseeable import and export demands; or

“(15) unreasonably decline export cargo bookings if such cargo can be loaded safely and timely, as determined by the Commandant of the Coast Guard, and carried on a vessel scheduled for the immediate destination of such cargo.”.

(b) Rulemaking on unreasonably declining cargo.—

(1) IN GENERAL.—Not later than 90 days after the date of enactment of this Act, the Commission shall initiate a rulemaking proceeding to define the term “unreasonably decline” for the purposes of subsection (a)(15) of section 41104 of title 46, United States Code (as added by subsection (a)).

(2) CONTENTS.—The rulemaking under paragraph (1) shall address the unreasonableness of ocean common carriers prioritizing the shipment of empty containers while excluding, limiting, or otherwise reducing the shipment of full, loaded containers when such containers are readily available to be shipped and the appurtenant vessel has the weight and space capacity available to carry such containers if loaded in a safe and timely manner.

SEC. 10. Detention and demurrage.

(a) In general.—Section 41104 of title 46, United States Code, is further amended by adding at the end the following:

“(d) Certification.—Failure of a common carrier to include a certification under section 41102(e) alongside any demurrage or detention charge shall eliminate any obligation of the charged party to pay the applicable charge.

“(e) Demurrage and detention practices and charges.—Notwithstanding any other provision of law and not later than 30 days of the date of enactment of this subsection, a common carrier or marine terminal operator, shall—

“(1) act in a manner consistent with any rules or regulations concerning demurrage or detention issued by the Commission;

“(2) maintain all records supporting the assessment of any demurrage or detention charges for a period of 5 years and provide such records to the invoiced party or to the Commission on request; and

“(3) bear the burden of establishing the reasonableness of any demurrage or detention charges which are the subject of any complaint proceeding challenging a common carrier or marine terminal operator demurrage or detention charges as unjust and unreasonable.

“(f) Penalties for false or inaccurate certified demurrage or detention charges.—In the event of a finding that the certification under section 41102(e) was inaccurate, or false after submission under section 41301, penalties under section 41107 shall be applied if the Commission determines, in a separate enforcement proceeding, such certification was inaccurate or false.”.

(b) Rulemaking on detention and demurrage.—

(1) IN GENERAL.—Not later than 120 days after the date of enactment of this Act, the Federal Maritime Commission shall initiate a rulemaking proceeding to establish rules prohibiting common carriers and marine terminal operators from adopting and applying unjust and unreasonable demurrage and detention rules and practices.

(2) CONTENTS.—The rulemaking under paragraph (1) shall address the issues identified in the final rule published on May 18, 2020, titled “Interpretive Rule on Demurrage and Detention Under the Shipping Act” (85 Fed. Reg. 29638), including the following:

(A) Establishing clear and uniform definitions for demurrage, detention, cargo availability for retrieval and associated free time, and other terminology used in the rule. The definition for cargo availability for retrieval shall account for government inspections.

(B) Establishing that demurrage and detention rules are not independent revenue sources but incentivize efficiencies in the ocean transportation network, including the retrieval of cargo and return of equipment.

(C) Prohibiting the consumption of free time or collection of demurrage and detention charges when obstacles to the cargo retrieval or return of equipment are within the scope of responsibility of the carrier or their agent and beyond the control of the invoiced or contracting party.

(D) Prohibiting the commencement or continuation of free time unless cargo is available for retrieval and timely notice of cargo availability has been provided.

(E) Prohibiting the consumption of free time or collection of demurrage charges when marine terminal appointments are not available during the free time period.

(F) Prohibiting the consumption of free time or collection of detention charges on containers when the marine terminal required for return is not open or available.

(G) Requiring common carriers to provide timely notice of—

(i) cargo availability after vessel discharge;

(ii) container return locations; and

(iii) advance notice for container early return dates.

(H) Establishing minimum billing requirements, including timeliness and supporting information that shall be included in or with invoices for demurrage and detention charges that will allow the invoiced party to validate the charges.

(I) Requiring common carriers and marine terminal operators to establish reasonable dispute resolution policies and practices.

(J) Establishing the responsibilities of shippers, receivers, and draymen with respect to cargo retrieval and equipment return.

(K) Clarifying rules for the invoicing of parties other than the shipper for any demurrage, detention, or other similar per container charges, including determining whether such parties should be billed at all.

(c) Rulemaking on minimum service standards.—Not later than 90 days after the date of enactment of this Act, the Commission shall initiate a rulemaking proceeding to incorporate subsections (d) through (f) of 41104 of title 46, United States Code, which shall include the following:

(1) The obligation to adopt reasonable rules and practices related to or connected with the furnishing and allocation of adequate and suitable equipment, vessel space accommodations, containers, and other instrumentalities necessary for the receiving, loading, carriage, unloading and delivery of cargo.

(2) The duty to perform the contract of carriage with reasonable dispatch.

(3) The requirement to carry United States export cargo if such cargo can be loaded safely and timely, as determined by the Commandant of the Coast Guard, and carried on a vessel scheduled for such cargo’s immediate destination.

(4) The requirement of ocean common carriers to establish contingency service plans to address and mitigate service disruptions and inefficiencies during periods of port congestion and other market disruptions.

SEC. 11. Assessment of penalties.

(a) Assessment of penalties.—Section 41109 of title 46, United States Code, is amended—

(1) in subsection (a)—

(A) by inserting “or, in addition to or in lieu of a civil penalty, order the refund of money” after “this part”; and

(B) by inserting “or refund of money” after “conditions, a civil penalty”;

(2) in subsection (c) by inserting “or refund of money” after “civil penalty”;

(3) in subsection (e) by inserting “or order a refund of money” after “civil penalty”; and

(4) in subsection (f) by inserting “or who is ordered to refund money” after “civil penalty is assessed”.

(b) Additional penalties.—Section 41108(a) of title 46, United States Code, is amended by striking “section 41104(1), (2), or (7)” and inserting “subsections (d) or (e) of section 41102 or paragraph (1), (2), (7), (14), or (15) of section 41104(a)”.

(c) Conforming amendment.—Section 41309 of title 46, United States Code, is amended—

(1) in subsection (a)—

(A) by inserting “or refund of money” after “payment of reparation”; and

(B) by inserting “or to whom the refund of money was ordered” after “award was made”; and

(2) in subsection (b) by inserting “or refund of money” after “award of reparation”.

(d) Award of reparations.—Section 41305(c) of title 46, United States Code, is amended—

(1) by inserting “or (c)” after “41102(b)”; and

(2) by inserting “, or if the Commission determines that a violation of section 41102(e) was made willfully or knowingly” after “of this title”.

SEC. 12. Investigations.

Section 41302 of title 46, United States Code, is amended by striking “or agreement” and inserting “, agreement, fee, or charge”.

SEC. 13. Injunctive relief.

Section 41307(b) to title 46, United States Code, is amended—

(1) in paragraph (3)—

(A) in the heading by striking “and third parties”; and

(B) by striking the second sentence; and

(2) by adding at the end the following:

“(5) THIRD PARTY INTERVENTION.—The court may allow a third party to intervene in a civil action brought under this section.”.

SEC. 14. Technical amendments.

(a) Federal maritime commission.—The analysis for chapter 461 of title 46, United States Code, is amended by striking the first item relating to chapter 461.

(b) Assessment of penalties.—Section 41109(c) of title 46, United States Code, is amended by striking “section 41104(1) or (2)” and inserting “paragraph (1) or (2) of section 41104(a)”.

(c) National shipper advisory committee.—Section 42502(c)(3) of title 46, United States Code is amended by striking “Representation” and all that follows through “Members” and inserting “Representation.—Members”.

SEC. 15. Authorization of appropriations.

Section 46108 of title 46, United States Code, is amended by striking “$29,086,888 for fiscal year 2020 and $29,639,538 for fiscal year 2021” and inserting “$32,603,492 for fiscal year 2022 and $35,863,842 for fiscal year 2023”.

SEC. 16. NAS study on supply chain industry.

(a) In general.—Not later than 60 days after the date of enactment of this Act, the Secretary of Transportation shall seek to enter into an agreement with the National Academy of Sciences under which the National Academy shall conduct a study on the United States supply chain that examines data constraints that impede the flow of maritime cargo and add to supply chain inefficiencies and that identifies data sharing systems that can be employed to improve the functioning of the United States supply chain.

(b) Contents.—The study required under subsection (a) shall include—

(1) the identification of where bottlenecks or chokepoints are most prominent within the United States supply chain;

(2) the identification of what common shipping data is created with each hand-off of a container through the United States supply chain and how such data is stored and shared;

(3) the identification of critical data elements used by any entity covered by subsection (c), including the key elements used for various supply chain business processes;

(4) a review of the methodology used to store, access, and disseminate shipping data across the United States supply chain and evaluation of the inefficiencies in such methodology;

(5) an analysis of existing and potential impediments to the free flow of information among entities covered by subsection (c), including—

(A) identification of barriers that prevent carriers, terminals, and shippers from having access to commercial data; and

(B) any inconsistencies in—

(i) terminology used across data elements connected to the shipment, arrival, and unloading of a shipping container; and

(ii) the classification systems used across the United States supply chain, including inconsistencies in the names of entities covered by subsection (c), geographical names, and terminology;

(6) the identification of information to be included in an improved data sharing system designed to plan, execute, and monitor the optimal loading and unloading of maritime cargo; and

(7) the identification of existing software and data sharing platforms available to facilitate propagation of information to all agents involved in the loading and unloading of maritime cargo and evaluate the effectiveness of such software and platforms if implemented.

(c) Collection of information.—In conducting the study required under subsection (a), the National Academy of Sciences shall collect information from—

(1) vessel operating common carriers and non-vessel operating common carriers;

(2) marine terminal operators;

(3) commercial motor vehicle operators;

(4) railroad carriers;

(5) chassis providers;

(6) ocean transportation intermediaries;

(7) custom brokers;

(8) freight forwarders;

(9) shippers and cargo owners;

(10) the National Shipper Advisory Committee;

(11) relevant government agencies, such as the Federal Maritime Commission, the Surface Transportation Board, and the United States Customs and Border Protection;

(12) to the extent practicable, representatives of foreign countries and maritime jurisdictions outside of the United States; and

(13) any other entity involved in the transportation of ocean cargo and the unloading of cargo upon arrival at a port.

(d) Facilitation of data sharing.—In carrying out the study under subsection (a), the National Academy of Sciences may solicit information from any relevant agency relating to the United States supply chain.

(e) Report.—Not later than 18 months after entering into an arrangement with the Secretary under subsection (a), the National Academy of Sciences shall submit to the Committee on Transportation and Infrastructure of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate, and make available on a publicly accessible website, a report containing—

(1) the study required under subsection (a);

(2) the information collected under subsections (b) and (c), excluding any personally identifiable information or sensitive business information; and

(3) any recommendations for—

(A) common data standards to be used in the United States supply chain; and

(B) policies and protocols that would streamline information sharing across the United States supply chain.

SEC. 17. Temporary emergency authority.

(a) Public input on information sharing.—

(1) IN GENERAL.—Not later than 30 days after the date of enactment of this Act, the Federal Maritime Commission shall issue a request for information seeking public comment regarding—

(A) whether congestion of the common carriage of goods has created an emergency situation of a magnitude such that there exists a substantial adverse effect on the competitiveness and reliability of the international ocean transportation supply system;

(B) whether an emergency order described in subsection (b) would alleviate such an emergency situation; and

(C) the appropriate scope of such an emergency order, if applicable.

(2) CONSULTATION.—During the public comment period under paragraph (1), the Commission may consult, as the Commission determines to be appropriate, with—

(A) other Federal departments and agencies; and

(B) persons with expertise relating to maritime and freight operations.

(b) Authority to issue emergency order requiring information sharing.—On making a unanimous determination described in subsection (c), the Commission may issue an emergency order requiring any common carrier or marine terminal operator to share directly with relevant shippers, rail carriers, or motor carriers information relating to cargo throughput and availability, in order to ensure the efficient transportation, loading, and unloading of cargo to or from—

(1) any inland destination or point of origin;

(2) any vessel; or

(3) any point on a wharf or terminal.

(c) Description of determination.—

(1) IN GENERAL.—A determination referred to in subsection (b) is a unanimous determination by the Commission that congestion of common carriage of goods has created an emergency situation of a magnitude such that there exists a substantial adverse effect on the competitiveness and reliability of the international ocean transportation supply system.

(2) FACTORS FOR CONSIDERATION.—In issuing an emergency order under subsection (b), the Commission shall ensure that such order includes parameters relating to temporal and geographic scope, taking into consideration the likely burdens on ocean carriers and marine terminal operators and the likely benefits on congestion relating to the purposes described in section 40101 of title 46, United States Code.

(d) Petitions for exception.—

(1) IN GENERAL.—A common carrier or marine terminal operator subject to an emergency order issued under this section may submit to the Commission a petition for exception from 1 or more requirements of the emergency order, based on a showing of undue hardship or other condition rendering compliance with such a requirement impractical.

(2) DETERMINATION.—Not later than 21 days after the date on which a petition for exception under paragraph (1) is submitted, the Commission shall determine whether to approve or deny such petition by majority vote.

(3) INAPPLICABILITY PENDING REVIEW.—The requirements of an emergency order that is the subject of a petition for exception under this subsection shall not apply to a petitioner during the period for which the petition is pending.

(e) Limitations.—

(1) TERM.—An emergency order issued under this section shall remain in effect for a period of not longer than 60 days.

(2) RENEWAL.—The Commission may renew an emergency order issued under this section for an additional term by a unanimous determination by the Commission.

(f) Sunset.—The authority provided by this section shall terminate on the date that is 2 years after the date of enactment of this Act.

(g) Definitions.—In this section:

(1) COMMON CARRIER.—The term “common carrier” has the meaning given such term in section 40102 of title 46, United States Code.

(2) MOTOR CARRIER.—The term “motor carrier” has the meaning given such term in section 13102 of title 49, United States Code.

(3) RAIL CARRIER.—The term “rail carrier” has the meaning given such term in section 10102 of title 49, United States Code.

(4) SHIPPER.—The term “shipper” has the meaning given such term in section 40102 of title 46, United States Code.

SEC. 18. Determination of budgetary effects.

The budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go Act of 2010, shall be determined by reference to the latest statement titled “Budgetary Effects of PAYGO Legislation” for this Act, submitted for printing in the Congressional Record by the Chairman of the House Budget Committee, provided that such statement has been submitted prior to the vote on passage.

Passed the House of Representatives December 8, 2021.

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Freight Rates Fell Last Month But Climb Again Now https://www.universalcargo.com/freight-rates-fell-last-month-but-climb-again-now/ https://www.universalcargo.com/freight-rates-fell-last-month-but-climb-again-now/#respond Tue, 14 Dec 2021 23:55:34 +0000 https://www.universalcargo.com/?p=10561 In July, I went out on a limb as seemingly the only one in the shipping industry to predict ocean freight rates could fall by the end of the year.

I turned out to be right. YAY! Headlines like "Ocean Shipping Rates Fall but Ports Are Still Jammed" from the Wall Street Journal and "Premium Ocean Shipping Rates Fell 25% Last Week, Ports Still Clogged" from Floor Daily hit about a month ago.

Unfortunately, it was short-lived. BOO! Now headlines like "About that rate relief … ocean shipping costs are rising again" from American Shipper have replaced those dropping rate headlines.

Of course, if rates went down once, they could go down again. In fact, eventually they have to fall. With inflation out of control and looking to only get worse with the Democrats' tremendously high spending plans and money printing, it doesn't look like inflation is going to slow down anytime soon. The extra money people have from stimuli and lockdowns preventing traveling and spending on entertainment is dwindling. We're also past the heavy importing season that preps stores for the Christmas and holiday shopping season. That should equate to falling demand and decreased rates. Of course, carriers have learned to manipulate capacity with things like blanked (cancelled) sailings through their alliances, so freight rates probably won't fall as fast or low as demand might normally dictate.

But let's step back from looking at the future of how freight rates might behave and see what they've been doing lately and are doing right now.

Find out how freight rates have fallen and rose again (and more!) by reading the full post in Universal Cargo's blog.

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In July, I went out on a limb as seemingly the only one in the shipping industry to predict ocean freight rates could fall by the end of the year.

I turned out to be right. YAY! Headlines like “Ocean Shipping Rates Fall but Ports Are Still Jammed” from the Wall Street Journal and “Premium Ocean Shipping Rates Fell 25% Last Week, Ports Still Clogged” from Floor Daily hit about a month ago.

Unfortunately, it was short-lived. BOO! Now headlines like “About that rate relief … ocean shipping costs are rising again” from American Shipper have replaced those dropping rate headlines.

Of course, if rates went down once, they could go down again. In fact, eventually they have to fall. With inflation out of control and looking to only get worse with the Democrats’ tremendously high spending plans and money printing, it doesn’t look like inflation is going to slow down anytime soon. The extra money people have from stimuli and lockdowns preventing traveling and spending on entertainment is dwindling. We’re also past the heavy importing season that preps stores for the Christmas and holiday shopping season. That should equate to falling demand and decreased rates. Of course, carriers have learned to manipulate capacity with things like blanked (cancelled) sailings through their alliances, so freight rates probably won’t fall as fast or low as demand might normally dictate.

But let’s step back from looking at the future of how freight rates might behave and see what they’ve been doing lately and are doing right now.

Last Month’s Ocean Freight Rate Drop

Last month actually saw a significant ocean freight rate drop.

Freight Rates

The Wall Street Journal (WSJ) reported it in rather a good news, bad news type of way:

The cost to move a container across the Pacific fell by more than one-quarter last week, the biggest decline in two years. The decline signals that the huge demand for Asian exports is easing, though shipping executives say it will be months before the logjam of ships outside of U.S. ports clears up.

Yes, port congestion is still a thing. However, we are at the point where it should naturally be improving. And there are some reports of improvement already. Improvement doesn’t mean there isn’t a long ways yet to go. The ports are often playing catch up in the months after the peak season as shipping eases despite a little surge before the Chinese New Year. However, ports are not normally this congested, having never recovered from last peak season as demand and cargo movement remained at near-record to record levels through the year.

According to the WSJ article, which was penned by Costas Paris, shipping executives don’t expect the logjam of ships at U.S. ports to ease until “February at the earliest.” That’s not much of a surprise as a week ago there were nearly 100 ships (96 was the number I saw) waiting to dock at Southern Californian ports.

But today’s post is not about port congestion. It’s about freight rates. So let’s go back to Paris. No, not France, the WSJ article. In that November 15th article, Paris wrote:

The cost to move a container from China to the U.S. West Coast fell 26% last week compared with the week before to $13,295, according to the Freightos Baltic Index.

That is a significant drop, though there was still that feel of good news, bad news from Paris:

That is still more than three times as high since the start of the year when the same box cost $4,200.

Despite a freight rate drop, container shipping prices were still incredibly high. However, let’s keep that glass half full and concentrate on the fact rates were finally dropping. And by a very significant amount at that. For the last year and a half, it seemed like freight rates did nothing but rise and shatter records. There was actually a little period where freight rates stabilized for two to three months and an occasional slight decrease before rates continued their stratospheric ascent. However, before last month’s drop, it had been months since any kind of freight rate decrease had been seen, at least according to the article’s source:

Freightos head of research Judah Levine said it was the first decline since June in the premium cargo owners pay to secure space on ships.

Freight Rates Now Back Up

As is often the case here in Universal Cargo’s blog, it’s Miller time. No, that doesn’t mean enjoying a drink. It means looking at an American Shipper article by Greg Miller. In this case, it’s the one with the headline mentioned above about ocean shipping costs rising again.

Of course, Miller starts with a classic misquote of Samuel L. Clemens: “Reports of my death have been greatly exaggerated.” Ah, classic Mark Twain – almost – and classic Miller to use this funny line to signify this historic, and what shippers would probably call damnable, rate boom is not over. Miller reports:

The historic rate boom appears alive and well — bad news for cargo shippers and good news for container shipping investors.

There was a dip in spot prices over recent months from stratospherically high levels, but downward momentum did not hold. In several trade lanes, including Asia-to-U.S., rates are now gravitating upward yet again.

Okay, okay, let’s get to the numbers, Miller. His article was published on Monday, December 13th, and it reports:

The Drewry World Container Index, a global composite of main routes, rose 2.3% last week, to $9,262 per forty-foot equivalent unit, up 170% year on year. The index hasn’t been this high since the last week of October.

A different measure, the Shanghai Container Freight Index (SCFI), shows an even more bullish pattern for ocean carriers. After pulling back minimally in October, the SCFI global composite continued its climb and has just reached a new all-time high, rising 1.8% last week and 2.7% the week before that.

Looking specifically at the Asia-U.S. trade, Drewry’s Shanghai-Los Angeles weekly assessment was $10,138 per FEU last week, up 5% week on week. Drewry’s Shanghai-New York assessment rose 4% from the prior week, to $13,118 per FEU.

The Platts Freight All Kinds (FAK) daily rate assessment, which does not include premiums, was at $8,400 per FEU for the North Asia-West Coast route on Friday, unchanged since late October. The Platts North Asia-East Coast rate was at $10,000 per FEU on Friday, an all-time high and the same level it has generally been since mid-September.

The FBX daily index — which does include premiums for its two Asia-U.S. routes — was at $14,924 per FEU on Friday for Asia-West Coast, up 7% month on month and 3.8 times the spot rate at the same time last year.

FBX’s Asia-East Coast rate was at $17,195 per FEU on Friday, up 8% month on month and 3.5 times the spot rate at the same time last year.

As of Friday, Xeneta put the daily Far East-West Coast FAK rate at $7,383 per FEU, excluding premiums. To put that in perspective, Xeneta assessed the most recent low at $6,913 last Tuesday. Pricing is up 7% since then. It put the all-time high for this route at $8,961 per FEU on Oct. 31, 21% above Friday’s rate.

Making Comparisons

You may have noticed there’s more extensive data from Miller in American Shipper than Paris in the Wall Street Journal. That’s generally to be expected when comparing shipping-specific news outlets to mainstream media outlets. Especially with it being reported earlier this month that the White House has been having secret (though not so secret now) meetings with major news outlets to give more positive coverage of the economy and supply chain, it wouldn’t be surprising to see only the best data singled out. Kudos to Paris for his good news, bad news approach to his article.

Adding to the differences you see are all the different container indices out there. Paris was using Freightos while Miller referenced the Drewry World Container Index, the SCFI, Platts, FBX, and Xeneta.

None of the indices can be looked at by the average shipper to know exactly what freight pricing they’ll be paying on their cargo containers. Some indices include only the base per-container rate carriers are charging on particular routes while others include fees carriers automatically add to their per-container rates. In July, Freightos changed the way they calculate their index, which led to a massive index hike that had nothing to do with the actual market. It’s not uncommon for one index to be three times as high as another with the numbers it reports for shipping a container on a particular route.

What shippers can get from the indices is how freight rates are trending. Are they increasing? Decreasing? Significantly? Or just a little?

That Freightos index drop last month Paris reported on was quite large. However, Miller is showing increases now to all time highs. Still, the recent week-on-week percentage rises are not nearly as large as the week-on-week percentage drop Paris was reporting on. I think we could see another significant drop very soon. Big surprise, I might be the only one with such a prediction…

Experts Bullish on Freight Rates

Miller reports that freight rates are expected to not just remain high, but probably keep on rising:

The consensus is that spot rates should remain strong in the near term, if not rise further. “The container sector continues to be well supported,” affirmed Clarksons Platou Securities on Monday.

According to S&P Global Platts, “All-inclusive trans-Pacific container shipping rates to North America held steady [last week] with the expectation that shipping lines would push for further increases [this week] as demand strengthens.

“Shippers are getting squeezed by a shortage of empty containers in Asia as port congestion and blank [canceled] sailings impede the return of equipment from Europe and North America.”

As a side note, I think blank sailings should be looked into by regulators. Blanking sailings is something completely in the carriers’ control and decisions they make as groups inside of their vessel sharing agreement partnerships (or alliances). Not only are carriers able to manipulate the market through blank sailings, but they also create equipment and container shortages that greatly contribute to congestion and rises in shipping costs.

Then again, I’ve advocated for regulators to reconsider allowing these massive carrier alliances since the U.S. and Europe approved the P3 Network (which was actually halted by China).

But back to the final opinions Miller’s article shares about rising freight rates:

Consultant Jon Monroe wrote in his new weekly newsletter, “It does not look like the spot market will come down anytime soon.”

Vespucci Maritime CEO Lars Jensen said in an online post: “And up we go again. … Following a large hike in rates up to Chinese New Year 2021, rates did decline for a short while, only to then rocket further on upwards over summer 2021. Then there was a second break after Golden Week 2021, where rates once more declined. But now we are again setting new records. It appears this might continue until Chinese New Year 2022.”

Let’s hope they’re wrong.

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Biden-Backed Port Congestion Plan Not as Successful as Advertised https://www.universalcargo.com/biden-backed-port-congestion-plan-not-as-successful-as-advertised/ https://www.universalcargo.com/biden-backed-port-congestion-plan-not-as-successful-as-advertised/#respond Fri, 10 Dec 2021 19:55:21 +0000 https://www.universalcargo.com/?p=10558 Parenting 101 from the Ports of Los Angeles & Long Beach On Tuesday, in yet another blog post about the Ports of Los Angeles and Long Beach postponing the outrageous container dwelling fees they’ve been threatening, I compared the threats to a mom counting down her children before they get in trouble. Only the mom […]

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Parenting 101 from the Ports of Los Angeles & Long Beach

On Tuesday, in yet another blog post about the Ports of Los Angeles and Long Beach postponing the outrageous container dwelling fees they’ve been threatening, I compared the threats to a mom counting down her children before they get in trouble. Only the mom doesn’t really want to punish her children, so she just keeps restarting the countdown.

Ports threaten fees

Of course, such a tactic inevitably becomes ineffective, as appears to be the case at the Ports of Los Angeles and Long Beach.

Children will test their mother and eventually catch on to the fact no punishment is coming. Likewise, as I wrote on Tuesday, no one at this point likely thinks the ports will actually assess these insanely high fees they’ve been threatening. Hundred-dollar-per-day-per-container fees, increasing by one hundred dollars each day, then cumulatively adding together? As President Biden would say – if he wasn’t connected to the plan – “Come on, man!”

Sparse Numbers Breed Skepticism

While the ports and White House have been touting the effectiveness of the plan, I’ve been skeptical at only hearing a percentage decrease in dwelling containers at the ports with no comparative data. Greg Miller added validation to my skepticism with a data-driven article in American Shipper that shows, as his article title says, the plan has stalled. He put it nicer at one point in the article:

[The plan to threaten fees is] already working a lot less than it used to. American Shipper analyzed all of the available statistics and found that progress in clearing long-dwelling containers has slowed significantly over recent weeks.

Let’s assume for the moment all reduction in long-dwelling containers is completely due to these fee threats. Yes, I’m skeptical of that too. However, I stated already in Universal Cargo’s Thanksgiving-week-post about the fees being postponed again that while correlation doesn’t mean causation, it would be awfully coincidental to say the two aren’t related. That doesn’t mean other factors, like the heavy holiday importing should be over (especially with so many shippers doing that holiday importing early), don’t contribute to reduction of congestion and long-dwelling containers. Still, let’s assume it’s just fee threats contributing to reduced long-dwelling containers. Miller’s article makes it clear the congestion reduction being sold to us as correlating to these threats is not as strong as advertised.

In fact, when he quoted shipping consultant Jon Monroe, you’d think results aren’t happening at all:

“My money says the new port surcharge may never be implemented — as long as we continue to improve the port congestion. And is this happening? NO. But don’t tell anybody. This is best kept a dirty little secret left uncovered.”

Spinning Numbers

Apparently, Miller couldn’t resist telling people, as he got into the data. He also had no problem sharing how easily the data could be spun to look better than it is:

Meanwhile, percentage changes such as the one cited by Seroka are inherently prone to spinning. The White House reports declines measured in twenty-foot equivalent units, whereas the ports publicly report declines in containers, regardless of size. The ports of Long Beach and Los Angeles report their container numbers in two different ways. And any percentage change is heavily skewed by which date range you pick.

The quoted percentage and date range from Seroka is actually how Miller started his article:

“We’re starting to see some traction,” Port of Los Angeles Executive Director Gene Seroka proclaimed on Bloomberg TV on Tuesday. “Those aging containers are down by 50% over the last six weeks.”

When Miller digs into the numbers a bit more than giving that one stat Seroka shares, things don’t look quite so rosy in terms of reducing long-dwelling cargo.

Fuller Picture at the Port of Long Beach

Port of Long Beach

The Port of Long Beach side looks worse than the Port of Los Angeles in terms of the data Miller shared:

The Port of Long Beach provides statistics on the number of containers that meet these two specific “late” definitions [6 days for cargo leaving by rail and 9 days for cargo leaving by truck]. But the Port of Los Angeles does not.

For Long Beach, the vast majority of reported late containers are in the nine-days-plus category for trucking, not the six-days-plus category for rail. The total on Monday, 20,772 containers, was actually 20% higher than the total three weeks prior, on Nov. 13, of 17,271 containers. Excess-dwell containers represented 35% of total import containers on the port on Monday, up from 29% on Nov. 13.

Uh oh. That actually looks like numbers are going in the wrong direction. However, there is an overall decrease in long-dwell containers since basically the start of when the fees were supposed to be implemented. But they stopped decreasing. And on a macro level, there are more shipping containers overall at the port than there were when the fees were supposed to begin:

Looking all the way back to Nov. 2, five weeks ago, the total number of excess dwell containers in Long Beach was down 22% as of Wednesday. Yet the numbers in Long Beach have plateaued more recently. Furthermore, the number of total import containers at Long Beach terminals has not decreased — it has actually slightly increased. There were 57,042 import containers at Long Beach terminals on Nov. 1 and 57,970 on Tuesday.

It seems the fee threats aren’t quite the congestion killers they’re telling us they are.

Port of Los Angeles Better But Stalled

But let’s jump over to the Port of Los Angeles side. I did say things look a little better there from Miller’s data share:

The Port of Los Angeles posts numbers on containers by days dwelling: up to four, five to eight, nine to 12, and 13-plus. Stats are available from Nov. 1. (The Port of Long Beach has these figures as well, but only from Nov. 9.)

The number of containers in Los Angeles dwelling nine days or more is a fair approximation of the number that would be charged excess-dwell fees if those fees were ever charged, but it excludes late rail containers in the six-to-eight-day category.

On Oct. 24, the day before the fee announcement was made, there were 37,410 containers in Los Angeles dwelling nine days or longer. The decline over the past six weeks matches the figure cited by Seroka on Bloomberg.

Unlike in Long Beach, Los Angeles has seen a sharp drop in total import containers on the port. On Nov. 1, there were 87,485. On Wednesday, there were 57,311.

This is excellent news. Seroka didn’t lie. There’s data to match his statement and more data to show improvement on a macro level. Surely, Seroka didn’t leave anything out, right Miller? Well, there is that whole stalling thing:

Despite the drop in total import containers at Los Angeles terminals, the percentage of containers dwelling nine days or more versus the total was 34% on Wednesday, the same percentage as Nov. 21.

As far as the long-dwelling containers targeted by the fee-threat plan, progress stalled in Los Angeles around Nov. 23. The numbers over the past two weeks have plateaued.

What Do You Expect from the White House?

Photo of Joe Biden by Gage Skidmore
Photo of Joe Biden by Gage Skidmore

Meanwhile, the White House is skewing numbers to make things look better than they are at the ports. Miller reports:

The White House puts out twice-monthly releases on supply chain issues, including stats on containers dwelling nine days or more at the ports of Los Angeles and Long Beach. The White House reports the numbers in TEUs, not containers (most of the containers in LA/LB are 40-footers).

On Nov. 29, the White House reported that the number of long-dwelling containers in the two ports was 75,000 TEUs, a week-on-week drop of 7% from 81,000 TEUs on Nov. 22.

The ports of Los Angeles and Long Beach reported a combined 45,458 containers dwelling nine days or more on Nov. 22, and 44,919 on Nov. 29, representing a much smaller week-on-week drop of 1%.

7%, 1%, that’s okay. This is still probably the most honest thing this administration has ever said.

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Ports of LA & LB Keep Resetting Countdown Until You’re in Trouble https://www.universalcargo.com/ports-of-la-lb-keep-resetting-countdown-until-youre-in-trouble/ https://www.universalcargo.com/ports-of-la-lb-keep-resetting-countdown-until-youre-in-trouble/#respond Tue, 07 Dec 2021 20:19:17 +0000 https://www.universalcargo.com/?p=10553 The Ports of Los Angeles and Long Beach announced another postponement in the assessment of the enormous fees they originally announced were going into effect on November 1st. When announced, the fees were supposed to first be assessed on November 15th. Instead, each week when the fees were supposed to actually be charged to ocean freight carriers, who would pass the fees on to shippers, the ports announced postponement of the fees.

This is the fourth such postponement.

It's like the mom who doesn't want to actually punish her children but wants them to do what she says. "Three... two... one." These countdowns tend to be effective with children at first, but, inevitably, they always get tested. If the children don't move and the mom just starts the countdown over, it doesn't take long for the kids to think the punishment will never come.

At this point, I doubt there are many who believe the Ports of Los Angeles and Long Beach will actually assess these enormous fees they've been threatening since late October. However, the countdown may have had the desired effect.

Find out more by reading the full post in Universal Cargo's blog.

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The Ports of Los Angeles and Long Beach announced another postponement in the assessment of the enormous fees they originally announced were going into effect on November 1st. When announced, the fees were supposed to first be assessed on November 15th. Instead, each week when the fees were supposed to actually be charged to ocean freight carriers, who would pass the fees on to shippers, the ports announced postponement of the fees.

This is the fourth such postponement.

It’s like the mom who doesn’t want to actually punish her children but wants them to do what she says. “Three… two… one.” These countdowns tend to be effective with children at first, but, inevitably, they always get tested. If the children don’t move and the mom just starts the countdown over, it doesn’t take long for the kids to think the punishment will never come.

At this point, I doubt there are many who believe the Ports of Los Angeles and Long Beach will actually assess these enormous fees they’ve been threatening since late October. However, the countdown may have had the desired effect.

The ports say there has been a combined decrease of 37% in “aging” cargo at the docks. Oh, cargo grows up too fast, doesn’t it?

How much of that is due to the threat of these fees is unknown, but like I said, the threatened fees are enormous:

They’re not like being grounded for a couple days or losing your allowance for the week. The fees start at $100 per day per container that dwells too long at the terminals. Each day, the fee would be increased by $100 and added cumulatively to the fees for the previous days. So a container that stayed three days too long would have a cumulative fee of $600.

For containers moving from the port by rail, these fees would start on day six that the shipping container remained on the docks. For cargo containers moving by truck, the fees would start on the ninth day.

I guess the movement that has happened, apparently from the ports’ countdowns until shipping lines (but really shippers) get in trouble, has been enough to satisfy the Ports of Los Angeles and Long Beach. However, they have not given any numbers of expectations for how much dwelling cargo would or should be moved or reduced by the time the fees were supposed to be assessed nor have they given any comparison numbers to see how this reduction compares to reductions during port congestion or this time of year.

An added bonus to the whole situation for the ports is they get to lay blame for their severe congestion completely on others – and shipping lines, along with several others, certainly bear significant responsibility – as if the Ports of Los Angeles and Long Beach played no role in the congestion problems that have plagued them.

Still, it would be nice to hear someone say, “Here’s the role I/we played in the problem.” Outlandish dreams aside, it looks like we get to wait until December 13th for the ports to restart their countdown until you’re in trouble, shippers.

Here’s the postponement announcement the Port of Long Beach published yesterday:

December 6, 2021

Long Beach, Los Angeles will continue to monitor progress in cargo flow on terminals

The Port of Long Beach and the Port of Los Angeles announced today that consideration of the “Container Dwell Fee” would be held off another week, until Dec. 13.
 
Since the fee was announced on Oct. 25, the twin ports have seen a combined decline of 37% in aging cargo on the docks. The executive directors of both ports will reassess fee implementation after another week of monitoring data.
 
Under the temporary policy approved Oct. 29 by the Harbor Commissions of both ports, ocean carriers can be charged for each import container that falls into one of two categories: In the case of containers scheduled to move by truck, ocean carriers could be charged for every container dwelling nine days or more. For containers moving by rail, ocean carriers could be charged if a container has dwelled for six days or more. Currently, no date has been set to start the count with respect to container dwell time.
 
The ports plan to charge ocean carriers in these two categories $100 per container, increasing in $100 increments per container per day until the container leaves the terminal.
 
Before the pandemic-induced import surge began in mid-2020, on average, containers for local delivery remained on container terminals under four days, while containers destined for trains dwelled less than two days.
 
Any fees collected from dwelling cargo will be reinvested for programs designed to enhance efficiency, accelerate cargo velocity and address congestion impacts.
 
The policy was developed in coordination with the Biden-Harris Supply Chain Disruptions Task Force, U.S. Department of Transportation and multiple supply chain stakeholders.

Click Here for Free Freight Rate Pricing

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China’s Covid Zero Policies Worsen Supply Chain Problems https://www.universalcargo.com/chinas-covid-zero-policies-worsen-supply-chain-problems/ https://www.universalcargo.com/chinas-covid-zero-policies-worsen-supply-chain-problems/#respond Tue, 30 Nov 2021 23:03:53 +0000 https://www.universalcargo.com/?p=10548 If you're interested in prolonging the world's supply chain woes, follow China's example. With its Covid Zero policies, China won't allow crew changes for foreign crew on ships and imposes ridiculously long quarantines – we're talking close to two months – on returning Chinese seafarers.

K Oanh Ha and Jack Wittels report in a Bloomberg article:

China’s increasingly extreme Covid Zero policies are standing in the way of a full recovery for the shipping industry and prolonging a crisis that’s snarled ports and emptied shelves worldwide.

In its attempts to keep the virus out, China’s continued to prohibit crew changes for foreign crew and recently imposed as much as a seven-week mandatory quarantine for returning Chinese seafarers. Even vessels that have refreshed their crew elsewhere have to wait two weeks before they’re allowed to port in China.

Find out how that's affecting supply chains and more by reading the full post in Universal Cargo's blog.

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If you’re interested in prolonging the world’s supply chain woes, follow China’s example. With its Covid Zero policies, China won’t allow crew changes for foreign crew on ships and imposes ridiculously long quarantines – we’re talking close to two months – on returning Chinese seafarers.

China Sea Shipping

K Oanh Ha and Jack Wittels report in a Bloomberg article:

China’s increasingly extreme Covid Zero policies are standing in the way of a full recovery for the shipping industry and prolonging a crisis that’s snarled ports and emptied shelves worldwide.  

In its attempts to keep the virus out, China’s continued to prohibit crew changes for foreign crew and recently imposed as much as a seven-week mandatory quarantine for returning Chinese seafarers. Even vessels that have refreshed their crew elsewhere have to wait two weeks before they’re allowed to port in China.

To comply, shipowners and managers have had to reroute ships, delaying shipments and crew changes, adding to the supply chain crisis. “China’s restrictions cause knock-on effects,” said Guy Platten, the secretary general of the International Chamber of Shipping, which represents shipowners and operators. “Any restrictions to ship operations have an accumulative impact on the supply chain and cause real disruptions.”

There are many bad Covid policies in the world, but China’s may be the worst while the country is a key cog in international trade, as the Bloomberg article also contains:

The world’s biggest exporter, China is a key hub for the shipping industry. It is also the last country to hew to a Covid Zero policy, with increasingly radical measures. In recent weeks, authorities locked in 34,000 people at Shanghai Disneyland for mandatory testing. A Beijing school held primary school children overnight after a teacher tested positive. The definition of “close contact” now extends to people separated by as much as a kilometer.

There’s nothing like fear and authoritarianism to lead to bad policies. Obviously, there’s no science to back up close contact stretching out to people a kilometer away from each other. There’s no science to justify locking thousands of people in an amusement park for testing or locking children in a school over a single positive test from a teacher. Likewise, there’s also no good science to China shutting down a major port terminal over a single positive COVID test, but that’s another move the country made a few months back that negatively impacted the world’s supply chain.

As bad as terminal shutdowns, like the one mentioned above, are for international shipping, these restrictions and quarantines on crew are even worse. Huileng Tan reports in Business Insider:

Seafarers typically take a break from sailing after four to six months onboard, according to the International Maritime Organization.

Most seafarers in the world come from five countries: China, the Philippines, Indonesia, the Russian Federation, and Ukraine. Before the pandemic, seafarers would sometimes have to head to another country to board a ship. Likewise, some would disembark in another country before making their way home on a plane, which has already been made increasingly difficult in the last two years due to border controls. 

The staff swap exercise for Chinese seafarers has become increasingly difficult “due to stricter Chinese Government isolation requirements on seafarers post sign off and prior to repatriation,” the not-for-profit Global Maritime Forum said in a recent press release.

This means ships are rerouting to work around China’s restrictions, prolonging shipments.

The Bloomberg article gives a taste of how delays and costs add up from China’s restrictions:

“We’ve had vessels that ran into demurrage” — late fees — “we’ve had instances where we had to deviate, either before we call China, or after,” said Eman Abdalla, global operations & supply chain director at Cargill. “There are instances where the delays are within hours, but there are also instances where the delays could go on to days.”

Euronav NV, one of the world’s largest owners of oil supertankers, has spent an estimated $6 million handling disruptions related to the crew change crisis, including the likes of deviations, quarantines and higher travel costs. 

“In the past, it was pretty nice to do crew rotation when we were in China,” said Chief Executive Officer Hugo De Stoop.  “And now basically it’s not possible.” 

For seafarers, the kinds of quarantines they’re facing to go home are not just ridiculous, they’re brutal.

The latest restrictions at China’s ports target Chinese crew, requiring them to quarantine for three weeks before their return to China, then another two weeks at the port of arrival, and two more weeks in their province before they can reunite with their families, according to Terence Zhao, managing director of Singhai Marine Services, one of the biggest Chinese crew supply agents.

Even seafarers with emergency medical needs aren’t allowed to get care in China, ship managers said. An Anglo-Eastern chief officer with a severe tooth abscess couldn’t get off his vessel for treatment. The ship had to divert to South Korea before he could see a dentist.

Ship owners and operators also acknowledge that they are managing China’s restrictions by shifting the burden to the workers on board. Chinese authorities won’t allow more than three Chinese seafarers on a flight to the mainland, so their return home can be stretched to months after they’ve signed off from vessels, said Hojgaard.

Anglo-Eastern said as of this week, 555 out of its 16,000 active crew are overdue for relief, and nearly 60 have been on ships for more than 11 months, the maximum mariners are allowed by international law to be on board. “We are trying our best to get them off but can’t,” said Hojgaard. 

I have a bunch of jokes about trying to get seamen off but being unable to do so, but the situation is so bad, I can’t bring myself to include them. Unfortunately, this situation does not appear likely to end soon as the Bloomberg article says, “This month, China’s coronavirus czar defended the nation’s strict covid measures and signaled there wouldn’t be an easing of rules.”

Click Here for Free Freight Rate Pricing

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Ports of Los Angeles & Long Beach Delay Fees Again – Happy Thanksgiving! https://www.universalcargo.com/ports-of-los-angeles-long-beach-delay-fees-again-happy-thanksgiving/ https://www.universalcargo.com/ports-of-los-angeles-long-beach-delay-fees-again-happy-thanksgiving/#respond Tue, 23 Nov 2021 03:18:24 +0000 https://www.universalcargo.com/?p=10545 The Ports of Los Angeles and Long Beach seem happy to keep dangling the threat of incredibly high container dwell fees to induce movement of import shipping containers out of the ports' terminals.

On Monday (November 22nd), when the new but temporary fees were supposed to go into effect, the Port of Los Angeles put out a press release announcing the fees are on hold until November 29th.

That's a happy Thanksgiving gift for shippers. While these fees are technically placed on shipping lines, those ocean freight carriers plan to pass the fees on to shippers. The fees are steep too. They start at $100 per shipping container. Each day, the fee increases by another $100 and is added to the amount already owed. The cumulative effect is a rapidly increasing fee that would get out of hand fast.

Find out more by reading the full post in Universal Cargo's blog.

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The Ports of Los Angeles and Long Beach seem happy to keep dangling the threat of incredibly high container dwell fees to induce movement of import shipping containers out of the ports’ terminals.

On Monday (November 22nd), when the new but temporary fees were supposed to go into effect, the Port of Los Angeles put out a press release announcing the fees are on hold until November 29th.

That’s a happy Thanksgiving gift for shippers. While these fees are technically placed on shipping lines, those ocean freight carriers plan to pass the fees on to shippers. The fees are steep too. They start at $100 per shipping container. Each day, the fee increases by another $100 and is added to the amount already owed. The cumulative effect is a rapidly increasing fee that would get out of hand fast.

The following chart shows how big the threatened fees are, starting at day 9 when they are supposed to take effect, and what the cumulative charge per container would be if failure to move the cargo occurred:

For shipping containers waiting for rail rather than truck to get them out of port terminals, these fees would begin after only 6 days instead of 9.

This is the second time these fees have been postponed. We just blogged last week about them being delayed the first time.

The obvious point is to scare shippers and carriers into getting cargo containers out of the ports before they have to pay these exorbitant amounts. If shipping containers move well enough, though no exact amount of shipping containers cleared has been given, that would satisfy the ports enough to keep from implementing this fee hike.

Apparently, it’s working. The Port of Los Angeles said in its press release that aging cargo on the docks have declined by 33% since the this big dwell fee was announced.

Of course, correlation doesn’t necessarily mean causation. However, it would be awfully coincidental to say the two weren’t related. Because there are other factors at play to reduce dwelling containers on the docks and port congestion in general, it wouldn’t be as coincidental as saying a novel coronavirus outbreak hitting a city had nothing to do with the fact that city just happened to have a virology lab doing gain of function research on coronaviruses. Still, the connection would be hard to deny. Certainly, no one will be labeled a conspiracy theorist for going along with the connection between the fee threat and the movement of containers.

A second postponement of this fee does give hope that it will not be implemented at all. Here at Universal Cargo, we’ll be keeping a close eye on it.

Here’s the full text of the Port of Los Angeles’s press release:

‘CONTAINER DWELL FEE’ ON HOLD UNTIL NOV. 29


San Pedro Bay Ports Cite Continued Improvements on Marine Terminals

SAN PEDRO, Calif. — Nov. 22, 2021 — Following meetings today with U.S. Port Envoy John Porcari and industry stakeholders, the Port of Los Angeles and the Port of Long Beach announced further postponement of the “Container Dwell Fee.” With continued progress moving containers off marine terminals, the fee will not be considered before Nov. 29.

Since the fee was announced on Oct. 25, the twin ports have seen a decline of 33% combined in aging cargo on the docks. The executive directors of both ports are satisfied with the progress thus far and will reassess fee implementation after another week of monitoring data.

Under the temporary policy approved Oct. 29 by the Harbor Commissions of both ports, ocean carriers can be charged for each import container that falls into one of two categories: In the case of containers scheduled to move by truck, ocean carriers could be charged for every container dwelling nine days or more. For containers moving by rail, ocean carriers could be charged if a container has dwelled for six days or more.

The ports plan to charge ocean carriers in these two categories $100 per container, increasing in $100 increments per container per day until the container leaves the terminal.

Before the pandemic-induced import surge began in mid-2020, on average, containers for local delivery remained on container terminals under four days, while containers destined for trains dwelled less than two days.

Any fees collected from dwelling cargo will be reinvested for programs designed to enhance efficiency, accelerate cargo velocity and address congestion impacts.

The policy was developed in coordination with the Biden-Harris Supply Chain Disruptions Task Force, U.S. Department of Transportation and multiple supply chain stakeholders.

Click Here for Free Freight Rate Pricing

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UPDATE: Fees Delayed at Ports of Los Angeles & Long Beach https://www.universalcargo.com/update-fees-delayed-at-ports-of-los-angeles-long-beach/ https://www.universalcargo.com/update-fees-delayed-at-ports-of-los-angeles-long-beach/#respond Thu, 18 Nov 2021 21:48:32 +0000 https://www.universalcargo.com/?p=10543 At the beginning of the month, we blogged about $100-per-day fines the Ports of Los Angeles and Long Beach were to impose on carriers for lingering containers. The carriers immediately said they'd pass the fees off on shippers, of course, so these are more like fees for shippers, who are already paying sky-high freight rates and dealing with costly delays from port congestion.

Today, we share good news. At least for the moment. Those fees are being delayed.

Find out more by reading the post in Universal Cargo's blog.

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At the beginning of the month, we blogged about $100-per-day fines the Ports of Los Angeles and Long Beach were to impose on carriers for lingering containers. The carriers immediately said they’d pass the fees off on shippers, of course, so these are more like fees for shippers, who are already paying sky-high freight rates and dealing with costly delays from port congestion.

Today, we share good news. At least for the moment. Those fees are being delayed.

Supply Chain Brain reported earlier this week:

The U.S.’s largest ports of Los Angeles and Long Beach will postpone the start of a fee on ocean carriers that fail to clear containers off the docks, which was set to begin Monday.

The plan to charge carriers $100 per day for each container sitting on the docks for at least three days announced by the twin ports last month was put on hold until Nov. 22, Port of Los Angeles Executive Director Gene Seroka said in a statement.

Port of L.A. Says Improved Cargo Clearing Caused Postponement

The Port of Los Angeles’s press release announcing the postponement of these fees includes the subtitle, “Noticeable Progress in Reduction of Import Containers on Terminals.” The implication that improved movement of import shipping containers from the dock resulted in the fee delay is made more explicit in the release, but it also makes it clear that if results don’t continue to meet the ports’ approval, they are ready to implement the fees.

Here’s the full content of the press release from the Port of Los Angeles:

SAN PEDRO, Calif. — Nov. 15, 2021 — The Port of Los Angeles and the Port of Long Beach announced today that they will delay consideration of the “Container Dwell Fee” directed at ocean carriers until Nov. 22.

“There’s been significant improvement in clearing import containers from our docks in recent weeks,” said Port of Los Angeles Executive Director Gene Seroka. “I’m grateful to the many nodes of the supply chain, from shipping lines, marine terminals, trucks and cargo owners, for their increased collaborative efforts. We will continue to closely monitor the data as we approach November 22.”    “We’re encouraged by the progress our supply chain partners have made in helping our terminals shed long-dwelling import containers. Clearly, everyone is working together to speed the movement of cargo and reduce the backlog of ships off the coast as quickly as possible,” said Port of Long Beach Executive Director Mario Cordero. “Postponing consideration of the fee provides more time, while keeping the focus on the results we need.”   Since the fee was announced on Oct. 25, the twin ports have seen a decline of 26% combined in aging cargo on the docks. This encouraging momentum supports a delay in implementation of the fee.

Under the temporary policy approved Oct. 29 by the Harbor Commissions of both ports, ocean carriers will be charged for each import container that falls into one of two categories: In the case of containers scheduled to move by truck, ocean carriers will be charged for every container dwelling nine days or more. For containers moving by rail, ocean carriers will be charged if a container has dwelled for six days or more.

The ports will charge ocean carriers in these two categories $100 per container, increasing in $100 increments per container per day until the container leaves the terminal.

Before the pandemic-induced import surge began in mid-2020, on average, containers for local delivery remained on container terminals under four days, while containers destined for trains dwelled less than two days.

Any fees collected from dwelling cargo will be reinvested for programs designed to enhance efficiency, accelerate cargo velocity and address congestion impacts.

The policy was developed in coordination with the Biden-Harris Supply Chain Disruptions Task Force, U.S. Department of Transportation, Port of Long Beach and multiple supply chain stakeholders.

Click Here for Free Freight Rate Pricing

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Cargo Theft Up 42% in California https://www.universalcargo.com/cargo-theft-up-42-in-california/ https://www.universalcargo.com/cargo-theft-up-42-in-california/#respond Wed, 17 Nov 2021 00:28:07 +0000 https://www.universalcargo.com/?p=10539 The peak season is often a time of particular danger for shippers' cargo from cargo theft. For the last 18 months, it has felt like a continuous peak season, with near-record to record high levels of cargo reaching U.S. ports. With the Ports of Los Angeles and Long Beach being the busiest ports in the U.S., handling approximately 40% of the imports to arrive in the U.S., and among the worst in terms of congestion, it is not surprising that cargo theft has seen an increase in California. Cuts in police budgets in Los Angeles and other major cities in the state also don't help. Police cuts in 2020 also coincided with an alarming 30% increase in murders, according to data from Los Angeles, Oakland, San Diego, and San Francisco.

The end result is higher risk for cargo moved in and through California in 2021. An Insurance Journal article reported the following about the third quarter of 2021:

Theft reports along the West coast of the United States increased 42% year-over-year. California continues to see frequent thefts of high-end computer electronics shipments, [CargoNet] said.

Find out more, including how to protect your imports and exports from cargo theft, by reading the full post in Universal Cargo's blog.

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The peak season is often a time of particular danger for shippers’ cargo from cargo theft. For the last 18 months, it has felt like a continuous peak season, with near-record to record high levels of cargo reaching U.S. ports. With the Ports of Los Angeles and Long Beach being the busiest ports in the U.S., handling approximately 40% of the imports to arrive in the country, and among the worst in terms of congestion, it is not surprising that cargo theft has seen an increase in the Golden State. Cuts in police budgets in Los Angeles and other major cities in California also don’t help. Police cuts in 2020 also coincided with an alarming 30% increase in murders, according to data from Los Angeles, Oakland, San Diego, and San Francisco.

International Shipping Freight Forwarder Scams

The end result is higher risk for cargo moved in and through California in 2021. An Insurance Journal article reported the following about the third quarter of 2021:

Theft reports along the West coast of the United States increased 42% year-over-year. California continues to see frequent thefts of high-end computer electronics shipments, [CargoNet] said.

Dani Romero reported in Yahoo! Finance:

Thieves made off with greater than $5 million value of products as a result of so-called supply-chain theft in California in the third quarter of 2021, according to CargoNet’s data.

For those of you unfamiliar with CargoNet, it is a company that runs a national database on cargo theft as well as a cargo theft prevention and recovery network.

California Is Not Alone

Cargo theft is not only a problem in California. Romero also reports:

California topped the list of states most targeted by thieves, CargoNet data showed — followed by Texas and Florida. As much as $45 million in cargo thefts have been reported from January to September. In 2020, cargo thefts reached $68 million and in 2019 they hit $49 million, according to the analysis, with the pace of theft is expected to continue through 2022. [sic.]

Overall Cargo Theft Down in Q3 2021 Vs. Q3 2020

There is, however, some good news in all of this. Despite California’s dramatic year-over-year increase, cargo theft overall (for the U.S. and Canada) in the third quarter of 2021 significantly decreased year-over-year. Cargo theft being down is actually the headline Insurance Journal ran with. They opened their article with the number of supply chain thefts of the quarter and the comparison statistics:

There were 359 supply chain theft and fraud incidents across the United States and Canada in the third quarter of 2021, according to CargoNet.

They included 294 total theft incidents that involved theft of a trucking vehicle like a semi-truck or theft of cargo, the cargo theft prevention and recovery network reported.

This was a 19% decrease from third quarter of 2020, but overall 2020 was a record-setting year for theft. When compared to the third quarter of 2019, theft reports were up 13% this third quarter.

Those last two lines dampen the good news. Cargo theft overall is still up from what it was in 2019, but at least it has significantly decreased from 2020, which saw a spike in the crime.

How To Protect Against Cargo Theft

Cargo theft is a topic that has come up from time to time in Universal Cargo’s blog. We always want to help our customers’ shipping go as smoothly as possible. So how do you protect yourself and your business from cargo theft?

Cargo Insurance

This may sound like an obvious answer, but many shippers try to avoid cargo insurance. I understand the sentiment. When renting cars, I have often foregone getting the insurance to save the money. However, when it comes to international shipping, there are just too many risks to make skimping out on insurance a wise idea.

On top of theft, there’s vandalism, loss, damage, seizure, and more that could go wrong. Make sure you or your business partners (if the incoterm deal type you use puts the insurance responsibility on them) properly insure your cargo.

Keep Your Cargo Moving

There’s an old saying in the international shipping industry, it was even quoted in Romero’s article, “Freight at rest is freight at risk.” I’ve often heard it as, “A container at rest is a container at risk.”

When cargo containers are sitting idle, they are at the most risk for theft or vandalism. Shippers can’t completely control this. Congestion at ports, like we’ve been seeing for the last year plus, can cause shipping containers to sit idly at no fault of the shippers. Truckers may need to rest, make stops, or take breaks when transporting cargo, creating moments of vulnerability. However, if shippers don’t handle all their responsibilities promptly and correctly through the course of a shipment, that can also lead to delays, putting more risk on their cargo.

Hire the Right Freight Forwarder

Businesses new to international shipping, especially, need to be careful to hire the right freight forwarder to help them import and export their goods. An experienced freight forwarder knows everything shippers need to do to keep their imports and exports moving as smoothly as possible.

With its 35+ years of experience as a trusted freight forwarder, Universal Cargo guides businesses through the shipping process, putting its well-developed network to work for you. At Universal Cargo, we also keep our fingers on the pulse of the industry, considering potential upcoming threats, like next year’s dockworker contract expiration and negotiations, so we can advise our customers on routes and supply chain options less likely to suffer costly disruptions.

Click Here for Free Freight Rate Pricing

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Interview with CEO Devin Burke & Charles Freeman, Business Development About the New UC Air Freight Division https://www.universalcargo.com/interview-with-ceo-devin-burke-charles-freeman-business-development-about-the-new-uc-air-freight-division/ https://www.universalcargo.com/interview-with-ceo-devin-burke-charles-freeman-business-development-about-the-new-uc-air-freight-division/#respond Thu, 11 Nov 2021 23:49:02 +0000 https://www.universalcargo.com/?p=10530 With Universal Cargo launching a new air freight division, I caught up with CEO Devin Burke and Charles Freeman, Business Development, who's heading up the division to find out more. They graciously agreed to quick interviews. Check out the Q&As in Universal Cargo's blog to find out about what Universal Cargo is doing to serve its customers even better and a little bit about how these professionals reached their respective positions.

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With Universal Cargo launching a new air freight division, I caught up with CEO Devin Burke and Charles Freeman, Business Development, who’s heading up the division to find out more. They graciously agreed to quick interviews. Check out the below Q&As to find out about what Universal Cargo is doing to serve its customers even better and a little bit about how these professionals reached their respective positions.

Q&A with CEO Devin Burke

Q: You’ve been in the freight forwarding business for over 35 years now. It’s a pretty cool success story how you became owner and CEO of Universal Cargo. Would you share that with our blog readers?

A: I worked for UCM [Universal Cargo Management] first in 1991 after 6 years in the industry. I was the sales director and head of business development and built up our Asian network as well as increased revenue by 4 times in 9 years. At the start of 2000 I bought the company from the original owner. For the past 21 years we have grown by at least 6 to 7 times with 3 offices in the US.

Q: Why now to launch a new air freight division at Universal Cargo?

A: For the past 21 years, we have been primarily focused on a niche market of Home Goods importers from Asia door to door service via ocean freight. Although this business has proven lucrative during the Pandemic, we feel that will only last so long as the Market is constantly changing and evolving.  Air, export, and domestic freight is something that came to us as gravy business, but it is a huge market we have always ignored.  It is high time to become fully vested.

Q: Universal Cargo has long delivered air freight services. How will the new air freight division differ from previous services like Express4Air?

A: As I mentioned above, this air business UCM handled in the past was minimal and we could only co-load with air forwarders, giving us a disadvantage in the marketplace. By becoming an IATA [International Air Transport Association] licensed air forwarder we can play with the big boys.

Q: Do you see an influx in air freight over ocean shipping with the skyrocketed ocean freight rates?

A: Yes. Although the overall freight business has lifted all boats (literally) with the rising tide, the difference in the air and ocean gap has shrunk. So not only is air a viable option costwise, when you factor in 2-3 month average delays in ocean, air is a must.

Q: What has you most excited about Universal Cargo’s new air freight division?  

A: It opens us up to several new markets besides the Home Goods market, which typically avoids Air due to the size of these goods (Furniture, etc).  We are looking forward to expanding our customer base for not only air but handling these same air customers’ ocean, trucking, etc. 

Q&A with Charles Freeman, Business Development

Q: Thanks for taking the time to answer questions about Universal Cargo’s new air freight division and congratulations on heading it up. Would you give our blog readers some background on yourself so they can get to know you a little bit?

A: My background is complex. I started out in air freight in 1995 with DHL Worldwide Express, first as a courier and then operations person, where I learned the ins and outs of the air freight business on the small package side. I ultimately moved up to an outside sales representative covering the Miami/Fort Lauderdale area.  After that I moved onto Swiss Air Cargo where I worked for a year doing the more heavyweight air side of the business. I was ultimately recruited by Northwest Airlines Cargo where my job entailed covering Florida, Georgia, South Carolina, Eastern Tennessee, and Southern Mississippi.  This is where my heavy weight air freight knowledge came together.

I was lucky to have a great director who saw the potential in me and mentored me. I sold Toyota Motor Corporation, General Electric, and Proctor & Gamble accounts. I was traveling to Japan every three months to visit clients in the Japanese market as well. In the eight years I was with Toyota, I visited Japan 14 times. Great experience. In 2005, Northwest went into bankruptcy, I was offered a buyout, and I took it, as my department was going to be streamlined and partially eliminated.

I then went into trucking and started my own trucking brokerage firm. I found a niche market of overweight, refrigerated container of poultry, beef, pork, and seafood. After 10 years, I left the logistics industry to pursue a childhood dream to fly for an airline as a pilot. I ended up selling my business and became first a flight instructor to build up flight time and then I moved on to a Department of Defense contractor where I flew a Jetstream 31/32 as a pilot.  I was flying a 19-seat turbo prop into Naval Bases in Guantanamo Bay; Cuba; and Fresh Creek Andros Island, Bahamas. After that, I had the required flight time to get to a Regional Airline where I ended up at a United Express carrier out of Los Angeles where I had to transfer from Miami, Florida to Los Angeles, California. I was furloughed in from United Express in April 2020 when my company lost their contract with United.

Q: Give us a rundown of what this new air freight department looks like?

A: Our air freight department has a combined 50 years of experience. I am heading this operation up with my 20 plus years of experience. I have Keefe Kirkevold, who brings many years of air freight experience to our team. Keefe can route freight with the best of them and his can-do attitude with his huge smile makes things go. We have Catherine Sanchez, who has many years of air freight experience as well.  She is dedicated, focused, and driven to meet the ever changing customers’ needs.  She is not only our operations manager, she is a visionary; she’s on the pulse of the industry.

Q: What’s the biggest difference between offering air freight services, as Universal Cargo has in the past, and launching this air freight division?

A: The big difference with the air freight offerings Universal Cargo had in the past and what we are launching is night and day. In the past, Universal Cargo was brokering air freight with a third party operator. This added fees and kept us at the mercy of this third party logistics firm or firms we were dealing with.  Our new division offers direct services through all major US Passenger Airlines as well as International airlines.  Our certification through the TSA and soon IATA will grant us the ability to move our customers freight on a passenger airline, thereby offering competitive rates. 

Q: Will customers who’ve shipped by air through Universal Cargo notice a big difference?

A: Yes they will. We will not only offer the great Universal Cargo service, we will also offer air freight service that will be along those lines with competitive rates with an established network that will provide this. 

What gives Universal Cargo a competitive edge when it comes to air freight?

A: Universal Cargo’s competitive edge is our great staff. A company is just a company without great people, and we have that in this division.  We have years of experience, we have rates, we have a network, and we have people. Keefe and Catherine are an advantage that our competition don’t have. I believe this is our advantage. It’s our people. 

A company is only as good as its people, and I believe we have the best!

What are you most excited about in heading up Universal Cargo’s new air freight division?

A: What excites me most is to add a dimension to our service offerings. When I was hired I was told for years Universal Cargo wanted to start an air freight division. I am honored to be the one to put it all together with our team. Making a difference and being entrusted to do it gets me excited and gets me out of bed in the morning.

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Fees, Fines, Fo Fum – Shippers Get Ready to Pay a Hefty Sum https://www.universalcargo.com/fees-fines-fo-fum-shippers-get-ready-to-pay-a-hefty-sum/ https://www.universalcargo.com/fees-fines-fo-fum-shippers-get-ready-to-pay-a-hefty-sum/#respond Wed, 03 Nov 2021 01:02:51 +0000 https://www.universalcargo.com/?p=10522 It appears the Ports of Los Angeles and Long Beach and their partners think they can climb out of congestion by charging hefty fines on cargo containers stuck on the docks.

Big surcharges, starting at $100 a day are being implemented right now.

There is also a hefty hike on chassis fees happening simultaneously.

Find out all the details in Universal Cargo's blog.

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It appears the Ports of Los Angeles and Long Beach and their partners think they can climb out of congestion by charging hefty fines on cargo containers stuck on the docks. Big surcharges, starting at $100 a day are being implemented right now. There is also a hefty hike on chassis fees happening simultaneously. Find out all the details

Shipping Containers Need Contents Verified

Storage Fee on Shipping Lines (But Really Shippers)

A new storage fee went into effect yesterday (Monday, November 1st) on shipping lines. Bill Mongelluzzo reported in the Journal of Commerce (JOC) on Friday:

The respective Boards of Harbor Commissioners for Los Angeles and Long Beach on Friday approved the implementation of an “emergency” storage fee designed to force shipping lines to clear long-dwelling containers from marine terminals that are deluged with boxes amid record imports into the US’ largest gateway….

The new fee will go into effect Monday, although the ports will not begin assessing the penalties until at least Nov. 15. Port leadership said they have discretion to delay the collection of fees if they see progress in containers being moved from the terminals over the next two weeks. The new fee will be in effect for 90 days.

Los Angeles and Long Beach shocked the trade this week by telling carriers they would be assessed an emergency fee for containers that remain at the terminals too long. Those surcharges start at $100 on the ninth day of dwell for local-delivery boxes and on day six for railroad containers, then escalate in increments of $100 with each passing day.

Ocean freight carriers do carry some of the responsibility for the congestion we’ve been seeing at the ports. When the pandemic was first hitting in 2020, they blanked (cancelled) hundreds of sailings for fear of demand decrease and financial loss. They overreacted, dropping capacity well below demand and caused misdistribution of shipping containers and other equipment around the world. The results were container and equipment shortages and the need to play catch-up as demand boomed with lockdowns and stimuli dramatically increasing consumer spending on goods.

While the carriers contributed to the congestion and made out like bandits, making billions and billions in profit, they will be passing the costs of these fines on to shippers. Standard modus operandi, really. Mongelluzzo writes:

But the trans-Pacific carriers who ply the US’ largest trade lane quickly made clear they would not absorb the new fees, and instead pass the costs on to the retailers who own the product inside the tens of thousands of containers sitting at LA-LB’s 12 marine terminals.

Has 24-7 Hours Plan Been Abandoned for Fees?

From the start of the hype from President Biden, Secretary of Transportation Pete Buttigieg, and the Ports of Los Angeles and Long Beach, I was skeptical about just how 24-7 these 24-7 port hours would be. When you have President Biden and Pete Buttigieg pointing backward to say the Port of Long Beach had already started 24-7 hours, and what they were actually referring to was just extended gate hours at only one terminal, how could you not be skeptical?

Here we are about two weeks out from the big announcements about 24-hour port operations at the Port of Los Angeles, and this is what we’re hearing from the port, as reported in the JOC article:

Since mid-September, Los Angeles and Long Beach have, with the support of the Biden administration, attempted to collaborate with the 12 container terminals in the port complex and the importers whose containers are handled there on ways to cut down on excessive dwell times. [Gene Seroka, executive director of the Port of Los Angeles] said that of the 125,000 individual importers and exporters who ship through Los Angeles, only 20 companies expressed interest in working with the port on potential solutions.

“We tried diplomacy. We tried collaboration. Nothing works,” Seroka said, adding LA sees no other option than to assess fees on excessive-dwell containers.

This actually sounds like the Biden Administration’s influence. Blame others, get angry, and impose an expensive edict. Seroka might as well have said, “We’ve been patient, but our patience is wearing thin,” as President Biden did when he vilified those who hadn’t been vaccinated and announced vaccine mandates.

In the meantime, we’re not hearing much from the ports about extended gate hours or “24-7” operations like we were just a couple weeks ago.

Thousands of Containers Racking Up Fees, But Does It Help?

shipping containers for import export

Lori Ann LaRocco wrote an article published just today by American Shipper about the containers “now on penalty clock” at the Ports of Los Angeles and Long Beach:

The penalties on 58,900 containers at the ports of Los Angeles and Long Beach are officially racking up charges. These containers were part of the 60,000 containers the ports alerted the ocean carriers last Monday to move or face a daily $100 penalty per container, increasing in $100 increments per day.

Now that the first week of implementing these fines is here, after a week for carriers, terminals, truckers, and railroads to work together in an attempt to clear shippers’ containers and avoid the new fines, does it look effective? Will this be the answer? Here is the response the Port of LA gave American Shipper when asked for “updates on the removal of the ‘lingering’ containers”:

According to Port of Los Angeles Executive Director Gene Seroka, there are a total of 84,000 total imports on docks waiting to be transported, a total that is 3,000 higher than a week ago. Of those 84,000, a whopping 40,000 of those containers have been at the Port of LA for nine-plus days, which is considered lingering. Containers are considered long-dwelling if the boxes are waiting over nine days for truck, six days for rail.

“This is the wrong direction,” said Seroka.

That’s certainly not a positive sign. However, the Port of Long Beach spun its answer to the question with much more positivity:

The Port of Long Beach saw 10% of its 27,000 lingering containers move out since last Wednesday. The port has approximately 18,900 containers being charged penalties.

“This is a sign that the surcharge is having its intended effect, but clearly there is more work to do,” said Noel Hacegaba, COO of the Port of Long Beach. “The ocean carriers are stepping up and coordinating with the shippers, terminals, railroads and motor carriers to look for the fastest way to push inbound containers out of the terminals.”

Of course, the Port of Long Beach doesn’t clarify how that moving out of 10% of lingering containers compares to the normal clearing of lingering containers in that amount of time. But let’s face it, containers aren’t lingering on the ports for a lack of effort to move them. Throwing additional fees on shipping containers doesn’t address the causes of the already costly delays.

Fines Like an Additional Tax on the American Consumer

Critics of adding more fines instead at the Ports of Los Angeles and Long Beach rather than addressing root causes of the problem see this as potentially “catastrophic,” with shipping lines passing the costs off to shippers and those importers of goods, in return, raising prices on their customers. In a story on the fines in the Epoch TImes, Jack Phillips writes:

… some shipping firms and trade groups last week expressed worry that the new fine would trigger catastrophic results. Some executives warned that the fine will trigger even more increases in prices.

“As far as the ‘hyper-demurrage’ announced in Los Angeles/Long Beach, I think it will be catastrophic,” Rich Roche, vice president of international transportation at Mohawk Global Logistics, said during a meeting with other trade groups last week, reported FreightWaves.

And Ken O’Brien, president of Gemini Shippers Group, said that “what was done this week at the ports of Los Angeles and Long Beach is effectively an indirect tax on the American consumer,” the report said.

Trucking & Empty Container Problems

Of the many issues contributing to congestion at the ports, trucking is one that often gets mentioned but seldom seems to see progress. For years, there’s been a trucker shortage affecting shippers ability to get their goods to and from the ports. Things like vaccine mandates exacerbate the trucker shortage, but there are also problems when the trucks do get to the ports. Equipment shortages or mislocation, especially on chassis, along with long truck ques are longstanding problems at the port terminals. Truckers and trucking companies will tell you the ports are looking in the wrong place entirely when concentrating on fines on full cargo containers.

LaRocco’s American Shipper articles shares:

The Harbor Trucking Association tells American Shipper it continues to face the same issues with the terminals.

“Our hurdle has been and continues to be empty container returns,” said Matt Schrap, CEO of the Harbor Trucking Association. “While there has been movement on a limited number of sweeper vessels beginning to call to the port complex, we need consistent and continuous empty sweeper dispatch in order to free up space on dock and in our yards.”

Truck, shipping containers, plane

After sharing data around duration and slow-movement of trucks at Port of Los Angeles and Long Beach terminals, the article continues:

Weston LaBar, head of strategy for Long Beach-based logistics company Cargomatic, tells American Shipper his team continues to see an increase in the volume of containers moved every week.

“For us, the major issues are not about moving imports but rather continue to be around empty return restrictions that can lead to capacity constraints around chassis and yard storage,” explained LaBar. 

“What the focus of the ports and public sector needs to be on is empty container storage and returns. The fee won’t solve any issues of port congestion without solving for the underlying contributing factors around empty containers.” 

Big Chassis Fee Increase on Containers

The additional storage fines are not the only new fees we’re seeing at the Ports of LA and LB. Chassis fees are increasing too.

Let’s end this blog with a look at a notice from the West Coast Chassis Pool (WCCP Pool), spreading to notices to shippers from truckers. Does it bother anyone else that WCCP Pool abbreviates its name with the word “Pool” after an acronym that ends with a “P” that stands for “Pool”? Here’s the notice that went out signed by Pool Manager John Yakos:

Ocotber 31, 2021

Dear Motor Carrier,

As stated in the Chassis Agreement between WCCP Pool and your company, WCCP Pool may amend its rental rates from time to time. In order to better meet market trands, WCCP Pool will be amending its rental rates effective December 1, 2021. Attached is an amended and restated Schedule 1 to replace the previous version of Schedule 1 that was attached to the original Chassis Agreement. This letter and the attached schedule are intended to provide you with adequate notice of the upcoming changes in rental rates.

Please let me know if you have any questions regarding the proposed changes.

The result, trucking companies, like CBL Freight, are sending shippers notices to inform them:

**Starting Nov. 1, 2021 our chassis fee for 40′-45′ container will be $60/day.

**Starting Dec. 1, 2021 chassis fee for all containers will be $85/day after 4days.

That’s the big print. If you want the nitty gritty, here’s the rest of the rundown on fees that CBL gives:

Pier pass is applied all days/ shifts/ terminals. We charge pier pass 40’/45′ $75 and 20′ $40.  we don’t do hazmat D.G. goods cntn and residential area.

**all Delivery orders and notice must be sent before 4 pm to nancy@cblfreight.com and Marcela@cblfreight.com any DO sent after regular hours will be processed the next day. 1. Chassis rental fee & split chassis : consignee need to notify us cntn empty status and we need at least 48hrs (port operating hours) to return your empty cntn and chassis. Terminal chassis fee or CBL chassis fee is minimum $60/day. CBL reserve the right to use our own chassis in order to get your job done when port congestion or no chassis situation. CMA /ANL/US LINES $65 /day $65/day for tri-axle chassis , Split chassis fee $100 dollars, Billing party will responsible for per diem, extra chassis fee. 2.. Dry run/Stirct delivery appt. /waiting charge: $150 dollars dry run if cntn UTL, congestion, close area, no chassis  or driver got kick out for any reason. will provide supporting document except Pier A and PCT terminal. Terminal waiting time $85/hr after 2hrs free waiting .$85 per hour client waiting charge after 1 hour for both 40′ and 20′, all waiting times will be billed at least 0.5 minimum increases according to  POD,  not go by delivery appt. time. ** customer waiting time minimum 0.5/hrs,**, there will be $100 for early ( before 8am) or strict delivery app. time, there will be $100 for early ( before 8am) or strict delivery appt. time. Without order strict appt. service,our delivery window time is 2-4hrs 3.Demurrage and per diem: CBL will NOT responsible for demurrage and per diem if port congestion/ no return location or app.or duel transaction/ cntn UTL/no chassis, or chassis no good / no pick up appointment/close area/available pick up day not enough or any A/R issue, such as pass due, short payment or over credit limit.  We are not liable for per diem if empty cntn no return location, dual transaction, congestion, or customer didn’t notify us cntn empty. 4. over weight cntn fee: for 40′ cntn. if D.O. cargo net weight 44000- 49000lbs, bill $250 o.w. 49000 – 54000lbs bill $300 o.w. > 54000lbs bill $350 o.w. or if scale ticket 80000-85000lbs bill $250 o.w. 85000-90000lbs bill $300, > 90000lbs bill $350 o.w.bill party will responsible for ow.citation. for 20′ cntn if D.O. cargo net weight 37000- 44000lbs, bill $250 o.w. 44000 – 47000lbs bill $300 o.w, > 47000lbs bill $350 o.w.or if scale ticket 69500-73000lbs bill $250 o.w. 73000-78000lbs bill $300, > 78000lbs bill $350 o.w.  Billing party will responsible for ow.citation ,billing party and consignee is responsible  and must reimburse CBL for any fines, expenses, violations, delays, costs and accidents 5. $200 extra stop from port to exam site 6. Prepull fee $150: either prepull to cbl next day deliver or out gate delivery after 5pm. 7. Storage fee $40/day. EX: p/u Monday, deliver Tuesday, no storage fee.p/u Monday, deliver Wednesday, bill $80 two days storage fee. 8,extra stop minimum charge $200. 9. Pacific Ocean Transportation’s maximum cargo liability is $100,000.00 per shipment/occurrence.10. due to port short 20’ chassis creating port congestion, $65/day 20′ chassis fee. 11. SSL flat tire road service: Emergency service $200.00 plus $250 per flat tire.

[sic.]

If that makes your head swim, you’re in good company. This is just a tiny portion of all the things freight forwarders keep track of for shippers.

Click Here for Free Freight Rate Pricing

 

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6 Reasons Biden Suddenly Cares About the Supply Chain https://www.universalcargo.com/6-reasons-biden-suddenly-cares-about-the-supply-chain/ https://www.universalcargo.com/6-reasons-biden-suddenly-cares-about-the-supply-chain/#respond Fri, 22 Oct 2021 02:00:08 +0000 https://www.universalcargo.com/?p=10507 Transportation Secretary Pete Buttigieg went on a press tour, where he talked about the port congestion we're seeing right now. The Biden Administration has been talking about the ports and the supply chain a great deal lately. Rather suddenly. Major congestion at the ports has been happening literally the entirety of Biden's presidency. However, President Biden before now has shown a lack of care about shipping and the supply chain.

Tuesday's blog about the president finally nominating an Administrator of the United States Maritime Administration at the Department of Transportation, after delaying the appointment for 278 days and closing the White House maritime desk while this same "supply chain crisis" has been raging, gives evidence that President Biden doesn't really care about shipping and the supply chain. Why is the administration and their media allies so focused on it now? Because it's politically beneficial.

Read the post in Universal Cargo's blog to see 6 things the supply chain story does for the Biden Administration.

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Transportation Secretary Pete Buttigieg went on a press tour, where he talked about the port congestion we’re seeing right now. The Biden Administration has been talking about the ports and the supply chain a great deal lately. Rather suddenly. Major congestion at the ports has been happening literally the entirety of Biden’s presidency. However, President Biden before now has shown a lack of care about shipping and the supply chain.

Photo of Joe Biden by Gage Skidmore
Photo of Joe Biden by Gage Skidmore

Tuesday’s blog about the president finally nominating an Administrator of the United States Maritime Administration at the Department of Transportation, after delaying the appointment for 278 days and closing the White House maritime desk while this same “supply chain crisis” has been raging, gives evidence that President Biden doesn’t really care about shipping and the supply chain. Why is the administration and their media allies so focused on it now? Because it’s politically beneficial.

Here are 6 things the supply chain story does for the Biden Administration.

1. It Creates a Diversion

First, the supply chain story shifts focus away from disasters this administration has caused. Disasters like those at the southern border and in Afghanistan.

Talking about holding meetings where the Port of Los Angeles agrees to go 24/7 and supply chain industry leaders and the International Longshore & Warehouse Union (ILWU) agree to cooperate with that sounds much better than talking about a botched withdrawal that got American soldiers killed; left American citizens, green card holders, and allies behind; and included the Biden administration blowing up an innocent family with seven kids and lying about it.

2. It Gives a Credit Grab Opportunity

Second, the story might give the administration an easy, much-needed win. And if it doesn’t, they can just point the finger of blame at the private sector.

This isn’t the first time the ports have suffered severe, drawn-out, and costly congestion, creating bottlenecks in the supply chain. It’s not even the first time this has taken place during the lead-up to the holiday shopping season. Think about the 2014-15 contentious ILWU contract negotiations. We had the bottlenecks, ships waiting at anchor, billions in costs to the economy, agricultural exports rotting on the docks, and imports not getting to retailers on time to make it to the shelves for holiday shopping. Eventually, the congestion got cleaned up, as it will this time.

The ports and supply chain players are executing strategies born out of experience to deal with the congestion, and it will be their execution of those strategies that will help determine how long it takes the ports to recover, not federal intervention. But that won’t stop the Biden Administration from jumping in and taking credit.

The ports are already likely to start recovering over the upcoming months for several reasons. We’re coming to the end of the annual peak season, when importing for the holiday shopping season starts to decline and we eventually reach a typically slower shipping season. As things open more and more, a percentage of the spending that moved from services, entertainment, and travel to goods – majorly increasing shipping demand over the last year and a half – will move back to people going out and traveling again. New shopping habits will be hard to break, but soaring inflation and stimulus money running out for people will also likely slow spending on goods.

No, the Biden Administration suddenly making a big deal about this problem they’ve been ignoring all this time and patting themselves on the backs for getting involved when the Ports of Los Angeles and Long Beach have extra motivation to get this cleaned up as quickly as possible because there’s the looming ILWU contract negotiations next year that could throw West Coast ports right back into congestion doesn’t wreak of opportunism at all.

As things improve at the ports over the upcoming months and into next year, the Biden Administration will be saying look what we did. If they fail to improve, no worries. The Biden Administration will have plenty of others to blame, as per usual.

4. It Makes a Great Scapegoat

Speaking of blame game, the supply chain problems are President Biden’s favorite scapegoat for inflation. It’s the perfect scapegoat because more expensive shipping does mean higher prices, so let’s blame port congestion and the supply chain for all the inflation we’re experiencing. Surely, spending trillions more than the government has and printing more money doesn’t have to do with inflation. Paying people to stay home rather than work doesn’t increase labor costs (and shortages) and contribute to inflation. Pushing vaccine mandates that cause people who refuse to comply to be fired or forced to quit doesn’t also increase labor shortages and costs (and I’m sure that helps the trucker shortage too).

Of course, it’s not true.

A week ago, I blogged about how port congestion is not the cause of inflation and what are the root causes of the increased shipping costs. If you’re a regular reader of this blog, you know that over the last year and a half I’ve written a great deal about what has caused the high freight rates we’re seeing and the supply chain problems we’re having. In fact, I’ve been writing about the issues building up to our current supply chain problems for the last ten years in Universal Cargo’s blog.

5. It’s a Chance to Do What the Biden Administration Does Best

Secretary Buttigieg repeatedly says on his press tour that the supply chain problems are happening because of incredible demand, which is caused by President Biden’s excellent work on the economy. One such quote, which has garnered much derision is:

“… demand is up, because income is up, because the president has successfully guided this economy out of the teeth of a terrifying recession.”

If you were wondering what the Biden Administration does best, this is it: lie.

As mentioned above, and gone into in great detail in many previous posts, high demand is a big factor in the high freight rates we’ve been seeing and the congestion at the ports. This demand precedes Biden’s presidency. The ports were already seeing near-record to record level highs in goods moved through them for months before Biden took office. It doesn’t take much logic to know his presidency didn’t cause that. It is, in fact, impossible, assuming we still live by the rule of time only moving forward.

Furthermore, the economy and new jobs under this administration has repeatedly and severely underperformed. At first, the administration explained why the economy wasn’t performing well with excuses and absurd lies. My favorite was when Biden’s economic adviser Cecilia Rouse blamed April’s job numbers on Easter being in March this year (when Easter was in April):

YouTube Video

Now instead of lying about why the economy isn’t performing well under President Biden, Secretary Buttigieg just lies and says the economy is performing so well it’s creating these problems.

I’ll let this quote from Nate Ashworth’s article, published in Election Central, retort Buttigieg’s lie:

No economist worth anything believes that Biden has guided the country out of a recession. On the contrary, some economists believe the economy, aided by Biden’s anti-growth tax-and-spend policies, is already in a recession worse than

“America has already slipped into a recession that could be as bad as the 2008 financial meltdown according to key consumer data, a Dartmouth College professor has warned.

“David Blanchflower, of Dartmouth, and Alex Bryson, of University College London, say that every slump since the 1980s has been foreshadowed by 10-point drops in consumer indices from the Conference Board and University of Michigan.

“The indices are drawn from questions put to ordinary Americans about their income expectations, employment conditions and what they expect for the US economy in the near future.

“The Conference Board has measured a 25.3-point drop in 2021, while UM has recorded an 18.4-point slump. This compares to a 19-point and a 21-point dip for the indices respectively ahead of the 2008 global financial crash.

“‘It seems to us that there is every likelihood that the United States entered recession at the end of 2021,’ the authors write in a new research paper.”

6. It Creates Opportunity to Push the Democrat’s Reconciliation Bill

Finally, the supply chain story gives an opportunity to push President Biden and the Democrat’s “infrastructure bill,” as Secretary Buttigieg and others refer to the $3.5 trillion reconciliation bill they want to pass on top of a bipartisan $1.2 trillion infrastructure bill.

In his press appearances, where Secretary Buttigieg talks about the supply chain, he eventually turns the topic to this crisis being why we need to pass the president’s infrastructure deal – again, talking about the $3.5 trillion reconciliation one. There are actually Democrats who refuse to go along with the exorbitant amount of spending in the bill, and the Democrats, led by Speaker Nancy Pelosi, won’t move forward with the $1.2 trillion infrastructure bill without the $3.5 trillion one.

It’s hard to reference just how much money that is, but to try, the total revenue – mostly made up of taxes – of the federal government in 2019 was $3.5 trillion.

If we’re going to talk about easing inflationary pressures, which Buttigieg pays lip service to in his press tour, out of control governmental spending seems like a good place to start. If we’re going to talk addressing labor shortage, we don’t do it by pushing people out of the workplace with vaccine mandates. And if we really care about shipping, supply chain, and infrastructure, we don’t hold an already enormous but likely to pass infrastructure bill hostage in an attempt to push through a plethora of agendas hidden in a massive $3.5 trillion bill.

I’ll leave you with a smattering of the Pete Buttigieg supply chain publicity tour, featuring interviews on Fox News, MSNBC, CNN, and NBC.

YouTube Video

YouTube Video

YouTube Video

YouTube Video

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Biden Finally Nominates Maritime Administrator https://www.universalcargo.com/biden-finally-nominates-maritime-administrator/ https://www.universalcargo.com/biden-finally-nominates-maritime-administrator/#respond Wed, 20 Oct 2021 02:04:11 +0000 https://www.universalcargo.com/?p=10504 Last week, President Biden announced his intention to nominate Ann Phillips as Administrator of the United States Maritime Administration at the Department of Transportation.

According to the White House release, "Ann Phillips is a leader in the field of coastal resilience and climate impact on national security at the regional, national and international level."

Yes, leader in the field of "climate impact" makes this sounds like a nominee to tout the political talking point of climate change and push the Democratic Party's policies they justify through the fear of global warming.

There are those who have voiced doubt over Phillips' qualifications for the job at hand. In a FreightWaves article, John Gallagher writes:

But with advising and assisting the secretary of Transportation on commercial maritime matters one of the primary responsibilities of the maritime administrator, maritime officials contacted by FreightWaves questioned if she has the experience to help manage the current supply chain crisis affecting the domestic maritime sector.

“She looks like she would have been more suited for a position at [Environmental Protection Agency] or [National Oceanic and Atmospheric Administration],” said one source who declined to be identified, “especially given that this [supply chain] issue is not going away for a while.”

With the way the left uses cancel culture to go after those who dare disagree with – let alone criticize – it, it's no surprise someone questioning Phillips's qualifications might choose not to reveal his or her identity. There's also the fact that maritime officials will have to work with Phillips, assuming her nomination is confirmed, and questioning someone's qualifications is not the strongest way to begin a working relationship with her.

I, on the other hand, have no trouble saying what I think. I believe Ann Phillips to be exponentially more qualified to be Administrator of the United States Maritime Administration at the Department of Transportation than Pete Buttigieg is to be Secretary of Transportation. Unfortunately, that's not a high bar to clear. At all. But more on that later. Phillips actually does have maritime experience.

Read the full post in Universal Cargo's blog to find out more, including Phillips's maritime experience – which is impressive – and her supply chain experience – which is non-existent – and just how much President Biden has ignored shipping and the supply chain until now, when it's politically expedient.

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Last week, President Biden announced his intention to nominate Ann Phillips as Administrator of the United States Maritime Administration at the Department of Transportation.

According to the White House release, “Ann Phillips is a leader in the field of coastal resilience and climate impact on national security at the regional, national and international level.”

Yes, leader in the field of “climate impact” makes this sounds like a nominee to tout the political talking point of climate change and push the Democratic Party’s policies they justify through the fear of global warming.

There are those who have voiced doubt over Phillips’ qualifications for the job at hand. In a FreightWaves article, John Gallagher writes:

But with advising and assisting the secretary of Transportation on commercial maritime matters one of the primary responsibilities of the maritime administrator, maritime officials contacted by FreightWaves questioned if she has the experience to help manage the current supply chain crisis affecting the domestic maritime sector.

“She looks like she would have been more suited for a position at [Environmental Protection Agency] or [National Oceanic and Atmospheric Administration],” said one source who declined to be identified, “especially given that this [supply chain] issue is not going away for a while.”

With the way the left uses cancel culture to go after those who dare disagree with – let alone criticize – it, it’s no surprise someone questioning Phillips’s qualifications might choose not to reveal his or her identity. There’s also the fact that maritime officials will have to work with Phillips, assuming her nomination is confirmed, and questioning someone’s qualifications is not the strongest way to begin a working relationship with her.

I, on the other hand, have no trouble saying what I think. I believe Ann Phillips to be exponentially more qualified to be Administrator of the United States Maritime Administration at the Department of Transportation than Pete Buttigieg is to be Secretary of Transportation. Unfortunately, that’s not a high bar to clear. At all. But more on that later. Phillips actually does have maritime experience.

The White House lists in her experience the following:

Prior to her current appointment, Ann Phillips served nearly 31 years on active duty in the United States Navy, retiring as a Rear Admiral. Her final Flag command was as Commander, Expeditionary Strike Group TWO, including 14 ships and 10 subordinate commands – all the Amphibious Expeditionary Forces on the East Coast of the United States. Earlier she served on the Chief of Naval Operations’ Staff as Deputy Director and then Director of Surface Warfare Division, had the honor to commission and command USS MUSTIN (DDG 89), and to command Destroyer Squadron 28.

No Supply Chain Experience

I find Phillips 31-year career in the Navy impressive, but do notice a lack of experience in commercial shipping. Her current appointment, mentioned above, doesn’t show any supply chain experience, let alone expertise, either. Here’s how the White House press release describes it:

In her current appointment as the first Special Assistant to the Governor of Virginia for Coastal Adaptation and Protection, she is building a collaborative, whole of government and community approach to address the impact of coastal flooding across the Commonwealth, including the development of Virginia’s first Coastal Resilience Master Plan. In particular, she coordinates across Federal, State, local and other partners to create equitable strategies to address rising waters and climate impact to federal, maritime, and other critical coastal infrastructure assets in Virginia.

Captain John Konrad also notices her lack of experience and writes about it in an excellent gCaptain article:

Phillips is a highly decorated Navy leader with a long list of accomplishments and is highly respected by everyone gCaptain has interviewed. She was head of the Navy’s Climate Change Task Force and is a highly sought after consultant on climate security issues. She holds an MBA. She was chairman of a local government Sea Level Rise Preparedness and Resilience project. She once captained a Navy warship. The appointment looks great on paper except for one kinda big problem. This is not a warship position. It’s a commercial shipping appointment and she has zero experience aboard any commercial ships. She does not even have experience leading navy military sealift ships.

Concerns over a lack of supply chain experience are understandable as national headlines and TV news are drawing everyone’s attention to the supply chain with the keywords “crisis,” “bottlenecks,” and “inflation” never forgotten to be emphasized.

I can also understand some having concern over Phillips’s apparent lack of experience in the rail, road, and air aspects of the job, as Gallagher’s FreightWaves article immediately follows its section about the doubters of Phillips’s qualifications with the following:

MarAd, which is part of the Department of Transportation, points out that of the more than 300 U.S. ports, many of them have “complicated elements that integrate water, rail, road and even airborne transportation modes. MarAd is committed to efficiently managing each and every piece of this intermodal transportation network, ensuring its role as a key contributor to our nation’s economic and national security posture.”

I don’t know how much exposure Phillips has to these other forms of transportation and the logistics involved with them. There certainly will be a learning curve. Fully learning and understanding commercial shipping and the supply chain, with all its challenges, will certainly be an ongoing challenge. However, as long as I’m not judging by President Biden’s past appointees, I have no reason to doubt Phillips’s ability to handle the job.

Biden Doesn’t Care About Shipping

I’m actually more concerned by the Biden Administration’s apathy when it comes to shipping and the nation’s supply chain. Oh yes, now President Biden cares about those things. Now that it’s a convenient distraction from the array of failures we’ve been seeing from this administration and a scapegoat as the cause of inflation, President Biden acts like he cares about it. However, gCaptain points out just how much Biden has ignored shipping and the supply chain to this point:

Biden appointed no ship owners to his cabinet, he closed the White House maritime desk, and delayed his MARAD appointment for 278 days. The Biden administration seemigly cares so little about shipping they have even forgot to recall critical republican appointed delegates to the International Maritime Organization (IMO) in London.

This “supply chain crisis” is not something that suddenly hit. It has been going on literally the entirety of Biden’s presidency. I posted an alert to shippers in Universal Cargo’s blog in December of 2020 that talked about crisis at the ports, ships backed up and waiting at anchor there, and a lack of trucks and truckers, among other issues causing shippers to expect delays and fees with getting their goods. Sound familiar?

Additionally, if President Biden cared about shipping, he wouldn’t have appointed Buttigieg as Secretary of Transportation. I don’t care about the secretary’s two-month-long paternity leave because it makes no difference whether he’s on the job or not. By opening his mouth, Buttigieg has proven his lack of understanding about the supply chain and the economy. But that’s what you get when you appoint people to positions of power in exchange for dropping out of a political race and endorsing you at a critical moment.

Joe Biden himself spoke of Pete Buttigieg’s complete lack of experience while on the campaign trail before making the aforementioned deal with the then presidential hopeful. In the next blog, we’ll look at Buttigieg’s words that prove him unqualified as Secretary of Transportation.

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Port Congestion, 24/7 Gate Hours, Biden, & Inflation https://www.universalcargo.com/port-congestion-24-7-gate-hours-biden-inflation/ https://www.universalcargo.com/port-congestion-24-7-gate-hours-biden-inflation/#respond Thu, 14 Oct 2021 23:33:30 +0000 https://www.universalcargo.com/?p=10496 Speaking in the East Room on Wednesday (October 13th), President Biden announced:

"After weeks of negotiation and working with my team and with the major union and retailers and freight movers, the Ports of Los Angeles — the Port of Los Angeles announced today that it’s going to be — begin operating 24 hours a day, 7 days a week."

How 24/7 will 24/7 be? When will 24/7 happen? Whose idea is it? Is port congestion to blame for inflation? What's really causing higher shipping costs? We get into it all and more.

Check it out in Universal Cargo's blog!

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24/7 Gate Hour Announcement

Speaking in the East Room on Wednesday (October 13th), President Biden announced:

After weeks of negotiation and working with my team and with the major union and retailers and freight movers, the Ports of Los Angeles — the Port of Los Angeles announced today that it’s going to be — begin operating 24 hours a day, 7 days a week.

That’s not exactly what the Port of Los Angeles announced. Here’s Wednesday’s full – but brief – statement from the Port of Los Angeles:

Port of Los Angeles Executive Director Gene Seroka today met with President Biden. The President announced initiatives to address current supply challenges, including moving to 24/7 operations at the Port of Los Angeles.

Following is a statement from Executive Director Seroka regarding President Biden’s announcement regarding 24/7 operations.

“Operational details are being discussed and worked out with the supply chain stakeholders.  The significance of today’s announcement is the commitment from industry leaders responsible for moving goods on behalf of American consumers and businesses to open up the capacity needed to deliver.  It’s a call to action for others to follow.

“We have heard directly from the President, the Vice President, Secretary Buttigieg, National Economic Council Director Deese, and Port Envoy Porcari.  We have a lot of work ahead.  The Port of LA is called America’s Port because cargo we handle reaches every corner of the country.  In the days ahead, we are committed to continuing to be the convener to ensure the supply chain delivers for the American people.”

How 24/7 Will 24/7 Actually Be?

A few weeks ago, I wrote about the congestion at the Ports of Los Angeles and Long Beach and the little being done about it. The ports described their moves as taking “bold new efforts to improve freight movement,” but very limited increases in gate hours, mainly seen from a single terminal at the Port of Long Beach, was far from bold or novel.

I was left asking many questions. Among them, “Can extended gate hours happen at all the terminals? At the Port of Los Angeles too? Are there any ideas beyond increasing gate hours?”

They could have been responding directly to some of my questions with this 24/7 talk.

Moving to 24/7 gate hours seems good. But we don’t actually know what that looks like. Are we talking all terminals? Some terminals? As long as there is a terminal operating somewhere at the Port of Los Angeles at any given hour, no matter how they alternate which gates are open, does that count as 24/7?

When Will 24/7 Be 24/7?

President Biden makes it sound like as of now the Ports of Los Angeles and Long Beach are open 24/7. However, by the White House’s own press release Wednesday – yes, on the same day as President Biden’s remarks and the Port of Los Angeles’s statement – 24/7 port operations were under discussion rather than underway:

Today, Vice President Harris, Secretary Buttigieg and Director Deese met with the leaders of the ports of Los Angeles and Long Beach, as well as representatives of labor and the business community, to discuss solutions to the congestion at the two ports. The two ports discussed moving to 24/7 operations.

Labor leaders made clear their support for this effort, and business leaders announced new commitments to move their cargo during the newly available night time and weekend hours. Participants discussed how the movement of cargo during less congested times will allow trucks to move more quickly on highways during less crowded night time hours, and truckers at the ports can drop off and pick up loads more quickly. These commitments from some of the nation’s biggest companies during off-peak hours should increase small businesses’ ability to move their goods during the peak hours, including those exporting their goods.

What we’re actually looking at right now are commitments or pledges from the likes of ports, unions (International Longshore & Warehouse Union [ILWU] and teamsters), and major shippers (such as Walmart, FedEx, UPS, Target, etc.) to extend gate hours and better utilize extended gate hours with the goal of improving the flow of cargo.

This sounds even more clearly like the case at the open of the Port of Long Beach’s press release, also put out Wednesday:

Port of Long Beach Executive Director Mario Cordero, the International Longshore and Warehouse Union, and large companies met with President Biden today to secure commitments to better utilize extended gate hours to move historic volumes of cargo ahead of the holiday season.

Ocean Freight Port

In the press release, the Port of Long Beach touts the expansion of gate hours it did at one of its terminals in September and the regional supply chain summit it held “attended by White House Ports representative John Porcari along with representatives from Gov. Gavin Newsom’s office to take steps to speed cargo handling.”

The big push is for increased efficiency and cooperation over the next 90 days to ease the congestion that has been going on for the last year. Of course, the idea of 24/7 operations is on everyone’s lips and is certainly included in the Port of Long Beach’s press release:

As part of the coordination facilitated by the Biden administration today, the ILWU agreed to work extra shifts, clearing the way for private businesses to adjust their operations to move cargo 24/7 to clear the backlog.

Somehow, I have my doubts we’ll truly see 24/hour gate hours from the Ports of Los Angeles and Long Beach for the next 90 days, but I do expect more extended gate hours. As long as something is open somewhere within the ports at most hours day or night, I’m sure they’ll call it 24/7 operations. We’ll have to watch and see.

Whose Idea is 24/7?

The Port of Long Beach does its political duty to profusely thank the Biden Administration in the press release, but it also makes clear the idea for 24/7 operations didn’t come from the Biden Administration, instead taking credit for the idea themselves:

Cordero first introduced the idea of 24/7 operations before the pandemic, during the State of the Port in January 2019, in a visionary approach to looming supply chain hiccups.

“Whenever we are faced with a crisis here, it’s our philosophy to channel it into something positive,” Cordero said. “Before this unprecedented cargo surge began, we believed 24/7 operations were the future. After all, consumers can shop online at any time, whether it’s at 4 p.m. or 4 a.m., and 24/7 is already the standard at our partner ports in Asia. The supply chain truly never stops now, and we’re thankful to the Biden administration for using its influence to ensure cargo is always moving.”

Why 24/7 Now?

I won’t get into how the idea of 24/7 operations wouldn’t have been a novel, let alone revolutionary or even “visionary” idea, at the beginning of 2019. I will say, it likely would have been helpful during this last year of congestion. However, it is not a panacea either. If it were, and if the Port of Long Beach has been holding onto this visionary idea of 24/7 operations, why wouldn’t it have been put in place earlier?

Timing is everything for the Biden Administration here. Port congestion was building into a problem in the months leading up to President Biden taking office. It persisted through what are normally slower times for the international shipping industry. President Biden didn’t form a supply chain task force until June, about half a year after taking residence in the White House. Then it wasn’t until August 27th that he named John Porcari port envoy. Now this push for 24/7 operations comes at the end of the traditional peak season, when over the next three months, the ports should (in theory, as many are predicting against it this year) be able to get congestion back under control anyway.

For an administration in much need of a win after showing incompetence at the border and in Afghanistan as well as economic and employment growth that grossly underwhelm in the midst of incredible high inflation, this could finally be a win. However, it’s not all the Biden Administration and its allies in the media are toting it to be. International shipping is having one of its rare moments of making national headlines as the Biden Administration and media point fingers at it as the cause of inflation.

Port Congestion Taking Blame for Inflation?

In an AP News article, Josh Boak paints the picture of Wednesday’s news just how it would be if the Biden Administration was holding the brush:

President Joe Biden tried to reassure Americans on Wednesday that he can tame high inflation, announcing a deal to expand operations at the Port of Los Angeles as prices keep climbing and container ships wait to dock in a traffic jam threatening the U.S. economy and holiday shopping.

Prices are jumping in large part because container ships are stranded at ports and because unloaded goods are waiting for trucks, leading to mass shortages and delays that have caused a longer than expected bout of inflation. The rising costs are eating into worker pay, creating a drag on growth and driving Republican criticism of Biden just as his multitrillion-dollar tax, economic, climate and infrastructure agenda is going through the crucible of congressional negotiations.

Um, no. Holding up port congestion as this big cause of inflation, which many in the media are doing, is wrong. In fact, it’s fairly far down on the list of factors contributing to inflation and is certainly not a root cause.

First, let’s not pretend like spending trillions and trillions of dollars that the government doesn’t have and ramping up the printing of money doesn’t decrease the value of the dollar. It doesn’t matter how many vapid sentences are spewed about a $3.5 trillion bill actually costing nothing. Paying people to stay home rather than work also adds to inflation as businesses lose productivity for not being able to fill jobs and spend more on labor, trying to lure potential employees their way. Many businesses were closed never to reopen, shrinking competition and lending toward higher prices. Vaccine mandates and COVID proticols also increase costs to businesses, losing employees who refuse to comply, spending in attempts to replace them, experiencing decreased efficiency and increased costs in purchasing PPE and tests/testing. Those costs get passed on in the prices of goods and services as well.

All that said, increased shipping costs certainly also contributes to inflation with higher costs resulting in higher prices of goods. Port congestion is costly and adds to that, yes, but freight rates have soared over the last year and a half. At the end of August, I was writing about freight rates that were more than 5 times what they were a year earlier, when freight rates were already incredibly high. There are many reasons for the sky-high freight rates. And it doesn’t come down to port congestion. That’s just an exacerbating factor with root causes that need to be addressed.

What’s Really Causing Higher Shipping Costs?

The place to start with shipping costs is the same as any other business sector: supply and demand. Demand for goods, and therefore shipping to the U.S., soared above capacity in 2020.

Freight Rates

I’ve gotten into this more than once in Universal Cargo’s blog, but for Mr. Boak and others in the media who point to port congestion as a larger blame for inflation than it deserves while ignoring the rest of what’s been happening in the industry, let’s recap. Early in the pandemic, a decrease in demand was expected and ocean freight carriers were predicted to lose billions. So they artificially decreased capacity in the industry by blanking (cancelling) hundreds of sailings. They overdid it. Capacity was dropped well below market demand, which allowed them to increase rates (and they made billions).

The reason carriers are now able to so easily manipulate capacity – something that they struggled with for years – is competition has shrunk as they’ve consolidated into just three major carrier alliances dominating global ocean freight shipping. This consolidation was approved under the Obama Administration and allowed to continue through the Trump Administration.

After the carriers decreased capacity below demand, there was a boom in demand as lockdowns and government stimuli vastly increased American spending on goods, especially through online shopping. Freight rates exploded, but so did the supply chain.

Because carriers blanked so many sailings, equipment – especially shipping containers – were not properly distributed around the globe. Shortages created problems and delays as did months of record to near-record amounts of shipments. COVID restrictions and even closures that decreased an already problematic level of efficiency at the ports added to the problem, as did a trucker shortage problem the industry has faced for years. Thus, severe congestion at ports like Los Angeles and Long Beach occured.

More to Address Than Gate Times

A big factor alluded to above that has played into U.S. port congestion, which is problematic for the Biden Administration, has to do with the dockworker unions. American ports are woefully inefficient compared to many ports around the world, especially in China, largely because the ILWU and International Longshoremen’s Association (ILA) fight against automation.

The unions are huge campaign contributors to Biden and the Democrats, so you won’t hear the administration acknowledge this issue, but there’s a good chance the problem will come front and center at the ports next year with the ILWU contract expiring and a fight over automation expected.

The ILWU has not shied away from slowing down the ports to gain leverage in contract negotiations or trying to get what they want, in general. In fact, trying to gain control of two jobs that never belonged to the union, they slow-timed the Port of Portland so much containerships could no longer call on the port, and shippers were forced to truck their goods to and from farther away ports. The last time west coast ports saw congestion anywhere close to what we’ve been seeing lately was in 2014 and ’15 when the ILWU was in contentious contract negotiations with the Pacific Maritime Association (PMA).

Moving forward with technology and automation is important at the ports for helping the supply chain avoid the kind of troubles it’s having in the future. It’s one of many factors that must be addressed moving forward.

Going 24/7 at the ports is not going to solve inflation. Out of control government spending and higher taxes that the Biden Administration is pushing are bad signs that we’re nowhere near the end of inflation. Hopefully, the 24/7 gate hours at the Ports of Los Angeles and Long Beach do help clear the congestion. The Biden Administration pushing for cooperation in this area is a rare move by the administration I actually think is worth supporting.

It’s also worth noting that longer port hours, extended hours – likely overtime – for dockworkers, and businesses trucking in the middle of the night and extending operation hours at warehouses and stores to receive those shipments come with increased costs too, at least in the short term, which likely get passed on to consumers. If the extended gate hours cooperation gets the congestion cleared up faster, it will be well worth it for the savings, but it’s not the answer to high freight rates, and it’s far, far from the answer to inflation.

 

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Supply Chain Chaos & Sky-High Freight Rates Until 2023?! https://www.universalcargo.com/supply-chain-chaos-sky-high-freight-rates-until-2023/ https://www.universalcargo.com/supply-chain-chaos-sky-high-freight-rates-until-2023/#respond Fri, 08 Oct 2021 00:48:56 +0000 https://www.universalcargo.com/?p=10490 When will it end? There are plenty of things people could be saying that about nowadays, but for U.S. shippers, unbelievably high freight rates; terribly congested ports; and disrupted, unpredictable supply chains create this sentiment every day. The last year and a half has been an escalating disaster for shippers as freight rates have shattered record high after record high; reliability from carriers has hit low after unbelievable low; cargo has kept getting rolled to later voyages; record numbers of ships have sat at anchor, waiting to get to the Ports of Los Angeles and Long Beach; the congestion within the ports has refused to clear, U.S. agricultural exporters – along with other exporters – have gotten refused service and shipping containers; shippers have gotten hit with unfair demurrage and detention fees, carriers have basically held cargo for ransom with no-roll premiums... When will it all end?

Maybe not until 2023 according to an article by Greg Miller American Shipper published this week.

Find out all about it by reading the full post in Universal Cargo's blog.

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When will it end? There are plenty of things people could be saying that about nowadays, but for U.S. shippers, unbelievably high freight rates; terribly congested ports; and disrupted, unpredictable supply chains create this sentiment every day. The last year and a half has been an escalating disaster for shippers as freight rates have shattered record high after record high; reliability from carriers has hit low after unbelievable low; cargo has kept getting rolled to later voyages; record numbers of ships have sat at anchor, waiting to get to the Ports of Los Angeles and Long Beach; the congestion within the ports has refused to clear, U.S. agricultural exporters – along with other exporters – have gotten refused service and shipping containers; shippers have gotten hit with unfair demurrage and detention fees, carriers have basically held cargo for ransom with no-roll premiums… When will it all end?

Maybe not until 2023 according to an article by Greg Miller American Shipper published this week.

Current Chaos Plus Labor Union Contract Negotiations

More and more, experts are predicting out of control freight rates, port congestion, and general supply chain chaos to last well into 2022. I was basically alone when I predicted we could see freight rates come down a bit by the end of this year back when we were heading into an early peak season (and ports were already congested in part from what seemed like 2020’s peak carrying all the way into this year’s). If the experts are right about this mess lasting well into 2022, you have a potential disaster waiting for the baton to keep this nightmare going. Labor contract negotiations at West Coast ports between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) are looming. The current dockworkers contract expires next year, and that poses a danger to shippers. Contentious contract negotiations between the ILWU and PMA in 2014-15 led to major port congestion, supply chain disruption, and heavy costs to U.S. shippers and the economy.

I actually blogged about this back in August. The issue of automation alone is likely to make for an ugly fight between the ILWU and PMA that would be costly for shippers. I’m hoping contract negotiations end up going smoothly and nothing is disrupted. Unfortunately, most experts don’t find that likely, which is why I also offered 3 ways to protect your supply chain from the likely ILWU port congestion. I said at the time that there were those who worried we’d have little respite between what we’ve been facing and what looks likely to come. That worry of little respite has turned to fear of no respite.

The current mess bleeding into the potential mess of next year is how Miller sees sky-high freight rates and supply chaos going all the way into 2023.

Are We There Yet?

Miller gets into how hard it is to tell when we’ve finally hit the height of this mess and things start getting better:

international shipping port cranes & containers

The Golden Week holiday is now underway in China. At this time in 2020, some market watchers expected spot ocean freight rates to peak just after Golden Week, then fall back. Asia-West Coast spot rates, as measured by Drewry, are triple what they were when those predictions were made, despite a recent dip.

“Timing the top” predictions have slid from Golden Week 2020 to year-end 2020 to Chinese Lunar New Year 2021 to midyear to year-end 2021 to sometime past Lunar New Year 2022. Liner companies have persistently proven far too conservative in their forecasts. Maersk has upgraded its guidance three times this year; current 2021 earnings guidance is more than twice initial expectations.

Even in the darkness there is hope. That recent dip mentioned could possibly continue. Perhaps my against the grain prediction of prices coming down some by the end of the year will come true.

In 2020, my against the grain prediction that we’d still have a peak season when experts were predicting we wouldn’t because of the pandemic came true. It came too true. However, this year I predicted we might see the peak season fizzle early because of inflation and shippers importing early because of all the supply chain disruptions. Inflation keeps climbing and shippers did ship early, but the peak season does not appear to have fizzled.

Universal Cargo’s shipment count, which I use as a barometer for the industry, had a small dip of 6% in September from August but appears like October could end as high September. But we have a while to wait for the final numbers there.

It’s All Peak Season to Me

I said earlier that all of 2021 has felt like a peak season. Miller quoted an industry expert in his article who went ahead and just called it all peak season, saying the chaos will last well into next year and the freight rates to stay high for the year:

Nerijus Poskus, vice president of global ocean at digital freight forwarder Flexport, told American Shipper, “We have been in a never-ending peak season. In my opinion, peak season is when there is less supply than demand and there is a backlog building somewhere. And I think we have been in it ever since COVID hit.

“I would say that the shippers that don’t have enough inventory at this time are going to sell out prior to Christmas because of all of the delays,” Poskus said, adding that the current lead time for cargo from Asia to inland U.S. points using non-premium ocean and rail can now be over 100 days.

“I think this chaos will last well into 2022. [Shippers] should expect that the whole of 2022 may be another peak season,” he said, adding, “Importers should expect the spot market to remain high for 2022.”

A little redefining of peak season aside, Poskus is not alone in his forecast. Miller quoted others with similar things to say about the future. Yes, experts are expecting shipping to drag on like this for a while, but it is worth pointing out that they’ve been wrong repeatedly over the last couple years. Let’s hold on to the glimmer of hope that the little freight rate dip turns into something more and the ports get congestion under control, but plan for the less favorable outcomes many are predicting.

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Port of Houston Thwarts Cyber Attack https://www.universalcargo.com/port-of-houston-thwarts-cyber-attack/ https://www.universalcargo.com/port-of-houston-thwarts-cyber-attack/#respond Thu, 30 Sep 2021 19:12:34 +0000 https://www.universalcargo.com/?p=10486 How about some good news for a change? There was a cyber attack on the Port of Houston. No, that's not the good news. The good news is the port was able to thwart the attack. Last week, the port put out a statement:

The Port of Houston Authority (Port Houston) successfully defended itself against a cybersecurity attack in August. Port Houston followed its Facilities Security Plan in doing so, as guided under the Maritime Transportation Security Act (MTSA), and no operational data or systems were impacted as a result.

In recent years, cyber attacks have been a major problem for the international shipping industry. The International Maritime Organization (IMO) was hit by cyber attack last year, interrupting service. That came hot on the heals of CMA CGM falling victim to a major cyber attack. When CMA CGM was attacked, it was just the latest in a series of attacks. CMA CGM's attack made it so all four of the world's largest ocean carriers had fallen victim to the crime.

Find out more by reading the full post in Universal Cargo's blog.

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How about some good news for a change? There was a cyber attack on the Port of Houston. No, that’s not the good news. The good news is the port was able to thwart the attack. Last week, the port put out a statement:

The Port of Houston Authority (Port Houston) successfully defended itself against a cybersecurity attack in August. Port Houston followed its Facilities Security Plan in doing so, as guided under the Maritime Transportation Security Act (MTSA), and no operational data or systems were impacted as a result.

Cyber Attacks Pervasive in International Shipping

In recent years, cyber attacks have been a major problem for the international shipping industry. The International Maritime Organization (IMO) was hit by cyber attack last year, interrupting service. That came hot on the heals of CMA CGM falling victim to a major cyber attack. When CMA CGM was attacked, it was just the latest in a series of attacks. CMA CGM’s attack made it so all four of the world’s largest ocean carriers had fallen victim to the crime.

Maersk Cyber Attack

Attacks on major carriers can mean much more than disruption to their voyage schedules or danger to the security of their customers’ sensitive information. When Maersk was hit by a major cyber attack in 2017, it caused the company to have to close down terminals it operated at the Ports of New York, New Jersey, and Los Angeles while Maersk was working to get its systems back under control.

There’s no need to tell shippers how bad interruption at the ports can be when we’ve spent the last year dealing with severe and costly congestion at U.S. ports, and the Ports of Los Angeles and Long Beach in particular. That’s why it’s such great news that the Port of Houston was successfully able to defend against this recent cyber attack.

Cyber Attack Defenses Improving?

With businesses becoming more and more dependent on technology, cyber attack has become more and more common, and probably more sophisticated too. Of course, that means defenses against it should also be getting better and better.

Cyber Attack

This story may be a good sign that the international shipping industry is getting better against cyber attacks. I regularly monitor international shipping news stories, and it’s been about a year since there was a major story about a cyber attack disrupting the industry (unless you count the Colonial Pipeline cyber attack that happened in April of this year and had a tangential effect, negatively impacting oil/gas prices and even availability in some parts of the U.S.). After serious cyber attack stories had been so prevalent, that the first story about a cyber attack hitting international shipping in about a year is a story about a cyber attack being defeated suggests, though doesn’t prove, gains are happening in cyber defense.

Attacks and defenses on the technology front can be studied and learned from. When something like the Port of Houston successfully stops a cyber attack, strategies can certainly be applied to sectors beyond transportation. In an American Shipper article about the Port of Houston thwarting this cyber attack, Noi Mahoney reports:

Jen Easterly, director of the Cybersecurity and Infrastructure Security Agency, told a Senate committee on Thursday that hackers had targeted the Texas port.

“We worked with the U.S. Coast Guard on a vulnerability at the Port of Houston and found out about this hack [involving a password-management program],” Easterly said during the “National Cybersecurity Strategy: Protection of Federal and Critical Infrastructure Systems” Senate committee hearing.

“We work with our FBI partners and our Coast Guard partners to better understand that vulnerability and then to be able to get that information out to see whether in fact we saw the same vulnerability across the federal cyber ecosystem and in our critical infrastructure partners.” 

Shippers should also be looking at their operations for cyber attack weaknesses and ways to protect themselves against cyber criminals.

Port of Houston’s Chief Information Security Officer Recognized

Worth sharing from Mahoney’s article is that the Port of Houston – particularly, its chief information security officer, Chris Wolski – received recognition for the cybersecurity work that resulted in thwarting this attack:

The U.S. Coast Guard attended a Port of Houston commission meeting Tuesday and presented an award of merit to Chris Wolski, Port Houston’s chief information security officer, for “his actions and continued diligence, expertise and contributions concerning protecting Port Houston and the Houston Ship Channel overall on matters related to cybersecurity,” according to officials.

Congratulations, Mr. Wolski! The honor seems well deserved.

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Now What’s Hitting Container Shipping? Power Shortages?! https://www.universalcargo.com/now-whats-hitting-container-shipping-power-shortages/ https://www.universalcargo.com/now-whats-hitting-container-shipping-power-shortages/#respond Wed, 29 Sep 2021 01:34:37 +0000 https://www.universalcargo.com/?p=10485 Over the last year and a half, shippers might have thought they'd seen it all. Astronomical freight rates, hundreds of blanked (cancelled) sailings, no-roll fees that basically amount to holding cargo ransom, months upon months upon months of port congestion, carriers denying shipping containers to U.S. exporters, terminal shutdowns over fear of COVID outbreaks even if there's only a single positive test, record numbers of shipping containers falling into the ocean, a megaship blocking the Suez Canal by getting stuck in the middle, unfair detention and demurrage fees, trucker shortages, equipment shortages, abysmal carrier reliability so much so that giant shippers are resorting to chartering ships exclusively for their own goods... What else could possibly go wrong?

How about power shortages interrupting the supply chain?

There's a power crunch happening in Europe and Asia, and it's already impacting supply chains as Chinese factories are getting shut down in turns to conserve power.

Find out more about this and ponder if we've gone too far in our fear of global warming by reading the full post in Universal Cargo's blog.

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Over the last year and a half, shippers might have thought they’d seen it all. Astronomical freight rates, hundreds of blanked (cancelled) sailings, no-roll fees that basically amount to holding cargo ransom, months upon months upon months of port congestion, carriers denying shipping containers to U.S. exporters, terminal shutdowns over fear of COVID outbreaks even if there’s only a single positive test, record numbers of shipping containers falling into the ocean, a megaship blocking the Suez Canal by getting stuck in the middle, unfair detention and demurrage fees, trucker shortages, equipment shortages, abysmal carrier reliability so much so that giant shippers are resorting to chartering ships exclusively for their own goods… What else could possibly go wrong?

Freight forwarding

How about power shortages interrupting the supply chain?

There’s a power crunch happening in Europe and Asia, and it’s already impacting supply chains as Chinese factories are getting shut down in turns to conserve power.

Martina Li reported in The Loadstar:

Factories in at least ten Chinese provinces have either cut output or closed temporarily this month, after government-imposed power cuts to curb carbon emissions.

By Friday, at least 10 publicly listed companies told the Shanghai and Shenzhen stock exchanges their factory output had been hit by the power cuts, and their 2021 earnings could be adversely affected.

Greg Miller reports in a Journal of Commerce (JOC) article:

According to Bloomberg, power use is now being curbed by tight supply and emissions restrictions in the Chinese provinces of Jiangsu, Zhejiang and Guangdong.

Bloomberg quoted Nomura analyst Ting Lu as stating, “The power curbs will ripple through and impact global markets. Very soon the global markets will feel the pinch of a shortage of supply from textiles and toys to machine parts.”

Nikkei reported that an affiliate of Foxconn, the world’s biggest iPhone assembler and a key supplier of Apple and Tesla, halted production at its facility in Kunshan in Jiangsu Province on Sunday due to lack of electricity supply. Another Apple supplier, Unimicron Technologies, also halted production in Kunshan on Sunday, said Nikkei, citing regulatory filings.

Stoppages of Chinese factories would further delay deliveries of U.S. imports, which have already been waylaid by extreme congestion at ports in Southern California and, more recently, ports in China.

Fear of Global Warming

A large factor in this wave of power cuts interrupting supply chains is fear. In fact, it may be the number one factor. The fear is palpable with how Miller began his article about the power crisis:

There’s panic-buying of gasoline in the U.K. Natural gas prices in Europe and Asia are skyrocketing. Protests are breaking out across Europe due to spiking electricity bills. India and China are short of coal for utilities. Power is being rationed to factories in multiple Chinese provinces — and winter is coming.

That last line sends spine-shivering images of White Walkers descending from the north. There are certainly reasons to fear expensive power prices and especially power shortages in the winter. Look at what happened during the “Deep Freeze” in Texas with power grids failing and people dying of hypothermia.

Fear set up that tragedy. Fear, which led to power grids being dependent upon far more expensive but far less reliable solar and wind power. That fear has set up this power crisis in Asia, Europe, and throughout the world. It’s the fear pushed by alarmists saying things like, “the world will end in 12 years if we don’t address climate change…”

My point is not to deny climate change. However, I will point out that it’s popular voices like that of Rep. Alexandria Ocasio-Cortez (AOC), who was quoted above, that we listen to over the voices of people like Dr. Leslie Woodcock, emeritus professor at the University of Manchester (UK) School of Chemical Engineering and Analytical Science and former NASA scientist who was quoted in a Breitbart article as saying,

The term ‘climate change’ is meaningless. The Earth’s climate has been changing since time immemorial, that is since the Earth was formed 1,000 million years ago. The theory of ‘man-made climate change’ is an unsubstantiated hypothesis [about] our climate [which says it] has been adversely affected by the burning of fossil fuels in the last 100 years, causing the average temperature on the earth’s surface to increase very slightly but with disastrous environmental consequences.

This is not the way science works. If you tell me that you have a theory there is a teapot in orbit between the earth and the moon, it’s not up to me to prove it does not exist, it’s up to you to provide the reproducible scientific evidence for your theory.

Such evidence for the man-made climate change theory has not been forthcoming.

Big Costs Rather Than Big Evidence

That the evidence is not forthcoming, as Dr. Woodcock says, seems true. I’ve often dived into articles and papers about global warming and climate change to see and understand the evidence because I think it’s possible we add to global warming, I’ve been told we do, and there are so many costly policies based on the claim. I’ve read article after article and seen countless news segments where people have stated it’s undeniable that people are causing global warming. Unfortunately, they never share proof and rarely give any evidence, let alone compelling evidence. Please post such proof or evidence in the comments section below.

We’ve so effectively been sold on the fear of global warming, we don’t seem to be counting the costs of how we’re fighting it. From years of massively incentivizing solar and wind power – in the name of fighting global warming – over gas, coal, and nuclear power, we ended up with over 200 people dead, by many reports, during the “Deep Freeze” in a state that would otherwise be unlikely to have power grid problems.

Now we’re seeing the power crisis in Europe and China. Maybe you think the fight against global warming has nothing to do with factories getting shut down in China, a country notorious when it comes to polluting. Think again. The cuts are directly tied to carbon-neutrality goals. Li reports in her Loadstar article:

The cuts followed China’s economic planning agency, the National Development and Reform Commission, released a “dual-control” plan to restrict energy-intensive activities and consumption.

The plan commanded provincial governments to ration electricity consumption to control emissions in line with President Xi Jinping’s target for carbon emissions to peak by 2030, and to achieve carbon-neutrality by 2060.

Live Not By Fear

I think reducing pollution, including CO2 emissions is absolutely worth pursuing. In fact, I think you’d have trouble finding many people against doing so. It’s just important that we don’t do more damage out of fear of climate change, or whatever else politicians and the media push us to fear, than we do good.

There are those who don’t want us to count the costs of our actions. Let me expand a quote I included above. “Millennials, and Gen z, and all these folks that come after us are looking up, and we’re like ‘the world will end in 12 years if we don’t address climate change,'” AOC said, finishing the run-on sentence with, “and your biggest issue is how are we gonna pay for it?'”

Actually, my biggest issue there is either using massive hyperbole or just plain lying about 12 years until Doomsday to cause fear to exploit. However, putting that aside, yes. How are we going to pay for “it” is an important question. Are we going to pay for it by destroying power sectors and crashing economies upon which our children depend? Are we going to pay for it in more deaths from depending on unreliable wind and solar power? Those seem as worthy of fear as climate change. Or are we going to pay for it in prudent measures that may include reasonable sacrifices?

There is always an “it” to fear. When we give in to that fear is usually when we pay more than we even thought to consider.

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How Bad Port Congestion Is & the Little Being Done About It https://www.universalcargo.com/how-bad-port-congestion-is-the-little-being-done-about-it/ https://www.universalcargo.com/how-bad-port-congestion-is-the-little-being-done-about-it/#respond Thu, 23 Sep 2021 22:12:42 +0000 https://www.universalcargo.com/?p=10483 Congestion at U.S. ports has been a problem without relief for the last year. When there is already longstanding congestion before the peak season – which we're deep into now – hits, you know congestion is bad. But just how bad is that congestion?

Short answer: really bad. However, there is a much more specific answer.

In an American Shipper article, Greg Miller provided a pretty solid answer to how backed up the Ports of Los Angeles and Long Beach are.

While pointing out the number varies from day to day, Miller reported:

"... there were 70 container ships in the queue on Monday with total capacity of 432,909 twenty-foot equivalent units. To put the enormity of that number in perspective, that’s more than the inbound container volume the Port of Long Beach handled in the entire month of August. It’s roughly what Charleston handles inbound in four months and what Savannah handles in two.
The combined import throughput of both Los Angeles and Long Beach in August was 893,118 TEUs. Assuming ships waiting offshore are effectively full and capacity is a good proxy for volume, and that terminals are able to process vessels at the same pace they did in August, the anchorages and drift areas could only be completely cleared if no ships arrived for 14 days straight days."

Find out more and what the ports are doing about the congestion by reading the full post in Universal Cargo's blog.

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How Bad Is Congestion at the Ports of Los Angeles & Long Beach?
Port of Long Beach

Congestion at U.S. ports has been a problem without relief for the last year. When there is already longstanding congestion before the peak season – which we’re deep into now – hits, you know congestion is bad. But just how bad is that congestion?

Short answer: really bad. However, there is a much more specific answer.

In an American Shipper article, Greg Miller provided a pretty solid answer to how backed up the Ports of Los Angeles and Long Beach are.

While pointing out the number varies from day to day, Miller reported:

… there were 70 container ships in the queue on Monday with total capacity of 432,909 twenty-foot equivalent units. To put the enormity of that number in perspective, that’s more than the inbound container volume the Port of Long Beach handled in the entire month of August. It’s roughly what Charleston handles inbound in four months and what Savannah handles in two.

The combined import throughput of both Los Angeles and Long Beach in August was 893,118 TEUs. Assuming ships waiting offshore are effectively full and capacity is a good proxy for volume, and that terminals are able to process vessels at the same pace they did in August, the anchorages and drift areas could only be completely cleared if no ships arrived for 14 days straight days.

Of course, it’s not like no ships are going to arrive for two weeks straight at the busiest sea port in the U.S. Ships arrive there every day. Miller points out, “Vessel-positioning data from MarineTraffic confirms that a steady stream of container ships remains en route across the Pacific, destined for Los Angeles.”

He also reported the average vessel-waiting time at the Port of Los Angeles is at an all-time high of nine days.

Of course, this is bad news for shippers trying to get their goods for the upcoming holiday season; however, the Port of Long Beach is at least doing something to help get cargo out of the port to shippers…

Long Beach Tries Extended Cargo Pickup Hours

There are many things that have contributed to port congestion. Among them have been COVID restrictions that, along with decreasing dockworker efficiency, negatively affected terminal hours during the pandemic. It seems like common sense that extending hours would be one way to help toward alleviating congestion.

Eric Kulisch reported in an American Shipper article that the Port of Long Beach, with Total Terminals International as the launch partner, has a new initiative to extend gate hours for trucks to pickup shipping containers.

The operator of the port’s largest container terminal, located on Pier T, will encourage truckers to make late-night and pre-dawn trips for containers by offering more flexible appointment windows. Shuttle drivers will be able to pick up containers from 11 p.m. to 1:30 a.m. Mondays through Thursdays. The gates will be open for prearranged double moves — empty container drop-off plus loaded pickup — between 3 and 7 a.m. In both cases, drivers with appointments will be able to show up at any time rather than being held to a strict reservation slot, the port authority said Tuesday.

Making containers available at off-peak hours is designed to increase throughput by servicing trucks at less busy times and help speed warehouse trips because of reduced levels of traffic on roadways.

The average dwell time for containers at the Ports of Los Angeles and Long Beach, Kulish also reports, “has stretched to six days, according to port officials.”

Not So Bold Bold Moves

Add the days ships are waiting to get unloaded to the number of days containers are stuck at the ports, and you have an average of 17 days shippers are waiting from the time a ship initially arrives with their cargo to when that cargo leaves the Ports of Los Angeles and Long Beach.

Hopefully, the Port of Long Beach’s initiative will help with that some, but there are many factors causing congestion at the ports, including continued COVID restrictions on dockworkers.

It’s good to see the Port of Long Beach taking a step toward fighting the congestion happening there, but why wait through a year of congestion before starting a pilot program like this? What other initiatives can the ports utilize to fight congestion? Can extended gate hours happen at all the terminals? At the Port of Los Angeles too? Are there any ideas beyond increasing gate hours? Are there any COVID restrictions that could be examined to see if they are unnecessarily slowing operations? Are there efficiency experts being brought in to look for ways to improve the situation? Are other industry experts being invited to consult and cooperate on fighting congestion?

There are some positive answers to the questions I just asked. There is some consultation happening, and the ports are moving to improve congestion. But at about the same pace cargo moves through the ports right now. If that fast. Last week, the Ports of Los Angeles and Long Beach issued a joint press release that they opened with:

Today, after consultation with multiple supply chain stakeholders and the U.S. Department of Transportation, the ports of Long Beach and Los Angeles announced bold new measures to improve freight movement and reduce delays through the ports as they continue to experience record volumes.

Bold is an awfully strong word. The biggest item in the press release was that there will be extended gate hours. In addition to the Port of Long Beach late night gate initiative discussed above, the Port of Los Angeles will be testing out opening up weekend gates. Frankly, an elementary student could come up with that idea.

Additionally, “both ports have called on marine terminal operators to incentivize the use of all available gate hours, especially night gates, to reduce congestion and maximize cargo throughput capacity.” Yes, I know, that’s not an actual action but a call to action for others to possibly take.

Probably the boldest thing in the press release was how profusely it thanked the Biden-Harris Administration. I’m sure it was to score political points, but I’m not sure linking the administration to one more disaster helps. Then again, with Afghanistan, the southern border crisis, unconstitutional mandates, out of control spending and money printing, eviction moratorium that Biden admitted was probably unconstitutional when he signed it, inflation, and, well, you get the point. What’s one more disaster to this administration?

My favorite part of the press release is the following line:

In addition to expanded hours and incentivized reservation priority, the ports urge terminals and the trucking community to consider other corrective measures.

In other words, see what you can come up with, terminals and truckers. The initial draft probably said it that way but replaced the “tr” with an “f”.

It makes you think the experts are probably right with their predictions that this congestion will last well into 2022.

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FMC & DOT Intensify International Shipping Probe… So They Say https://www.universalcargo.com/fmc-dot-intensify-international-shipping-probe-so-they-say/ https://www.universalcargo.com/fmc-dot-intensify-international-shipping-probe-so-they-say/#respond Thu, 16 Sep 2021 22:43:20 +0000 https://www.universalcargo.com/?p=10477 Right now, there are a few governmental moves concerning international shipping that should pique U.S. shippers' interest.

First, the Federal Maritime Commission (FMC) voted to proceed with two initiatives related to detention and demurrage fees. Second (though first chronologically), the commission announced the membership of its new Shipper Advisory Committee, which "will advise the Commission on policies relating to the competitiveness, reliability, integrity, and fairness of the international ocean freight delivery system."

Third, the Department of Transportation (DOT) is looking to hear from the public on problems in the supply chain as it makes a report in response to President Biden's executive order that specifically mentioned the international shipping industry.

Shippers make a bevy of complaints about unfair practices in the international shipping industry. For years, unfair demurrage and detention fees have been at or near the top of the list of shippers' complaints. Every once in a while, the Federal Maritime Commission makes some noise about looking into or doing something about these unfair fees. Unfortunately, it has added up to little more than noise.

Lately, the FMC, Biden Administration, Congress, Department of Justice (DOJ), and the DOT have added a little pressure to the international shipping industry – with the industry's complained-about fees, soaring freight rates, and competition-shrinking carrier alliances.

Go to Universal Cargo's blog to get into the three governmental moves that could give shippers some hope that the problems they face in the international shipping industry will eventually be addressed (maybe).

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Right now, there are a few governmental moves concerning international shipping that should pique U.S. shippers’ interest.

First, the Federal Maritime Commission (FMC) voted to proceed with two initiatives related to detention and demurrage fees. Second (though first chronologically), the commission announced the membership of its new Shipper Advisory Committee, which “will advise the Commission on policies relating to the competitiveness, reliability, integrity, and fairness of the international ocean freight delivery system.”

Third, the Department of Transportation (DOT) is looking to hear from the public on problems in the supply chain as it makes a report in response to President Biden’s executive order that specifically mentioned the international shipping industry.

Background

Shippers make a bevy of complaints about unfair practices in the international shipping industry. For years, unfair demurrage and detention fees have been at or near the top of the list of shippers’ complaints. Every once in a while, the Federal Maritime Commission makes some noise about looking into or doing something about these unfair fees. Unfortunately, it has added up to little more than noise.

Lately, the FMC, Biden Administration, Congress, Department of Justice (DOJ), and the DOT have added a little pressure to the international shipping industry – with the industry’s complained-about fees, soaring freight rates, and competition-shrinking carrier alliances. Here are a some recent related stories:

FMC & Chinese Regulators Address Ocean Carriers About Freight Rates

FMC Ups Reporting Requirements on Carrier Alliances

U.S. Importer Files Carrier Collusion Complaint with FMC

Is the Government Going After Carrier Alliances?

Could Biden’s Executive Order Endanger Carrier Alliances?

Now let’s get into the three governmental moves that could give shippers some hope that the problems they face in the international shipping industry will eventually be addressed. Maybe.

1. FMC’s Demurrage and Detention Initiatives

The FMC issued a press release yesterday (September 15th), announcing two initiatives, which were moved forward by vote:

The first initiative is to issue a policy statement on issues that affect the ability of shippers, truckers, and others to obtain reparations for conduct that violates the Shipping Act, including conduct related to demurrage and detention.

So the first initiative is to issue a policy statement. It’s not a policy statement itself, just that one is coming. They’re saying the FMC is on the case, and we’ll come up with something soon. Bold words.

Here’s the second initiative:

Additionally, the Commission in due course will issue an Advance Notice of Proposed Rulemaking (ANPRM) that will solicit public comments on two questions: first, whether the Commission should require ocean common carriers and marine terminal operators (MTOs) to include certain minimum information on or with demurrage and detention billings; and second, whether the Commission should require carriers and marine terminal operators to adhere to certain practices regarding the timing of demurrage and detention billings.

I love that this initiative opens with “in due course.” That always makes you feel like things will be happening imminently. This initiative isn’t even in due course, we’ll set this policy. No, this is, in due course, we’ll let the public submit opinions about whether or not we should set policy on these issues.

The press release isn’t long, so here’s its full text:

FMC to Issue Guidance on Complaint Proceedings and Seek Comments on Demurrage and Detention Billings

Posted September 15, 2021

The Federal Maritime Commission has voted to move forward with two demurrage-and-detention related initiatives proposed by Commissioner Rebecca F. Dye as part of Fact Finding 29. Unlike Commissioner Dye’s other Interim Recommendations, these initiatives required formal Commission approval.

The first initiative is to issue a policy statement on issues that affect the ability of shippers, truckers, and others to obtain reparations for conduct that violates the Shipping Act, including conduct related to demurrage and detention. The policy statement will provide guidance on the scope of the prohibition against carrier retaliation, when attorney fees may be imposed on a non-prevailing party, and who may file a complaint with the Commission alleging unreasonable conduct.

Additionally, the Commission in due course will issue an Advance Notice of Proposed Rulemaking (ANPRM) that will solicit public comments on two questions: first, whether the Commission should require ocean common carriers and marine terminal operators (MTOs) to include certain minimum information on or with demurrage and detention billings; and second, whether the Commission should require carriers and marine terminal operators to adhere to certain practices regarding the timing of demurrage and detention billings.

The Commission has also moved forward with other recommendations from FF29, including hiring additional staff for CADRS, including one person who will be designated as the agency’s exporter advocate. The Commission will make announcements related to other recommendations as developments warrant.

2. FMC Announces National Shipper Advisory Committee Membership

This next announcement from the FMC came from a press release published last week (on September 9th).

The FMC has officially announced who the members are of its newly formed National Shipper Advisory Committee.

“The Committee is comprised of 24 members,” the FMC said, “evenly divided between those who export cargo from and those who import cargo to the United States, that will advise the Commission on policies relating to the competitiveness, reliability, integrity, and fairness of the international ocean freight delivery system.”

The list has representatives from big U.S. shipping companies you’d expect, such as Walmart, Target, and Amazon. Amazon actually operates its own ships rather than solely depending on ocean freight carriers, like other U.S. importers and exporters, making the company’s an interesting voice in the group. With as poorly as U.S. agricultural exporters have been treated during the pandemic, it’s good to see they have a couple representatives on the list, one from American Commodity Company and another from Tyson Foods.

Here’s the full list:

  • Committee members will serve until December 31, 2024.
  • Michael Brock, Walmart
  • Brian Bumpass, Brenntag North America, Inc.
  • Justin Cauley, CHS, Inc.
  • Robert Connor, Mallory Alexander International Logistics, LLC
  • Chris Crutchfield, American Commodity Company
  • Rick DiMaio, Office Depot
  • John Esborn, Wayfair, LLC
  • Scott Fremont, Target
  • Sean Healy, The Scoular Company
  • Steven Hughes, MEMA/Auto Care Association
  • Alexis Jacobson, BOSSCO Trading LLC
  • Fernando Lagonell, DuPont
  • Alison Leavitt, Wine and Spirts Shippers Association
  • Daniel Miller, Cargill Incorporated
  • Debb Minskey, IKEA
  • Jennifer Morrissey, Ocean Spray Cranberries, Inc.
  • Kenneth O’Brien, Gemini Shippers Group
  • Adnan Qadri, Amazon
  • Richard Roche, Mohawk Global Logistics
  • Gabriel Rodriguez, A Customs Brokerage, Inc.
  • Randy Strait, Tyson Foods
  • Michael Symonanis, Louis Dreyfus
  • Joshua Woods, Blue Diamond Growers

3. DOT is Probing… Soon… Probably

Finally, we get to the DOT. And in typical governmental style, it has announced it plans to seek public opinion pertaining to supply chain problems for a report that it also plans to write.

No, the announcement here is not that it is asking for public opinion, let alone has written a report, on supply issues. The news is the DOT plans to do these things.

Michael Angell reports in the Journal of Commerce (JOC):

The DOT said in a regulatory filing Tuesday that it plans to seek input from the public to prepare a report on problems related to the US supply chain. The DOT said the report aims to provide input for President Joe Biden’s February executive order on how US supply chains can be made more resilient.

The DOT said it is seeking comments on “operational bottlenecks and chokepoints” that are slowing the movement of freight, whether shortages in equipment and warehousing are exacerbating those problems, and what the best solutions might be.

Of course, a report is still not actually taking action on an issue. It’s a step toward it. And we’re a step closer to that report. Well, we’re a step closer to an actual step toward that report. Kind of. There has definitely been an announcement made.

Conclusion

The government is doing what it does best. It’s making some noise about a long-standing issue while we all wait to see when it takes action. If it takes action. When and if it does take action, the next questions will be if that action is the correct action to take, if it is effective in creating change, and whether the change it does make will actually prove positive.

But we don’t need to worry about those questions for quite some time. In the meantime, shippers will do the best they can importing and exporting goods. At least you’ve always got Universal Cargo by your side.

Click Here for Free Freight Rate Pricing

“DOT has heard from many stakeholders about issues related to bottlenecks on highways, rail, and at ports, as well as severe container/chassis shortages and lack of adequate warehousing capacity, particularly around the nation’s largest ports,” the agency said in its filing.

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Devin Burke Gets Inside Scoop from Port of L.A. https://www.universalcargo.com/devin-burke-gets-inside-scoop-from-port-of-l-a/ https://www.universalcargo.com/devin-burke-gets-inside-scoop-from-port-of-l-a/#respond Tue, 14 Sep 2021 23:19:48 +0000 https://www.universalcargo.com/?p=10475 Let’s talk rail and what’s happening with getting shipping containers out of the Port of Los Angeles, so your goods can get to your businesses around the U.S. Universal Cargo’s CEO Devin Burke had a conference call with the Port of L.A. yesterday (September 13th). During the meeting, he got some good intel. from the […]

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Let’s talk rail and what’s happening with getting shipping containers out of the Port of Los Angeles, so your goods can get to your businesses around the U.S. Universal Cargo’s CEO Devin Burke had a conference call with the Port of L.A. yesterday (September 13th). During the meeting, he got some good intel. from the port on this topic.

First, let’s get some background.

Background

The international shipping industry is in the thick of peak season when, in preparation for the holiday shopping season, more goods are imported to the U.S., especially from China, than any time of the year. Unfortunately, with a deluge of cargo volume over the last year, Covid restrictions having limited operations, poorly placed equipment – including shipping containers – around the world, and other factors, U.S. ports were already suffering major congestion problems before the peak season even started. Add to that serious U.S. rail congestion and trucker shortages, and shippers are facing major delays in getting their goods on top of often being hit with demurrage and detention fees, all while paying record freight rates. Last month, freight rates reached prices over 500% higher year-on-year for imports from Asia to the U.S. West Coast.

We often focus on the ocean shipping aspect of the importing and exporting process in this blog. However, Universal Cargo not only handles port to port shipping for U.S. importers and exporters but door to door as well. That means rail is a major concern and challenge that our customers care about. Intermodal shipping is not getting any easier for shippers before and/or after the ocean (or air) portion of the importing or exporting process.

On top of rail congestion around the U.S., rail prices have also surged. Just one example of the rail rate hikes we’ve seen over the last year happened last month when Union Pacific Railroad made the move to “raise its surcharge on low-volume shippers out of California from $3,000 to $5,000 per container on loads that exceed contracted volume, effective Aug. 8,” as reported by Ari Ashe in a Journal of Commerce (JOC) article.

Port of L.A. Holding Containers

You’d think as congested as the Port of Los Angeles and the U.S. rails have been, that the port would be sending shipping containers out on the trains as fast as possible. Well, not exactly.

After his conference call with the Port of L.A., Burke said, “I learned that in the past few months, to help organize the chaotic situation with the rail, the port has decided to stop sending out containers bound for a specific destination (like Memphis, Chicago, Dallas, etc.) in piecemeal – or, as they call it, “partial trains” – whereby they only send 10-20 containers at a time. But, instead, they are waiting for a full train.”

Locomotive Engineer James Moe said a very typical car length for a modern train can haul 240 containers. Longer trains also exist.

Burke continued, “So when [the ports] do this, they can better measure and track where all containers are and what their accurate ETA is at destination. The downside, of course, is most containers will certainly experience delays waiting for a full train.”

Perhaps this strategy does end up being more efficient for the port than sending partial trains, but most shippers probably won’t want to hear about one more way their cargo could be held up. If, ultimately, this strategy helps ease the congestion at ports, it may be worth it to many shippers. If you’re holding your breath for that, though, you probably shouldn’t.

End in Sight for Congestion?

A question on many shippers’ minds is when will this interminable congestion at the ports end? Burke’s conversation with the Port of L.A. did not provide the most optimism on that front.

“They don’t see any break in the logjam in L.A. at least through November,” Burke shared, “with an average of 20 ships arriving every day and about the same leaving.”

Relief could start coming quickly after that. The port representatives told Burke, “There is an expectation that volume should drop off after Thanksgiving, and that could cause some catching up to happen as far as loosening the logjam both overseas and here. But no one can see any drop at this point in time.” Thus, maybe we could see things finally cleaned up a bit early in 2022. Maybe.

But then our problems could start up again not too long after that.

As previously discussed in Universal Cargo’s blog, when all this congestion is finally cleaned up, there’s another danger on the horizon. The International Longshore & Warehouse Union’s (ILWU) master contract is set to expire next year. It seems like every time this happens, negotiations for a new contract get contentious, and shippers have to pay the price with bad congestion at the ports. We’ve given 3 strategies for shippers to protect themselves from this possible disruption.

Retailers Chartering Ships Not Bypassing Carriers

I’ve been writing a bit about big shippers/retailers chartering their own ships in the face of the supply chain problems of exorbitant freight rates, difficulty getting space on voyages, and carriers not meeting BCO’s contracted volumes. While retailers bypass the spot market (though not necessarily paying less per container) and competition for ship space by chartering ships dedicated solely to their goods, they’re not really bypassing the major carriers.

Rather than chartering from independent ship owners, as I’ve assumed some of these big shippers were probably doing, the retail giants seem to be chartering from the major carriers. Carriers also often operate port terminals, bringing up the question of whether their customers who are chartering whole ships might get preferential treatment at the ports.

Burke said, from his meeting with the port, that “according to what anybody knew, they didn’t expect preferential treatment of the chartered vessels coming in by Walmart, Home Depot , etc. as far as unloading and finding chassis; however, it was suspected that depending upon the actual carrier doing the chartering (Maersk, MSC, CMA, etc.) that some customers, like Walmart, would most likely be getting some favors.”

Click Here for Free Freight Rate Pricing

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Big Shipping Trend – Retailers Book Their Own Ships https://www.universalcargo.com/big-shipping-trend-retailers-book-their-own-ships/ https://www.universalcargo.com/big-shipping-trend-retailers-book-their-own-ships/#respond Thu, 09 Sep 2021 23:34:40 +0000 https://www.universalcargo.com/?p=10474 It's officially a trend. Shippers are chartering ships to exclusively carry their goods.

We're not talking about just any shippers, of course. Big retailers, beneficial cargo owners (BCOs) who import goods in large enough quantities to contract directly with ocean freight carriers, are going around those carriers by paying for whole ships to exclusively transport their goods.

We first saw this back June with Home Depot. The story broke that Home Depot reserved a ship for its sole use, and I asked if this could become a trend that could disrupt the international shipping business.

I wrote at that time, "If your Best Buys, Walmarts, and Targets of the world decided to move away from the carriers with large quantities of their goods being sailed on ships of their own, carriers would feel the impact. To induce shippers to keep more goods with them, carriers would need to improve upon the rates and reliability/service they offer."

Those other big U.S. retailers have decided to make similar moves to Home Depot's. Not all of them, of course, but just a little over a week ago, I wrote about Dollar Tree – a top-5 U.S. importer – entering into a 3-year contract for a large vessel to carry its goods in response to the negative impacts of the high freight rates we've seen in international shipping over the last year-plus.

Find out what other retailers are doing it by reading the full post in Universal Cargo's blog.

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It’s officially a trend. Shippers are chartering ships to exclusively carry their goods.

We’re not talking about just any shippers, of course. Big retailers, beneficial cargo owners (BCOs) like Frisco Movers who import goods in large enough quantities to contract directly with ocean freight carriers, are going around those carriers by paying for whole ships to exclusively transport their goods.

Home Depot

We first saw this back June with Home Depot. The story broke that Home Depot reserved a ship for its sole use, and I asked if this could become a trend that could disrupt the international shipping business.

I wrote at that time, “If your Best Buys, Walmarts, and Targets of the world decided to move away from the carriers with large quantities of their goods being sailed on ships of their own, carriers would feel the impact. To induce shippers to keep more goods with them, carriers would need to improve upon the rates and reliability/service they offer.”

Large Shipper Importer Dollar Tree
Dollar Tree picture by Michael Rivera.

Dollar Tree

Those other big U.S. retailers have decided to make similar moves to Home Depot’s. Not all of them, of course, but just a little over a week ago, I wrote about Dollar Tree – a top-5 U.S. importer – entering into a 3-year contract for a large vessel to carry its goods in response to the negative impacts of the high freight rates we’ve seen in international shipping over the last year-plus.

I, of course, pointed out that the move was similar to Home Depot’s. In fact, as Dollar Tree seemed to be taking it further than Home Depot, I wrote, “With Dollar Tree saying it will continue to add more ocean charters this year, this is looking like something that could become a trend.”

Walmart

You need more for a trend? Add Walmart to the list. Jonathan Boonzaier reports in an article published by Trade Winds:

US retail giant Walmart has revealed that it has chartered in vessels to mitigate supply chain issues that are threatening its supply of goods.

Ikea

I’ve heard rumors that Target too was joining this trend; however, I’ve been unable to find any official confirmation. I did, however, find confirmation in an NBC News article by Leticia Miranda that Ikea joined the trend:

Ikea confirmed to NBC News it is also shipping goods over private vessels, along with purchasing its own shipping containers, another costly and unusual move brought about by short supply.

Not Just Ships

The last nugget of information in that last quote is significant. Carriers have pointed to shipping container shortages as one of the disruptive problems the international shipping industry has faced over the last year. Because shipping containers are not positioned in the proper places around the world – and particularly in Asia – carriers have done things like deny containers and service to U.S. exporters, and U.S. agricultural exporters in particular, in order to get the containers back over on the more lucrative shipping routes like eastbound transpacific.

However, that container shortage was largely caused, in the first place, by the hundreds of blanked (cancelled) sailings carriers did in the early days of the pandemic. With three carrier alliances dominating all of ocean shipping, carriers were able to cooperatively reduce capacity when experts were predicting the pandemic would reduce demand and result in billion dollar losses for carriers. Demand did initially drop, but nothing close to the level to which carriers reduced capacity. Then demand surged with shipping containers out of place all around the world.

Companies buying their own shipping containers protects them from one possible disruption in the supply chain. If you can’t get a shipping container for your goods – something many businesses have struggled with over the last year – you can’t ship them. Not a problem when you have your own containers. It’s the same concept as chartering your own vessels to protect your business from the disruption many shippers have faced over the last year of not being able to get space on carriers’ ships.

Looking to the Future

Many see this move of chartering ships as a short term one. But is it? Dollar Tree entered a 3-year contract and said it’s looking at getting more ships. Amazon already operates ships itself, and has been doing so for a while.

This ship-chartering trend is an obvious reaction to the incredibly high freight rates and frustratingly low reliability coming from carriers. But how will it affect carriers. Will the lost business be enough to cause freight rates to lower and service levels to increase? Will the trend even continue to grow or will it be a handful of major retailers doing what they can during this difficult moment for importing goods.

Smaller shippers certainly can’t afford to get their own ships, but if rates and services improve, that would certainly be good news for them. Perhaps the larger shippers might even start selling space on their ships to improve profits, creating more competition in an industry where competition has sadly been shrinking for years.

One thing is certain. At Universal Cargo, we’ll be watching what happens with this trend and how it affects the industry. You can be sure we’ll talk about it more in the future, right here, in this blog.

Click Here for Free Freight Rate Pricing

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Dos and Don’ts for Getting Published in Universal Cargo’s Blog https://www.universalcargo.com/dos-and-donts-for-getting-published-in-universal-cargos-blog/ https://www.universalcargo.com/dos-and-donts-for-getting-published-in-universal-cargos-blog/#respond Tue, 07 Sep 2021 22:29:51 +0000 https://www.universalcargo.com/?p=10473 It's been a few years since we published guidelines and a video for getting published in Universal Cargo's blog, and it's high time for an update.

I receive many email queries and submissions (sent to Jared@UniversalCargo.com) and have spent a lot of time explaining why certain topics wouldn't be a good fit for us or why a submission wasn't approved for publication. Thus, this post may be a bit self-serving in that it could save me time. However, if you heed the words of this post, it will also serve you in your attempts to get published in Universal Cargo's blog – and possibly elsewhere too!

Check out the full post in Universal Cargo's blog to find out the dos and don'ts about getting published there.

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It’s been a few years since we published guidelines and a video for getting published in Universal Cargo’s blog, and it’s high time for an update.

UC Blog

I receive many email queries and submissions (sent to Jared@UniversalCargo.com) and have spent a lot of time explaining why certain topics wouldn’t be a good fit for us or why a submission wasn’t approved for publication. Thus, this post may be a bit self-serving in that it could save me time. However, if you heed the words of this post, it will also serve you in your attempts to get published in Universal Cargo’s blog – and possibly elsewhere too!

Many hopefuls do get published in Universal Cargo’s blog. However, there are plenty who do not. Follow the dos and don’ts that follow if you want to be in the former group rather than the latter.

Dos

Do Follow All the Submission Guidelines

Universal Cargo’s submission guidelines have not changed. If you want to be published in our blog, your submission must be:

  • International Shipping Related
  • Original Content
  • Previously Unpublished
  • 500+ Words
  • Include an Author Bio

We have a short video explaining this:

YouTube Video

Do Reread, Rewrite, and Edit Your Work

Universal Cargo is only interested in publishing high quality articles. Submitting an article riddled grammatical and spelling errors is an easy way to get rejected. While I will do some editing to fix the occasional mistake that snuck through in an otherwise excellent article, a submission that is plagued by mistakes makes the author appear lazy, uneducated, and/or unprofessional. That’s not the way to get published anywhere.

I’m not here to rewrite your article for you. Take the time to read over your work and make sure it is at its best before you submit. I had a professor once who often said, “The world only wants your best.” He wasn’t wrong.

Do Read Previously Published Articles on the Same or Related Topics

Sometimes I have to reject an article that was well-written and follows all of Universal Cargo’s guidelines simply because it’s redundant. You can do a search on Universal Cargo’s website to bring up previously published posts on a topic. Make sure your article isn’t just rehashing things we’ve already covered in the blog.

If we have already published articles on your topic, that might be a good thing. That means we think the topic is sufficiently valuable to our readers for us to blog about it. If we have covered the topic, just make sure your article goes into more depth or has something new to say about it.

Do Be Accurate

I’ve rejected many submissions over the years for making statements about international shipping that are wrong. Make sure the information in your article is clear and correct.

Write For Our Target Market

Universal Cargo’s target market is U.S. businesses/businesspeople who import and/or export goods. The target market is not freight forwarders or other businesses that offer international shipping services. That’s what we do, and we post blogs for our customers and potential customers. If your article is not written for our target market, it won’t get published.

Don’ts

Don’t Submit Articles About Auto Shipping

Universal Cargo got away from shipping cars and other automobiles years ago. Please do not submit articles about shipping automobiles because they will just be rejected.

Don’t Submit Articles About International Moves

Universal Cargo helps businesses import and export goods. We do not ship household goods. Much like articles about auto shipping, articles about moving internationally will be rejected.

Don’t Plagiarize, Joe!

Yes, this is in our guidelines, but it’s worth emphasizing. Stealing someone else’s work is not only wrong, it is also illegal when it comes to copyrighted material, such as what you’d find in books, magazines, and websites.

You can’t simply paraphrase a published work and call it your own. It’s okay to research, paraphrase, and even quote from others’ works – just make sure you properly credit the original authors and where they were published.

Despite the current president of the United States history with it, plagiarism does not pay. We do plagiarism checks on submissions. If you are caught submitting plagiarized work, not only will your article be rejected, but we won’t consider other submissions from you in the future either.

Don’t Be Too General

Articles submitted to Universal Cargo should not be fluffy musings of general knowledge. Don’t submit articles that are nothing more than paragraphs of basic information.

If a reader could know everything in your article from scrolling through a Google search page on its topic, don’t expect your article to be published. What you write should provide actual value to our target market of U.S. importers and exporters.

Don’t Be Rude

I would think this would go without saying, but submission emails I’ve received have proven me wrong. Don’t be rude when submitting articles.

We’ve spent years building Universal Cargo’s blog into a recognized, respected, and high-Google-ranked source of information about the international shipping industry. We’re happy to give shippers, writers, and industry professionals the opportunity to share in the benefits of our hard work. Because we’ve opened our blog up to submissions does not mean you are entitled to be published in it.

When submitting work anywhere, you should always be polite. Why would any publisher, of a blog or anything else, want to publish someone who is rude in a situation where courtesy, if not gratitude, is called for?

Submit Now

To submit articles for publication consideration in Universal Cargo’s, email articles or queries to Jared@UniversalCargo.com.

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Carriers Defend Against Shipper’s Complaint to FMC https://www.universalcargo.com/carriers-defend-against-shippers-complaint-to-fmc/ https://www.universalcargo.com/carriers-defend-against-shippers-complaint-to-fmc/#respond Fri, 03 Sep 2021 00:27:10 +0000 https://www.universalcargo.com/?p=10471 At the beginning of August, we shared a story in Universal Cargo's blog about a U.S. shipper, MCS Industries, filing an official complaint with the Federal Maritime Commission (FMC) that accused Cosco Shipping and Mediterranean Shipping Company (MSC) of collusion. It's been widely stated as fact in the industry and its news outlets that shippers don't make such formal filings against carriers for fear of retaliation.

This case is worth watching because, depending on how the FMC handles it, there could be ramifications on the continuance of carrier alliances that now dominate international shipping. The FMC has threatened to put injunctions on vessel sharing agreements, which create carrier alliances, if the alliances are found to be violating the Shipping Act of 1984 that MCS claims MSC and Cosco violated.

Find out all about it by reading the full post in Universal Cargo's blog.

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At the beginning of August, we shared a story in Universal Cargo’s blog about a U.S. shipper, MCS Industries, filing an official complaint with the Federal Maritime Commission (FMC) that accused Cosco Shipping and Mediterranean Shipping Company (MSC) of collusion. It’s been widely stated as fact in the industry and its news outlets that shippers don’t make such formal filings against carriers for fear of retaliation.

For more about the complaint, you can click here to go back to that original blog post.

Why Is This Case Important?

This case is worth watching because, depending on how the FMC handles it, there could be ramifications on the continuance of carrier alliances that now dominate international shipping. The FMC has threatened to put injunctions on vessel sharing agreements, which create carrier alliances, if the alliances are found to be violating the Shipping Act of 1984 that MCS claims MSC and Cosco violated.

Since the failed P3 Network began the trend of carrier alliances in ocean shipping, in 2013, I’ve considered these alliances as a shrinking of competition in the industry. I’ve argued for years that shrinking of competition through carrier alliances would be bad for shippers – and mean higher freight rates – in the long run. Unfortunately, I’ve never seen enough from the FMC to make me think the commission was likely to shut down or significantly restrict these alliances.

In its complaint, MCS Industries claimed that MSC only honored about a third of the volumes contracted with the shipper, and Cosco delivered only 1.6 percent of contracted capacity. Then, MCS claimed, for the current year, the two ocean freight carriers “collectively refused to provide MCS sufficient commitments in their advance service contracts, instead providing only a fraction of the space MCS needed at substantially higher prices…”

However, with President Biden’s executive order announcing his administration’s antitrust push specifically bringing up international shipping’s carrier alliances along with the FMC and DOJ looking at carriers for Shipping Act violations while Congress is considering a massive rewrite of the Shipping Act of 1984, carrier alliances do appear to be facing more danger of being shut down than ever before.

Thus, they’re not going to take accusations of collusion and Shipping Act violations lying down. MSC and Cosco have filed responses to MCS’s accusations, and they’re not holding back. With the billions carriers have been making, you know they can afford the best lawyers money can buy to respond.

Cosco filed a 13-page official response with FMC while and MSC filed a 20-page official response.

Cosco’s Response

Cosco’s defense starts by claiming that MSC fails to state a claim for which relief can even be granted:

At its core, the Complaint centers on MCS’s claim that CSL has breached the service contract between it and MCS. However, neither the facts pled in the Complaint nor the text of the contract itself support such a claim. The contract’s duration runs from January 1, 2021 through April 30, 2022, and CSL’s service commitment requires it to carry 500 MCS TEUs. There are no monthly or quarterly carriage requirements. To date, CSL has carried approximately 92 MCS TEUs; eight months remain as of the time of filing this answer to complete CSL’s service commitment requirement.

On top of that, Cosco claims the FMC doesn’t have the subject matter jurisdiction under the Shipping Act, quoting it as saying, “the exclusive remedy for a breach of a service contract is an action in an appropriate court.”

After that, the gloves really come off. Cosco calls the regulatory claims made by MCS “bogus.”

“…MCS’s non-specific assertion that CSL discriminated against MCS in favor of other shippers in connection with its service contract lacks any alleged proof, and is absolutely false,” Cosco says. Then they add that even if MCS’s accusations were true, the’d fail to meet a legitimate claim under the Shipping Act of 1984 as it’s currently drafted.

Repeatedly, Cosco points to MCS’s accusations as untrue.

“Moreover, MCS ‘s allegations that CSL colluded with other carriers to drive up freight rates, that it created artificial scarcity, that it unjustly and unreasonably exploited customers, and that it refused to negotiate with MCS are completely and utterly false,” Cosco claims.

Cosco points at congestion and carriers inability to keep up with demand being triggered by unforeseen, record growth in U.S. imports and shoreside COVID restrictions. Cosco says it “has not colluded with any other carriers to drive up freight rates, nor has it created artificial scarcity. Rather, COSCO has been working intensively with shipper customers to provide the highest levels of service quality and quantity under extraordinary circumstances.”

Cosco goes so far as to say, in Fall of 2020, it reopened negotiations of existing service contracts with MCS to increase the number of containers shipped from Qingdao to the U.S., “despite MCS’ poor track record of contract performance in past years.”

Then Cosco really goes after MCS’s claim the carrier only delivered 1.6% of contracted capacity in May through July of 2021 as “a false statement of material fact to the tribunal.”

“As the actual records will show,” Cosco claims, “MCS did not confirm any bookings with CSL [COSCO SHIPPING LINES CO., LTD.] during the month of June 2021 at any origination ports customarily used by MCS to present its containers to CSL for carriage, and even failed to utilize all space offered and confirmed to MCS in July 2021.”

MSC’s Response

MSC Joanna
MSC Joanna – photo by Alf van Beem

MSC answers MCS’s allegations in 60 numbered paragraphs to begin before laying out 9 points of defense. The paragraphs give details and make a number of similar statements to the ones I highlighted above from Cosco. Thus, I’ll skip to their list of defenses against MCS’s filed complaint:

1. The Commission lacks jurisdiction over this matter because Complainant’s claims arise out of the Ocean Carrier Agreement between MSC and the Complainant, and are subject to arbitration in New York.

2. Complainant fails to state a claim upon which relief can be granted.

3. Complainant’s claims are barred in whole or in part because any damages Complainant allegedly incurred resulted from its own inaction, negligence or other fault.

4. Any alleged damages sustained by the Complainant were proximately, directly, and solely caused by the acts of third persons over whom MSC had and has no direction or control.

5. Complainant’s claims are barred in whole or in part by the doctrines of waiver, estoppel, and/or laches.

6. Any alleged nonperformance of the contract or violations alleged herein were excused by force majeure and MSC is not responsible for damages resulting therefrom.

7. MSC’s practices were neither unjust nor unreasonable.

8. MSC reserves any jurisdictional defenses or rights to arbitrate or proceed in another forum.

9. MSC reserves the right to amend this Verified Answer to raise any additional defenses or affirmative defenses that may arise in the course of this proceeding.

Conclusion

Obviously, this has all the makings to be a bitter battle between MCS and the carriers, MSC and Cosco, the shipper makes claims against.

It’ll be interesting to see if MCS’s case makes other shippers more likely to bring forward claims themselves or be reaffirmed in their fear of retaliation. Probably more interesting will be if any of the accusations stick, and the FMC decides there is justification to bring injunctions against any vessel sharing agreements.

It’s important to note, MSC and Cosco are in separate alliances. MSC is part of the 2M Alliance while Cosco is part of the Ocean Alliance. Assuming the FMC is decided to have the jurisdiction for this complaint and decides collusion or other Shipping Act violations exist, would these carriers be punished completely individually or would both of their alliances face injuction?

I’ll be keeping an eye on this case and its ramifications for the international shipping industry. And where else would I write about it all than here in Universal Cargo’s blog?

Click Here for Free Freight Rate Pricing

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Dollar Tree Exemplifies Losses Shippers Facing & Solutions https://www.universalcargo.com/what-to-do-about-these-sky-high-freight-rates/ https://www.universalcargo.com/what-to-do-about-these-sky-high-freight-rates/#respond Tue, 31 Aug 2021 23:20:48 +0000 https://www.universalcargo.com/?p=10468 It feels like we've been talking about the international shipping industry's sky-high freight rates non-stop for the last year and a half. With freight rates breaking record after record over that time, there's good reason. Just over a week ago, Freightos posted the following information of what ocean freight rates currently look like:

Asia-US West Coast prices are at $18,425/FEU, a 50% gain since a month ago. This rate is 503% higher than the same time last year.

Asia-US East Coast prices are at $19,943/FEU, a 30% increase in the last four weeks and 475% higher than rates for this week last year.

Paying around five times as much to import goods than it cost a year ago, when freight rates were already high, is an incredible toll on shippers. Some businesses can't afford it at all. Some are taking losses as they try to power through this difficult period. Some have sought alternative sourcing, but if they're still importing, rates aren't cheap. Some have sought domestic sourcing to avoid importing goods altogether. Some have even had to cease operations.

Read the full post in Universal Cargo's blog to see details about the negative impact these high freight rates have had on Dollar Tree, what they did about it, and what you can do about it to help your business.

The post Dollar Tree Exemplifies Losses Shippers Facing & Solutions appeared first on Universal Cargo.

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It feels like we’ve been talking about the international shipping industry’s sky-high freight rates non-stop for the last year and a half. With freight rates breaking record after record over that time, there’s good reason. Just over a week ago, Freightos posted the following information of what ocean freight rates currently look like:

Asia-US West Coast prices are at $18,425/FEU, a 50% gain since a month ago. This rate is 503% higher than the same time last year.

Asia-US East Coast prices are at $19,943/FEU, a 30% increase in the last four weeks and 475% higher than rates for this week last year.

Paying around five times as much to import goods than it cost a year ago, when freight rates were already high, is an incredible toll on shippers. Some businesses can’t afford it at all. Some are taking losses as they try to power through this difficult period. Some have sought alternative sourcing, but if they’re still importing, rates aren’t cheap. Some have sought domestic sourcing to avoid importing goods altogether. Some have even had to cease operations.

Case Study: Dollar Tree

Large Shipper Importer Dollar Tree
Dollar Tree picture by Michael Rivera.

Todd Maiden wrote an article for American Shipper about the negative impact these high freight rates have had on Dollar Tree:

Discount chain Dollar Tree reeled in its outlook for fiscal 2021, citing escalating freight costs as the reason….

Dollar Tree (NASDAQ: DLTR) said elevated transportation expenses will drag down full-year earnings by $1.50 to $1.60 per share compared to last year. The update assumes an additional freight spend of $185 million to $200 million (60 cents to 65 cents per share) above the prior forecast issued at the end of May.

The revised full-year EPS range of $5.40 to $5.60 is 7% lower (at the midpoint) than the quarter-ago guide and shy of the $5.65 recorded last year.

Keep in mind, last year was 2020 when lockdowns hurt retailers like Dollar Tree and stocks in general had tumbled.

Most of Universal Cargo’s readers are small to medium shippers, whereas, Dollar Tree is an extremely large shipper. In fact, Maiden reports, “Dollar Tree is a top-5 U.S. importer, bringing in approximately 90,000 forty-foot equivalent units annually.” Being a smaller shipper makes your business more vulnerable to these high freight rates than are the large shippers. However, Dollar Tree is more vulnerable than the average large shipper because of its lower price points; thus freight costs are a higher percentage of its gross merchandise margin, according to a quote from the company in the article.

Large Shippers’ Duress Directly Impacting Small to Medium Shippers

Often, smaller shippers think what’s happening with these larger shippers that are able to contract directly with ocean freight carriers doesn’t affect them. However, that’s not true. Those BCO [Beneficial Cargo Owner] contracts do have an impact on the spot market rates, within which small to medium shippers have to operate. Yet that’s nothing compared to the impact smaller shippers are feeling as a fallout from the relationships between BCOs and carriers right now.

Ocean freight carriers are not meeting their contractual obligations to BCOs. In fact, carriers are not even coming close. In this regard, the Dollar Tree example from Maiden’s article is kind of astounding:

At the end of its fiscal first quarter, the expectation was ocean carriers would honor approximately 85% of contractual commitments with Dollar Tree. That number is now likely to be closer to 60% to 65%.

Management said spot market rates have moved roughly 20% higher since the May update.

If Dollar Tree contracted all of its annual 90,000 FEUs, that would mean carriers’ failure or refusal to honor their contracts would flood 31,500 to 36,000 FEUs of cargo into the spot market. All those thousands of FEUs would now be competing directly with small to medium shippers’ cargo for space on sailings and help push the spot rates up.

There probably is a portion of Dollar Tree’s cargo that would have been in the spot market anyway, but obviously nowhere near the level we’re now seeing.

What Dollar Tree Is Doing About High Freight Rates & What You Can Do

Dollar Tree, being such a large shipper, has some options available to it that smaller shippers do not. Check this out from Maiden’s article:

Dollar Tree recently chartered dedicated space on container ships for the first time. It entered a three-year contract for “one large vessel,” which is expected to make its first voyage for the company in the next few weeks.

This is a similar move to one made by Home Depot back in June, when the company reserved a ship for its sole use. I asked at the time if this could become a trend that would disrupt the ocean shipping industry. With Dollar Tree saying it will continue to add more ocean charters this year, this is looking like something that could become a trend.

If more and more large shippers seek whole ships set aside for just their cargo, how will that affect BCO contracts with carriers? How will it affect the industry’s capacity? How will it affect carrier competition? How will it affect the spot market. It’s an interesting development to watch in the industry, especially because it could have significant implications for smaller shippers.

Of course, small to medium shippers probably can’t charter their own ships – unless maybe they start teaming up together to do so – but there is something Dollar Tree is doing to deal with these sky-high freight rates that smaller importers could do.

Maidend reports that Dollar Tree management said the company “will continue seeking new suppliers domestically as well as in other regions to minimize its exposure to the trans-Pacific trade lane.”

Universal Cargo has helped its clients make such moves in the past. We’ve helped customers make smooth transitions from importing from China to sourcing from other countries. Not only do we handle international shipping, but we also can take care of domestic shipping needs. Contact your account executive today.

Click Here for Free Freight Rate Pricing

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3 Ways To Protect Your Supply Chain from Likely ILWU Port Disruption https://www.universalcargo.com/3-ways-to-protect-your-supply-chain-from-likely-ilwu-port-disruption/ https://www.universalcargo.com/3-ways-to-protect-your-supply-chain-from-likely-ilwu-port-disruption/#respond Thu, 26 Aug 2021 22:45:42 +0000 https://www.universalcargo.com/?p=10465 In the last blog we talked about the very likely scenario that, with the master contract for the International Longshore & Warehouse Union (ILWU) expiring in less than a year, contract negotiations will turn ugly and result in costly disruption and congestion at West Coast ports for shippers. In fact, many are concerned that the fight over automation, paired with the ILWU wanting serious pay increases after seeing carriers make billions over the last year, will make 2022 contract negotiations as bad or worse than the contentious 2014-15 negotiations.

Most shippers need no reminders of the inability in 2015 to get their goods in time for the holiday shopping season, agricultural exports rotting on the docks, or the international contracts lost because cargo couldn't move through the ports. After all the port congestion, record high freight rates, and unfair demurrage and detention fees that have been experienced for months on end, the last thing shippers probably want to hear about is another disruptive event likely on the way to their supply chains. However, knowing about the risk now can help prepare for this possible disruption before it happens.

So what can shippers do to protect themselves from what could be contentious and disruptive labor negotiations on the West Coast?

Read the full post in Universal Cargo's blog to find out about three options to start exploring now to save your business significant loss later.

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In the last blog we talked about the very likely scenario that, with the master contract for the International Longshore & Warehouse Union (ILWU) expiring in less than a year, contract negotiations will turn ugly and result in costly disruption and congestion at West Coast ports for shippers. In fact, many are concerned that the fight over automation, paired with the ILWU wanting serious pay increases after seeing carriers make billions over the last year, will make 2022 contract negotiations as bad or worse than the contentious 2014-15 negotiations.

ILWU PMA meet about contract extension
Dockworker and shipping container

Most shippers need no reminders of the inability in 2015 to get their goods in time for the holiday shopping season, agricultural exports rotting on the docks, or the international contracts lost because cargo couldn’t move through the ports. After all the port congestion, record high freight rates, and unfair demurrage and detention fees that have been experienced for months on end, the last thing shippers probably want to hear about is another disruptive event likely on the way to their supply chains. However, knowing about the risk now can help prepare for this possible disruption before it happens.

So what can shippers do to protect themselves from what could be contentious and disruptive labor negotiations on the West Coast?

Here are three options to start exploring now to save your business significant loss later.

1. Explore East and Gulf Coast Routing

The most obvious solution for disruption at West Coast ports is to move cargo through East and/or Gulf Coast ports instead. Many shippers think they’ll just reroute cargo if disruption happens. I can’t emphasize enough that waiting for disruption to hit before considering other routes is a mistake.

If you wait for disruption to happen to do anything, you’ll experience the costly delays from the disruption and have to fight for space on alternate routes with every other shipper who is scrambling last minute.

Now is the time to start considering alternate routes. If you’re thinking of exporting or importing through, say, the Port of Savannah instead of the Port of Los Angeles, you’ll need to consider more than containership routes and services ocean freight carriers offer to and from Georgia Port Authority terminals. You’ll have to look at rail and trucking options to get your goods to or from the alternate port’s terminals.

Switching ports, especially from one coast to another, means major changes to your supply chain. It’s important to examine those changes as early as possible, knowing what service changes you’ll need, who offers those services, who is well experienced in those services, and what kind of rates they charge.

2. Import/Export Early

Many importers took this strategy when approaching the current peak season. U.S. ports have been suffering from congestion since before 2021 began. Retailers didn’t want to risk delays on imported cargo during the peak season preventing them from having goods ready and on the shelves for the upcoming holiday shopping seasons. Thus, they shipped early. It was a smart move.

While this peak season has been wrought with congestion, delays, and fees on top of incredibly high freight rates, next year’s peak season could be worse. Slowdowns, strikes, and lockouts are all possibilities next peak season, when shippers will need cargo flowing through the ports most. Getting ahead on stocking is a strong way to protect against this.

Now is not too soon to start analyzing and projecting what level of goods ordering you’ll need next year. Stocking ahead in the early part of 2022 will make your business less vulnerable to the potential disruption that lies ahead.

There may be a sweet spot a few months into 2022. Many experts are projecting freight rates to remain exceptionally high well into next year. March or April may be a time when those rates come down a bit, will give the ports some time to recover from their current heavily congested peak season, and beat the heated negotiations between the ILWU and the Pacific Maritime Association (PMA)

3. Consider Sourcing Change

I know, I know, we fear change. However, businesses should always be open to change in order to keep up with the times, meet costumer needs, and maximize profits. One thing to consider changing is your manufacturing source. Different manufacturing could help you avoid disruption at West Coast ports.

One route to consider is avoiding importing altogether. Are there domestic suppliers out there capable of handling your manufacturing needs? If you go with them, disruptions at the ports are not a worry.

Perhaps, if not all, some of your manufacturing could be done domestically. Testing out an American producer may be a wise move, and it could be an additional thing you’re proud of, knowing that’s one more way you’re supporting the U.S. economy. It could even be something you advertise, helping to increase your sales.

Many don’t realize this, but Universal Cargo can also help businesses with their domestic shipping, not just international shipping.

There are also other countries you could import from that don’t require using seaports at all. Our neighbors to the north and south, Canada and Mexico, respectively, may be viable options for your sourcing.

In fact, early last year, Universal Cargo published a whole article on importing from Mexico.

Of course, if you’re thinking about changing your supply chain in such a fundamental way as to acquire new sourcing, the sooner you get to work on this, the better.

Click Here for Free Freight Rate Pricing

 

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ILWU & PMA Likely Heading for Fight that Will Cost Shippers https://www.universalcargo.com/ilwu-pma-likely-heading-for-fight-that-will-cost-shippers/ https://www.universalcargo.com/ilwu-pma-likely-heading-for-fight-that-will-cost-shippers/#respond Wed, 25 Aug 2021 02:07:54 +0000 https://www.universalcargo.com/?p=10463 Their supply chains shaking and rattling, shippers wake up in cold sweats. If not dark, the horizon is hazy, impossible to see what lies ahead. But shippers know there's a contract expiration out there. And they dread it. Shippers can't help but hear a little voice in their heads, "Theeey're heeere." What's here? The poltergeists of the 2014-15 contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). As bad as that ghost is, as damaging as those 2014-15 negotiations were to shippers' businesses, shippers wonder, Will the next negotiations be worse?

Find out more by reading the full post in Universal Cargo's blog.

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Their supply chains shaking and rattling, shippers wake up in cold sweats. If not dark, the horizon is hazy, impossible to see what lies ahead. But shippers know there’s a contract expiration out there. And they dread it. Shippers can’t help but hear a little voice in their heads, “Theeey’re heeere.” What’s here? The poltergeists of the 2014-15 contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). As bad as that ghost is, as damaging as those 2014-15 negotiations were to shippers’ businesses, shippers wonder, Will the next negotiations be worse?

YouTube Video

Here We Go Again

We have entered into the final year of the current ILWU/PMA master contract, which will expire July 1st, 2022. Shippers often lobby, even beg, for these contract negotiations to start early, well before the current contract expires. However, the union tends to prefer holding off on earnest negotiations until the previous contract expires, so they can use the most powerful weapons in their arsenal for negotiation leverage: slowdowns, threats of strikes, and strikes.

ILWU PMA meet about contract extension

The ones who suffer the most for the use of these weapons, and lockouts from employers, are shippers. When the 2014-15 negotiations turned contentious, congestion gripped the West Coast ports. Retailers didn’t get goods in time to stock the shelves for the holiday shopping season, agricultural exporters could do nothing but watch as their produce rotted on the docks, international contracts were forever lost, and the economy suffered billions of dollars in losses.

Of course, we’re here in the middle of peak season, so why are we talking about a contract expiration that doesn’t take place until next peak season? The answer is because contentious contract negotiations can be so disruptive – and downright destructive – that shippers are smart planning ahead for how to deal with them. Many shippers are already doing so, worried even more about the transition from the current ILWU contract to the next than such transitions in years past, according to a Journal of Commerce (JOC) article by Peter Tirschwell:

The approaching expiration next July of the current US West Coast dockworker contract is prompting more than the usual amount of interest among shippers. This is due to the possibility that any disruption tied to the negotiations for a new contract could extend the paralysis that has consumed container shipping since last year. Several importers have already put contingency plans in place in the event of labor disruption on the West Coast docks, and some tell JOC.com they have already begun diverting cargo to East Coast ports.

It’s scary to think that after the last year of port congestion, record high freight rates, and supply chain disruption, we could be on our way to yet another disruptive, port congesting, cargo delaying event that can also stretch on for months and months. There are those who worry we’ll get little respite between the port congestion we’ve been seeing and the port congestion likely to come with the ILWU/PMA contract negotiations. The end result would be two years straight of incredibly difficult shipping conditions for importers and exporters.

Automation an Automatic Fight

The biggest issue that will likely cause these contract negotiations to be contentious is port automation. That should come as no surprise to anyone.

Both longshore unions, the ILWU on the West Coast and the ILA on the East and Gulf Coasts, have long fought against automation at the ports. That fight has caused automation and efficiency at U.S. ports to lag well behind many ports around the world. In fact, in a blog about how the pandemic did not cause the high freight rates we’ve been seeing (it acted more as a tipping point), Universal Cargo CEO Devin Burke was quoted as specifically pointing to the longshoremen unions “keeping ports (especially L.A.) very slow, cumbersome, and congested” as one of seven factors leading to the high freight rates shippers have been suffering through.

Despite the unions fighting against automation, some has come anyway. The progress of technology at the ports is ultimately inevitable because it is needed. The ILWU has been rewarded handsomely for what compromises it has made when it comes to automation. Tirschwell writes:

In recent years, ILWU members have become increasingly vocal in their opposition to terminal automation, seeing it as an existential threat despite having agreed in 2008 and in all subsequent contracts to allow automation at West Coast terminals. By the time the current agreement expires on July 1, 2022, the dockworkers will have received some $800 million in incremental wages and benefits in return for that concession.

The increasing opposition to automation mentioned above makes for a likely problem when it comes to negotiating the next contract. In fact, Tirschwell also writes:

Management sources tell JOC.com they anticipate the union will aggressively seek to roll back terminal operators’ rights to automate and thereby densify limited terminal acreage, especially at the ports of Los Angeles and Long Beach. The TraPac Los Angeles and Long Beach Container Terminal facilities have already been automated, APM Terminals automated a section of its Pier 400 terminal in Los Angeles, and the MSC-owned Total Terminals International (TTI) Long Beach has plans in the works for a 10-year automation project that the ILWU has claimed will result in “the destruction of jobs and maximum extraction of foreign profit.”

If things do get ugly with contract negotiations, shippers need to be ready. It’s not too soon to start planning. In the next blog, we’ll look at how shippers can protect themselves from this threat to their supply chains.

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Updates on the Port of Ningbo Terminal Closure https://www.universalcargo.com/updates-on-the-port-of-ningbo-terminal-closure/ https://www.universalcargo.com/updates-on-the-port-of-ningbo-terminal-closure/#respond Thu, 19 Aug 2021 19:38:47 +0000 https://www.universalcargo.com/?p=10457 The Port of Ningbo – the third busiest container port in the world – was supposedly going to start a phased reopening yesterday (Wednesday, August 18th) after its Meidong Container Terminal [also known as the Meishan Island International Container Terminal] was shut down over a week ago because of a single positive COVID test. However, it does not appear reopening began taking place Wednesday despite the fact that there have been no new COVID cases there.

Keith Wallis reported in the Journal of Commerce (JOC) on Monday (August 16th):

"Forwarders expect Ningbo’s shuttered Meidong container terminal to start a phased reopening on Wednesday with a resumption of full operations on September 1 after extensive rounds of testing by Ningbo health authorities showed no new cases of COVID-19."

However, Ji Siqi reported today (August 19th) in the South China Morning Post:

"Ningbo-Zhoushan Port said on Wednesday that it was preparing to restart operations at the Meishan terminal, without giving additional information. And on Thursday, an employee at the terminal who answered the Post’s call said there was no firm date for resuming service."

Find out more about this potentially very disruptive event to U.S. supply chains by reading the full post in Universal Cargo's blog.

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The Port of Ningbo – the third busiest container port in the world – was supposedly going to start a phased reopening yesterday (Wednesday, August 18th) after its Meidong Container Terminal [also known as the Meishan Island International Container Terminal] was shut down over a week ago because of a single positive COVID test. However, it does not appear reopening began taking place Wednesday despite the fact that there have been no new COVID cases there.

Port of Ningbo
Picture: Port of Ningbo by International Maritime Organization

Keith Wallis reported in the Journal of Commerce (JOC) on Monday (August 16th):

Forwarders expect Ningbo’s shuttered Meidong container terminal to start a phased reopening on Wednesday with a resumption of full operations on September 1 after extensive rounds of testing by Ningbo health authorities showed no new cases of COVID-19.

However, Ji Siqi reported today (August 19th) in the South China Morning Post:

Ningbo-Zhoushan Port said on Wednesday that it was preparing to restart operations at the Meishan terminal, without giving additional information. And on Thursday, an employee at the terminal who answered the Post’s call said there was no firm date for resuming service.

Optimism Over Level of Disruption

Congestion has obviously been building since the shutdown, but so far the impact of the shutdown has not been as disruptive as many in the industry feared. However, it should be noted that negative impacts from disruptive events like port closures have a rippling effect across the industry with the worst effects happening in the weeks even months after the initial disruptive event.

Belief is growing, however, that the results from the partial closure at the Port of Ningbo won’t be as bad as those from the partial shutdown of China’s Yantian Port, which was in response to a COVID-19 outbreak. Despite the fact that the partial closure of Yantian Port was from a Wuhan Coronavirus outbreak and the Port of Ningbo’s was from only a single positive test, they extremely similar situations.

One important reason the results of Ningbo’s shutdown seem like they’ll be less damaging for supply chains, especially those regarding U.S. importers, than the result of Yantian’s closure is a less disruptive response from ocean freight carriers. Keith Wallis wrote in his JOC article:

There were 41 vessels at anchor waiting for a berth Tuesday morning and the average number of weekly port calls to Ningbo fell 22% from nearly 188 container vessels to 146 last week, but the total nominal vessel capacity calling the port only dropped 7.8% to 572,052 twenty-foot equivalent units, project44, a supply chain visibility platform, said in a media bulletin. 

The reason is that the other four terminals at the port absorbed the inbound and outbound container traffic redirected from Meishan, which handles about a quarter of the port’s volume. Also, ocean carriers did not blank as many sailings as they did following the Yantian lockdown. 

Project44 said it recorded only 15 blank, or canceled, sailings to Ningbo on Tuesday, which is in line with the average number of voided sailings at the port to keep vessel routes on schedule.

Carriers are primarily diverting to other terminals rather than skipping the port entirely.

Pessimism Creeping Back In

Of course, a big factor in Yantian Port’s closure being so disruptive was how long it lasted. Yantian’s partial closure lingered on for over a month. If Ningbo’s return to full operation happens September 1st, the damage from it should be largely contained, not that it wouldn’t be felt across supply chains at all. It’s inevitable that many shippers will experience some delay and disruption. However, if the closure lingers on, as Siqi’s more recent article with a declaration from a terminal employee that no firm date for resuming services exists, the delays and disruption could be very significant.

Siqi shared the following outlook:

“If the port returns to full capacity before the end of August, we should be OK with only marginal delays and impacts,” said Akhil Nair, vice-president of global carrier management and ocean strategy at Seko Logistics.

With the best case scenario of full reopening happening on September 1st but uncertainty over that date, the worst case scenario of Yantian-like disruption remains a possibility.

Yantian’s partial shutdown was originally supposed to be extremely short and no big deal. And that was from an outbreak of cases rather than a single positive test. Despite China’s strict approach to COVID-19, you have to wonder if there is more going on at the Meidong terminal.

Let’s say your fear is high enough to shut down one of the world’s biggest container terminals over a single case of COVID-19. That person goes into quarantine, everyone else gets tested, and maybe you add even more cleaning to the already high COVID-19 protocols. With no other positive tests, you reopen, right?

It should take more than one positive test to justify closure of a major container terminal, especially for an extended period of time. China isn’t exactly known for its transparency, so if there is more than a single positive test that has happened or is happening at the Port of Ningbo, we probably won’t know what it is. We’ll probably just see its Meidong container terminal’s closure linger on, aggravating its impact on the international shipping industry.

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Single COVID Case Shuts Down Major Chinese Port Terminal https://www.universalcargo.com/single-covid-case-shuts-down-major-chinese-port-terminal/ https://www.universalcargo.com/single-covid-case-shuts-down-major-chinese-port-terminal/#respond Thu, 12 Aug 2021 19:32:19 +0000 https://www.universalcargo.com/?p=10454 Chinese authorities shut down a terminal at the third busiest container port in the world after a single positive COVID test. Yesterday, Eric Kulisch reported in American Shipper:

Chinese authorities on Wednesday closed a major container terminal at the Port of Ningbo after a dock worker tested positive for COVID, raising fears among traders that supply chain disruptions that occurred when Yantian terminal in Shenzhen reduced output by 70% for a month earlier this summer would be repeated.

All operations at the Ningbo Meidong Container Terminal, also referred to as the Meishan Terminal, were immediately suspended following the positive test results, according to local media reports and logistics operators.

Chinese authorities on Wednesday closed a major container terminal at the Port of Ningbo after a dock worker tested positive for COVID, raising fears among traders that supply chain disruptions that occurred when Yantian terminal in Shenzhen reduced output by 70% for a month earlier this summer would be repeated.

All operations at the Ningbo Meidong Container Terminal, also referred to as the Meishan Terminal, were immediately suspended following the positive test results, according to local media reports and logistics operators.

Kulisch points out in the article that the Meidong Container Terminal is one of five terminals at Ningbo, and its shutdown effectively eliminates 20% of the port's capacity.

Fin out more, including this shutdown's impact, by reading the full post in Universal Cargo's blog.

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Chinese authorities shut down a terminal at the third busiest container port in the world after a single positive COVID test. Yesterday, Eric Kulisch reported in American Shipper:

Chinese authorities on Wednesday closed a major container terminal at the Port of Ningbo after a dock worker tested positive for COVID, raising fears among traders that supply chain disruptions that occurred when Yantian terminal in Shenzhen reduced output by 70% for a month earlier this summer would be repeated.

All operations at the Ningbo Meidong Container Terminal, also referred to as the Meishan Terminal, were immediately suspended following the positive test results, according to local media reports and logistics operators.

Kulisch points out in the article that the Meidong Container Terminal is one of five terminals at Ningbo, and its shutdown effectively eliminates 20% of the port’s capacity.

Supply Chain Disruption

We’ve been talking about ocean freight carriers’ poor service (as freight rates have soared) a decent amount in Universal Cargo’s blog over the last year. The topic especially came up over the last couple weeks. On-time vessel arrivals from China to U.S. have been under 30%. I mentioned in the last blog, about the government going after carrier alliances, that carriers’ argue that exceptional circumstances from the pandemic and disruptions beyond their control to the supply chain are to blame for high rates and decreased reliability. As I said then, this argument should not be simply dismissed. This kind of disruption is beyond carriers’ control and does cause delays, not just at the Port of Ningbo but rippling through the supply chain. However, that does not mean carriers haven’t played a role in their own reliability issues as well. Frankly, ocean freight carriers have been notoriously unreliable and lacking in transparency long before the pandemic ever arrived.

Still, terminal shutdowns at major ports like this are disruptive events that there’s no way carriers could prevent. You don’t have to go back very far to see a similar situation have a serious impact on the world’s supply chains. In May, a partial shutdown at another busy Chinese port, Yantian, was supposed to be no big deal but turned into a majorly disruptive event as the partial shutdown lingered through June.

It wouldn’t take much for the partial shutdown at the Port of Ningbo to turn similarly disruptive as the one at Yantian Port. That exact topic is also covered in Kulisch’s American Shipper article:

“If something goes sideways in Ningbo, it’s going to be a real problem. At least as big, potentially, as what happened in Yantian,” a sea freight executive at a large logistics company said during a customer briefing American Shipper was privy to.

The freight forwarding division of C.H. Robinson told customers in an email notice to expect port delays and congestion.

Any lengthy closure could result in cargo diversion to other terminals and ports, putting a strain on their operations and exacerbating capacity challenges that have led to record shipping rates 10 times greater than normal for certain routes. 

Bad Timing

Especially worrying is the fact that we’re right in the middle of international shipping’s peak season when more cargo is shipped from China to the U.S. than any other time in the year. This year, we entered peak season with port congestion already a major problem at U.S. ports. Additional disruption right now is the last thing shippers need.

Many shippers got ahead of this, after a year of extremely poor reliability from carriers and backups in the supply chain, starting the peak season early to ensure their goods would be imported in time for the back to school and holiday shopping seasons. However, even many shippers who thought ahead thusly are still waiting through heavy delays and cargo rolling to receive their goods. Watching yet another potentially highly disruptive event hit the industry is the last thing they need.

Unfortunately, results of this terminal shutdown are already being felt, as reported in Reuters:

Shipping company CMA CGM (CMACG.UL) put out a note on Thursday saying that some vessels will be re-routed to Shanghai or skip port calls at Ningbo. Hapag-Lloyd HLAG.DE expects the suspension in Meidong to cause delays in some planned sailings, according to a company statement.

Ports in nearby Shanghai, where many vessels are being re-routed, are seeing the worst congestion in at least three years. About 30 vessels are queuing outside Yangshan port, a key container terminal in Shanghai, Refinitiv data showed.

Fear Over Reason

Part of what makes this terminal shutdown crazy is it’s the result of only one positive COVID test. China’s very restrictive approach to COVID shows that any port, no matter how big, is at risk of being shut down at any time. A full blown outbreak is shown not to be needed when a single positive COVID test shuts down one of the world’s busiest container terminals. Additionally, there are no reports to even suggest additional tests were administered to ensure the test wasn’t a false positive.

coronavirus

Fear over COVID has been pushed to a point that there are probably many thinking, Good. I’m glad the terminal was shut down over a single positive test. However, we can’t shut down the world over fear of this virus. It’s highly contagious, yes, but it’s also highly treatable, and for the majority of people who get it – even the Delta variant – they suffer mild to no symptoms. That’s not to diminish the losses of people’s lives to the virus. Every death to a virus is serious. Deaths to a virus that was likely enhanced in a lab so it could infect humans rather than existing this way naturally in the world are tragic.

Still, we can’t allow ourselves to continue to compound the negative effects of the pandemic because of fear and grief. After 2020, we’ve seen lockdowns are not effective in fighting COVID. For those who are doubtful because they’ve only heard the voices reinforcing fear and pushing more governmental control and restrictions of freedoms, studies from around the world come to similar conclusions as the one by Rabail Chaudhry, George Dranitsaris, Talha Mubashir, Justyna Bartoszko, and Sheila Riazi of EClinicalMedicine that states, “lockdowns and wide-spread COVID-19 testing were not associated with reductions in the number of critical cases or overall mortality.”

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Is the Government Going After Carrier Alliances? https://www.universalcargo.com/is-the-government-going-after-carrier-alliances/ https://www.universalcargo.com/is-the-government-going-after-carrier-alliances/#respond Tue, 10 Aug 2021 22:45:39 +0000 https://www.universalcargo.com/?p=10452 Today, we continue our look at governmental pressure on the international shipping industry. Having watched carrier competition shrink over the last decade until reaching the point we're at now, where only three carrier alliances dominate ocean freight shipping, we're seeing the shipping lines able to control capacity in the industry and push freight rates up. High demand over the last year has paired with that, helping freight rates soar to record highs.

While freight rates are so high, service from carriers is low. Over the last year, every time I've seen stats on carriers' vessel reliability for a month from maritime research firms like Sea Intelligence, on-time vessel performance from Asia to the U.S has been less than 30%. Shippers keep getting hit with detention and demurrage fees caused by factors well out of their control. Shippers have complained about this for years, but these unfair fees seem to have only gotten worse since the pandemic hit. Additionally, carriers have refused services and shipping containers to U.S. exporters, including agricultural exporters, to prioritize more profitable routes.

Shippers have been petitioning the government to step in, and the government has taken notice. In the last blog post, we looked at an executive order from President Biden announcing policy for a big antitrust push, which includes in the global container shipping industry. Today, we'll look at other moves being made by the government that could seriously impact carrier alliances, which if broken up could result in freight rates coming down for shippers, and the industry as a whole.

Read the full post in Universal Cargo's blog to find out about proposed reform to the Shipping Act of 1984 and the DOJ & FMC looking into carriers for possible Shipping Act violations.

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Today, we continue our look at governmental pressure on the international shipping industry. Having watched carrier competition shrink over the last decade until reaching the point we’re at now, where only three carrier alliances dominate ocean freight shipping, we’re seeing the shipping lines able to control capacity in the industry and push freight rates up. High demand over the last year has paired with that, helping freight rates soar to record highs.

While freight rates are so high, service from carriers is low. Over the last year, every time I’ve seen stats on carriers’ vessel reliability for a month from maritime research firms like Sea Intelligence, on-time vessel performance from Asia to the U.S has been less than 30%. Shippers keep getting hit with detention and demurrage fees caused by factors well out of their control. Shippers have complained about this for years, but these unfair fees seem to have only gotten worse since the pandemic hit. Additionally, carriers have refused services and shipping containers to U.S. exporters, including agricultural exporters, to prioritize more profitable routes.

Shippers have been petitioning the government to step in, and the government has taken notice. In the last blog post, we looked at an executive order from President Biden announcing policy for a big antitrust push, which includes in the global container shipping industry. Today, we’ll look at other moves being made by the government that could seriously impact carrier alliances, which if broken up could result in freight rates coming down for shippers, and the industry as a whole.

Rewriting the Shipping Act of 1984

We could see massive rewriting of U.S. legislation regarding international shipping. Last month, Mark Szakonyi and Peter Tirschwell wrote an excellent article in the Journal of Commerce (JOC) titled, “US regulators train sights on container shipping.”

The article brings up President Biden’s executive order, but it also states that “for the first time in more than 20 years, Congress is on track to rewrite the shipping law that gives the Federal Maritime Commission (FMC) its direction, powers, and purview.” This could actually be a bigger deal than the executive order, which – let’s face it – has a large scope and is still just one of many, many executive orders the president has signed.

Szakonyi and Tirschwell outline new legislation being proposed that addresses the unfair detention and demurrage complaints made by shippers and U.S. exporters’ claim that they are being discriminated against in favor of more profitable trade lanes for carriers:

So-called unreasonable detention and demurrage bills are a longstanding grievance of shippers, to the point that the National Industrial Transportation League (NITL) and the Agricultural Transportation Coalition (AgTC) have proposed legislative changes to shift the legal burden of proof in detention and demurrage billing from shippers to carriers. Language shifting that burden is part of a draft bill that envisions an upending of the current regulatory system and could be introduced before the August recess of Congress.

Although there is no guarantee the bill will pass in its current draft form, the initial salvo by Rep. John Garamendi, D-Calif., dubbed the Ocean Shipping Reform Act of 2021, would take US shipping law in a starkly different direction, reversing the deregulatory trajectory of the most recent shipping law rewrites in 1984 and 1998 by placing a heavy burden on ocean carriers and strengthening the oversight role of the FMC.

According to a draft of the bipartisan bill obtained by JOC.com, the new regulations would make it much more difficult for container lines to refuse to carry export cargo or prioritize repositioning of empties at the expense of ports. If passed into law, the bill would also prohibit carriers from collecting detention and demurrage fees in cases when “obstacles to cargo retrieval or return of equipment are… beyond the control of the invoiced or contracting party.”

In addition, it would go further than current law in barring unreasonable denial of service by a shipping line, saying a carrier “may not… fail to furnish or cause a contractor to fail to furnish the facilities and instrumentalities needed to perform the transportation services, including containers.”

Who knows if this Shipping Act reform will go through, especially as Congress seems less and less effective with the widening rift between our nation’s two main parties. That the bill is bipartisan certainly helps.

FMC & DOJ Looking at Carriers for Shipping Act Violations

The Shipping Act of 1984 doesn’t need to be rewritten or reformed for carriers and their alliances to find themselves in hot water with U.S. regulatory bodies. Both the FMC and the DOJ are focusing in on antitrust isuues, much like President Biden’s Executive Order on Promoting Competition in the American Economy talks about.

Szakonyi and Tirschwell write, “The FMC and the Justice Department on July 12 agreed to increase cooperation between the agencies on antitrust issues through a first-of-its-kind memorandum of understanding [MOU].”

I’ve written more than once over the last several months that I don’t know how much higher carriers could push freight rates without serious backlash from shippers and regulaators. Well, shippers have been complaining to the government, and anyone who’d listen, for sometime now. Finally, a large shipper filed a formal complaint with the FMC claiming caarrier collusion.

This claim is the exact sort of thing that could test the FMC and DOJ’s seriousness and cooperation in investigating carriers and their alliances for potential infractions of the Shipping Act. Szakonyi and Tirschwell’s article goes on to say:

The MOU could enable the FMC to get the DOJ’s perspective on whether it has enough of a case showing an existing agreement violates the Shipping Act of 1984 to seek a federal injunction from a judge, and potentially how such a case could be strengthened, according to a maritime attorney who asked not to be identified. The FMC has only sought an injunction once; in 2008, it pursued a preliminary injunction against the ports of Los Angeles and Long Beach Clean Truck Program. A federal court denied the injunction the following year.

Injunctions on carriers’ vessel sharing agreements are the exact thing that would break up carrier alliances. Based on the FMC’s history, I still don’t find it overly likely we’ll see the commission seek such injunctions. However, we may have reached the breaking point with freight rates and service in the industry that such action from the FMC, in conjunction with the DOJ, is possible with the Biden Administration’s antitrust push.

At the very least, the MOU does have the FMC auditing detention and demurrage fees leveraged by the big shipping lines – Cosco Shipping Group, CMA CGM, Evergreen, Hapag-Lloyd, HMM, Maersk, Mediterranean Shipping Co., Ocean Network Express, and Yang Ming – according to the JOC article:

A week after signing the agreement with DOJ, the FMC told the top nine container lines operating on US trades that the agency will immediately begin auditing how they bill customers for detention and demurrage. The newly formed Vessel-Operating Common Carrier Audit program will gauge whether additional storage fees that stem from an inability to pick up or return containers heed the agency’s interpretive ruling: that the fairness of detention and demurrage fees should be viewed through a lens of whether they encourage cargo flow.

… Each carrier must tap a managing director to respond to the audit and provide monthly updates to regulators.

Conclusion

Shippers are more and more disgruntled as the incredibly high freight rates hurt their ability to make a profit. The incredible inflation of rates in international shipping add to the inflation already happening in the U.S. from factors like the trillions in spending from the government and money printing to go along with it as well as oil and gas prices continuing to rise. With the size and impact of the international shipping industry, that’s reason enough to get the government’s attention if shippers’ complaints aren’t.

Despite generally being one for smaller government and less regulation, I have argued for years that the government should reconsider approving the carrier alliances that dominate ocean freight shipping because I recognize the need to protect industries and consumers from monopolies and oligopolies. Not to mention, the international shipping industry could never truly be a free market when foreign governments are major backers or owners of some of the industry’s biggest players, such as Cosco being China state-owned.

There is the risk of the government going too far, over-regulating the international shipping industry. We’ve seen in the education and health care industries costs skyrocket with more government involvement. Similar results would be most disconcerting in the industry that handles 90% of the world’s goods.

Carriers will obviously fight legislation that specifically targets them. They argue that these incredible price increases and drops in service reliability are due to exceptional circumstances in the market caused by the pandemic and additional disruptions to the supply chain. That certainly is part of the puzzle and shouldn’t be fully dismissed.

Returning to a time when freight rates were so low they were unsustainable for carriers is also not ultimately good for shippers. Such circumstances were a major driving force in shrinking carrier competition to where it is now. As with most things, a balance must be found.

In the meantime, we’ll have to watch to see if there’s any bite behind the government’s bark. Legislation may never pass that reforms the Shipping Act. The FMC has talked about unfair detention and demurrage fees before without any real action. The commission has also threatened injunctions on carrier alliances in the past if Shipping Act infractions were found to have taken place, but we’ve also seen no injunctions on vessel sharing agreements. Still, there is mounting pressure here, and it seems like eventually something will have to give.

Click Here for Free Freight Rate Pricing

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Could Biden’s Executive Order Endanger Carrier Alliances? https://www.universalcargo.com/could-bidens-executive-order-endanger-carrier-alliances/ https://www.universalcargo.com/could-bidens-executive-order-endanger-carrier-alliances/#respond Fri, 06 Aug 2021 04:00:26 +0000 https://www.universalcargo.com/?p=10449 A couple blogs ago, I wrote about three ways ocean freight rates could see a significant drop. One of those ways was if regulators break up the carrier alliances that now dominate international shipping. Based on history, I wrote this was fairly unlikely. However, there is governmental pressure from the Biden Administration and Congress to do something about the lack of competition in the international shipping industry.

While the Democratic Party, which currently holds the White House and a congressional majority, does tend toward bigger government and more regulatory control, it was during the years of the Obama Administration's leadership that carrier alliances, with regulatory approval, exploded in the industry until international shipping was dominated by just three alliances. However, that was before the adverse effect of the resulting shrunken competition was felt in the economy as it is being felt now. It still seems fairly unlikely carrier alliances will be broken up now, but persistent appeals from shippers to the Biden Administration and Congress seem like they may have paid off in getting governmental attention on claims of unfair carrier practices.

Over the next couple blogs, we'll look at governmental pressure on the international shipping industry, starting today with an executive order from President Biden.

Find out all about it by reading the full post in Universal Cargo's blog.

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A couple blogs ago, I wrote about three ways ocean freight rates could see a significant drop. One of those ways was if regulators break up the carrier alliances that now dominate international shipping. Based on history, I wrote this was fairly unlikely. However, there is governmental pressure from the Biden Administration and Congress to do something about the lack of competition in the international shipping industry.

While the Democratic Party, which currently holds the White House and a congressional majority, does tend toward bigger government and more regulatory control, it was during the years of the Obama Administration’s leadership that carrier alliances, with regulatory approval, exploded in the industry until international shipping was dominated by just three alliances. However, that was before the adverse effect of the resulting shrunken competition was felt in the economy as it is being felt now. It still seems fairly unlikely carrier alliances will be broken up now, but persistent appeals from shippers to the Biden Administration and Congress seem like they may have paid off in getting governmental attention on claims of unfair carrier practices.

Over the next couple blogs, we’ll look at governmental pressure on the international shipping industry, starting today with an executive order from President Biden.

Photo of President Biden (before he was president) by Gage Skidmore.

Is This the Executive Order Exporters Were Asking For?

On July 9th, President Biden issued Executive Order on Promoting Competition in the American Economy.

International shipping was not the executive order’s sole target. In fact, international shipping was not even close to its main topic. However, the global container shipping industry did come up explicitly.

Also brought up explicitly are farmers, who have perhaps received the worst treatment from ocean freight carriers over the last year. Farmers actually appear a number of times in the order, including mention right at the beginning:

A fair, open, and competitive marketplace has long been a cornerstone of the American economy, while excessive market concentration threatens basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers.

One would think, or at least hope, the letter agricultural exporters sent to President Biden, urging him to take action against ocean freight carriers’ unfair actions, influenced the creation of this executive action despite the months that lapsed between the two and its much broader focus.

U.S. agricultural exporters have had shipping containers and services denied them by carriers in order to prioritize more lucrative shipping routes after it was the alliances’ blanking (cancelling) of hundreds of sailings that largely caused the container shortage problems the shipping industry has faced since the early months of the pandemic. Some people have raised questions about the legality of the carriers’ treatment of U.S. agricultural exporters.

Whether carriers’ practices have been legal or not is for the FMC to determine, but it is clear that consolidation among carriers into alliances has reduced competition in the industry, allowed carriers to control capacity and increase freight rates, and put shippers at a disadvantage. Such consolidation and reduction of competition is what the executive order focuses on, saying there’s a need for government action:

Robust competition is critical to preserving America’s role as the world’s leading economy.

Yet over the last several decades, as industries have consolidated, competition has weakened in too many markets, denying Americans the benefits of an open economy and widening racial, income, and wealth inequality. Federal Government inaction has contributed to these problems, with workers, farmers, small businesses, and consumers paying the price.

Biden’s Antitrust Push

What’s happening in this executive order is the Biden Administration is saying it’s going to make a big antitrust push, and its connecting some of the Democratic Party’s favorite buzzwords – racial inequality, income inequality, and wealth inequality – to the push. Another buzzword (or buzzphrase, if that was only a thing) to pay attention to in the order is “whole of government approach.”

The Biden Administration wants all government agencies involved in this antitrust push with agencies of overlapping jurisdiction working together. The administration also establishes a “White House Competition Council within the Executive Office of the President” to “coordinate, promote, and advance Federal Government efforts to address overconcentration, monopolization, and unfair competition in or directly affecting the American economy…”

This order affirms that it is the policy of my Administration to enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly and monopsony — especially as these issues arise in labor markets, agricultural markets, Internet platform industries, healthcare markets (including insurance, hospital, and prescription drug markets), repair markets, and United States markets directly affected by foreign cartel activity.

Whereas decades of industry consolidation have often led to excessive market concentration, this order reaffirms that the United States retains the authority to challenge transactions whose previous consummation was in violation of the Sherman Antitrust Act (26 Stat. 209, 15 U.S.C. 1 et seq.) (Sherman Act), the Clayton Antitrust Act (Public Law 63-212, 38 Stat. 730, 15 U.S.C. 12 et seq.) (Clayton Act), or other laws.  See 15 U.S.C. 18; Standard Oil Co. v. United States, 221 U.S. 1 (1911). 

Does the Executive Order Go After Carrier Alliances?

The executive order is broad but explicitly singles out agricultural input industries, the American information technology sector, prescription drugs and healthcare services – sliding into the order support for a public health insurance option, which I’m not sure promotes competition – and the telecommunications sector before including the international shipping industry as follows:

Similarly, the global container shipping industry has consolidated into a small number of dominant foreign-owned lines and alliances, which can disadvantage American exporters.

The mention of alliances and their specific ability to disadvantage exporters is of note.

Does that mean the Biden Administration is encouraging, or even pressuring, the FMC to break up the alliances? Maybe. However, industries within the United States definitely seem to be of greater focus. It’s possible carrier alliances were mentioned just to placate those letter-writing agricultural exporters, but it seems quite possible carriers and their alliances could receive more scrutiny.

Ultimately, it’s hard to tell the level of action that will actually come out of this executive order. How much of it is political posturing? How much of it will be challenged? How much will populism – looking for election points – come into play in what anticompetitive practices in which industries will be targeted (or just publicized)?

I still find it fairly unlikely the FMC will disband the vessel sharing agreements that create the alliances. However, this could bring more attention to the recent carrier collusion complaint MCS Industries filed with the FMC against MSC and Cosco. How the FMC handles the complaint and continues to investigate unfair detention and demurrage fees could be telling in whether alliances really are in danger of getting broken up. Of course, it’s never completely impossible for a sudden announcement to be made that the FMC has removed its approval from any specific vessel sharing agreement.

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U.S. Importer Files Carrier Collusion Complaint with FMC https://www.universalcargo.com/u-s-importer-files-carrier-collusion-complaint-with-fmc/ https://www.universalcargo.com/u-s-importer-files-carrier-collusion-complaint-with-fmc/#respond Tue, 03 Aug 2021 20:55:11 +0000 https://www.universalcargo.com/?p=10433 While shippers have been complaining and accusing ocean freight carriers of profiteering and unfair practices since the pandemic hit (and for years before that as well), there have not been major complaint filings from shippers to the Federal Maritime Commission (FMC) of actual carrier collusion during the pandemic... until now.

On July 30th, a U.S. shipper filed a formal complaint of carrier collusion against Cosco Shipping and Mediterranean Shipping Company (MSC). The shipper is a pretty large one too. Mark Szakonyi reports in a Journal of Commerce (JOC) article that the complaint was filed by MCS Industries and, according to Wayfair, is the market leader in wall and poster frames.

Yes, this could get confusing as MCS is accusing MSC of collusion, but the complaint itself appears pretty straightforward. Find out more about it by reading the full post in Universal Cargo's blog.

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While shippers have been complaining and accusing ocean freight carriers of profiteering and unfair practices since the pandemic hit (and for years before that as well), there have not been major complaint filings from shippers to the Federal Maritime Commission (FMC) of actual carrier collusion during the pandemic… until now.

MSC Joanna
MSC Joanna – photo by Alf van Beem

On July 30th, a U.S. shipper filed a formal complaint of carrier collusion against Cosco Shipping and Mediterranean Shipping Company (MSC). The shipper is a pretty large one too. Mark Szakonyi reports in a Journal of Commerce (JOC) article that the complaint was filed by MCS Industries and, according to Wayfair, is the market leader in wall and poster frames.

Details of the Complaint

Yes, this could get confusing as MCS is accusing MSC of collusion, but the complaint itself appears pretty straightforward.

The formal complaint, as reported by Szakonyi, accuses Cosco and MSC “of working together to violate service contracts to further take advantage of record trans-Pacific container spot rates and premiums.” Here are details Szakonyi gives about MCS’s claim:

MCS Industries accuses Cosco and MSC of working in “parallel and seemingly coordinated fashion” in failing to honor service contracts at agreed upon rates and then selling the space “to the highest bidder.”

MCS Industries says Cosco and MSC continue to fail to honor service-contract allocations, inflicting more than $600,000 in damages.

At the heart of MCS’s grievance is its accusation that MSC only honored approximately one-third of the volumes contracted through service contracts, and Cosco delivered just 1.6 percent of contracted capacity.

“In negotiations for the current shipping year, (Cosco and MSC) and other global ocean carriers collectively refused to provide MCS sufficient commitments in their advance service contracts, instead providing only a fraction of the space MCS needed at substantially higher prices, which MCS accepted in order to secure such space, believing that such higher prices would fully compensate (Cosco and MSC) for current market disruptions,” MCS wrote in the complaint.

Have Carriers Finally Pushed Rates Too Far?

Often in Universal Cargo’s blog, I write predictions for how freight rates will behave in the future. Over the last several months, I questioned on more than one occasion how much higher carriers could push freight rates without serious blowback from shippers and even regulators. We may have reached the breaking point.

Szakonyi says in his article that “fears of retaliation have long held shippers back from filing formal complaints [against ocean freight carriers] with the [FMC].” I have often heard this vocalized or seen it written. It’s not hard to think shippers would avoid filing a public complaint against carriers for fear of not being able to negotiate favorable contracts with them. However, there’s nothing favorable about the freight rates shippers are currently able to negotiate. At least, not from shippers’ perspective. Freight rates are so high, importing goods is no longer worth the cost for many shippers, their profits completely eaten up by the costs. Carriers, on the other hand, are raking in the profits by the billions while their reliability in reserving space for cargo on voyages and delivering on schedule has been terrible.

Paying sky-high rates while receiving poor service could very well push shippers past the fear of retaliation to filing complaints like MCS has. It also turns out, the complaints shippers have made to President Biden and Congress may be having some effect. Not only is there pressure to rewrite the Shipping Act, but Szakonyi writes, “The FMC has come under intense pressure from Congress and the Biden administration to crack down on shipping law violations.”

That pressure, including an executive order, is worth a blog unto itself. You’ll get that next time.

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3 Ways Ocean Freight Rates Could Come Back Down https://www.universalcargo.com/3-ways-ocean-freight-rates-could-come-back-down/ https://www.universalcargo.com/3-ways-ocean-freight-rates-could-come-back-down/#respond Fri, 30 Jul 2021 01:11:18 +0000 https://www.universalcargo.com/?p=10432 International shipping, with its ocean freight sector in particular, is a volatile industry. Freight rates go up and down like a roller coaster. But not in the last year. Ocean freight rates have done practically nothing but go up and shatter records. Shippers are paying extraordinarily high freight rates, and the experts keep saying there's no relief in sight. In fact, many are saying we'll never see freight rates as low as they were as recently as 2019. In the last post, I promised to give you ways freight rates could come back down. I don't mean a slight decrease but a drop to levels that would have been considered normal before 2020 hit.

See three ways freight rates could come back down by reading the full post in Universal Cargo's blog.

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International shipping, with its ocean freight sector in particular, is a volatile industry. Freight rates go up and down like a roller coaster. But not in the last year. Ocean freight rates have done practically nothing but go up and shatter records. Shippers are paying extraordinarily high freight rates, and the experts keep saying there’s no relief in sight. In fact, many are saying we’ll never see freight rates as low as they were as recently as 2019. In the last post, I promised to give you ways freight rates could come back down. I don’t mean a slight decrease but a drop to levels that would have been considered normal before 2020 hit.

Here are 3:

1. Demand Plummets

This seems like the most obvious factor to cause freight rates to fall. Basic economic principles of supply and demand would say if shipping demand drops, freight rates should drop. However, when the pandemic first hit, shipping demand did initially decrease. Ocean freight carriers had an answer.

Man Looking Up at Shipping Containers

Through their alliances, carriers were able to blank (cancel) hundreds of sailings. By doing so, they shrunk capacity (supply) well below what the market demand actually called for and managed to increase freight rates at a time when demand dipped. It’s not like the laws of supply and demand suddenly stopped applying to the industry. Instead, the much reduced carrier competition, thanks largely to alliances, allowed carriers to manipulate, even control, the supply side.

It has now become assumed that carriers could control capacity indefinitely. However, very quickly after the dip in shipping demand came an international shipping boom. While carriers had been showing more discipline with capacity and ability to control it over the couple years leading up to the pandemic, they have yet to prove they can control capacity against adversity of low demand over a long period of time.

Factors like shutdowns, moving spending from entertainment, travel, and services to online shopping, and government stimuli, giving consumers more money, helped demand make it so near-record to record high amounts of freight have been shipped from port to port practically every month for the last year. If the incredibly strong demand we’ve been seeing takes a steep fall that lasts for an extended amount of time, carriers may struggle to drop capacity low enough and long enough to keep a significant drop in freight rates from happening.

How Likely Is This?

Unfortunately, an economic crash is still a very real danger. Even without a full-blown crash, inflation is very strong right now. You’ve likely felt it in your pocket book and bemoaned how much money it takes to fill your gas tank. While all the money being printed with the trillions the government is spending (that it doesn’t have) in stimuli is a big part of that inflation, high freight rates play a role in inflation too. It’s not like none of those increased shipping costs would get passed on to consumers. Businesses also have increased costs to meet Covid protocols and President Biden’s proposed tax hikes are threatening to increase their costs even more.

Thus, even without a full-blown crash, demand is likely to start dropping because the dollar doesn’t go as far while reopening also moves a portion of spending back to services, entertainment, and travel. There are still many businesses that have permanently closed over the course of the shutdowns and other businesses moving to domestic manufacturing because of the high import costs that haven’t caught up with the economy and international shipping yet.

Ultimately, a significant and at least moderately sustained drop in demand is likely. Carriers failed to properly redistribute shipping containers when they blanked so many sailings to control capacity during a short-lived dip. That was disastrous for ports, shippers, and carriers’ reliability. Will they be able to maintain such tight capacity control with heavy blanking for a prolonged period and risk even worse container and equipment redistribution? Possibly. But I don’t think they could without serious backlash.

Verdict: Fairly Likely.

2. Regulators Break Up Carrier Alliances

I’ve been suggesting regulators reconsider allowing carrier alliances as we now know them for years. Carrier alliances are what give carriers the greatest control over capacity. Is it really a good idea to allow the largest companies in an industry that has long struggled with anti-trust violations to form partnerships where they share ships and reduce competition?

Ending carrier alliances would hamper carriers’ ability to so effectively manipulate capacity and freight rates. I’m not saying carrier alliances mean carriers are breaking anti-trust laws by doing things like conspiring on freight rates. However, carrier alliances do make such hypothetical activities easier. And that major carriers have been found guilty of price fixing in the (recent) past is not hypothetical.

Breaking up carrier alliances certainly wouldn’t guarantee carriers would stop reducing capacity through blanked sailing. Blanking sailings would, of course, still be a practice. Breaking up carrier alliances would, however, make it harder for carriers to blank sailings in such a coordinated way. It would encourage more competition in the industry. In turn, that would likely mean reduced freight rates.

How Likely Is This?

Over the last year, shippers, especially but not exclusively U.S. exporters, have had legitimate complaints against carriers and their alliances. Complaints against carriers include dramatically increasing freight rates while service became seriously worse, blanking hundreds of sailings to reducing capacity well below what market demand required, imposing unfair demurrage fees for situations beyond shippers’ control, forcing shippers to pay no-roll premiums to keep shipments from being rolled over to later sailings (though sometimes still rolling cargo despite payment), refusing to serve U.S. agricultural exporters in order to get shipping containers back to Asia quicker for more lucrative eastbound transpacific shipping, and flat out profiteering off the pandemic. Shippers have taken their complaints to the Federal Maritime Commission (FMC), to President Biden, and to members of Congress.

The FMC, specifically existing to protect U.S. shippers, has actually announced investigations into carrier alliances and even threatened to shut down carrier alliances if they’re not in compliance with regulations. However, probably the biggest action America’s maritime regulator has taken is requiring carriers to submit data to the FMC more regularly. Most shippers find this highly disappointing.

While it would only take one major maritime regulatory body from around the world to disrupt carrier alliances, history does not suggest regulators will break up carrier alliances any time soon. The only major carrier alliance that was halted in recent memory was when China’s Ministry of Commerce, in 2014, decided not to approve the P3 Network between Maersk, MSC, and CMA CGM; however, P3 was quickly replaced by the 2M Alliance between Maersk and MSC. A plethora of carrier alliances followed – none of which failed to garner approval – until all of the world’s major carriers aligned themselves into just three alliances.

Verdict: Fairly Unlikely

3. Renewed Freight Rate Wars

If you go back five years, the international shipping industry was in the exact opposite state of what it’s in now. Freight rates were incredibly low. In fact, they broke record after record for how low they were. Shippers obviously loved it, but it was terrible for carriers. Such low freight rates resulted in huge losses for them. Much as profits can be measured in the billions now, losses could be measured in the billions then (though not quite so many billions). Carriers were merging, some were getting bought out… Major ocean freight carrier Hanjin Shipping went belly up.

One factor that helped drive freight rates so low was carriers undercutting each other’s rates. Carriers would try to impose general rate increases (GRIs) or peak season surcharges (PSS) but not be able to maintain them because another carrier would drop their rates below them. Carriers most commonly engaged in undercutting each other’s rates in order to grab market share, as you’d expect. However, it did seem that some of the larger carriers had a bigger picture in mind of running some of their smaller competitors out of business altogether.

Freight rate wars came up in Universal Cargo’s blog so often back in the day that in 2017, when carriers were finally managing to emerge from their freight rate wars with more discipline and getting freight rates to rise, we had to post a Star Wars: Empire Strikes Back-inspired rate wars crawl. Okay, I had to post that crawl:

YouTube Video

Obviously, if carriers return to their old ways of battling for market share, freight rates will fall.

How Likely Is This?

The question is why would carriers go back to undercutting each other’s rates when cooperating in alliances to control capacity has worked so well to make so much money? Carriers surely remember the freight rate war days when they were losing billions. There’s no question they like making billions more.

I don’t see freight rate wars hitting the international shipping industry as they used to do. That doesn’t mean, however, some carriers wouldn’t make moves to get under the astronomical freight rates we’re seeing to make a market share grab. All it would take is one or two carriers making such a move to have others make counter moves with their rates.

Carriers have eaten too well off their fattened calves of high demand and high freight rates for bigger carriers to think they can drive competition out of business by undercutting their rates. That just leaves undercutting each other in moves to grab market share. When demand starts coming down is when the temptation to make a market share grab with freight rates would rise. However, carriers seem to have learned that working together in alliances to control capacity while avoiding undercutting each other is the better way to make money.

Verdict: Somewhat Unlikely.

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Will New Ships Bring Freight Rates Back Down? https://www.universalcargo.com/will-new-ships-bring-freight-rates-back-down/ https://www.universalcargo.com/will-new-ships-bring-freight-rates-back-down/#respond Tue, 27 Jul 2021 23:19:56 +0000 https://www.universalcargo.com/?p=10429 High freight rates have become a motif in Universal Cargo's blog over the last year. That's not surprising as freight rates have climbed and climbed, breaking record after record, much to the chagrin of shippers. Unfortunately, there's no clear end in sight to these expensive freight rates. Experts see high freight rates and incredible profits for ocean freight carriers continuing in 2022. However, maritime research firm Drewry does point to a risk to carriers' ability to maintain these high rates that's on its way to the international shipping industry in 2023: new ships.

Carriers have been taking advantage of the shipping boom and their high profits over the last year to order ships. Traditionally, more ships – and the increased capacity that comes along with them – brings downward pressure on freight rates which has actually resulted in lower rates. In fact, carriers struggled with overcapacity so much over the last decade, years with billion dollar losses were not uncommon. Are the newbuild ship orders carriers have in place a legitimate threat to their current high freight rates and profits?

Find out more, including thoughts from Drewry and other international shipping experts, by reading the full post in Universal Cargo's blog.

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High freight rates have become a motif in Universal Cargo’s blog over the last year. That’s not surprising as freight rates have climbed and climbed, breaking record after record, much to the chagrin of shippers. Unfortunately, there’s no clear end in sight to these expensive freight rates. Experts see high freight rates and incredible profits for ocean freight carriers continuing in 2022. However, maritime research firm Drewry does point to a risk to carriers’ ability to maintain these high rates that’s on its way to the international shipping industry in 2023: new ships.

Are New Ships a Threat to Carrier Profits & High Freight Rates?

Carriers have been taking advantage of the shipping boom and their high profits over the last year to order ships. Traditionally, more ships – and the increased capacity that comes along with them – brings downward pressure on freight rates which has actually resulted in lower rates. In fact, carriers struggled with overcapacity so much over the last decade, years with billion dollar losses were not uncommon. Are the newbuild ship orders carriers have in place a legitimate threat to their current high freight rates and profits?

Greg Miller reported Drewry’s thoughts on ship orders in the American Shipper article we’ve been discussing through the last couple blogs:

Drewry does see a supply side risk from higher newbuild orders for delivery starting in 2023. However, it added, “Even if carriers do revert to type and the current newbuild craze ends the [profit] upcycle in 2023, they will have made so much money between 2020-22 that they will be set up for years to come. They could potentially make as much profit in this window as they could have hoped for in a decade or more.”

Old Habits Would Sink Freight Rates

For more about how much carriers are making right now, you can go back a few blog posts to the one titled, 12 Figure Profits for Carriers? Depends on How Peak Season Plays Out. Despite just a couple years ago many carriers looking like they were struggling to keep afloat, no one needs to worry about the financial health of ocean freight carriers right now. What shippers are wondering, and many hoping for, is will carriers fall back to old habits of pushing capacity way above demand, get into freight rate wars, and cause rates to plunge.

If that’s what you’re hoping for, don’t hold your breath.

Miller’s article continues:

… it’s far from certain that newbuilds will have the same effect on liner profits that they had in the past cycles

Carrier alliances can limit future rate downside by canceling sailings, known in the industry as “blanking” or “voiding” sailings. Maersk CEO Soren Skou said in his company’s last quarterly call, “On the question of the orderbook, what really matters to us is the capacity we deploy compared to the demand we have. It’s not really important how many ships exist in the world. It’s how many ships that are deployed that matters.”

Carriers Shouldn’t Return to Old Habits

Ah, there’s the rub. Not only can carrier alliances limit rate downside by cancelling sailings, they have done it. We’ve talked a great deal here in Universal Cargo’s blog about how carriers blanked hundreds of sailings in 2020 when demand initially did drop a bit in the early days of the Wuhan Coronavirus pandemic. Not only did they drop capacity well below market demand, they caused container and equipment shortages (through failure to properly relocate containers and equipment) that largely contribute to the port congestion problems the international shipping industry has been seeing around the world.

It should, therefore, come to no surprise to regular readers of Universal Cargo’s blog that carriers, utilizing their alliances, have the ability to limit the impact of new ships with blanked sailings, controlling capacity and keeping freight rates high. What might be surprising to our regular readers is the beginning of the next quote from George Griffiths, editor of global container freight at S&P Global Platts:

Griffiths said, “Everyone had said this [carrier capacity management] was a pipe dream, but we saw in 2020, at the very start of the pandemic, when demand fell, carriers pulled sailings out of the loops. It’s now a tried and tested measure. If carriers understand how to employ void sailings, we will eventually see rates come down, but I’d be skeptical about whether they’d go back down to the levels we saw in 2019.”

For years, I’ve been warning about the shrinking of carrier competition through alliances eventually resulting in shippers paying higher freight rates. If you were reading this blog back in 2014 through 2016, you might have thought I was obsessed with the topic. I even created and kept updating the Carrier Craziness Bracket for shippers to visually follow the shrinking carrier competition in international shipping. Here are a handful of the bracket updates from when I first created it in 2014, as the doomed P3 Network was the biggest news in international shipping, until it was busted worse than a March Madness bracket when all the major carriers were ultimately organized into just three alliances:

Carrier Craziness Bracket
Carrier Craziness Bracket updated with Ocean Alliance and THE Alliance
Carrier Craziness Bracket
Universal Cargo’s Carrier Craziness Bracket, showing the crazy alliances, mergers, and bankruptcy in ocean freight shipping.

I know Universal Cargo blog readers and I weren’t the only ones not surprised to see carrier alliances take control of capacity and push freight rates up. Carriers have been building toward this for quite some time. Their discipline with capacity had already been greatly improved in 2018 and 2019 from previous years of rampant overcapacity and unsustainably low freight rates.

Once you get past Griffiths’s hyperbole about everyone having said carrier capacity control is just a pipe dream, what he says sounds very reasonable. Why indeed would carriers allow freight rates to drop again when they’ve tasted billions in profits from controlling capacity and pushing freight rates way up? That sentiment is echoed in Miller’s article by Patrik Berglund, CEO of rate-data platform Xeneta:

As Berglund put it, “Yes, this is a cyclical industry … [but] shipping lines now finally know how to make massive amounts of money. Why would they allow overcapacity to happen again?” 

What Factors Could Cause Freight Rates to Drop Again?

Well, capacity is not the only factor in freight rates. There are some factors that could cause freight rates to come back down in shippers’ favor. In the next post, we’ll look at how freight rates could improve.

Click Here for Free Freight Rate Pricing

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Will International Shipping Be Like This in 2022? https://www.universalcargo.com/will-international-shipping-be-like-this-in-2022/ https://www.universalcargo.com/will-international-shipping-be-like-this-in-2022/#respond Wed, 21 Jul 2021 02:33:40 +0000 https://www.universalcargo.com/?p=10406 Over the last year, international shipping has been marked by container and equipment shortages, port congestion, high demand, lost containers, rolled containers, and – of course – outrageously high freight rates. Do the experts think next year will be better? For as much as the experts have been wrong about the last year, how likely are their predictions to come to fruition?

I promised in the last blog post to get into international shipping outlooks for 2022 and beyond in the following post. Then I went on vacation, leaving you hanging all last week. Today, I make good on the promise as I begin examining expert opinions on the future of international shipping.

Check it out in Universal Cargo's blog.

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Over the last year, international shipping has been marked by container and equipment shortages, port congestion, high demand, lost containers, rolled containers, and – of course – outrageously high freight rates. Do the experts think next year will be better? For as much as the experts have been wrong about the last year, how likely are their predictions to come to fruition?

I promised in the last blog post to get into international shipping outlooks for 2022 and beyond in the following post. Then I went on vacation, leaving you hanging all last week. Today, I make good on the promise as I begin examining expert opinions on the future of international shipping.

2022 Demand & Freight Rates

International shipping experts don’t give much hope for shippers to see relief from soaring freight rates anytime soon.

Greg Knowler reported a few weeks ago in the Journal of Commerce (JOC):

Container shipping rates will remain at record levels for the rest of the year and into 2022 as demand significantly outpaces capacity in an environment that will further drive up carrier profitability, according to Moody’s Investors Service.

Unfortunately, the experts aren’t exactly predicting freight rates to hold on to their heights for only a short time into 2022 and then suddenly drop. Greg Miller reported in American Shipper:

[Patrik Berglund, CEO of rate-data platform Xeneta] also sees demand outpacing supply in 2022, which is “bad news for the customer side.”

Overall, the expectations from practically everywhere you look are for demand and freight rates to remain high and carriers to continue making excellent profits next year.

sleek container ship

However, as I’ve written about in the past, there is risk for consumer demand to plummet. Rounds of stimulus have certainly increased consumer demand over the last year. However, with the incredible amount of government spending and money printing that comes along with it, inflation is also hitting. Inflation impacts people’s ability to continue purchasing goods at the level they have while reopenings move a portion of spending on goods back to services, entertainment, and travel.

There is something to be said for the inertia of spending. Having established habits of increased online shopping over the course of the pandemic, there are people who will continue in that spending habit, supposing they are able. Of course, inertia alone isn’t enough to keep demand steady.

Consumer demand is not the only place to look for reductions in international shipping demand. The outrageously high freight rates and fees shippers have been facing from international shipping has had some businesses look for domestic sourcing as the profit margin on imported goods are shrinking or disappearing altogether.

Over One-Third Earnings Drop

Even though experts are predicting 2022 to be another excellent year for carriers, there is still a significant drop expected.

Miller’s American Shipper article continued:

Drewry forecasts container-liner sector EBIT [earnings before interest and taxes] to drop by just over a third next year, to a level that still represents an “astonishing performance by historical standards.”

When we’re talking about the potential for a $100 billion 2021 for carriers, a one-third drop in earnings still would mean an incredible 2022 for carriers. Especially when you think about not-so-long-ago-years when carriers were suffering billion dollar losses. However, if the experts think carrier earnings will be reduced by an amount that can be measured in tens of billions, they must see some decrease in demand and freight rates coming next year.

That is at least a glimmer of hope for shippers.

As I stated in the last post, I still believe we could still see some drops in demand and freight rates before 2021 is done, but I’m badly outnumbered by those who disagree.

We’ll continue looking at the future of international shipping next time, examining a potential risk to the high freight rates carriers are enjoying and shippers are hating.

Click Here for Free Freight Rate Pricing

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12 Figure Profits for Carriers? Depends on How Peak Season Plays Out https://www.universalcargo.com/12-figure-profits-for-carriers-depends-on-how-peak-season-plays-out/ https://www.universalcargo.com/12-figure-profits-for-carriers-depends-on-how-peak-season-plays-out/#respond Thu, 08 Jul 2021 17:58:13 +0000 https://www.universalcargo.com/?p=10403 A couple months ago, we blogged about carriers making billions with these high freight rates shippers are being forced to choke down. Well, that was nothing. Wait until you hear this....

If ocean freight carriers walk away from 2021 with $100 billion in profits, it wouldn't be surprising according to maritime research company Drewry.... It's Miller time. Yes, owners of shipping lines probably are or will be clinking celebratory drinks; however, by "it's Miller time," I actually mean it's time to share some reporting by Greg Miller published in an American Shipper article. Besides, carrier owners are probably drinking something much more expensive than Miller Lite. Miller reported:

On Monday, U.K. consultancy Drewry predicted that container shipping lines will post aggregate earnings before interest and taxes (EBIT) of $80 billion this year, and “if freight rates surpass expectations in the remainder of the year, we would not be surprised to see an annual profit line in the region of $100 billion.”

And why wouldn't freight rates surpass expectations? Isn't that what they've been doing for the last year?

Shippers don't have to be told that freight rates are incredibly high. Freight rates have done almost nothing but grow and shatter records for the last year. We did have a few months earlier this year when freight rates held pretty steady (at right about record highs). Most international shipping analysts before and during that period predicted rates would start coming down. Nope. Instead, rates went right back to climbing.

But is this how things will really continue for the rest of the year? Read the full post in Universal Cargo's blog to find out more.

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A couple months ago, we blogged about carriers making billions with these high freight rates shippers are being forced to choke down. Well, that was nothing. Wait until you hear this….

Freight Rates

If ocean freight carriers walk away from 2021 with $100 billion in profits, it wouldn’t be surprising according to maritime research company Drewry…. It’s Miller time. Yes, owners of shipping lines probably are or will be clinking celebratory drinks; however, by “it’s Miller time,” I actually mean it’s time to share some reporting by Greg Miller published in an American Shipper article. Besides, carrier owners are probably drinking something much more expensive than Miller Lite. Miller reported:

On Monday, U.K. consultancy Drewry predicted that container shipping lines will post aggregate earnings before interest and taxes (EBIT) of $80 billion this year, and “if freight rates surpass expectations in the remainder of the year, we would not be surprised to see an annual profit line in the region of $100 billion.”

And why wouldn’t freight rates surpass expectations? Isn’t that what they’ve been doing for the last year?

Shippers don’t have to be told that freight rates are incredibly high. Freight rates have done almost nothing but grow and shatter records for the last year. We did have a few months earlier this year when freight rates held pretty steady (at right about record highs). Most international shipping analysts before and during that period predicted rates would start coming down. Nope. Instead, rates went right back to climbing.

Will Freight Rates Continue to Grow for the Rest of 2021?

Now, it seems that all the analysts think rates will continue growing for the rest of the year. On Tuesday, Universal Cargo published a guest blog post from economist John Nicks, in which he gave reasons global shipping costs would continue to rise.

Never being afraid to buck trends, I still think we could see rates drop this year; however, we have to get through the peak season first. Normally, August is thought of as the first real month of the peak season, but 2021’s peak season is already well under way. When I made predictions for this year’s peak season back in May, I predicted it would fizzle early. I may be the only one making that prediction, however. Some international shipping experts are still talking as if the peak season hasn’t begun because we’re still only in July.

If you want vogue predictions, consider ones like that of George Griffiths, editor of global container freight at S&P Global Platts. In his American Shipper article, Miller quoted Griffiths:

“I would now be surprised if we saw any significant downside before the end of this year,” said Griffiths.

“The demand we’re seeing at the moment is completely unprecedented and we haven’t actually hit peak season yet. Everyone’s planning a long way ahead, which is why we’re already seeing people front-load shipments ahead of Christmas. For the next quarter, we’re expecting rates to stay pretty bullish if not rise further — and certainly not tumble from the point they are now,” said Griffiths.

It is the front-loading that Griffiths speaks of that made me predict the peak season would start early and not be as strong at the end. I, of course, could be completely wrong. Though not about the peak season starting early. That has already happened. While it makes sense that if shippers front-loaded peak season shipping, there would be less cargo volume left to be shipped at the end of the peak season.

Still, there are factors that could keep volume high all the way through to the end of October and even beyond.

Reasons Peak Season Could Sustain Itself Despite Being Front-Loaded

One factor is congestion. U.S. ports have been incredibly congested for months, dealing with month after month after month of near-record to record-high cargo volume. The slowed movement of cargo through the ports could spread cargo volume out for weeks, giving a prolonged effect to the peak season.

Another factor is carriers’ propensity for rolling cargo to later sailings. The incredible amount of unreliability from carriers is part of why shippers are doing so much front-loading. Shippers want to make sure they have their goods in time for the holiday shopping season. But who doesn’t think carriers will continue rolling cargo back during the peak season, also giving a prolonged effect.

A third factor is simply the momentum of spending. U.S. consumers have increased their buying of goods over the pandemic. Despite factors like inflation and reopenings allowing a percentage of spending to move back to services, entertainment, and travel, patterns of behavior – certainly not excluding buying things – are hard to break away from. If spending on goods remains high or just retailers’ expectation of consumer spending remains high, shippers will continue to keep import volumes high. Of course, expectations for Christmas and holiday spending remain optimistic.

Looking to the Future

For carriers to actually hit $100 billion, not only does the peak season need to remain strong through its traditional end but continue in an exceptional way, much like it did last year. We’ll have to watch how the peak season goes.

Unlike Drewry, I would be surprised if carrier profit made it all the way to twelve figures. However, as I’ve warned about for years, carriers are now able to control capacity and therefore freight rates because of how they’ve shrunk competition in the industry, largely through the forming of alliances. While I think freight rates could still drop this year, I don’t think carriers will allow them to drop too far.

Already, the billions carriers have been making has wiped out between a decade and two of struggles when capacity did get out of hand, outpacing demand, causing freight rates to plummet to unsustainable lows. Plummeting rates against out of control capacity was especially true during the last decade.

In the next blog, I’ll get into outlooks for 2022 and beyond. As a bit of a preview, the experts mentioned above, along with others, don’t have predictions that are likely to make shippers happy. Perhaps, however, it will give shippers a glimmer of hope to know that all these experts have been wrong before. Griffiths is quoted as admitting being incorrect in Miller’s article:

“I hold my hand up. I was one of the people who thought rates would come down and I wasn’t alone,” said … Griffiths… “I had thought rates would come down after Chinese New Year. Here we are six months later and rates are still high and actually increasing.

There is also some hope for better freight rate days to come, despite gloomy expert forecasts, other than the experts have been wrong before, but we’ll save that for next time…

Click Here for Free Freight Rate Pricing

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Are Freight Rate Indices & Carrier Fees Useless? https://www.universalcargo.com/are-freight-rate-indices-carrier-fees-useless/ https://www.universalcargo.com/are-freight-rate-indices-carrier-fees-useless/#respond Tue, 29 Jun 2021 21:52:04 +0000 https://www.universalcargo.com/?p=10399 Mike Wackett wrote an article in the Loadstar that might make shippers consider ocean freight spot rate indices and the fees ocean freight carriers have been charging to guarantee service as trivial things. Despite paying hefty fees to avoid it, shippers have seen their cargo rolled to later sailings with additional fees thrown at them in the process while carriers have quoted spot freight rates far higher than any rate index listed as the concurrent rates.

Let's start with the freight rates.

Wackett reports:

"Short-term freight rates from China to North Europe have breached the $20,000 per 40ft mark, while transpacific carriers are quoting rates of up to $25,000 to the US west coast.

"And there was one report of $32,000 from Shanghai to Los Angeles being quoted this week."

Find out more by reading the full post in Universal Cargo's blog.

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Mike Wackett wrote an article in the Loadstar that might make shippers consider ocean freight spot rate indices and the fees ocean freight carriers have been charging to guarantee service as trivial things. Despite paying hefty fees to avoid it, shippers have seen their cargo rolled to later sailings with additional fees thrown at them in the process while carriers have quoted spot freight rates far higher than any rate index listed as the concurrent rates.

Let’s start with the freight rates.

Are These Freight Rates for Real?

Wackett reports:

Short-term freight rates from China to North Europe have breached the $20,000 per 40ft mark, while transpacific carriers are quoting rates of up to $25,000 to the US west coast.

And there was one report of $32,000 from Shanghai to Los Angeles being quoted this week.

While $25,000 per FEU from China to the U.S. West Coast is an incredible number, $32,000 is outrageous. However, there is a caveat to the latter amount. Yes, it was an actual quote given, but it was apparently given with the intention of making the shipper go away, according to Wackett’s article:

… Craig Grossgart, SVP of global ocean at Seko Logistics, confirmed to The Loadstar that one shipper had been quoted $32,000 this week for the shipment of a 40ft container from Shanghai to Los Angeles.

“To be honest, I think it was a polite way of the carrier saying to the customer it doesn’t want to take its business,” said Mr Grossgart.

There is something to be said about how much ocean freight carriers have been making – billions of dollars – that they can make outrageous quotes above the already sky-high freight rates to get rid of customers. However, we don’t know the circumstances around this particular shipment or shipper to know why the carrier didn’t want to take on the cargo, assuming Grossgart’s conjecture that the high quote was given intentionally to push away the customer.

If the $32,000 freight rate wasn’t actually a good faith quote, don’t automatically think the same about the $25,000 per FEU. Grossgart made it clear to the Loadstar that the $25,000 amount was for real:

Nevertheless, he said a figure of $25,000 per 40ft had been quoted to a shipper that needed to move 300 containers from Shanghai and Yantian to Los Angeles next month – “and that is a serious offer”.

Something that makes this $25,000 amount especially egregious is that it’s on a bulk shipment. Normally, when shipping hundreds of containers like this, the shipper could expect to get a break on the rate per container. Granted, probably not as big a drop as $32,000 down to $25,000. However, we normally wouldn’t be talking about freight rate numbers this large in the first place.

What’s the Point of a Freight Rate Index?

There is a major problem here. Shippers have no idea how high what they have to pay on cargo is going to be. What carriers are charging, especially once they add all their fees to the amount, is much larger than what the rate indices would indicate. Wackett’s article points out how the gap between spot market indices and what shippers are actually paying is widening by the week:

For example, the North Europe component of today’s Freightos Baltic Index stood at $11,006 per 40ft, while the FBX reading for the US west coast was $6,588.

How do you go from a U.S. West Coast rate index of $6,588 to $25,000, let alone the outlandish $32,000 figure?

That $6,588 isn’t some low outlying number to make this gap seem more dramatic either. If you read Universal Cargo’s last blog post, you would have seen other indices quoted from an American Shipper article with even lower Asia to West Coast freight rates:

Drewry’s latest weekly rate for Shanghai-Los Angeles was $6,358 per FEU, up 197% y/y. S&P Global Platts’ daily North Asia-West Coast FAK assessment for June 22 was $5,800 per FEU.

Carriers charging shippers three to four times what a rate index says for importing or exporting goods makes those indices almost unusable for shippers. Maybe the indices will tell shippers what direction rates are trending in, but with the kinds of gaps we’re seeing, the indices give shippers little indication of what they’ll actually be paying.

Carrier Fees with No Guarantees

For the last year, freight rates have been out of control while carrier reliability has basically been an oxymoron. On top of record shattering freight rates, carriers have piled on the fees. About a year ago, I called carriers out for implementing no-roll premiums, calling these fees, especially when they were being assessed after carriers had blanked (cancelled) hundreds of sailings, tantamount to holding cargo for ransom.

Even when shippers pay these outrageous fees, it hasn’t always prevented carriers from rolling the cargo and charging shippers additional fees at the same time.

The Loadstar article highlights this problem:

Although these massively elevated rates include a premium fee, to guarantee equipment and space, some shippers complain that their cargo is still getting rolled.

“We paid their ridiculous charges and thought that was the end of it,” said one forwarder, “but then we found out from our local agent that the boxes were still on the quay and the line wanted more to ship the cargo.

“Apparently, there was another FAK hike from the next vessel which they insisted on charging, which means their so-called premium fees are worth nothing,” he added.

Is This Sustainable for Carriers?

We could very well be nearing the end of the shipping boom that’s been taking place for the last year. Inflation issues in the U.S., which are only made worse by these high freight rates, could cut into consumer spending. Spending certainly won’t end altogether, but the dollar is not going as far as it did and things are opening up more and more, causing entertainment, travel, and services to cut in on spending on goods. Holiday shopping is not far away, and international shipping is in peak season now preparing for that. However, a significant drop in international shipping demand should probably be expected to come right around the corner.

Carriers will do their best to utilize the control over capacity they’ve gained to push supply low through blanked sailings again and keep freight rates up when demand does drop. Carriers proved themselves quite capable of dropping capacity below a dip in market demand in the early parts of 2020. However, with the huge freight rate numbers we’ve been seeing, it seems carriers turned to price gouging over the last year. How long can they be expected to maintain high rates with lagging service and demand that could be on the edge of falling? That’s something we’ll look at in future blogs.

Click Here for Free Freight Rate Pricing

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Good News, Bad News: Yantian Port Back to Full; Freight Rates Rise Even Higher https://www.universalcargo.com/good-news-bad-news-yantian-port-back-to-full-freight-rates-rise-even-higher/ https://www.universalcargo.com/good-news-bad-news-yantian-port-back-to-full-freight-rates-rise-even-higher/#respond Thu, 24 Jun 2021 18:50:24 +0000 https://www.universalcargo.com/?p=10398 It’s a classic case of good news, bad news. After Tuesday’s bad news blog about Yantian Port’s partial shutdown lingering and creating a “worse-than-Suez” level of international shipping disruption, it’s nice to have some good news on the topic to report today. Good News: Yantian Port, one of the busiest ocean freight ports in China, […]

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It’s a classic case of good news, bad news.

Man Looking Up at Shipping Containers

After Tuesday’s bad news blog about Yantian Port’s partial shutdown lingering and creating a “worse-than-Suez” level of international shipping disruption, it’s nice to have some good news on the topic to report today.

Good News: Yantian Port, one of the busiest ocean freight ports in China, is back to full operation today (Thursday, June 24th). This, according to Greg Knowler and Keith Wallis of the Journal of Commerce (JOC):

Shenzhen’s Yantian International Container Terminals (YICT) will resume full operations early Thursday, but the huge backlog of boxes stacked up during four weeks of severe congestion will need to be flushed out on top of growing peak-season demand.

That’s right, we couldn’t even make it through the first sentence of Knowler and Wallis’s article before getting to bad news.

Bad News: Yantian’s congestion and backlog of shipping containers as well as cluster of container ships waiting at anchor will take some time to clear.

Good News: Chinese ports are more efficient than U.S. ports, where dockworker unions have effectively fought against modernization and automation, allowing for quicker clearing of congestion there than is possible at ports like Los Angeles, Long Beach, and New York.

Bad News: International shipping’s peak season is in full swing. Increasing demand on already higher-than-normal demand for goods from China to the U.S. will make it harder for Yantian Port to recover quickly.

Good News: Nearby ports – like the Ports of Hong Kong, Shekou, and Nansha – can help lighten the load for Yantian Port.

Bad News: While sharing Yantian’s load, these other ports also share in suffering congestion. Knowler and Wallis report:

“Yantian is one of the most important gateway hubs globally, and the ripple effect of the partial closure of the port has led to port congestion in nearby ports, such as Nansha, Shekou, and Hong Kong,” [a Maersk China spokesperson] said.

Good News: Shippers are learning the lesson to diversify their product sourcing.

Universal Cargo CEO Devin Burke went to High Point Market earlier this month, where those in the furniture industry gather. It’s a chance to mingle with furniture importers, more than a few of whom are Universal Cargo clients. Mr Burke told me about conversations he had with those in the furniture industry who have diversified sourcing that previously leaned heavily on China. Importing from Mexico, thanks in no small part to USMCA replacing NAFTA, is a popular alternative. Sourcing and shipping furniture domestically is another choice growing in popularity, as sky-high freight rates from China are dissolving import savings over U.S. manufacturing. Burke highlighted one conversation in which a furniture importer said he stopped shipping from China altogether.

Bad News: Port congestion in China will intensify and prolong the peak season as it takes weeks to clear.

Knowler and Wallis quote John Painter, CEO of Guangzhou Port America, as saying, “The backlog of containers will surely cause a more intense peak season…” That was followed immediately by Painter, too, talking about shippers (and carriers) diversifying their supply chains: “… but I truly believe shippers as well as carriers have learned a valuable lesson — to diversify ports not only at destinations, but at origin ports as well, which helps balance out and protect the supply chain.”

Good News (if you’re an ocean freight carrier): Freight rates are continuing their meteoric rise.

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Bad News (if you’re a shipper): Freight rates are continuing their meteoric rise.

This is kind of like the old Good Idea, Bad Idea sketch from the 90’s cartoon Animaniacs where “playing catch with your grandfather” was both the good and bad ideas.

Yes, freight rates continuing to rise is both good and bad news. It just depends on your perspective. Of course, for most of us, our perspective makes it bad news. That’s because most of us are shippers rather than ocean freight carriers.

Freight Rates to the Moon

Greg Miller lays out the out-of-this-world freight rates we’re seeing right now in an American Shipper article:

The trajectory of trans-Pacific spot rates brings to mind the retail-trader catchphrase “to the moon.” Index rates (which do not include premium charges) have just crossed the line into five figures per day.

Carriers implemented general rate increases (GRIs) on June 1. Spot rates rose. They enacted more GRIs on June 15. Rates jumped again. Another wave of GRIs is set for July 1 and more have just been announced for July 15. Add fallout from China port congestion to the mix, and it’s a recipe for rates to keep climbing.

Miller reports the indices on freight rates from Asia to the U.S., and, of course, we’re seeing new heights:

Asia to U.S. East Coast

On June 15, the day carrier GRIs were implemented, the Freightos Baltic Index daily assessment for Asia-East Coast jumped 7%. It kept rising after that, reaching an all-time high of $10,104 per FEU by the end of the week — the first time this route index breached $10,000. As of June 22, it was at $10,002 per FEU assessment, up 205% year on year (y/y).

S&P Global Platts provides daily assessments of Freight All Kinds (FAK) rates. Its North Asia-East Coast FAK assessment was $7,100 per FEU on June 22.

Drewry released its latest weekly rate assessment for the Shanghai-New York route on June 17: $8,017 per FEU, up 195% y/y.

Asia to U.S. West Coast

The Freightos Baltic Index daily assessment for Asia-West Coast also jumped after the latest round of GRIs. By June 22, it was at a new all-time high of $6,681 per FEU, up 160% y/y.

Drewry’s latest weekly rate for Shanghai-Los Angeles was $6,358 per FEU, up 197% y/y. S&P Global Platts’ daily North Asia-West Coast FAK assessment for June 22 was $5,800 per FEU.

Universal Cargo Is Here to Help

Universal Cargo is always ready to help you with your importing (and exporting). Whether you’re weathering the storm of high freight rates through continued importing from China or diversifying your sourcing, shipping from other countries or even going with domestic manufacturing and shipping, contact Universal Cargo today.

Click Here for Free Freight Rate Pricing

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What’s Disrupting International Shipping Now? https://www.universalcargo.com/whats-disrupting-international-shipping-now/ https://www.universalcargo.com/whats-disrupting-international-shipping-now/#respond Tue, 22 Jun 2021 18:06:30 +0000 https://www.universalcargo.com/?p=10397 Our last post was an excellent guest article by Jake Rheude about being ready for the next Suez-Canal-level-disruption to the global supply chain, and your business's supply chain in particular. While the fallout from the Ever Given blocking the Suez Canal for a week is still being felt, the next Suez-level disruption is already here. Actually, this event is being widely dubbed as worse-than-Suez in terms of ship delays and overall international shipping disruption.

A COVID-19 outbreak caused one of China's busiest ports, Yantian Port, to partially close late last month. At the time, it was supposed to be no big deal. The partial shutdown was to be extremely short, resulting in a small backup that would quickly be caught up. Unfortunately, that's not how things turned out.

Read the full post in Universal Cargo's blog to see how badly things have turned out and more.

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Our last post was an excellent guest article by Jake Rheude about being ready for the next Suez-Canal-level-disruption to the global supply chain, and your business’s supply chain in particular. While the fallout from the Ever Given blocking the Suez Canal for a week is still being felt, the next Suez-level disruption is already here. Actually, this event is being widely dubbed as worse-than-Suez in terms of ship delays and overall international shipping disruption.

Partial Port Shutdown in China

shipping containers at port

A COVID-19 outbreak caused one of China’s busiest ports, Yantian Port, to partially close late last month. At the time, it was supposed to be no big deal. The partial shutdown was to be extremely short, resulting in a small backup that would quickly be caught up. Unfortunately, that’s not how things turned out.

Supply Chain Brain published a Bloomberg article four days ago about how the partial shutdown has carried on:

When one of China’s busiest ports announced it wouldn’t accept new export containers in late-May because of a COVID-19 outbreak, it was supposed to be up and running again in a few days. But as the partial shutdown drags on, it’s further snarling trade routes and lifting record freight prices even higher.

Yantian Port now says it will be back to normal by the end of June, but just as it took several weeks for ship schedules and supply chains to recover from the vessel blocking the Suez Canal in March, it may take months for the cargo backlog in southern China to clear while the fallout ripples to ports worldwide.

If you’re hoping the situation has changed since Friday, I’m sorry to be the bearer of bad news. Costas Paris reported yesterday in the Wall Street Journal (WSJ):

Shipping executives say around 50 container ships remain backed up around the Yantian port in Southern China and that some 350,000 loaded containers are stacked up on docks as the major gateway for China goods heading to Western nations struggles to recover from a Covid-19 outbreak that disrupted operations there.

I guess there is at least a little bit of good news. Later in the WSJ article, Costas does report:

Officials at Yantian say cargo-hauling operations that normally handle about 36,000 containers a day are back to 70% of capacity, from 30% earlier this month. But the vessel queue is so long that liner operators are diverting their ships to nearby ports that are also swamped with containers.

Ships at Anchor

The article also sites marine data provider Alphaliner as saying the ocean freight carrier Hapag-LLoyd stated (yes, that’s a pretty long line of sourcing) that there are around 50 ships waiting to call at Yantian Port, and that number is down from 70 ships waiting to call on the port last week. Despite a very significant drop in waiting ships, 50 is an incredible large number of ships to have backed up and sitting at anchor.

To put that number in some perspective, back in January, we were talking about the horrible port congestion and container ship backup at the Ports of Los Angeles and Long Beach having 37 ships waiting at anchor, well-surpassing the horrendous congestion we saw there during the 2014-15 contentious ILWU contract negotiations, when ships waiting at anchor topped out at 28. Half a year later, the congestion at the U.S. West Coast ports, including Los Angeles and Long Beach, is still not cleared up.

Chinese ports do tend to be more efficient than U.S. ports, so hopefully, clearing the congestion at Yantian will go much quicker than clearing the congestion here. Still, we’re right now in the peak season for shipping from China to the U.S. That means this partial shutdown of one of China’s busiest ports really couldn’t have come at a worse time.

With Yantian Port wait times for ships last week averaging 16 days, according to the Bloomberg article in Supply Chain Brain, ships are being diverted to other (incredibly busy) ports in China. Ultimately, this is just the congestion spreading.

According to the article on Friday, “There are currently 139 container vessels anchored off the coast of China, about 50% more than the average from mid-April to early May, according to Bloomberg analysis of vessel data.” Of course, this congestion is rippling from China to the U.S., where – as already mentioned – we’re already dealing with severe congestion.

For U.S. businesses that import goods, this is all the more reason to look at sourcing options to diversify the obtaining of goods and other ways to protect themselves against supply chain disruptions. In Universal Cargo’s blog, we’ll continue to share ways businesses can do just that.

Click Here for Free Freight Rate Pricing

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Could This Move Disrupt the Ocean Shipping Business? https://www.universalcargo.com/could-this-move-disrupt-the-ocean-shipping-business/ https://www.universalcargo.com/could-this-move-disrupt-the-ocean-shipping-business/#respond Tue, 15 Jun 2021 23:32:55 +0000 https://www.universalcargo.com/?p=10394 An intriguing story broke in the international shipping industry at the start of this week. A shipper made a move that has the potential to be disruptive to ocean carriers, who run the world's ocean freight industry.

Greg Miller reported in an American Shipper article:

One of America’s largest retailers, Home Depot (NYSE: HD), has just reserved a ship for its sole use.

Yes, it's just one shipper reserving one ship. The length of time the ship is reserved for is unknown, along with other details like the ship's name or if Home Depot is working with a freight forwarder intermediary, according to the article. However, this move makes it clear that things can't continue as they have been when it comes to ocean freight carriers' services and the freight rates they're charging.

Miller writes, "The move underscores just how tight trans-Pacific capacity has become and how worried retailers are about getting goods on shelves at any cost." I think it underscores more than that.

Find out more by reading the full post in Universal Cargo's blog.

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An intriguing story broke in the international shipping industry at the start of this week. A shipper made a move that has the potential to be disruptive to ocean carriers, who run the world’s ocean freight industry.

Home Depot Container Ship

Greg Miller reported in an American Shipper article:

One of America’s largest retailers, Home Depot (NYSE: HD), has just reserved a ship for its sole use.

Yes, it’s just one shipper reserving one ship. The length of time the ship is reserved for is unknown, along with other details like the ship’s name or if Home Depot is working with a freight forwarder intermediary, according to the article. However, this move makes it clear that things can’t continue as they have been when it comes to ocean freight carriers’ services and the freight rates they’re charging.

Miller writes, “The move underscores just how tight trans-Pacific capacity has become and how worried retailers are about getting goods on shelves at any cost.” I think it underscores more than that.

Freight Rates Are Too High

First, freight rates are too damn high. I don’t know how many articles I’ve written over the last year specifically about or containing sections about record freight rates, soaring freight rates, or fees and premiums shippers are being hit with. I do know that I could be writing another one of those articles right now. As a matter of fact, on Friday, Miller, who wrote the article about Home Depot chartering a ship exclusively for their own cargo, wrote yet another article about freight rates skyrocketing to new record heights, with upward rate momentum accelerating.

He reported there had been about a 20% surge in Asia to East Coast freight rates per FEU (forty-foot equivalent units) over the previous few days, resulting in the highest freight rates ever and a 224% increase year on year. His source on that was Freightos. He also shared S&P Global Platts daily assessment from the day before (Thursday) that North Asia to U.S. East Coast rates on Freight All Kinds (FAK) was up 152% year on year.

For Asia to West Coast, Freightos showed freight rates per FEU to be up 194% year on year and S&P Global Platts’ North Asia to West Coast North America FAK rates to be up 172% year on year, according to Miller’s American Shipper article.

Perhaps the most alarming moment in the article was the following:

“We haven’t seen the worst of it — $20,000 [per FEU] all-in rates to the East Coast are coming,” predicted Steve Ferreira, CEO and founder of Ocean Audit.

This is just more bad news for shippers, who are more than tired of seeing freight rates hit new record highs. It’s also bad news U.S. consumers, who are already dealing with inflation; higher freight rates add to that by forcing retailers to charge more for goods in order to remain profitable.

Profitability isn’t a problem for carriers – at least not anymore. While ocean freight carriers used to struggle with profitability, these incredibly high freight rates they’re charging are helping them have record-breaking revenue. Carriers are making billions.

However, I’ve been saying that carriers can’t push freight rates much higher without serious backlash from shippers. In fact, there already has been some backlash for a while from shippers, who, last year, accused carriers of profiteering off the pandemic. Home Depot making the move to get their own ship is, however, a sign of a bigger backlash that could be costly for carriers.

Carrier Reliability Is Abysmal

While carriers have been charging much more for shipping goods around the world, their services have not improved. In fact, carrier reliability has gotten worse.

Let’s face it, ocean freight carriers have never been known for their reliability. However, since the pandemic hit, carrier reliability fell to new lows. Back in December, I got into this issue in a blog post about carriers introducing “slidings” to apparently improve in this area:

Last month, Asia to U.S. container ships failed to arrive on time over 70% of the time. Worldwide, ocean freight carriers only had their container vessels on schedule about half the time. Those stats comes from a Sea-Intelligence service reliability index cited in a Bloomberg article I quoted in our last blog post, warning shippers, especially U.S. importers, to expect delays and fees.

Not all of that is the carriers’ fault. Severe port congestion is a major factor in making ships late. Of course, carriers also played a role in creating the congestion with their shifting to bigger and bigger ships and blanking (cancelling) hundreds of sailings last year, which helped create container shortages (and directly decreased reliability) that contribute even now to congestion. However, carriers aren’t responsible for shipping demand creating a year of near record to record volumes.

Of course, it’s not just a question of ships not arriving on times. Shippers are often struggling with getting space at all for their cargo on sailings.

Will Other Shippers Follow Home Depot’s Lead?

After facing these horrific services and historic freight rates (even though Home Depot would deal more in the direct contract space with carriers than the spot rate market), Home Depot has decided it’s better for its business to go out and get a whole ship devoted solely to its goods. That’s a significant investment, especially as getting ships isn’t particularly easy or cheap during this surge in shipping we’ve been seeing over the last year.

Home Depot, of course, must think the cost is worth it. The question is whether other shippers will do or try to do likewise.

Obviously, a move like this would not be an option for small to medium shippers. However, the actions of the big shippers would likely have an impact on the smaller ones. If your Best Buys, Walmarts, and Targets of the world decided to move away from the carriers with large quantities of their goods being sailed on ships of their own, carriers would feel the impact. To induce shippers to keep more goods with them, carriers would need to improve upon the rates and reliability/service they offer.

Such a loss in cargo volume to carriers, as a decrease in demand is wont to do, should create downward pressure on rates regardless of carrier attempts to woo back their biggest customers. Such downward freight rate pressure should trickle to the medium and small shippers. But what could be even more interesting than that is if the large shippers, chartering their own ships, started selling some of their space to smaller shippers – not that Home Depot is doing that.

If such trends as BCOs getting their own ships and selling space on them were to actually happen, it could be devastating for carriers. The potential for disruption to the ocean freight carriers’ business is substantial. When businesses in an industry operate in a self-first fashion, increasing prices while decreasing service, eventually, customers will find alternate options. Carriers should consider what’s happening – as well as potentialities – carefully.

Click Here for Free Freight Rate Pricing

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Imports to Dramatically Slow in 2022 https://www.universalcargo.com/imports-to-dramatically-slow-in-2022/ https://www.universalcargo.com/imports-to-dramatically-slow-in-2022/#comments Thu, 10 Jun 2021 22:00:53 +0000 https://www.universalcargo.com/?p=10392 The Journal of Commerce (JOC) published a very interesting article by Larry Gross. Gross is president and founder of Gross Transportation Consulting and a JOC analyst. Despite the dramatic growth we've seen in cargo volume since the lockdowns and government stimuli helped nurture heavy increases in consumer spending – especially online shopping – Gross says when we look at 2021 versus 2020, we won't actually see dramatic growth in imported cargo volume. That goes against what I'd say most in the international shipping industry have been assuming. Additionally, Gross says we can expect much slower growth in 2022 and beyond.

I've been known to run counter to several – certainly not all – expert predictions about how cargo demand and the international shipping industry will perform. However, Gross's predictions line up with the predictions I've been making over this last year much more than any expert analysis I've seen. He opens his article with:

"While the current surge in import TEUs is of historic proportions, when the books are closed on 2021, the gains versus the prior year will not look nearly as strong, and will more closely resemble the gains seen in the year after the Great Recession."

Find out more by reading the full post in Universal Cargo's blog.

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The Journal of Commerce (JOC) published a very interesting article by Larry Gross. Gross is president and founder of Gross Transportation Consulting and a JOC analyst. Despite the dramatic growth we’ve seen in cargo volume since the lockdowns and government stimuli helped nurture heavy increases in consumer spending – especially online shopping – Gross says when we look at 2021 versus 2020, we won’t actually see dramatic growth in imported cargo volume. That goes against what I’d say most in the international shipping industry have been assuming. Additionally, Gross says we can expect much slower growth in 2022 and beyond.

2021 Vs. 2020

I’ve been known to run counter to several – certainly not all – expert predictions about how cargo demand and the international shipping industry will perform. However, Gross’s predictions line up with the predictions I’ve been making over this last year much more than any expert analysis I’ve seen. He opens his article with:

While the current surge in import TEUs is of historic proportions, when the books are closed on 2021, the gains versus the prior year will not look nearly as strong, and will more closely resemble the gains seen in the year after the Great Recession.

The reason this runs counter to so many people’s thinking about 2020 versus 2021 is that in the first part of 2020, in the early days of the pandemic, there was actually a decrease in cargo volume. Fear struck the industry, as fear was pushed through society as a whole, with predictions that carriers would lose billions of dollars. Thus, carriers blanked (cancelled) sailings at a dizzying pace. Cargo volume never dropped as low as carriers expected, with them sinking capacity well below market demand; however, even as July hit, the rumor was that 2020 would have no peak season. I disagreed, predicting there would be a peak season, though I predicted lower-than-normal peak season volumes, saying, “It is unlikely volume numbers will be anywhere near as high as they would have been had the novel coronavirus pandemic not struck.” I was right about the former but very wrong about the latter.

2020 had an enormous peak season, and import cargo volume has remained at near-record to record levels ever since. With extremely high volume from the start of 2021, unlike the early parts of 2020, it makes sense that most in the industry would think 2021 would greatly outpace the previous year. Gross isn’t saying there won’t be growth seen in the numbers, only that growth won’t look nearly as strong as it would seem.

Why 2021 Might Not Be as Comparatively Big as We Thought

In my 3 predictions for the 2021 peak season, I said not only is the peak season going to be early this year but that it was likely already here (which seems to have turned out true with Universal Cargo’s numbers showing about a 27% jump in shipments last month and another 23% jump here in June). Along with that, I predicted we could see the peak season end early as well. The peak season ending a little early this year (if that prediction also comes true) paired with carriers having to blank many sailings during this current volume boom because of port congestion, failing to keep up with demand – as Greg Miller talks about in an American Shipper article – could contribute to less dramatic growth than expected. However, there’s much more than that happening.

Gross’s reference above to the Great Recession or the 2008 Recession is an apt one. Growth is expected, almost impossible to avoid, after a recession. However, the recovery in 2009 and beyond was incredibly slow, with job growth and unemployment numbers turning out to be not just lower than expected but abysmally so after President Obama took office. Sound familiar with reporters having to double check job growth numbers live on air because of how incredibly short April’s final job growth numbers fell of expectations here in President Biden’s first several months in office? When Louis Woodhill examined the data from the Great Recession’s recovery, comparing it to other recession recoveries, in a 2012 Forbes article, he concluded “Obama wins the gold for worst economic recovery ever.”

With very similar policy philosophies between the Obama and Biden administrations, we could easily be at the beginning of a similarly poor recovery. I’ve gone so far as to say in Universal Cargo’s blog that a crash in cargo volume is likely coming with all the businesses and jobs that have been lost to the lockdowns eventually catching up with us, incredibly high government spending that will factor into inflation (which we’re already seeing), further jobs lost and gas prices increased by President Biden’s attack on the oil industry with moves like cancelling the Keystone XL Pipeline, all while the administration pushes for higher taxes, more regulation, and more spending. These economic factors could have a very negative impact on recovery.

Gross’s Analysis – Current Recovery & the Great Recession’s

Gross expects recovery from the coronavirus-pandemic-caused recession to be similar to those of the 2008 Recession:

A review of past performance for the years after the big year of recovery suggests dramatically slower growth in the future. Further, there is good reason to expect that the gains this time will trail those we have previously seen.

Gross doesn’t give the “good reason” why this recovery should behave similarly to that from the Great Recession. Perhaps his reasoning is in line with whaat I wrote above or perhaps he has other reasons. Either way, Gross does lay out clear expectations with charts to illustrate what he’s saying. Here’s the analysis he gives:

The first chart examines the import TEUs arriving in the ports of the US and Western Canada since the start of 2017. It portrays the TEUs per working day received each month. This approach removes a substantial amount of month-to-month volatility, which is a statistical artifact resulting purely from calendar effects.

We can see that in August of 2020, import TEUs shifted into a higher gear than has previously been seen. Activity has subsequently been sustained at roughly the same level. As we compare this period with prior years, we can see that not only has volume been strong, but also unnaturally stable. You normally don’t get six months of activity remaining within such a narrow range. Only February showed much differential, and we can easily attribute that to the polar vortex and associated operational disruptions.

Such flat activity suggests that the system has been bumping into its capacity ceiling. Barring new capacity being brought online or major improvements in velocity, there is little reason to expect this situation will radically change in the coming months. This implies that year-on-year gains are going to shrink dramatically come August no matter how strong demand is.

As shown in the second chart, the first four months of 2021 have produced an outsized 27.8 percent gain versus the prior year, which dwarfs 2020’s pandemic-impacted volumes. The last nine months have been exceptional by any measure. The gain has been over 20 percent versus the prior year (third chart). But how meaningful is this?

In 2010, import TEUs climbed 17.1 percent for the full year as we recovered from the Great Recession downturn the previous year. Subsequent years showed gains of less than 5 percent. If we assume that import TEUs continue to arrive at the same rate that they were received in April, then for the year 2021, we will see a gain for the year of slightly over 15 percent versus 2020. Will history repeat?

From 2010 through 2019, the last “normal” year, import TEUs grew at a compound annual growth rate of 4.5 percent. Volume has grown faster than GDP as a result of continuing offshoring activity. Importantly, this differential implies the continuing flow of jobs overseas. Given the current tensions with China and the disruptions importers are currently dealing with, offshoring additional products and economic activity perhaps isn’t the “no-brainer” that it used to be.

If the situation simply stabilizes, then import TEU growth rates won’t exceed that seen in the goods portion of GDP. In other words, it doesn’t take “near-shoring” or “reshoring” to produce dramatically slower import growth. It simply requires an end to the flow of new activity overseas.

Caution is therefore indicated when looking at the durability of the current surge. Activity will likely be buoyed by continuing strong economic growth. But there is little reason to expect that the current torrid pace will continue as we move into 2022 and beyond.

Universal Cargo has no affiliation with the JOC nor do they pay us or in any way request endorsement, but articles like this one from Larry Gross make a subscription to the JOC worth it.

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Carriers Pause Transpacific Calls to Port of Oakland https://www.universalcargo.com/carriers-pause-transpacific-calls-to-port-of-oakland/ https://www.universalcargo.com/carriers-pause-transpacific-calls-to-port-of-oakland/#respond Tue, 08 Jun 2021 23:06:58 +0000 https://www.universalcargo.com/?p=10386 In the midst of an early peak season and port congestion, carriers suspend containership calls to the Port of Oakland, according to Bill Mongelluzzo's reporting in the Journal of Commerce (JOC):

Two more trans-Pacific carriers have joined Zim Integrated Shipping Services in suspending some of their calls to Oakland due to congestion as port staff meets with terminal operators and the longshore union to expedite the hiring and training of additional dockworkers.

It may seem odd that while we're seeing record imports to West Coast ports – at least what are believed will be record imports when the final official numbers are tallied – that carriers would remove any calls or services to ports there. However, these decisions are not about the demand but the congestion.

Find out more by reading the full post in Universal Cargo's blog.

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In the midst of an early peak season and port congestion, carriers suspend containership calls to the Port of Oakland, according to Bill Mongelluzzo’s reporting in the Journal of Commerce (JOC):

Hapag-Lloyd Ship

Two more trans-Pacific carriers have joined Zim Integrated Shipping Services in suspending some of their calls to Oakland due to congestion as port staff meets with terminal operators and the longshore union to expedite the hiring and training of additional dockworkers.

It may seem odd that while we’re seeing record imports to West Coast ports – at least what are believed will be record imports when the final official numbers are tallied – that carriers would remove any calls or services to ports there. However, these decisions are not about the demand but the congestion.

Reasons for Port Congestion at Oakland

Last month, in a blog post giving three predictions for this peak season, the Port of Oakland surpassing the Ports of Los Angeles and Long Beach in terms of congestion was talked about. That post didn’t get into why the Port of Oakland, in particular, has had such an uptick in congestion over the ports in the San Pedro Bay. However, one of the reasons is alluded to in the above quote from Mongelluzzo’s article.

Labor Shortage & the ILWU

The Port of Oakland has been experiencing a labor shortage, Mongelluzzo reports. He says that labor shortage has been exposed by the spike in imports this year.

It’s important to note that dockworker jobs on the West Coast are tightly controlled by the International Longshore & Warehouse Union (ILWU). The ILWU is a very powerful union that fights against port and terminal automation. Dockworker unions at all U.S. coasts thwarting port modernization has contributed to making U.S. ports fall behind other ports around the world in terms of productivity. Universal Cargo CEO Devin Burke listed this as one of the causes for port congestion we’ve been seeing, which in turn he lists as a contributing factor to the incredibly high freight rates we’ve been seeing. You can learn more about that in our blog titled COVID-19 Did Not Cause These High Freight Rates.

Berth Closure to Install Bigger Cranes

Mongelluzzo did not get into unions holding back U.S. port productivity as a cause for the current congestion at the Port of Oakland. He did, however, share another “major issue” that he points as one of two (the labor shortage being the first) responsible for the congestion and vessel backlogs:

The port’s largest terminal, Oakland International Container Terminal, which handles about 75 percent of the port’s total container volume, lost one of its four berths in January with the arrival of three new super post-Panamax cranes. The berth was out of commission while the cranes were being installed and tested. The cranes were commissioned on May 27 and vessel calls resumed that day.

As you might have spotted as a motif in recent Universal Cargo blog posts, this issue isn’t some isolated event. There were years of lead-up to the Port of Oakland needing to bring in these giant cranes.

Carriers’ Megaships’ Mega-Impact

Ultimately responsible for the port needing bigger cranes are the ocean freight carriers. They became obsessed with bigger and bigger ships, despite the fact that these megaships weren’t good for anyone else in the international shipping industry. Some experts even argued as carriers were putting ships as long as skyscrapers are high on the water that the megaships weren’t even good for the carriers. Of course, it’s not hard to see why carriers liked the bigger ships.

Bigger ships could save carriers money on fuel efficiency as they move extremely large quantities of shipping containers in fewer sailings across the ocean. But carriers’ push for bigger ships forced heavy costs to ripple through the rest of the industry. The Panama Canal underwent a massive expansion project, which had a serious issue with ships hitting its walls right after the canal was expanded. Ports had to deepen their waters and, like the Port of Oakland, install bigger cranes to handle the bigger ships. Shippers had to deal with more risk, unable to mitigate by spreading their cargo out on multiple ships like they were previously able to do. And, of course, there have been congestion issues ever since carriers started delivering so many containers to ports at one time on single ships.

Call Suspension Details

Universal Cargo’s blog has talked enough about how the increased cargo over the last year helped congestion reach incredible levels. Efforts to move some cargo volume from the overwhelmed Ports of Los Angeles and Long Beach to the Port of Oakland has not yielded relief. Since the congestion at the Port of Oakland has gotten even worse than that at the Ports of Los Angeles and Long Beach, it makes some sense that carriers are pulling away from it.

Here are the rest of the details on the carriers removing calls from the Port of Oakland, courtesy of Mongelluzzo and the JOC:

A spokesman for Hapag-Lloyd told JOC.com Monday that later this month the carrier will drop its trans-Pacific westbound calls in Oakland, with the plan being to return those services to the Northern California port around mid-August if the congestion now vexing the gateway is cleared.

Also, according to schedules posted on the website of CMA CGM, some trans-Pacific Oakland calls were dropped last month, and some others scheduled through August will be omitted.

Zim announced last week that Oakland was being dropped from its expedited North China to West Coast service due to congestion issues at the Northern California port. That service will continue to call in Los Angeles, which has also experienced congestion problems this year.

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You Won’t Believe How Many Shipping Containers Were Lost to the Pacific Ocean Last Winter https://www.universalcargo.com/you-wont-believe-how-many-shipping-containers-were-lost-to-the-pacific-ocean-last-winter/ https://www.universalcargo.com/you-wont-believe-how-many-shipping-containers-were-lost-to-the-pacific-ocean-last-winter/#respond Fri, 04 Jun 2021 01:26:39 +0000 https://www.universalcargo.com/?p=10385 This is staggering. Over 3,000 shipping containers fell into the Pacific Ocean last winter, Tim Lydon reports in the Revelator. We're not talking about all shipping containers lost throughout the world over the full course of 2020. We're just talking about shipping containers that fell off transpacific containerships from Asia to the U.S during the winter of 2020.

After a few paragraphs about the megaship ONE Apus's massive loss of containers when it was hit by a storm on its way from China to Los Angeles, Lydon writes:

"It was also only one of at least six spills since October that dumped more than 3,000 cargo containers into the Pacific Ocean along shipping routes between Asia and the United States. They include the loss of 100 containers from the ONE Aquila on Oct. 30 and 750 containers from the Maersk Essen on Jan. 16. Both ships encountered rough weather while delivering goods to the United States."

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This is staggering. Over 3,000 shipping containers fell into the Pacific Ocean last winter, Tim Lydon reports in the Revelator. We’re not talking about all shipping containers lost throughout the world over the full course of 2020. We’re just talking about shipping containers that fell off transpacific containerships from Asia to the U.S during the winter of 2020.

CV ONE Apus

After a few paragraphs about the megaship ONE Apus’s massive loss of containers when it was hit by a storm on its way from China to Los Angeles, Lydon writes:

It was also only one of at least six spills since October that dumped more than 3,000 cargo containers into the Pacific Ocean along shipping routes between Asia and the United States. They include the loss of 100 containers from the ONE Aquila on Oct. 30 and 750 containers from the Maersk Essen on Jan. 16. Both ships encountered rough weather while delivering goods to the United States.

Various Dangers to Cargo at Sea

Cargo faces many dangers at sea.

We posted a couple blogs about the ONE Apus back in December of last year. In the last blog about it, we shared WK Webster & Company’s drone footage that had been posted on Youtube, showing massive shipping container stacks that had fallen over on the ship. It’s obvious that many containers from those toppled stacks are missing altogether. In case you missed it, here’s the video:

YouTube Video

I’m pretty sure neither the Maersk Essen nor the ONE Aquila made Universal Cargo’s blog (before now). It’s not uncommon for us to blog about major accidents with containerships, as the loss of cargo (and sometimes worse – the loss of life) has an obvious impact on shippers. However, it would be impossible, only publishing two blogs a week (usually), for us to cover every containership accident, hijacking, or loss that happens throughout the year while still keeping shippers informed on the most important news stories in international shipping.

Sometimes, these accidents are the biggest news stories impacting shippers’ importing and exporting. After all, it was just a couple months ago Evergreen’s megaship the Ever Given turned sideways and ran aground in the Suez Canal. There was worry the canal could be blocked for weeks. Luckily, workers were able to get the ship free within about a week. Still, congestion rippled from the Suez Canal to ports around the world at a time when port congestion was already a major problem in many places, but especially at U.S. ports. Shippers are still dealing with and paying for the fallout of the Ever Given damming the Suez Canal. That was such a big story, mainstream media picked it up and Lydon even made mention of the Ever Given incident at the top of his Revelator article despite the fact that it in no way contributed to the 3,000 plus shipping containers that ended up in the Pacific Ocean last winter, which is what his article was about.

A few years ago, there had been such an uptick in fires on containerships, we had to do a blog harping on the need for better container content verification in the international shipping industry. One of the problems causing fires on the ships was undeclared or misdeclared hazardous materials. Not only has this problem put the cargo of other shippers at risk, but it has also cost sailors their lives.

Luckily, no seamen lost their lives when ONE Apus lost all those containers in a storm. Unfortunately, crews of ships are not always so lucky. In 2015, we blogged about the El Faro, a cargo ship that was lost during Hurricane Joaquin, only to be found a month later at the bottom of the sea. Its 33 crew members, and less importantly but not insignificantly 391 shipping containers, were all lost.

We haven’t blogged about it in quite some time, but piracy is still a danger to ships, their cargo, and crew on international waters. There are also the more mundane dangers to cargo like being damaged while moving or damage caused by extreme temperature changes or exposure to salt water or humidity, or even misplaced shipping containers…

Risk to Cargo Increased With Bigger Ships

In 2013, when carriers had full-scale bought into the fad of megaships, I wrote a Universal Cargo blog article titled Megalomania: Who Really Benefits from the Megaship Craze? Experts were starting to come out and question the wisdom of these larger and larger ships at that time, and I found myself agreeing that these enormous ships weren’t really good for the industry.

Worries about ridiculously more cargo being carried on single ships immediately raised risk concerns. Pairing these behemoth ships with carrier alliances really made it impossible for shippers to spread their cargo risk out on various ships. When Hanjin, a major ocean freight carrier, went bankrupt in 2016, fears were realized as not only Hanjin-shipped cargo but cargo chartered with their alliance partner carriers got stuck at sea.

Supposedly, carrier alliances have done work to guard against everyone’s cargo getting frozen because one member goes down, but we’ve continued to see the risks of these megaships come to fruition. Never before the ONE Apus had over 1,800 shipping containers fallen from a ship to the sea at one time – and that doesn’t even mention the hundreds of other containers that were damaged in the collapse of the stacks.

Unfortunately, large scale damage, loss, and severe delay have become more and more prevalent in the international shipping industry.

Cargo Insurance Is a Must

I needn’t belabor this point. All those dangers highlighted in the last sections make it clear how important cargo insurance is for shippers.

Unfortunately, many shippers try to get around properly insuring their goods. I can understand this. When I rent a car, I often opt out of the insurance to save money, figuring I won’t need it and my own insurance will suffice if necessary. The wisdom of this with car rentals is debatable, but there’s no debate when it comes to international shipping.

Always make sure your cargo is properly insured. Yes, that’s something Universal Cargo is here to help you with you too.

Click Here for Free Freight Rate Pricing

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Rail Shrinking Free Time to Fight Congestion – Shippers Pay the Price https://www.universalcargo.com/rail-shrinking-free-time-to-fight-congestion-shippers-pay-the-price/ https://www.universalcargo.com/rail-shrinking-free-time-to-fight-congestion-shippers-pay-the-price/#respond Tue, 01 Jun 2021 20:13:46 +0000 https://www.universalcargo.com/?p=10384 One of the factors adding to port congestion is backups with getting shipping containers onto trains. Railroads point to inland supply chain constraints, such as shortages of chassis at inland terminals, as the problem. In an attempt to solve the problem, railroads have decided to decrease free time at inland terminals. I can't imagine any U.S. shippers being happy about the decision.

Ari Ashe reports in the Journal of Commerce (JOC):

"US Class I railroads on both coasts are tightening free time to speed the pickup of record import volumes flowing through their busiest terminals. The moves will narrow the window on many domestic and international shippers and is meant to encourage quicker turns of containers and chassis to relieve congestion on inland rail ramps.

"Just two weeks after Norfolk Southern Railway (NS) tightened its free time clock at several of its busiest terminals, BNSF Railway (BNSF) said it will eliminate the so-called 5:00 p.m. cutoff for calculating free time at all its facilities, effective June 7.

...

"In some cases, BNSF’s new policy will eliminate one free day to pick up cargo."

Read the full post in Universal Cargo's blog to learn more.

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One of the factors adding to port congestion is backups with getting shipping containers onto trains. Railroads point to inland supply chain constraints, such as shortages of chassis at inland terminals, as the problem. In an attempt to solve the problem, railroads have decided to decrease free time at inland terminals. I can’t imagine any U.S. shippers being happy about the decision.

Ari Ashe reports in the Journal of Commerce (JOC):

US Class I railroads on both coasts are tightening free time to speed the pickup of record import volumes flowing through their busiest terminals. The moves will narrow the window on many domestic and international shippers and is meant to encourage quicker turns of containers and chassis to relieve congestion on inland rail ramps. 

Just two weeks after Norfolk Southern Railway (NS) tightened its free time clock at several of its busiest terminals, BNSF Railway (BNSF) said it will eliminate the so-called 5:00 p.m. cutoff for calculating free time at all its facilities, effective June 7. 

In some cases, BNSF’s new policy will eliminate one free day to pick up cargo.

More Fees for Shippers

If there’s a way for shippers to pay more for importing goods over the last year, they’ve done it. Freight rates have skyrocketed. Cargo delays have piled up as carrier reliability hit abysmal lows and port congestion has been severe. Trucking prices have increased while shippers have been plagued by a lack of available trucks. Shippers have been hit with unfair demurrage and detention fees and ridiculous no-roll premiums. Rail prices have also increased. Now, shippers have to worry about more fees at inland rail terminals because of the tightening of free time there.

Ashe writes in the JOC article:

BNSF’s decision may cause shippers to be billed more storage, or demurrage, fees and place additional pressure on trucking companies to pull containers faster. 

BNSF is not the only Class I railroad to tighten the window. NS tightened its free time clock on May 15 from two days to one day at all Tier 1 terminals, including Atlanta, Chicago, Cincinnati, and Kansas City. Citing a lack of chassis in Detroit, Louisville, Kentucky, and Birmingham, Alabama, the eastern railroad has eliminated all free time at those facilities except for the hours between notification to the shipper and 11:59 p.m. local time. 

Wrong Decision

There is no way around this decision by the railroads being costly for shippers. Congestion and trucker shortages at inland terminals already make it difficult for shippers to retrieve their cargo. Putting fees on them to speed up the retrieval of containers from rail terminals is not likely to actually make the retrieval of cargo faster.

Shippers already have inducement to get their cargo as quickly as they can. Delays can be costly for shippers before you even add on fees that can add up for storage beyond free time at terminals. When there is congestion at terminals, it’s not shippers’ fault their goods are stuck there. I’m against this move by the railroads. There is little likelihood it will actually help the congestion problem. Instead, it adds even more costs to shippers which will likely have to be passed down to consumers. With an inflation problem already taking place in the U.S., this is the last thing that’s needed.

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3 Predictions for the 2021 Peak Season https://www.universalcargo.com/3-predictions-for-the-2021-peak-season/ https://www.universalcargo.com/3-predictions-for-the-2021-peak-season/#respond Thu, 27 May 2021 21:27:17 +0000 https://www.universalcargo.com/?p=10382 I made a prediction in Tuesday's blog post about this year's peak season. That post wasn't actually about predicting what will happen with international shipping in the upcoming months, so the prediction was buried in the article. Today's post will focus on what shippers, particularly importers, may see in the near future based on the data and trends I see surrounding the international shipping industry. Therefore, I'll revisit the prediction today and add to it.

Be warned, when it comes to international shipping predictions, I don't just go with what industry experts say will happen. Last year, when the pandemic scared some experts into saying there would be no peak season, I predicted we would still have a peak season, though I didn't expect it to be as big as it was. Frankly, it's as though that peak season never ended. That cargo volume has remained at near record to record highs ever since has many in the industry expecting an enormous peak season this year.

On the other hand, there are usually international shipping expert predictions that I fully or partially agree with.

You'll find all the predictions in the full post in Universal Cargo's blog.

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I made a prediction in Tuesday’s blog post about this year’s peak season. That post wasn’t actually about predicting what will happen with international shipping in the upcoming months, so the prediction was buried in the article. Today’s post will focus on what shippers, particularly importers, may see in the near future based on the data and trends I see surrounding the international shipping industry. Therefore, I’ll revisit the prediction today and add to it.

Ocean Freight Port

Be warned, when it comes to international shipping predictions, I don’t just go with what industry experts say will happen. Last year, when the pandemic scared some experts into saying there would be no peak season, I predicted we would still have a peak season, though I didn’t expect it to be as big as it was. Frankly, it’s as though that peak season never ended. That cargo volume has remained at near record to record highs ever since has many in the industry expecting an enormous peak season this year.

On the other hand, there are usually international shipping expert predictions that I fully or partially agree with. You’ll find a mix in the predictions below.

#1 – Early Peak Season

You can check out more details in the last blog, but in a Journal of Commerce (JOC) article by Bill Mongelluzzo about rail backups for containers at the Ports of Los Angeles and Long Beach, 2021’s peak season is coming early. The article credits an advisor to non-vessel-operating common carriers (NVOs) named Jon Monroe with saying retailers are pushing purchase order cycles up by four to five weeks because of port congestion and a lack of cargo space offered by carriers.

I agree with this industry expert, and others, who say we’ll see an early peak season. However, where he says the peak season could start in early July, I say we could already be seeing it. Early July isn’t that early for the peak season to start. A strong peak season often gets ramped up in July before soaring in August and September.

Universal Cargo’s May shipments spiked by 27%. That’s a peak-season-like jump in cargo shipped.

Shippers have experienced massive cargo delays for the last year. First it was all the blank sailings delaying shipments. When that dropped capacity below market demand, finding and keeping spots on sailings became an issue for many shippers (which is an area where Universal Cargo’s years of industry experience is helpful). Then, with the boom in shipping demand, port congestion kept shippers from getting their goods anywhere close to when they were originally scheduled to arrive. Factors like trucker shortages and rail backups haven’t helped either. If retailers would normally be importing their back-to-school and holiday shopping goods in late July and August, moving those shipments up to May and June makes sense.

#2 – 2021 Peak Season Will Fizzle Early

With what has seemed like a never ending peak season ever since the last peak season, many think volume will remain at record to near-record highs right through the end of the year. The idea that volume being high going into peak season just means that we’ll have an even bigger peak season does make some sense.

However, as I was predicting in the last blog, I’m not convinced that will be the case. With the peak season arriving early, I believe there is a strong chance it will end early. That doesn’t mean volume will be terrible in September and October, when the peak season shipping is normally strong, but I do expect volumes to drop at that point.

Additionally, it’s not impossible for volume to take a hard dive. Inflation is hitting the U.S., new job numbers and unemployment numbers have not been good, and going out options are starting to open up that might take back some of the U.S. spending that moved from entertainment to buying goods.

However, it is still likely that it will take some time for spending on goods to really fall off. New spending habits developed over the pandemic will be hard to break. There are still high stimulus unemployment benefits that people are receiving, so they can keep shopping as they stay home, and likely money left out there to be spent from stimulus checks people have received. These factors could stave off a sudden crash in consumer spending. Still, with the factors already mentioned and many businesses permanently gone because of the shutdowns, the danger of such a crash still looms.

#3 – Congestion Won’t Be Cleared in Time for Peak Season

Finally, we get to something I completely agree with the majority of industry experts on. Port congestion will not be cleared in time for the peak season. Partially, because I believe the peak season is already starting and port congestion is still here, it’s already too late for congestion to be cleared for the peak season. But even if we do have a month or more before the peak season really hits, there’s still not likely enough time to clear congestion for it.

Tuesday’s blog did highlight improvements in congestion at the Ports of Los Angeles and Long Beach. Even with those improvements, it’s important to note those ports are still very congested. And, of course, that post was about rail backups there – another factor in congestion – getting worse. Congestion is not just an issue at the San Pedro Bay ports. The Port of Oakland right now is even more congested than the Ports of Los Angeles and Long Beach.

Greg Miller reports in an American Shipper article:

Peak shipping season is coming soon — and the “parking lot” of container ships stuck at anchor off the coast of California is still there, with Oakland surpassing Los Angeles/Long Beach as the epicenter of congestion.

Shipping giant Maersk warned in a customer advisory on Wednesday that Los Angeles and Long Beach “remain strained with vessel wait times averaging between one to two weeks.” But it said “the situation is even more dire at the Port of Oakland, where wait times now extend up to three weeks.”

The article goes on to say the deadline for clearing congestion before the peak season won’t happen:

Port of Los Angeles Executive Director Gene Seroka has repeatedly said that the San Pedro Bay anchorages need to be cleared before the traditional peak season surge begins. He has voiced a goal of June 1 for “few if any ships” at anchor.

That deadline, which is a week away, will not be met.

If hope has all but run out for the San Pedro Bay ports to clear congestion for the peak season, it has completely run out for the Port of Oakland.

The peak season, which Miller’s article also says is expected to arrive early, usually comes with its own congestion challenges. Miller explicitly says the implication of what we’re seeing is that there will be more congestion. The only place I can offer a little brighter side is if the peak season ends earlier than many expect, as I predicted above, then the clearing of congestion, finally, will begin earlier than people expect too.

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Congestion Improving at Ports But Rail Could Be Problem for Peak Season https://www.universalcargo.com/congestion-improving-at-ports-but-rail-could-be-problem-for-peak-season/ https://www.universalcargo.com/congestion-improving-at-ports-but-rail-could-be-problem-for-peak-season/#respond Tue, 25 May 2021 20:58:35 +0000 https://www.universalcargo.com/?p=10381 From the West Coast to the East Coast, congestion has been a problem at the ports all year. Congestion at the country's busiest ports – the Ports of Los Angeles and Long Beach – has been especially visible. Some of the worst congestion has happened there. Congestion at the Ports of Los Angeles and Long Beach persists, but there has been improvement in some areas: fewer ships waiting at anchor and reducing dwell times for containers leaving the port by truck. Unfortunately, one area that hasn't seen improvement is rail. In fact, it's getting worse.

Bill Mongelluzzo reports on it in the Journal of Commerce:

"Rail container dwell times in April averaged 11.2 days, up from 10.5 days in March and the highest level of the year, according to the Pacific Merchant Shipping Association [PMSA], a nonprofit group that represents carriers and terminals, mostly in legislative matters. This is congesting the terminals and slowing down the entire port-related supply chain."

Find out more, including a prediction about 2021's peak season, by reading the full post in Universal Cargo's blog.

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From the West Coast to the East Coast, congestion has been a problem at the ports all year. Congestion at the country’s busiest ports – the Ports of Los Angeles and Long Beach – has been especially visible. Some of the worst congestion has happened there. Congestion at the Ports of Los Angeles and Long Beach persists, but there has been improvement in some areas: fewer ships waiting at anchor and reducing dwell times for containers leaving the port by truck. Unfortunately, one area that hasn’t seen improvement is rail. In fact, it’s getting worse.

rail shipping containers

Bill Mongelluzzo reports on it in the Journal of Commerce:

Rail container dwell times in April averaged 11.2 days, up from 10.5 days in March and the highest level of the year, according to the Pacific Merchant Shipping Association [PMSA], a nonprofit group that represents carriers and terminals, mostly in legislative matters. This is congesting the terminals and slowing down the entire port-related supply chain

Many Factors Contribute to Port Congestion

It almost sounds as if carriers and terminals are pushing the blame for port congestion on rail. There are many factors playing into the congestion, not the least of which is almost a year of near-record to actual record high cargo volume at the ports. Carriers certainly share part of the blame too. When they blanked (cancelled) hundreds of sailings during the early parts of 2020, shrinking capacity below market demand, they created equipment shortages – particularly container shortages – by not redistributing as is needed. Also contributing is carriers’ trend toward bigger – even mega – container ships over the last decade combined with forming alliances that share and load up these huge ships that sometimes carry more than 20,000 TEUs of goods. This brings quantities of cargo containers to ports at once that are difficult for ports to handle quickly. Also not helping is U.S. ports’ lagging productivity compared to other ports around the world. As we’ve talked about recently in this blog, dockworker unions fighting automation at the ports contributes to this lower productivity.

How Rail Slowdowns Affect Port Operation

Even with all these factors and more adding to congestion at the ports, carriers and terminals are not wrong about slowdowns in getting containers onto rail adding congestion at terminals and “slowing down the entire port-related supply chain.” It simply shouldn’t be labeled as THE reason for congestion. A spokesperson for PMSA is quoted in Mongelluzzo’s article, describing how it works:

“The longer containers stay on terminals without getting picked up, the more unnecessary moves have to be made in order to reach older containers underneath stacks of newer ones, further contributing to the ongoing congestion,” said Jessica Alvarenga, manager of government affairs at PMSA.

Like a rock dropped into water, disruption at one part of the port causes ripples of congestion across the rest of it. Of course, port congestion makes waves across the whole supply chain.

Early Peak Season

One of the waves brought up in the JOC article is an early peak season:

Jon Monroe, an advisor to non-vessel-operating common carriers (NVOs), said that because of congestion at ports in Asia and the US, and a shortage of vessel capacity following 10 consecutive months of record or near-record import volumes, retailers are pushing up their purchase order cycles by four to five weeks. That means the peak season could start in early July, rather than in August as it has in past years, he said.

Because shippers, and importers in particular, are seeing delays in getting their goods from the ports, it makes sense they would start importing a bit earlier for the holiday shopping season. However, it’s not uncommon for the peak season to start ramping up in July as it heads for its heights in August and September. A strong peak season can continue through October and even November.

Could 2021 Peak Season Disappoint?

International shipping demand has remained so strong, it’s as if the 2020 peak season never ended. In fact in May, Universal Cargo’s shipments, which I often use as a barometer for the international shipping industry, have seen a 27 percent increase from last month. Despite the strong demand year 2021 has been, May is the biggest month so far.

Some of this could be early peak season shipping with importers making sure they get ahead of any possible port congestion delays. If shippers really are shipping earlier to play it safe against congestion, that could take away some shipping from those traditionally bigger months like August and September.

Most experts seem bullish on 2021’s peak season, expecting a surge to build on the already high shipping demand we’ve been seeing. However, I’m a little less bullish. I know, last year, I was predicting there would be a peak season when experts were saying we might not have one at all. I’m not just going against the grain again because it worked out well for me last year. Inflation is starting to set in from the trillions in government spending, the dollar printing, and businesses having to spend more to attract employees who are receiving so much in unemployment and stimulus checks that they’re choosing to hold off on re-entering the workforce. The Biden Administration’s oil policies, including the cancellation of the Keystone XL Pipeline, and the cyber attack on the Colonial Pipeline have caused gas prices to increase in the U.S. And, of course, the incredibly high freight rates shippers have had to pay for the last year adds to inflation as well.

The falling power of the dollar is likely to start having a larger and larger effect on spending. I don’t think it will be fast enough to mean there will be no peak season in 2021. There should still be a peak season. However, between it coming early and the risk of spending dropping off, the peak season could fizzle a bit when demand would normally still be surging.

The Good News

As mentioned at the beginning of this article, there are improvements being seen in areas of congestion at the Ports of Los Angeles and Long Beach. In fact, Mongelluzzo reports in his JOC article that terminal operators say most areas of congestion are improving their productivity:

The good news, terminal operators say, is that excessive rail container dwell times in Los Angeles-Long Beach are an outlier, as almost all other indicators of productivity in the port complex are improving. The number of container ships at anchor awaiting berthing space, for example, has fallen to 18 as of Thursday, down from more than 30 container vessels that were at anchor each day from December through March, according to the Marine Exchange of Southern California. 

Fewer ships are waiting to unload their shipping containers, and those containers are being trucked out of the ports faster, according to the article:

… the average dwell time for containers that leave the terminals by truck for local delivery continues to improve, shrinking from 3.77 days in March to 3.65 days in April. Local-delivery dwell times have declined in each of the last four months from an average of 5.12 days in January.

As for the backup of rail shipping of containers out of the ports, BNSF and Union Pacific (UP), according to the JOC article, point to “supply chain constraints along their networks and chassis shortages at rail ramps in the US interior” as the problem. From Mongelluzzo’s article, railroads seem confident they’ll be able to get things caught up at the Ports of Los Angeles and Long Beach and handle the general increase in volume they expect the future to hold:

“As inland supply chain constraints moderate, the resulting velocity improvement on our rolling stock will generate more than enough capacity to handle the current backlog as well as increasing volumes in Los Angeles-Long Beach into the future,” a BNSF spokeswoman told JOC.com Thursday. 

UP in April has increased its well car capacity moving to and from Los Angeles-Long Beach as train velocity improved along its intermodal network, and UP is also sending additional locomotive resources west to handle increased cargo volumes, a spokeswoman for the railroad told JOC.com.  

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Jared Vineyard

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3 International Shipping News Stories Shippers Should Know About https://www.universalcargo.com/3-international-shipping-news-stories-shippers-should-know-about/ https://www.universalcargo.com/3-international-shipping-news-stories-shippers-should-know-about/#respond Thu, 20 May 2021 22:31:58 +0000 https://www.universalcargo.com/?p=10380 There are three international shipping news stories making headlines this week that shippers should know about. These are the kind of stories that affect U.S. importers and exporters' bottom lines.

The stories involve port automation, dockworker unions, trucker shortages, and shippers calling on Congress for help.

Find out all about what's happening by reading the post in Universal Cargo's blog.

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There are three international shipping news stories making headlines this week that shippers should know about. These are the kind of stories that affect U.S. importers and exporters’ bottom lines.

1. ILWU Fighting Port of Long Beach Automation

The dockworker unions fighting automation is not a new thing. It’s something that has held up U.S. ports from being as productive as other ports around the world, helped turn contract negotiations at the ports contentious and costly for the whole U.S. economy, and has been known to pop up in Universal Cargo’s blogs from time to time.

automated container shipping

Recently, we published a post about the pandemic not being the cause of the record high freight rates shippers have been forced to deal with. In it, Universal Cargo CEO Devin Burke gave seven factors that culminated, with COVID-19 acting as just the tipping point, in the high freight rates. Among his points was “very slow adaptation and progress of automation in US ports (compared to China and Asia) coupled with stubborn longshoreman unions keeping ports (especially LA) very slow, cumbersome, and congested.”

I wrote in that post that we’d get into this, and the rest of Burke’s points, in upcoming blog posts. This is already the second time this topic has come up in the blog since then. Two weeks ago, I wrote about the International Longshoremen’s Association (ILA) strangling the Port of Charleston’s new terminal. Now the International Longshore & Warehouse Union (ILWU) fighting automation at the Port of Los Angeles’ twin port is making headlines.

Bill Mongelluzzo reports in the Journal of Commerce (JOC):

Total Terminals International’s decision this week to automate its 385-acre Pier T terminal in Long Beach sets up a classic struggle between terminal operator employers and the International Longshore & Warehouse Union. 

The union opposes the project on the grounds it will eliminate some dockworker jobs, but employers say automation is needed to increase capacity and keep the ports of Long Beach and Los Angeles competitive.

As required by the coastwide contract when an individual employer decides to automate, TTI met Monday with leaders of the three ILWU locals in Southern California to lay out the details of its automation plan. The locals will now provide their input, observations, and suggestions on the plans, but according to the terms of the coastwide contract that was signed in 2008, the ILWU cannot block the project, McKenna told JOC.com Wednesday.

Just because the labor contract says the ILWU can’t block an automation project doesn’t mean the union won’t try. When things happen at a port that the dockworkers’ union there doesn’t like, the union has a tendency to slow-time the port. Just look at what the ILWU did to the Port of Portland a few years back.

We’ll have to keep an eye on this situation. Port congestion is already a major problem. The union making it worse could be disastrous. This also has the potential to make negotiations contentious next year when the current contract between the ILWU and Pacific Maritime Association (PMA). No one should want a repeat of the 2014-15 negotiations. Not only did shippers lose money through goods not reaching shelves in time for the holiday shopping season and agricultural goods rotting on the ports but U.S. businesses lost overseas deals and partners that were never recovered or replaced.

Trucker Shortage Problem Worsening

The trucker shortage the international shipping industry faces is another issue we’ve talked about off and on over the years. When I was writing about this trucker shortage problem in 2014, I hoped it would improve by now. Unfortunately, it’s getting worse.

Ari Ashe reports in the JOC:

Drivers who dray ocean containers in the Midwest and South Central US are quitting in alarming numbers this year because rail terminal congestion has lowered their daily productivity and, in turn, their paychecks, according to trucking executives. 

Although trucking companies have raised rates for drayage service and increased driver pay, it has not been enough to compensate drivers for completing fewer jobs per day. Drayage providers in Chicago, Cleveland, Columbus, Dallas, Kansas City, and Memphis have seen as much as one-quarter of their drivers quit because of their decline in income. 

Average local drayage driver pay has fallen about 20 percent this year compared with 2019 because drivers get paid per completed job — not per hour or per mile — according to trucking executives in Chicago, Dallas, Kansas City, and Memphis. 

With chassis shortages, terminal congestion, and restrictions on export loads and returning empty boxes, drivers have lost as many as three turns per day compared with 2019 and early 2020, the executives told JOC.com. 

There’s something of a catch-22 happening here. The congestion problems at the ports are made worse by shortages of truckers. At the same time, truckers are quitting because of the congestion at the ports. For shippers, it’s a no-win situation.

At the end of last year, we were warning shippers to expect delays and fees. A perfect storm of factors was happening at the ports, causing shippers to draw the short end of the stick. One of the biggest factors hurting shippers was a complete lack of trucks. As can be seen by this JOC story published yesterday, the problem only continues to get worse.

Shippers Urge Congress to Update Shipping Act Against Ocean Carriers

Finally, there’s one more story making headlines that relates to topics we commonly discuss in this blog. Shippers are trying to get the government to act on unfair ocean carrier practices. We’ve talked about the shrinking carrier competition in the ocean freight industry, unfair fees shippers are hit with, and even refusal of service to U.S. exporters (especially agricultural exporters) in order to ship empty containers back to Asia to restock shortages (carriers caused through massive blank sailings) on more lucrative shipping routes.

international shipping federal antitrust law

Agricultural exporters tried turning to President Biden, but not surprisingly, their complaints fell on deaf ears. Now shippers are turning to Congress, asking for modifications to the Shipping Act of 1984 to “clamp down on ocean carriers” and the practices hurting the U.S. economy.

John Gallagher’s American Shipper article on this topic breaks down the four main modifications shippers from the National Industrial Transportation League (NITL) are asking for:

∙ Prohibit common carriers and marine terminal operators from adopting and applying unjust and unreasonable demurrage and detention rules and practices.

∙ Require carriers to adhere to minimum service standards with respect to equipment and vessel space allocations and contract performance, and require contingency service plans during periods of port congestion to mitigate supply chain disruptions.

∙ Address unfair business practices that relate to access to, allocation of and interchange of equipment, as well as unreasonable allocations of vessel space by ocean common carriers considering foreseeable import and export demand.

∙ Expand the FMC’s authority to act on complaints filed against anti-competitive agreements between ocean carriers that operate with antitrust immunity, such as alliances, and allow third parties to participate in court proceedings initiated by the FMC against such agreements.

Unfortunately for the NITL, I wouldn’t expect any better response from Congress than the response agricultural exporters got from President Biden.

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Freight Rates Manage to Climb Even Higher https://www.universalcargo.com/freight-rates-manage-to-climb-even-higher/ https://www.universalcargo.com/freight-rates-manage-to-climb-even-higher/#respond Tue, 18 May 2021 20:46:42 +0000 https://www.universalcargo.com/?p=10378 We've been watching freight rates rise to new heights, breaking record after record, for a year. Is it possible for freight rates to get worse? Yes. And they have. After a period of months with pretty steady, though very high, freight rates – even a moment last month when transpacific rates came down a little bit – freight rates climbed again.

Transpacific rates to both coasts as well as transatlantic rates to the East Coast rose significantly last week.

Read the full post in Universal Cargo's blog to see how much freight rates have increased, adding more fuel to inflation and economic crash risk.

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We’ve been watching freight rates rise to new heights, breaking record after record, for a year. Is it possible for freight rates to get worse? Yes. And they have. After a period of months with pretty steady, though very high, freight rates – even a moment last month when transpacific rates came down a little bit – freight rates climbed again.

Freight Rates

Transpacific rates to both coasts as well as transatlantic rates to the East Coast rose significantly last week.

Here are some of the numbers reported by Greg Miller in an American Shipper article:

GLOBAL

The weekly Shanghai Containerized Freight Index, which tracks global trends, rose 8% week on week. And spot-rate moves don’t tell the whole story. Shippers are paying up to $3,000-$5,000 more per box in premiums on top of base rates just to get their cargo loaded.

Miller mentioned contracts, though also 50-100% higher than they were a year ago, protecting some shippers from these still surging freight rates. However, most readers of Universal Cargo’s blog fall in the small to medium shipper range, who operate in the spot market and see no contract mitigation, like BCOs get, on freight rates.

Asia to USWC Freight Rates

Shippers importing from China to West Coast ports like the Ports of L.A. and Long Beach are paying much more than they were a year ago and significantly more than just a few weeks ago. Miller reports:

As of Wednesday, the Freightos Baltic Daily Index assessed Asia-West Coast spot rates (SONAR: FBXD.CNAW) at $5,650 per forty-foot equivalent unit (FEU). That’s up 15% from the beginning of this month and up 70% from rates back in August and September when pricing began to garner headlines. Rates are now 3.2 times higher than in mid-May 2020, up 228% year-on-year (y/y).

Drewry’s weekly World Container Index, published Thursday, assessed Shanghai-Los Angeles rates at $5,255 per FEU, up 201% y/y…

Asia to USEC Freight Rates

Here are the numbers Miller shared for those shipping from China and elsewhere in Asia to East Coast ports:

On the longer route from Asia to the East Coast via the Panama Canal (SONAR: FBXD.CNAE), Freightos assessed Wednesday’s spot rate at $7,435 per FEU, up 171% y/y. The all-time high was hit Tuesday: $7,555 per FEU.

Add on extra charges and it looks like paying around $10,000 per FEU is the new normal for Asia-East Coast cargoes.

Drewry’s weekly World Container Index, published Thursday, assessed … Shanghai-New York rates at $7,085 per FEU, up 154% y/y.

Transatlantic Freight Rates

Last month, we blogged about Transatlantic freight rates climbing in the wake of Evergreen’s massive containership the Ever Given blocking the Suez Canal as well as a little rise in transpacific freight rates that was happening at the moment. Miller’s American Shipper highlights how the transatlantic freight rates are continuing to grow:

Last month’s surge was just the beginning. Rates have kept climbing. As of Wednesday, Freightos put the Europe-East Coast spot rate (SONAR: FBXD.ENAE) at a record-high $4,299 per FEU, up 132% y/y.

Drewry’s assessment is considerably lower than Freightos’, at $3,550 per FEU, up 37% y/y.

The difference between Drewry and Freightos’ respective freight rate growth on the transpacific shows how much variance methodology and data gathering differences can make in the reporting of data and statistics. Despite the difference between these numbers, one thing is clear: freight rates are going up. And we’re still not quite to international shipping’s peak season.

Inflation Plus Inflation

Miller’s article title began with the clickable words “inflation alert.” Miller made it clear that these higher freight rates will be passed on to consumers as much as possible in the form of inflation. This is a scary thought when inflation is already hitting the U.S.

Massive government spending and dollar printing has the U.S. already experiencing inflation. High unemployment benefits and checks people are receiving from government stimulus are adding to inflation by making it harder and more expensive to hire workers for businesses, a number of which are paying people just to interview. The cancellation of the Keystone XL Pipeline and the cyber attack on the Colonial Pipeline also adds to inflation in the oil and gas sector. Putting this giant increase in the cost of shipping on top of these other inflation factors is scary.

As I’ve been saying all year, and for a while before, the risk of a big economic crash is high. What we’re seeing with freight rates is one more factor building up that risk. In the meantime, be ready for that dollar not to go as far as you’re used to.

 

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Why Are Ocean Carriers Doing “Risky” Shipbuilding? https://www.universalcargo.com/why-are-ocean-carriers-doing-risky-shipbuilding/ https://www.universalcargo.com/why-are-ocean-carriers-doing-risky-shipbuilding/#respond Thu, 13 May 2021 22:45:34 +0000 https://www.universalcargo.com/?p=10376 For years, ocean carriers struggled with overcapacity. It pushed freight rates low, and they lost billions. Over the last couple years, carriers learned more discipline with capacity. Over the course of the pandemic – even at the beginning when demand dipped – carriers controlled cargo space so tightly that freight rates have soared to record highs. Add in a demand surge, and carriers are making billions. During this upswing, carriers started ordering new ships built.

In two years, when many of the new container ships get delivered, this surge in shipping demand we're seeing will be over. Why are carriers ordering these ships? Isn't this a risk of returning to overcapacity? Lower freight rates? Possible losses again?

Read the full post in Universal Cargo's blog to find out.

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For years, ocean carriers struggled with overcapacity. It pushed freight rates low, and they lost billions. Over the last couple years, carriers learned more discipline with capacity. Over the course of the pandemic – even at the beginning when demand dipped – carriers controlled cargo space so tightly that freight rates have soared to record highs. Add in a demand surge, and carriers are making billions. During this upswing, carriers started ordering new ships built.

container ship at dock

In two years, when many of the new container ships get delivered, this surge in shipping demand we’re seeing will be over. Why are carriers ordering these ships? Isn’t this a risk of returning to overcapacity? Lower freight rates? Possible losses again?

One international shipping expert, maritime research firm Drewry’s senior manager for container research Simon Heaney, was quoted in a Loadstar article as saying he didn’t understand it:

“I don’t understand why owners are so desperate to acquire new ships that are going to take at least two years to be delivered,” said Mr Heaney. “They are not going to arrive in time to cash in on this boom and all they are really doing is to potentially increase the risk of overcapacity returning to the market after a few good years of repairing the situation.”

In Tuesday’s post about Drewry’s prediction that freight rates will remain high for at least two more years, I promised I would give reasons I believe carriers have for ordering these new ships. Now it’s time deliver on that promise.

Renewing the Fleet

First off, there are always shipbuild orders on the books in the international shipping industry. Ships do not last forever. Old ships have to be replaced by new ships. There is also a general increase in shipping volume year upon year to keep up with. There is a hefty increase happening right now in new ships ordered, but not to the level that resulted in the overcapacity crisis carriers faced during the last decade.

Greg Miller gave some numbers to that effect on newbuild orders at the end of March when he wrote an American Shipper article on the “now-booming” container ship building industry:

According to the latest figures from Alphaliner, the orderbook as of Friday was 401 container ships totaling 3.63 million twenty-foot equivalent units (TEUs). The orderbook is 15.3% of the on-the-water fleet’s capacity measured in TEUs, up from a multi-decade low of just 9.4% in mid-2020.

However, today’s ratio pales in comparison to an orderbook-to-fleet ratio of over 60% in 2008. “An orderbook of 15% of the fleet is normal,” assured Stefan Verberckmoes, shipping analyst and Europe editor at Alphaliner, in an interview with American Shipper. This is an orderbook level that makes sense to renew the fleet and handle annual cargo growth.

Ships get taken out of rotation, retired, and scrapped by carriers all the time. Not every TEU ordered means capacity goes up by that amount. It may be a bit premature to worry about this current shipbuilding spike resulting in overcapacity.

Optimizing Ship Size

For the last decade, there’s been a trend in the international shipping industry toward bigger ships. Bigger ships created more fuel economy and helped carriers and their alliances pack more cargo into fewer sailings. Yes, these ships have also increased risk for shippers by making it hard for them to disperse cargo and added congestion at ports. But what does that matter when carriers are saving money?

During the pandemic, near-countless blank (cancelled) sailings followed by a huge surge in online shopping and shipping demand resulted in carriers needing to deploy much smaller, faster ships to deliver goods. The ordering that has since happened has focused on increasing the ships in both of these two size classes.

Miller reports:

For 2020 overall, almost all of the orders were for megamaxes or for smaller ships (2,500 TEU or below) used primarily for intra-Asia trades. There were only a few “neo-Panamaxes” — ships of 12,000-16,000 TEU with 20 container rows on deck that can traverse the new Panama Canal locks. There were virtually no orders in the midsize 5,000- to 9,000-TEU categories. Newbuilds were either very big or very small.

One reason carriers are ordering ships is to continue optimizing the ship sizes in their fleet.

Meeting Ship Emission Regulations

The big story of 2020 was supposed to be IMO 2020. As of January 1st 2020, the International Maritime Organization (IMO) required a 0.5% sulfur cap on fuel emissions, lowered from 3.5%. Carriers have to keep working to make sure all the vessels in their fleets are compliant.

There were some violations that happened in 2020, but after the pandemic hit, it didn’t seem like inspecting ships for compliance was done as fully as it would have been if COVID restrictions, increased demand, and port congestion hadn’t limited port authorities’ resources in checking for compliance.

I expected there to be more shipbuilding based on making cleaner ships than there appears to have been. However, keeping ships coming in that are either equipped with engines designed for cleaner fuel or built with scrubbers to clean the more traditional fuel does come into play.

Leading up to 2020 (and during 2020), shipyards fell way behind in retrofitting previously-built ships’ engines with scrubbers. It makes sense there would be an increase in replacing older ships than trying to retrofit all of them.

Carriers Can Afford It

Perhaps this is one of the biggest reasons for the increase in new shipbuilding orders. Right now, carriers are flushed with cash. I already mentioned how carriers are making billions of dollars right now. Some are making billions in single quarters. During a moment when carriers have the capital to spend seems like a good time to invest in the future.

A combination of overcapacity and massive losses led to carriers majorly decreasing orders in recent years. Now that they have capacity under much better control and are seeing excellent profits, it makes sense an increase in orders would occur. Of course, carriers will still need to be mindful to keep capacity under control.

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At Least 2 More Years of High Freight Rates Says Drewry https://www.universalcargo.com/at-least-2-more-years-of-high-freight-rates-says-drewry/ https://www.universalcargo.com/at-least-2-more-years-of-high-freight-rates-says-drewry/#respond Tue, 11 May 2021 22:42:57 +0000 https://www.universalcargo.com/?p=10374 Maritime research firm Drewry is predicting the same thing we've been saying here in Universal Cargo's blog for a while: high freight rates aren't going away with the pandemic.

Mike Wackett reports in the Loadstar:

"Shippers must brace themselves for at least two more years of elevated freight rates and tight supply, according to Drewry.

"The maritime consultant predicts average rates – a blend of spot, contract, backhaul and regional trade rates – will increase about 23% this year; but for some headhaul routes, it said, the hike would be 'substantially higher'."

High rates don't necessarily mean remaining at the peak, record-breaking levels we've been seeing. Drewry does expect rates to come down some next year from the highs they've reached, but shippers will still be paying significantly more than they used to before the pandemic...

Find out more by reading the full post in Universal Cargo's blog.

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Maritime research firm Drewry is predicting the same thing we’ve been saying here in Universal Cargo’s blog for a while: high freight rates aren’t going away with the pandemic.

Freight Rates

Continued High Freight Rates

Mike Wackett reports in the Loadstar:

Shippers must brace themselves for at least two more years of elevated freight rates and tight supply, according to Drewry.

The maritime consultant predicts average rates – a blend of spot, contract, backhaul and regional trade rates – will increase about 23% this year; but for some headhaul routes, it said, the hike would be “substantially higher”.

High rates don’t necessarily mean remaining at the peak, record-breaking levels we’ve been seeing. Drewry does expect rates to come down some next year from the highs they’ve reached, but shippers will still be paying significantly more than they used to before the pandemic, according to the Loadstar article, where Wackett quotes Drewry’s senior manager for container research Simon Heaney:

“For 2022, we do see some erosion in freight rates as the inflationary impact of supply chain inefficiencies hopefully disappears, but we think carriers are still going to be able to keep freight rates high, thanks to the in-depth capacity management they fine-tuned during the pandemic, as well as the pricing discipline they have shown.

“For next year, while rates will come down, they will still be substantially higher [than pre-pandemic] and we expect average rates will come down from this year’s lofty highs by approximately 9%,” said Mr Heaney.

Shrinking Competition Not Pandemic to Blame for High Freight Rates

We’ve focused on that in-depth capacity management Heaney refers to a great deal in Universal Cargo’s blog. The way rates shot up during the pandemic left many thinking the pandemic is the cause of the surged rates. Last month, we posted a blog to make it crystal clear COVID-19 is not the cause of these high freight rates. For a while, we’ve been trying to let shippers know that when the pandemic ends, freight rates aren’t likely to suddenly “go back to normal.” Universal Cargo CEO Devin Burke gave seven factors that were building toward higher freight rates before the coronavirus outbreak began, resulting in a tipping point for freight rates to skyrocket when the pandemic. Not the least of these factors is capacity management, which Burke referred to in his list with blank sailings.

Blank sailings are cancelled sailings. During the early months of the pandemic, carriers cancelled hundreds of sailings. At that point, we hadn’t yet seen the surge in online shopping and shipping demand that would be caused by lockdowns stopping spending on going out and travel and government stimuli putting more money in people’s pockets. At first, demand dipped. Drops in demand naturally put downward pressure on pricing in any industry. However, for international shipping, freight rates did not drop, they increased. That’s because by cancelling so many sailings, carriers were able to drop capacity (supply) even below the market demand.

Carriers were able to do this because of how much competition has shrunk in the international shipping industry over the last several years, not only through mergers, buyouts, and bankruptcy but also through carrier alliances. With all the major carriers grouped into just three carrier alliances dominating all of ocean freight shipping, carriers are able to control capacity. I’ve been warning for years that this would eventually result in higher freight rates for shippers and argued regulators should reconsider their stance on allowing carrier alliances before we even got to the point of shrinking to only three.

A New (But Old) Hope

While the future sounds dark for shippers regarding freight rates, there is a bit of hope, like secret plans hidden inside a small droid, that Heaney and Wackett’s article offers:

However, he said: “One small crumb of comfort for shippers is that ocean carriers and non-operating owners are, potentially, sowing the seeds to shorten the bull run they are enjoying right now by over-investing in new tonnage.”

In the first three months of the year, carriers and non-operating owners signed contracts for some 170 newbuilds, at a capacity of about 1.9m teu, the majority of which will be delivered in 2023. And with further orders in the pipeline, the supply-demand scales could tip back the other way in two years’ time, especially if there is a further global demand shock in the interim.

Perhaps the biggest factor that led to all the shrinking carrier competition in the international shipping industry was overcapacity. As carriers raced to build bigger ships, have larger capacity fleets, and control more market share in the industry, capacity well out-paced demand. This (along with carriers undercutting each other’s rates) put severe downward pressure on freights rates. Over the years, I’ve written many articles about record low freight rates, which were unhealthily low for carriers and the industry as a whole, which would eventually turn good news into bad news for shippers. Carriers lost billions, and competition shrank.

Carriers spent more years struggling with overcapacity than showing the discipline to control it. The financial reward of capacity control has been so great, with profits soaring in the billions, it seems doubtful carriers would let capacity get out of control again.

Why the New Shipbuilding

Heaney, in Wackett’s Loadstar article, is quoted as sounding confused about why carriers would order new ships right now:

“I don’t understand why owners are so desperate to acquire new ships that are going to take at least two years to be delivered,” said Mr Heaney. “They are not going to arrive in time to cash in on this boom and all they are really doing is to potentially increase the risk of overcapacity returning to the market after a few good years of repairing the situation.”

It’s obvious, as Heaney points out, that ships to be delivered in two years will miss the demand boom happening now. There are a few other major reasons I can think of for the ship order increase happening now. That will be the topic of Thursday’s blog.

 

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ILA Strangling Port of Charleston’s New Terminal https://www.universalcargo.com/ila-strangling-port-of-charlestons-new-terminal/ https://www.universalcargo.com/ila-strangling-port-of-charlestons-new-terminal/#respond Fri, 07 May 2021 00:49:33 +0000 https://www.universalcargo.com/?p=10353 As ports are congested on both coasts of the U.S., there's a fully capable terminal at the Port of Charleston where carriers are not sending their ships. Rather than call at this terminal, container ships are sent to a neighboring terminal that's already trying to handle surging imports, a situation across East Coast ports that was exacerbated by the recent Suez Canal disruption. Why are carriers not calling at this terminal? Because they're are afraid of getting frivolously sued by the International Longshoremen's Association (ILA) for doing so.

Kim Link-Wills reports in an American Shipper article:

"It is unclear whether ocean carriers will avoid a newly opened container terminal in South Carolina until a labor dispute is cleared up. But at least for now, it appears most shipping lines are steering clear of the Port of Charleston’s Hugh K. Leatherman Terminal to avoid being caught up in a lawsuit filed by the International Longshoremen’s Association (ILA).

"Over the next 15 days, only two container ships are slated to be handled at the Leatherman Terminal. Forty vessels are scheduled to berth at the Port of Charleston’s neighboring Wando Welch Terminal in the same time period."

Find out more by reading the full post in Universal Cargo's blog.

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As ports are congested on both coasts of the U.S., there’s a fully capable terminal at the Port of Charleston where carriers are not sending their ships. Rather than call at this terminal, container ships are sent to a neighboring terminal that’s already trying to handle surging imports, a situation across East Coast ports that was exacerbated by the recent Suez Canal disruption. Why are carriers not calling at this terminal? Because they’re are afraid of getting frivolously sued by the International Longshoremen’s Association (ILA) for doing so.

Port of Charleston
Port of Charleston

Kim Link-Wills reports in an American Shipper article:

It is unclear whether ocean carriers will avoid a newly opened container terminal in South Carolina until a labor dispute is cleared up. But at least for now, it appears most shipping lines are steering clear of the Port of Charleston’s Hugh K. Leatherman Terminal to avoid being caught up in a lawsuit filed by the International Longshoremen’s Association (ILA).

Over the next 15 days, only two container ships are slated to be handled at the Leatherman Terminal. Forty vessels are scheduled to berth at the Port of Charleston’s neighboring Wando Welch Terminal in the same time period.

Should These Union Expectations Be Acceptable?

For what’s getting close to half a century, South Carolina ports have used a hybrid model of employing ILA and state employees. The union hasn’t exactly been happy with this. In fact, Link-Wills reports a clause was put in the 2013 master contract between the ILA and United States Maritime Alliance (USMX) to do a study on “how the hybrid labor model ‘could be altered to permit work currently performed by state employees to be performed by ILA-represented employees in a more productive, efficient and competitive fashion.’”

That study was apparently never done. Just speculation here, but maybe that’s because no one believes giving control of more jobs at ports to longshore unions would make the ports more productive, efficient, or competitive. I know of no evidence that would suggest as much. As a matter of fact, the longshore unions at the East and West Coasts are part of why U.S. ports are less efficient than their counterpart ports in Asia.

Just last week in a blog about how the pandemic is not the root cause of the high freight rates we’re seeing right now, Universal Cargo’s CEO gave seven factors leading to what we’re seeing. One of his reasons for the high freight rates was a searing one for longshore unions: “Very slow adaptation and progress of automation in US ports (compared to China and Asia) coupled with stubborn longshoreman unions keeping ports (especially LA) very slow, cumbersome, and congested.”

We’ve come to expect disruption at the ports whenever a master union contract expires and a new one needs to be negotiated. The unions, ILA on the East and Gulf Coasts and the International Longshore & Warehouse Union (ILWU) on the West Coast, always seem to have their most powerful negotiation tools – port slowdowns and strikes – at the ready to leverage better deals. In recent memory, we’ve seen more of this on the West Coast than the East Coast; however, automation was a sticking point in the last contract negotiations between the ILA and USMX. Automation at the ports is always met with staunch opposition from the ILA and ILWU. That’s probably the single biggest reason U.S. ports have fallen behind other countries’ ports in this area.

Longshore Union Overreach Is Costly

One can understand that from the unions’ point of view, automation is a threat. They don’t want to see machines taking their jobs. Of course, the ILA and ILWU have shown they want control of all jobs at the ports, and have no problem hurting ports, shippers, and carriers in order to try to take jobs away from other people. Even jobs that have never belonged to the ILA or ILWU.

Over only two jobs plugging and unplugging reefer containers, the ILWU hard-timed the Port of Portland so much, making it so inefficient with slowdowns and shutdowns, carriers stopped sending container ships to the port altogether. These two jobs never belonged to the ILWU. They had always been performed by the International Brotherhood of Electrical Workers. Not only did this obviously hurt shippers, the port, and the carriers that called there, but it also hurt the dockworkers who loaded and unloaded containerships at the Port of Portland. The ILWU was willing to sacrifice their own people’s jobs to show their power and make any port think twice about not giving them control over any job. Now we’re seeing something similar from the ILA.

The Leatherman Terminal is a new terminal that could be a serious help during this time of costly port congestion. The ILA is trying to muscle its way to controlling every job there, even though the union is not entitled to every job, as the hybrid model is long established at ports in the state of South Carolina. The union is basically saying, if we can’t have all the jobs, we’ll make it so there are no jobs. By suing carriers who call on the terminal, they’re intimidating them away from calling upon it. Carriers are making billions right now, so they’ll be fine. The ones the ILA are hurting most are the employees losing work over the union’s actions and shippers, who usually suffer the greatest losses during congestion at the ports.

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Just How Much Are Carriers Earning with These High Freight Rates? https://www.universalcargo.com/just-how-much-are-carriers-earning-with-these-high-freight-rates/ https://www.universalcargo.com/just-how-much-are-carriers-earning-with-these-high-freight-rates/#respond Tue, 04 May 2021 21:34:21 +0000 https://www.universalcargo.com/?p=10351 Soaring freight rates for the last year plus have significantly cut into shippers' profits. Not surprisingly, these sky-high freight rates have had the opposite effect for carriers. But just how much are carriers making? 2020 fiscal year and 2021 Q1 profit reportings are rolling in and revealing carriers are making billions.

That carriers are making billions on these high freight rates is not surprising as all the way back in June of 2020, I wrote in Universal Cargo's blog about how carriers went from looking at billions in losses to billions in profits. The billions in losses talked about in that post were projections, but it wasn't that long ago that I wrote about actual losses in the billions for carriers.

Find out just how much carriers are making by reading the full post in Universal Cargo's blog.

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Soaring freight rates for the last year plus have significantly cut into shippers’ profits. Not surprisingly, these sky-high freight rates have had the opposite effect for carriers. But just how much are carriers making? 2020 fiscal year and 2021 Q1 profit reportings are rolling in and revealing carriers are making billions.

That carriers are making billions on these high freight rates is not surprising as all the way back in June of 2020, I wrote in Universal Cargo’s blog about how carriers went from looking at billions in losses to billions in profits. The billions in losses talked about in that post were projections, but it wasn’t that long ago that I wrote about actual losses in the billions for carriers.

Just in 2018, MOL President and CEO Junichiro Ikeda said, “We’re all going to go bust” about ocean carriers’ near future. An American Shipper article by Chris Dupin at the time shared, “BlueWater Reporting estimates that the 11 largest carriers (not including the privately held Mediterranean Shipping Co.) lost nearly $10.6 billion in 2016, about $1.4 billion in 2017 and already $1.3 billion in the first quarter of this year [2018].”

Back then, carriers’ big concern was the increased cost of fuel – in particular, low sulfur fuel to meet the then upcoming IMO 2020 0.5% sulfur cap on fuel. In fact, IMO 2020 was supposed to be the big story of last year for international shipping. That turned out to be completely wrong. It was the costs associated with the cleaner fuel regulation from the International Maritime Organization that led to Ikeda saying carriers were all going to go bust. However, the real issue carriers had been struggling with for years that caused shipping lines to struggle with profitability and suffer huge losses was overcapacity. While in 2018 and 2019, carriers had shown increased discipline when it came to managing the amount cargo space on shipping routes, experts – like those from the maritime research company Drewry – predicted carriers would still struggle with overcapacity in 2020. That was as wrong as IMO 2020 being international shipping’s biggest story of 2020.

Instead of struggling with capacity in 2020, carriers dropped capacity below demand at the beginning of the pandemic when there was an initial dip in demand and remained in control of capacity through all the surging of demand since. Here are some of their profit results:

How Many Billions in Profit Did ONE Make in 2020?

Ocean Network Express ONE cargo ship

Greg Knowler reports in the Journal of Commerce (JOC):

Ocean Network Express (ONE) Friday reported a record net profit of $3.48 billion for its fiscal year ending Mar. 31, as recovering demand and high rates drove up profitability.

Even for as well as ONE did in 2020, there’s a good chance their profit will be even higher for 2021.

How Many Billions Did Cosco Make in Just Q1 of 2021?

You thought ONE’s FY 2020 profits were good. Cosco made close to 70% of that in the first quarter of 2021 alone.

Greg Knowler reports in another JOC article:

Cosco Shipping Holdings, the parent company of container carriers Cosco Shipping Lines and OOCL, reported a $2.39 billion net profit for the first quarter, an incredible $2.33 billion higher than during the first quarter of 2020, on the back of substantial gains in revenue and volume.

How Did Maersk Do in 2020?

You wouldn’t expect the biggest leader in the international shipping industry not to get in on these billions of dollars in profit, would you? Let’s see if a third JOC article by Greg Knowler confirms those expectations:

Maersk Cargo Ship
Maersk Cargo Ship pic: Maersk Line

The largest global container carrier posted a $2.9 billion net profit in 2020, led by strongly rebounding fourth-quarter demand from consumers in its major markets. Earnings before interest, taxes, depreciation, and amortization (EBITDA) surged 44 percent to $8.2 billion for the year.

Again, if you think that 2020 amount is something, just wait. 2021 is expected to be even bigger according to Knowler’s article:

Maersk reported a highly profitable 2020 Wednesday, yet it said 2021 would be an even more profitable year, fueled by high rates, strong demand, and disrupted supply chains.

That last item listed as a factor fueling Maersk’s profits is probably concerning for shippers. Disrupted supply chains generally mean less money for shippers while for carriers, it apparently means increases in profits. Shippers have been complaining, and legitimately so, that service from carriers has been significantly worse and more unreliable from carriers over the last year while what carriers are charging them has been significantly higher. Well, for one of those parties, it’s been working out quite nicely. That hardly inspires confidence that carriers have the motivation to better their services.

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COVID-19 Did Not Cause These High Freight Rates https://www.universalcargo.com/covid-19-did-not-cause-these-high-freight-rates/ https://www.universalcargo.com/covid-19-did-not-cause-these-high-freight-rates/#respond Thu, 29 Apr 2021 22:37:50 +0000 https://www.universalcargo.com/?p=10335 Over the last year, Universal Cargo has posted so many blogs about the astronomical freight rates the international shipping industry has been seeing, shippers are probably tired of reading about it. Of course, shippers are even more tired of paying these rates that have set record after record over the last year, cutting deep into businesses' profits. In previous years, we were able to post much more exciting blog posts with headlines about record low freight rates. What happened? How did freight rates get to this place?

Many will say it's the pandemic. However, COVID-19 is not responsible for the high freight rates we've seen. Some might object and point to how freight rates have soared over the course of the pandemic. For those making that observation, it's important to remember correlation does not mean causation.

COVID-19 has certainly played a role in the high freight rates shippers have been forced to deal with over the last year, but as the pandemic wanes, high freight rates are not likely to do the same. That's because the root cause of these high freight rates is not the pandemic. The pandemic was merely a "tipping point" for the many factors that caused freight rates to get to where they are now.

Read the whole post in Universal Cargo's blog to find out 7 causes for these high freight rates laid out by Universal Cargo's CEO Devin Burke.

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Over the last year, Universal Cargo has posted so many blogs about the astronomical freight rates the international shipping industry has been seeing, shippers are probably tired of reading about it. Of course, shippers are even more tired of paying these rates that have set record after record over the last year, cutting deep into businesses’ profits. In previous years, we were able to post much more exciting blog posts with headlines about record low freight rates. What happened? How did freight rates get to this place?

Many will say it’s the pandemic. However, COVID-19 is not responsible for the high freight rates we’ve seen. Some might object and point to how freight rates have soared over the course of the pandemic. For those making that observation, it’s important to remember correlation does not mean causation.

COVID-19 has certainly played a role in the high freight rates shippers have been forced to deal with over the last year, but as the pandemic wanes, high freight rates are not likely to do the same. That’s because the root cause of these high freight rates is not the pandemic. The pandemic was merely a “tipping point” for the many factors that caused freight rates to get to where they are now.

Devin’s Seven Reasons for Spiked Freight Rates

The only person I know who’s probably as annoyed as me by the oversimplification of blaming the rise of freight rates we’ve seen over the last year on the pandemic is Devin Burke, Universal Cargo’s CEO.

“I just don’t want to put it out there that the Pandemic is the reason,” he told me. “It’s like maybe 20% of the reason, in my opinion.”

Years ago, Universal Cargo did a series of videos called Devin’s Sevens. Perhaps he can’t help himself from thinking in sevens because when Mr. Burke spoke about the reasons for these incredibly high freight rates, he gave seven factors:

  1. Reduction in vessel manufacturing due to the overcapacity glut between around ‘14-‘19
  2. Blank sailings
  3. Reduction in manufacturing of equipment
  4. Decommissioned vessels
  5. Very slow adaptation and progress of automation in US ports (compared to China and Asia) coupled with stubborn longshoreman unions keeping ports (especially LA) very slow, cumbersome, and congested
  6. China/US trade war ‘18-‘20  causing high tariffs
  7. Merging of carriers (giving them more unity and control of the market)

All of these factors are things I’ve written about in Universal Cargo’s blog, so regular readers aren’t likely to find these causes for high freight rates surprising. The lack of the pandemic showing up on Mr. Burke’s list, however, might be surprising. It’s important to know Mr. Burke is not dismissing the role the pandemic played in these high freight rates we’re seeing. Instead, he’s putting the pandemic’s role with freight rates in the proper context. These high freight rates are not happening in some pandemic bubble. They’re part of a continuum of what’s been happening in the international shipping industry.

“One of the key reasons the freight rates have spiked is because of what happened leading up to the pandemic,” Mr. Burke said. “I believe the pandemic was the lighting of the fuse (or the tipping point).”

This new Devin’s seven of factors listed above, he described as significant events in the international shipping industry that led up to March 2020.

What’s Really Happening

Some people will give you a simple narrative that the coronavirus pandemic came along and caused freight rates to spike like we’ve seen. While the pandemic played its role, that simple narrative is misleading and can distract from the things really happening in the international shipping industry. Many things have been happening for a long time that should have had shippers concerned before the pandemic ever struck.

All the factors Mr. Burke brought up are important. We’ve talked about them before in this blog and will go into more detail on them in the future. Regular readers of this blog know I’ve been warning about shrinking competition among carriers, with a combination of mergers, buyouts, bankruptcy, and especially consolidating into alliances for years.

In the year or two before the pandemic hit, we saw carriers tightening up on capacity, controlling how much space there was for shippers’ cargo on international waters. This was already allowing carriers to bring higher freight rates to the industry while limiting the volatility of falling then rising then falling again rates. Even without a pandemic, carriers were ready to push rates high. The pandemic, however, provided the perfect circumstances for carriers to flex their muscle. At the same time, the rest of the industry struggled under tight regulation and restrictions while being unprepared for the increase of demand that was about to hit, exacerbating the situation.

“So basically when the Pandemic hit and stopped everything for 3-4 months, then all of a sudden boomed because of pent up demand and the country opening up,” said Mr. Burke, “this gave carriers total control of market to make up for the billions they’d lost in the previous 8-10 years. So going forward, we will still see this trend, regardless of Covid, because there remains a shortage of vessel space, an increase in demand, shortage of equipment, slow ports, and carriers will take advantage of this to earn high revenues.”

All of this, we’ll get into more in future blogs. You can also search our blog for these key terms to see past posts pertaining to these issues.

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Transpacific Freight Rates Come Down a Little Bit https://www.universalcargo.com/transpacific-freight-rates-come-down-a-little-bit/ https://www.universalcargo.com/transpacific-freight-rates-come-down-a-little-bit/#respond Thu, 22 Apr 2021 19:42:19 +0000 https://www.universalcargo.com/?p=10331 Freight rates from Asia to the U.S. are still very high. In fact, still historically so according to Greg Miller's American Shipper article published on Tuesday. However, they have come down a little bit. That's something for U.S. importers who have seen nothing but sky-high freight rates for the last year with no end in sight.

Let's have some Miller time – no, not cracking a cold one, but that does sound like more fun than talking freight rates. Miller reports in his American Shipper article:

Norway-based Xeneta collects long-term contract rate data, using millions of inputs per month from shippers and non-vessel-operating common carriers (NVOCCs).

...

... As of Tuesday, Xeneta pegged the average long-term contract rates for Asia-West Coast cargo at $2,030 per forty-foot equivalent unit (FEU), up 33% from a year ago.

That sounds bad, but during a presentation a month ago, on March 23, the number was much worse: Xeneta listed that day’s average Asia-West Coast rate as $2,640 per FEU, up 50% year on year.

The same moderation can be seen in Xeneta’s Asia-East Coast estimates: $2,866 per FEU as of Tuesday, up 19% year on year. On March 23: $3,659 per FEU, up 28% year on year.

What does this mean for shippers operating in the spot rate market? Read the full post in Universal Cargo's blog to find out.

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Freight rates from Asia to the U.S. are still very high. In fact, still historically so according to Greg Miller’s American Shipper article published on Tuesday. However, they have come down a little bit. That’s something for U.S. importers who have seen nothing but sky-high freight rates for the last year with no end in sight.

Let’s have some Miller time – no, not cracking a cold one, but that does sound like more fun than talking freight rates. Miller reports in his American Shipper article:

Norway-based Xeneta collects long-term contract rate data, using millions of inputs per month from shippers and non-vessel-operating common carriers (NVOCCs).

… As of Tuesday, Xeneta pegged the average long-term contract rates for Asia-West Coast cargo at $2,030 per forty-foot equivalent unit (FEU), up 33% from a year ago.

That sounds bad, but during a presentation a month ago, on March 23, the number was much worse: Xeneta listed that day’s average Asia-West Coast rate as $2,640 per FEU, up 50% year on year.

The same moderation can be seen in Xeneta’s Asia-East Coast estimates: $2,866 per FEU as of Tuesday, up 19% year on year. On March 23: $3,659 per FEU, up 28% year on year.

What Does It Mean for Spot Freight Rates?

Most of the shippers who read our blog are likely operating in the spot rate space rather than the contract space when it comes to freight rates. Contract rates are reserved for the big beneficial cargo owners (BCOs) – the Targets, Best Buys, and Walmarts of the world. However, spot rates play a factor into how high the freight rates are in BCO contracts.

The idea, or at least the goal from the shippers’ point of view, is contract rates allow BCOs to pay less than the spot rate amounts for their shipping. It also gives them cost points they can plan on for the year. The current spot rates and projections for the spot rates plays an important part in negotiating what the contract amounts are.

That contract prices are significantly decreasing from the kind of rates seen a month ago likely means some spot rate drops or projected spot market freight rate drops. Of course, shippers shouldn’t get too excited by that as contract rates are still significantly higher than they were a year ago.

This is also traditionally a slow time in the market when fewer goods are shipped, especially compared with the upcoming peak season. Despite it being the slow part of the year, demand is still high for international shipping. Despite demand being unusually high, it does appear to have come down a little but in April.

I often use Universal Cargo’s shipping numbers as a barometer for the industry, and transpacific shipping in particular. There was about a 13% drop in shipments from March to April. Additionally, some of the end of month projected shipments in April could end up being reclassified as May shipments.

Despite that drop in shipments, April remains strong. Still, there could be a little bit of decline in freight rates coming as a result of the little decrease in demand. That’s especially true as there was just a little surge in rates.

However, a large dip is not expected. In fact, rates appear like they will remain high right up until and through the peak season.

Click Here for Free Freight Rate Pricing

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FMC Deregulates on Ocean Carrier Service Contracts – Shippers Await Action on Fees https://www.universalcargo.com/fmc-deregulates-on-ocean-carrier-service-contracts-shippers-await-action-on-fees/ https://www.universalcargo.com/fmc-deregulates-on-ocean-carrier-service-contracts-shippers-await-action-on-fees/#respond Tue, 20 Apr 2021 20:05:15 +0000 https://www.universalcargo.com/?p=10330 The Federal Maritime Commission (FMC) made a regulation move concerning ocean freight carriers. It's actually a bit of deregulation when it comes to carriers filing service contracts. Maybe it would even be more accurate to say it's an easing of regulation on filing service contracts.

John Gallagher – not the Gallagher who used to smash watermelons with mallets; his first name was actually Leo – reports in an American Shipper article:

"The Federal Maritime Commission (FMC) will begin this year what it calls a 'new era of flexibility' for service contract filing for container lines and their U.S. importer and exporter customers.

"An amended rule that takes effect on June 2 will allow ocean carriers to file original service contracts with the agency up to 30 days after they go into effect. Current regulations require that they be filed with the FMC before an ocean carrier is allowed to receive and move cargo under the terms of that contract."

Find out more by reading the full post in Universal Cargo's blog.

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The Federal Maritime Commission (FMC) made a regulation move concerning ocean freight carriers. It’s actually a bit of deregulation when it comes to carriers filing service contracts. Maybe it would even be more accurate to say it’s an easing of regulation on filing service contracts.

container ship at dock

John Gallagher – not the Gallagher who used to smash watermelons with mallets; his first name was actually Leo – reports in an American Shipper article:

The Federal Maritime Commission (FMC) will begin this year what it calls a “new era of flexibility” for service contract filing for container lines and their U.S. importer and exporter customers.

An amended rule that takes effect on June 2 will allow ocean carriers to file original service contracts with the agency up to 30 days after they go into effect. Current regulations require that they be filed with the FMC before an ocean carrier is allowed to receive and move cargo under the terms of that contract.

Reaction to Easing of Contract Filing Regulation

Shippers in general probably won’t mind this bit of deregulation. The flexibility does have the potential to improve service from carriers, allowing them to load shippers’ cargo faster after signing a contract. It doesn’t make the contract any less binding and shouldn’t decrease the FMC’s ability to review contracts to make sure carriers aren’t taking advantage of shippers. Ultimately, though, most shippers – especially small to medium shippers – are not likely to see any real difference from this deregulation.

Most in the international shipping industry – and the container shipping sector in particular – either view this bit of deregulation positively or with indifference. Gallagher’s article did, however, make note of the one dissenting opinion that was submitted to the FMC:

BassTech International, a raw materials supplier, was the sole commenter that opposed the change, asserting that “eliminating any regulation that will reduce transparency and meaningful Commission oversight of ocean carrier behavior will have a negative impact on U.S. businesses that rely on importing and exporting by ocean transportation,” according to the FMC.

Transparency, or the lack thereof, from carriers is something worth being concerned about. Carriers are notoriously opaque in their practices. However, I don’t believe there is much risk of this deregulation decreasing carrier transparency (and not just because it seems impossible for them to be less transparent). Contracts still must be filed and will be reviewed. This simply allows the contracts to go into effect faster.

Granted, I’m generally for less regulation rather than more when it comes to business. However, I do recognize the need for some regulation to prevent monopolies, stop unethical practices that would take advantage of consumers, and protect communities and environments in which businesses operate. There is regulation, which I believe should be put in place, that shippers have been waiting for from the FMC.

Shippers Waiting for Real FMC Action

For years, shippers have complained of unfair fees, especially detention and demurrage fees, from carriers and terminal operators. Unfair fees levied against shippers because of out-of-their-control factors such as congestion and limited operations due to Covid restrictions have been especially prevalent during the pandemic.

Meanwhile, U.S. exporters, especially in the agricultural sector, have been denied service by carriers so shipping lines could ship empty containers back to Asia faster to feed into the more profitable (for carriers) eastbound transpacific shipping routes.

While the FMC has talked a decent talk about investigating carrier practices and fees, shippers have seen almost nothing in terms of regulatory action. Probably the biggest bit of regulatory action the FMC has taken is to increase the frequency with which carrier alliances must report key trade data.

Shippers are still waiting for the FMC redress some of their complaints.

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Record Imports & No More Overcapacity – Are We Really Seeing a “New Normal” in International Shipping? https://www.universalcargo.com/record-imports-no-more-overcapacity-are-we-really-seeing-a-new-normal-in-international-shipping/ https://www.universalcargo.com/record-imports-no-more-overcapacity-are-we-really-seeing-a-new-normal-in-international-shipping/#respond Thu, 15 Apr 2021 22:31:50 +0000 https://www.universalcargo.com/?p=10327 As the Ports of Los Angeles and Long Beach hit record volumes of imports for March and freight rates reached a new peak, experts are telling us that the days of overcapacity, and the lower freight rates they bring, are over.

This post shares the record numbers from the Ports of LA & LB, and analyzes the claim of an international shipping expert that we're looking at a new normal in international shipping.

Read the full post in Universal Cargo's blog to learn about balances and imbalances in ocean freight shipping right now, how they're affecting freight rates, and if changes are on the way.

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As the Ports of Los Angeles and Long Beach hit record volumes of imports for March and freight rates reached a new peak, experts are telling us that the days of overcapacity, and the lower freight rates they bring, are over.

First, let’s look at the record-setting volume.

Ports of Los Angeles & Long Beach’s Record March

Greg Miller reports in American Shipper:

Los Angeles handled 957,599 twenty-foot equivalent units (TEUs) in March, up 113% year on year — the highest March number in the port’s history….

“That’s a big number for a peak month like September or October. But we’ve never seen volume like this in the first half of the year.”

Miller was quoting Port of Los Angeles Executive Director Gene Seroka at the end there.

Eric Kulisch reported in American Shipper:

The Long Beach port authority on Thursday said its terminals handled 840,387 twenty-foot equivalent units (TEUs) last month, surpassing the previous high of 815,885 set in December. March is normally one of the slowest months for maritime trade, as supply chains relax from order peaks associated with U.S. and Chinese holidays.

In Tuesday’s post, we talked about freight rates hitting new highs. In fact, freight rates have been so high for so long now, some shippers are starting to wonder if they’ll ever come down.

Shipping Expert Talks New Normal

Lars Jensen, CEO & Partner of SeaIntelligence Consulting, wrote an article for the Journal of Commerce (JOC) that states right in the title “shippers face a ‘new normal’ of more balanced capacity.”

shipping containers for import export

We’ll get to that balanced capacity part in a bit. First, I hate the phrase “new normal.” While it doesn’t have to be all negative, “new normal” has been used a ton over the last year to get people to accept agenda-driven narratives, reduction of freedoms, and political power grabs. I do have to admit, however, the main message of Jensen’s “new normal” article is likely true: gone are the days of severe overcapacity in ocean freight shipping.

Carriers creating overcapacity in their competition with each other and – as Jensen points out – to attain scale benefits drove freight rates down. In fact, over the last decade, I’ve written many posts in Universal Cargo’s blog about record low freight rates while pointing out carriers’ inability to manage capacity as a leading cause of those low rates shippers enjoyed. Jensen, in his article, went so far as to say, “The ‘Old Normal’ has for decades been an abundance of capacity.”

However, with the onset of dominant carrier alliances growing to control the industry since 2014, I’ve been warning the shrinking of competition would eventually result in higher freight rates for shippers. When the pandemic hit in 2020, we saw the three controlling alliances flex their muscles and squash capacity – well below the initially reduced demand the pandemic caused – driving freight rates way up.

We’d actually already seen more capacity discipline from carriers in the year or two leading up to 2020. However, never before had they seen the kind of price points and profits controlling capacity and pushing freight rates up could bring before now. Carriers will certainly strive to maintain this kind of profit or something close to it, but does that mean this is truly the “new normal”? Will shippers never see rates come back down because carriers have so thoroughly controlled capacity?

Demand Is Still a Factor

Demand is, of course, a huge factor in the incredibly high freight rates we’re seeing. It is also a factor in carriers’ ability to control capacity balance. What happens when demand finally falls? And it is hard to imagine it won’t eventually take a very large tumble. Despite being built on top of a strong economic foundation before the pandemic hit, demand is artificially high right now, propped up by government stimuli and a year of people saving money because they were unable to go out or travel due to lockdowns.

Yes, carriers could blank (cancel) hundreds of sailings like they did when the pandemic first hit. However, for the better part of a year, carriers have added capacity, and have even done more ship ordering, in response to all the demand they are seeing. After months and months of record to near record volume, it won’t be as easy to match capacity to a sudden and steep drop in demand.

Larger ships, even megaships, are pervasive in the international shipping industry. With the massive ships, many of which able to transport well over 20,000 TEU on a sailing, there is a level that demand could drop to that carriers would struggle to avoid well exceeding with capacity.

Additionally, there are still some signs of capacity races from carriers. I’ve written a couple Universal Cargo blog posts over the last couple years about MSC buying ships, increasing its capacity, and threatening to overtake Maersk in terms of fleet capacity. There’s even been some bitterness between the 2M Alliance members over it. MSC is back in international shipping headlines again for being set to replace Maersk as the world’s largest container line, such as in this article from Shipping Watch. Of course, MSC had been projected to surpass Maersk earlier than the current projections, which is just one indication Maersk may not give up its thrown without a fight.

The MSC-Maersk rivalry is just an example to show there is still a capacity competition that exists between carriers. While we likely will see much more control over capacity in the future, like Jensen says, it is not impossible to think there will be times that the industry will still struggle with overcapacity. Such times should be fewer and further between, but when they happen, they will be accompanied by downward pressure on freight rates.

Capacity Balance Is a Strong Phrase

I said I’d get back to that “balanced capacity” phrase Jensen used in his article. Yes, capacity is more balanced from the carriers’ point of view, as they’re not suffering from severe overcapacity. However, I don’t like the use “capacity balance” when describing what’s been happening in international shipping over the last year.

Right now, we’re getting right around the time of year that carriers dropped capacity well below market demand last year. That’s a capacity imbalance that pushed freight rates way up and angered shippers, who accused carriers of profiteering off the pandemic. The hundreds of blanked sailings carriers instituted a year ago also began a huge imbalance of shipping containers that persists to this moment.

The way carriers have been dealing with this imbalance of shipping containers has been by limiting the service and capacity offered to U.S. exporters, shipping empty containers back to Asia instead of containers full of U.S. goods. American agricultural exporters have especially suffered from this and have gone so far as to plead to President Biden to do something. Not surprisingly, no action has been seen from the Biden Administration on the issue.

Carriers continue to prioritize shipping empty containers back to Asia over supplying U.S. exporters with them. Miller’s American Shipper article provides detail from the Port of Los Angeles’ executive director on the continued imbalance of shipping empty containers over loaded ones:

“The madness continues with the empties,” said Seroka, referring to outbound empty container volumes loaded on ships in Los Angeles in March.

Last month saw the highest-ever number of empties loaded on ships in Los Angeles. The four-to-one gap between empty export containers and full export containers “is the highest gap we’ve seen in recent times,” he added.

Asked why this was occurring, he responded, “It’s quicker [for ocean carriers] to get the empties onto the ships and to the next point of origin in Asia to recycle them and have them come back as imports than it would be for the additional transit time to reach U.S. exporters here and then deliver exports to Asia consignees on the other side of the Pacific.

“So, they’re trying to cut down the transit time and catch up on the massive orders for imports and the next round to come to the U.S.”

Conclusion

Freight rates are high, as is cargo volume, especially when it comes to importing from China, and Asia in general. Volume and freight rates look like they’ll remain high for most of the year, making it through this traditionally slower part of the year and into the peak season, when traditional swells in cargo should carry high freights and volume forward for a few more months.

Carriers, with their competition-reducing alliances, have gotten much better at controlling capacity. This makes it likely that when volume does finally come down, freight rates won’t drop as dramatically as they have in the past.

A sudden and severe drop in capacity could create a situation in which carriers find it more difficult to avoid overcapacity. Such an outcome is not at all out of the realm of possibility, especially with the worries of the big stimulus bubble that’s been created popping and causing a recession or crash. In such outcomes, freight rates should fall.

Carriers appear to have no qualms in creating capacity imbalances so long as they result in profits. That means shippers, especially but not limited to U.S. exporters, could continue to find it harder to obtain space for their cargo well into the future.

In the meantime, shippers would be wise to follow Jensen’s advice to be prepared for continued higher freight rates and more difficult shipping circumstances than have been seen in years past:

As such, shippers – big and small – need to re-assess their supply chain strategies for the post-pandemic new normality and find how they best balance between transactional costs, supply chain speed, supply chain flexibility, and supply chain resilience.

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Shocker: Carriers Raise Ocean Freight Rates in April https://www.universalcargo.com/shocker-carriers-raise-ocean-freight-rates-in-april/ https://www.universalcargo.com/shocker-carriers-raise-ocean-freight-rates-in-april/#respond Tue, 13 Apr 2021 21:33:21 +0000 https://www.universalcargo.com/?p=10322 If you thought freight rates couldn't get any higher, carriers responded with, "Hold my beer."

We often focus on transpacific freight rates, with the prevalence of importing from China, which have been astronomical for almost a year now. However, we'll get to transpacific rates later; it's the transatlantic rates that just spiked. Businesses that import from Europe won't be happy with the ocean freight rates they're seeing in April.

Greg Knowler reported in a Journal of Commerce (JOC) article:

"Spot rates on the trans-Atlantic westbound trade have shot up to $2,548 per TEU, an almost 66 percent jump year over year, as carriers introduced substantial rate increases at the start of April to capitalize on sustained demand from North American importers."

Find out more, including changes on the transpacific freight rate side, by reading the full post in Universal Cargo's blog.

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If you thought freight rates couldn’t get any higher, carriers responded with, “Hold my beer.”

Freight Rates

We often focus on transpacific freight rates, with the prevalence of importing from China, which have been astronomical for almost a year now. However, we’ll get to transpacific rates later; it’s the transatlantic rates that just spiked. Businesses that import from Europe won’t be happy with the ocean freight rates they’re seeing in April.

Greg Knowler reported in a Journal of Commerce (JOC) article:

Spot rates on the trans-Atlantic westbound trade have shot up to $2,548 per TEU, an almost 66 percent jump year over year, as carriers introduced substantial rate increases at the start of April to capitalize on sustained demand from North American importers.   

Greg Miller reported in an American Shipper article how much these transatlantic freight rates spiked from the end of last month:

In the U.S. markets, the biggest rate move this month is in the westbound trans-Atlantic trade.

The Freightos assessment of this route (SONAR: FBXD.ENEA) shows rates surging by almost 50% between March 31 and Thursday, to $3,254 per FEU.

What Caused This Latest Freight Rate Spike?

When the Suez Canal saw a nearly week-long closure from Evergreen’s Ever Given blocking it, there were many who worried the event would push freight rates even higher. We discussed the possibility of this in previous posts, but it is not only the effect on capacity from the canal disruption that is causing these high freight rates.

Demand remains extremely strong for international shipping, in particular the importing of goods to the U.S. Often, goods from Asia to the U.S. are the first to come to mind; however, Europe to U.S. goods demand is strong too. This high demand for goods – stemming largely from government stimuli and money saved from consumers not going out over the last year because of the pandemic – is an upward pressure on freight rates that we’ve also talked a great deal about in previous posts.

Strong demand and reduced service because of disruption also combine with a strong desire from carriers to increase rates. Knowler wrote in his JOC article:

While carriers have achieved at least some of their hefty increases, the rates are far below their aspirational freight-all-kinds (FAK) targets, which were set as high as $7,500 per FEU.

Carriers’ desire to push rates up may be the biggest factor in this transatlantic freight rate spike. High freight rates have helped take a year when carriers have provided some of the historically worst service we’ve seen in international shipping and turn it into one of the most profitable (for carriers) we’ve ever seen. Another American Shipper article by Greg Miller shows how carriers are continuing to enjoy that profit and are about to report “blockbuster Q1 earnings.”

Transatlantic routes from Europe to the U.S. haven’t seen the kind of freight rate growth carriers enjoyed on other routes. I haven’t seen indicators showing transatlantic demand really spiked in April. It appears to be simply remaining strong. The Suez Canal disruption certainly impacts capacity and cargo volume to European and U.S. East Coast ports may have been just the opportunity carriers needed to push up pricing for shipping on the last remaining routes where rates were “formerly sleepy” as Miller described them in his article.

It really felt like only a matter of time before transatlantic rates surged like the rates have on other trade routes, Suez Canal disruption or no Suez Canal disruption.

Transatlantic Freight Rates Will Continue to Rise This Month and Next

Knowler reports in his JOC article:

Further rate increases have been announced for April 26 and May 1 on the trans-Atlantic, accompanied by peak season surcharges on the Mediterranean to Canada trades ranging from $350 per FEU to $850 per TEU.

Sometimes surcharges like these fail to stick; however, that has not been the case over the last year. I would expect these announced rate increases to successfully be implemented by carriers.

Asia-U.S. Rates Back to Peak

It’s hard to talk about ocean freight rates and not mention Asia to U.S. rates. And wouldn’t you know, there has been a little increase there too. Just last week, I posted here about what’s happening with freight rates – and the focus was on transpacific rates. While I said they likely wouldn’t come down for a while, I stated carriers probably couldn’t push them much higher for fear of further backlash from shippers and government regulators investigating and possibly intervening. I should have known carriers would immediately hand me their beer.

Miller reported in the JOC that Asia to U.S. freight rates are peaking yet again:

In the much larger Asia-U.S. trade, Freightos put the rate to the East Coast (SONAR: FBXD.CNAE) at $6,239 per day as of Thursday, a new all-time high topping the previous record set in early February.

The Asia-West Coast rate (SONAR: FBXD.CNAW) was at $5,052 per FEU, just below the new high hit on Wednesday.

In the Drewry weekly indices, the latest assessment from Shanghai to New York (SONAR: WCI.SHANYC) is even higher than Freightos’ — at $6,705 per FEU. Drewry assessed the Shanghai-to-Los Angeles spot rate (SONAR: WCI.SHALAX) at $4,202 per FEU.

Still, these are not huge gains on transpacific routes. They just give more evidence to what we already believed: freight rates aren’t coming down anytime soon. Rates will likely remain high between now and the peak season, which will continue to carry those high price points for shippers.

Click Here for Free Freight Rate Pricing

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What’s Happening With International Shipping Freight Rates https://www.universalcargo.com/whats-happening-with-international-shipping-freight-rates-2/ https://www.universalcargo.com/whats-happening-with-international-shipping-freight-rates-2/#respond Tue, 06 Apr 2021 19:18:50 +0000 https://www.universalcargo.com/?p=10319 It was hoped the high freight rates we've been seeing for about a year now in the international shipping industry would finally start easing back down at this point; however, it appears reprieve is not coming yet for a couple of reasons.

Check out the post in Universal Cargo's blog to find out what's putting upward pressure on rates and a projection for the rest of 2021's freight rates.

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It was hoped the high freight rates we’ve been seeing for about a year now in the international shipping industry would finally start easing back down at this point; however, it appears reprieve is not coming yet. There are a couple of reasons.

Spending Keeping Demand High

As expected, consumer spending is up with the third round of stimulus hitting the U.S. Services are slowly opening with COVID-19 restrictions reducing, but spending still remains strongly focused on goods. That means demand for importing goods remains strong. That high demand, let alone ocean freight carriers’ ability to manipulate capacity, means freight rates look to remain high.

American Shipper published an article by Andrew Cox on this exact topic. Since demand was reduced at this time last year because of the onset of the pandemic, the article makes comparisons against 2019 rather than 2020.

Cox shared data showing that total card spending (TCS) for the week ending on March 27th was up 20% over 2019, in aggregate. TCS for households receiving stimulus was up 49%. All that increased spending continuing to take place results in increased cargo volume imported. Cox shares:

The FreightWaves Inbound Ocean TEU Volume Index to the U.S. is up 75% over 2019 currently and is poised to move higher in the coming weeks.

Capacity Hit Because of Suez Canal Disruption

Ocean freight carriers have gone into damage control after the nearly week-long blocking of the Suez Canal by Evergreen’s megaship Ever Given. Cancellations are happening, including some from Maersk that have some shippers angry; container and equipment supply issues are exacerbated; and general tightening of capacity are taking place as extra pressure and congestion on ports, especially European ports and to a lesser degree U.S. East Coast (USEC) ports, is expected in the upcoming days and weeks.

While we’re not fully seeing the fallout from the clogging of the Suez Canal yet, all the signs are there for upward pressure on freight rates.

Greg Knowler wrote an article for the Journal of Commerce (JOC) about how the Suez Canal disruption is renewing fears on shipping container shortages. At the end of that article, Knowler addresses the effect of Ever Given getting stuck in the canal on freight rates:

Freight rate marketplace Freightos projected the equipment shortages in Asia will pressure freight rates on the major east-west trade lanes. “With so much capacity delayed, and no additional ships to take their place, carriers are likely to cancel Asia-Europe sailings for ships that won’t make it back to Asia on schedule,” Judah Levine, research lead at Freightos, said in its weekly newsletter. “The reduction in capacity and the resulting additional shortage of containers back in Asian-origin ports could put renewed pressure on ocean rates.”

This upward pressure on freight rates should most be felt on Asia to Europe shipments. However, Asia to USEC should feel a similar pressure, but likely to a lesser extent. Of course, the ripple effect of capacity being tightened on other routes as carriers readjust spreads that upward pressure on rates even further.

Conclusion

Freight rates have been pretty stable over the last couple months. While we’d like to see the extremely high rates come down, they at least have not been climbing to even more astronomical heights. We haven’t seen a spike yet in the aftermath of the Suez Canal disruption, which is a good thing. The latest surge in spending from the newest stimulus, likewise, has not caused a jump in rates.

It is possible with these events that create upward pressure on rates that we could see rates go even higher than they are now. However, I think it is more likely the pressure will merely keep freight rates from falling for a little while longer. The real question is how much longer.

Carriers are enjoying very profitable freight rates, and they’d certainly like to maintain that right into international shipping’s peak season, when volume and rates typically increase as importers and retailers are stocking for the holiday shopping season. July, when the peak season usually starts gaining steam, isn’t that far away. I expect carriers will maintain high freight rates until that time, especially with their ability to shrink capacity to keep rates up if they need to. At that point, the natural cycle of the shipping industry should keep rates high for a few more months, basically keeping freight rates high for most of the year.

Could rates climb even higher than they are? It’s possible. However, I’m not sure how much higher freight rates actually can go. There is already resentment and backlash growing from shippers, and regulators are taking notice of carriers’ practices and investigating. There also comes a point when rates cut into profit margins to a point that demand starts falling off. Carriers may not want to push rates up much more for fear of damaging relations with customers too much and of regulators stepping into the situation.

Click Here for Free Freight Rate Pricing

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Ever Given Free, Let the Fallout Begin https://www.universalcargo.com/ever-given-free-let-the-fallout-begin/ https://www.universalcargo.com/ever-given-free-let-the-fallout-begin/#respond Tue, 30 Mar 2021 21:06:37 +0000 https://www.universalcargo.com/?p=10311 She's afloat once again. The Ever Given, which was stuck sideways in the Suez Canal, has been freed.

While one of the companies hired to get the ship free said it could take weeks, in actuality, the Ever Given's time stuck in the middle of the Suez Canal lasted a little less than a week. It got wedged sideways last Tuesday and freed yesterday (Monday). Maybe the company was creating buffer time in order to look great when freeing the ship faster. I'll give them the benefit of the doubt that there was no telling how long it would take to free the Ever Given.

It was still long enough that shippers will feel its effects. U.S. East Coast ports likely have new congestion problems on the way because of it.

Find out more in Universal Cargo's blog.

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She’s afloat once again. The Ever Given, which was stuck sideways in the Suez Canal, has been freed. Yahoo Finance posted a Youtube video, showing the the megaship moving again. The video is forty minutes long, but don’t worry, most of the video is exactly the same as the rest, so it’s well worth your time.

YouTube Video

Faster Than Feared

Photo: Ever Given by flickr user kees torn.

While one of the companies hired to get the ship free said it could take weeks, in actuality, the Ever Given’s time stuck in the middle of the Suez Canal lasted a little less than a week. It got wedged sideways last Tuesday and freed yesterday (Monday). Maybe the company was creating buffer time in order to look great when freeing the ship faster. I’ll give them the benefit of the doubt that there was no telling how long it would take to free the Ever Given.

While we’ll miss the memes of the ship, we are happy that traffic will be able to move through the Suez Canal again. If you missed the memes altogether, here’s a Tastefully Offensive post that shared 20 of them. One of the memes shows I wasn’t the only person reminded of Austin Powers when Evergreen’s megaship got stuck sideways:

We’ve Only Just Begun… To Have Problems Suez Canal Jam

In last Thursday’s blog, there was a section about port congestion and the rippling effect the Suez Canal congestion from Ever Given being stuck in it would cause. Much of the focus was on port congestion that would likely be caused at European ports from the tidal wave of ships coming through once the Suez Canal was cleared and the ripple effect that would be seen on supply chains across the global shipping industries. However, there are plenty of ships that go through the Suez Canal headed to U.S. East Coast ports. We very well could see more port congestion problems as a result.

In fact, American Shipper published an article by Greg Miller yesterday about the fallout U.S. ports and shippers are about to face from the chaos at the Suez Canal:

In the U.S. market, East Coast cargo flows will bear the brunt of the fallout, although consequences will be felt nationwide.

Most of the boxes transiting the Suez Canal move from Asia to Europe. But the waterway also handles very significant volumes from Southeast Asia and India to the East Coast.

… almost one in three containers from Asia transits the Suez Canal en route to the East Coast.

The result of this is similar to what we talked about in the last blog post with European ports. U.S. East Coast ports are likely going to see a surge in ships arriving, which will likely cause congestion problems. More congestion problems.

Congestion is currently worse at West Coast ports, with the Ports of Los Angeles and Long Beach being poster children for ship backups, but there has been plenty at East Coast ports too. The Port of New York and New Jersey has been especially bad on the east side of the country. In a couple of weeks, East Coast ports could make a run at catching up to West Coast ones for highest congestion.

Before extra ships arrive, there’s a little period of lull when ships that were supposed to arrive do not. This may help East Coast ports prepare as much as they can for the likely surge. Still, when ships arrive in bunches, there will be ships that have to anchor and wait for docks to open. Delays can only be mitigated to a point.

Services Disrupted

Miller included in his American Shipper article one of the best lists I’ve seen of disrupted ocean freight carriers’ services (that specifically include U.S. ports) from the Suez Canal blockage:

Services: EC4, EC5 (THE Alliance) — Rotation: Taiwan, China, Singapore, Vietnam, NY/NJ, Norfolk, Charleston, Savannah. Average vessel capacity: 13,929 twenty-foot equivalent units (TEUs). YM Mandate at anchor in Red Sea. MOL Maestro at anchor off Port Said, Egypt. ONE Munchen, YM Wellhead, ONE Marvel rerouted around cape.

TP17 (2M) — China, Hong Kong, Vietnam, Singapore, NY/NJ, Charleston, Savannah, Miami, Freeport (Texas). Average vessel capacity: 9,093 TEUs. Adrian Maersk at anchor off Port Said. Axel Maersk at anchorage in Red Sea. Maersk Algol and Arnold Maersk rerouted around cape.

TP11 (2M) — Vietnam, Singapore, NY/NJ, Norfolk, Savannah, Freeport (Bahamas).GSL Grania at anchor off Port Said. Maersk Skarstind, Maersk Santana, Maersk Kowloon rerouted around cape.

India America Express/IEX (CMA CGM, Hapag-Lloyd, ONE, OOCL) — India, Egypt, NY/NJ, Norfolk, Charleston, Savannah. Average vessel capacity: 9,513 TEUs. Athenian at anchor off Port Said.

Columbus Jax (Ocean Alliance) — multiple loops, including China, Vietnam, India, Halifax (Nova Scotia), NY/NJ, Norfolk, Charleston, Savannah. Average vessel capacity: 12,456 TEUs. CMA CGM Lyra at anchor off Port Said. CMA CGM Leo rerouted eastbound around cape.

Indus Express (MSC) — India, Saudi Arabia, Israel, Italy, Spain, NY/NJ, Norfolk, Charleston, Freeport (Bahamas), Houston. Average vessel size: 8,546 TEUs.MSC Giulia at anchor off Port Said. Northern Javelin rerouted eastbound around cape.

MECL(Maersk, Sealand) — India, Dubai, Oman, Djibouti, Egypt, Spain, NY/NJ, Norfolk, Charleston, Savannah, Houston. Average vessel size: 6,363 TEUs. Maersk Denver at anchorage in Red Sea. Maersk Seletar at anchor off Port Said.

Conclusion

We’ll have to keep an eye on how much international shipping gets impacted from the week of the Suez Canal being blocked by the Ever Given.

Beyond the disrupted routes and potential port congestion, container and equipment shortage problems the industry has been experiencing could be exasperated. How many blanked sailings will we see from carriers readjusting fleets? Will this be one more thing keeping freight rates high?

Things could have been worse with an even longer period of the Ever Given being stuck in the Suez Canal, but there will likely be plenty of fallout for shippers, and the international shipping industry in general, to deal with from this event.

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Aground Megaship Could Block Suez Canal for Weeks https://www.universalcargo.com/aground-megaship-could-block-suez-canal-for-weeks/ https://www.universalcargo.com/aground-megaship-could-block-suez-canal-for-weeks/#respond Thu, 25 Mar 2021 18:48:53 +0000 https://www.universalcargo.com/?p=10310 You thought port congestion at U.S. ports – the Ports of Los Angeles and Long Beach especially – is bad. You're right. But at least it's possible for ships to get in and out of the ports (it just takes days). At the Suez Canal, ships can't go through at all. And it could be that way for weeks!

The Suez Canal is blocked right now because a megaship ran aground – it actually got stuck sideways inside it – making it completely impossible for ships to move either direction through the canal.

You may have even seen pictures online of the Evergreen's aground megaship Ever Given. Such images have been circulating since the ship got stuck on Tuesday. After all, it's not every day you see an ultra large container vessel jammed width-wise in a canal. It looks like the golf cart Austin Powers tried to turn around in the narrow corridor of Dr. Evil's hideout.

Find out how this looks to affect shipping around the globe by reading the full post in Universal Cargo's blog.

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Photo: Container Ship ‘Ever Given’ stuck in the Suez Canal, Egypt – March 24th, 2021 by flickr user Pierre Markuse

You thought port congestion at U.S. ports – the Ports of Los Angeles and Long Beach especially – is bad. You’re right. But at least it’s possible for ships to get in and out of the ports (it just takes days). At the Suez Canal, ships can’t go through at all. And it could be that way for weeks!

Who’s Driving That Ship, Austin Powers?

The Suez Canal is blocked right now because a megaship ran aground – it actually got stuck sideways inside it – making it completely impossible for ships to move either direction through the canal. You may have even seen pictures online of the Evergreen’s aground megaship Ever Given. Such images have been circulating since the ship got stuck on Tuesday. After all, it’s not every day you see an ultra large container vessel jammed width-wise in a canal. It looks like the golf cart Austin Powers tried to turn around in the narrow corridor of Dr. Evil’s hideout.

Like Ben Jenkins wonders about how the Austin Powers filmmakers got the cart into this position, there has been much speculation about how the Ever Given got into a similar one. Most of that speculation seems to be centered on the idea that wind blew it off course, causing it to spin sideways.

Stuck in the Worst Traffic Jam You Can Imagine

It appears there is no real damage to the ship or its cargo. What is damaged is international shipping traffic movement through one of the world’s key shipping lanes.

Ahmed Shawkat wrote an article for CBS News that has potentially very bad news on how long it will take to get things cleared up:

Peter Berdowski, CEO of the Dutch company Boskalis that owns Smit Salvage [one of the companies hired to get Ever Given afloat again], said Thursday that it was still too early to determine how long the job might take.

“We can’t exclude it might take weeks, depending on the situation,” Berdowski told the Dutch television program “Nieuwsuur,” according to Reuters.

There are other ships stuck inside the Suez Canal, whose crews can do nothing but wait for the massive cargo ship to get dislodged. We’ve probably all experienced the frustration of being stuck in a traffic jam on the freeway because an accident happened up ahead. Take that freeway situation, increase it exponentially, and you get the situation in which sailors are trapped right now in the Suez Canal.

Port Congestion & Rippling Effect on Global Shipping

All told, more than 30 container ships other than the Ever Given can’t transit the primary waterway that connects Asia and Europe, according to Michael Angell in an article he wrote for the Journal of Commerce (JOC). The result, when the canal finally gets unblocked, will be a tidal wave of ships pushing through the canal and heading for ports. European ports will likely compete with American ones for the title of most congested. Angell writes:

“Every port in Western Europe is going to feel this,” a spokesman for the Port of Rotterdam told JOC.com Thursday. “No terminal anywhere in the world has an unlimited number of docks and cranes to load and unload containers. So when these ships do arrive at their destination, there will inevitably be longer waiting times.”

A spokeswoman for the port of Antwerp said the Suez blockage would have an operational impact on shipping traffic, but it was too early to assess the scale of that impact.

“Every day that the ship is stuck, additional ships will have to wait,” she told JOC.com. “Once resolved, there will be a peak of ships in all Western European ports. If this lasts much longer, it could have a major impact on the global logistics chain.” 

Of course, that last sentence in the above quote is probably the one that should concern U.S. shippers most.

Global logistics are all tied together when it comes to international shipping. Port congestion in the U.S. paired with port congestion in Europe certainly will have an effect on U.S. shippers who import and export to Europe. Those who import and export to China, and Asia in general, shouldn’t expect those ports to be unaffected either. However, the latter should see congestion to a lesser degree, as the amount of cargo flowing from Asia to Europe exceeds that flowing in the opposite direction.

Still, this piles on to already existing issues affecting the industry like container and equipment shortages, truck driver shortages, dismal schedule reliability from carriers, and port congestion.

More Blanked Sailings and Rate Increases

With ships getting held up, blank (cancelled) sailings are expected to happen from carriers as well. In his article, Angell shared blank sailing, rerouting, and freight rate increase threats from Lars Jensen, CEO of SeaIntelligence Consulting and a JOC analyst:

… a prolonged delay in moving ships through the Suez will have a ripple effect of forcing carriers to cancel future sailings as they try to catch up with the previous delays, Jensen said. The resulting cancellations in an already tight shipping market could force rates even higher, he added. 

“The longer this lasts, the more you will see a situation with a new round of blank sailings a month from now as the vessels stuck in line will be unable to get back in time and hence force blank sailings,” Jensen said.

Unlike the blank sailings instituted by carriers in response to weak cargo volumes, these missed voyages would be structural in nature. When a vessel has been delayed for a week or longer at a given port — or in this case outside the Suez Canal — the carrier will then institute a “structural” blank for that ship’s next sailing to rectify the service schedule.

Angell added that Hapag-Lloyd announced it was considering vessel diversions around Cape of Good Hope. Angell points out how going around Africa like that adds more than 3,000 nautical miles to the transit, longer transit times by at least a week, and the necessity for ships to speed up to maintain weekly schedules. “… an increase of two knots over five days of extra steaming burns an additional 1,000 tons of fuel, according to maritime industry analyst Alphaliner,” Angell says.

You can bet that extra cost would be passed on to shippers, who are already suffering through sky-high freight rates.

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US Importers’ Shipping Contracts Double: What Does That Mean for Spot Rates? https://www.universalcargo.com/us-importers-shipping-contracts-double-what-does-that-mean-for-spot-rates/ https://www.universalcargo.com/us-importers-shipping-contracts-double-what-does-that-mean-for-spot-rates/#respond Tue, 23 Mar 2021 22:09:06 +0000 https://www.universalcargo.com/?p=10308 The way ocean freight rates have skyrocketed in 2020 and into 2021, it became expected that the big U.S. shippers – the beneficial cargo owners (BCOs) of the world like Walmart, Target, Best Buy, and the like – would end up with higher freight rate contracts with ocean freight carriers this year than last. And, boy, were those expectations right.

According to an article from Bill Mongelluzzo in the Journal of Commerce (JOC), BCOs' contracts with carriers this year contain freight rates that are basically double the rates they negotiated for last year:

"The top half-dozen US importers of Asia cargo are finalizing trans-Pacific service contracts at levels that are approximately double what they signed last year, according to conversations with a number of market participants.

"The approximate rates for the largest retailers are about $2,500 per FEU to the West Coast and $3,500 per FEU to the East Coast. In the 2020-21 annual service contracts that run through May 1, 2021, the largest retailers reportedly signed for about $1,100 to $1,300 to the West Coast and $700 to $1,000 per FEU higher than that to the East Coast."

Most businesses do not import the amount of goods BCOs do. Instead of negotiating year-long contracts directly with carriers, small to medium shippers must play the spot rate market, where freight rates fluctuate throughout the year. While it's impossible to know exactly how spot rates will behave, the contracts signed by BCOs around this time of year each year set expectations for the kind of rates small to medium shippers will be able to get.

Find out more by reading the full post in Universal Cargo's blog.

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The way ocean freight rates have skyrocketed in 2020 and into 2021, it became expected that the big U.S. shippers – the beneficial cargo owners (BCOs) of the world like Walmart, Target, Best Buy, and the like – would end up with higher freight rate contracts with ocean freight carriers this year than last. And, boy, were those expectations right.

Freight Rates

According to an article from Bill Mongelluzzo in the Journal of Commerce (JOC), BCOs’ contracts with carriers this year contain freight rates that are basically double the rates they negotiated for last year:

The top half-dozen US importers of Asia cargo are finalizing trans-Pacific service contracts at levels that are approximately double what they signed last year, according to conversations with a number of market participants.

The approximate rates for the largest retailers are about $2,500 per FEU to the West Coast and $3,500 per FEU to the East Coast. In the 2020-21 annual service contracts that run through May 1, 2021, the largest retailers reportedly signed for about $1,100 to $1,300 to the West Coast and $700 to $1,000 per FEU higher than that to the East Coast.

Most businesses do not import the amount of goods BCOs do. Instead of negotiating year-long contracts directly with carriers, small to medium shippers must play the spot rate market, where freight rates fluctuate throughout the year. While it’s impossible to know exactly how spot rates will behave, the contracts signed by BCOs around this time of year each year set expectations for the kind of rates small to medium shippers will be able to get.

BCO Contracts Vs. Spot Rates

Overall, BCOs are generally going to pay less than smaller businesses for their imports. Otherwise, why would BCOs bother with these contracts at all? However, it is not necessarily the case that small to medium importers are always paying more for their cargo shipping. Expectations for peak season shipping, when volume usually significantly increases as retailers are preparing for the holiday shopping seasons, factor highly into negotiations. That can mean BCOs are paying a bit more than the spot market rates during slower times of the year in order to pay less during the peak season. The highly volatile nature of the ocean freight market can also see unexpected dips in prices, even during peak season, causing the spot market to go below contract rates.

Unfortunately for shippers in general, a shift has happened in the ocean freight market since the onset of three carrier alliances dominating the entire ocean freight industry. Carriers are now more capable of controlling capacity, reducing the impact falls in demand usually have on prices in a market. In 2020, this allowed carriers to more than mitigate the downward pressure on freight rates that should have taken place in the early part of the year when international shipping demand fell because of the initial fear of the COVID-19 pandemic. Carriers reduced capacity below demand, which then soared, and we’ve yet to see space and equipment catch back up to demand.

Looking forward in 2021, BCOs, and shippers in general, are worried about having space for their goods. That worry plus the astronomical freight rates we’ve been seeing, the massive port congestion at U.S. ports, and carriers’ newfound ability to manipulate capacity to keep rates high put all the cards in carriers’ hands. Greg Miller wrote an American Shipper article about just that last month.

Small to medium shippers who have to operate in the spot market this year can clearly see what the bigger players think about international shipping for 2021. The expectations are that space will be tight and spot rates will be high. The trillions of dollars the government keeps dropping in stimulus will likely keep spending and transpacific shipping demand high for a while. But for how long? The government spending record money that it doesn’t have seems risky to me. I worry a crash is on the way. Perhaps if the 2021 expectations that resulted in these high contracts are correct, that crash, if it is indeed inevitable, won’t come until 2022.

Click Here for Free Freight Rate Pricing

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Are Gulf Coast Ports Good Alternative to Congested East & West Coast Ports for Importing from China? https://www.universalcargo.com/are-gulf-coast-ports-good-alternative-to-congested-east-west-coast-ports-for-importing-from-china/ https://www.universalcargo.com/are-gulf-coast-ports-good-alternative-to-congested-east-west-coast-ports-for-importing-from-china/#respond Fri, 19 Mar 2021 00:56:35 +0000 https://www.universalcargo.com/?p=10296 Some shippers are looking at Gulf Coast ports like the Port of Houston as possible alternatives to the severely congested ports along the East and West Coasts. Port congestion like we're seeing at the country's largest ports by TEU moves, such as the Ports of Los Angeles and Long Beach on the West Coast and New York and New Jersey on the East Coast, not only costs shippers time but money. Are Gulf Coast ports the answer?

Let's consider it while checking out the full post in Universal Cargo's blog.

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Some shippers are looking at Gulf Coast ports like the Port of Houston as possible alternatives to the severely congested ports along the East and West Coasts. Port congestion like we’re seeing at the country’s largest ports by TEU moves, such as the Ports of Los Angeles and Long Beach on the West Coast and New York and New Jersey on the East Coast, not only costs shippers time but money. Are Gulf Coast ports the answer?

Container Ship at Port

Universal Cargo has certainly found alternative routes for shippers importing or exporting goods over the years to avoid costly situations like congestion, labor slowdowns, strikes, and lockouts at various ports. However, that doesn’t mean switching ports, especially when that change includes switching coasts, is necessarily always the answer to major congestion problems like we’re seeing.

Factors That May Dissuade from Switching Ports

Switching to a Gulf Coast port may be a good option for certain shipments of some shippers, but there are many reasons it may not make sense for other shippers or shipments. There are many such possible reasons, but here are the few that stand out the most:

  • Additional trucking and rail costs or challenges
  • Fewer or more expensive shipping routes to alternate ports
  • Smaller alternative ports unable to handle influx of volume being rerouted

Shippers Turning to Port of Houston

Gulf Coast ports are increasing their market share of imports from Asia right now. With the terrible congestion we’re seeing at the Ports of Los Angeles and Long Beach, America’s largest port complex in terms of shipping containers of imported goods – especially from China – handled, it makes sense that shippers would turn to alternatives.

Noi Mahoney wrote an article for American Shipper that highlights a rather large importer exploring the Port of Houston as an alternative to the Ports of Los Angeles and Long Beach as well as New York and New Jersey for importing from Asia:

Austin, Texas-based cooler and drink ware manufacturer Yeti (NYSE: YETI) is testing Port Houston as an alternative to the Port of Los Angeles and Long Beach or Port of New York/New Jersey for importing its shipments from Asia, according to Paul Carbone, Yeti’s CFO. 

“We’re seeing some elongated wait times coming through the ports in the process of shipments,” Carbone said during Bank of America’s 2021 Consumer and Retail Technology Conference on March 9. 

To mitigate wait times and supply chain risks, Carbone said Yeti is cross-docking its shipments, using some different shipping lanes, and using faster shipping lanes out of Southeast Asia “to cut down on the transport time.”

“Lastly, we’re testing some alternative ports, but we haven’t even started that,” Carbone said. “Port Houston is right down from our Dallas-Fort Worth distribution center. So we’re going to send some ships into there; it’s a smaller port, we don’t want that to get overrun. So we’re testing that.”

For Yeti, the Port of Houston makes particular sense with the company being Texas-based. Would Port Houston make as much sense for importers and exporters closer to the Ports of Los Angeles or New York or more direct rail routes from those ports? It possibly still could, but rail rates have been increasing as well as trucking rates with the shipping demand increase we’ve seen over the last six-plus months and the trucker shortage problem the industry faces. Those factors, along with things like rates and times on ocean freight routes to the Port of Houston, would have to be carefully considered against rates and congestion issues at other ports shippers may have previously preferred utilizing.

Mahoney does list other major shippers utilizing the Port of Houston right now:

Other retailers that utilize Port Houston as an import gateway include Walmart (NYSE: WMT), IKEA, Ross Stores Inc. (NASDAQ: ROST) and Lowe’s Companies Inc. (NYSE: LOW).

Small to medium shippers may not be able to control the ports they utilize nor adjust their logistics for switching ports as easily as the above mentioned large companies. However, some smaller shippers may have more flexibility than larger companies, not having to go through as much bureaucracy and red tape as the larger companies do. When shipping through Universal Cargo, shippers can talk through their options with their account managers.

Port Houston & Others Worth Considering

The Port of Houston is also the largest U.S. port on the Gulf Coast. It consistently ranks in the country’s top ten largest ports in terms of cargo volume. In fact, when it comes to foreign waterborne tonnage, Port Houston ranks number one in the country, something it boasts on its website:

The Port of Houston is a 25-mile-long complex of nearly 200 private and public industrial terminals along the 52-mile-long Houston Ship Channel. The eight public terminals are owned, operated, managed or leased by the Port of Houston Authority and include the general cargo terminals at the Turning Basin, Care, Jacintoport, Woodhouse, and the Barbours Cut and Bayport container terminals.

Each year, more than 247 million tons of cargo move through the greater Port of Houston, carried by more than 8,200 vessels and 215,000 barges. In 2019, the port achieved the number 1 ranking in total waterborne tonnage in the United States and still ranks 1st in the U.S. in foreign waterborne tonnage; 1st in imports; 1st in export tonnage and 1st in total vessel transits

Still, how much market share Port Houston could efficiently handle taking from ports on the East and West Coasts is hard to tell. However, it certainly has not experienced the kind of congestion we’re seeing at the Ports of Los Angeles and Long Beach and could be a viable option for some shippers looking to escape congestion and the delays and costs they’ve suffered as a result.

Other ports on the Gulf Coast worth looking into include the Port of Corpus Christi and the Port of South Louisiana. The team at Universal Cargo is always ready to help shippers consider their options and optimize their importing and exporting practices.

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Congestion Looks Like It Will Snowball into Peak Season, But There’s Hope https://www.universalcargo.com/congestion-looks-like-it-will-snowball-into-peak-season-but-theres-hope/ https://www.universalcargo.com/congestion-looks-like-it-will-snowball-into-peak-season-but-theres-hope/#respond Fri, 12 Mar 2021 01:07:27 +0000 https://www.universalcargo.com/?p=10292 It’s early to talk about the 2021 peak season for the international shipping industry; however, with severe congestion at U.S. ports expected to last at least into the summer, 2021’s peak season could be one of the most challenging in recent memory. Congestion At Least into Summer? Bill Mongelluzzo reported in the Journal of Commerce […]

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It’s early to talk about the 2021 peak season for the international shipping industry; however, with severe congestion at U.S. ports expected to last at least into the summer, 2021’s peak season could be one of the most challenging in recent memory.

Ocean Freight Port

Congestion At Least into Summer?

Bill Mongelluzzo reported in the Journal of Commerce (JOC):

The ports of Los Angeles and Long Beach have settled into a pattern of congestion that virtually every sector of the international supply chain says will last at least into the summer months — and possibly longer — if second-half volumes don’t wane.

In Tuesday’s post, we got into port congestion, at the Ports of Los Angeles and Long Beach in particular, its causes, and how it will take time to clear up. More and more experts appear to be of the opinion that we have at least three or four months left of this congestion, but that is dependent upon how much volume comes through the ports. Mongelluzzo writes in his JOC article:

How long the congestion continues will depend largely on import volumes between now and the beginning of the peak season in August. Weekly import volumes so far this year are “30 to 40 percent higher” than what the port was handling in 2019 and previous years, said Gene Seroka, executive director of the Port of Los Angeles. 

Anticipating record sales in 2021, retailers expect US containerized exports will increase 20 percent or more each month through June, albeit from unusually low import volumes last spring. Los Angeles-Long Beach handles about 50 percent of total US imports from Asia, according to PIERS, a JOC.com sister product within IHS Markit.

Here’s where things get interesting. Will that volume remain high for the next few months and will the peak season be strong?

Shippers Moving Sourcing From China

Again, we wrote about things like the new stimulus keeping spending by consumers high for a little longer, but there are also issues like the permanent business closures from the lockdowns that will eventually catch up to spending. Then there are the freight rates themselves.

Ocean freight rates, especially when talking importing from China to the U.S., have been astronomical in 2020. Those higher costs of importing goods results in higher costs of goods to consumers. That could certainly start slowing purchases. Then there are businesses looking for different sourcing to escape these high rates (and big fees carriers have charged on top of them).

The Loadstar published an article by Gavin van Marle about importers shunning China for other sourcing because of the skyrocketed freight rates. Van Marle’s article was actually about UK shippers, but we could see similar things from U.S. shippers. In fact, many U.S. shippers may have a head start on moving their sourcing as the trade war between the U.S. and China, marked by high tariffs on U.S. imports from China in the year plus leading up to the pandemic, had many moving sourcing to other countries as well as going domestic with sourcing.

Carriers Remove Services from Congested USWC Ports

Not only could cargo volume through U.S. ports be affected by shippers changing their sourcing – though that is the sort of thing that can take time for businesses to do – it could also be affected by carriers reducing sailings to places like the Ports of Los Angeles and Long Beach because of the heavy congestion and shifting of which routes are the most profitable.

2M is removing services to U.S. west coast ports, according to an another article in the Loadstar, this one by Mike Wackett:

To improve schedule reliability, 2M partners Maersk and MSC are to avoid congested US west coast ports with two transpacific pendulum services.

From this week, the AE1/Shogun and AE6/Lion loops from Asia will turn in North Europe instead of going on to the US.

It looks like a combination of the congestion at west coast ports and that the Asia to USWC freight rates have finally stopped rising and Asia to North Europe rates are currently more profitable.

Maersk said the decision to discontinue the pendulum loops was in response to “the recent unprecedented market situation with severe port congestion and equipment limitations across global supply chains”.

However, another shipper contact said he thought the 2M network changes might have “more to do with rates”, as spot rates from Asia to North Europe are currently double those for the US west coast.

“Some might say, after carriers got a tap on the fingers for increasing rates on the transpacific and appear to have stopped the rate hike, that they now want to sail vessels where the money is – or, alternatively, what’s the point of loading up a ship to sit for days or weeks on the US west coast?” said Nick Coverdale, founder of Hong Kong-based Agreefreight.

Conclusion

Rates starting to come down a little bit on Asia-USWC shipments, though they’re still extremely high, is a sign that demand may be starting decrease a little.

We talked in the last post about volume, using Universal Cargo’s shipments as a barometer for the industry. Last month did have a significant drop in volume despite factories staying open in China through the Chinese New Year, but then volume shot back up for month, with numbers currently looking a little bit bigger than January’s very high volume.

That makes it hard to say demand is really waning yet. However, when Maersk does something, the rest of the carriers also follow suit. We could see other carriers, in conjunction with the other two major carrier alliances, take some services off the USWC. That could help with the congestion leading up to the peak season.

As for the peak season itself, that’s something you can guarantee we’ll talk about in future blogs as 2021 carries on.

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Yes, Port Congestion Is Still Bad & Not Going Away Soon https://www.universalcargo.com/yes-port-congestion-is-still-bad-not-going-away-soon/ https://www.universalcargo.com/yes-port-congestion-is-still-bad-not-going-away-soon/#respond Wed, 10 Mar 2021 01:03:00 +0000 https://www.universalcargo.com/?p=10283 We're not completely bereft of signs that port congestion, which is so costly to shippers, could start easing soon; however, congestion is at record-setting levels and what's probably the biggest cause of that congestion at U.S. ports persists: high cargo volume.

A couple months of high cargo isn't really a problem. The international shipping industry has its peak season every year when more cargo than normal comes through the ports for a few months. Then the cargo traffic reduces, and if a little congestion was happening, it clears up. However, what happens if that cargo traffic doesn't reduce? That's basically what we're seeing right now.

Greg Miller reports in American Shipper that the congestion happening right now at the Ports of Los Angeles and Long Beach makes the horrific congestion we saw there in 2015 because of the labor strife during long, contentious contract negotiations pale in comparison. That's saying something as I wrote many blogs about the agricultural exports rotting on the docks, goods failing to get to store shelves, and billions of dollars in damage done to the U.S. economy during the 2014-15 congestion.

Find out more by reading the full post in Universal Cargo's blog.

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We’re not completely bereft of signs that port congestion, which is so costly to shippers, could start easing soon; however, congestion is at record-setting levels and what’s probably the biggest cause of that congestion at U.S. ports persists: high cargo volume.

international shipping port cranes & containers

A couple months of high cargo isn’t really a problem. The international shipping industry has its peak season every year when more cargo than normal comes through the ports for a few months. Then the cargo traffic reduces, and if a little congestion was happening, it clears up. However, what happens if that cargo traffic doesn’t reduce? That’s basically what we’re seeing right now.

Greg Miller reports in American Shipper that the congestion happening right now at the Ports of Los Angeles and Long Beach makes the horrific congestion we saw there in 2015 because of the labor strife during long, contentious contract negotiations pale in comparison. That’s saying something as I wrote many blogs about the agricultural exports rotting on the docks, goods failing to get to store shelves, and billions of dollars in damage done to the U.S. economy during the 2014-15 congestion.

Cause of Congestion

For more than half a year, cargo volumes have been at near-record and record highs. That’s a long time to handle the kind of volume we’re seeing at places like the Ports of Los Angeles and Long Beach. That could have been enough on its own to create severe congestion. However, from the start of these high volumes, there have been other issues plaguing the movement of goods. At the top of these other factors is equipment shortages.

Carriers blanked (cancelled) hundreds of sailings in the lead up to this high volume in order to lower capacity and raise freight rates. Early in 2020 with the onset of COVID-19, it was expected ocean freight carriers would lose billions. Instead, carriers used extreme amounts of blanked sailings to control capacity, shrinking it well below market demand, and push freight rates way up. One of the problems this created was failure to reallocate needed shipping containers. All this while demand was higher than expected because lockdowns and government stimulus had Americans buying goods at high rates when money couldn’t be spent on services, entertainment, and travel, which usually get more market share of spending.

Shortages of containers and other equipment, along with pandemic-related protocols that reduce productivity, contributed to congestion right from the start of this period of high cargo volume being shipped.

Is Cargo Volume Reducing?

Usually, the Chinese New Year brings much reduced volume of imported cargo as factories in China close for a couple weeks. If there was some leftover congestion from particularly strong peak and holiday seasons, this is a good time to catch up.

However, China kept factories open through its Spring Festival holiday this year, as we blogged about last month when the Lunar New Year arrived, to keep up with increased demand for goods and discourage travel over concerns that it would spike coronavirus transmission.

There did, however, still seem to be cargo volume reduction during the Chinese New Year time. Looking at Universal Cargo’s shipment counts, which I often use as a barometer for the international shipping industry, February’s cargo volume came down some from the high cargo volume we’d been seeing moved through the ports for months. Universal Cargo actually saw about a 20% reduction in shipments in February as compared to January. That’s a very significant drop. However, February’s volume would still be considered strong and March’s volume shot back up. March’s shipment count is currently about 4% higher than January’s total was (of course, some of the cargo estimated for the end of March could push back into early April).

As it looks likely a third stimulus check for Americans, this time of $1,400, is getting geared up to be voted on in another COVID-19 relief bill (though there’s plenty in the bill that has nothing to do with the pandemic), that could very well keep the heavy spending on goods continuing a little longer. On the other hand, lockdowns should be easing more and more, allowing spending on going out, entertainment, and travel to increase at the cost of spending on goods. Eventually, the loss of jobs and permanent closing of businesses caused by the lockdowns will catch up to the economy, slowing spending on goods as well. In fact, the risk of a crash from the spending that comes out of trillions of dollars in stimulus that the government doesn’t actually have while so many businesses have been destroyed by too often draconian rules is extremely high.

Conclusion

While an end to the high, high cargo movement we’ve been seeing does appear to be on it’s way, it seems like it will be delayed a little longer. Thus, delays will continue at the ports. Even when cargo volume does reduce, it will take some time to clear up the congestion we’re seeing.

The extremely high freight rates we continue to see (though a slight easing up is starting to be seen), has some shippers moving away from importing from China. We’ll look at that in the next post…

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Jones Act Debate Overview https://www.universalcargo.com/jones-act-debate-overview/ https://www.universalcargo.com/jones-act-debate-overview/#respond Thu, 04 Mar 2021 22:28:24 +0000 https://www.universalcargo.com/?p=10282 This post concludes our long Jones Act blog series, recapping the major points of the debate we covered and putting them all in one easy reference point.

We began this series after President Biden reaffirmed his support for the Jones Act in one of the barrage of executive orders he signed during his initial days in office. In order to decide if you think the president is right in affirming this legislation, you have to know what it is and what the debate over it is all about.

Read the full post in Universal Cargo's blog to get the big picture of the debate over this legislation.

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Jones Act Debate

This post concludes our long Jones Act blog series, recapping the major points of the debate we covered and putting them all in one easy reference point.

We began this series after President Biden reaffirmed his support for the Jones Act in one of the barrage of executive orders he signed during his initial days in office. In order to decide if you think the president is right in affirming this legislation, you have to know what it is abd what the debate over it is all about.

What Is the Jones Act?

The Jones Act is the commonly used name for the Merchant Marine Act of 1920. It requires ships delivering goods between U.S. ports be American made, owned, and manned.

Here is our post that gives more detail about what the Jones Act is and what it does:

President Biden Supports the Jones Act – What Is It?

You can click here to read the actual text of the Jones Act.

National Security

One of the biggest points of argument regarding the Jones Act is it is needed for national security.

The Jones Act has many proponents within the military who say the legislation is essential for supporting a U.S. merchant marine that is needed to support the military in times of emergency and war with the ability to support troops or U.S. actions around the world. Opponents say even with the Jones Act’s protectionist attempts, the U.S. merchant marine is not large enough to serve this purpose and is not essential in national defense anyway.

Proponents also argue the Jones Act protects the waterways throughout the entire United States, including its territories, from potential bad foreign actors who might attempt an attack through them. Proponents believe it would be extremely expensive and possibly impossible to guard all such waterways without the Jones Act. Opponents argue foreign ships are already allowed to U.S. ports and allowing them to traverse from port to port within the U.S. would not represent a significant increase of security threat.

Here is our post covering the national security portion of the debate:

The Jones Act Debate Part 1: National Security

Protectionism Vs. Hindrance

The Jones Act is obviously protectionist legislation meant not merely for national security protection but to help the U.S. shipbuilding and maritime sectors. The topic of protectionist laws is something that gets debated in and of itself, but the effectiveness of the Jones Act in protecting U.S. shipbuilding and shipping is also hotly debated.

Proponents say the Jones Act is absolutely necessary to support U.S. jobs, the shipbuilding industry here, and U.S. shipping in general. Opponents say the legislation actually does the opposite of what it intends by hurting U.S. shipping. They say U.S. carriers shipping between U.S. ports have to spend more for ships, hurting competition and costing potential shipping jobs. All this, they say, while U.S. shipbuilding has done nothing but dwindle under the Jones Act.

Here’s our post on the protectionism vs. hindrance part of the debate:

The Jones Act Debate Part 2: Protectionism or Hindrance

Hawaii

Does the Jones Act hurt Hawaii? Opponents of the legislation say it absolutely does. They say it increases the cost of living in Hawaii and hurts the economy, especially when it comes to export goods that Hawaiian businesses sell to customers in the U.S. mainland. Proponents of the act say the increase cost of goods being credited to the Jones Act are overblown, sometimes even non-existent, and the Jones Act actually creates jobs in Hawaii. Both sides point to studies to support their views while refuting the claims of the other side.

Here’s our blog that gets into these complete opposite views about the Jones Act’s impact on Hawaii:

The Jones Act Debate Part 3: Cost to Hawaii

Here is some material from both sides as well.

You can check out American Maritime Partnership (AMP) arguing for the Jones Act, specifically pointing to a study concerning Hawaii, by clicking here.

You can check out an article from Grassroot Institute of Hawaii that directly refutes the study AMP put forward. The article challenges the study’s efficacy while pointing to a study from Grassroot Institute of Hawaii that contradicts the previous study’s findings. Click below to go to that article on Grassroot Institute of Hawaii’s site:

Jones Act lobby lobs a dud in advance of our landmark study.

Puerto Rico

The argument is made that the Jones Act is particularly bad for any noncontiguous U.S. state or territory, which would, of course, include Puerto Rico. Similarly to Hawaii, it is argued the Jones Act increases the cost of shipping to Puerto Rico and, therefore, the cost of living in Puerto Rico. Not only is the Jones Act bad for the economy of Puerto Rico, opponents argue, but it is also bad for U.S. industries that sell goods to Puerto Rico. Proponents, as expected, tend to refute these claims. Again, both sides have studies they point to in order to support their stances.

Here’s our post that gets into the Puerto Rico portion of the debate:

The Jones Act Debate Part 4: Puerto Rico

Disaster Relief

Opponents of the Jones Act argue it hinders disaster relief when something like a hurricane strikes. This part of the debate especially flared up after Hurricane Maria hit Puerto Rico a few years ago. Proponents of the Jones Act argue that if there is any way the Jones Act would hinder recovery from some kind of disaster, it can be waived, as has happened several times in the past, removing any such hindrance. Opponents say that is not enough as such a waiver only happens for a limited time and then the Jones Act continues to do the damage of slowing recovery and making it more expensive. Proponents argue disasters, including Hurricane Maria, are being used as an excuse to get rid of the Jones Act at times when the legislation is not actually an issue for recovery at all.

Here is our post going into detail on the disaster relief part of the debate:

The Jones Act Debate Part 5: Disaster Relief

Conclusion

This series was meant to give our readers a good idea of what the Jones Act is and an understanding of what the major points of debate around it are. It was not meant to take a side but help you on your path to deciding whether you support keeping the hundred plus year old legislation or reforming or repealing it.

There’s still plenty more that could be said about the Jones Act, and we’ll probably revisit it in the future. We’re always happy to hear from you. If there are more issues relating to international shipping that you’d like us to cover the way we’ve covered the Jones Act debate, let us know.

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US Ag Exporters Urge President Biden Take Action Against Ocean Freight Carriers’ Practices https://www.universalcargo.com/us-ag-exporters-urge-president-biden-take-action-against-ocean-freight-carriers-practices/ https://www.universalcargo.com/us-ag-exporters-urge-president-biden-take-action-against-ocean-freight-carriers-practices/#respond Tue, 02 Mar 2021 21:17:23 +0000 https://www.universalcargo.com/?p=10281 71 U.S. agricultural industry groups teamed up to write a letter to President Biden, informing him of the injury ocean freight carriers are doing to US agriculture, food, and forestry product exporters and urging him to take action.

"This is a crisis: unless the Shipping Act and other tools available to our government are applied promptly, agriculture industries will continue to suffer great financial losses; these carrier practices will render US agriculture noncompetitive for years to come," they write in their letter.

The associations, federations, and commissions that put their names to the letter aren't wrong either. Despite a gamut of questionable actions by carriers during the course of the pandemic from using their alliances to drop capacity below market demand to charging no-roll premiums, which I argued were paramount to holding shippers' cargo for ransom, what carriers are doing to U.S. agricultural exporters seems to be the most damaging.

Find out more about the situation and read the full letter to the president by viewing the full post in Universal Cargo's blog.

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71 U.S. agricultural industry groups teamed up to write a letter to President Biden, informing him of the injury ocean freight carriers are doing to US agriculture, food, and forestry product exporters and urging him to take action.

“This is a crisis: unless the Shipping Act and other tools available to our government are applied promptly, agriculture industries will continue to suffer great financial losses; these carrier practices will render US agriculture noncompetitive for years to come,” they write in their letter.

agricultural export

The associations, federations, and commissions that put their names to the letter aren’t wrong either. Despite a gamut of questionable actions by carriers during the course of the pandemic from using their alliances to drop capacity below market demand to charging no-roll premiums, which I argued were paramount to holding shippers’ cargo for ransom, what carriers are doing to U.S. agricultural exporters seems to be the most damaging.

Back in November, I opened a blog post questioning the legality of what carriers are doing to U.S. agricultural exporters with the frank statement, “U.S. agricultural exporters are getting screwed.” It was because of that post the letter agricultural exporters wrote to the president first came to my attention. After reading the post, reporter William Schulz sent the letter to me and requested I comment, specifically asking if the exporters raised a valid concern.

“I believe exporters are raising a very valid concern,” I replied before briefly laying out the situation of what’s happening to agricultural exporters and why I think their concerns are valid.

Overview of What Carriers Are Doing to Shippers Through Pandemic

Here’s how I laid out the situation for Mr. Shulz:

“For years, I’ve been warning that the carrier alliances, which regulators around the world like the FMC have allowed, shrink competition in the ocean freight industry and would eventually result in shippers paying higher rates. We really saw that come to fruition in 2020 when carriers manipulated capacity, dropping it below demand, and pushing freight rates way up. That may not be as completely nefarious as it sounds, as I don’t think anyone expected demand to soar as high as it did with lockdowns and government stimulus moving so much spending to goods. It’s still hard to believe carriers did not go beyond what was reasonable, especially when they started pushing no-roll premiums on shippers when carriers’ reliability reached terrible lows despite the record high rates they were charging.

“On top of that, the incredible amount of blanked sailings carriers did in the first half of 2020 began a shipping container shortage, particularly in Asia, by not properly reallocating containers. That was exacerbated by the very high demand for international shipping that was seen all through the second half of the year and beyond. That’s all bad for U.S. shippers, including agricultural exporters, but here’s where U.S. agricultural exporters really have a complaint: carriers withholding shipping containers and services from them. It seems pretty clear that carriers prioritized getting shipping containers back to Asia, where they were making more money on eastbound transpacific routes, delivering goods from China to the U.S. especially, over getting containers to U.S. exporters. Rather than shipping containers full of U.S. agricultural goods to Asia, they shipped empty containers back to Asia, seriously damaging U.S. agricultural exporters’ ability to ship their goods.”

Full Letter to the President

Here’s the full letter the agricultural exporters wrote to the president, including the list of all 71 groups behind it:

February 24, 2021
President Joseph R. Biden
The White House
1600 Pennsylvania Avenue NW
Washington, D.C. 20500

Dear President Biden,

As is being widely reported, one of the great commercial challenges of the on-going pandemic has been actions of ocean container carriers, including declining to carry our export cargo, severely injuring US agriculture, food and forestry product exporters, preventing us from delivering affordably and dependably to international markets. This is a crisis: unless the Shipping Act and other tools available to our government are applied promptly, agriculture industries will continue to suffer great financial losses; these carrier practices will render US agriculture noncompetitive for years to come.

According to their own public reports, the ocean carriers are enjoying their most profitable period in decades by controlling capacity and charging unprecedented freight rates, imposing draconian fees on our exporters and importers, and frequently refusing to carry U.S. agricultural exports.

These refusals and charges by the ocean carriers dramatically increase costs to our exporters, making foreign sales inefficient and uneconomical, rendering farmers and processors (for the first time), unreliable suppliers to the global supply chain. The international ocean container carriers which carry over 99% of our foreign commerce, are headquartered overseas – perhaps unaware of the injury their actions are causing to the US economy, as they profit from the pandemic.

The situation is so egregious that the Federal Maritime Commission (FMC) last year issued a Rule setting forth guidelines as to what would be reasonable carrier practices – however, none have been implemented by the carriers, deepening the crisis. While the FMC is undertaking further efforts to gain compliance, the damage being done to our agriculture and forest products industries is severe, increasing, and with lost foreign markets, may be irreversible.

The Shipping Act provides the FMC with the authority to prohibit unreasonable, unjust practices, and “to promote the growth and development of US exports through competitive and efficient ocean transportation…’. Given the urgency of this situation in commerce, we ask that these tools and any others available to our government be immediately applied to stem the current ocean carrier practices that are so damaging our agriculture exports.

Sincerely,

  1. Agriculture Transportation Coalition
  2. African-American Farmers of California
  3. Agricultural & Food Transporters Conference of ATA (American Trucking Association)
  4. Almond Alliance of California
  5. American Farm Bureau Federation
  6. American Feed Industry Association
  7. American Forest & Paper Association
  8. American Potato Trade Alliance
  9. American Pulse Association
  10. California Seed Trade Association
  11. California Cotton Ginners and Growers Association
  12. California Farm Bureau Federation
  13. California Fresh Fruit Association
  14. California Prune Board
  15. California Rice Commission
  16. California Walnut Commission
  17. Cascade Shippers Association
  18. Colorado Corn Growers Association
  19. Consumer Brands Association
  20. Corn Refiners Association
  21. Dairy Farmers of America
  22. DairyAmerica Inc.
  23. Harbor Trucking Association
  24. Hardwood Federation
  25. Idaho Potato Commission
  26. Intermodal Motor Carriers Conference of ATA
  27. International Association of Refrigerated Warehouses
  28. International Dairy Foods Association
  29. Leather and Hide Council of America
  30. Meat Import Council of America
  31. National Association of Egg Farmers
  32. National Chicken Council
  33. National Cotton Council
  34. National Council of Farmer Cooperatives
  35. National Fisheries Institute
  36. National Hay Association
  37. National Milk Producers Federation
  38. National Onion Association
  39. National Pork Producers Council
  40. National Turkey Federation
  41. Nisei Farmers League
  42. North American Meat Institute
  43. North American Renderers Assiciation
  44. North Dakota Grain Growers Association
  45. Oregon Potato Commission
  46. Oregon Seed Association
  47. Pacific Coast Council of Customs Brokers & Freight Forwarders Association
  48. Pacific Northwest Asia Shippers Association
  49. Pet Food Institute
  50. Potato Growers of Michigan, Inc.
  51. Potato Growers of Washington, Inc.
  52. Produce Marketing Association
  53. Specialty Crop Trade Council
  54. Specialty Soya & Grains Alliance
  55. U.S. Apple Association
  56. U.S. Dairy Export Council
  57. U.S. Meat Export Federation
  58. U.S. Pea and Lentil Trade Association
  59. United Fresh Produce Association
  60. United States Cattlemen’s Association
  61. US Forage Export Council
  62. USA Dry Pea and Lentil Council
  63. USA Poultry & Egg Export Council
  64. USA Rice
  65. Washington Farm Beaureau
  66. Washington State Hay Growers Association
  67. Washington State Potato Commission
  68. Western Agricultural Processors Association
  69. Western Growers Association
  70. Wine and Spirits Shippers Association
  71. Wisconsin Potato & Vegetable Growers Association

CC:  Secretary, U.S. Department of Agriculture, Tom Vilsack

        Secretary, U.S. Department of Transportation, Peter Buttigieg

        Chair, Council of Economic Advisors, Cecilia Rouse

        Chair, Federal Maritime Commission Michael Khouri

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The Jones Act Debate Part 5: Disaster Relief https://www.universalcargo.com/the-jones-act-debate-part-5-disaster-relief/ https://www.universalcargo.com/the-jones-act-debate-part-5-disaster-relief/#respond Fri, 26 Feb 2021 04:29:08 +0000 https://www.universalcargo.com/?p=10280 The Jones Act debate often flairs up during times of natural disaster in the U.S., particularly when that natural disaster hits a noncontiguous state or territory, such as Puerto Rico. As a matter of fact, the subject went viral a few years ago after Hurricane Maria hit Puerto Rico in 2017. There were plenty of angry tweets and Facebook posts about the Jones Act hindering aid to Puerto Rico. Others posted about those claims being off base.

Today's post, continuing the Jones Act debate series, will lay out the arguments for whether or not the Jones Act hurts disaster relief.

Find out all about it by reading the full post in Universal Cargo's blog.

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The Jones Act debate often flairs up during times of natural disaster in the U.S., particularly when that natural disaster hits a noncontiguous state or territory, such as Puerto Rico. As a matter of fact, the subject went viral a few years ago after Hurricane Maria hit Puerto Rico in 2017. There were plenty of angry tweets and Facebook posts about the Jones Act hindering aid to Puerto Rico. Others posted about those claims being off base.

Jones Act Debate

Today’s post, continuing the Jones Act debate series, will lay out the arguments for whether or not the Jones Act hurts disaster relief.

First, here’s what we’ve covered so far:

President Biden Supports the Jones Act – What Is It and What Does It Do?

The Jones Act Debate Part 1: National Security

The Jones Act Debate Part 2: Protectionism or Hindrance

The Jones Act Debate Part 3: Cost to Hawaii

The Jones Act Debate Part 4: Puerto Rico

As per usual, I’ll state that this series is not meant to take a side but merely present arguments proponents and opponents of the Jones Act make to help you on your way to deciding where you stand in the debate.

The Back and Forth About Jones Act Hindering Disaster Relief

Opponents of the Jones Act say it hinders recovery efforts after natural disasters (and sometimes man-made ones like oil spills). This is going to overlap with the last part of this series, as Puerto Rico’s recovery from Hurricane Maria took center stage in this debate in 2017 and continues to garner passionate social media posts to this day.

In ’17, the debate got heated, as all politically related topics seem to do in recent years, especially when there’s an opportunity to call a political opponent racist during it. However, if you could maneuver your way through accusations of racism, you might find a back and forth something like this:

“The Jones Act limits recovery supplies from getting to Puerto Rico.”

“The supplies are getting there, but they’re stuck at the ports because Puerto Rico’s infrastructure is the real problem.”

To be honest, despite many, many articles and posts about how the Jones Act hurt the recovery of Puerto Rico, I found very little in terms of depth and evidence to support the assertion. Usually, people quickly pivoted to the arguments that shipping to Puerto Rico is more expensive because of the Jones Act, which is a serious debate worth considering that is well-covered in Part 4 of this series.

Opponents of Jones Act Point to Oil & Fuel Shipping Hurting Puerto Rico’s Recovery

After Hurricane Maria, there was a bottleneck of recovery supplies at the ports in Puerto Rico, as Jones Act proponents say, but perhaps the best arguments on the other side are about the Jones Act making it difficult to get American oil and fuel to Puerto Rico increased the cost and time of the recovery.

James W. Coleman, professor at Southern Methodist University’s Dedman School of Law, wrote in an opinion article published by Fox News titled Repeal the Jones Act to speed Puerto Rico recovery:

Puerto Rico is in trouble. Nearly 85 percent of the island’s 3.4 million American citizens remain without electric power, water pumps on half the island aren’t working, and fuel and truck shortages are preventing food and supplies from being delivered to many areas. Authorities say it could take at least three and as many as six months to restore electricity to all residents.

The recovery of Puerto Rico could progress much more rapidly if the Jones Act was wiped off the books….

… Puerto Rico must import liquefied natural gas for its power plants, but there are no ships complying with the Jones Act large enough to transport that much gas from the U.S. Gulf Coast. Instead, Puerto Rico imports liquefied natural gas from Trinidad & Tobago. Low-cost gas from the mainland United States is sent to Asia, Europe, and South America instead, transported on the ships of other nations.

A year later, Mark J. Perry – American Enterprise Institute scholar and a professor of economics at the University of Michigan, Flint – wrote in an opinion article for the Hill that the Jones Act’s effect on shipping oil slowed recovery time while making it more expensive in Puerto Rico.

The Jones Act has raised the cost of transporting oil and gas to all U.S. domestic ports, but especially ports in the noncontiguous regions of Hawaii and Puerto Rico, which was devastated by a natural disaster in the form of Hurricane Maria a year ago this month. Inflated shipping costs due to the Jones Act were a secondary and avoidable man-made disaster for Puerto Rico that added to the costs of recovery and significantly slowed the recovery time.

Yes, those are generalities Perry speaks with, but they represent a very popular opinion. Finding analysis and specifics on how much recovery was slowed or how much more it cost because of the Jones Act is something I wasn’t able to find, despite going through many, many articles making the same assertions. If you have good evidence or sources for this, please share them in the comments section below.

It is certainly possible the Jones Act could hinder recovery efforts when shipping is needed. For that reason, and possibly for other political reasons too, the Jones Act has been waived under emergency circumstances a number of times. That’s something both sides of the debate can point to. One side can say if the Jones Act didn’t hurt recovery, it would never need to be waived. The other side could say when there is a disaster that the Jones Act might slow the response to, it can always be waived for that circumstance.

Is Jones Act Wrong Place to Look for Disaster Relief Problems?

Aaron Klein, Senior Fellow of Economic Studies for the Brookings Institution, argues in a Brookings article:

The feverish debate about whether to waive the Jones Act to expedite Puerto Rico’s disaster recovery was akin to considering what to do about a paper cut for a cancer patient. Its waiver was—and remains—irrelevant to the core humanitarian problems at hand and any needed reaction. The key problems, including insufficient and delayed federal resources, and a lack of means to distribute supplies on the island, have nothing to do with the Jones Act.

Klein thinks that while the opinion that the Jones Act hurt disaster relief in Puerto Rico is wildly popular, it is also wrong. He backs up this opinion with a comparison of needs between situations of waiving the Jones Act. While Klein does not dismiss the idea that Puerto Rico is treated differently as a commonwealth than states are, he points to reasons the decision of waiving the Jones Act in 2017 compared to earlier waivings of the legislation do not play into that:

After the speculation about the Jones Act’s supposed barrier to aid delivery spread virally online, the Department of Homeland Security was pressed by Rep. Nydia Valezquez (D-NY) to waive the Jones Act. Comparisons were made to prior waivers for hurricanes that landed in the continental states, fueling arguments that Puerto Rico was receiving second-class treatment. This fed into a broader narrative concerning whether Puerto Rico is more broadly treated equitably given its commonwealth status.

While that broad debate has great merit, focusing on the Jones Act component is wrong. It fails to appreciate the distinction between waivers based on oil and fuel shipping and cargo shipping. Those types of ships are not interchangeable and hurricanes to the Gulf Coast involved fuel and oil tanker shortages. As Keith Hennessy, director of the National Economic Council under President George W. Bush, stated regarding the waivers granted during Katrina and other times: “The direct benefits of a waiver were, in this case, small and diffuse. Waivers allowed 50K barrels per day here, and 100K barrels there, to arrive several days earlier than they would have otherwise. The waiver resulted in handfuls of short-term arrangements that moved fuel more expeditiously.” Puerto Rico, did not need oil tankers, nor were the problems about getting fuel to the port.

For Klein, the Jones Act debate as it pertains to disaster relief for Puerto Rico after Hurricane Maria was about the media and politicians being opportunistic with the disaster. If not repealing the Jones Act, where should people look for the good of Puerto Rico’s recovery? Klein concludes his article with this:

More broadly, those concerned with Puerto Rican disaster assistance in the short term, and how to restore the economy of Puerto Rico in the long term, should focus on the real economic problems. As my Brookings colleague Jason Miller correctly argues, this requires a long-term, sustained commitment of economic resources and assistance to the Commonwealth.  It may also require rethinking the sustainability of the island as a commonwealth, or whether it should join the United States as the 51st state. Puerto Rico should not be used to press a long-standing economic debate regarding where to draw the line in which parts of our nation’s economy and military security are opened up to foreign competition. Critics of the President [President Trump at the time of his writing] and those who wish to show support for a stronger disaster recovery ought to think twice before retweeting or Facebooking an enticing headline purporting to link obscure laws to topical disasters. They may be inadvertently supporting policies they actually oppose.

Concluding the Jones Act Debate

We can’t end a debate that has been raging on for a century, but we can end the blog series covering it. While there are more arguments we could cover in this series, I believe we’ve hit the most talked about ones. We’ll do one last post on this series that quickly lists the arguments so you have them in one place for easy reference, then we’ll bid the topic adeaui – at least until it pops up in the news in a very significant way.

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The Jones Act Debate Part 4: Puerto Rico https://www.universalcargo.com/the-jones-act-debate-part-4-puerto-rico/ https://www.universalcargo.com/the-jones-act-debate-part-4-puerto-rico/#respond Wed, 24 Feb 2021 01:19:38 +0000 https://www.universalcargo.com/?p=10279 We're now deep in a series covering the debate over the 100-year-old piece of legislation known as the Jones Act. The controversial Merchant Marine Act of 1920, as it is formally named, has passionate proponents and opponents. Perhaps the most passionate arguments over the Jones Act center on its effects on Puerto Rico. That's what we'll look at in today's post.

Here’s what we’ve covered so far:

President Biden Supports the Jones Act – What Is It and What Does It Do?

The Jones Act Debate Part 1: National Security

The Jones Act Debate Part 2: Protectionism or Hindrance

The Jones Act Debate Part 3: Cost to Hawaii

I'll put my usual disclaimer here that this series itself is not meant to argue for or against the Jones Act. Rather, the point is to lay out arguments being made in the raging debate over the legislation to let you see what people are saying, so you can go research the arguments and make a decision for yourself.

To dig in on the Jones Act debate, specifically as it pertains to Puerto Rico, read the full post in Universal Cargo's blog.

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We’re now deep in a series covering the debate over the 100-year-old piece of legislation known as the Jones Act. The controversial Merchant Marine Act of 1920, as it is formally named, has passionate proponents and opponents. Perhaps the most passionate arguments over the Jones Act center on its effects on Puerto Rico. That’s what we’ll look at in today’s post.

Jones Act Debate

Here’s what we’ve covered so far:

President Biden Supports the Jones Act – What Is It and What Does It Do?

The Jones Act Debate Part 1: National Security

The Jones Act Debate Part 2: Protectionism or Hindrance

The Jones Act Debate Part 3: Cost to Hawaii

I’ll put my usual disclaimer here that this series itself is not meant to argue for or against the Jones Act. Rather, the point is to lay out arguments being made in the raging debate over the legislation to let you see what people are saying, so you can go research the arguments and make a decision for yourself.

With that, let’s get into the Jones Act and Puerto Rico.

Opponents of the Jones Act Argue It Raises Cost of Living & Hurts the Economy in Puerto Rico

We already touched upon Puerto Rico in part 3 of this series when Congressman Ed Case from Hawaii pointed to a 2012 Federal Reserve Bank of New York study that found “[i]t costs an estimated $3,063 to ship a twenty-foot container of household and commercial goods from the East Coast of the United States to Puerto Rico; the same shipment costs $1,504 to nearby Santo Domingo (Dominican Republic) and $1,687 to Kingston (Jamaica)—destinations that are not subject to Jones Act restrictions.”

However, opponents of the Jones Act don’t have to go all the way back to 2012 to point to a study as evidence that the Jones Act is bad for Puerto Rico. Grassroots Institute of Hawaii published an article by Jonathan Helton in 2019 about two new (at the time of publication) studies that indicate the Jones Act hurts Puerto Rico’s economy. Helton writes:

One of the studies, conducted by John Dunham & Associates, found that the Jones Act has prevented the creation of 13,250 jobs and $1.5 billion in annual economic growth, representing $1.1 billion in higher prices, $337.3 million in wages, and $106.4 million in lost tax revenues.

The other, conducted by Advantage Business Consulting, looked specifically at U.S. territory’s food industry and estimated that the Jones Act equaled a 7.2 percent tax on food and beverages alone, or about $367 million extra for island residents.

“Individually, families pay $300 more or $107 per person for food and beverages,” said ABC economist Vicente Feliciano.

Proponents of the Jones Act Argue It Does Not Raise Cost of Living in Puerto Rico and Positively Contributes to Puerto Rico’s Economy

Proponents of the Jones Act have studies they point to as well, refuting claims like those above that the Jones Act raises the cost of living and goods in Puerto Rico.

The American Maritime Partnership has whole pages dedicated to the subject, including their main Puerto Rico economy page that leads with the following in large text boxes:

A new study performed jointly by Reeve & Associates and Estudios Técnicos, Inc. concluded that the Jones Act has no impact on either retail prices or the cost of living in Puerto Rico.

“…retail prices of goods in Puerto Rico are essentially the same as on the mainland and freight rates for shipments between the mainland and Puerto Rico are very similar or lower than rates for shipping between the [mainland] and neighboring islands of Puerto Rico such as the U.S. Virgin Islands, Haiti, and the Dominican Republic.”

Later, the page says, “The Jones Act has no impact on either retail prices or the cost of living in Puerto Rico,” using the following as evidence:

A market basket analysis of an assortment of consumer goods at Walmart Stores in San Juan, Puerto Rico, and Jacksonville, Florida, found there was “no significant difference in the prices of either grocery items or durable goods between the two locations.” In fact, retail prices of goods in Puerto Rico are essentially the same as on the mainland.

The report found that shipping costs between the mainland and Puerto Rico make up only a small percentage of the retail price. For example, ocean shipping accounts for just 3 cents (or 2 percent) in the retail price of $1.58 for a can of chicken soup in San Juan. It found that, “[e]ssentially, transportation costs for Puerto Rico are not materially different than those on the mainland.

While opponents say the Jones Act hurts Puerto Rico’s economy and prevents job creation, proponents say the opposite. On another American Maritime Partnership page, they give the following blurb, citing yet another study, for how the Jones Act benefits Puerto Rico and creates jobs:

A GAO [Government Accountability Office] study on Puerto Rico listed a number of potential harms to the territory itself if the Jones Act were changed, including the possible loss of the stable service the island currently enjoys under the Jones Act and the loss of jobs on the island. Moreover, American domestic carriers are making some of the largest private sector investments currently underway in Puerto Rico by investing nearly $1 billion in new vessels, equipment, and infrastructure. They employ hundreds of Puerto Rican American citizens on the island and on vessels serving the market, providing highly reliable, low-cost maritime and logistics services. These private sector jobs and reliable services are important to the long-term recovery of the Puerto Rican economy and would be jeopardized by changes to the Jones Act.

American Maritime Partnership also points to the aforementioned study by Reeve & Associates and Estudios Técnicos, Inc as not only saying the Jones Act does not impact retail prices or the cost of living, but also does the following:

In addition, the report found that the state of the art maritime technology, Puerto Rico focused investments, and dedicated closed-loop service offered by Jones Act carriers provide a significant positive economic impact to the island, at freight rates lower or comparable to similar services to other Caribbean Islands.

Opponents Say Jones Act Hurts U.S. Economy in Sale of Goods to Puerto Rico

The main point Jonathan Hilton makes in his article against the Jones Act is obvious: the Jones Act is costly to the people and economy of Puerto Rico. However, Helton, along with other opponents of the Jones Act, also argues that there’s a negative impact on the U.S. economy in that the legislation hurts U.S. goods’ ability to compete with foreign goods when it comes to selling in Puerto Rico. Again, Helton turns to studies in his article to support the claim:

Feliciano and his team of researchers derived their estimates from data showing that transporting containers from the United States to Puerto Rico costs, on average, 2.5 times, or 151 percent more, than transporting from foreign ports. Specifically, “$3,027 from U.S. ports versus $1,206 from non-U.S. ports … after having made the corresponding adjustments for size of container and distance.”

Even U.S. manufacturers are harmed by this issue, because it makes their products cost more, whether in Puerto Rico, Alaska, Hawaii or Guam. The Jones Act is, in effect, a hidden tax that dissuades consumers in these locations from buying U.S. goods, incentivizing them, in turn, to buy foreign goods.

Known as “import substitution,” this concept has Puerto Ricans buying liquid natural gas, corn, potatoes and other products from foreign suppliers, instead of American suppliers, because it is too expensive to ship them in on Jones Act ships.

Proponents Argue U.S. Goods Strongly Compete & Foreign Competition Further Supports Jones Act Does Not Raise Prices in Puerto Rico

We know from previous parts of this series that proponents of the Jones Act argue that it supports American jobs. Proponents of the Jones Act do not think it hinders U.S. products’ ability to compete in Puerto Rico because there is still a strong presence of goods shipped from the U.S. mainland to Puerto Rico despite foreign vessels’ ability to bring goods there directly from the rest of the world.

In a press release article on the aforementioned Reeve & Associates and Estudios Técnicos, Inc study report, American Maritime Partnership shared:

Finding that 57 percent of San Juan’s port traffic in 2016 was carried on foreign vessels, the report noted that there is “nothing in the Jones Act that precludes foreign-flag vessels from serving Puerto Rico directly from foreign countries.” It concluded that there was strong competition between carriers serving the island, stating that “if cargo owners in Puerto Rico believed that the Jones Act shipping services were adding costs that negatively impacted their business, you would expect to see [an increase in foreign flag shipping].”

The aforementioned GAO study American Maritime Partnership also cites took place five years earlier than the Reeve and Estudios Técnicos one just mentioned. The GAO study noted two-thirds of the ships serving Puerto Rico were from foreign carriers. American carriers gaining market share from approximately 33% to 43% in that half decade provides evidence that U.S. goods are competing in Puerto Rico. American Maritime Partnership calls it “an intensely competitive transportation market.”

That intense competition, Jones Act proponents say, provides further evidence that the Jones Act is not hiking up prices in Puerto Rico. In fact, American Maritime Partnership even argues the Jones Act does not even hike shipping costs from the U.S. to Puerto Rico over its foreign island neighbors. American Maritime Partnership directly disputes the claim that import costs are at least twice as high in Puerto Rico as in neighboring islands on account of the Jones Act with:

There is no study that supports this statement in any way. In fact, anecdotal evidence about rates indicates that the opposite is true. For example, one analysis shows it is 40% more expensive to ship goods from the U.S. mainland on foreign vessels to the U.S. Virgin Islands (not subject to the Jones Act) than on Jones Act vessels to Puerto Rico.

The Jones Act Debate Continues

When natural disasters like hurricanes strike, the Jones Act debate tends to flare up. When we continue this series, we’ll look at the arguments around whether or not the Jones Act impedes disaster relief efforts.

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The Jones Act Debate Part 3: Cost to Hawaii https://www.universalcargo.com/the-jones-act-debate-part-3-cost-to-hawaii/ https://www.universalcargo.com/the-jones-act-debate-part-3-cost-to-hawaii/#respond Thu, 18 Feb 2021 22:02:59 +0000 https://www.universalcargo.com/?p=10278 Does the Jones Act have a negative impact on the economies of noncontiguous U.S. states and territories? We'll look at arguments concerning just that, with an eye specifically on Hawaii, in today's post as we continue our series on the Jones Act.

Here's what we've covered so far:

President Biden Supports the Jones Act – What Is It and What Does It Do?

The Jones Act Debate Part 1: National Security

The Jones Act Debate Part 2: Protectionism or Hindrance

Again, I'll take a moment to reiterate that the point of this series is not to take sides on whether the Jones Act should be repealed, reformed, or protected. Instead, this series shares arguments for and against the Jones Act, so you can learn more about it, know the key issues to research in regard to it if you want to know more, and decide for yourself where you stand on the legislation.

See the arguments and evidence on whether or not the Jones Act hurts Hawaii by reading the full post in Universal Cargo's blog.

The post The Jones Act Debate Part 3: Cost to Hawaii appeared first on Universal Cargo.

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Does the Jones Act have a negative impact on the economies of noncontiguous U.S. states and territories? We’ll look at arguments concerning just that, with an eye specifically on Hawaii, in today’s post as we continue our series on the Jones Act.

Here’s what we’ve covered so far:

President Biden Supports the Jones Act – What Is It and What Does It Do?

The Jones Act Debate Part 1: National Security

The Jones Act Debate Part 2: Protectionism or Hindrance

Again, I’ll take a moment to reiterate that the point of this series is not to take sides on whether the Jones Act should be repealed, reformed, or protected. Instead, this series shares arguments for and against the Jones Act, so you can learn more about it, know the key issues to research in regard to it if you want to know more, and decide for yourself where you stand on the legislation.

With that, let’s get into the debate…

Opponents of the Jones Act Say It Hurts Noncontiguous U.S. States & Territories Like Hawaii

Jones Act Debate

On December 20th, 2019, Congressman Ed Case from District 1 of Hawaii stepped onto the House floor to introduce three bills that would reform the Merchant Marine Act of 1920, commonly known as the Jones Act.

He argued the Jones Act creates a monopolistic closed market on domestic cargo shipping to noncontiguous U.S. states and territories, especially island ones as is the case with Hawaii and Puerto Rico; it dramatically increases the shipping cost and, therefore, the cost of goods and living in these places; and stifles the export economies of these places as well.

Here are some excerpts from Congressman Case’s speech:

The Jones Act was enacted in a protectionist era under the guise of preserving a strong national merchant marine. But today it is just an anachronism: most of the world’s shipping is by way of an international merchant marine functioning in an open, competitive market. And those few U.S. flag cargo lines that remain have maneuvered the Jones Act to develop virtual monopolies over domestic cargo shipping to, from and within our most isolated and exposed locales – our island and offshore states and territories – that have no alternative modes of transportation such as trucking or rail.

My Hawai‘i is a classic example. Located almost 2,500 miles off the West Coast, we import well over 90 percent of our life necessities by ocean cargo. There are plenty of international cargo lines who could and would compete for a share of that market. Yet only two U.S. flag domestic cargo lines—Matson Navigation and Pasha Hawai‘i—operate a virtual duopoly over our lifeline.

While they are nominally subject to federal regulation, the fact of the matter is that cargo prices have gone in only one direction–up, fast and repeatedly, despite a surplus of international shipping–and it is indisputable that there is no downward market pressure which would otherwise result from meaningful competition. These accelerating cargo prices are not absorbed by the shipping lines, but passed through all the way down the chain, to the transporters, wholesalers, retailers, small businesses, mom-n-pops and ultimately consumers, of all of the elementals of life, from food to medical supplies, clothes, housing and virtually all other goods. The result is a crippling drag on an already-challenged economy and the very quality of life in Hawai‘i.

The broadest, deepest effects of the Jones Act on Hawai‘i result from its impact on westbound imports from the continental United States to Hawai‘i. But Hawai‘i is an export location as well, in key products such as agriculture and livestock. Here the Jones Act also effectively stifles meaningful competition in getting those products to their primary markets on the U.S. Mainland. Because the producers of these products and all that rely for their own livelihood on their successful export have to eat inflated shipping costs, these export industries, which any economist knows are the ultimate key to any economy’s prosperity, are also crippled.

Congressman Case gets into specifics as to how the Jones Act hurts Hawaii’s cattle industry, seriously hurting Hawaii’s ranchers in bringing cattle to the U.S. mainland market. Then he moves to some specific cost of goods/living numbers being higher because of shipping costs:

At a basic level, the everyday goods that we rely on in Hawai‘i cost much more than on the Mainland, a difference which largely cannot be attributed to anything other than shipping costs. Yesterday, there was a 30 percent difference in the price of a gallon of milk at Safeway grocery stores in Honolulu and Long Beach, California. My constituents pay $6.39 for a gallon of whole milk and those in Long Beach, one of the major ports where Hawai‘i’s good come from, pay $4.49.

Supporters of the Jones Act would likely say that it will of course cost more to buy goods that have to be shipped over the ocean, but Congressman Case uses shipping cost comparisons between Puerto Rico, which falls under the Jones Act, and nearby non-U.S. territories, which don’t fall under the act, to show the legislation inflates shipping costs, and therefore the price of goods:

In 2012, the Federal Reserve Bank of New York studied Puerto Rico’s economy and found that “the high cost of shipping is a substantial burden on the Island’s productivity.” The New York Fed found that, “[i]t costs an estimated $3,063 to ship a twenty-foot container of household and commercial goods from the East Coast of the United States to Puerto Rico; the same shipment costs $1,504 to nearby Santo Domingo (Dominican Republic) and $1,687 to Kingston (Jamaica)—destinations that are not subject to Jones Act restrictions.” There is only one reason why costs are double to ship from the continental United States to a domestic port in Puerto Rico as compared to foreign ports in the Dominican Republic and Jamaica: there is international competition on the latter routes, none on the domestic route and the shipping companies take full advantage of that lack of competition.

Proponents of Jones Act Say It Does Not Increase the Cost of Living in Hawaii and Shipping Competition There Is Healthy

An obvious issue with the last argument made by Congressman Case is it is using data that is now almost a decade old. The milk price he points to, however, was current when he was speaking in 2019. Proponents of the Jones Act will point to a study even more recent than those milk costs that concludes the Jones Act does not raise the cost of living in Hawaii.

The study was released in July of 2020. American Maritime published an article about the study that opens exactly how proponents of the Jones Act would want it to:

Economists from Boston based Reeve & Associates (Reeve) and Hawaii based TZ Economics have released a joint report, “The Impact of the Jones Act on Hawaii,” that concluded the Jones Act has no significant impact on the cost of living in Hawaii. In addition, the report found that freight rates in the U.S. Mainland-Hawaii trade lane have declined in real terms over the last ten years, while the Jones Act has delivered positive and substantial economic contributions, including job creation, new infrastructure investments, and a reliable pipeline for critical consumer and industrial goods moving to and from the Islands.

Here’s evidence cited from the study in the article regarding cost of goods/living in Hawaii:

• A market basket study of 200 consumer goods purchased from major retailers such as Costco, Home Depot, Target and Walmart found no significant difference in the price of consumer goods. 142 out of 200 items (71%) were precisely the same in stores in Hawaii as they were in California. In some cases, retail prices of goods were cheaper in Hawaii.

• The study found that while Hawaii does have a high cost of living, that cost is primarily driven by housing expenses and other factors, not the type of consumer goods carried to Hawaii by Jones Act carriers.

While Congressman Case argued shipping costs between mainland U.S. and Hawaii have done nothing but increase with the lack of competition from foreign shipping, the study’s findings say these freight rates have actually decreased (the subtitle of American Maritime article is even Ocean Freight Rates Declined Since 2008):

• The study shows that freight rates in the Mainland-Hawaii trade have declined in real terms when considering the cost of inflation, while benchmarks such as overall U.S. inflation and intercity truckload prices have increased substantially (28%). This freight rate decline is despite a 50% increase in wharfage charges for port/terminal improvements.

According to the creators of the study, this decrease in rates is due to healthy competition between U.S. flagged carriers that deliver goods to and from Hawaii. Rather than the duopoly Congressman Case describes between Matson Navigation and Pasha Hawaii, the study points to three U.S. flagged carriers – the two previously mentioned plus Aloha Marine Lines – “dedicated to Hawaii’s specific needs for high frequency and fast transit to deliver consumer goods to the Hawaiian Islands”:

• Three U.S. flagged carriers with a fleet of twenty combined vessels, specifically designed to accommodate the needs of Hawaii transportation commerce, currently provide regular scheduled shipping services between the U.S. Mainland and Hawaii.

• Due to intense and healthy competition, freight rates have declined in real terms while carriers have increased capacity with modern, custom-designed vessels.

• Jones Act carriers have introduced five new U.S. vessels, as well as three more on the way in the fourth quarter of 2020. According to the study, with these most recent additions, there is more than ample capacity to meet the needs of Hawaii families and businesses. In fact, Jones Act carriers have increased capacity by 22% since 2015 with the addition of new vessels. The level of available capacity in the market naturally drives healthy price competition.

The article goes so far as to say “eliminating the Jones Act could undermine priority, frequency, and speed” of shipping to and from Hawaii.

As far as hurting Hawaii’s economy, proponents say it helps Hawaii’s economy and would point to this study as evidence that it supports 13,000 jobs for Hawaiian families:

• The Jones Act delivers $787 million in annual workforce income and $3.3 billion economic impact to the local economy.

The Debate Continues

Congressman Case brought up Puerto Rico, pointing to shipping costs as evidence of the damage the Jones Act does. Proponents of the Jones Act have a response for that too, but Puerto Rico has another big issue debated in regards to it. When we continue examining this debate, we’ll focus our sights on Puerto Rico.

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The Jones Act Debate Part 2: Protectionism or Hindrance https://www.universalcargo.com/the-jones-act-debate-part-2-protectionism-or-hindrance/ https://www.universalcargo.com/the-jones-act-debate-part-2-protectionism-or-hindrance/#respond Tue, 16 Feb 2021 23:34:06 +0000 https://www.universalcargo.com/?p=10276 Today, we continue our look at the debate over the Jones Act, looking at the issue of protectionism, specifically when it comes to the U.S. shipbuilding and maritime sectors.

Remember, the point of this series is not to take sides on whether the Jones Act should be repealed, reformed, or protected. Rather, the point is to lay out the arguments being made so shippers, and everyone else, affected by this legislation can research these arguments and decide where they stand on this issue for themselves.

Does the Jones Act protect or hinder the U.S. maritime sector? The Jones Act certainly falls under the protectionist category of legislation. Opponents of the legislation, however, argue it hinders the sector rather than aiding it.

Find out all about it by reading the full post in Universal Cargo's blog.

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Today, we continue our look at the debate over the Jones Act, considering the issue of protectionism, specifically when it comes to the U.S. shipbuilding and maritime sectors.

Jones Act Debate

After President Biden reaffirmed his support for the Jones Act, we posted an article giving an overview of what the Jones Act is and what it does. We followed up last week by beginning this series, in which we look at major arguments for and against the legislation. Part 1 covered the issue of national security.

Remember, the point of this series is not to take sides on whether the Jones Act should be repealed, reformed, or protected. Rather, the point is to lay out the arguments being made so shippers, and everyone else, affected by this legislation can research these arguments and decide where they stand on the Jones Act for themselves.

Jones Act Opponents Say It Hurts U.S. Shipping and Shipbuilding

Does the Jones Act protect or hinder the U.S. maritime sector? The Jones Act certainly falls under the protectionist category of legislation. Opponents of the legislation, however, argue it hinders the sector rather than aiding it.

Jonathan Helton wrote an article published by the Mises Institute, effectively arguing that the Jones Act has been a failed piece of protectionism for the last 100 years:

After World War I, Congress passed the Jones Act as a continuation of normal practice. But the U.S. still hadn’t regained its shipbuilding prowess, and a combination of postwar factors caused U.S. shipyards to construct zero oceangoing ships between 1922 and 1928. A 1922 government report identified one likely contributor: price. Building a new ship in the U.S. cost 20% more than building one abroad.

This price difference continued rising, to 30% in the 1930s and 200% in the 1950s. Today, the price difference for a Jones Act ship can range from four to five times, depending on the type of vessel.

Facing higher upfront costs, U.S. carriers made a logical move: They bought fewer new ships. The disincentive effects of high up-front costs caused shipyards to lose their economies of scale, further increasing the price of a new ship. This has led to U.S. shipyards losing more business, creating a vicious cycle in the shipbuilding and carrying industries. To wit, in 1950 there were about 430 Jones Act-qualified blue-water ships. Today there are only 99 such ships left.

Jones Act Supporters Say Jones Act Is Crucial for U.S. Shipbuilding Jobs & Shipping

Proponents of the Jones Act, on the other hand, argue that U.S. shipbuilding without the Jones Act would not stand a chance of continuing to compete at all with foreign shipbuilders, who benefit from protectionist laws and subsidization from their governments. Dan Goure wrote an article, published by the National Interest, arguing that the Jones Act is critical to U.S. shipbuilding:

In addition, some opponents of the Jones Act mischaracterize it as outmoded economic protectionism. In fact, today, the Jones Act is a reasonable response to the predatory practices of foreign shipyards and shipping companies. Foreign governments routinely subsidize ship construction directly or through advantageous tax policies. Foreign-flagged ship operators are able to take advantage of lax safety and compensation rules to undercut U.S. shippers’ prices.

Rep. John Garamendi (D-Calif.) wrote an opinion piece in the Hill where he wrote with a little rhetorical flair how the Jones Act supports American jobs and industry:

The Jones Act is a simple law: it requires that shipping between two U.S. ports occur on ships that are built in the United States, fly the U.S. flag, and are operated by crews consisting of at least 75 percent American citizens. This requirement buttresses a domestic maritime trade that supports nearly half a million jobs and almost $100 billion in annual economic impact. If the Jones Act did not exist, this industry would be sharply undercut by foreign shippers with lower labor protections, environmental requirements, and safety standards. Not only would we outsource marine transportation along our coasts and inland waterways to the cheapest foreign bidder, we also would hollow out a key component of American industrial might.

The Debate Continues

When we continue this series, we’ll look at the potential price impact the Jones Act has on goods, specifically in relation to non-contiguous U.S. states and territories.

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Chinese New Year Chinese Port Congestion https://www.universalcargo.com/chinese-new-year-chinese-port-congestion/ https://www.universalcargo.com/chinese-new-year-chinese-port-congestion/#respond Thu, 11 Feb 2021 21:25:59 +0000 https://www.universalcargo.com/?p=10272 Happy Chinese New Year! This year, the Chinese New Year falls on February 12th, and though it is still February 11th here as I'm typing these words, it is already February 12th in Beijing. Unfortunately, this Chinese New Year is marked by port congestion at all Chinese ports. That's right, for those of you who import from China or export to China, your cargo is being met by severe congestion coming and going, as port congestion remains a major problem here at U.S. ports as well.

If you were expecting to continue reading about the Jones Act debate in today's post, don't worry, we will get back to that series in future posts. First, we needed to share about current shipping news that's impacting businesses right now. The pressing issue of the day is port congestion.

Read the full post in Universal Cargo's blog to find out about port congestion, delays, and changes to how Chinese manufacturing is handling the Chinese New Year in 2021.

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Happy Chinese New Year! This year, the Chinese New Year falls on February 12th, and though it is still February 11th here as I’m typing these words, it is already February 12th in Beijing. Unfortunately, this Chinese New Year is marked by port congestion at all Chinese ports. That’s right, for those of you who import from China or export to China, your cargo is being met by severe congestion coming and going, as port congestion remains a major problem here at U.S. ports as well.

If you were expecting to continue reading about the Jones Act debate in today’s post, don’t worry, we will get back to that series in future posts. First, we needed to share about current shipping news that’s impacting businesses right now. The pressing issue of the day is port congestion.

Keith Wallis reported in the Journal of Commerce (JOC):

Container lines and marine terminals are battling vessel delays and congestion at key Chinese port gateways as a pre-Chinese New Year cargo rush coupled with strong cargo demand, COVID-19 labor restrictions, and high terminal utilization aggravate infrastructure bottlenecks.

Logistics executives said Shenzhen, Ningbo, Shanghai, and Dalian are among the worst affected, although delays are occurring at all major Chinese ports ahead of the new year holiday that starts Friday.

Factories Stay Open Through Holiday

We’ve already mentioned in other blog posts how manufacturing in China is different during this Chinese New Year than it traditionally has been (you can find out more about Chinese New Year’s traditional impact on shipping here). Normally, Chinese manufacturing shuts down for a couple weeks for the celebration of the Spring Festival Holiday (the Chinese New Year). However, that is not the case this year. China is keeping factories open, telling citizens to celebrate in place, and even restricting travel.

Of course, the pandemic is the top reason China gives for imposing these changes, but keeping up with the increased U.S. (and European) demand for Chinese goods is a large factor in keeping factories open too. Of course, that demand is largely pandemic related too as U.S. lockdowns and stimuli have hurt U.S. businesses and manufacturing but kept American spending strong and shifted a large proportion of it from travel and entertainment to goods.

Normally, there is a small shipping surge right before the Chinese New Year followed by the slowest time of the year for international shipping once it arrives, lasting through February and March. That does not appear to be the pattern this year. We’re still seeing above average imports like we’ve been seeing for the last six months, which has been a large factor in the severe port congestion we’re seeing in the U.S. Bill Mongelluzzo reported in the JOC that terminal operators at the Ports of Los Angeles and Long Beach expect near-record cargo volumes to continue well into Spring and the backlog of ships in the harbor at those ports not to clear up until sometime between April and June.

Delays

Of course, cargo delays are typically the biggest impact shippers face with port congestion. Delays tend to mean a financial impact, and often shippers face unfair demurrage and detention fees when port congestion gets bad. Right now, rollovers and delays on cargo coming out of China are certainly happening.

Rollovers were so prevalent in 2020, largely because of all the blanked (cancelled) sailings by ocean freight carriers, carriers actually started pushing no-roll premiums on shippers. With the congestion at Chinese ports, rollovers have bumped up from an already too high percentage of shipments. However, the increase may not be as large as one would expect.

The Maritime Executive published an article courtesy of Ocean Insights today that reports:

At ports, overall rollover percentages continued to climb as well, reaching 39 percent, a two percent increase on December numbers and a nine percent increase year-over-year.

While overall rollover rates have increased, the major Asian ports in Singapore and Tanjung Pelepas saw no increase in rollovers from December 2020 to January 2021, while Shanghai, Hong Kong increased by just 1 percent and Busan decreased 1 percent. Port Klang in Malaysia remains an outlier with an 11 percent increase in rollover cargo from 55-66 percent month-on-month.

I believe when the February rollover numbers come out, there’ll be an increase month-on-month increase from January.

Meanwhile, carrier reliability in 2020 started fairly normal (which is not to say good) but became absolutely putrid. Delays in January this year compared to delays in January last year are much higher. The Ocean Insights article lays those numbers out.

In terms of the number of changes to delivery dates (ETA), the Asia to US West Coast trade lanes showed the largest increase from an average of 1.7 ETA changes per shipment in January 2020 to 3.9 by January this year. 

While Asia to Europe cargo ETA changes per shipment averaged 1.4 in January 2020, they increased to 3.1 a year later. 

By these metrics, the average delay for containers increased from about one day in January 2020, to more than five days in January 2021 (Carriers’ Schedule Reliability is a measurement of delay from port to port.) 

Combining the Chinese New Year port congestion at Chinese ports with the port congestion happening at U.S. ports, I expect delays to compound further, making average delays on February and March ETAs even longer than the five day January average.

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The Jones Act Debate Part 1: National Security https://www.universalcargo.com/the-jones-act-debate-part-1-national-security/ https://www.universalcargo.com/the-jones-act-debate-part-1-national-security/#respond Wed, 10 Feb 2021 00:19:38 +0000 https://www.universalcargo.com/?p=10274 The Jones Act, or Merchant Marine Act of 1920, is a hotly debated piece of legislation. Our last blog post got into exactly what the Jones Act is and what it does after President Biden reaffirmed his support for the act that requires ships transporting goods between U.S. ports to be U.S. built, owned, and manned. This follow-up blog series shares arguments for and against the Jones Act.

The goal of this post is not to actually argue for or against the Jones Act, but give U.S. shippers, and anyone else who is interested, an overview of the debate on a piece of legislation that greatly impacts the U.S. shipping industry. However, we'd love to hear your opinions on the Jones Act, and you can share them in the comment section of this post.

Because this is an article about a debate, it will quote more opinion and editorial pieces than regular readers of Universal Cargo's blog would be accustomed to seeing in our posts. With that being said, let's get into one of the biggest talking points when it comes whether or not the Merchant Marine Act of 1920 should be repealed or reformed: national security.

Find out about the national security arguments in the Jones Act debate by reading the full post in Universal Cargo's blog.

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The Jones Act, or Merchant Marine Act of 1920, is a hotly debated piece of legislation. Our last blog post got into exactly what the Jones Act is and what it does after President Biden reaffirmed his support for the act that requires ships transporting goods between U.S. ports to be U.S. built, owned, and manned. This follow-up blog series shares arguments for and against the Jones Act.

Jones Act Debate

The goal of this post is not to actually argue for or against the Jones Act, but give U.S. shippers, and anyone else who is interested, an overview of the debate on a piece of legislation that greatly impacts the U.S. shipping industry. However, we’d love to hear your opinions on the Jones Act, and you can share them in the comment section of this post.

Because this is an article about a debate, it will quote more opinion and editorial pieces than regular readers of Universal Cargo’s blog would be accustomed to seeing in our posts. With that being said, let’s get into one of the biggest talking points when it comes whether or not the Merchant Marine Act of 1920 should be repealed or reformed: national security.

Proponents Say Jones Act is Needed for National Security

Those in favor of the Jones Act argue that it is essential for U.S. security. There are two main arguments to the security aspect of the Jones Act.

The first argument is that the Jones Act supports a U.S.-based merchant marine. Without the the Jones Act, the argument goes, the U.S. would be dependent on foreign ships and crews, none of which can be counted on in the event of war or maritime support for the U.S. military and navy.

The second national security argument is that it would be difficult, costly, and possibly impossible to defend all of the country’s waterways, especially inland waterways, from threats that may be aboard foreign ships if they are allowed to traverse between U.S. ports.

Especially when it comes to the first security argument, U.S. generals and military leaders, whose jobs are based in national security, tend to rank high on the list of supporters of the Jones Act.

One such Jones Act advocate is Retired Rear Admiral Thomas K. Shannon, who wrote an op-ed for the Washington Times that was republished by the American Maritime Partnership. Here’s a chunk of the argument he laid out for why the Jones Act is critical to national security:

“… what opponents almost always fail to understand is the critical importance of the Jones Act for our national security and economic stability.

The very first paragraph of the law states that it “is necessary for the national defense and the development of the domestic and foreign commerce of the United States to have a merchant marine owned and operated as vessels of the United States by citizens of the United States composed of the best-equipped, safest, and most suitable types of vessels constructed in the United States and manned with a trained and efficient citizen personnel.”

As the former commander for the U.S. Navy Military Sealift Command, the importance of the Jones Act and the merchant marine that it supports is obvious. From the First and Second World Wars, to Iraq and Afghanistan, a robust U.S.-flagged maritime capability has been the cornerstone of our nation’s military deployments. To borrow a sports analogy, our military is built for “away games,” and before our Army can march to war, it must sail. In fact, when called into action, our military relies on ships to carry 95 percent of our combat capability to and from the war zone.

Unlike other countries, the United States does not subsidize its commercial shipbuilding capacity with taxpayer dollars. Instead, with the Jones Act, we enable a base maritime capability of U.S.-trained mariners, U.S.-flagged ships, a shipbuilding industrial base and a ship-repair capability. This “American made” capacity has been called our “4th arm of defense,” and it enables our president and Congress to project our combat capabilities as part of the Department of Defense budget every year.

The Jones Act ensures a level of maritime capability for America’s defense that cannot and should not be yielded to foreign nations that may one day be our enemy in war.

While the economic and security benefits of the Jones Act are clear, the law is carefully balanced to ensure certainty of markets for financial investors. U.S.-flagged Jones Act carriers have made significant investments in vessels and terminal upgrades to serve the trade. Undercutting these investments by repealing or waiving the Jones Act erodes stability, reliability and predictability among U.S. commercial operators and unnerves potential investors in new vessels, with adverse and cascading impacts on the entire industry, our wartime capacity and our national security.

The second national security argument is laid out in a pretty streamlined way in an op-ed article of the Hill by George Landrith:

Because of the Jones Act, foreign flagged ships with unknown and unvetted foreign crews cannot deliver goods to New Orleans and then sail up the Mississippi River deep into the American heartland. We would have no way to know if terrorists or other bad actors — maybe Chinese or Russian spies — had infiltrated the crew. Imagine the resources required to protect almost 100,000 miles of inland waterways! How could the U.S. ever hope to have any border security if we make every mile of shoreline on both sides of every inland waterway an entry point? The costs would be staggering.

Rebuttal to National Security Argument

Those who oppose the Jones Act obviously don’t buy into the argument that it is in any way essential to America’s national security. The main counter Jones Act opponents make to the argument that the legislation supports a merchant marine that can be called upon to support wartime and overseas operations is that merchant marine is not actually called upon for such support and is not large enough to accomplish this purpose anyway.

During a panel on reforming or repealing the Jones Act put together by the Heritage Foundation, which advocates repealing the Jones Act, Chairman and CEO of NTELX and former member of the U.S. Federal Maritime Commission (FMC) made this argument:

If there’s any, any issue you could think of on which the assertions of the people who support it are completely and patently provably wrong, this is the one law that you could find. There is no other law on which there is so much agreement by everyone but the people who benefit, and it’s a very small set of people. It’s basically three shipyards who have built 40 ships only because the law requires people buy them–to buy them from these yards, of which 30 were oil tankers or product tankers. We have dropped almost nothing in terms of sailors to sail the ships that might be there if they were, but they’re not. The jones act fleet is virtually non-existent and doesn’t actually go into war.

the factors here that ships cost too much it costs three to five times as much to build a ship here in the United States is anywhere else it’s not because our labor is better it’s not because our laws are tougher on technology or anything else or safety it’s purely because we don’t build enough ships and don’t have enough demand that’s big ships among small ships we’re basically a global leader our barge yards push out 4,000 ships a year very competitive lots of competitors our small boats and tenders and all those have lots of competitors but not in the ships that we think of as national security

As for the second argument of securing ports against threats that may be concealed in foreign flagged and manned vessels, the general counter argument is that foreign ships arrive at U.S. ports every day. It wouldn’t really make any difference, say those for repealing the act, if we allowed those foreign ships to take goods from one port to another.

The Jones Act Debate Continues

Since this legislation is still being debated over a hundred years after going into effect, it shouldn’t be a problem continuing this discussion about that debate in later blog entries. This Jones Act series will continue, getting into protectionism, costs, and Puerto Rico.

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President Biden Supports the Jones Act – What Is It? https://www.universalcargo.com/president-biden-supports-the-jones-act-what-is-it/ https://www.universalcargo.com/president-biden-supports-the-jones-act-what-is-it/#respond Fri, 05 Feb 2021 01:14:04 +0000 https://www.universalcargo.com/?p=10268 Among the flurry of executive orders from the new administration (President Biden had already signed 40 executive orders and actions as of a week ago) is an order in which the president reaffirms his support for the controversial Jones Act. If the executive order didn't make his support clear enough, the president's words crystalized his views on the legislation:

The executive action I am taking also reiterates my strong support for the Jones Act and American vessels, you know, and our ports, especially those important for America's clean energy future and the development of offshore renewable energy.

The Jones Act, actually named the Merchant Marine Act of 1920, turns 101 this year. Colloquially called the Jones Act after Washington Senator Wesley Jones who introduced the legislation, federal statute 46 USC section 883 has long been a focal point of controversy. Opponents of the legislation call it outdated and say it needs to be repealed or at least reformed, but the Jones Act also has staunch supporters, lobbying for its continuation.

This post gives a quick overview of what the Jones Act, and in a follow-up blog post, we will present the arguments for and against this impactful piece of legislation.

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Among the flurry of executive orders from the new administration (President Biden had already signed 40 executive orders and actions as of a week ago) is an order in which the president reaffirms his support for the controversial Jones Act. If the executive order didn’t make his support clear enough, the president’s words crystalized his views on the legislation:

Port full of shipping containers

The executive action I am taking also reiterates my strong support for the Jones Act and American vessels, you know, and our ports, especially those important for America’s clean energy future and the development of offshore renewable energy.

The Jones Act, actually named the Merchant Marine Act of 1920, turns 101 this year. Colloquially called the Jones Act after Washington Senator Wesley Jones who introduced the legislation, federal statute 46 USC section 883 has long been a focal point of controversy. Opponents of the legislation call it outdated and say it needs to be repealed or at least reformed, but the Jones Act also has staunch supporters, lobbying for its continuation.

This post gives a quick overview of what the Jones Act, and in a follow-up blog post, we will present the arguments for and against this impactful piece of legislation.

What Does the Jones Act Do?

There are two main things the Jones Act does.

  • 1. The Jones Act requires goods shipped between U.S. ports to be transported on ships that are U.S. built, owned, and crewed.
  • 2. The Jones Act gives seamen and offshore oil rig workers (and their families) the right to be paid damages in the event of injury or death due to negligence, dangerous working conditions, or if a ship or rig is found to be unseaworthy.

Workers’ Rights Not At Issue

The first of the two things the Jones Act does is what usually gets discussed when whether or not to repeal the legislation is debated. I have seen much debate over whether or not U.S. built, owned, and manned ships should be the only ones allowed cabotage between U.S. ports but no controversy over seamen and rig workers’ rights to sue over injury and death.

The workers protections provided by the Jones Act are sometimes misunderstood. Because the Jones Act is heavily supported by the dockworker unions, people often think the protections are for longshoremen. They are not. Dockworkers are afforded similar rights to sue for damages through the Longshore and Harbor Workers’ Compensation Act.

The main reason the Jones Act is so heavily supported by the International Longshoremen’s Association (ILA), representing the dockworkers on the east coast, and the International Longshore & Warehouse Union (ILWU), representing dockworkers on the west coast, is that the Jones Act creates the need for more ship calls at the ports, and therefore, more work for longshoremen.

Jones Act Is Not a Partisan Issue

As polarized as politics are, the Jones Act debate is not one that falls down political lines. It would not be surprising to see it become one more issue on which our two major political parties take opposite sides; however, both Republicans and Democrats have called for the repeal of the Jones Act and both Democrats and Republicans have defended it.

As aforementioned, the dockworkers unions, which heavily support the Democratic Party, staunchly support protecting the Jones Act. Their lobbying carries weight in the Democratic Party. On the other hand, the U.S. military also tends to support the Jones Act on arguments of national security, which tends to carry weight with the Republican Party.

On the other hand, the regulatory nature of the Jones Act goes against the smaller government, less regulation ideals of the right. On the left, arguments are being made that the Jones Act is “strangling Puerto Rico.”

In a followup blog, we’ll get into the arguments for why the Jones Act should be repealed or kept.

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2021 Freight Rates & International Shipping Outlook Part 3 – Chinese New Year Change & More https://www.universalcargo.com/2021-freight-rates-international-shipping-outlook-part-3-chinese-new-year-change-more/ https://www.universalcargo.com/2021-freight-rates-international-shipping-outlook-part-3-chinese-new-year-change-more/#respond Thu, 28 Jan 2021 22:41:55 +0000 https://www.universalcargo.com/?p=10265 We continue today with a series taking a deep dive into the outlook of international shipping in 2021. Part 1 focused on high ocean freight rates, cargo volume trends, and the potential for a crash. Part 2 of this series focused on intermodal shipping, rife with rising truck and rail costs. Today, we look at a long-standing trend in shipping that is being broken in 2021.

Manufacturing in China traditionally shuts down for two weeks during the upcoming Chinese Spring Festival or Chinese New Year, but that's not what's happening in 2021.

Get into that and more by reading the full post in Universal Cargo's blog.

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We continue today with a series taking a deep dive into the outlook of international shipping in 2021. Part 1 focused on high ocean freight rates, cargo volume trends, and the potential for a crash. Part 2 of this series focused on intermodal shipping, rife with rising truck and rail costs. Today, we look at a long-standing trend in shipping that is being broken in 2021. Manufacturing in China traditionally shuts down for two weeks during the upcoming Chinese Spring Festival or Chinese New Year, but that’s not what’s happening in 2021. Let’s get into the details and what they mean for this year’s international shipping.

logistics supply chain international shipping

When Is the Chinese New Year?

Because it is based on the Chinese calendar, each year the Chinese New Year falls on a different date on the calendar we use here in the U.S. 2020 was the year of the rat on the Chinese calendar and began on January 25th. This year, the Chinese say good-bye to the year of the rat and hello to the year of the ox on February 12th.

If you want to know more in general about the Chinese New Year, or Lunar New Year as it is also called, and how is affects international shipping, Universal Cargo published an excellent guest article on the subject by David Fan.

Change to Chinese New Year in 2021

The changing date of the Chinese New Year is a constant, so this year’s mid-February date compared to last year’s late-January date is not concerning. What is concerning is that this year the two-week shutdown of Chinese factories and manufacturers will not happen.

For many weeks there has been talk about China trying to limit travel during the Spring Festival holiday in order to reduce the risk of spikes in the spread of COVID-19, which originated in Wuhan, China. Rumors and reports spread from the possibility of an extended holiday period to alternating closures of factories. With the recent increased demand on Chinese goods, not only from the U.S. but from countries that have dealt similarly with the pandemic around the world, what we’re seeing is manufacturing in China preparing to continue operating through the Lunar New Year.

Keith Wallis reported in the Journal of Commerce (JOC) last week:

“A number of China factories are looking like they will continue working through Chinese New Year (CNY) as much as they can in order to catch up on back-orders,” Roberto Giannetta, managing director of the Hong Kong Liner Shipping Association (HKLSA), told JOC.com.

The decision to keep factories open during the holiday follows an acceleration in the growth of Chinese merchandise exports over the second half of 2020. Exports of Chinese goods in December jumped 18.1 percent year over year in December, with shipments to the US and Europe rocketing 34.5 percent and 21.4 percent, respectively, within the same period, according to an IHS Markit analysis of data from China General Administration of Customs (GAC). That was down slightly from the 21.1 percent growth rate recorded in November, but still more than double the 7.2 percent growth recorded in July and one of the highest rates in three years despite a strong 2019 comparison.

The Effect on Port Congestion

Regular readers of this blog are probably tired of reading about how bad congestion is at the ports. Shippers, whether importing or exporting through East Coast or West Coast ports, are certainly tired of dealing with the delays and extra costs that have come with that congestion. Everyone is certainly ready for the congestion to end, but unfortunately, factories not shutting down for the Chinese New Year does not help the situation. In fact, it likely means congestion will last longer.

Imports tend to slow and blanked (cancelled) sailings are common during the Chinese Spring Festival. That’s not happening this year. In fact, Wallis’s JOC article continues with:

Seeing robust volume forecasts from customers, container lines haven’t blanked sailings during CNY as they normally do. On the trans-Pacific trade, carriers have blanked approximately 2.1 percent of total deployed capacity to the West Coast and 3.6 percent to the East Coast, compared with respective capacity cuts of 30.5 percent and 27.7 percent during CNY 2020, according to Sea-Intelligence Maritime Analysis.

What we’re seeing is cargo volume continuing at a much higher than usual rate while operations continue to be slowed at the ports by COVID-19 protocols. The outlook is that congestion will likely linger for a while, at least a couple more months, at the ports here in 2021. Even when the volume does finally slow, it will take some time for ports to recover and return to normal operations.

The Effect on Freight Rates

We’ve covered freight rates quite a bit in this series already, but the effect of Chinese factories operating through the Lunar New Year is not what shippers want to hear. It’s a familiar refrain: higher demand means upward pressure on freight rates. In fact, Wallis began his article with:

More Chinese factories will be producing exports for European and North American consumers rather than shutting down for Lunar New Year celebrations, signaling little reprieve for record spot rates on both trades and underscoring seemingly unrelenting imports.

At the same time, what we are not seeing is an increase in demand from where we already are. Thus, freight rates from China don’t look likely to increase even higher than the record freight rates we’re already seeing, but this doesn’t indicate drops in these prices right around the corner.

Shippers Won’t Like What They See from Carriers in 2021

While these high freight rates from China look like they’ll stay relatively stable for a little while longer, carriers are looking to push freight rates up from other country options (which have already been soaring as well). India, in particular, has been targeted by shipping lines for freight rate increases next month. Bency Mathew reports in the JOC:

CMA CGM has issued a notice announcing it will jack up its existing published rates from India to the US West Coast by $900 per TEU and $1,000 per FEU for all types of cargo from Feb. 1.

Mediterranean Shipping Co. will implement a GRI of $500 per TEU and $600 per FEU for all types of cargo moving from India to the US and San Juan, Puerto Rico, effective Feb. 15. The carrier from Feb. 1 will also impose a rate hike of $500 per container on India-Canada cargo.

Joining the new “GRI push,” Hapag-Lloyd has filed a 30-day notice — mandated by the US Federal Maritime Commission — seeking to hike rates by $480 per TEU and $600 per FEU on shipments from India to the US and Canada, also effective Feb. 15.

The way carriers act in near unison with such hikes does not bode well for shippers, who have watched competition shrink in the industry with the consolidation of carriers into alliances. Ocean freight carriers’ ability to control capacity, which they put on full display in 2020 when they dropped capacity below market demand, makes it hard to expect big drops in freight rates in 2020 outside of the possible crash discussed in Part 1.

Similarly, shippers shouldn’t expect to see carriers suddenly increase reliability. While it would be difficult for ocean freight carriers to sink below the reliability basement they entered in 2020, meaning there should be statistical improvement in reliability, carriers have little motivation to increase reliability after they were rewarded with much higher profits on a year of horrific reliability.

Shippers should expect to continue seeing cargo rollovers from carriers in 2021 while the shipping lines offer (push) more outrageous no-roll premiums to shippers. You know how I feel about no-roll premiums.

We’ll wrap this 2021 outlook series there, but this blog will continue to cover all the things happening in international shipping that affect your business in 2021 and beyond.

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2021 Freight Rates & International Shipping Outlook Part 2 – Intermodal Prices https://www.universalcargo.com/2021-freight-rates-international-shipping-outlook-part-2-intermodal-prices/ https://www.universalcargo.com/2021-freight-rates-international-shipping-outlook-part-2-intermodal-prices/#respond Wed, 27 Jan 2021 00:08:50 +0000 https://www.universalcargo.com/?p=10264 Today we continue our examination of freight rates and the outlook of the international shipping industry for 2021. Part 1 of this series looked at the high freight rate prices the international shipping market is seeing right now, particularly for transpacific ocean freight cargo from China to the U.S. Additionally, we looked at cargo volume, how it is trending, and the potential for a crash.

As we continue this examination, we look at what's happening with intermodal shipping, considering how truck and rail for getting containers to and from the ports is affecting importers and exporters' bottom lines.

Find out what's happening by reading the full post in Universal Cargo's blog.

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Today we continue our examination of freight rates and the outlook of the international shipping industry for 2021. Part 1 of this series looked at the high freight rate prices the international shipping market is seeing right now, particularly for transpacific ocean freight cargo from China to the U.S. Additionally, we looked at cargo volume, how it is trending, and the potential for a crash.

As we continue this examination, we look at what’s happening with intermodal shipping, considering how truck and rail for getting containers to and from the ports is affecting importers and exporters’ bottom lines.

Intermodal Prices Up

International Shipping air, ocean, truck, van
International Shipping air, ocean, truck, van

We’ve put a great deal of focus on how high ocean freight rates are, but truck and rail rates have also increased, making intermodal prices, in general, higher for shippers (not just because they’re paying more for ocean freight rates). That makes sense with the increase in cargo volume we’ve seen over the last six months combined with a trucker shortage. Increased demand paired with a decrease in supply should result in higher prices every time (unless regulatory intervention comes into play, which usually doesn’t turn out well in the long run).

In our desperation to find truckers to deliver shipping containers from the ports to businesses or vice versa, Universal Cargo offered extra money to get our customers’ goods taken care of and protect them from demurrage and detention fees.

Ari Ashe reported last week in the Journal of Commerce (JOC):

Shipper costs will rise more than 10 percent for intermodal service in certain US markets to support investment in new containers, drivers, and other equipment designed to ease the congestion woes seen last year, J.B. Hunt Transport Services said Tuesday.

Factors Increasing Intermodal Costs

Factors pushing truck and rail costs up are not going to disappear instantly, meaning the cost increases are not likely to reverse soon. The congestion factoring into higher costs, which we’ve talked about extensively in recent posts, will take some time to alleviate. However, the congestion will ease much faster than the trucker shortage problem will take to resolve.

We’ve posted about the trucker shortage off and on for years. It is a long-term, ongoing problem. The trucking industry is banking on automation to eventually solve it. The automation solution that I think has the most promise right now is seemingly driver-less trucks that are actually driven remotely. We blogged about such an unmanned, automated truck being tested in traffic back in 2019. However, even if the technology is almost ready, there are many regulatory hurdles that would have to be cleared before automated trucks can even go into mass production to even begin solving the trucker shortage issue.

The container shortage, along with availability of equipment like chassis to move the containers, is a major issue driving up costs right now. It’s something of a destructive cycle as the container shortage factors into congestion and the congestion factors into the container shortage. Recent and new container orders and the easing of congestion that is coming will likely see container availability back under control within the next couple months; however, increased container costs have been a significant issue for shippers recently. These costs are seen in increased freight rates, both over the ocean and by truck and rail.

Shippers have felt the effects of this shortage through delays in being able to ship, rate hikes, and detention and demurrage fees.

How Long Before Truck and Rail Prices Come Back Down?

Truck and rail prices vary regionally, and the increases are significant. Ashe shared some data of what has and will likely happen with intermodal prices in the previously quoted JOC article:

Prices will likely grow more than 10 percent in the Los Angeles market — the epicenter of congestion in 2020 — based on conversations with non-asset intermodal marketing companies (IMCs). Domestic intermodal volume out of the Southwest surged 17.2 percent year over year in the fourth quarter.

As discussed above, the trucker shortage puts upward pressure on trucking rates and will continue to do so for some time. However, the biggest factor in prices is often demand. Demand is higher than usual and appears likely to stay that way for at least another month or two (and potentially longer). The longer the congestion lasts, the more demand is felt on trucking and rail. There’s no reason to think the increases in price that are happening will come down right away.

If the possible crash we discussed in the last part of the series happens, that would obviously put extreme downward pressure on intermodal prices. However, I don’t expect drops in trucking and rail rates in the next month or two while port congestion is being tackled and the latest stimulus likely sparked a fair bit of spending to help demand stay strong a little bit longer.

There are signs American spending on goods that has pushed the high volume demand could really start slowing. There are some easings of restrictions happening as thing like California’s Governor Gavin Newsom is feeling the recall pressure and alleviating some of his severe lockdown policies and New York Governor Andrew Cuomo has had a sudden change of heart to start saying things like the cost is too high to stay closed and wait for the vaccine. This could lead to a portion of American consumer spending shifting back from purchasing goods to going out again. It is certainly good news for businesses being allowed to reopen that have managed to survive shutdowns so far.

Unless we see a crash in a few months from all the jobs lost and businesses that can’t reopen, at that point truck and rail prices should fluctuate up and down some with the rises and falls in demand. However, truck and rail rates do not tend to be nearly as volatile as spot ocean freight rates (of course, carrier control on the industry through alliances may have put an end to ocean freight rate volatility as we’ve known is). For truck and rail, the starting point when we do start seeing up and down fluctuation will be these higher rates we’re at and about to get to now.

Continued in Next Post

There’s more happening with 2021 international shipping, including an unusual year for factory operations in China during the upcoming Chinese Spring Festival Holiday. We’ll get to that and more as this series continues with the next post in Universal Cargo’s blog.

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2021 Freight Rates & International Shipping Outlook Part 1 https://www.universalcargo.com/2021-freight-rates-international-shipping-outlook-part-1/ https://www.universalcargo.com/2021-freight-rates-international-shipping-outlook-part-1/#respond Fri, 22 Jan 2021 00:10:25 +0000 https://www.universalcargo.com/?p=10261 What's happening with freight rates, and shipping costs in general, in 2021? Are they finally coming down after soaring to record highs in 2020, staying the same, or becoming even more expensive?

Obviously, shipping costs have a large impact on businesses' bottom lines, so let's examine what's happening with these costs.

Check it out in Universal Cargo's blog.

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What’s happening with freight rates, and shipping costs in general, in 2021? Are they finally coming down after soaring to record highs in 2020, staying the same, or becoming even more expensive?

Truck, shipping containers, plane

Obviously, shipping costs have a large impact on businesses’ bottom lines, so let’s examine what’s happening with these costs.

Freight Rates Remain High

To start 2021, both volume and freight rates have remained exceptionally high.

Greg Miller reports in American Shipper that as of the end of last week, spot freight rates from China to the United States west coast (USWC) are up 173% from the same time last year. His source is the Freightos Baltic Daily Index.

The year-on-year difference is not as big for shipping cargo to the opposite side of the country, but they’re still twice as much as they were last year. Freight rates from China to USEC are up 100% year-on-year, Miller reports.

Cargo Volume Resembles Peak Season Type Numbers

As would be expected with such higher-than-normal freight rates right now, cargo volume is higher than usual as well. In fact, looking at Universal Cargo’s shipment count, which I use as a barometer for the international shipping industry, the number of shipments we have for January look like peak season numbers (the type you would see in August and September) rather than January numbers.

January does often get a little surge toward the end of the month from importers trying to beat the Chinese New Year, when manufacturers in China close down for a couple weeks, but you would not expect volume to look like it typically does in the middle of the peak season.

Our shipment file count for January right now is about 22% larger than what we saw for January in 2020. Looking at the traditionally busiest months of the peak season, this month’s shipment count is a little less than 10% smaller than both August and September’s numbers were. 2020’s peak season was especially strong, so even with fewer shipments than August and September had, these are still numbers that resemble peak season volume.

Is Cargo Volume Decreasing?

High demand is obviously a factor that pushes prices in an upward direction. A drop in demand could reduce the upward pressure on freight rates as well as help out the port congestion that has been so costly for shippers.

Volume is still very strong, as discussed in the previous section. However, it does appear, at least from the barometer of Universal Cargo shipments, that January is seeing some decrease in the incredibly high cargo volume we’ve been seeing for months.

December nearly matched August and September in terms of cargo volume. January is sitting at just over a 9% reduction in shipments from the amount December had. Additionally, some of those tentatively scheduled end-of-the-month January shipments could become February shipments, reducing the volume a bit further. This could mean we are starting to see demand slow down.

However, a new round of stimulus money that recently went out to U.S. citizens; the Biden Administration’s plan for more; and continued lockdowns that have been especially promoted by the Democratic Party now in charge of the White House, Senate, and House could keep this inflated demand on goods continuing for at least a few more months.

Is a Crash Looming?

When this stimulus and lockdown inflated demand on goods finally ends, volume could crash.

The U.S. economy went into the pandemic exceptionally strong. Then businesses and jobs were shut down and lost. There is a serious recession happening, but it is masked by trillions of dollars in government stimulus and people spending money on goods because they can’t spend money going out as they normally would.

Eventually, the loss of businesses and jobs will catch up to us. Something that could make it worse is the bigger government, higher taxes, and doubled minimum wage approach of President Biden and his party, which could hurt American businesses and consumers’ spending power through higher business expenses and inflation. The new president came out of the gates swinging, signing 17 executive orders and other directives on his first day in office, according to an Aishvarya Kavi written story for the New York Times. Tightened governmental control usually doesn’t bode well for businesses, and in a few months, we could see massive declines in international shipping volume.

If that crash happens with imported goods, there would certainly be downward pressure on freight rates. However, the circumstances surrounding those lower rates wouldn’t be something shippers like.

Continued in Next Post

This examination of 2021 freight rates and international shipping outlook continues in the next blog as we’ll get into when freight rates might start falling, changes in intermodal shipping importers and exporters are dealing with, and more.

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Container Ship Backups Worse Than During 2014/15’s Devastating Labor Contract Negotiations https://www.universalcargo.com/container-ship-backups-worse-than-during-2014-15s-devastating-labor-contract-negotiations/ https://www.universalcargo.com/container-ship-backups-worse-than-during-2014-15s-devastating-labor-contract-negotiations/#respond Thu, 14 Jan 2021 21:16:03 +0000 https://www.universalcargo.com/?p=10258 There's a bigger ship backup at the Ports of Los Angeles and Long Beach, with more than a score and a half of container ships anchored and waiting to birth off the coast of Southern California according to the Journal of Commerce (JOC), than there were during the contentious contract negotiations of 2014-15 that were so devastating for U.S. shippers.

Find out all about in Universal Cargo's blog.

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There’s a bigger ship backup at the Ports of Los Angeles and Long Beach, with more than a score and a half of container ships anchored and waiting to birth off the coast of Southern California according to the Journal of Commerce (JOC), than there were during the contentious contract negotiations of 2014-15 that were so devastating for U.S. shippers.

Ocean Freight Port

Shippers who imported or exported goods six years ago, along with everyone who was working in the international shipping industry at the time, remember the 2014/15 contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) well. Most would probably like to forget it. Critical slowdowns and shutdowns hit U.S. west coast ports, retailers couldn’t get their goods to stock shelves in time for the holiday shopping season, agricultural exports rotted on the docks, U.S. manufacturers lost international business deals and partners, and the economy lost billions of dollars.

When the two sides of the negotiations finally reached a tentative contract, I wrote about how shippers deserve better. It’s discouraging to see any aspect of port congestion actually be worse than what we saw in 2014/15, especially when considering how long it took to end and recover from the port congestion that happened then. Unfortunately, we’re seeing more ships waiting to dock at the Ports of Los Angeles and Long Beach than we ever saw during the 2014/15 labor crisis, according to a JOC article:

During the 2014-15 West Coast labor crisis, the most container ships at anchor was 28 on March 15, 2015. That was exceeded this year on Jan. 8, when there were 37 ships at anchor.

There being a higher number of ships waiting at anchor than was ever reached in 2014/15 is not a one day anomaly either. Since Christmas, there have often been more ships waiting to get into the Ports of Los Angeles and Long Beach than was seen at the peak of congestion caused by the contentious contract negotiations while ships at anchor have been pretty consistently outnumbering the number of ships at berth. Here are more details from the JOC article:

In the 18 days since Dec. 25, only on Jan. 11 were there more ships at berth than at anchor, with 35 ships at marine terminals and 34 ships waiting to unload. The number of ships at and awaiting berth was the same at 27 on Dec. 27. As of Tuesday [January 12th], there were 31 ships at anchor and 29 at berth, according to the Marine Exchange of Southern California, the agency that manages ship traffic.

It doesn’t help that ships are bigger than they used to be, carrying more containers of goods to ports at a time, either. Of the ships waiting to berth, “a dozen have capacities of more than 10,000 TEU, including CMA CGM’s Marco Polo, which has 16,020 TEU of capacity,” according to the article, which also reports that 18 more ships are scheduled to arrive in the next three days.

The number of ships arriving at the moment are not really above normal. There is only one more ship scheduled to arrive over the next few years than during this period last year. However, leading up to now, demand for imported goods has been much stronger than normal. Despite early expectations in 2020 to the contrary, peak season shipping was very strong last year. In an exceptional year, that demand and increase in cargo volume arriving at the ports can stretch beyond August and September through October and into November, but even then in 2020 cargo demand didn’t let up. Even now, that cargo demand remains strong, and it has left the ports extremely congested exacerbated by added limitations due to pandemic protocols, trucker shortages, and equipment shortages.

I detailed what’s happening at the ports more extensively in a warning to shippers to expect delays and fees.

Congestion is so bad at the ports, Universal Cargo CEO sent a letter to customers just two days before Christmas that began, “We have found it necessary to alert you of what we would call a ‘Perfect Storm’ of events that are causing much pain and headache all over our industry right now…”

That perfect storm hasn’t come to an end yet, but you can be sure we’re keeping a close eye on it here at Universal Cargo. We’ll keep giving you updates about things getting better or worse at the ports as well as all the international shipping news that matter to shippers most here in this blog.

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Transpacific Freight Rates Start Climbing Again to New Record Highs https://www.universalcargo.com/transpacific-freight-rates-start-climbing-again-to-new-record-highs/ https://www.universalcargo.com/transpacific-freight-rates-start-climbing-again-to-new-record-highs/#respond Thu, 07 Jan 2021 23:45:44 +0000 https://www.universalcargo.com/?p=10255 Transpacific freight rates, and freight rates in general, were astronomical in 2020, rising and rising until, at last, they reached a plateau around the end of September/beginning of October. Then, in what is normally one of – some might even say the most – volatile rate market on the planet, freight rates remained stable at their record-breaking heights for basically the rest of the year. It was almost eerie to see months go by with relatively no change in freight rates. Starting right at the end of December, freight rates finally started changing again but not in the direction shippers would like to see. Freight rates have increased to even new historic heights.

Read all about it in Universal Cargo's blog.

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Transpacific freight rates, and freight rates in general, were astronomical in 2020, rising and rising until, at last, they reached a plateau around the end of September/beginning of October. Then, in what is normally one of – some might even say the most – volatile rate market on the planet, freight rates remained stable at their record-breaking heights for basically the rest of the year. It was almost eerie to see months go by with relatively no change in freight rates. Starting right at the end of December, freight rates finally started changing again but not in the direction shippers would like to see. Freight rates have increased to even new historic heights.

New Freight Rate Heights

Last week, freight rates ticked up by a significant amount. Greg Miller reported in an American Shipper article:

According to the Freightos Baltic Daily Index, Asia-West Coast rates (SONAR: FBXD.CNAW) rose to a fresh all-time high of $4,189 per FEU on Monday, up 8% from last Friday. Rates are now triple what they were one year ago.

Rates also just jumped on the Asia-East Coast route (SONAR: FBXD.CNAE). Spot rates were $5,397 per FEU on Monday, up 9% from last Friday. Rates in this trade lane are now double what they were one year ago.

As if double the freight rates from a year ago isn’t bad enough for shippers, the news on freight rates got even worse this week. Bill Mongelluzzo reported in the Journal of Commerce:

Carriers in the eastbound trans-Pacific are charging all-inclusive rates of more than $6,000 per FEU to the West Coast and $8,000 per FEU to the East Coast in today’s extremely tight market, forwarders say.

Have Carriers Risen Above the Market?

Demand is much higher than normal for this time of year, as discussed in our 2021 outlook article posted on Tuesday, but does that mean transpacific freight rates should be this high? For the last year, freight rates haven’t appeared to be responding naturally to the ebbs and flow of the market.

Shippers were accusing carriers of profiteering off the pandemic when despite lower demand in the earlier parts of 2020, freight rates significantly rose, largely because of carrier alliance shipping lines utilizing tactics – blank sailings in particular – to lower capacity, which sank well below market demand. If industry professionals weren’t already suspicious at that point, their eyebrows did raise when the unprecedented rate plateau hit. An early December article about “the mystery of the frozen trans-Pacific spot rates” Greg Miller wrote for American Shipper highlights the suspicion over freight rates:

“It is worth highlighting that this is the first time we have ever seen a flat development,” said Patrik Berglund, CEO and co-founder of freight-rate intelligence company Xeneta, during a company presentation on Tuesday.

“It is worth highlighting that this is the first time we have ever seen a flat development,” said Patrik Berglund, CEO and co-founder of freight-rate intelligence company Xeneta, during a company presentation on Tuesday.

“If you look at the charts historically, this has never happened before. It raises some serious questions. The European shippers’ council and the U.S. authorities are keeping their eyes on this, evaluating whether these really are pure, open, competitive market conditions.”

It may actually be authoritarian pressure that caused the plateau. Both of Miller’s articles reference the possibility of a closed door meeting Chinese officials had with carrier executives, reportedly concerning freight rates. Many rumors have circulated about the meeting, mostly revolving around China pressuring carriers about freight rates and blank sailing. The version Miller shared in his article from a little over two months into the frozen rates is certainly plausible:

Chinese officials called a meeting with ocean liners on Sept. 11. During a client call in early October, Jefferies analyst Andrew Lee recounted, “What we heard from the [people in the] meeting themselves was that it wasn’t [regulators saying], ‘You’ve got to cut the rates.’ It was, ‘Carriers are making a lot of money on the trans-Pacific at the moment. Let’s not push it much higher.’”

Whether it is a coincidence or not, index rates halted their ascent within two weeks of the meeting. They haven’t really moved since.

Just imagine, freight rates could have been higher during the last quarter of 2020. I won’t get into the hypotheticals of what that could have happened with that, but carriers certainly have been doing well through all of this. For years, they have struggled with profitability, but in 2020, these giant shipping companies have posted some exceptional profits. Shippers, meanwhile, have seen their shipping costs rise and the reliability of receiving their goods on time diminish.

The Federal Maritime Commission (FMC) has been investigating carrier alliances’ practices, even threatening carriers around the same time Chinese officials held the closed door meeting with the shipping lines. Still, the FMC gives shippers little confidence that it will take action to return a competitive freight rate market to the industry.

I’ve argued for years that carrier alliances shrink competition in the ocean freight industry and are ultimately bad for shippers. We really seem to be watching that play out now.

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2021 Outlook for Importing From China https://www.universalcargo.com/2021-outlook-for-importing-from-china/ https://www.universalcargo.com/2021-outlook-for-importing-from-china/#respond Tue, 05 Jan 2021 23:53:35 +0000 https://www.universalcargo.com/?p=10254 International shipping in 2021 continues right where 2020 left off. That sentence sounds obvious, but what it means is an abnormal start to the year when it comes to ocean freight shipping, and transpacific shipping in particular. High demand, high freight rates, and high port congestion can all be expected to start the year.

Read all about it in Universal Cargo's blog.

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International shipping in 2021 continues right where 2020 left off. That sentence sounds obvious, but what it means is an abnormal start to the year when it comes to ocean freight shipping, and transpacific shipping in particular. High demand, high freight rates, and high port congestion can all be expected to start the year.

2021 International Shipping Outlook

2020’s Lead Up to 2021’s International Shipping

2020 ended with high demand in ocean freight shipping, severe port congestion, trucker shortages, and shortages of equipment – shipping containers in particular – making things difficult for U.S. shippers. Things got so bad, one of our last blog posts of the year was an alert to shippers, warning them to expect fees and delays.

While 2020 had lower than normal transpacific demand early in the year due to pandemic reactions, demand never dropped as low as initially expected. It certainly did not drop as low as ocean freight carriers anticipated, as they dropped capacity well below market demand with hundreds of blanked (cancelled) sailings. Despite some decrease in demand that was happening, freight rates rose, and then demand boomed, sending freight rates soaring to record highs while carrier reliability sank to terrible lows.

The 2020 peak season that many predicted would not exist turned out to be extremely strong and did not dwindle when the peak season usually wraps up. Looking at Universal Cargo’s shipment numbers, which I often use as a barometer for the industry, after a strong October, November and December both saw gains in shipment counts from the previous months. When all was said and done, December’s shipment count was almost identical to August and September’s counts, which are traditionally the two biggest months of the year for transpacific shipping. September had one less shipment than August, and December had only three fewer than September had. Additionally, if not for the terrible port congestion, December would have had more shipments.

That end of the year demand well outpaced the end of 2018, when shippers who import from China were shipping heavily at the end of the year to beat a January 1st, tariff hike of 25%. Not only is this international shipping demand abnormally high, it’s from actual goods demand from American spending rather than preemptive shipping because of a trade war. That means the increased demand does not suddenly end with the new year but should continue on here in 2021.

Continued High Demand in Early 2021

With COVID restrictions continuing and another round of stimulus from the federal government taking place, American spending remains strong when it comes to goods. That means transpacific shipping demand will remain high for the time being. Industry professionals can also see other markers to confirm demand is still strong here at the beginning of 2021. Check out this excerpt from a Bill Mongelluzzo-written article published New Year’s Eve by the Journal of Commerce (JOC):

[Alan Murphy, CEO of Sea-Intelligence Maritime Analysis] projected that the growth seen in the “extended peak” of last summer and fall will actually accelerate in early 2021, given the increased vessel capacity carriers are deploying into the new year. “Deployed capacity is dictated by demand,” he said in Sea-Intelligence’s Sunday Spotlight newsletter.

As mentioned earlier, capacity is not a perfect indicator of demand, as carriers shrank capacity below what market demand dictated in the first half of 2020. However, carriers’ recent push to control capacity and discipline to avoid overcapacity makes the increase of capacity they are currently putting in place an even better indicator that demand really is remaining strong, as experts are projecting.

Here’s the added capacity Mongelluzzo shares in the JOC:

In order to accommodate the growing cargo volumes and the e-commerce requirements for speed to market, trans-Pacific carriers in the second half of 2020 launched three new weekly services, and these strings continued to operate into the new year. Matson Navigation Co. added a second loop from China to Long Beach, and Mediterranean Shipping Co. launched its Santana service from China to Long Beach. CMA CGM added a premium service from China to Los Angeles.

How Will We Be Able to Tell When Demand Dampens Again?

Normally, U.S. importing demand is fairly weak this time of year, with a small surge ahead of the Chinese New Year in February. With last year’s demand starting a bit weaker than usual, this year’s unusually strong demand should create incredibly high year-over-year comparisons. If in the first few months of 2021 year-over-year comparisons for a month are only moderately than stronger than 2020, that will be a good indicator demand is slowing back down.

Normally, freight rates are highly volatile in the international shipping industry and respond strongly to increases and decreases in demand. However, carriers proved in 2020 that they can utilize their alliances to control capacity and keep freight rates high even when demand falls. That makes freight rates a poorer indicator of demand than it has been in the past (and conversely, demand a poorer indicator of freight rates than it’s been in the past).

While freight rates shouldn’t be ignored in conversations about international shipping demand, capacity announcements (like adding or blanking sailings), trends in volume growth or decline, and ordering of shipping containers and other equipment are turning into better factors for predicting demand. Right now, experts are expecting demand to stay strong at least through January and likely through February and March. However, a lot can happen in the first quarter of the year.

Conclusion

It will likely take some time for ports, and the supply chain as a whole, to recover from the congestion and disruption we’ve been seeing. Continued high demand obviously does not help in these endeavors but neither do COVID-19 lockdowns or protocols that limit hours of operation, numbers of workers, and productivity at points throughout the supply chain.

With the high demand at least through January and very possibly longer, freight rates are expected to remain high. Simultaneously, low availability of truckers and congestion at the ports continues to put shippers at risk of being hit with unfair demurrage and detention fees, something the FMC is investigating and urged to take action to stop.

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Universal Cargo’s Top 10 Blog Posts of 2020 – You Won’t Believe What #1 Is! https://www.universalcargo.com/universal-cargos-top-10-blog-posts-of-2020-you-wont-believe-what-1-is/ https://www.universalcargo.com/universal-cargos-top-10-blog-posts-of-2020-you-wont-believe-what-1-is/#respond Thu, 31 Dec 2020 20:34:24 +0000 https://www.universalcargo.com/?p=10252 For many, today couldn't get here quickly enough. At midnight tonight, we say goodbye to 2020 and hello to 2021, hoping for a better year. Traditionally, Universal Cargo has said goodbye to years by reviewing the top 10 international shipping news stories of the year. This year, we thought we'd change it up a little bit because COVID-19 so thoroughly dominated the news cycle that almost the whole countdown would be coronavirus related.

Thus, instead of the top international shipping news stories, we're going to count down the top 10 most popular blog posts of 2020. And you won't believe what came in at number one. The rules are simple. Posts are ranked in order of unique views they received. Only entries that were posted in 2020 qualify (many posts from previous years would crack the list if we were looking at all blog posts visited in 2020).

Remembering the days of funnier late night comedy than we have today, we're doing this list David Letterman style, counting down from number ten to number one. Find out what the most popular blog posts of 2020 were by visiting Universal Cargo's blog now.

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For many, today couldn’t get here quickly enough. At midnight tonight, we say goodbye to 2020 and hello to 2021, hoping for a better year. Traditionally, Universal Cargo has said goodbye to years by reviewing the top 10 international shipping news stories of the year. This year, we thought we’d change it up a little bit because COVID-19 so thoroughly dominated the news cycle that almost the whole countdown would be coronavirus related.

Thus, instead of the top international shipping news stories, we’re going to count down the top 10 most popular blog posts of 2020. And you won’t believe what came in at number one. The rules are simple. Posts are ranked in order of unique views they received. Only entries that were posted in 2020 qualify (many posts from previous years would crack the list if we were looking at all blog posts visited in 2020).

Remembering the days of funnier late night comedy than we have today, we’re doing this list David Letterman style, counting down from number ten to number one. If you want to visit the blog posts yourself, just click on their title headings to follow links to the individual posts. No more waiting. Let the countdown begin!

Benfits of Blockchain International Shipping Logistics.png

#10 – How Logistics Can Benefit from Cryptocurrency

A guest post by Kelly Skangale cracks the top 10 list. Cryptocurrency is increasing in popularity and there is a push to get its blockchain technology more involved in international shipping. In this post, Skangale goes through blockchain benefits for the logistics industry as well as challenges to consider in adopting the new technology to the international shipping industry.

Chinese New Year 2020

#9 – How Does the Chinese Spring Festival Holiday Affect the International Logistics Industry?

Breaking into the top 10 at number 9 is a guest post by David Fan about how the Chinese New Year affects international shipping. This was Universal Cargo’s first blog post of 2020, and not only did Fan get into how the Chinese Spring Festival holiday affects international shipping with this post, he shared background on the holiday like what it means in China and the time span of its celebration.

INLT pandemic supplies webinar surgical masks
INLT pandemic supplies webinar surgical masks

#8 – Importing Pandemic Supplies Requirements Laid Out by Customs Broker

Of course, it would be impossible for the pandemic not to have affected this list at all. Coming in at number 8 on our countdown is this blog post about importing pandemic supplies like masks, gloves, gowns, thermometers, sanitizers, and disinfectants. Many people found this post, with information straight from a webinar Universal Cargo’s house customs broker gave, extremely useful as their businesses needed to import supplies to protect their employees and customers and follow pandemic-related regulations.

Ocean Freight Port

#7 – What Will the 2020 Peak Season Look Like?

Coming in at number 7 is a post I wrote examining what was happening in the international shipping industry and making predictions about how the 2020 peak season would look. Many had been predicting 2020 would not have a peak season at all. I didn’t buy into that narrative, predicting we would have a peak season and freight rates would high; however, the peak season ended up being even stronger than I projected. In fact, demand remains strong even now as if we’re still in the middle of the peak season. Our readers ask for posts like this, as such articles give indicators of what to expect in the industry, helping shippers better prepare for their importing and exporting operations.

shipping containers supply chain
Shipping Containers Picture: https://unsplash.com/photos/tjX_sniNzgQ

# 6 – Exporting by Ship? How to Choose the Right Shipping Containers

Guest writers did extremely well in Universal Cargo’s blog this year. Already the third post from a guest contributor, this article by Shawn Mack about choosing shipping containers comes in at number 6. Mack covers the topic of choosing the correct shipping container well, outlining factors like type of sea freight, varieties of container designs based on function, and shipping container sizes. This is an especially useful article for businesspersons who are new to importing and exporting goods.

Shipageddon

#5 – What’s Shipageddon & Do You Need to Know About It?

Coming in at number 5 is a blog that explains one of 2020’s shipping buzzwords: shipageddon. Was the word designed by the mainstream media mainly to scare people? Probably. Still, there was a perfect storm leading up to the Christmas holiday that has created great difficulty for U.S. shippers who import and export goods. However, shipageddon was supposed to be more about last-mile and domestic shipping problems creating great inventory shortages around the country. That was not seen anywhere near the level of deserving such an ominous word, and this post is worth reading just for the awareness of the “descent into chaos” language and fearmongering tendencies we’re seeing more and more from the mainstream media.

#4 – Importing From Mexico to the US

importing from mexico to the us

Not all international shipping comes from across an ocean. Our neighbors right here on our own continent can make great international trade partners. This post is all about importing from Mexico, and who knew it would be so popular, coming in as Universal Cargo’s fourth most popular blog post of the year. Then again, why not? Between the trade war with China and COVID-19 originating there, people who import from China have been looking at alternate countries to import goods from for a while. Mexico could be an excellent option for many with much faster delivery.

#3 – How Does the Coronavirus Impact International Trade with China?

citizens of wuhan lining up outside of a drug store to buy masks during the wuhan coronavirus outbreak

While COVID-19 would have dominated an international shipping news story countdown, it really hasn’t dominated the most popular blog posts of 2020. This is the last time the coronavirus pops up on this list, though it is quite high at number 3, and only the third post on the list heavily influenced by the pandemic. Actually, this article is all the way back from January, before COVID-19 hit pandemic levels and was still being called the Wuhan coronavirus by all major news sources. At this point, the virus was a new disease, spreading in China, and the fatigue of hearing story after story after story about it hadn’t set in yet. Shippers needed to know what was going on in China and how it would affect their trade with business partners in that country. This blog post supplied those details back when the confirmed infection rate was only 7,711 people.

#2 – Cargo Vs. Freight — What’s the Difference?

Difference between cargo and freight

Coming in #2 on the list is another guest post; this one from George McKinley. I told you guest contributors did really well in Universal Cargo’s blog this year. McKinley wrote a great article about the differences between two commonly interchanged words that proved to be of interest to more than just linguists. Many think it makes no difference whether you use the word cargo or freight. They’d be wrong. What differentiates cargo from freight? Check out the post McKinley wrote to find out all about it and perhaps use this knowledge to impress friends or colleagues later on.

#1 – International Shipping And Marijuana — What Should You Know?

marijuana shipping

This post almost never got published. Mary Walton had submitted the excellent article about international shipping and marijuana to Universal Cargo many months before it actually made it onto the site. There was worry at the time of submission that the article might result in many false leads to Universal Cargo that might waste some of our team members’ time. Instead, after we finally decided to publish the article, it became our most viewed blog post of 2020. I guess we underestimated the popularity of marijuana. With all the legalization movement on the plant over the last several years, many people and businesses are looking into what they need to know to ship it. Congratulations, Mary, on writing the most popular blog Universal Cargo published in 2020!

Amazingly, half of this year’s most viewed blog posts came from guest writers, including the number 1 post. If you’re interested in submitting articles for publication in Universal Cargo’s blog, check out our submission guidelines and tips post. Who knows, maybe you’ll write the most popular blog post of 2021.

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Ocean Carriers to Introduce “Slidings” – Will They Help Reliability? https://www.universalcargo.com/ocean-carriers-to-introduce-slidings-will-they-help-reliability/ https://www.universalcargo.com/ocean-carriers-to-introduce-slidings-will-they-help-reliability/#respond Wed, 30 Dec 2020 00:00:47 +0000 https://www.universalcargo.com/?p=10251 I've typed the words "ocean freight carriers are notoriously unreliable" so many times over the last decade of writing in Universal Cargo's blog that I should probably have the statement permanently on my clipboard, ready to paste into any article at any time. Now there's a new buzzword going around in the international shipping industry, which I've never typed, that ocean carriers are saying will help increase reliability: "slidings."

What is or are "slidings" and will it/they actually make ocean freight carriers more reliable? Those are the questions this post will explore, but first, we'll get into just how bad ocean carrier reliability has gotten. Read about it all in Universal Cargo's blog.

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I’ve typed the words “ocean freight carriers are notoriously unreliable” so many times over the last decade of writing in Universal Cargo’s blog that I should probably have the statement permanently on my clipboard, ready to paste into any article at any time. Now there’s a new buzzword going around in the international shipping industry, which I’ve never typed, that ocean carriers are saying will help increase reliability: “slidings.”

What is or are “slidings” and will it/they actually make ocean freight carriers more reliable? Those are the questions this post will explore, but first…

How Bad Has Ocean Carrier Reliability Gotten?

In 2020, ocean carrier unreliability hit all new levels.

Regular readers of this blog likely don’t need me to go back through the immense blanked (cancelled) sailings carriers implemented this year, their rolling over of cargo to later sailings (even charging shippers no-roll premiums), their interdependency on each other through alliances, carriers’ focus on profits over service (something that has especially hurt U.S. agricultural exporters), and their severe lack of transparency contributing to these shipping lines regularly failing to deliver cargo to ports on schedule.

U.S. shippers, in general, don’t need me to tell them ocean carriers will likely be behind schedule with delivering their cargo either. But just how bad is it? Last month, Asia to U.S. container ships failed to arrive on time over 70% of the time. Worldwide, ocean freight carriers only had their container vessels on schedule about half the time. Those stats comes from a Sea-Intelligence service reliability index cited in a Bloomberg article I quoted in our last blog post, warning shippers, especially U.S. importers, to expect delays and fees.

Carriers Not Always At Fault

To be fair, ocean freight carriers are not at fault for all of their shipping schedule failures. Natural events like storms – not even needing to be the size of hurricanes – creating high winds and waves have an impact. A perfect example is the MV ONE Apus losing and suffering damage to a massive number of shipping containers after being hit by a storm. The ship was sailing to the Port of Long Beach but ended up turning back and docking in Japan to assess the damage.

Carriers have increased the exposure and risk storms hitting ships can cause. In recent years, carriers have moved to bigger and bigger ships, including massive megaships as long as skyscrapers are tall and capable of carrying well over 20,000 TEU (twenty-foot equivalent units) of goods. With their carrier alliances sharing ships and push to fill them, it is more difficult for shippers to spread their cargo out over different vessels to reduce risk.

Another factor adding to carrier unreliability beyond carrier control is port congestion. Yes, port congestion is something to which carriers and their practices like the use of megaships and blanked sailings disrupting the movement and allocation of shipping containers has contributed, but there are many other factors like demand, trucker shortages, labor strife, and pandemic protocols and hours that carriers have nothing to do with that have created or currently are creating congestion. Mike Wackett ends an article in the Loadstar with a quote that articulates this point:

SeaIntelligence’s Lar Jensen commented that due to the long wait times being experienced at ports, “it would not be reasonable to purely blame carriers for this dramatic drop in performance”.

That article just happened to be about “slidings.”

What Is “Slidings”

“Slidings” comes out of the phrase “schedule sliding.” Schedule sliding is backing up or sliding back the scheduled arrival date of a vessel at a port to a later date. With slidings, ocean freight carriers are adding more time to the transit times on their sailing schedules to account for delays they’re experiencing because of port congestion (as well as other factors).

Perhaps a better way to think about the concept is stretching the transit times of ships, but maybe someone thought “slidings” sounded better than “stretchings.” Maybe they were right. People might have said “stretchings” are carriers stretching the truth about how long sailings take. But it’s certainly true congestion holds up ships and prevents them from going from port to port as originally scheduled.

Wackett, in his article, describes slidings as adding buffer time to schedules before giving the following example of a carrier utilizing sliding:

Hapag-Lloyd said today it was adding seven days to the westbound schedule of its AS2 Asia to South America east coast schedule for 13 weeks – one of two loops it operates on the trade in cooperation with Maersk, Hamburg Süd, MSC and ONE.

When carriers talk about slidings, they’re talking about these longer schedule times directly in relation to port congestion as seen when Wackett quotes Hapag-Lloyd CEO Rolf Habben Jansen:

“Looking at congestion we see at US ports and other places we will still see delays in the first quarter, and we will not see a lot of blankings, but we will see slidings, because when a ship has to wait six days at one port, and at another port it has to wait four days, you are 10 days behind schedule, which in reality means that you also lose a week, even if you sail back at top speed, so I think that we will see slidings and I think that we will also see all the capacity that is available deployed.”

Slidings Instead of Blank Sailings

What stands out to me in the above quote is that Jansen says in the first quarter there won’t be many blank sailings, but there will be slidings.

Right now, there are many projecting demand to remain high in the first quarter of 2021, something we will get into more in a future blog. With strong demand, you would not expect to see a great deal of blank sailings. Even so, carriers have shown strong discipline in controlling capacity over these last two years, especially in 2020, with blank sailings being their biggest tool for doing so. Therefore, even with high demand, some blank sailing will likely still occur. However, the same effects blank sailing gives could be garnered through slidings.

If transit times are stretched enough, fewer sailings could fit in the schedule without adding additional ships. If moving forward, carriers created schedules with fewer voyages that have longer sailing times, they can still reduce capacity, push back a sailing within their buffer time, even increase their buffer time, and label it all under slidings instead of cancellations or blankings.

Will Slidings Actually Increase Reliability?

Slidings could end up being more of an optics measure than an actual change. Ship arrivals may still take just as long but with a larger scheduled arrival window. Ships arriving under the same kind of time lapses would no longer be technically late according to the schedule, but shippers wouldn’t be seeing their goods any faster.

Even if it is just a change in communication, fewer ships being technically late may ease some of the anger from shippers of repeatedly having their cargo fail to arrive at port when scheduled and reduce tension between them and the carriers. However, there may be a more concrete improvement caused by slidings.

Sometimes, port congestion, and other reasons for falling behind schedule, cause carriers to skip ports altogether with their ships in attempts to stay on schedule, get back on schedule, or just reduce how far behind they are. Adding more buffer time into schedules may significantly reduce the pressure on carriers to arrive, making it less likely they’ll feel the need to skip a port and offload cargo elsewhere.

“If you have to wait off a UK port for a week and then eventually decide to skip and dump the boxes in Zeebrugge, Rotterdam or Bremerhaven, then the schedule is totally shot to pieces,” [an Asia-North Europe carrier] said.

“Some of us have been arguing that we have to build more buffer time into the schedules and, by doing so, we would actually save costs by not having to make last-minute port changes,” he said.

The carrier, not surprisingly, talks about the last-minute change in port in terms of cost and profit, but service could obviously improve in this scenario too. Having their goods offloaded at a different port than planned can be very costly in terms of delay for shippers. Sometimes it requires shippers to make new, more difficult, and more expensive arrangements to retrieve their cargo.

While it’s impossible to know exactly how the use of slidings will turn out, there is at least some potential improved reliability.

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Shippers Alert: Expect Delays & Fees https://www.universalcargo.com/shippers-alert-expect-delays-fees/ https://www.universalcargo.com/shippers-alert-expect-delays-fees/#respond Wed, 23 Dec 2020 20:26:06 +0000 https://www.universalcargo.com/?p=10250 Shippers importing goods from anywhere in the world – but especially China and other Asian countries – should expect to experience delays and fees.

Right now, ports in Asia and the U.S. are bottlenecked with congestion, way above average cargo volume, container shortages, and a lack of available trucking.

This is a shipping crisis that has spread from Asia to the U.S.

Go to Universal Cargo's blog to find out more.

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Shippers importing goods from anywhere in the world – but especially China and other Asian countries – should expect to experience delays and fees.

Right now, ports in Asia and the U.S. are bottlenecked with congestion, way above average cargo volume, container shortages, and a lack of available trucking.

This is a shipping crisis that has spread from Asia to the U.S.

Crisis at the Ports and Its Cause

Since COVID-19 spread from a novel coronavirus in Wuhan, China to a Pandemic causing shutdowns here in the U.S. (and in countries throughout the world), Universal Cargo has been publishing blog posts about unfair and coronavirus-related demurrage and detention fees, container shortages, trucker shortages, higher than anticipated cargo volume, pandemic-related supply chain disruptions, and it has all added up to the closest thing to a “shipageddon” that U.S. importers and exporters could expect to see.

Additionally factoring into the crisis are chassis and other equipment shortages, COVID-19 shutdowns, limited hours and crew protocols, social distancing protocols, new appointment systems at port terminals, holiday and vaccine shipping eating into the U.S. truck fleet, and less reliability from ocean freight carriers even as they’re charging record high freight rates.

Fees and Delays

Universal Cargo’s team has worked hard to shield our customers from delays and fees from carriers and port terminals that many shippers have been suffering for most of this year. At the same time, we’ve been keeping you informed on what’s happening in the international shipping industry as a whole through this blog. Unfortunately, congestion and shortages have gotten so bad at the ports and in the industry, it’s just not possible to move containers quickly enough to avoid all delays and fees, particularly demurrage fees (storage fees at the port longer than the allotted free time) that generally accumulate per diem as well as detention fees (fees for returning empty containers late) that also typically add up by the day.

Ships Backed Up at Ports

Ports in the U.S. and around the world have been suffering congestion for months. A Bloomberg News article by Brendan Murray gives a good picture of what’s happening at the ports all around the country right now as Murray focuses a short paragraph on the details of what’s happening specifically at the Ports of Los Angeles and Long Beach:

Slowly clogging up since September, the main artery for trade between China and the U.S. is still choked. Anchored off the coast of California over the weekend were almost 20 container ships waiting to offload at Los Angeles and Long Beach, up from about a dozen at the end of November. The Port of L.A. expects to handle 152,000 inbound containers this week – a 94 percent increase from the same week a year ago.

There would be one more large container ship right now with thousands more TEU (twenty-foot equivalent units) of cargo waiting with those 20 ships mentioned above if the MV ONE Apus hadn’t suffered a massive container stack collapse when a storm hit it near Hawaii as it was en route to the Port of Long Beach. Of course, shippers whose goods were onboard the Apus would probably rather see their cargo add to the port congestion than be lost at sea, despite the horrible congestion we’re seeing.

No Trucks

As horrendous as the congestion at the ports is, the impossibility of getting trucks and truckers right now is even more frustrating. Even for the most established freight forwarders like Universal Cargo with long-established relationships with truckers and trucking companies and a willingness to pay extra for the trucking can’t get truckers right now because there are no truckers to get.

Catherine Sanchez, Universal Cargo Account Manager, opened up about her frustration with problem:

You know I am going to try all resources and ways to get this done. I have tried every single trucker, including old truckers, for customers and the one that [an associate] recommended. I tried to offer extra money and nothing. I have tried to call [trucking company head whose name is omitted] and beg him…. I have been working on [trucking company B] for over a week and now all these new ones as well, and I am just totally stuck and getting very frustrated.

To be clear, this is in no way only a problem on the West Coast. Here’s a response a trucking company gave Sanchez for late December, East Coast cargo move requests, which were submitted in what would normally be plenty of time for the scheduling: “I am sorry; for the NYC/NJ area our availability is not until mid January.” There simply are no truckers available.

Demurrage, Detention, and Carriers’ Double Standard

Adding insult to injury is shippers face serious penalties for not picking up their cargo and not returning empty shipping containers on time. Shippers have long complained about the unfair nature of these demurrage and detention fees, which carriers and terminals charge by the day. Not only is the failure to move shipping containers that result in these fees completely out of shippers’ control, but there is a double standard when it comes to being on time with transportation.

Ocean freight carriers are notoriously unreliable when it comes to being on time with transporting cargo across the seas, a problem that has been much worse in 2020. Carriers implemented an onslaught of blanked (cancelled) sailings this year, pushing capacity well below demand and freight rates to record highs while causing cargo to be rolled over and over again to later sailings. Even after carriers went back to adding capacity and backing off blank sailings, they still have been failing to deliver on time at astounding rates.

Murray reported in his Bloomberg article that carriers only had their container ships on schedule about half the time last month:

Just 50.1 percent of container vessels arrived on time in November, down from 80 percent a year earlier and the lowest level in records dating to 2011, according to a service reliability index compiled by Copenhagen-based Sea-Intelligence. From Asia to North America, on-time arrivals dropped below 30 percent, less than half the long-run average globally.

Carriers aren’t paying penalties or discounting shippers when the shipping company delivers cargo late to port. In fact, carriers charged more not only with higher freight rates but with no-roll premiums, where they asked shippers to pay extra to prioritize their cargo to make it less likely to be rolled over onto later sailings than originally scheduled. This only added to the accusations shippers have been laying upon carriers of profiteering off the pandemic.

Help Me FMC Kenobi – You’re My Only Hope

Forgive the Star Wars reference, but many shippers are feeling like this is our most desperate hour and are turning to the Federal Maritime Commission (FMC) as the last hope.

Shippers’ best chance of avoiding demurrage and detention fees probably lies with action from the FMC, as it has been investigating carrier practices, especially by the major carrier alliances that dominate ocean shipping, as well as demurrage and detention fees in particular.

The FMC’s history of protecting – or perhaps I should say failure of protecting – shippers from unfair demurrage and detention fees does make shippers’ hope in the commission stepping in dwindle some. Last year, the FMC announced it would finally “address detention and demurrage charge issues” by adopting a set of recommendations by Commissioner Rebecca Dye. Actual action beyond increasing investigation following that announcement has been lacking.

In an April press conference, the FMC announced it “has issued new guidance about how it will assess the reasonableness of detention and demurrage regulations and practices of ocean carriers and marine terminal operators”:

Under the new interpretive rule, the Commission will consider the extent to which detention and demurrage charges and policies serve their primary purpose of incentivizing the movement of cargo and promoting freight fluidity. The rule also provides guidance on how the Commission may apply that principle in the context of cargo availability (and notice thereof) and empty container return.

That’s certainly a step in the direction of restricting unfair fees, but is the FMC willing to actually take action on carriers and terminals?

The FMC did just up trade data reporting requirements on carrier alliances, announced in a press release late last month. That little step of action is something but far from what the FMC is being urged to do. Bill Mongelluzzo reported in the Journal of Commerce (JOC) last month that a coalition of shippers, truckers, and customs brokers asked the FMC “to consider an immediate suspension of detention and demurrage charges at the ports of Los Angeles and Long Beach and New York-New Jersey until congestion at the country’s two largest gateways dissipates.”

FMC Has Power to Halt Unfair Demurrage and Detention Fees

I’m not a big-government guy and am of the opinion that there have been many governmental overreaches in the history of the U.S., especially this year; however, the situation shippers find themselves in right now is exactly the sort of situation for which governmental intervention is called.

The FMC does seem to be recognizing unfair practices against U.S. shippers are taking place and there is confidence from inside and outside the FMC that the commission has the power with its new interpretive rule to stop detention and demurrage fees enforced for reasons outside of shippers’ control.

Here are some excerpts from Mongelluzzo’s JOC article that highlight this:

Truckers feel confident the FMC can use its existing powers to immediately turn guidelines issued in the commission’s interpretive rulemaking decision earlier this year into rules that would require suspension of detention and demurrage charges in Los Angeles-Long Beach and New York-New Jersey.

“Using their legal powers and authority, the FMC can act quickly,” said [Harbor Trucking Association CEO Weston LaBar].

FMC commissioner Dan Maffei, in a statement to JOC.com Monday that he said reflects his personal opinion, called for the FMC to investigate reports of charging shippers and truckers for congestion-related issues they did not create.

“This spring, when the FMC unanimously voted to finalize the interpretive rule concerning detention and demurrage charges, I noted that we had made a first step, but should consider further action if that interpretive rule was not sufficient,” Maffei added.

[Peter Friedmann, executive director of the Agriculture Transportation Coalition] noted that issues related to congestion and demurrage are included in filings that ocean carriers have submitted to the FMC. “It’s not a question of whether they have the authority, it’s the will,” he said.

At Universal Cargo, we’ve been extraordinarily successful at protecting our customers from demurrage and detention charges, but there’s only so much we can control. Unfortunately, we have yet to see the FMC step in on these unfair fees shippers have been and are facing right now. One thing you can always rely is at Universal Cargo, no matter the challenges, we’ll always work hard and do everything possible on behalf of the shippers who entrust us with their importing and exporting needs.

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ONE Apus Update: Devastating Drone Video Footage https://www.universalcargo.com/one-apus-update-devastating-drone-video-footage/ https://www.universalcargo.com/one-apus-update-devastating-drone-video-footage/#respond Tue, 22 Dec 2020 22:49:40 +0000 https://www.universalcargo.com/?p=10245 On November 30th, the MV One Apus had a massive shipping container collapse as it was hit by a storm and massive waves in the Pacific Ocean on its way to the Port of Long Beach. We blogged about all the details surrounding the unfortunate incident, including the estimate from an Ocean Network Express (ONE) press release that over 1,900 shipping containers could have been lost or damaged. While technically not wrong, that figure now seems like a significant understatement.

1,900 turned out to be a closer number to just the amount of shipping containers lost overboard. The containers remaining on the ship are not a pretty sight. Estimates now are saying 2,250 containers have been lost or damaged with more than not of them being 40 ft containers, making for a very high TEU (twenty-foot equivalent unit) count. Gavin van Marle reports in an article for the Loadstar:

New analysis of drone video footage of the ONE Apus container vessel, which suffered a dramatic stack collapse on 30 November in the Pacific, has revealed that as much as 4,500 teu could be lost or damaged.

...

The carrier confirmed that 1,816 containers had been lost overboard, including 64 dangerous goods (DG) boxes. It abandoned its route and returned to Japan, berthing at Kobe last week.

Check out insane videos of the unbelievable shipping container wreckage by continuing this post in Universal Cargo's blog.

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On November 30th, the MV One Apus had a massive shipping container collapse as it was hit by a storm and massive waves in the Pacific Ocean on its way to the Port of Long Beach. We blogged about all the details surrounding the unfortunate incident, including the estimate from an Ocean Network Express (ONE) press release that over 1,900 shipping containers could have been lost or damaged. While technically not wrong, that figure now seems like a significant understatement.

CV ONE Apus

1,900 turned out to be a closer number to just the amount of shipping containers lost overboard. The containers remaining on the ship are not a pretty sight. Estimates now are saying 2,250 containers have been lost or damaged with more than not of them being 40 ft containers, making for a very high TEU (twenty-foot equivalent unit) count. Gavin van Marle reports in an article for the Loadstar:

New analysis of drone video footage of the ONE Apus container vessel, which suffered a dramatic stack collapse on 30 November in the Pacific, has revealed that as much as 4,500 teu could be lost or damaged.

The carrier confirmed that 1,816 containers had been lost overboard, including 64 dangerous goods (DG) boxes. It abandoned its route and returned to Japan, berthing at Kobe last week.

They say a picture is worth a thousand words, so let’s take a look at millions of words worth with 24-pictures-per-second videos of what those devastating container stack collapses look like on the ONE Apus. There are several videos on Youtube of containership and its unfortunate boxes, but gCaptain shared WK Webster & Company’s drone footage that van Marle refers to above:

YouTube Video

The Loadstar article quotes WK Webster’s assessment of the damage:

“It can be seen [from the drone footage] that there are 22 bays on deck, of which 16 have collapsed to both port and starboard, leaving only six fully or partially intact,” said Michael Hird, director of cargo casualty management at WK Webster.

“With 20 rows of containers per bay, and with stack heights of between six and eight containers, we anticipate that approximately 2,250 containers have been lost or damaged.

“It will also be noted that the vast majority appear to be 40ft units and, therefore, equivalent to approximately 4,500 teu,” he said, adding that that figure would include the 1,816 units already reported by ONE.

“That would leave just over 400 collapsed on deck – except that the photos look like there are more than that on deck. So I suspect the numbers may change a little as the vessel sorts through the debris during the discharge operations,” he said.

When the ONE Apus ran into trouble, it was near Hawaii. Rather than complete its journey to the Port of Long Beach, the ship abandoned its route and headed back to Japan, where it docked, the damage is being assessed, and the process of offloading the containers have begun.

Several videos of the containership have been posted on Youtube from the period it was docking to being anchored at port. Here are a few that zoom in on those damaged containers.

YouTube Video

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YouTube Video

Here’s one last video that compares a loaded One Apus to the mess the ship was in after the storm, helping to add a little more perspective to just how bad of a container collapse this was.

YouTube Video

I’ve done my best to avoid mentioning cargo insurance through this post, despite the fact that WK Webster is a cargo claims consultancy company. However, I would be remiss not to mention just how much financial loss in cargo damage this stack collapse represents. The Maritime Executive reports:

The unprecedented container collapse aboard the boxship ONE Apus could end up costing $200 million in cargo damage, according to an estimate from a claims consultant.

That is an incredible amount loss, so yeah, always get cargo insurance.

Click Here for Free Freight Rate Pricing

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Furniture Importers Can Make Big Money Over Next Few Years If They Can Solve This Problem Part 3 https://www.universalcargo.com/furniture-importers-can-make-big-money-over-next-few-years-if-they-can-solve-this-problem-part-3/ https://www.universalcargo.com/furniture-importers-can-make-big-money-over-next-few-years-if-they-can-solve-this-problem-part-3/#respond Fri, 18 Dec 2020 01:19:00 +0000 https://www.universalcargo.com/?p=10241 In Part 1 of this series, we looked at the incredible opportunity presented to furniture importers and sellers by spiking demand that is predicted to stay strong over the next few years. In Part 2, we focused in on the struggles furniture importers and sellers face with supply chain issues and risks to the long-term high demand on furniture.

Today's blog is all about solutions. We look at how businesses in the furniture and home/office furnishing industry can improve their supply chains and take advantage of the high demand opportunity that currently exists to make big money.

Unfortunately, there is no one size fits all solution for fixing a business's supply chain in the furniture industry. Supply chain methods that work for a furniture chain giant with locations all over the country wouldn't be feasible for a mom and pop antique furniture shop. Some in the business just have a small showcase location with warehousing of the actual furniture they sell elsewhere while others have giant stores they ship their inventory to and then from to their customers. Others don't even have a brick and mortar location at all, selling to customers strictly through online stores.

Each furniture business must assess its own needs when it comes to supply chain.

Go to Universal Cargo's blog to see advice that applies to any furniture business concerning its logistics as well as supply chain solutions better suited for different sizes and types of furniture sellers and importers. If you source domestically instead of internationally, don't worry – this post is for your supply chain too.

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In Part 1 of this series, we looked at the incredible opportunity presented to furniture importers and sellers by spiking demand that is predicted to stay strong over the next few years. In Part 2, we focused in on the struggles furniture importers and sellers face with supply chain issues and risks to the long-term high demand on furniture.

Supply Chain Solutions for Furniture Business

Today’s blog is all about solutions. We look at how businesses in the furniture and home/office furnishing industry can improve their supply chains and take advantage of the high demand opportunity that currently exists to make big money.

Unfortunately, there is no one size fits all solution for fixing a business’s supply chain in the furniture industry. Supply chain methods that work for a furniture chain giant with locations all over the country wouldn’t be feasible for a mom and pop antique furniture shop. Some in the business just have a small showcase location with warehousing of the actual furniture they sell elsewhere while others have giant stores they ship their inventory to and then from to their customers. Others don’t even have a brick and mortar location at all, selling to customers strictly through online stores.

Each furniture business must assess its own needs when it comes to supply chain. Below, we’ll get into advice that applies to any furniture business concerning its logistics as well as supply chain solutions better suited for different sizes and types of furniture sellers and importers. If you source domestically instead of internationally or sell a product other than furniture, don’t worry – this post is for your supply chain too.

Communicate With Suppliers About Logistics

A few years ago, I did some shopping on a phone app. I ordered some toys that I thought my kids would love that were reasonably priced. Christmas was a couple months away, so I thought this would get some of my holiday shopping done early. The problem was Christmas arrived before almost all of the toys did. Despite ordering them months before Christmas, it was more than a month after Christmas before all the presents arrived.

It’s easy to get caught up in the product and the price when sourcing goods or materials and overlook a supplier’s ability to get the product to you. Like I fell into the trap of ordering Christmas presents without looking into how long it might take for them to arrive (don’t worry, I got other presents for the kids before Christmas hit), many furniture sellers have fallen into this same trap with their inventory ordering.

It doesn’t matter how good a product is if you can’t get it when you need it. It’s important to talk to manufacturers and suppliers about their supply chains before entering into a deal with them. If they are responsible for shipping the goods to you, which they might not be, or if they are partially responsible for shipping the goods to you, there are several things you need to know:

  • How long will it take to transport the goods?
  • How many risks exist within their supply chain?
  • What methods of shipping do they use?
  • Do they handle shipping themselves or do they outsource?
  • How have they handled supply chain problems in the past?
  • Do they have contingency plans for things that go wrong in the supply chain?
  • Who is responsible for each leg of the goods’ journey from manufacturer to you, including insurance, customs fees, etc?
  • Are there extra costs and fees you’ll pay or may be charged from the delivery process of which you’re currently unaware?

Of course, you should not only speak to the other company about their supply chain but also to others who have worked with them concerning the supplier or manufacturer’s reliability. It’s also important to know that the supply chain doesn’t start with the product shipping from a manufacturer to you.

Where Does the Supply Chain Start?

If you’re ordering furniture or some other manufactured goods, the supply chain starts with the manufacturer getting the raw materials and resources needed to make the goods (and even before that with the companies that provide those). If something goes wrong with your manufacturer’s supply chain, your supply chain breaks before it even gets started.

Just like you talk to your manufacturer about how the goods get to you, talk to them about how the materials they use to manufacture the goods get to them. If your supplier manufactures wooden furniture, for example, where do they get their wood and other materials used in the construction of the furniture?

You want to make sure your suppliers are protecting their supply chains in ways like we’re going through in this blog post. If your suppliers’ material sourcing gets interrupted, your inventory gets interrupted.

Who Should Be Responsible for Shipping?

As alluded to above, your manufacturer may be responsible for getting goods to you, you may be responsible for that, or there may be some combination of the two.

You may want to leave as little of this as possible up to the manufacturer. They might just use the cheapest service they can find or cut corners, which could result in the products being damaged, getting delayed, never reaching you at all, not being properly insured, or just generally proving unreliable.

On the other hand, you may feel like your suppliers are much better qualified to handle the shipping details than you and be happy to put all of that in their hands.

Who is responsible for what in the shipping process should be clearly communicated between supplier and buyer. For international deals, there are Incoterms, which clearly define responsibilities for international shipping. We have a number of blogs plus a video series listed and embedded, respectively, below. These go through each Incoterm to help you know which one you want to use for any particular international deal:

YouTube Video

YouTube Video

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YouTube Video

These Incoterm deals define not just who is responsible for paying for the shipping of each leg of goods’ journey but who is responsible for insurance and customs costs.

Even when you decide to let the manufacturer or supplier be responsible for shipping, you want to have a conversation about their shipping and supply chain as discussed above.

If you’re sourcing domestically rather than internationally, you don’t have to worry about Incoterms, but you still want to have clear communication about who is responsible for what in the shipping process.

Know the Risks to Your Supply Chain

Risk assessment is an important part of any business. It is extremely important when it comes to supply chain to head off potential problems before they disrupt your whole business.

We’ve started to get into this already with the sections above as supply chain risks obviously start before you ever get the furniture or products (or the materials to build the furniture or products) you sell. Beyond making sure your suppliers assess and manage their risks, diversifying your suppliers greatly reduces yours.

If you have only one supplier and that supplier shuts down or is unable to get the furniture you sell to you, you’re in serious trouble. Having multiple suppliers protects you from this risk, but spreading those suppliers out geographically also mitigates risk in a big way. If all of your suppliers are near each other, something like a natural disaster or local port congestion could disrupt your sourcing from all of them.

Spreading out your suppliers but having them all within the same country also carries risk. If you had several manufacturers, but they were all in China when the trade war with China hit, the costs on all of your goods went up with the tariffs regardless of which manufacturer they came from. Imagine all your goods came from the same country, and then that country was hit with sanctions. Suddenly, you wouldn’t be able to get your products at all.

Of course, diversifying where you source your goods or materials from is only managing one of many risks, and Universal Cargo has published several posts dedicated to supply chain risk assessment. These posts include guest articles like Reasons Why Supply Chain Risk Management Is More Important Than Ever Before, 6 Small Supply Chain Issues That Can Topple Your Entire Operation, and 6 Supply Chain Management Issues That Hurt the Bottom Line.

You can read those articles to get into the importance of risk assessment and specific areas you might not have thought to examine yet, but the bottom line is to see where there are weaknesses in your supply chain and act to make those weaknesses stronger before a link breaks in your chain.

Deciding Between In-House and 3PL Logistics Solutions

There’s a choice to be made by each furniture importer and seller, and that’s whether to handle its own logistics or hire an outside company with supply chain expertise to handle these matters. If a business does decide to go with a 3rd party logistics company (3PL), more decisions have to be made about how much of their logistics they want that outside company to handle.

As a trusted freight forwarder, Universal Cargo has handled importing and exporting for furniture companies and other types of businesses for the last 35 years. Sometimes our services for a company end there, just getting their goods to a port inside the country, but other companies have us deliver all the way to their door or go further by having us handle their warehousing needs.

The easiest way for a company to improve its supply chain is to hire a well-established logistics company to put its expertise to work for them. However, some companies may find going in-house for some or all of their logistics needs is the way they want to go.

While many companies may not find hiring full-time employees with logistics experience to handle the importing and exporting of goods to be optimal or even feasible, they may find success going in-house when it comes to their last-mile logistics after importing through a freight forwarder. Earlier in this series as well as in other posts, we mention the trucker shortage problem that currently exists. A furniture seller may choose to buy their own trucks and hire their own drivers to handle deliveries to their customers so they don’t have to worry about service disruptions from trucking companies.

Each business has to assess its own capabilities and compare benefits of going in-house vs. 3PL when it comes to their supply chain. Universal Cargo has a number of blogs on the benefits 3PLs provide and how to choose freight forwarders or other logistics companies if you decide to go that route:

There’s obvious bias in suggesting you go 3PL here, but there are also obvious advantages, especially with international shipping. Utilizing the the expertise and experience of a freight forwarder like Universal Cargo over going it alone makes sure someone is handling your supply chain who has seen all the challenges supply chains encounter and knows how to navigate those problems with the most efficiency possible.

Click Here for Free Freight Rate Pricing

More To Improve Your Supply Chain

There’s more we could get into on improving your supply chain, covering issues like security and utilizing new technology. Rather than try to pack any more into today’s post, here are more posts you could read to make your supply chain more efficient and your business more profitable now and into the future:

Contract Management Best Practices for Improving Supply Chain Performance

5 Effective Ways to Handle the Complexity of a Supply Chain

How To Optimize 3 Key Areas of Business for Supply Chain Success in 2020 Pandemic

Supply Chains in the Post COVID Era

4 Lessons for Mitigating Supply Chain Disruption During a Pandemic

3 Ways for Companies that Import & Export Goods to Secure Systems

3 Tips for Creating a Branded Supply Chain to Boost Your Business

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Furniture Importers Can Make Big Money Over Next Few Years If They Can Solve This Problem Part 2 https://www.universalcargo.com/furniture-importers-can-make-big-money-over-next-few-years-if-they-can-solve-this-problem-part-2/ https://www.universalcargo.com/furniture-importers-can-make-big-money-over-next-few-years-if-they-can-solve-this-problem-part-2/#respond Tue, 15 Dec 2020 22:30:51 +0000 https://www.universalcargo.com/?p=10239 Right now, demand for furniture is soaring, but supply chain disruptions are making it difficult for furniture importers and sellers to meet that demand. Today we continue to look at this moment of both opportunity and frustration for furniture importers.

In the first part of this series, we got into what has created the demand hike for furniture and why furniture demand should continue to be strong for some time. Today, we'll get into the struggles furniture importers are facing and the risk to sustained future demand in the home (and office) furnishing market.

Check it out in Universal Cargo's blog.

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Right now, demand for furniture is soaring, but supply chain disruptions are making it difficult for furniture importers and sellers to meet that demand. Today we continue to look at this moment of both opportunity and frustration for furniture importers. Click here to read Part 1 of this series.

Cat Hears Risks for Furniture Importers

In the first part of this series, we got into what has created the demand hike for furniture and why furniture demand should continue to be strong for some time. Today, we’ll get into the struggles furniture importers are facing and the risk to sustained future demand in the home (and office) furnishing market.

JC Reindl wrote a story published by Detroit Free Press last week that encapsulates what furniture businesses are going through.

A Furniture Sellers’ Predicament

Reindl’s article gets into the struggles of Loves Furniture & Mattresses (visit here to know which is the best mattress for a heavy person) despite the current spike in furniture demand.

While the article spends a good chunk of real estate on a payment and service dispute between Loves and a sign company called Fairmont Sign Co., what most concerns us is how the article says an inventory crunch appears to be putting financial strain on the company that took over Art Van Furniture stores just last year. In fact, in the very first paragraph, the article points to pandemic-related supply chain issues as the cause for Loves struggles to pay vendors and put fresh inventory in its stores.

There could have been some poor business decisions that played a role in Loves Furniture’s struggles, as the article quotes the company’s new CEO, Mack Peters, who was brought in to turn things around as saying, “To make a long story short, we kind of got ahead of ourselves a little bit.”

Even so, many furniture companies are facing the same problems Loves faces with getting furniture (or even the raw materials for creating furniture) imported, shipped to stores, and shipped to customers.

The article spends a few paragraphs on Peters talking about leveraging his contacts in the furniture industry to speed up deliveries. He says one of Loves’ biggest suppliers normally delivers in 3-6 weeks from the placement of an order but is now saying it will take half of a year or longer. Peters says, basically, that because he has relationships and pull within the industry, he can get inventory delivery in March rather than June or July. “But still, that’s three months compared to six weeks.”

If other businesses in the furniture industry are looking at these kinds of delivery times to get inventory, they’re likely also looking at profitability struggles. And, as you probably know by now, logistic problems seem pervasive in the furniture industry.

We’ll get into ways businesses in the furniture industry can improve their supply chains in a future blog (and you can always contact Universal Cargo to help you with your importing, exporting, and even domestic shipping of furniture in the meantime), but let’s take a moment to look at the risks to the sustained furniture demand low interest rates appear to be offering.

Risk to Sustained Furniture Demand

No one can tell the future, but, in the first part of this series, we got into why demand should remain high for furniture over the next few years. The biggest reason was the central bank saying it would keep interest rates at or around zero until 2023.

While low interest rates do encourage house buying and increased spending as well, they also tend to push up inflation. As buying power of the dollar shrinks, spending tends to suffer. If inflation increases too much, the fed could quickly change its mind on maintaining those low interest rates, which would dampen the housing market and, thus, the furniture market. Plus, how often do we trust those running the government to actually keep their word? Because the fed says it’ll keep rates ultra low until 2023 does not necessarily make it so.

Polarized politics, drastic gaps in costs of living between states, and regulations pushing businesses out of certain states will certainly remain driving forces for people to move from one state to another in large numbers. That certainly helps keep demand up on house and furniture buying. However, a new Biden administration could create serious changes to the overall U.S. economy that could dampen the furniture industry some.

President Trump’s policies of lowered taxes and deregulation resulted in more jobs, higher median income, and a very strong economy. Under President Biden, increased taxes and increased regulation could have the opposite effect on the economy. Additionally, more than doubling the minimum wage, as President-elect Biden is for, risks inflation and increased unemployment, as these things have come with increasing minimum wage in the past.

Those would be negative factors for demand on housing and furniture. And let’s not forget businesses account for a good portion of furniture buying, which would also lessen with a dampened economy.

Additionally, we still have not fully felt the effects of the shutdowns as they have been mitigated by government stimulus. As a vaccine is now being distributed, and the world prepares to move past living in fear of COVID-19, how many businesses will never reopen? How many jobs permanently lost? How much toll will the economy feel?

All these risks have the potential to decrease spending in markets across the U.S., including the furniture market. However, let’s not leave this section on a sour note.

Even with the risks of the incredibly high demand the furniture industry currently sees coming to an end, there is always going to be a market for furniture. People always need a place to live and work, and furniture plays a role in that. Despite risks of demand falling from its current height, optimism is still high for the industry’s demand in the upcoming few years. Furniture businesses need to make sure they have the right logistics in place to meet those demands.

Supply Chain Solutions in Part 3

Come back for the third part of Universal Cargo’s series on furniture importers’ opportunity and challenge where we’ll get into how furniture importers can strengthen their supply chains.

Click Here for Free Freight Rate Pricing

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Furniture Importers Can Make Big Money Over Next Few Years If They Can Solve This Problem Part 1 https://www.universalcargo.com/furniture-importers-can-make-big-money-over-next-few-years-if-they-can-solve-this-problem/ https://www.universalcargo.com/furniture-importers-can-make-big-money-over-next-few-years-if-they-can-solve-this-problem/#respond Thu, 10 Dec 2020 22:13:28 +0000 https://www.universalcargo.com/?p=10238 Furniture demand shot up in 2020, and the increase in demand does not look like a momentary spike ready to plummet. Demand for furniture should continue to be high for the next few years.

While most would probably call 2020 a bad year, Universal Cargo has already blogged about how it turned out to be a great year for ocean freight carriers' profitability. Similarly, 2020 has set furniture importers and sellers – the whole home furnishing industry, really – up for big profits. But there's a big if to go with that. Home furnishing companies can make big money over the next few years if they get past supply chain issues plaguing the industry.

Many companies that import furniture, something Universal Cargo has helped businesses do for the last 35 years, are taking advantage of the increased demand for their goods while others are struggling to take advantage of the opportunity because of supply chain problems.

The furniture industry already suffered from supply chain issues before 2020 with things like trucker shortages, sourcing reliability, and carrier irregularity on pricing and capacity. When the pandemic hit, it exacerbated supply chain problems with plenty of disruptions bottlenecking the flow of goods. All this, while consumers' expectations of immediate gratification on furniture orders never seems to relent.

Keep reading in Universal Cargo's blog.

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Furniture demand shot up in 2020, and the increase in demand does not look like a momentary spike ready to plummet. Demand for furniture should continue to be high for the next few years.

Opportunity for furniture importers

While most would probably call 2020 a bad year, Universal Cargo has already blogged about how it turned out to be a great year for ocean freight carriers’ profitability. Similarly, 2020 has set furniture importers and sellers – the whole home furnishing industry, really – up for big profits. But there’s a big if to go with that. Home furnishing companies can make big money over the next few years if they get past supply chain issues plaguing the industry.

Many companies that import furniture, something Universal Cargo has helped businesses do for the last 35 years, are taking advantage of the increased demand for their goods while others are struggling to take advantage of the opportunity because of supply chain problems.

The furniture industry already suffered from supply chain issues before 2020 with things like trucker shortages, sourcing reliability, and carrier irregularity on pricing and capacity. When the pandemic hit, it exacerbated supply chain problems with plenty of disruptions bottlenecking the flow of goods. All this, while consumers’ expectations of immediate gratification on furniture orders never seem to relent.

Lockdowns Start the Increase in Furniture Demand

It would be easy to see the surge in furniture demand as a short-term thing while people are stuck at home because of lockdowns during the pandemic. Shutdowns have certainly increased demand in a number of ways:

  • Schools being closed has forced kids into a virtual classroom at home. To accommodate this, parents have bought furniture and house accessories like shelving units to make things comfortable and organized for their children. I myself bought a shelving unit to create cubbies to help my kids keep their work and school supplies organized.
  • Businesses also have been forced to shut their doors, sending employees to work from home. Furniture spending on home offices has been a big boon for the home furnishing industry as well.
  • Spending so much more time at home, in general, has caused people to spend money on home improvement, including furniture buying just to make the home more comfortable and pleasant. Money that would normally go into things like going out or vacationing has been used in this way.

All of the above things do sound momentary. Lockdowns and extreme social distancing won’t last forever, and once enough people have set up their home offices, virtual school spaces, and invested in making their places more homey, that demand should settle back down, right? Well, there’s another big factor increasing demand for home furnishings: buying homes.

Home Buying Should Keep Furniture Demand Strong

In response to the pandemic, the Federal Reserve dropped interest rates basically to nothing. This is big for house buying. It takes mortgages way down for new buyers, increasing the number of people buying homes. Of course, with house buying comes furniture and home furnishings buying. What’s more, Jacob Passy reports in a MarketWatch article, “The central bank said it will keep interest rates at or around zero until the end of 2023 most likely.”

To go along with cheaper mortgages, there are things happening like the exodus of California and other states like New York, New Jersey, Illinois, and more where state regulations are pushing out businesses, and people are moving to other states where they can afford to buy homes and their money goes further. In 2019, before the pandemic even hit, 653,551 Californians moved away from the state. Since the pandemic hit, California’s government has taken the opportunity to take more control and add more regulation, sometimes arbitrarily, to the businesses and people of the state. Things like Governor Newsom’s extreme regulatory orders, which he’s been caught ignoring himself, add to dissatisfaction many feel with how the state is run, and will likely make the state’s exodus grow. Similarities can be seen in other states, including the ones mentioned above.

Ultimately, that means demand furniture and home furnishing buying should continue to be exceptionally strong through the next few years, but there are risks to the low interest rates. We’ll get into those risks as we continue to look at furniture importing opportunity and related supply chain issues in Part 2 of this series.

In the meantime, Universal Cargo is here to help you with your importing, exporting, and even domestic shipping needs.

Click Here for Free Freight Rate Pricing

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Could Transpacific Shipping Market Stay Strong Through the Slow Season? https://www.universalcargo.com/could-transpacific-shipping-market-stay-strong-through-the-slow-season/ https://www.universalcargo.com/could-transpacific-shipping-market-stay-strong-through-the-slow-season/#respond Wed, 09 Dec 2020 00:35:25 +0000 https://www.universalcargo.com/?p=10236 Click Here for Free Freight Rate Pricing

2020 hasn't just seen a strong peak season for the international shipping industry, it has seen a shipping boom, particularly in Asia to U.S. shipping. This transpacific shipping boom is expected to continue well into 2021, until at least March or beyond, according to a Greg Miller penned American Shipper article, which quoted industry experts on the topic:

The trans-Pacific cargo wave should last “at least until Chinese New Year,” SeaIntelligence Consulting CEO Lars Jensen told FreightWaves.

...

According to Damien McClean, CEO of SIA Flexitanks, “I expect it [trans-Pacific demand] will be crazy all the way until March, after Chinese Lunar New Year.”

Read more by checking out the full post in Universal Cargo's blog.

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It’s the time of year when international shipping tends to slow down. However, international shipping, especially on transpacific routes, is not slowing down. In fact, it appears to be speeding up. Universal Cargo’s final shipment numbers for November topped October’s, and December looks like its shipment count could end up higher still, but more on that later.

International Shipping Cargo Ship Freight Forwarder

2020 hasn’t just seen a strong peak season for the international shipping industry, it has seen a shipping boom, particularly in Asia to U.S. shipping. This transpacific shipping boom is expected to continue well into 2021, until at least March or beyond, according to a Greg Miller penned American Shipper article, which quoted industry experts on the topic:

The trans-Pacific cargo wave should last “at least until Chinese New Year,” SeaIntelligence Consulting CEO Lars Jensen told FreightWaves.

According to Damien McClean, CEO of SIA Flexitanks, “I expect it [trans-Pacific demand] will be crazy all the way until March, after Chinese Lunar New Year.”

2020 Shipping Vs. a Typical Year & UC’s Shipping Barometer

Early in 2020, and even as the midpoint of the year approached, there were predictions – yes, from industry professionals and analysts – that there would be no peak season in 2020. I went against the grain and predicted we would see a 2020 peak season. However, it turned out to be much stronger than I expected. Still, when international shipping experts changed their tunes and predicted the shipping market’s volume to increase through the last few months of the year, I was skeptical.

I didn’t think October would match or outpace September nor that demand would be able to maintain October’s strength in November and December. October was exceptionally strong, though volume came down a little from September. Surely, December would come down at least a little more. However, looking at Universal Cargo’s scheduled shipments as a barometer for the industry, December is every bit as strong as November. Currently, Universal Cargo has more shipments with December ETAs than November’s final shipment count. Inevitably, some of those shipments initially filed with end-of-the-month December ETAs will end up as early January shipments, but probably not enough for December’s total to fall below November’s.

The biggest months of international shipping’s peak season are usually August and September as shippers import heavily, preparing for the big holiday shopping seasons. It’s not uncommon for peak season to really start picking up in July. A strong peak season will continue on through October and even into early November. For ocean freight, December is not part of the peak season. It’s too late. However, in an exceptional year, December could still have healthy volume with some carryover from the peak season. Really, November and early December are the peak season for air freight rather than ocean freight because of how much faster goods can be shipped by air. For transpacific freight to be performing this well, it must go beyond peak season shipping.

What’s Causing the Transpacific Shipping Boom

Like with everything it seems in 2020, the finger has to be pointed at COVID-19 for the transpacific shipping boom. Of course, it’s only part of the puzzle, but it is a very large piece.

We’ve talked about it before, but lockdowns in response to the pandemic have had an enormous impact on shipping this year. People being stuck in their homes has increased online shopping. Money that would be spent on services and going out created more spending on buying things, especially things for the home. Universal Cargo has many clients in the furniture industry – importing furniture is a specialty of Universal Cargo’s – and the lockdowns have resulted in increased sales for many in that industry as people make themselves more comfortable in their homes that they’re spending much more time in than normal.

Of course, there are factors that play into increased shopping and, therefore, shipping. The U.S. economy was incredibly strong before the pandemic hit. Unemployment was way down, and income was up. It was historically up in 2019, according to a Wall Street Journal article by Stephen Moore:

Real median household income—the amount earned by those in the very middle—hit $65,084 (in 2019 dollars) for the 12 months ending in July. That’s the highest level ever and a gain of $4,144, or 6.8%, since Mr. Trump took office.

After the pandemic hit, technology allowed a great many people to keep working despite shutdowns, and a stimulus package added money to the pockets of both people able to keep working and those who weren’t.

All of the above factors have been keeping people spending and container ships very busy.

The question is whether or not this can be maintained. The experts at the top of this post point to yes. SeaIntelligence Consulting CEO Lars Jensen says it will until at least February, when the Chinese Lunar New Year hits, and Damien McClean, CEO of SIA Flexitanks says until March. “And it doesn’t necessarily have to end in March,” Greg Miller wrote in the article.

Eventually, however, this shipping boom does have to end.

Lockdowns are going back into effect in many places, so we’re certainly not done with spending on goods replacing spending on services. However, can the government manage to dole out more stimulus packages in the trillions of dollars? How many businesses and jobs will be lost to the latest round of shutdowns? How much do those things slow the spending? How will a vaccine play into the picture? Will changes in economic policies stymie the economy?

What we do know is right now the international shipping market remains strong and isn’t showing signs of slowing down yet. That means freight rates remain high. This will be something to watch as we’re entering what would normally be the slow season for international shipping as a new year hits. There’s often a little surge in January to beat the Chinese New Year shutdowns, but we could see much more than that little surge all through the traditionally slow months.

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Over 1900 Containers Could Be Lost or Damaged in Storm https://www.universalcargo.com/over-1900-containers-could-be-lost-or-damaged-in-storm/ https://www.universalcargo.com/over-1900-containers-could-be-lost-or-damaged-in-storm/#respond Thu, 03 Dec 2020 23:21:34 +0000 https://www.universalcargo.com/?p=10234 On Monday night, a violent storm hit an Ocean Network Express (ONE) containership on its way to the Port of Long Beach. A large number of shipping containers were lost overboard. Others were damaged. According to ONE, over 1,900 containers could have been lost or damaged. Of those, 40 are believed to be dangerous goods containers.

According to an American Shipper article by Kim Link-Wills that staggering number of shipping containers lost or damaged is "more than the average number of containers lost in an entire year from all vessels around the globe." Later in the article, Link-Wills puts that further into perspective by providing from the World Shipping Council data that between 2008 and 2019 only an average of 1,382 containers were lost at sea per year.

Find out all about it by reading the post in Universal Cargo's blog.

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ONE Apus image by kees torn of Flickr

On Monday night, a violent storm hit an Ocean Network Express (ONE) containership on its way to the Port of Long Beach. A large number of shipping containers were lost overboard. Others were damaged. According to ONE, over 1,900 containers could have been lost or damaged. Of those, 40 are believed to be dangerous goods containers.

According to an American Shipper article by Kim Link-Wills that staggering number of shipping containers lost or damaged is “more than the average number of containers lost in an entire year from all vessels around the globe.” Later in the article, Link-Wills puts that further into perspective by providing from the World Shipping Council data that between 2008 and 2019 only an average of 1,382 containers were lost at sea per year.

ONE’s Press Releases

There are two statements ONE released about the incident. The first statement reports that CV ONE Apus lost a significant number of containers when severe weather caused it to roll heavily. Here’s that full but brief statement:

Statement 1 – 1st December 2020

NYK Shipmanagement Pte Ltd as managers of the container vessel ONE Apus (IMO# 9806079) regret to report that a significant number of shipping containers were lost overboard during severe weather on the night of Monday 30th November 2020 at 2315LT approximately 1600NM North West of Hawaii, USA.

The vessel was en-route from Yantian, China to Long Beach, USA when it encountered a storm cell producing gale-force winds and large swells which caused the ONE Apus to roll heavily resulting in the containers to dislodge and fall into the ocean. The Master diverted the vessel to ensure the ongoing safety of the crew and ship until conditions eased.

A notification was sent to the USCG in Honolulu and NYK Shipmanagement is coordinating with stakeholders to find a port of refuge for the vessel to assess any damages and determine the numbers of containers lost.

A full investigation will be conducted into this incident in conjunction with the Flag State and the relevant maritime authorities.

More information will be provided as it becomes available.

The second statement from ONE revealed more information, giving the estimate of over 1,900 containers lost or damaged. Here’s the full text of that release:

Statement 2 – 2nd December 2020

Chidori Ship Holding LLC as owners and NYK Shipmanagement Pte Ltd as managers of the container vessel ONE Apus (IMO# 9806079) report that the ship is now proceeding in a westerly direction towards Japan with plans to seek a suitable port to right unstable containers, assess any damages and determine the exact numbers of containers lost after encountering severe weather on the night of Monday, November 30 2020.

The vessel was on passage from Yantian, China to Long Beach, USA approximately 1600NM North West of Hawaii, when it encountered a violent storm cell producing gale-force winds and large swells which caused the ONE Apus to roll heavily resulting in the dislodging of the lost containers.

A notification was sent to the JRCC in Honolulu and Guam with maritime navigational warnings subsequently broadcast.

Early investigations onboard the ONE Apus have determined that the impacted container bays remain unsafe for close-quarter inspections; however, it is estimated that the number of lost or damaged units could exceed 1,900, of which some 40 are believed to be DG containers.

Our focus remains on getting the ship to a safe port to ensure the ongoing safety of the crew, the vessel and the cargo on board.

A full investigation will be conducted into this incident in conjunction with the Flag State and the relevant maritime authorities.

More information will be provided as it becomes available.

Investigation

Shippers whose goods were on the ship but in containers that were not damaged will obviously experience significant delays in the arrival of their imports. It will probably be a while before it can be sorted out whose containers of goods were lost, whose were damaged, and whose survived the storm unharmed. Any goods onboard being imported as a last push for the holiday almost certainly will not make it in time for Christmas.

Investigations will have to look into whether the containers onboard the CV ONE Apus were properly lashed and secured. While putting the amount of loss from this incident into perspective, Link-Wills pointed out one of this year’s highest profile cases of shipping containers lost at sea: the APL England off the coast of Australia. In that case, with only 50 containers lost, “the master of the container ship was charged in Australia for not ensuring the vessel was operated in a manner to prevent pollution of the marine environment.”

Shipping and Freight Resource posted an article after the APL England was released after undergoing investigation, sharing the following findings:

… that the lashing arrangement for the cargo was inadequate and that some of the securing points for containers on deck were heavily corroded which cause the stack collapse and loss of containers at sea.

These findings were found to be in breach of the requirements of SOLAS (The International Convention for the Safety of Life at Seas) necessitating the detention of the ship in the Port of Brisbane till the serious deficiencies were fixed by the ship’s owner APL and the vessel operator.

It was May 24th when the APL England hit troubled seas, May 26th when it was detained, and June 19th when it was finally released.

While not quite a megaship, which has come to refer to ships of 18,000 twenty-foot equivalent units (TEU) or more in capacity, the ONE Apus is a much larger container vessel than the APL England. The APL England has a capacity of 5,780 TEU according to Shipping and Freight Resource while the ONE Apus has a capacity of 14,052 TEU. Inspecting and investigating, as a result, could take longer for the ONE Apus than it did for the APL England, especially with container bays remaining unsafe for closeup inspections as ONE shared in its second statement.

Increased Risk in International Shipping

While twenty and forty foot shipping containers are the most popular, the ONE Apus must have also been carrying a great deal of eight and/or ten foot containers in order to exceed 1,900 boxes lost or damaged. The increase in online shopping in 2020 as well as the container shortage problem the industry has been experiencing likely has resulted in an increase of smaller shipping containers used this year. It would be interesting and probably a wise idea to see risk analysis done on that.

Because of the trends of larger container ships and carrier alliances, risk for large scale loss, damage, and delay in international shipping has significantly increased in recent years. It is more difficult for shippers to diversify the ships their goods are traveling on and one incident can result in the loss of massive shipping containers, as has happened here, that are from several different carriers.

ONE is actually a joint venture of three global ocean freight carriers – NYK, K Line, and Yang Ming – which operates within the THE Alliance. Thus shipping containers on the ONE Apus could include boxes from any of those three carriers or other carriers in the THE Alliance such as Hapag-Lloyd or MOL.

Link-Wills’ article included some of the top companies at risk of suffering loss because they shipped through ONE, but these are just the tip of the iceberg:

Henry Byers, FreightWaves’ maritime market expert, said the top importers using ONE as their ocean carrier into Long Beach the past 30 days were Flexport International, MOL Consolidation, Topocean Consolidation, UPS Ocean Freight Services, DHL Global Forwarding, Kuehne + Nagel and C.H. Robinson. Other ONE customers through Long Beach include Penguin Random House, Wilson Sporting Goods and Hasbro.

Events like this also serve as a reminder of why cargo insurance is so important when importing or exporting goods.

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FMC Ups Reporting Requirements on Carrier Alliances https://www.universalcargo.com/fmc-ups-reporting-requirements-on-carrier-alliances/ https://www.universalcargo.com/fmc-ups-reporting-requirements-on-carrier-alliances/#respond Tue, 01 Dec 2020 21:29:38 +0000 https://www.universalcargo.com/?p=10230 The Federal Maritime Commission (FMC) is increasing how often ocean freight carriers from the three major alliances that dominate global shipping must file trade data. Shipping lines from these global carrier alliances used to have to submit data, which the FMC analyzes to "determine trends in the marketplace and the potential for illegal behavior" from carriers, on a quarterly basis. Now carriers from the three major carrier alliances will have to file required trade data every month.

That "determine... the potential for illegal behavior" part is why this is important for shippers.

This year especially, but certainly not exclusively, shippers have been complaining about unfair practices from ocean freight carriers. Complaints against carriers include service declining while carriers dramatically increased freight rates, cancelling hundreds of sailings among other means of reducing capacity well below what market demand required, imposing unfair demurrage fees for situations beyond shippers' control, forcing shippers to pay no-roll premiums to keep shipments from being rolled over to later sailings, and flat out profiteering off of the pandemic.

Just last week, we dedicated a blog post to an additional complaint, that of carriers withholding containers from U.S. exporters – U.S. agricultural exporters in particular. Right in the title we asked if what carriers are doing to U.S. agricultural exporters is illegal.

The FMC seems to be taking more interest in investigating whether the practices of carriers, especially within the alliances they've formed, are illegal. To find out more, read the full post in Universal Cargo's blog.

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The Federal Maritime Commission (FMC) is increasing how often ocean freight carriers from the three major alliances that dominate global shipping must file trade data. Shipping lines from these global carrier alliances used to have to submit data, which the FMC analyzes to “determine trends in the marketplace and the potential for illegal behavior” from carriers, on a quarterly basis. Now carriers from the three major carrier alliances will have to file required trade data every month.

That “determine… the potential for illegal behavior” part is why this is important for shippers.

This year especially, but certainly not exclusively, shippers have been complaining about unfair practices from ocean freight carriers. Complaints against carriers include service declining while carriers dramatically increased freight rates, cancelling hundreds of sailings among other means of reducing capacity well below what market demand required, imposing unfair demurrage fees for situations beyond shippers’ control, forcing shippers to pay no-roll premiums to keep shipments from being rolled over to later sailings, and flat out profiteering off of the pandemic.

Just last week, we dedicated a blog post to an additional complaint, that of carriers withholding containers from U.S. exporters – U.S. agricultural exporters in particular. Right in the title we asked if what carriers are doing to U.S. agricultural exporters is illegal.

The FMC seems to be taking more interest in investigating whether the practices of carriers, especially within the alliances they’ve formed, are illegal. Perhaps 2020’s uptick in complaints against carriers is causing the FMC to increase its investigations into carriers. Perhaps it’s caused by how the carrier alliances flexed their muscles to control capacity and increase freight rates even during a time of decreased demand this year when pandemic-caused lockdowns should have caused downward pressure on freight rates in a naturally behaving market.

I’ve long warned in this blog that these carrier alliances shrink competition in the international shipping industry and would likely be bad for shippers in the long run. I watched carefully as competition shrunk in the industry with mergers, buyouts, bankruptcy, and especially alliances, sharing about it in Universal Cargo’s blog and creating Universal Cargo’s Carrier Craziness Bracket as competition shrinkage spiraled out of control.

Carrier Craziness Bracket
Universal Cargo’s Carrier Craziness Bracket, showing the crazy alliances, mergers, and bankruptcy in ocean freight shipping.

In 2016, before the carrier alliances made it all the way down to just three alliances dominating shipping, I even called for regulators to rethink their stance on carrier alliances. Instead, regulators continued to allow massive alliances until we ended up where we are now with ocean shipping dominated by the 2M, THE, and OCEAN alliances. Even within the THE Alliance, competition shrunk more as the three big Japanese ocean freight carriers – NYK, K Line, and Yang Ming – joined forces to form the joint venture Ocean Network Express (ONE).

At least the FMC is recognizing how dominant the 2M, THE, and OCEAN alliances are. While, in its press release about increasing these three carrier alliances’ data filing requirements, the FMC says there are over 300 cooperative agreements filed with the commission, it does state, “These three agreements have the greatest potential to cause or facilitate adverse market effects based on the agreement’s authority and geographic scope in combination with underlying market conditions.”

Still, increasing scrutiny on the alliances is not the same as actually taking action against practices. We’ve seen enough press releases about FMC investigations, concerning demurrage in particular, without follow-up action to know that. The FMC does quote Chairman Khouri as saying the commission will go to federal court to stop further operation of an alliance agreement, if necessary. But he said they would talk directly with the carriers about Shipping Act violations first. And we’ve heard this from the FMC before. Still, making these carriers, which infamously lack transparency, report data monthly instead of quarterly is a step in the right direction.

Here is the complete text of the FMC’s press release:

Federal Maritime Commission Increases Global Alliances’ Information Monitoring Report Requirements

Posted November 25, 2020

Pursuant to direction from FMC Chairman Michael Khouri, the Commission has issued letters to the three global carrier alliances (2M, THE, and OCEAN) requiring that certain carrier-specific trade data currently filed with the Commission quarterly, must now be submitted on a monthly basis.

The Commission’s Bureau of Trade Analysis (BTA) has traditionally relied on a combination of individual vessel operator confidentially provided data and information from commercially available industry data to monitor and analyze container carrier freight rates and service market trends. The Commission’s BTA has determined that given recent fluctuations in the markets, they need to receive key trade data directly from alliance carriers on a more frequent basis in order to better position staff economists to timely evaluate changes in the transpacific and transatlantic trades and report findings to the Commission.

A core function of the FMC is the monitoring of ocean carrier alliance agreements filed with the agency. The FMC receives and evaluates exhaustive, commercially sensitive information from regulated entities, in this case, parties to an ocean carrier alliance agreement. That information is carefully analyzed, along with other information that permits FMC staff to determine trends in the marketplace and the potential for illegal behavior.

The FMC’s section 6(g) (46 U.S.C. 41307) review and oversight responsibility for filed agreements is ongoing and continues after a filed agreement has gone into effect. The FMC prioritizes its continuous monitoring of the 300 plus cooperative agreements currently filed with the Commission. The three major global carrier alliances are the top priority and receive the highest scrutiny. These three agreements have the greatest potential to cause or facilitate adverse market effects based on the agreement’s authority and geographic scope in combination with underlying market conditions. On an ongoing basis, the FMC monitors key economic indicators and changes to underlying market conditions for all global alliance agreements to detect any joint activity by agreement members that might raise and maintain freight rates above competitive levels, or unreasonably decrease services. For these agreements, FMC staff conducts more detailed reviews, and periodically presents current findings and recommendations to the Commission.

Chairman Khouri stated, “If we detect any indication of carrier behavior that may violate the Shipping Act’s section 6(g) competition standard, we will immediately seek to address these concerns with direct carrier discussions. If necessary, the FMC will go to federal court to seek an injunction to enjoin further operation of the alliance agreement.”

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Is What Carriers Are Doing to U.S. Agricultural Exporters Illegal? https://www.universalcargo.com/is-what-carriers-are-doing-to-u-s-agricultural-exporters-illegal/ https://www.universalcargo.com/is-what-carriers-are-doing-to-u-s-agricultural-exporters-illegal/#respond Tue, 24 Nov 2020 23:35:13 +0000 https://www.universalcargo.com/?p=10226 U.S. agricultural exporters are getting screwed.

All the international shipping attention in the U.S. seems focused on importing rather than exporting. International shipping news sources, when talking about transpacific shipping, are almost always concentrated on eastbound shipments from Asia to the U.S. East Coast (USEC) and West Coast (USWC) rather than the other way around. Westbound freight rates from USWC to Asia, or any other U.S. export rates, are almost never even mentioned. Even in this blog, I write a great deal more about importing from China than exporting to Asia.

In the middle of this, U.S. agricultural exports, which were valued at $135.5 billion in 2019 according to Statistica, are being ignored. U.S. agricultural exports are not just ignored by the media, which doesn't really matter that much, but they're undervalued by shipping lines. Ocean freight carriers' failure to prioritize U.S. agricultural exports does matter. Immensely.

Find out all about what carriers are doing to U.S. exporters, investigation into it, and more by reading the full post in Universal Cargo's blog.

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U.S. agricultural exporters are getting screwed.

All the international shipping attention in the U.S. seems focused on importing rather than exporting. International shipping news sources, when talking about transpacific shipping, are almost always concentrated on eastbound shipments from Asia to the U.S. East Coast (USEC) and West Coast (USWC) rather than the other way around. Westbound freight rates from USWC to Asia, or any other U.S. export rates, are almost never even mentioned. Even in this blog, I write a great deal more about importing from China than exporting to Asia.

In the middle of this, U.S. agricultural exports, which were valued at $135.5 billion in 2019 according to Statistica, are being ignored. U.S. agricultural exports are not just ignored by the media, which doesn’t really matter that much, but they’re undervalued by shipping lines. Ocean freight carriers’ failure to prioritize U.S. agricultural exports does matter. Immensely.

With the COVID-19 pandemic, this year in particular has made it clear that carriers prioritize cargo coming from Asia to the U.S. over agricultural goods and other exports from farmers and U.S. shippers going to other countries. As the novel coronavirus spread from Wuhan, China to the rest of the world, carriers blank sailed (canceled) hundreds of sailings in anticipation of plummeting demand due to countries like the U.S. shutting down businesses in an attempt to slow the spread of the virus. The ocean freight carriers overcompensated, dropping capacity supply well below demand for moving cargo. The result was not only soaring freight rates but also a shipping container shortage, especially in Asia.

Carriers Withhold Containers From Exporters

Man Looking Up at Shipping Containers

The container shortage has caused carriers to rush into repositioning containers, shipping hundreds of thousands of empty containers back to Asia, withholding them from exporters, like those in the agricultural industry, who need to put their goods in those outbound containers.

Last month, Hapag-Lloyd went so far as to announce suspension of overseas agricultural exports from North America. In a Journal of Commerce (JOC) article by Bill Mongelluzzo on the topic at the time, Mongelluzzo alluded to how the restricting of U.S. exports to get empty containers back to Asia was spreading:

Peter Friedmann, executive director of the Agriculture Transportation Coalition, said many exporters, including hay, resin, and forest product shippers, are already seeing other carriers restrict their export liftings. However, he said he has not seen any formal announcements from carriers other than Hapag-Lloyd.

FMC Investigating Carrier Practices Against Exporters

Complaints against carriers from U.S. exporters, especially those within the agricultural industry, continue to mount, and the Federal Maritime Commission (FMC) has taken notice. Costas Paris wrote about it in a Wall Street Journal article on Friday (November 20th):

The U.S. maritime regulator will investigate whether shipping lines are impairing the ability of American farmers to reach foreign markets by holding back empty containers needed to export goods.

The Federal Maritime Commission said in a statement Friday that it would investigate actions by ocean carriers at the ports of Los Angeles, Long Beach and New York, as a crush of imports has triggered bottlenecks at the country’s biggest export gateways and buffeted inbound and outbound supply chains.

However, the FMC statement Paris writes about does not specifically mention farmers, agricultural exports, or the withholding of empty containers from U.S. exporters. To be fair, the statement was short, and export containers did at least get a mention when listing potentially unreasonable practices.

The potentially unreasonable practices of carriers and marine terminals regarding container return, export containers, and demurrage and detention charges in the Ports of Los Angeles, Long Beach, and New York/New Jersey present a serious risk to the ability of the United States to handle trade growth.

The practices on which the FMC has been focusing investigation are ones U.S. importers have been complaining about during the pandemic: unfair demurrage and detention fees. Concerns of exporters, though not explicitly defined, finally seem to have been added to the investigation last Thursday (November 19th) with a Supplemental Order expanding Commissioner Rebecca F. Dye’s authority “to investigate ocean carriers operating in alliances and calling the Port of Long Beach, the Port of Los Angeles, or the Port of New York and New Jersey.”

The Supplemental Order lists the type of practices or regulations from carriers that may be in violation of the Shipping Act as follows:

This includes, but is not limited to, practices and regulations related to demurrage and detention, empty container return in light of 46 C.F.R. § 545.5, and practices related to the carriage of U.S. exports.

Hopefully, withholding containers from exporters to send them back empty will not just be an afterthought in the FMC’s investigation.

Carriers File Rate Hikes on U.S. Agricultural Exports

agricultural export

Carriers prioritize Asia-U.S. shipments over U.S.-Asia shipments because they make much more money on them. Eastbound transpacific freight rates are several times more expensive than westbound transpacific freight rates. A large factor in this is agricultural goods, dominating U.S.-Asia shipments, have a much lower market value than the manufactured goods that dominate Asia-U.S. shipping.

To shrink this gap, but perhaps feeling to exporters like adding insult to injury, carriers filed rate increases on U.S. agricultural exports to Asia. At the beginning of the month, Bill Mongelluzzo reported in the Journal of Commerce (JOC):

US agriculture exporters are finding it harder to secure equipment as peak season nears, and now they face steeper all-inclusive costs for shipments to Asian customers, with little hope that new general rate increases (GRIs) of $100 to up to $1,000 per container will make equipment more available.

Spot rates in the eastbound trans-Pacific will still be at least four or five times higher than the westbound rates even with the GRIs, so carriers will still prefer to ship empty containers back to Asia as quickly as possible to be refilled with US imports, rather than delaying the return of the containers for weeks to haul low-paying agricultural exports to Asia.

Increased freight rates certainly do not guarantee better service from carriers. In fact, all year as freight rates have climbed and climb, service and reliability from carriers have declined. On top of that, such large cost increases could be catastrophic for agricultural exporters. It’s broken down as follows in Mongelluzzo’s article:

Agricultural representatives said that if carriers implement a $1,000 per-FEU GRI to make it worth their while to reposition empty containers in the interior, that could increase the transportation cost so high that it drives exporters out of the international marketplace.

“They can’t absorb a $1,000 increase,” Friedmann said.

And if agricultural exporters cannot serve the markets they have worked hard to develop — either because freight rates are too high or they can’t secure the equipment they need — they could lose those customers for future business when the market returns to normal, Steenhoek said.

For the long-term health of the agricultural sector, carriers need to stop screwing over U.S. agricultural exporters.

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Freight Rates, Volume, & Shutdowns https://www.universalcargo.com/freight-rates-volume-shutdowns/ https://www.universalcargo.com/freight-rates-volume-shutdowns/#respond Thu, 19 Nov 2020 23:34:40 +0000 https://www.universalcargo.com/?p=10216 Headlines about soaring freight rates are still prevalent in international shipping. In fact, just yesterday (November 18th), Marine Link published an article by Roslan Khasawneh called Container Freight Rates Soar. The article highlights data from the Freightos Baltic Global Container Index (FBX), reporting "a weighted average of 12 major global container routes rose to $2,359 per forty-foot equivalent (FEU) container this week, the highest on record and up 30% since July 1."

I've been writing posts in Universal Cargo's blog since before Freightos even existed (Freightos was founded in 2012), so I'm not sure how far back the FBX goes, but still, the record is significant in showing how strong the international shipping market is in general right now. Freight rates around the world, on average, are still rising. Transpacific rates from China to the U.S. are, and I'm sure this doesn't surprise anyone, even higher than the average.

Khasawneh points out that the 40 TEU container freight rate from China to the U.S. West Coast (USWC) is up 50% since July 1st. The China to USWC index freight rate number Khasawneh reported is very similar to what we saw earlier this month when we were examining freight rates and volume behavior. Khasawneh, using Freightos data, reports $3,878 per container from China to USWC right now compared to the Shanghai Containerized Freight Index (SCFI) showing $3,871 per container from China to USWC at the beginning of the month.

China to USWC rates have remained pretty stable like this since we hit October. These rates are down from record amounts surpassing $4,000 that the industry saw by the end of September. However, China to U.S. East Coast (USEC) have actually risen to a new record this week, according to the Marine Link article:

"The cost to ship a container from China to the U.S. East Coast, a key global retail market, topped $4,750 this week, up 42% since July and a new record, according to Freightos data in Refinitiv Eikon."

Read the rest of the post in Universal Cargo's blog to see how cargo volume is playing into this and how lockdowns factor in.

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High Freight Rates

Headlines about soaring freight rates are still prevalent in international shipping. In fact, just yesterday (November 18th), Marine Link published an article by Roslan Khasawneh called Container Freight Rates Soar. The article highlights data from the Freightos Baltic Global Container Index (FBX), reporting “a weighted average of 12 major global container routes rose to $2,359 per forty-foot equivalent (FEU) container this week, the highest on record and up 30% since July 1.”

Global Digital Platform for shipping from Maersk & IBM

I’ve been writing posts in Universal Cargo’s blog since before Freightos even existed (Freightos was founded in 2012), so I’m not sure how far back the FBX goes, but still, the record is significant in showing how strong the international shipping market is in general right now. Freight rates around the world, on average, are still rising. Transpacific rates from China to the U.S. are, and I’m sure this doesn’t surprise anyone, even higher than the average.

Khasawneh points out that the 40 TEU container freight rate from China to the U.S. West Coast (USWC) is up 50% since July 1st. The China to USWC index freight rate number Khasawneh reported is very similar to what we saw earlier this month when we were examining freight rates and volume behavior. Khasawneh, using Freightos data, reports $3,878 per container from China to USWC right now compared to the Shanghai Containerized Freight Index (SCFI) showing $3,871 per container from China to USWC at the beginning of the month.

China to USWC rates have remained pretty stable like this since we hit October. These rates are down from record amounts surpassing $4,000 that the industry saw by the end of September. However, China to U.S. East Coast (USEC) have actually risen to a new record this week, according to the Marine Link article:

The cost to ship a container from China to the U.S. East Coast, a key global retail market, topped $4,750 this week, up 42% since July and a new record, according to Freightos data in Refinitiv Eikon.

High Cargo Volume

The drop we’ve been hoping to see in freight rates hasn’t come yet. Playing into the still high freight rates is the fact demand remains high for Asia to U.S. shipping. Volume was projected by the National Retail Federation (NRF) to come down this month and next. While I wrote in the aforementioned Universal Cargo post how I thought the drop the NRF projected for December to likely be a bit too much, I was with the NRF in expecting transpacific freight volume to reduce this month and next.

shipping containers

However, those who are regular readers of this blog may know I like to use Universal Cargo sales numbers as a barometer for the international shipping industry’s demand. Right now, Universal Cargo has over 10% more shipments with November ETAs than Universal Cargo helped shippers move in October. There will surely be shipments originally estimated as end of November cargo moves that will actually be December shipments, but it certainly does not look like we are seeing any significant volume drop in the month and could easily be looking at a stronger November than October in terms of cargo volume.

If Universal Cargo’s numbers are an indicator of larger industry numbers, as they tend to be, that would explain why freight rates have remained steady so far this month and even increased a bit for USEC.

Threat of More Lockdowns

In some Democrat-led states, lockdowns are being reinstated. How that will affect international shipping moving forward is complicated but generally not good. Lockdowns earlier in the year resulted in expectations of much lower shipping demand than what actually happened. Buying did not really go down during the lockdowns, it just moved online. In fact, people leaving home less meant less money being spent on things like entertainment and gas and many people buying more things for and, of course, from their homes with online shopping. That resulted in carriers having to send a lot of smaller, faster ships to deliver goods amidst all the blank (cancelled) sailing they were doing. Shutdowns likely keep online shopping surging.

CA Governor Gavin Newsom picture by Gage Skidmore on flickr.
CA Governor Gavin Newsom picture by Gage Skidmore on flickr.

On the other hand, some small businesses can’t survive lockdowns. Businesses’ whose doors are forced closed will slow or stop the importing they would do while employees and owners’ personal spending likely will slow with the loss of work. Stimulus checks and increased unemployment from the government earlier this year kept many people who weren’t working shopping, but it’s yet to be seen what further stimulus might come from the government, not to mention trillion dollar stimulus plans are in no way maintainable.

Longterm results of lockdowns are yet to be seen, but it is hard to imagine such results are good. We’ve been in a period of cargo volume bouncing back big time as businesses have been reopening their doors. Closing them again may not result in a similar rebound. They are also increasingly difficult for people to accept, especially when governors imposing COVID restrictions, along with their healthcare advisors and lobbyists, often don’t follow the restrictions themselves.

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Port Congestion Unfairly Causes Demurrage & Detention Fees Levied on Shippers https://www.universalcargo.com/port-congestion-unfairly-causes-demurrage-detention-fees-levied-on-shippers/ https://www.universalcargo.com/port-congestion-unfairly-causes-demurrage-detention-fees-levied-on-shippers/#respond Thu, 12 Nov 2020 19:32:07 +0000 https://www.universalcargo.com/?p=10214 U.S. shippers and truckers are being hit with detention and demurrage fees for reasons beyond their control. Again. Or maybe I should say still.

For those who are unsure or unaware of what these fees are, here's a quick definition:

Demurrage Fees:
Fees terminals charge for not picking up shipping containers of goods from the port beyond the "free time" allotted after being offloaded from a ship. The fee is sometimes referred to as "storage."

Detention Fees:
Fees carriers charge for not returning empty shipping containers from a shipment to the port within an allotted number of days. The fee is also call a "per diem charge." The number of days shippers are allowed to keep containers before returning them to the port can vary and are called "free days."

Both of the above fees tend to be cumulative on a daily basis and can quickly become severely expensive.

Back in March, we blogged about shippers being hit with coronavirus-related detention fees when a rash of blank sailings and restricted port hours for COVID-related reasons often made it impossible for shippers and truckers to return empty containers on time. Now, we're seeing port congestion cause both late pickup and return of shipping containers – but certainly not for a lack of trying on the parts of shippers and truckers.

Find out more by reading the full post in Universal Cargo's blog.

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international shipping port cranes & containers

U.S. shippers and truckers are being hit with detention and demurrage fees for reasons beyond their control. Again. Or maybe I should say still.

For those who are unsure or unaware of what these fees are, here’s a quick definition:

Demurrage Fees

Fees terminals charge for not picking up shipping containers of goods from the port beyond the “free time” allotted after being offloaded from a ship. The fee is sometimes referred to as “storage.”

Detention Fees

Fees carriers charge for not returning empty shipping containers from a shipment to the port within an allotted number of days. The fee is also call a “per diem charge.” The number of days shippers are allowed to keep containers before returning them to the port can vary and are called “free days.”

Both of the above fees tend to be cumulative on a daily basis and can quickly become severely expensive.

Back in March, we blogged about shippers being hit with coronavirus-related detention fees when a rash of blank sailings and restricted port hours for COVID-related reasons often made it impossible for shippers and truckers to return empty containers on time. Now, we’re seeing port congestion cause both late pickup and return of shipping containers – but certainly not for a lack of trying on the parts of shippers and truckers.

The very strong peak season 2020 is seeing – extending into November thanks in part to the stocking and restocking of reopening businesses and a massive increase in online shopping on top of shipping to prepare for the holiday season – is combining with COVID-related smaller numbers of dockworkers at ports to create port congestion. Congestion at the Ports of Los Angeles and Long Beach is especially bad right now, but congestion is being seen at ports all along the west coast and at east coast ports as well.

Kim Link-Wills wrote a whole article in American Shipper about how the Port of New York and New Jersey is striving to keep cargo moving during the record-setting volume numbers it’s seeing:

Port of New York and New Jersey officials announced Monday they are “taking extra measures to keep the supply chain fluid.”

The port set a monthly container record in August with 688,365 twenty-foot equivalent units (TEUs). It then broke that record in September by handling 720,969 TEUs, a 15.4% year-over-year increase.

According to the port, these efforts include keeping marine terminals open on holidays; adding extra hours of operation on nights and weekends; infusing extra chassis into the network; working overtime to keep chassis units roadworthy; and adding empty railcars as well as trains into the intermodal network.

On the west coast, where the Ports of Los Angeles and Long Beach handle more cargo volume than any other ports in the U.S., the struggle to keep cargo moving is not going well, evidence by the opening lines of an article by Ian Putzger in the Loadstar:

The chronic congestion that has plagued the US port complex of Los Angeles and Long Beach since the summer is going from bad to worse.

The California Trucking Association (CTA)  and Harbour Trucking Association (HTA) described the movement of cargo through the two ports this week as “nearing complete gridlock”.

The main point of the article is how the CTA and HTA are calling for a halt to the detention and demurrage charges that shippers and truckers are being hit with in the middle of this bad congestion:

The two trucking associations are now urging terminal operators and shipping lines to suspend detention and demurrage charges.

“Shippers and truckers are being put on the hook for millions of dollars of additional detention and demurrage charges, despite their inability to return empty containers or pick up import cargo,” they argue. “The immediate and fair course of action is to immediately suspend detention and demurrage.”

The CTA and HTA say they will take their case one step further if they don’t see progress soon, intending to call on the US Federal Maritime Commission [FMC] to intervene.

While these current ones seem especially egregious, shippers and truckers have long complained about unfair demurrage and detention fees. Going to the FMC with demurrage and detention fee complaints is no new thing.

In fact, a year ago the FMC announced it would it would “address detention and demurrage charge issues” by adopting a set of recommendations Commissioner Rebecca Dye made. Commissioner Dye led an 18-month fact finding investigation into these often unfair demurrage and detention fees. Unfortunately, little action has been seen from the FMC on the issue since then. It’s well past time the commission took stronger action to protect truckers and shippers in regard to this issue.

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Transpacific Freight Volume & Rates for October, November, & December 2020 https://www.universalcargo.com/transpacific-freight-volume-rates-for-october-november-december-2020/ https://www.universalcargo.com/transpacific-freight-volume-rates-for-october-november-december-2020/#respond Wed, 11 Nov 2020 01:18:43 +0000 https://www.universalcargo.com/?p=10213 Check out the latest post in Universal Cargo's blog for an overview of what's happening with transpacific shipping from last month to the end of the year. This could help you decide the best moment for your business's next big import or export.

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Shipping Containers Need Contents VerifiedOctober’s transpacific ocean freight shipping volume was strong, but not as strong as September’s.

How It Looked Like October Would Turn Out

There were experts predicting October volume would match or exceed September’s, and in early October it appeared that they might be right. In fact, I prematurely declared myself as being wrong for being less bullish on the month. On October 8th, in a post about what’s going on with importing goods, I wrote:

While we were in the middle of a very strong September amid what has turned out to be a very strong peak season, a number of experts predicted that October would be just as strong or stronger than September. I was skeptical. Based largely on shipment numbers we were seeing here at Universal Cargo and cargo volume trends I’ve watched over the last decade, I thought volume was likely to come down some in October.

On September 15th, in a blog about container shortages and record high freight rates, I wrote:

I’m not as bullish on October volume numbers as many of the experts are. That may seem surprising as I was predicting we would have a peak season when many of the experts were saying 2020 would not see a peak season at all. Or maybe it’s not surprising that I’d go against the grain. My expectation of decreased volume in October, however, is largely based on the anecdotal evidence of Universal Cargo seeing much less demand and far fewer sales for importing and exporting cargo in October so far as compared to what we saw for September in the lead-up to this month.

Not only could I be wrong, that prepositional phrase I put at the end of that sentence is a dangling modifier. How embarrassing. Additionally, on September 22nd, in a post about regulators addressing freight rates, I added to my prediction of less volume in October that we should finally see an end to the skyrocketing freight rates:

I already wrote in a blog post last week that I’m not as bullish on October freight rates and volumes as many industry experts are. Cargo volume and freight rates don’t look to be particularly low, but the month does not appear, at least to me based mainly on shipment numbers I’m seeing from Universal Cargo, like they will continue to soar at September levels. I expect to see volume somewhere between July and August levels, which isn’t bad. However, the volume drop should be enough to result in rates finally beginning to come back down.

How October Actually Turned Out

Universal Cargo shipments decreased by just over 7.3% in October from September, resulting in an October volume level that did land between July and August’s. The volume, however, was definitely closer to August’s shipment count than July’s.

October was a good month. Still, mitigating its strength a little is that there was a little larger than usual number of shipments originally estimated to be September shipments that became October ones due to carrier rollovers and shippers moving goods later than their original ETAs indicated. This ultimately made September look a little less strong than it originally appeared while making October look stronger.

It is not uncommon for shipments originally estimated to happen at the end of a month to become early shipments of the following month. There were shipments originally recorded with October ETAs that became November shipments, but not as many as was seen in September.

While Universal Cargo’s shipment amounts are indicators of what’s happening in the industry as a whole, they are still anecdotal. Final confirmed industry numbers aren’t available yet, but estimates do show volume down in October a little bit from September.

The National Retail Federation (NRF) put out a press release yesterday (November 9th) that nicely shares confirmed volume, measured in TEUs (twenty-foot equivalent units), that U.S. ports handled by month along with the estimated volume for October and projected volumes for the rest of the year. It shows September at 2.11 million TEUs and October at an estimated 2.00 TEUs.

That might not seem overly significant, but that drop of approximately 110,000 TEUs of freight helped result in climbing freight rates finally leveling off in October, and even coming down a little bit over the month.

Tipping Point to Freight Rates Coming Back Down

The above doesn’t mean there is zero climbing being done by freight rates. Just last week Mike Wackett reported in an article for the Loadstar that there was a small uptick in transpacific rates:

Meanwhile, on the transpacific tradelane, the SCFI recorded a modest $22 increase for spot rates to the US west coast to $3,871 per 40ft. For US east coast ports there was a $24 increase in the spot rate to $4,665 per 40ft.

However, it must be noted that SCFI recorded rates surpassing $4,000 per FEU by the end of September. That means that overall, October, while strong in terms of freight volume, did see some drop in both freight volume and freight rates.

Freight rates are still high, but there is some relief for shippers who have been watching freight rates climb to record levels in 2020.

Freight Costs & Volume Projections for the Rest of 2020

Does the little bit of rates creeping up at the beginning of November mean we’ll see rates and possibly volume back on the rise this month and into next? 

With shipping container shortages still an issue and carriers talking congestion fees in November and December during what’s been dubbed shipageddon, there’s plenty on the horizon to keep costs high for shippers at the moment. However, there is also good news. Demand should start pushing rates in a downward direction.

I’ve been doing so much disagreeing with projections in 2020, it’s good to see one that I do agree with. That projection comes from the NRF, saying volume should decrease over these last couple months of 2020.

Businesses are still reopening and restocking, keeping volumes healthy, but we’re moving past most of the holiday season international shipping. That’s a big part of what puts me on the same page as what the NRF said in its press release about what we’ll see for November and December:

With most holiday merchandise already in the country, November is forecast at 1.7 million TEU, up 0.2 percent year-over-year, and December is forecast at 1.58 million TEU, down 8.2 percent from last year.

I’m not sure if we’ll drop below last year’s volume in December or not like the NRF says. Last year, December was following a very weak peak season because of all the early importing that happened to beat tariff hikes earlier in 2019 and at the end of 2018. It seems like there could still be more demand than that as businesses continue to recover from shutdowns.

On the other hand, the higher freight rates we’re seeing lead into the end of 2020 may cause businesses to wait for the new year before shipping in order to get better rates during the traditionally slow season. That could help the NRF be correct about December’s volume dropping below the last month of 2019.

No matter if December volume drops below what it was last December, it should be a continuing decline in volume that started slowly in October and is expected to be more significant in both November and December. Less volume should put downward pressure on freight rates.

Carriers have shown the ability to counter that downward demand by reducing capacity, especially with blanked (cancelled) sailings. Additionally, even though volume should reduce over this month and next, it is still healthy. Therefore, expect healthy freight rates from carriers for the rest of the year. Even though rates likely remain healthy, they should still come down a significant degree over the course of November and December from where they were at their peak at the end of September/beginning of October and where they are now.

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MSC, Buying “Anything That Floats,” Likely to Surpass Maersk https://www.universalcargo.com/msc-buying-anything-that-floats-in-order-to-surpass/ https://www.universalcargo.com/msc-buying-anything-that-floats-in-order-to-surpass/#respond Thu, 05 Nov 2020 20:55:34 +0000 https://www.universalcargo.com/?p=10212 The Mediterranean Shipping Company, better known as MSC, is poised to surpass Maersk as the biggest ocean freight carrier in the world by capacity. And the shipping line could to do it soon. Right now, MSC is aggressively buying up ships, increasing its capacity. In fact, it's buying ships so aggressively that one sales and purchases (S&P) broker told The Loadstar that MSC is "interested in virtually anything that floats."

Find out about this battle to be the world's largest ocean freight carrier by reading the full post in Universal Cargo's blog.

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INNOVATION, MSC SANTHYA < KRVE 34 & MSC GAYANÉ — Flickr image by kees torn

INNOVATION, MSC SANTHYA < KRVE 34 & MSC GAYANÉ — Flickr image by kees torn

The Mediterranean Shipping Company, better known as MSC, is poised to surpass Maersk as the biggest ocean freight carrier in the world by capacity. And the shipping line could to do it soon. Right now, MSC is aggressively buying up ships, increasing its capacity. In fact, it’s buying ships so aggressively that one sales and purchases (S&P) broker told The Loadstar that MSC is “interested in virtually anything that floats.”

Mike Wackett shared that S&P broker quote in a Loadstar article outlining a “massive buying spree of second-hand tonnage” from the world’s second largest carrier by capacity:

According to Alphaliner, MSC has “embarked on a massive buying spree of second-hand tonnage worth around $180m, anticipating asset price rises, on the back of a fast-improving charter market”.

Transactions by MSC, both on the charter and S&P (sales & purchase) markets, are kept closely under wraps, but Alphaliner said it understood that the carrier was buying four 8,200-8,500 teu Zeaborn Ship Management-controlled ships for a total price of $114m.

And, according to vesselsvalue.com data, MSC purchased a quartet of 2006-built 8,533 teu sister vessels, the ER Tianping, ER Tianshan, ER Tokyo and ER Texas, on 30 October for $28m each.

With its recent purchases, MSC has further narrowed the capacity gap with Maersk, which now stands – with its orderbook – at some 160,000 teu, a margin that could easily be overcome with an order of new ULCVs.

ULCV stands for ultra large container vessel. The world’s largest container ships have a capacity of over 20,000 TEU (twenty-foot equivalent units). That means MSC, again this is including ships it has ordered, is potentially only three ships shy of surpassing Maersk’s capacity. That could be obtained with one order.

Such an order would not be unprecedented. In fact, I wrote an article here in Universal Cargo’s blog a year ago about an order for five ULCVs by MSC that, according to an article from Mike Wackett at that time, put the carrier on course to overtake Maersk within two years.

Even though the two carriers are alliance partners with their 2M vessel sharing agreement, Maersk wasn’t happy with MSC’s move a year ago toward overtaking Maersk. Wackett quoted a Maersk senior manager as saying at the time, “MSC are getting too big for their boots and we have a fight on our hands to stop them.”

Bitterness also grew between the companies a year ago as MSC poached one of Maersk’s top executives, Søren Toft, to be its CEO.

I wouldn’t expect Maersk to give up its title as the world’s largest ocean freight carrier very easily, so this could be an interesting battle to watch. As Highlander would say, there can be only one… number one. Well, I added that last little bit, but after all, who strives to be number two?

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Will Freight Rates Rise Again in November? https://www.universalcargo.com/will-freight-rates-rise-again-in-november/ https://www.universalcargo.com/will-freight-rates-rise-again-in-november/#respond Tue, 27 Oct 2020 22:35:51 +0000 https://www.universalcargo.com/?p=10205 Could freight rates from China to the US actually rise again in November? There are a couple indicators that make it look like a possibility.

Find out what's happening right now with cargo volume and freight rates, specifically importing from China, and what things will likely look like in November by reading the full article in Universal Cargo's blog.

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Could freight rates from China to the US actually rise again in November? There are a couple indicators that make it look like a possibility.

October Freight Rates & Cargo Volume

Service Ocean Freight2020’s incredible rising freight rates leveled off for transpacific shipping in October. I did expect Asia-US rates to finally stop rising in October, but I also expected them to start coming down a bit over the month. Instead, rates have stayed pretty stable all month long.

Those freight rates remaining at the record high levels they’d reach was largely due to demand. While I expected volume to be strong over the month, I was skeptical of those who predicted cargo volumes to not only remain as high as September’s but to exceed those levels. However, even by Universal Cargo’s shipping numbers, October volume looks very similar to September’s, despite looking like October’s volume would be smaller in the run-up to the month.

Indeed, October’s volume for Universal Cargo currently appears to be slightly outpacing September’s by six shipments. It’s possible that some shipments initially filed with end-of-the-month October ETAs end up as early November shipments, changing the data a bit. That did happen with September to an extent that changed our internal outlook on the month from having a not insignificant growth rate in volume from the month before to being almost dead even with August. Actually, we officially ended up with one less shipment in September than in August.

Borometer & Predictions Point Toward Strong November Demand

Being a single company, Universal Cargo’s volume numbers are anecdotal, but they do tend to follow the demand trends of the industry and can serve as something of a barometer for what’s happening with factors like demand in the international shipping industry. One of the biggest things all of the month-to-month cargo volume data talked about above indicates is that those who predicted cargo volume in October to be as strong or stronger than volume in August appear to be correct, or at least close to correct.

Those same people have similar predictions for November’s volume (and December’s and even early 2021 volume). A few weeks ago in a blog about what’s happening with importing goods at the moment, I included one such prediction of U.S. import flows remaining heavy all the way into 2021. With business re-openings and assessments of inventories being low – something you can read about in last week’s blog post about shipageddon – the peak season continuing right on through November looks more and more likely.

According to an article by Mike Wackett published in the Loadstar just today, Port of Los Angeles executive director Gene Seroka “advised that last month 97 container vessel called at the port, with no blank sailings, which included 11 extra loader and ad-hoc sailings deployed by carriers.” The article also included what import volume should look like this week:

… according to the port of Los Angeles’ Signal data forecaster, which provides a three-week overview of container imports, this week will see LA’s terminals handle over 125,000 teu of imports, which is some 48% higher than for the same week of last year.

That is strong volume. The percentage growth of imports on last year is less important than the actual amount of cargo coming in; however, there may be something to be learned from comparing years here. But we have to go back a little further than 2019.

Freight Rates Might Do Something Similar in November 2020 to November 2018

2019 had a very weak peak season, helping inflate the year-on-year percentage in the quote above. Often October and early November are included in the peak season, but by October in 2019, demand was weak and freight rates were falling. While 2019’s peak season was very different from 2020, the 2018 peak season had something in common with this year.

The trade war with China changed shipper behavior in a way that resulted not only in 2019’s subdued peak season but also in an engorged peak season in 2018. At this time two years ago, shippers were stocking ahead on goods from China, trying to beat a tariff hike that was scheduled for January 1st, 2019.

While 2020 is obviously different than 2018, both had or are having their peak seasons inflated by unusual circumstances. 2018 saw soaring freight rates in November. It is easy to see how this November, rates could similarly remain at their current soaring level or even push even higher. Carriers’ continued growth in their ability to maintain discipline in capacity management makes it even more likely shippers have to wait on freight rate relief.

November GRI & PSS

There is one more obvious rate increase indicator for November, but, luckily for shippers, it is not the strongest one I’ve ever seen. That last indicator comes in the form of a GRI and PSS.

CMA CGM has announced the continuation of its peak season surcharge (PSS) rate in November. Continued PSS is better than a new PSS, but this does show that CMA CGM has confidence in demand remaining strong.

A stronger indicator than the continued PSS is Hapag-Lloyd’s general rate increase (GRI) scheduled to hit shipments in November. The GRI is $960 per 20′ container and $1200 per 40′ container on shipments from Asia to North America.

The good news about this GRI is it was pushed back to November 15th from October 15th. Sometimes, GRIs that are pushed back never hit at all. However, carriers have done a good job in 2020 implementing GRIs and making them stick, but that also brings me to another bit of good news…

Despite some rumblings about November GRIs, the above mentioned are the only two official PSS or GRIs I’ve seen from major ocean freight carriers. Perhaps I’ve missed one somewhere, so if I have, please share it in the comments, but often when a GRI or PSS hits, we get them from several carriers at once. That is not the case for this November.

Conclusion

If transpacific shipping demand, particularly eastbound with China to U.S. cargo, remains strong as it is expected to, freight rates are likely to remain high in November. Rates could even increase. When the peak season was inflated two years ago by unusual circumstances, freight rates soared. Since then, carriers have gotten better at controlling capacity and putting upward pressure on freight rates.

Things can change fast in the international shipping industry, and 2020 is hardly a predictable year; however, freight rates have been remarkably less volatile this year than has been common over the years. It seems like freight rates have done nothing but rise in 2020. We here at Universal Cargo obviously will be keeping a close eye on this trend and keep you updated with the ups and hopefully downs of freight rates here in our blog.

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What’s Shipageddon & Do You Need to Know About It? https://www.universalcargo.com/whats-shipageddon-do-you-need-to-know-about-it/ https://www.universalcargo.com/whats-shipageddon-do-you-need-to-know-about-it/#respond Fri, 23 Oct 2020 00:29:58 +0000 https://www.universalcargo.com/?p=10203 There's a new 2020 doomsday word floating out there: shipageddon.

NBC, New York Times, and the Washington Post – none of which is my favorite news source – have all been throwing the word into headlines and articles. The word has started catching on elsewhere as well. So what is shipageddon? Is it something the media is inventing to create fear, get clicks, and drive an agenda, or is it a dramatic name to spotlight something we actually should pay attention to?

Basically, shipageddon is the already much increased online shopping because of the pandemic meeting the holiday season and potentially resulting in a large logjam of shipping goods and shortages on store shelves.

Despite its appearance in the Washington Post and it sounding like an excuse for why Amazon won't be delivering your Christmas orders on time, shipageddon is not a completely manufactured story to push Jeff Bezos's agenda. That's not to say the media won't use or isn't using shipageddon to drive agendas; I have already seen it used as a reason to vote for one presidential candidate over the other when whom you vote for in the upcoming election isn't going to impact shipping this holiday season.

Find out all about it by reading the full post in Universal Cargo's blog.

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ShipageddonThere’s a new 2020 doomsday word floating out there: shipageddon.

NBC, New York Times, and the Washington Post – none of which is my favorite news source – have all been throwing the word into headlines and articles. The word has started catching on elsewhere as well. So what is shipageddon? Is it something the media is inventing to create fear, get clicks, and drive an agenda, or is it a dramatic name to spotlight something we actually should pay attention to?

Basically, shipageddon is the already much increased online shopping as it began to hire a company to increase online sales but because of the pandemic meeting the holiday season and potentially resulting in a large logjam of shipping goods and shortages on store shelves.

Despite its appearance in the Washington Post and it sounding like an excuse for why Amazon won’t be delivering your Christmas orders on time, shipageddon is not a completely manufactured story to push Jeff Bezos’s agenda. That’s not to say the media won’t use or isn’t using shipageddon to drive agendas; I have already seen it used as a reason to vote for one presidential candidate over the other when whom you vote for in the upcoming election isn’t going to impact shipping this holiday season.

Shipageddon in International Shipping

While shipageddon mostly refers to a potentially bad shipping situation within the U.S., combining last-mile shipping and general domestic shipping with inventory shortages in stores, the term has also started getting use in the international shipping realm. Here, it mixes an increased demand and panic from American businesses with worries about port congestion, shipping issues from ports to warehouses, and shipping demand outstripping ocean freight capacity and shipping container availability.

A Greg Miller-written article in American Shipper with shipageddon in the title starts in something of an alarmist way:

“The ships are 100% full. The containers are 100% full. You can’t get a container built. You can’t pick up a ship from the spot market. The whole container-shipping cycle is at absolutely full pelt,” exclaimed Jeremy Nixon, CEO of Ocean Network Express (ONE), the world’s sixth-largest container line.

October’s ocean container market is “unbelievable,” said Nixon during an International Chamber of Shipping (ICS) virtual event last week. “We are sold out,” he revealed.

“Our job now is to keep the network going from an operational standpoint,” Nixon continued. “The ports are getting jammed up now. We’re starting to see bottlenecks in the supply chain. That’s another challenge going into this winter.”

October is indeed holding strong when it comes to international shipping, particularly in terms of eastbound transpacific shipping. I would call Nixon’s “unbelievable” description a bit strong, but understandable if the Ocean Network Express (ONE) is sold out when it comes to shipping for the month. However, international shipping’s peak season in 2020 has been strong, and it is by no means unheard of for the peak season to extend into and even through October.

Growing and growing freight rates have leveled off through October while cargo volume has seemed to actually hold pretty stable since August. Universal Cargo’s shipments are almost identical between August and September, and October is looking like it could end with official numbers right in line with those previous months’.

Nixon’s words notwithstanding, ocean freight carriers as a whole do have the ability to add capacity to shipping lanes if needed. Carriers have flexed their ability to control capacity throughout the year. Adding shipping containers, on the other hand, is trickier. There has been much made about a shipping container shortage this year, with a number of factors, mostly related to the pandemic, playing into that.

The word shipageddon doesn’t really come into play in Miller’s article until after all of the above, when it brings the issue back to American stores:

Inventories are historically low. There is rising concern that companies will not be able to import and deliver enough goods to meet consumer demand during the holiday season.

The New York Times cited rising concerns over the so-called “shipageddon” scenario, in which the retail supply chains and parcel shippers descend into chaos as Christmas nears.

A report released Monday by investment bank Jefferies warned of “empty shelves and raided storerooms,” noting that “it’s not just local grocers running out of essentials.”

“The summer and fall stages of the U.S. recovery have been marked by incredibly strong retail and housing sales, which have both surpassed pre-COVID levels by a wide margin,” wrote Jefferies. “Due to the torrid pace of sales and virus-related supply disruptions, inventory-to-sales ratios have plummeted to record lows.”

The Evercore ISI survey found that none of the consumer-business respondents thought inventory levels were “too high” or “a little too high.” Only 10% said they were “about right,” with 30% believing they were “a little too low” and 60% answering “too low.”

The implication is that retailers still need to bring in a lot more goods, primarily from China. If so, that is bullish for ocean container lines and concerning for U.S. shippers in terms of transport timing and availability, and spot and contract pricing.

Still, shipageddon is an extreme potential outcome within the U.S. with ramifications on international shipping. 60% of responding businesses (assuming they are a good representation of U.S. businesses overall) saying inventory is too low versus 40% saying it is a little too low or about right does give evidence that international shipping demand should remain strong for the moment. However, it is a long way from creating an apocalyptic outlook. It also says something good about the demand that is out there in the American marketplace.

Increase of Alarming Words

Shipageddon is an incredible intense word. Armageddon is the final battle between good and evil before Judgment Day. It marks the end of the world. To call the potential logjams in shipping we could see this year the end of the world is extreme to say the least.

We’re seeing an increase in words like this from the media. In 2014, when contract negotiations became so contentious between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association that cargo piled up at the ports, crops rotted there instead of being exported, and stores didn’t receive goods in time for holiday shopping, we didn’t call that shipageddon, portageddon, or uniongeddon. The economy lost billions. Foreign business contracts and relationships were lost. There were businesses that folded. However, we didn’t compare it to the end of the world.

The “descent into chaos” type of language accompanying the made-up doomsday word shipageddon is designed to sound frightening. Especially with this being an election year, language use is nauseatingly nyperbolic right now. People are called evil based on whom they vote for and existential threats apparently lie behind every policy or any phrase uttered by the wrong political party. However, no matter how bad shipping looks in the lead-up to Christmas, it is not the end of the world.

There may be inventory shortages around the holidays. There likely will be additional holiday shipping charges from the likes of UPS, FedEx, and others. Longer delivery times on Amazon orders are likely. However, it is unwise to become fearful or panicked when hearing a word like shipageddon.

Think about anytime you’ve heard these kinds of end of the world predictions in the past: Y2K, the verified gross mass (VGM) rule, carmageddon. Let me explain that last one for those of you who didn’t live in L.A. in 2011. A stretch of the 405 freeway was going to be shut down for a few hours to fix a bridge. The local radio, television stations, papers, politicians, homeless people in the streets went on and on about how traffic would be backed up for days and stranded motorists whose cars ran out of gas would be aimlessly wandering the streets and begging themselves. People got scared. They stayed off the roads. And I’ve never gotten across the city faster in all my years living there.

If you’re planning to do Christmas shopping online, sure, doing it early would be a good idea to make it more likely the presents will arrive on time. Be prepared that there could be some increases in prices and shipping around the holidays. And, yes, know that it’s possible you could see some shortages at stores. However, let’s not let the media panic us into making a run on toilet paper this Christmas. That won’t go well with plum Christmas pudding or fruitcake.

Click Here for Free Freight Rate Pricing

 

 

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Calling Out IMO on Wakashio Oil Spill Response https://www.universalcargo.com/calling-out-imo-on-wakashio-oil-spill-response/ https://www.universalcargo.com/calling-out-imo-on-wakashio-oil-spill-response/#respond Fri, 16 Oct 2020 01:09:17 +0000 https://www.universalcargo.com/?p=10197 The International Maritime Organization (IMO), with its IMO 2020 regulation capping ships' sulfur emissions at 0.5% and heavily publicized goal of cutting in half international shipping's 2008 green house gas emissions by 2050, is the paragon of environmental governance, right? It's a light in the dark smog of industry pollution. Well, the events surrounding the MV Wakashio oil spill paint a very different picture.

A couple months ago, on July 25th, a Japanese bulk carrier called the MV Wakashio ran aground on a coral reef just to the south of the island nation of Mauritius and an estimated thousand tons of oil spilled into the Indian Ocean. The IMO's response has been extremely controversial, even though it's receiving little to no attention by international shipping news sources.

It was actually an article last week from Forbes that caught my attention. "UN Ship Agency IMO Endorses Statement That Toxic Ship Oil Is ‘Just Like Skin Cream’," its headline read. We've all seen enough misleading headlines from supposedly reputable news sources to understand I was skeptical about how that could be true. However, I opened the article to find a very thoroughly written piece by Nishan Degnarain that raises a lot of questions about the IMO.

Find out all the details by reading the full article in Universal Cargo's blog.

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IMO image of MV WakashioThe International Maritime Organization (IMO), with its IMO 2020 regulation capping ships’ sulfur emissions at 0.5% and heavily publicized goal of cutting in half international shipping’s 2008 green house gas emissions by 2050, is the paragon of environmental governance, right? It’s a light in the dark smog of industry pollution. Well, the events surrounding the MV Wakashio oil spill paint a very different picture.

A couple months ago, on July 25th, a Japanese bulk carrier called the MV Wakashio ran aground on a coral reef just to the south of the island nation of Mauritius and an estimated thousand tons of oil spilled into the Indian Ocean. The IMO’s response has been extremely controversial, even though it’s receiving little to no attention by international shipping news sources.

It was actually an article last week from Forbes that caught my attention. “UN Ship Agency IMO Endorses Statement That Toxic Ship Oil Is ‘Just Like Skin Cream’,” its headline read. We’ve all seen enough misleading headlines from supposedly reputable news sources to understand I was skeptical about how that could be true. However, I opened the article to find a very thoroughly written piece by Nishan Degnarain.

Dgnarain didn’t bury the lead either, starting the article with:

The IMO issued a statement on September 15 standing by the comments of its representative in Mauritius who oversaw the disastrous oil spill clean up and salvage operation that is still ongoing.

In his comments to national media in Mauritius, the IMO representative had described the toxic ship oil spilled as being “Just like skin cream.”

In a statement on their website (which had been down last week due to a cyberattack against the IMO), the UN Agency not only described their Mauritius oil spill representative, Matthew Sommerville, as an ‘expert’, but also explained that he was supported by an entire IMO team.

“The IMO Secretariat is also supporting the response [to the Wakashio oil spill], by providing backstopping to the IMO expert in the field at the time of his deployment, and has been maintaining close liaison with the affected country, the flag State and technical partners throughout in order to provide support and assistance, as required.”   

The article included a video containing the comparison of the toxic oil spilled to hand cream. I’ve shared it here cued up to the moment in question:

YouTube Video

If this was just a story of a representative of the IMO downplaying the severity of the oil spill or being hyperbolic in explaining that this oil isn’t as bad as more traditional, thicker oils, well, that would still be bad but not likely to get a whole blog post here at UniversalCargo.com. However, this is just the tip of the iceberg. Or maybe I should say the tip of the Wakashio sticking out of the water after they decided to sink the rest of the tanker.

Yes, the tanker was intentionally sunk in the ocean somewhere off the coast of Maritius, raising questions of whether international law was broken, which was one of the many questionable decisions Degnarain wrote about in the Forbes article:

The IMO have also refused to answer questions posted by international organizations such as Greenpeace and Sea Shepherd whether international laws had been broken with the decision to sink the front section of the 300 meter vessel.

There are at least seven international environmental laws that have been highlighted.

  1. Violations of Marpol Annex 1
  2. Violations of Marpol Annex 6
  3. The International Convention for the Control and Management of Ships’ Ballast Water and Sediments (BWM Convention)
  4. International Convention on the Control of Harmful Anti-fouling Systems in Ships (AFS Convention)
  5. The Hong Kong International Convention for the safe and environmentally sound recycling of ships (Hong Kong Convention)
  6. Nairobi International Convention on the Removal of Wrecks
  7. The Convention on the Conservation of Migratory Species of Wild Animals (CMS)

While I haven’t seen much about the Wakashio oil spill and IMO’s response to it on international shipping news sites, the above quoted article is not the only exposé on the topic written by Degnarain and published by Forbes. Another article, titled “IMO In Hot Water Following Mauritius Oil Spill And Botched Wakashio Salvage Operation” was published back at the end of August. Both articles are scathing looks at the IMO’s response to the oil spill worth reading.

Here’s a taste from that August article:

Saying this has not been the finest hour for the global shipping regulator, the UN’s International Maritime Organization (IMO) would be a significant understatement.

46 days since the Panama-flagged, Japanese-owned vessel plowed straight into Mauritius’ largest and oldest coral reef system, questions are being asked about the role and effectiveness of the IMO.

The IMO was supposed to be the best face of the maritime industry – representing a cleaner, greener, more transparent, responsive and gender-balanced future of global shipping.

In the year that six major UN agreements were to be signed to give greater protection to life in the ocean (which was already under pressure from humans), one would have thought that a major oil spill amid the fragile coral reefs of a global biodiversity hotspot and high profile tourist destination, would have attracted some of the UN’s best scientists who recognized how important these unique species and ecosystems are, and would have worked night and day along with the Mauritian volunteers who were solely focused on protecting their island’s unique heritage.

Instead, Mauritius received representatives from the oil industry who acted on behalf of a UN agency – the IMO – shutting out local talent, and have been behind a series of increasingly catastrophic interventions that has now led to the loss of four local crew in Mauritius (three confirmed deaths and the captain still missing), the carcasses of almost 50 whales washing up on the Mauritian shoreline, 30km of heavily impacted oil-drenched beaches, a 300m iron ore carrier – larger than the Titanic – being deliberately sunk in an unknown location off the coast of Mauritius, and the 75m high stern of the vessel protruding like a giant tombstone on the once pristine coral reefs of Mauritius with no clear plan of how and when this will be removed, as the corals below are ground away each day with the strong currents and the supporting chains from the salvage operation….

Because Degnarain is a good writer, his comparative adjectives about what the IMO is supposed to represent for the future of global shipping – cleaner, greener, more transparent, more responsive, and more gender-balanced – serve as foreshadowing of all the things the IMO has proven itself not to be in its response to this spill. Degnarain covered these things in numbered sections to his article.

In the first section gets into IMO’s highly problematic involvement with the sinking of the MV Wakashio and lack of transparency surrounding that. After the sinking, whales and dolphins started washing up and an unknown brown substance was observed in the water.

The second section gets into the IMO’s failure to do basic testing and releasing of information required in a situation like this. Additionally, it gets into misinformation from IMO representative Matthew Sommerville, including the toxic oil is like hand cream comments discussed earlier.

The third section gets into the IMO rejecting the help and efforts from local experts and scientists in dealing with this crisis. Many of these experts would be in the best position to help having insight on the local marine biology that the IMO and outside scientists would not have.

The fourth section gets into the gender impact in the situation, starting with the statement, “Women were on the front lines of the oil spill in Mauritius – in both the response and in being on the receiving end of the impacts.” The section points out a gender imbalance in the impact of the oil spill and a complete derth of women in the IMO response teams.

“The actions of the IMO in what was once the paradise island of Mauritius has shown that this is a regulator that is out of touch and out of date,” Degnarain writes at the end of the article, concluding, “The world deserves better.”

The IMO’s actions in Mauritius do seem to be in direct contrast with its IMO 2020 regulation and talk about cutting carbon emissions in half by 2050. Is the former just mismanagement of a difficult situation? Is the latter just a diplomatic response to the highly politicized topic of climate change? Maybe the IMO is hoping Mauritius is too remote for people to care long enough for it to have to answer any tough questions about all this.

In the meantimes, I recommend everyone read Degnarain’s articles about the spill and IMO’s response. Here are the links again:

https://www.forbes.com/sites/nishandegnarain/2020/10/07/un-ship-agency-imo-endorses-statement-that-toxic-ship-oil-is-just-like-skin-cream/#668328b62200

https://www.forbes.com/sites/nishandegnarain/2020/09/10/imo-in-hot-water-following-mauritius-oil-spill-and-botched-wakashio-salvage-operation/

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FMC Invites Shippers to Comment on Fairness of Ocean Carrier Billing https://www.universalcargo.com/fmc-invites-shippers-to-comment-on-fairness-of-ocean-carrier-billing/ https://www.universalcargo.com/fmc-invites-shippers-to-comment-on-fairness-of-ocean-carrier-billing/#respond Tue, 13 Oct 2020 22:36:28 +0000 https://www.universalcargo.com/?p=10195 The Federal Maritime Commission (FMC) has opened an inquiry to the public regarding the billing practices of ocean freight carriers.

There have been many complaints and accusations regarding ocean freight carriers' billing practices in 2020; however, this inquiry is not about all such complaints. It is very specific. It's about whom carriers define as merchants when moving shippers' goods.

The controversy is the claim that third parties – such as third-party logistics providers, harbor truckers, stevedores, customs brokers, and freight forwarders, all of whom brought this complaint to the FMC – get defined by carriers as merchants and held responsible for any contractual agreement terms, including fees, that should be binding only between the carrier and the actual shipper.

As a shipper, you are invited to have your voice heard by the FMC in this inquiry. You may agree with those who brought the initial complaint that third parties are being unfairly held responsible for fees or other contractual terms that should be placed on shippers. You may think third parties are the ones who should be held responsible here, arguing you hire a third party to handle the shipping and any risk of additional charges during the process should lie with them. Perhaps your opinion is somewhere in between or another perspective on this issue entirely.

No matter your opinion, this is your chance to address the FMC with how this issue has, will, or may affect you and your business.

Check out the blog at UniversalCargo.com to read the full text of the FMC's Notice of Inquiry (NOI), which includes a more detailed background of the issue, where and to whom you should submit your comments, and when to submit by.

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Ships Coming to PortThe Federal Maritime Commission (FMC) has opened an inquiry to the public regarding the billing practices of ocean freight carriers.

There have been many complaints and accusations regarding ocean freight carriers’ billing practices in 2020; however, this inquiry is not about all such complaints. It is very specific. It’s about whom carriers define as merchants when moving shippers’ goods.

The controversy is the claim that third parties – such as third-party logistics providers, harbor truckers, stevedores, customs brokers, and freight forwarders, all of whom brought this complaint to the FMC – get defined by carriers as merchants and held responsible for any contractual agreement terms, including fees, that should be binding only between the carrier and the actual shipper.

As a shipper, you are invited to have your voice heard by the FMC in this inquiry. You may agree with those who brought the initial complaint that third parties are being unfairly held responsible for fees or other contractual terms that should be placed on shippers. You may think third parties are the ones who should be held responsible here, arguing you hire a third party to handle the shipping and any risk of additional charges during the process should lie with them. Perhaps your opinion is somewhere in between or another perspective on this issue entirely.

No matter your opinion, this is your chance to address the FMC with how this issue has, will, or may affect you and your business. This Notice of Inquiry (NOI) is to solicit public comment on the topic, so it is not only shippers who are invited to give opinion.

Below is the full text of the FMC’s NOI, which includes a more detailed background of the issue, where and to whom you should submit your comments, and when to submit by.

Issued: October 7, 2020

AGENCY: Federal Maritime Commission

ACTION: Notice of Inquiry

SUMMARY: The Federal Maritime Commission (“FMC” or “Commission”) is issuing this Notice of Inquiry (“NOI”) to solicit public comment on the practice of vessel- operating common carriers (VOCCs or carrier) defining “Merchant” in their bills of lading to apply to persons and entities with whom the VOCCs may not be in contractual privity. Generally, the Commission seeks public comment as to 1) how VOCCs apply the term “Merchant” in their bills of lading; 2) whether the definition, as applied, subjects third parties who are not in contractual privity with the carrier to joint or several liability; and 3) whether carriers have enforced the definition of merchant against third parties that have not consented to be bound by, or otherwise accept, the terms and conditions of the bill of lading.

DATES:

Submit comments on or before November 6, 2020.

ADDRESSES:

Submit comments to:

Rachel E. Dickon, Secretary

Federal Maritime Commissio

secretary@fmc.gov

(email comments [as] attachments preferably in MS Word or PDF)

 

800 North Capitol Street, N.W. Room 1046

Washington, D.C. 20573-0001

Phone: 202-523-5725

 

FOR FURTHER INFORMATION CONTACT:

Benjamin K. Trogdon, Director, and

Cory Cinque, Trial Attorney

Bureau of Enforcement

Federal Maritime Commission

800 North Capitol Street, N.W

Washington, D.C. 20573-0001

Phone: 202-523-5783

E-mail: btrogdon@fmc.gov and ccinque@fmc.gov

 

SUPPLEMENTARY INFORMATION:

Submit Comments:

Comments may be submitted by e-mail as an attachment (preferably in Microsoft Word or PDF) addressed to secretary@fmc.gov on or before November 6, 2020. Include in the subject line: “Response to FMC NOI – Merchant Clause.” The Commission will provide confidential treatment for comments received to the extent permitted by law and will not post comments to the public docket. Questions regarding filing or treatment of confidential responses to this inquiry should be directed to the Commission’s Secretary, Rachel E. Dickon, at the telephone number or e-mail provided above. This NOI will be made available via the Federal Register and on the Commission’s web-site at www.fmc.gov.

Background:

The Commission has received information from shipping industry participants that VOCCs have defined “merchant” in their respective bills of lading to include persons or entities who have no beneficial interest in the cargo, but rather are providing service as third parties on behalf of someone specifically identified on the bill of lading. The concerns expressed indicate that VOCCs may be enforcing the terms of the bill of lading (including, without limitation, collection of freight rates and charges, equipment charges, detention and demurrage charges) jointly and severally against entities that are not party to, and have not agreed to be bound by the bill of lading. The Commission has been advised by third-party logistics providers, harbor truckers, stevedores, customs brokers and freight forwarders, many of whom have no connection to the cargo or the shipment, other than providing service to entities that may own or have a proprietary interest in the cargo covered by a VOCC bill of lading, that VOCCs seek payment from such third parties for rates and charges pursuant to the terms and conditions of the bill of lading. Allegations have also been received that VOCCs threaten to discontinue allowing such third parties to provide service for future shipments unless amounts due on current shipments are paid.

This issue was raised in Docket No. 19-05, Interpretive Rule on Demurrage and Detention Under the Shipping Act by several commenters, including the New York New Jersey Freight Forwarders and Customs Brokers, the National Customs Brokers and Freight Forwarders Association, the Agricultural Transportation Coalition, as well as other industry participants since the issuance of the Final Rule. As noted in the Final Rule, “the Commission’s emphasis in the NPRM that ocean carriers bill the correct party reflected concerns raised by truckers that they were being required to pay charges that were more appropriately charged to others.” 85 FR. 29638, at 29662 (May 18, 2020). Several commenters reiterated these concerns. AgTC contended that ‘‘carriers should impose detention and/or demurrage on the actual exporter or importer customer with whom the carrier has a contractual relationship.’’ The New York New Jersey Foreign Freight Forwarders & Brokers Association asserted that VOCCs define the term ‘‘merchant’’ in their bill of lading too broadly, resulting in parties being billed for demurrage and detention ‘‘regardless of whether they are truly in control of the cargo when the charges were incurred.’’ Id.

The Commission clarified that one of its goals for the Interpretive Rule “was to emphasize the importance of ocean carriers and marine terminal operator bills aligning with contractual responsibilities.” Id. In doing so, the Commission noted that it “does not believe it is appropriate in this interpretive rule to prescribe” specific billing practices, or to address the application of the merchant definition as it related to such practices. Id. The Commission further noted it would address such issues in the context of particular facts, considering all relevant arguments. Although the Commission incorporated reference to certain billing practices and regulations in the Final Rule, it declined to prescribe specific billing practices or regulations which would be deemed reasonable under 46 U.S.C. 41102(c).

General contract law principles provide that one party cannot enforce a contract against another who did not assent to be bound by its terms and conditions. This can include situations where one party attempts to bind another party with unilaterally defined terms. Accordingly, the Commission has determined to request public comment on the manner in which VOCCs are defining the term “Merchant” and enforcing that definition in their bills of lading. The purpose of the inquiry is to determine whether such carrier enforcement (i.e., seeking to collect freight and other charges) is unfairly or unjustly wielded against third parties who have not directly contracted with the VOCC nor assented to be bound by the contract of carriage. The Commission encourages all interested parties, including VOCCs, shippers, ports, maritime terminal operators, ocean transportation intermediaries, truckers, stevedores or customs brokers to submit comments or to identify information relevant to the manner in which VOCCs have applied their respective definitions of “Merchant.”

As part of this NOI, the Commission will also be contacting certain VOCCs to provide information about the manner in which they have defined and applied their definition of a “Merchant.”The Commission will consider relevant comments submitted by any party. Along with comments, commenters should provide their name, title/position, contact information (e.g., telephone number and/or e-mail address), name and address of the company or other entity and the type of company or entity (e.g., carrier, exporter, importer, trade association, etc.).

Responses to the NOI will help the Commission ascertain more precisely the practices of VOCCs, including whether they may be imposing liability on entities who may not have assented to be bound to the terms and conditions of a VOCC’s bill of lading, and in determining whether additional analyses or action by the Commission may be necessary.

By the Commission.

Rachel Dickon

Secretary

Click Here for Free Freight Rate Pricing

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What the Freight Is Going On with Importing Goods Right Now? https://www.universalcargo.com/what-the-freight-is-going-on-with-importing-goods-right-now/ https://www.universalcargo.com/what-the-freight-is-going-on-with-importing-goods-right-now/#respond Fri, 09 Oct 2020 00:56:25 +0000 https://www.universalcargo.com/?p=10191 This blog will get into what's happening with freight rates, cargo volume behavior, and implications those have for shippers through the rest of the year and into 2021. But first – and I promise this is directly related – let me say something you probably won't hear from anyone else during this election season. You won't hear it from the candidates and you certainly won't hear it from the mainstream media. Here it comes – hold onto your hat:

I was wrong.

At least, I think so.

It'll be a little while before we know for certain, but it appears that October's international shipping cargo volume numbers may indeed end up being just as high or higher than September's. While we were in the middle of a very strong September amid what has turned out to be a very strong peak season, a number of experts predicted that October would be just as strong or stronger than September. I was skeptical. Based largely on shipment numbers we were seeing here at Universal Cargo and cargo volume trends I've watched over the last decade, I thought volume was likely to come down some in October.

See what's actually happening with freight and what it could mean for freight rates all the way into 2021 by reading the full post in Universal Cargo's blog.

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This blog will get into what’s happening with freight rates, cargo volume behavior, and implications those have for shippers through the rest of the year and into 2021. But first – and I promise this is directly related – let me say something you probably won’t hear from anyone else during this election season. You won’t hear it from the candidates and you certainly won’t hear it from the mainstream media. Here it comes – hold onto your hat:

I was wrong.

At least, I think so.

October Shipping Outpacing September?

Man Looking Up at Shipping ContainersIt’ll be a little while before we know for certain, but it appears that October’s international shipping cargo volume numbers may indeed end up being just as high or higher than September’s. While we were in the middle of a very strong September amid what has turned out to be a very strong peak season, a number of experts predicted that October would be just as strong or stronger than September. I was skeptical. Based largely on shipment numbers we were seeing here at Universal Cargo and cargo volume trends I’ve watched over the last decade, I thought volume was likely to come down some in October.

On September 15th, in a blog about container shortages and record high freight rates, I wrote:

I’m not as bullish on October volume numbers as many of the experts are. That may seem surprising as I was predicting we would have a peak season when many of the experts were saying 2020 would not see a peak season at all. Or maybe it’s not surprising that I’d go against the grain. My expectation of decreased volume in October, however, is largely based on the anecdotal evidence of Universal Cargo seeing much less demand and far fewer sales for importing and exporting cargo in October so far as compared to what we saw for September in the lead-up to this month.

Not only could I be wrong, that prepositional phrase I put at the end of that sentence is a dangling modifier. How embarrassing. Additionally, on September 22nd, in a post about regulators addressing freight rates, I added to my prediction of less volume in October that we should finally see an end to the skyrocketing freight rates:

I already wrote in a blog post last week that I’m not as bullish on October freight rates and volumes as many industry experts are. Cargo volume and freight rates don’t look to be particularly low, but the month does not appear, at least to me based mainly on shipment numbers I’m seeing from Universal Cargo, like they will continue to soar at September levels. I expect to see volume somewhere between July and August levels, which isn’t bad. However, the volume drop should be enough to result in rates finally beginning to come back down.

The latter prediction about freight rates may come to pass in October as rates have leveled off for the moment, I’ll be it at record high levels. However, it would probably take the former prediction coming true, carriers adding more capacity to shipping lanes than they’ve been doing of late, or them starting to undercut each other for a big drop in freight rates to happen right now.

While we won’t see overall cargo volume numbers until at least next month to confirm I was wrong or exonerate me if I was right about October’s levels, the anecdotal evidence of shipments through Universal Cargo has already shifted out of my favor. Yes, shipments continued to come for October, as expected, but there was also an unexpected surge in October shipments directly proportional to a sudden drop in our shipment numbers from September.

September Shipments Pushed Into October

That’s right, a significant number of September shipments became October shipments. About 7% of the September’s total shipments got pushed back, resulting in October’s scheduled shipments outnumbering either August or September’s.

I checked in with Catherine Sanchez, Senior Account Manager over in operations for Universal Cargo to see if this surge in pushed back shipments was due to rollovers from carriers. Ocean freight carriers have done so much rolling of cargo to later sailings this year with all the blank sailing they’ve done that they started charging shippers no-roll premiums to prioritize cargo, reducing the likelihood of it being delayed through rollover. I likened this practice to holding cargo for ransom back in July. It’s something Universal Cargo has worked hard to protect its shippers from as much as possible.

“Yes,” Catherine informed me concerning carriers rolling cargo, “there were some files [shipments] that got rolled over to other vessels, and this is mainly due to the surge in shipping that we believe is due to the holidays. Ocean Lines had so much congestion they were forced to roll some shipments over.” However, she told me this was not the only cause of shipments moving from September to October.

ETAs on planned bookings also changed because of things like freight not being ready and a truckers not being able to get the cargo in time to catch the planned vessels. There are also shipments that get an initial ETA put on them before booking ever happens, which would then be updated with actual dates once officially scheduled. “This will all apply to cargo booked towards the end of the month,” she said.

Strong October Cargo Shipping Demand, Slight September Surprise

A particularly high number of shipments planned for September may be propping up October’s early numbers. However, it is clear demand is still strong and carriers are busy moving cargo for shippers. What’s interesting is the shipments Universal Cargo is helping shippers with that moved from September to October actually dropped September’s cargo volume to almost even with August’s volume numbers (with September ending with one less shipment than August). This was surprising as all indicators showed September being an even stronger month than August for transpacific shipping, especially eastbound from China to the U.S.

In fact, despite the markers of concurrently rising capacity and freight rates, eastbound transpacific cargo growth actually started easing up a little in September.

Bill Mongelluzzo reported yesterday (October 7th) in the Journal of Commerce (JOC):

The growth in US imports from Asia slowed slightly in September from the previous month, but still saw a double-digit, year-over-year increase, and carriers and forwarders said they expect volumes in the eastbound trans-Pacific to stay elevated beyond October and possibly into early 2021. 

Indeed, carriers in the largest US trade lane are scheduled to increase capacity more than 25 percent this month. They anticipate that the traditional holiday season imports and a wave of e-commerce shipments will be especially strong this year.

Imports from Asia increased 11.2 percent last month from September 2019, after rising 13.7 percent year over year in August, according to PIERS, a JOC.com sister company within IHS Markit.

We’ll have to wait out the month to see if October really does match or outperform September. However, Mike Wackett reports in the Loadstar that transpacific capacity in October to the U.S. is tight. If you combine increased capacity with it still being full, that should mean increased volume.

Big Recovery Numbers into 2021

Demand right now is stronger than anyone expected it to be. Not only is there holiday season stocking, there’s restocking of reopening businesses and online shopping that continues to be very high as limitations remain on people’s ability to go out as they would have in the past due to continued COVID restrictions. There’s strong encouragement that can be taken from that about the economic recovery from shutdowns caused by the pandemic. In fact, check out the following from an American Shipper article by Greg Miller:

No one predicted a U.S. import surge in the middle of a pandemic — but it’s happening….

Investment bank Jefferies issued an exceptionally bullish report on Wednesday implying that import flows should remain heavy all the way into 2021….

“We are just at the beginning of what is likely to be one of the biggest restocking cycles — if not the biggest inventory restocking cycle — in U.S. history,” maintained Jefferies Chief Economist Aneta Markowska on a conference call held Thursday to discuss the report.

“What’s behind this is one of the biggest post-recession recoveries in the goods economy, including consumer goods as well as housing,” she said.

While the service economy has been “heavily impaired” by COVID and remains so, goods demand is growing both at the expense of services as well as due to “tremendously supportive fiscal policy.”

“Goods demand is now 6% higher than it was prior to the pandemic….

“Nobody anticipated demand to be this strong this quickly. As a result, we have inventory-to-sales [I/S] ratios today that are at absolute record lows.”

Beyond the need for inventories to catch up, said Markowska, “You could make a very, very strong case that producers will increasingly target much higher levels of precautionary inventory as they shift from ‘just in time’ to ‘just in case.’” If so, “they may actually overshoot pre-pandemic I/S ratio levels,” she said.

Really strong peak seasons can last longer than normal, through October and into November. What’s being talked about in Miller’s article is much more than that. If things continue the way Jefferies sees them, freight rates will likely remain high, though likely not as high as they are now, through the rest of the year and into 2021 unless the carriers mess up or government intervention steps in.

Click Here for Free Freight Rate Pricing

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Cyber Attack Hits International Maritime Organization https://www.universalcargo.com/cyber-attack-hits-international-maritime-organization/ https://www.universalcargo.com/cyber-attack-hits-international-maritime-organization/#respond Tue, 06 Oct 2020 19:36:54 +0000 https://www.universalcargo.com/?p=10188 Mark the International Maritime Organization (IMO) down as the latest international shipping industry player to be hit by cyber attack.

There are no indicators to say the cyber attack on the IMO is related to the cyber attack on CMA CGM, which I just wrote about in Universal Cargo's blog on Thursday. That is, there's no indication of relation other than they're both cyber attacks on major international shipping players in the same week.

While the IMO didn't exactly advertise about the attack on its website – something that would have been hard to do anyway with the website going down due to the attack – the organization did tweet about the cyber attack on Thursday:

"The interruption of service was caused by a cyber attack against our IT systems. IMO is working with @UN IT and security experts to restore systems as soon as possible, identify the source of the attack, and further enhance security systems to prevent recurrence," the organization said in the tweet.

Find out more by reading the full post in Universal Cargo's blog.

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Cyber AttackMark the International Maritime Organization (IMO) down as the latest international shipping industry player to be hit by cyber attack.

There are no indicators to say the cyber attack on the IMO is related to the cyber attack on CMA CGM, which I just wrote about in Universal Cargo’s blog on Thursday. That is, there’s no indication of relation other than they’re both cyber attacks on major international shipping players in the same week.

While the IMO didn’t exactly advertise about the attack on its website – something that would have been hard to do anyway with the website going down due to the attack – the organization did tweet about the cyber attack on Thursday:

“The interruption of service was caused by a cyber attack against our IT systems. IMO is working with @UN IT and security experts to restore systems as soon as possible, identify the source of the attack, and further enhance security systems to prevent recurrence,” the organization said in the tweet.

On Friday, the IMO tweeted that its website was back up and running:

After the website was back up and running on Friday, the IMO gave a bit more detail in a press release:

A number of IMO’s web-based services became unavailable on Wednesday 30 September. The systems impacted included the IMO public website and other web-based services.

The email system, including other Internal and external collaboration platforms, are working as normal. The platform used for virtual meeting with simultaneous interpretation has been unaffected and continued to function, without issue, during Wednesday’s Facilitation Committee (FAL) session and is expected to continue to function during today’s final FAL session.

The interruption of web-based services was caused by a sophisticated cyber-attack against the Organization’s IT systems that overcame robust security measures in place.

IMO has ISO/IEC 27001:2013 certification for its information security management system. IMO was the first UN organization to get this certification in 2015.

The IMO Headquarters file servers are located in the UK, with extensive backup systems in Geneva. The backup and restore system is regularly tested.

Following the attack the Secretariat shut down key systems to prevent further damage from the attack.

The Secretariat is working with international security experts to restore systems as soon as possible, to identify the source of the attack, and further enhance security systems to prevent recurrence.

Since yesterday (01/10/2020), service has been restored to the GISIS database; IMODOCS; and Virtual Publications. For security reasons, these systems were not available for a few hours early this morning but they are now back up and running.

Service will be restored to other web-based services as soon as possible and as safe as possible.

The Secretariat takes its responsibilities for cyber risk management and information security management extremely seriously and has acted immediately to address the cyber attack and to implement measures to ensure the risk of recurrence is minimised.

Cyber attack disruption to the IMO in addition to the four largest ocean freight carriers – Maersk, MSC, COSCO, and CMA CGM – all suffering major cyber attacks within the last few years adds to the disturbing trend of cyber attacks on international shipping companies that I wrote about last week.

Cargo Volume & Freight Rate Behavior in Next Blog

Meanwhile, interesting things are happening with ocean shipping demand and freight rates, especially in regards to transpacific shipping between China and the U.S. On Thursday, we’ll examine that and see if the outlook for the rest of the year and into 2021 is changing.

Click Here for Free Freight Rate Pricing

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Cyber Attack on CMA CGM Spotlights Alarming Problem in International Shipping https://www.universalcargo.com/cyber-attack-on-cma-cgm-spotlights-alarming-problem-in-international-shipping/ https://www.universalcargo.com/cyber-attack-on-cma-cgm-spotlights-alarming-problem-in-international-shipping/#respond Thu, 01 Oct 2020 20:29:03 +0000 https://www.universalcargo.com/?p=10186 Cyber attack is back in international shipping news this week, as CMA CGM became the latest major ocean freight carrier to fall victim to this disturbing trend.

All the Top Ocean Carriers Getting Attacked with Ransomware

Regular readers of Universal Cargo's blog may remember us posting about the world's largest ocean carrier by capacity, Maersk, getting hit by cyber attack a few years back. Maersk, however, is not the only other major ocean freight carrier that has recently been hit by a serious and disruptive cyber attack. Catalin Cimpanu outlines in an article for Zero Day Net that all four of the world's largest ocean carriers have now recently been hit by cyber attack:

APM-Maersk - taken down for weeks by the NotPetya ransomware/wiper in 2017.
Mediterranean Shipping Company - hit in April 2020 by an unnamed malware strain that brought down its data center for days.
COSCO - brought down for weeks by ransomware in July 2018.

On top of these, we also have CMA CGM, which today took down its worldwide shipping container booking system after its Chinese branches in Shanghai, Shenzhen, and Guangzhou were hit by the Ragnar Locker ransomware.

Find out more about this attack and alarming problem in the international shipping industry by reading the full article in Universal Cargo's blog.

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CMA CGM container ship

CMA CGM Hydra

Cyber attack is back in international shipping news this week, as CMA CGM became the latest major ocean freight carrier to fall victim to this disturbing trend.

All the Top Ocean Carriers Getting Attacked with Ransomware

Regular readers of Universal Cargo’s blog may remember us posting about the world’s largest ocean carrier by capacity, Maersk, getting hit by cyber attack a few years back. Maersk, however, is not the only other major ocean freight carrier that has recently been hit by a serious and disruptive cyber attack. Catalin Cimpanu outlines in an article for Zero Day Net that all four of the world’s largest ocean carriers have now recently been hit by cyber attack:

  1. APM-Maersk – taken down for weeks by the NotPetya ransomware/wiper in 2017.
  2. Mediterranean Shipping Company – hit in April 2020 by an unnamed malware strain that brought down its data center for days.
  3. COSCO – brought down for weeks by ransomware in July 2018.

On top of these, we also have CMA CGM, which today took down its worldwide shipping container booking system after its Chinese branches in Shanghai, Shenzhen, and Guangzhou were hit by the Ragnar Locker ransomware.

Cimpanu’s article is particularly interesting in that it points out how the shipping industry stands out when it comes to cyber attack.

This marks for a unique case study, as there is no other industry sector where the Big Four have suffered major cyber-attacks one after the other like this.

But while all these incidents are different, they show a preferential targeting of the maritime shipping industry.

“After Maersk was hit by the NotPetya crytper, I believe criminals realized the opportunity to bring a critical industry down, so payment of a ransom was perhaps more likely than other industries,” [Ken Munro, a security researcher at Pen Test Partners, a UK cyber-security company that conducts penetration testing for the maritime sector,] said.

Details About Cyber Attack on CMA CGM

The cyber attack on CMA CGM reportedly took place Monday. Today, on Thursday, the home page of the shipping company’s main website still prominently displays a block to inform customers that its eCommerce websites are temporarily unavailable.

CMA CGM website's cyber attack info block

It’s not surprising the block doesn’t actually mention cyber attack. Obviously, falling victim to cyber attack is not something CMA CGM would want to advertise. In fact, the carrier reportedly denied this was a cyber attack initially. However, the company soon confirmed it was a cyber attack, and a Lloyd’s list article shares more specifics about what CMA CGM is dealing with:

The cyber attack was launched using Ragnar Locker, a data encryption malware that has affected companies elsewhere. It is similar to an incident involving Portuguese energy firm EDP Renewables earlier this year.

In an email sent on Sunday and seen by Lloyd’s List (below), the hacker requested the French carrier to contact it within two days “via live chat and pay for the special decryption key”.

The Lloyd’s List article even included the below image of the ransom notice CMA CGM received from the criminals responsible for this attack.

CMA CGM ransom letter

CMA CGM ransom letter

CMA CGM did share publicly that it was hit by cyber attack. On Monday, CMA CGM published a news release:

The CMA CGM Group (excluding CEVA Logistics) is currently dealing with a cyber-attack impacting peripheral servers.

As soon as the security breach was detected, external access to applications was interrupted to prevent the malware from spreading.

Our teams are fully mobilized and access to our information systems is gradually resuming.

The CMA CGM network remains available to the Group’s customers for all booking and operation requests.

An investigation is underway, conducted by our internal experts and by independent experts.

A new communication will be issued at the end of the day.

Yesterday, CMA CGM posted the following update:

The CMA CGM Group continues to be fully mobilized to restore all its information systems.

Since the cyberattack, we have maintained our electronic booking solutions via INTTRA and via a manual form.

Today, the back-offices (Shared Services Centers) are gradually being reconnected to the network thus improving the bookings’ and documentation’s processing times.

We suspect a data breach and are doing everything possible to assess its potential volume and nature.

Our technical teams, alongside independent experts, are continuing the investigation.

Updates will be provided regularly as the situation evolves.

Quick Conclusion

It turns out the post Universal Cargo published on Tuesday titled Reasons Why Supply Chain Risk Management Is More Important Than Ever Before was even more apt than we realized when we accepted the guest article submission. Cyber security, not surprisingly, was even one of the supply chain risks that came up in the article.

Of course, the international shipping industry is not merely a giant industry on its own, but the vast majority of indsutries and economies around the world depend upon it. It’s an old stat, but 90% of the world’s goods are transported by ship. That means when an ocean freight carrier is attacked, many outside of the industry can potentially also fall victim.

Obviously, this reinforces shippers’ need for cargo insurance, but it makes the target on the international shipping industry’s back larger. There’s more at stake when an ocean freight carrier is attacked than there typically would be when a large company in another industry is attacked.

Carrier after carrier, and the largest ones in the industry at that, falling victim to cyber attack makes it clear this industry needs an upgrade in protection against hacking, malware, and other forms of cyber attack to protect itself and you, the shippers whose businesses depend upon it.

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Will Transpacific Shipping Demand Be Strong Into 2021? https://www.universalcargo.com/will-transpacific-shipping-demand-be-strong-into-2021/ https://www.universalcargo.com/will-transpacific-shipping-demand-be-strong-into-2021/#respond Thu, 24 Sep 2020 20:06:44 +0000 https://www.universalcargo.com/?p=10179 Transpacific shipping is strong right now. Despite predictions by experts earlier in the year that 2020 would see no international shipping peak season, we have had and are in a strong one. Will transpacific demand continue to be strong in the upcoming months or will we see it fall off as soon as a couple weeks from now? Greg Miller put forward evidence that transpacific shipping demand will remain strong through the rest of the year and even into 2021.

Check out that evidence, other explanations for it, and how transpacific shipping demand in 2020's peak season compares to typical years by reading the full article in Universal Cargo's blog.

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shipping containers for import exportTranspacific shipping is strong right now. Despite predictions by experts earlier in the year that 2020 would see no international shipping peak season, we have had and are in a strong one. Will transpacific demand continue to be strong in the upcoming months or will we see it fall off as soon as a couple weeks from now? Greg Miller put forward evidence that transpacific shipping demand will remain strong through the rest of the year and even into 2021.

Strong Shipping Container Orders Could Mean Strong Demand Into 2021

Miller reported in an FreightWave article:

Watch the containers to see which way the economic winds will blow. How many are ordered, for when and for how much. And if you do, you’ll see that box demand is strong — not just through year-end, but into 2021.

Three of the largest container-equipment lessors — Triton (NYSE: TRTN), Textainer (NYSE: TGH) and CAI International (CAI) — conducted virtual presentations for institutional investors over the past week, hosted by Keefe, Bruyette & Woods (KBW). Notes on those presentations provided to FreightWaves by KBW paint a rosy picture of consumer demand.

“Triton expects to see sustained heightened activity through the fourth quarter, while demand could remain strong through the Chinese New Year [in mid-February 2021],” reported KBW.

A handful of producers in China build almost all of the world’s containers. “At this point, factories are now full through January and are taking orders for February and March delivery,” KBW said, reporting on Triton’s presentation.

“Based on indications from customers [shipping lines], demand looks like it is going to continue into the first quarter,” speakers said in the Textainer and CAI presentations.

This certainly sounds good for international cargo shipping demand for October, November, December, and the beginning months of 2021. I definitely don’t think demand is suddenly going to drop off to nothing in these months, but there could be other factors affecting shipping container orders beyond shipping demand (which undoubtedly factors in).

Other Causes for Heightened Container Orders

Since March (and even before), carriers have had problems getting shipping containers back where they’re needed. Much of that was caused by the hundreds of sailings ocean freight carriers blanked (cancelled). Additionally, limited hours at ports and governmental shutdowns and restrictions placed on businesses made it difficult for shippers to return shipping containers.

On March 5th, we posted about shippers being hit with coronavirus-related detention fees when shippers weren’t able to give containers back on time for reasons beyond their control.

Currently, carriers are experiencing container shortages. That was no surprise after all the blanked sailings and problems getting containers back followed by a strong peak season. It’s not surprising that when carriers experience container shortages they would increase container orders.

An additional factor to consider is how well carriers have done in 2020. They turned a year in which they were projected to lose billions into the most profitable year they’ve had in recent memory. Carriers did this largely by shrinking capacity below market demand by blanking so many sailings through their alliances and driving freight rates up to record numbers. When businesses do well, they’re in a better position to invest in assets they need, such as shipping containers.

I don’t want to throw a wet blanket on indications of continued strong demand for transpacific shipping and international shipping in general. I just also see indications pointing to this being a strong peak season year with demand patterns we could expect from traditional shipper behavior.

2020 Peak Season Shipping Behavior Vs. Typical Years

In a typical year, demand decreases in the first week of October when the Chinese Golden Week takes place. Often, the Golden Week marks the end of the peak season. Or the beginning of the end as demand begins to drop. However, there are really strong years when demand remains strong through October, even extending the peak season into November.

2020 is obviously an abnormal year. There is, however, still demand created during these traditional peak season months by retailers preparing for the holiday season. On top of that, businesses are reopening, and that plays a factor into current demand. There’s also been a shift to more online shopping, which creates demand for international shipping and has been a big factor in making international shipping demand stronger than expected for many months in 2020.

August and September are traditionally the biggest months of the peak season. Some think October will be just as strong as this year. I’ve already said in previous posts I don’t believe October cargo volume will be as high as September’s. For shippers, that should mean 2020’s historic rise of freight rates should finally peak and start coming down. Carriers’ unprecedented control of capacity, of course, will have something to say on that front. However, none of that is to say October’s demand is or will be bad.

Right now, looking at Universal Cargo’s import/export sales numbers, October shipment numbers are sitting a little less than halfway between July and August’s shipment numbers. And there’s still time for that to grow some more. Typically, the peak season gets going in earnest somewhere between the latter part of July and the beginning of August. So while July, not surprisingly, saw some growth from June, Universal Cargo’s shipment numbers saw a much bigger jump from July into the full peak season month of August this year, increasing by almost 80% more shipments.

September was even better than August, which wouldn’t be abnormal. Now that October is almost here, seeing its shipments decline from September but not all the way down to July numbers is not at all out of line with seasonal demand behavior either.

Still, shipping demand is solid enough to make me consider this a strong peak season that does not come to an abrupt halt with October. There are just over 33% more shipments scheduled for October than Universal Cargo saw for July. While there’s still room for October shipment growth, we’re currently looking at just over 25% fewer shipments than August and a little more than 40% fewer shipments than Universal Cargo saw in September.

To me, that indicates we’ve likely seen the peak of the peak season with numbers starting to come back down in October, as would normally be expected. Demand is still not bad, and Miller’s reporting on container orders does give some hope that as we hit the slow international shipping months, especially the early months of 2021, the market demand won’t go as low as it often does.

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FMC & Chinese Regulators Address Ocean Carriers About Freight Rates https://www.universalcargo.com/fmc-chinese-regulators-address-ocean-carriers-about-freight-rates/ https://www.universalcargo.com/fmc-chinese-regulators-address-ocean-carriers-about-freight-rates/#respond Tue, 22 Sep 2020 19:53:01 +0000 https://www.universalcargo.com/?p=10176 It looks like the practices of ocean carriers during the pandemic and the resulting record-high freight rates have caught the attention of American and Chinese maritime regulatory authorities.

Last week (on Wednesday, September 16th), the Federal Maritime Commission (FMC) held a closed door meeting regarding ocean freight trade lanes and the actions of ocean freight carriers, both individually and as carrier alliances, during the pandemic.

The FMC's announcement gave carriers a warning, but Chinese regulators went a step further. Find out about both the FMC and China's actions and how they may affect the international shipping industry by reading the full article in Universal Cargo's blog.

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It looks like the practices of ocean carriers during the pandemic and the resulting record-high freight rates have caught the attention of American and Chinese maritime regulatory authorities.

FMC Warns Carriers

Ocean Freight PortLast week (on Wednesday, September 16th), the Federal Maritime Commission (FMC) held a closed door meeting regarding ocean freight trade lanes and the actions of ocean freight carriers, both individually and as carrier alliances, during the pandemic.

After the meeting, the FMC published the following:

Market trends in trade lanes serving the United States and actions taken by both individual ocean carriers and global alliances in response to COVID-19 and related impacts to the shipping industry were the topics of today’s non-public meeting of the Federal Maritime Commission.

The FMC regularly holds meetings to receive updates on international trade, the container shipping industry, and analysis of carrier agreement monitoring activities. The agency has heightened its scrutiny of markets, individual ocean carriers, and the three global carrier alliances in response to the unusual circumstances and challenges created by the COVID-19 pandemic. Today’s meeting focused on those developments.

Specifically, the Commission received detailed reports that addressed trends in spot rates, longer term service contracts, utilization of equipment, blanked sailings, revenue trends, the policies of individual carriers and global alliances for service changes, and what notice must be provided to the FMC when there are blanked, cancelled, or amended voyages.

The FMC is actively monitoring for any potential effect on freight rates and transportation service levels, using a variety of sources and markers, including the exhaustive information that parties to a carrier agreement must file with the agency.

If there is any indication of carrier behavior that might violate the competition standards in section 6(g) of the Shipping Act, the Commission will immediately seek to address these concerns with the carriers. If necessary, the FMC will go to federal court to seek an injunction to enjoin further operation of the non-compliant alliance agreement.

The last paragraph serves as a warning to carriers that the FMC will take carriers to federal court over violations of anti-competitive practices that violate the Shipping Act of 1984. Potentially, such action could disrupt the carrier alliances that now dominate ocean freight shipping.

The summary of the section in question of the Shipping Act states, “Section 6(g) sets forth the standard under which the Commission may seek an injunction against a substantially anticompetitive agreement.”

Would the FMC Really Halt a Carrier Alliance?

It seems unlikely the FMC would seek an injunction from the federal government that would order the discontinuation of one or more of the three carrier alliances dominating ocean shipping. The FMC has not stood in the way of these competition-shrinking vessel sharing agreements from the beginning of carriers’ moves toward them.

Even when the three largest container shipping carriers in the world (at the time) – Maersk, MSC, and CMA CGM – formed what was to be the first major carrier alliance, the P3 Network, the FMC approved it. Ironically, it was China that halted the anticompetitive creation of the P3 Network.

Of course, no regulator stopped Maersk and MSC from dropping CMA CGM and forming the 2M Alliance or CMA CGM joining the Chinese-government-owned COSCO and other carriers to form the Ocean Alliance. In fact, government regulators did nothing to stop all the carriers across the ocean freight industry from consolidating the market until there were just three carrier alliances dominating it all. That’s what enabled carriers to drop capacity below market demand and make freight rates soar with an onslaught of general rate increases (GRIs) in the middle of a pandemic.

Shippers, especially those who have been accusing carriers of unfair practices, are likely happy to see the FMC take notice of the situation; however, they’re more likely to see some actual effect on the situation by China’s recent action.

China Regulators Ahead of FMC Again

China went a step further than the FMC’s closed door meeting by actually questioning carrier representatives in a surprise meeting on the Friday before the FMC even issued its warning. Greg Miller reports in an American Shipper article:

The China Ministry of Transportation and Communication questioned liner reps in a special meeting last Friday.

In the aftermath of that sit-down, concerns have been raised about carriers’ ability to implement general rate increases (GRIs) and “blank” (cancel) sailings while averting future government backlash.

“The meeting in Shanghai was not something anybody was expecting,” said Alan Murphy, CEO of Sea-Intelligence, in an interview with FreightWaves. “A lot of people had plans for the weekend that got canceled. Nobody was ready for that.

“I think the carriers are now mulling how best to address this,” he continued. “The carriers are not going to blindly ignore the Chinese authorities. You can’t do that.”

Will Freight Rates to Drop in Response?

At least one GRI has been cancelled since that meeting between carrier reps and Chinese regulatory officials. It happened last week. Mark Szakonyi reported in a Journal of Commerce (JOC) article:

Two container lines executives — one with a Europe-based and the other with an Asia-based carrier — said Cosco Shipping has agreed to suspend a Sept. 15 general rate increase.

Frankly, Cosco dropping a GRI in apparent response to China isn’t that significant, especially when you consider it is a Chinese-state-owned shipping company. Additionally, this is very late in the season for regulators to take much credit for dropping freight rates anyway.

Despite some experts predicting freight rates could still rise significantly in the upcoming two to four weeks, even climbing by as much as one thousand five hundred dollars per forty foot container according to one, we’re approaching the Chinese Golden Week, which usually marks a decline in peak season shipping, even not uncommonly marking the end of international shipping’s peak season in general.

I already wrote in a blog post last week that I’m not as bullish on October freight rates and volumes as many industry experts are. Cargo volume and freight rates don’t look to be particularly low, but the month does not appear, at least to me based mainly on shipment numbers I’m seeing from Universal Cargo, like they will continue to soar at September levels. I expect to see volume somewhere between July and August levels, which isn’t bad. However, the volume drop should be enough to result in rates finally beginning to come back down.

Therefore, if China talked to carriers about putting a cap on freight rates, as some of the mixed reports of what China said to carriers in the meeting a couple weeks ago claim, that’s something of a non-issue. Maintaining these record high freight rates would be hard enough. Getting them to continue to grow would be quite a task for carriers.

Of course, blanked sailings has been how carriers have most managed to make freight rates so high this year. Some are saying China put pressure on carriers not to blank sailings. In fact, the language some are using (while others deny it) is that China instructed carriers not to blank sailings. Lately, carriers have been adding capacity to the market. However, there already have been blanked sailings announced for the upcoming Chinese Golden Week.

According to Greg Miller’s Loadstar article, some have said that China asked carriers to reinstate blanked sailings during Golden Week. If carriers actually do feel pressure from China and don’t cancel sailings during China’s Golden Week and beyond to the point they’d like, we could see a rapid fall in rates with capacity well outpacing demand.

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Container Shortages, Record Freight Rates, & Fees, Oh My! https://www.universalcargo.com/container-shortages-record-freight-rates-fees-oh-my/ https://www.universalcargo.com/container-shortages-record-freight-rates-fees-oh-my/#respond Tue, 15 Sep 2020 22:27:18 +0000 https://www.universalcargo.com/?p=10172 The peak season continues to be strong, especially for transpacific ocean freight shipping. And surprise, surprise, equipment shortages are reported to have come with the strong peak season.

Mike Wackett writes in a Loadstar article:

All the major carriers are experiencing equipment shortages at Asian ports with popular 40ft high cubes in particular short supply at Chinese depots.

Experts are now expecting the strong peak season, and shortages along with it, to continue into October, past Chinese Golden Week (October 1st-7th) when the peak season often, though certainly not always, slows down.

I'm not as bullish on October volume numbers as many of the experts are. Find out why by reading the full article in Universal Cargo's blog.

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The peak season continues to be strong, especially for transpacific ocean freight shipping. And surprise, surprise, equipment shortages are reported to have come with the strong peak season.

Mike Wackett writes in a Loadstar article:

All the major carriers are experiencing equipment shortages at Asian ports with popular 40ft high cubes in particular short supply at Chinese depots.

Experts are now expecting the strong peak season, and shortages along with it, to continue into October, past Chinese Golden Week (October 1st-7th), when the peak season often, though certainly not always, slows down.

Wackett adds later in his article:

And with surprising robust export demand, particularly on the transpacific, expected to continue into the traditional slack season and beyond the Chinese Golden Week holiday, the equipment shortage looks unlikely to improve for some time.

I’m not as bullish on October volume numbers as many of the experts are. That may seem surprising as I was predicting we would have a peak season when many of the experts were saying 2020 would not see a peak season at all. Or maybe it’s not surprising that I’d go against the grain. My expectation of decreased volume in October, however, is largely based on the anecdotal evidence of Universal Cargo seeing much less demand and far fewer sales for importing and exporting cargo in October so far as compared to what we saw for September in the lead-up to this month.

That is not uncommon demand behavior for this time of year. However, with expert expectations seemingly being higher than what I’m seeing, it is possible there could be a demand drop higher than many in the industry are expecting. If this takes carriers, which have been adding capacity to ocean freight lanes lately, by surprise, it could cause some relief from the record high freight rates shippers are currently seeing.

However, U.S. shippers shouldn’t expect to save money on shipments, especially imports from China, yet. More fees are being implemented by carriers. Yes, on top of record high rates, all the general rate increases (GRIs) carriers have implemented in recent months, and the no-roll premiums they’ve added for shippers to purchase to ensure their cargo doesn’t get rolled back to later sailings. Many shippers feel they have no choice but to pay these additional no-roll premiums, adding fire to accusations that carriers are profiteering off the pandemic.

The new fees some carriers are charging now are “box priority fees.” Yes, that sounds much like the no-roll fees. Pay more money to not exactly guarantee but prioritize your goods for getting a shipping container right away. Add that to the list of things shippers feel suspicious about in the middle of a pandemic when ocean freight carriers are managing enormous profits instead of the gigantic losses that were projected at the beginning of the year.

That suspicion from shippers, and freight forwarders as well, is clear when Wackett introduces box priority fees in his article:

… one Chinese forwarding source said equipment availability was more about “what you are prepared to pay”, with some lines introducing a “box priority fee”, payable at the time of booking.

Going all the way back to March when the novel coronavirus was just starting to hit America, U.S. shippers have been dealing with fees related to the pandemic and equipment. Then it was detention fees as carriers cancelled sailings and it was made extremely difficult for shippers to return containers to ports.

At the moment, freight rates are still climbing. I do think the peak is finally almost here. October will be an interesting month watch.

Click Here for Free Freight Rate Pricing

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2020 Is Great Year for Ocean Carriers as Freight Rates Break Records https://www.universalcargo.com/2020-is-great-year-for-ocean-carriers-as-freight-rates-break-records/ https://www.universalcargo.com/2020-is-great-year-for-ocean-carriers-as-freight-rates-break-records/#respond Thu, 10 Sep 2020 20:27:43 +0000 https://www.universalcargo.com/?p=10170 How about a positive headline for 2020? It's a great year for ocean freight carriers in the international shipping industry. Transpacific cargo volume continues to surge here in the peak season, and carriers have managed keep freight rates strong all year.

Now, this might not sound like particularly good news for U.S. shippers who are paying record high freight rates to import goods... Did I say record high freight rates? Record shattering container rates is the way Greg Miller puts it in the headline of an American Shipper article. However, despite these high rates (but also part of the reason for them), demand from U.S. shippers is strong so far this peak season, and that does signal the U.S. economy is not all gloom and doom, despite the damage done by the novel coronavirus pandemic. That probably shouldn't be too shocking given how strong the economy was before the virus struck.

To find out about cargo demand behavior, record breaking freight rates, the deficit with China, and how this will all be affected by the 2020 presidential election, read the full article in Universal Cargo's blog.

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Ocean Freight PortHow about a positive headline for 2020? It’s a great year for ocean freight carriers in the international shipping industry. Transpacific cargo volume continues to surge here in the peak season, and carriers have managed keep freight rates strong all year.

Now, this might not sound like particularly good news for U.S. shippers who are paying record high freight rates to import goods… Did I say record high freight rates? Record shattering container rates is the way Greg Miller puts it in the headline of an American Shipper article. However, despite these high rates (but also part of the reason for them), demand from U.S. shippers is strong so far this peak season, and that does signal the U.S. economy is not all gloom and doom, despite the damage done by the novel coronavirus pandemic. That probably shouldn’t be too shocking given how strong the economy was before the virus struck.

Cargo Demand and Carrier Behavior

Both myself and guest writers have brought up repeatedly in Universal Cargo’s blog how online shopping has spiked during the pandemic. This shopping has replaced, and at points outpaced, lost in-store retail shopping, helping result in the strong peak season we’re seeing now.

Initially, there was a drop in shipping demand as governments around the world ordered shutdowns in reaction to COVID-19. Carriers blanked (cancelled) sailings by the hundreds. However, they shrunk capacity below what shipping volume actually demanded and raked in big profits, resulting in accusations of profiteering off of the pandemic. When reliability declined as a result of all their cancellations and carriers started charging shippers no-roll premiums to ensure cargo won’t get rolled back to later sailings, those profiteering accusations felt justified.

However, with projections that carriers would lose $23 billion in 2020 because of the pandemic, and because of the unpredictable nature of how it would play out, it’s not hard to imagine carriers being surprised at demand outpacing the low supply they created. Carriers certainly have been adding capacity back in response to increasing demand, not only re-adding sailings but activating idle ships. Miller reported in his aforementioned American Shipper article:

The inactive fleet peaked at over 12% of the total fleet in late May. According to Alpahliner, it was down to just 3.4% as of Aug. 31

Transpacific Rates Way Outpacing Asia-Europe Freight Rates

All this added capacity to shipping lanes hasn’t kept freight rates from soaring, especially for the transpacific lanes. According to Alphaliner, Asia-US container shipping is three times more profitable for carriers than Asia-North Europe container shipping right now. Gavin van Marle lays it out in an article on the Loadstar:

According to new analysis from Alphaliner, after the Shanghai-Los Angeles SCFI spot rate reached a record $3,758 per feu on Friday, North American shippers and forwarders are now paying carriers $0.64 per nautical mile.

In contrast, North European importers are paying $0.19 per nautical mile for a shipment from Shanghai to Antwerp, the lowest of the nine routes covered by the Shanghai Containerised Freight Index.


It added that all nine SCFI routes had seen rates rise last week as shippers rushed to get shipments out of China before the Golden Week holiday begins early next month, with Shanghai-Lagos the second-most expensive route, at $0.58 per nautical mile, and Shanghai-Melbourne third, at $0.48 per nautical mile.

Meanwhile, the second- and third-cheapest routes are Shanghai-Genoa and Shanghai-Dubai, at $0.25 and $0.32 per nautical mile, respectively.

U.S. Demand for Chinese Goods & the Trade Deficit

Of course, demand is generally seen as one of strongest factors, if not the strongest factor, in the high transpacific rates we’re seeing right now. Despite COVID-19 originating in Wuhan, China, U.S. demand for Chinese goods is strong. In fact, for the moment, the U.S. trade deficit is back on the rise.

Ian Putzger writes in the Loadstar:

US west coast ports, and rail and road links to the interior, are currently struggling with a surge of imports from Asia, mostly from China.

Despite all the fiery rhetoric and tariffs, the flow of goods from China to the US has not slowed down.

If anything, US appetite for goods from China has increased: the country’s trade surplus with the US reached $34.2bn in August – the highest level since November 2018, when the trade conflict ramped up.

US imports overall have continued to outpace exports in recent months. Exports increased 11.8% from June to July, ending up 15.9% below their July 2019 tally, while imports maintained their upward momentum to reach pre-pandemic levels.

As Putzger calls President Trump’s words, including his threats to impose “big tax” on businesses importing goods from China rhetoric (even though it’s a strategy the president has already more than proven his willingness to implement), Putzger’s statement that the flow of goods from China has not slowed down is not altogether correct.

Imports from China did slow down with President Trump’s tariffs. That’s part of the reason you have to go back two years to see the surplus at the level it is at with the current surge, and the deficit hasn’t returned all the way to pre-trade-war levels.

Putzger, however, does have a point in that imports from China are surging now, and the trade deficit is moving back up. Unfortunately, with the media pumping fear of the pandemic as hard as ever and the political left fighting economic reopening efforts, the U.S. is well behind China in reopening business. That’s not to mention the pandemic completely interrupted the Phase One Trade Deal between the U.S. and China, and China had a large head start in fighting the Wuhan coronavirus, as it struck there first and the Chinese government tried to keep the virus a secret for as long as possible.

It would be hard to imagine the deficit continuing to decrease under those circumstances. However, it’s not hard to imagine the deficit beginning to fall again in the near future. But, obviously, there is a big factoring event coming up that U.S. citizens play a role in determining how the U.S. government will approach the deficit.

Future Approach to U.S. Trade Deficit Highly Dependent on Election

President Trump from Library of Congress

Image: President Trump from Library of Congress

The policies of whomever wins the presidential election in November will result in very different approaches to America’s deficit with China.

Former Vice President Joe Biden by Gage Skidmore on flickr

Image: Former Vice President Joe Biden by Gage Skidmore on flickr

Under the Obama/Biden Administration, globalization was prioritized, moving production away from the U.S. It is expected similar policy approaches would happen under a Biden/Harris Administration. If the Trump/Pence Administration continues, President Trump’s focus on reducing the deficit will remain, with his policies of tariffs and making U.S. business taxes competitive with the rest of the world to continue bringing production back to the U.S.

A Biden Administration likely means rising deficit. A continued Trump administration likely means more shrinking of deficit.

The former would likely mean higher demand on imports from China, which brings higher freight rates, however, the latter means higher tariffs, which also means higher costs on importing goods. Of course, the latter is better for the creation of U.S. products and jobs, but U.S. exporters could see more retaliatory tariffs on products they ship to other countries.

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Transpacific Freight Rates Hitting Record Highs https://www.universalcargo.com/transpacific-freight-rates-hitting-record-highs/ https://www.universalcargo.com/transpacific-freight-rates-hitting-record-highs/#respond Tue, 01 Sep 2020 17:56:12 +0000 https://www.universalcargo.com/?p=10166 Online shopping is way up. Physical shops and stores around the country have reopened or are reopening. This is the time of year retail typically stocks for holiday shopping, and this year is no different. Peak season shipping is strong. Carriers continue to add capacity to trade routes. Those carriers are also adding general rate increases (GRIs) on cargo shipping. It all adds up to transpacific freight rates continuing to climb. In fact, they're climbing all the way to record highs.

U.S. shippers probably much preferred it back in 2016 when we were blogging about record low freight rates or 2018 when it looked like rates might hit record lows again or last year's falling freight rates during the peak season. Since then, it has seemed like nothing but climbing rates.

Find out all about it by reading the full article in Universal Cargo's blog.

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Shipping Containers at Port Importing ExportingOnline shopping is way up. Physical shops and stores around the country have reopened or are reopening. This is the time of year retail typically stocks for holiday shopping, and this year is no different. Peak season shipping is strong. Carriers continue to add capacity to trade routes. Those carriers are also adding general rate increases (GRIs) on cargo shipping. It all adds up to transpacific freight rates continuing to climb. In fact, they’re climbing all the way to record highs.

U.S. shippers probably much preferred it back in 2016 when we were blogging about record low freight rates or 2018 when it looked like rates might hit record lows again (before they started climbing) or last year’s falling freight rates during the peak season. Since then, it has seemed like nothing but climbing rates.

Big Freight Rate Increases

Shippers definitely won’t like Mike Wackett’s headline over on the Loadstar’s logistics news site, which reads, “Shippers’ ocean freight budgets ‘about to explode’ as rates hit new highs.” The article lives up to the title.

Wackett shares data from the Shanghai Containerized Freight Index (SCFI), showing gains for the transpacific and Asia-Europe tradelanes in terms of freight rates. They combine for an increase of 7% on the week, continuing a trend of growth in freight rates, taking rates to 54% higher than they were a year ago.

Looking specifically at the transpacific side, concerning U.S. shippers the most, SCFI shows container spot rates from Asia to the U.S. East Coast (USEC) have jumped to an amount more than 5% higher than the highest freight rates ever reached in 2018, when rates saw major increases during the trade war. For Asia to U.S. West Coast (USWC), rates on the tradelane reached (another) record high, which were 125% higher than freight rates were at the same time last year.

My prediction back in July that freight rates had not reached their peak but would climb higher during the peak season, which many predicted would not even happen this year, certainly became true. Hopefully, my other prediction that carriers would add capacity to trade lanes, which they’ve done, that would be too high for moments of unexpected cargo volume drops, resulting in moments of lower freight rates for shippers to take advantage of will also come true.

September GRIs

Carriers have no intention of letting freight rates fall or even of staying pat with the record high freight rates they’ve reached so far. In September, shipping lines plan to push rates even higher with more GRIs.

Freightos CMO Eytan Buchman is quoted in Wackett’s Loadstar article as saying, “… carriers will likely introduce another China-US GRI for September, which would be the sixth in just three months.”

Actually, there are GRIs that officially go into effect today, September 1st, and others are set for September 15th as well. Carriers have a way of lining up GRIs with each other, which is a consternation for another blog, but let’s look at the biggest and most trend-setting of carriers, Maersk, for GRIs going into effect today. Maersk’s September 1st GRI for Far East to USWC is $400 and Far East to USEC is $600 per 40 ft. container.

Conclusion

While carriers have managed to maintain GRIs and higher freight rates well so far in 2020, how well they’ll be able to do so from this point on will be something to watch. Adding capacity creates risk of any sudden demand drops putting significant downward pressure on rates. Additionally, the risk of a carrier undercutting freight rates to make a grab for market share remains present.

Still, carriers have done an impressive job through 2020 of controlling rates, pushing them significantly higher than last year’s, and generating profit in a year that was expected to be difficult for them. As a result, the year has been more difficult for shippers, many already dealing with forced closures of businesses, having to cope with higher costs on shipping.

Click Here for Free Freight Rate Pricing

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Containerships & Optimism Return to Ocean Freight Market https://www.universalcargo.com/containerships-optimism-return-to-ocean-freight-market/ https://www.universalcargo.com/containerships-optimism-return-to-ocean-freight-market/#respond Thu, 27 Aug 2020 19:18:30 +0000 https://www.universalcargo.com/?p=10162 If you go on Facebook and scroll through, you'll probably find a lot of people bemoaning 2020 as a terrible year. For ocean freight carriers, on the other hand, 2020 has been one of the greatest years in their history. Indeed, it's continuing to get better for them, causing ocean freight shipping lines, which have had many years of struggle with profitability, to now have soaring confidence.

Despite depressed demand through the first half of the year because of novel coronavirus related shutdowns around the world, carriers managed to be very profitable by tightly controlling capacity, largely thanks to blank – or cancelled – sailings. In a Journal of Commerce (JOC) article, Greg Knowler shared Sea-Intelligence Maritime Consulting data that showed more than 400 sailings were cut from schedules in April and May. This helped carriers maintain general rate increases (GRIs) and keep freight rates high.

Also helping carriers increase profitability was the oil market crashing amidst the pandemic. Carriers' costs decreased dramatically when it comes to fuel bunkers, and this after already having charged shippers clean fuel surcharges for the implementation of IMO 2020, requiring ships to sail within a sulfur emission cap on fuel of 0.5%.

Now we're in the peak season for international shipping, and despite predictions there would be no peak season this year because of COVID-19, cargo volume is surging. This is, of course, good news for carriers. They are now looking at the ocean freight market much more optimistically than early in the year. Their behavior shows it.

Find out how by reading the full article in Universal Cargo's blog.

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cargo ship internationa shippingIf you go on Facebook and scroll through, you’ll probably find a lot of people bemoaning 2020 as a terrible year. For ocean freight carriers, on the other hand, 2020 has been one of the greatest years in their history. Indeed, it’s continuing to get better for them, causing ocean freight shipping lines, which have had many years of struggle with profitability, to now have soaring confidence.

Despite depressed demand through the first half of the year because of novel coronavirus related shutdowns around the world, carriers managed to be very profitable by tightly controlling capacity, largely thanks to blank – or cancelled – sailings. In a Journal of Commerce (JOC) article, Greg Knowler shared Sea-Intelligence Maritime Consulting data that showed more than 400 sailings were cut from schedules in April and May. This helped carriers maintain general rate increases (GRIs) and keep freight rates high.

Also helping carriers increase profitability was the oil market crashing amidst the pandemic. Carriers’ costs decreased dramatically when it came to fuel bunkers, and this after already having charged shippers clean fuel surcharges for the implementation of IMO 2020, requiring ships to sail within a sulfur emission cap on fuel of 0.5%.

Now we’re in the peak season for international shipping, and despite predictions there would be no peak season this year because of COVID-19, cargo volume is surging. This is, of course, good news for carriers. They are now looking at the ocean freight market much more optimistically than early in the year. Their behavior shows it.

Idle Ships Put Back in Service

Carriers have reinstated cancelled services and they’re putting idle ships back on the water.

Mike Wackett reports in an article for the Loadstar:

Some 90 containerships, equating to over 600,000 teu of capacity, have found employment in the past month as carriers continue to reinstate blanked sailings and add extra loaders on routes.

The article highlights Alphaliner data of laid-up ships hitting an all-time high at the end of May, “during the peak of the pandemic,” of 551 idle ships, which had 2.72 million TEU (twenty-foot equivalent units) of capacity, representing 11.6% of the global fleet. Then at July 20th, there were 313 laid-up ships, which combined for a capacity of 1.56 million TEU for 6.6% of the world’s fleet.

That brings us to now, when employment of idle ships has continued and Mike Wackett reports Alphaliner as saying:

“The inactive containership fleet dipped below the 1m teu mark for the first time in 2020, as carriers resumed several suspended services on the Far East-North America and Far East-Europe routes. Shipping lines also reduced the number of planned skipped sailings and implemented summer peak season extra loops,” said Alphaliner.

Rising Capacity Raising Questions

Solid – if not strong – peak season demand and carrier confidence has the world’s biggest shipping companies adding capacity to international shipping routes again, which raises questions.

The beginning of 2020 showed carriers have the ability to control and reduce capacity to not only manage during drops in demand but also excel during them. However, when carriers become bullish with capacity in response to strong performance and increased demand, will they be able pull in the reigns and drop capacity quickly when demand drops? In the past, that has been a problem.

Not uncoincidentally, carriers have often undercut each other’s prices and made grabs for market share. Can they resist returning to this behavior?

Right now, freight rate prices are strong and demand is strong. What kind of dips will we see between now and October when the peak season typically ends? Adding capacity when times were good often led to crashing freight rates and large losses when market growth slowed. It will be interesting to watch carrier behavior and freight rates in relation to shipping demand through the end of 2020 and into 2021 to get some of the answers to the questions raised as capacity rises.

Click Here for Free Freight Rate Pricing

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Explosion by the Port of Corpus Christi https://www.universalcargo.com/explosion-at-the-port-of-corpus-christi/ https://www.universalcargo.com/explosion-at-the-port-of-corpus-christi/#respond Tue, 25 Aug 2020 17:43:36 +0000 https://www.universalcargo.com/?p=10160 While it wasn't anywhere near as big as the devastating blast at the Port of Beirut a few weeks ago, a tragic explosion interrupted a U.S. port at the end of last week. On Friday, a dredging ship hit an underwater pipeline near the Port of Corpus Christi, resulting in the ship going up in flames.

Here's a local news video from KETKnbc:

Four people were killed and six more were injured. Those who were killed were initially classified as missing. Two of their bodies were recovered on Saturday, after which the search for the last two victims (who were presumed dead) was briefly suspended before the last two bodies were recovered on Monday.

Find out all about it by reading the full article in Universal Cargo's blog.

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While it wasn’t anywhere near as big as the devastating blast at the Port of Beirut a few weeks ago, a tragic explosion interrupted a U.S. port at the end of last week. On Friday, a dredging ship hit an underwater pipeline near the Port of Corpus Christi, resulting in the ship going up in flames.

Here’s a local news video from KETKnbc:

YouTube Video

Four people were killed and six more were injured. Those who were killed were initially classified as missing. Two of their bodies were recovered on Saturday, after which the search for the last two victims (who were presumed dead) was briefly suspended before the last two bodies were recovered on Monday. All this according to an article by Alexandria Rodriguez in the Corpus Christi Caller Times.

Rodriguez also described in her article what happened with the survivors:Waymon L Boyd Dredge Fire

Emergency crews aided eight people after the explosion. Six were taken to area hospitals, four by the Corpus Christi Fire Department and two by the Coast Guard. Two others refused treatment. Five people were then taken to hospitals in San Antonio for further treatment, officials said.

There has been much dredging at ports in recent years to make them capable of receiving the much larger containerships ocean freight carriers have been putting in the water. Corpus Christi, Texas is home to many oil refineries as well as ocean port terminals, likely making it a particularly dangerous area for dredging. However, dredging requires care around any ports where it is done.

According to a Reuters article, “The U.S. Coast Guard closed the Inner Harbor from Harbor Bridge inward of the Port of Corpus Christi ship channel.”

Ship traffic has since been allowed to start moving through the channel again, as the Port of Corpus Christi included the following in an new release update on the situation yesterday (Monday, August 24th):

The Captain of the Port has modified the safety zone in the Corpus Christi Ship Channel to allow vessel traffic throughout the Inner Harbor with restrictions. For the most recent Marine Safety Information Bulletins regarding the safety zone restrictions visit the Coast Guard’s Homeport site.

The Port of Corpus Christi’s news release on the situation from the day before shares the work being done to fight ecological damage from the event:

A piece of the dredging vessel was located in the middle of the channel and is in the process of being removed safely.

The Texas General Land Office, state lead for coastal oil spill response, is on scene working to identify and protect Texas natural resources and ensure the spill is contained.

Approximately 1,600 gallons of diesel fuel has been removed from the water and 680 gallons of diesel fuel/water was skimmed overnight.

Lawsuits have already been filed by families of those killed from the ship hitting the pipeline as well as by at least one of the men injured in the resulting fire. Alexandria Rodriguez reported on this in a separate Corpus Christi Caller Times article, in which she wrote, “Three of the lawsuits are seeking $50 million apiece. One is seeking $10 million.”

At Universal Cargo, our thoughts, prayers, and condolences certainly go out to the families who lost someone in this tragic event as well as those hurt by it.

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Crazy Pandemic Peak Season & Freight Rates https://www.universalcargo.com/crazy-pandemic-peak-season-freight-rates/ https://www.universalcargo.com/crazy-pandemic-peak-season-freight-rates/#respond Thu, 20 Aug 2020 21:54:56 +0000 https://www.universalcargo.com/?p=10156 A month ago, Greg Miller reported in an American Shipper article that not only had freight rates finally stopped rising but they also had dropped a bit. He posed the question, "Is this a new plateau or the start of a longer-term reversal as liner alliances bring more capacity back online?" I predicted a third option: freight rates would climb to even greater heights here in the traditional peak season. Boy, was I right.

Many predicted 2020 would not have a peak season at all because of economic downturn caused by the novel coronavirus pandemic. I predicted we would still have a peak season; however, I didn't realize it would be as big as it is right now.

Seeing Universal Cargo's shipment count spike by 82% in August from the month before was enough for me to believe the peak season was real. However, that was only anecdotal evidence, and Universal Cargo could be an outlier in the international shipping industry. Last week, a new American Shipper article from Greg Miller confirmed that what I was seeing in Universal Cargo's freight forwarding business was not an anomaly – there is a peak season happening in the importing and exporting business, and it's strong.

Ironically, the pandemic is part of why we're seeing such a strong peak season right now. Find out exactly what's happening with international shipping and freight rates by reading the full article in Universal Cargo's blog.

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Evergreen Containership at Port of BaltimoreA month ago, Greg Miller reported in an American Shipper article that not only had freight rates finally stopped rising but they also dropped a bit. He posed the question, “Is this a new plateau or the start of a longer-term reversal as liner alliances bring more capacity back online?” I predicted a third option: freight rates would climb to even greater heights here in the traditional peak season. Boy, was I right.

Many predicted 2020 would not have a peak season at all because of economic downturn caused by the novel coronavirus pandemic. I predicted we would still have a peak season; however, I didn’t realize it would be as big as it is right now.

Seeing Universal Cargo’s shipment count spike by 82% in August from the month before was enough for me to believe the 2020 peak season is really happening. However, that was only anecdotal evidence; Universal Cargo could be an outlier in the international shipping industry. Last week, a new American Shipper article from Greg Miller confirmed that what I was seeing in Universal Cargo’s freight forwarding business was not an anomaly – there is a peak season happening in the importing and exporting business, and it’s strong.

Pandemic Strengthening Peak Season?

Ironically, the pandemic is part of why we’re seeing such a strong peak season right now. Miller writes:

China-U.S. West Coast container rates continue their astonishing climb. Not because of too little vessel supply, but because of too much import demand. U.S. import demand that is not surging despite of coronavirus, but because of it.

That’s actually how he starts his article titled “Trans-Pacific ‘going crazy’ as demand defies pandemic pessimists.”

The two big factors supporting this claim of demand surging because of the pandemic are increased e-commerce and the importing of personal protective equipment, or PPE.

We’ve alluded to the increase in online shopping creating shipping demand in a few blogs, but Miller’s article really explains that increase by quoting Nerijus Poskus, vice president and global head of ocean freight at digital freight forwarder Flexport, who calls the current dynamics unprecedented:

“Our clients are selling more. They’re selling more online. And that’s why they’re shipping more into the U.S. Of the top 100 clients of Flexport, 80% of them are growing year-on-year and assumedly they’re gaining market share,” reported Poskus.

“People are still buying. Even unemployed people. They’re getting government support so they still have money. They’re no longer spending on restaurants, haircuts, gas and commuting. But they have the cash so they’re just buying more things. And they’re buying more things online.

“There are also many people leaving the cities, myself included. So, for example, I had to buy a lawnmower and all of the kinds of things for the home that I didn’t need in the city. I believe there are many people like me.”

It shouldn’t be a surprise that online shopping is so strong given how well the economy was doing before the pandemic struck. It is no more surprising that the pandemic suddenly created an enormous demand for PPE. Poskus is quoted in the article as saying he thinks 5-10% of shipping volume is PPE.

Soaring Freight Rates

We all know that increased demand puts upward pressure on prices. Add to that decreased reliability causing shippers to pay for premium services, to the point of feeling like their cargo is being held ransom, in order to keep their shipments from being rolled to later sailings, and shippers are paying very high prices for their international shipping right now.

Indeed, According to Miller’s article, freight rates we’re seeing right now are record setting. To get a feel for how transatlantic rates are soaring, Miller writes that freight rates on the China-West Coast route were up 137% from March 1st. While China-East Coast shipping did not have freight rate increases to the same level, the route did see a significant bump of 36%. Poskus expects rates to continue to rise, according to the article.

Will Freight Rate Drops Happen?

The one prediction I made that hasn’t come to fruition in all of this so far is that carriers won’t be able to perfectly manage capacity throughout the peak season and until the end of the year, causing some rate volatility, especially during dips of volume, that creates moments of opportunity for shippers to get much lower rates.

I’ve said we’ll see surges and drops in volume, and we’ve certainly seen surges. Those surges have caused carriers to add capacity to routes. Miller actually reported in his article that carriers have “reversed” the strategy of blank sailing that so marked the second quarter of the year that carriers were accused of price gouging through artificially dropping supply below demand:

“Most void sailings have now been reinstated,” said Alphaliner in its weekly report. In addition, carriers have launched five new regular services, adding 35,000 twenty-foot equivalent units (TEUs) in weekly capacity. On top of that, carriers have deployed multiple “extra loaders” — additional one-off sailings.

Copenhagen-based Sea-Intelligence estimates that carriers have increased their Asia-West Coast third-quarter capacity by 13.1% year-on-year, marking “the strongest capacity growth in a decade.”

This significant addition of capacity makes freight rates vulnerable to big drops should a sudden or unexpected dip in volume hit. Shippers should definitely keep an eye on the spot market. Of course, we’ll be doing that for you here at Universal Cargo.

The last section of Miller’s article focuses on theories and forecasts of when this shipping surge will end. “I don’t think this is sustainable,” Poskus in it. He thinks after the first week of October, things will slow down. Even if he’s right and carriers are making the same prediction, would they be able to bring capacity back down in time to keep freight rates from crashing?

In the past, when carriers have made large increases to capacity, they have struggled to bring capacity back under control to match demand. They have gotten better at that over the last couple of years, after ocean shipping has firmly become controlled by carrier alliances. But that control over capacity should be tested by the end of the year.

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Did You Know 21 Ships & Crews Have Been Abandoned So Far in 2020? https://www.universalcargo.com/did-you-know-21-ships-crews-have-been-abandoned-so-far-in-2020/ https://www.universalcargo.com/did-you-know-21-ships-crews-have-been-abandoned-so-far-in-2020/#respond Tue, 11 Aug 2020 21:09:19 +0000 https://www.universalcargo.com/?p=10143 The massive explosion at the Port of Beirut last week shined a light on a problem in international shipping that has long been hidden in the shadows. The blast – which killed 171 people and counting, wounded over 6,000 people, and displaced 300,000 from their homes, according to the Deccan Herald – reportedly was caused when a fire ignited 2,700 tons of ammonium nitrate that had been stored in a warehouse. That ammonium nitrate was put there years earlier when the m/v Rhosus, the ship transporting the explosive chemical compound, was abandoned along with its crew.

Joshua Keating outlined what happens when ships are abandoned in an article published by Slate:

Usually once a ship is abandoned, it will be “arrested” by the port—this is what happened with the Rhosus—and will be held until the shipowner can make good, or until the maritime courts of the country where the ship is located get involved and auction it off, using some of the proceeds to pay the wages of the crew. But crew members can lose their rights to these wages if they abandon their vessel, leading to extreme cases like the crew of the Azraqmoiah, who were stranded for 18 months off the cost of the United Arab Emirates in 2019 with little food or water. The cargo of these ships is typically not auctioned off, so in cases like that of the Rhosus, where the cargo’s owner loses interest in it, jurisdiction can be a little hazy.

If there is a usual procedure when ships are abandoned, this can't be an isolated event with the Rhosus. Find out the shocking truth about ship and seafarer abandonment in Universal Cargo's blog.

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Ships Coming to PortThe massive explosion at the Port of Beirut last week shined a light on a problem in international shipping that has long been hidden in the shadows. The blast – which killed 171 people and counting, wounded over 6,000 people, and displaced 300,000 from their homes, according to the Deccan Herald – reportedly was caused when a fire ignited 2,700 tons of ammonium nitrate that had been stored in a warehouse. That ammonium nitrate was put there years earlier when the m/v Rhosus, the ship transporting the explosive chemical compound, was abandoned along with its crew.

Joshua Keating outlined what happens when ships are abandoned in an article published by Slate:

Usually once a ship is abandoned, it will be “arrested” by the port—this is what happened with the Rhosus—and will be held until the shipowner can make good, or until the maritime courts of the country where the ship is located get involved and auction it off, using some of the proceeds to pay the wages of the crew. But crew members can lose their rights to these wages if they abandon their vessel, leading to extreme cases like the crew of the Azraqmoiah, who were stranded for 18 months off the cost of the United Arab Emirates in 2019 with little food or water. The cargo of these ships is typically not auctioned off, so in cases like that of the Rhosus, where the cargo’s owner loses interest in it, jurisdiction can be a little hazy.

If there is a usual procedure when ships are abandoned, this can’t be an isolated event with the Rhosus. In fact, Keating’s article goes on to alert readers that this is a major problem in the international shipping industry:

In his 2019 book The Outlaw Ocean, New York Times reporter Ian Urbina argues that abandonment is as serious a problem as flashier stories like piracy, writing, “if the public discovered that an industry had a de facto policy of looking the other way as workers in factories around the world were routinely locked behind chained doors for weeks or sometimes months, with no freshwater or food, unpaid and given no sense of when they might be permitted to go home, would there be immediate outrage? … Not at sea.”

We’ve blogged about dangers, including the still major problem of piracy, to ships, crews, and cargo in the past, but we’ve never blogged about ship abandonment. This is an issue that has sailed under my radar and, unfortunately, under the radar of many in the international shipping industry.

Occasionally, stories about ghost ships circulate. From the sound of that, you’d think these are just tall tales from sailors like those of mermaids or the leviathan or the edge of the world; however, ghost ships are real. They’re not haunted ships but empty ones, floating abandoned on the seas.

Here’s a video of one such ghost ship washing up in Ireland.

YouTube Video

Ghost ships like this tend to happen when ships run out of fuel or have mechanical failure, causing the crew to abandon ship or be rescued from it, leaving the ship to float alone at sea. These floating ghost ships are interesting and problematic; however, it’s ships along with their crews abandoned at ports that is the more common problem.

The International Maritime Organization (IMO) has a whole page devoted to seafarer abandonment where it lays out some alarming statistics on the topic:

On 31 December 2018, there were 366 abandonment incidents listed in the database since it was established in 2004, affecting 4,866 seafarers. Of those incidents, 175 cases were resolved, 77 cases were disputed and 52 cases were inactive. There were still 52 unresolved cases.

From 2011 to 2016, the number of cases per year ranged from 12 to 19. In 2017 and 2018, the cases reported increased drastically. In 2017, there were 55 cases reported, 14 of which were resolved that year and eight were resolved in 2018. In 2018, the total number of reported cases was 44 and of these, 15 cases had so far been resolved as of 31 December 2018. Of the cases reported in 2018, eight involved flag States which had not ratified MLC, 2006, as follows: Bahrain, the Democratic Republic of the Congo, Dominica, the United Republic of Tanzania and the United Arab Emirates.

I took a look at the International Labour Organization’s (ILO) database on reported incidents of abandonment of seafarers to find, shockingly, that there have been 21 reported cases of abandoned ships so far in 2020.

Ship and seafarer abandonment is clearly a persisting problem. Most U.S. shippers are unlikely to be directly affected by ship/seafarer abandonment as the large carriers shipping goods between the U.S. and its largest trade partners don’t tend to abandon their ships. Additionally, ships sailing under the American flag very rarely appear on the list. The only two such cases I saw were both resolved.

However, there have been a number of cases where the ships and crews were abandoned at U.S. ports. During an extremely busy time, this could have some impact at the port. If an abandoned ship was actually meant to call on the port, either delivering or picking up goods, loading and unloading cargo would obviously be interrupted, affecting the importers and/or exporters who were supposed to have their goods transported on the ship.

Of course, it is the crew members of abandoned ships who suffer the most in these situations. Shippers should be insured, and the loss or delay of goods would be hard to compare with the plight of the abandoned ship’s crew. When ships are abandoned, the crew is not paid and can be stranded on ships as they watch their food and supplies run out.

Similarly, many seafarers have been stranded on ships during the novel coronavirus pandemic. Seafarers stranded out on ships because of the COVID-19 situation have gotten some attention during this pandemic – we might dig into that a bit more in future blogs – however, the stories of seafarers abandoned during regular times have been largely ignored.

Unfortunately, the crews of ships, even though they are integral to the global economy, tend to be unseen and unheard. Those seafarers in distress from abandonment deserve better.

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Beirut Explosion: How Did 2,700 Tons of Ammonium Nitrate Get Warehoused at the Port? https://www.universalcargo.com/beirut-explosion-how-did-2700-tons-of-ammonium-nitrate-get-warehoused-at-the-port/ https://www.universalcargo.com/beirut-explosion-how-did-2700-tons-of-ammonium-nitrate-get-warehoused-at-the-port/#respond Thu, 06 Aug 2020 20:06:28 +0000 https://www.universalcargo.com/?p=10141 On Tuesday, the Port of Beirut was blown off the map by an explosion so big it shook the entire capitol city of Lebanon. The death toll is still growing, but last I saw, 135 people were reported killed and over 5,000 were injured. Videos of the blast hit social media streams, and they're absolutely terrifying.

The huge explosion is being linked to a warehouse at the port storing over 2,700 tons of ammonium nitrate, one of the world's most highly used chemical fertilizers but also the main component in many types of mining explosives according to a Gabriel da Silva written article in Scientific American.

It's hard to grasp just how much ammonium nitrate 2,700 tons is, especially without a point of reference. Helpfully, Kim Link-Wills actually gives that point of reference in an American Shipper article:

Two tons of ammonium nitrate was used in the 1995 Oklahoma City bombing that brought down a federal building and killed 168 people.

Unless you're too young, twenty-five years has probably not been long enough for you to forget how devastating that Oklahoma City explosion was. And this explosion in Beirut happened with well over a thousands times more ammonium nitrate. The incident is obviously still under investigation, but the story news sources like Reuters is reporting is that welding work set off fireworks that started the large fire that triggered the ammonium nitrate in the warehouse.

Read about how that ammonium nitrate got there in Universal Cargo's blog.

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On Tuesday, the Port of Beirut was blown off the map by an explosion so big it shook the entire capitol city of Lebanon. The death toll is still growing, but last I saw, 135 people were reported killed and over 5,000 were injured. Videos of the blast hit social media streams, and they’re absolutely terrifying.

The huge explosion is being linked to a warehouse at the port storing over 2,700 tons of ammonium nitrate, one of the world’s most highly used chemical fertilizers but also the main component in many types of mining explosives according to a Gabriel da Silva written article in Scientific American.

It’s hard to grasp just how much ammonium nitrate 2,700 tons is, especially without a point of reference. Helpfully, Kim Link-Wills actually gives that point of reference in an American Shipper article:

Two tons of ammonium nitrate was used in the 1995 Oklahoma City bombing that brought down a federal building and killed 168 people.

Unless you’re too young, twenty-five years has probably not been long enough for you to forget how devastating that Oklahoma City explosion was. And this explosion in Beirut happened with well over a thousands times more ammonium nitrate. The incident is obviously still under investigation, but the story news sources like Reuters is reporting is that welding work set off fireworks that started the large fire that triggered the ammonium nitrate in the warehouse.

While da Silva writes in the Scientific American article that it is “relatively difficult for a fire to trigger an ammonium nitrate explosion,” he points out that this did happen before with the Tianjin explosion back in 2015. Indeed, this feels all too similar to when I was writing in Universal Cargo’s blog about that explosion at a port warehouse five years ago. But what’s strange is the story of Beirut’s explosion actually starts before the explosion in Tianjin ever happened.

On September 23rd, 2013, the motor vessel Rhosus, under the Moldovian flag, sailed from Batumi Port, Georgia for the destination of Biera in Mazambique. Onboard was 2,750 tons of ammonium nitrate. The ship never reached its destination. An October, 2015 issue of the Arrest News details the story of the ship and how all that ammonium nitrate, which turned out to be a ticking time bomb, ended up in that warehouse:

En route, the vessel faced technical problems forcing the Master to enter Beirut Port. Upon inspection of the vessel by Port State Control, the vessel was forbidden from sailing. Most crew except the Master and four crew members were repatriated and shortly afterwards the vessel was abandoned by her owners after charterers and cargo concern lost interest in the cargo. The vessel quickly ran out of stores, bunker and provisions.

The Arrest News is published by ShipArrested.com, which is a network of top maritime lawyers around the world with the mission “to connect the world’s maritime law experts to guide you through swift ship arrests and releases.” This is important, as the ship master and crew members who were trapped onboard m/v Rhosus contacted ShipArrested.com for legal help getting home. Lawyers from the network, working on a humanitarian basis, successfully put in a legal application for the sailors to disembark and return home. The dangerous ammonium nitrate played a large role in the application and crew being granted freedom:

“Emphasis was placed on the imminent danger the crew was facing given the ‘dangerous’ nature of the cargo still stored in ship’s holds.”

Lebanon authorities decided that dangerous cargo shouldn’t be left at sea on an abandoned ship, so it was moved to the warehouse.

Owing to the risks associated with retaining the Ammonium Nitrate on board the vessel, the port authorities discharged the cargo onto the port’s warehouses.

It was 2014 when the ammonium nitrate would have been warehoused at the port. There it sat for six years, a giant bomb waiting to be ignited, until Tuesday. We know how the ammonium nitrate got there. It raises the question of why it stayed there.

Port officials are under house arrest during the investigation of the explosion, according to CBS News, and many are angry with powerful Lebanese officials and political factions, including the Hezbollah, for allowing this known and dangerous situation to go unchecked to a devastating effect. But there are more issues this raises than negligence by the rulers and government of Lebanon.

A major international shipping issue this spotlights is the practice of shipowners to abandon ships and crew. It turns out this is not an isolated, one-time occurrence. Most people, including international shipping professionals, don’t know this practice takes place. That’s something we’ll look into next week in Universal Cargo’s blog.

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ONE Posts 3,000% Profit Increase, Signalling Peak Season & Raising Shippers’ Eyebrows https://www.universalcargo.com/one-posts-3000-profit-increase-signalling-peak-season-raising-shippers-eyebrows/ https://www.universalcargo.com/one-posts-3000-profit-increase-signalling-peak-season-raising-shippers-eyebrows/#respond Tue, 04 Aug 2020 21:48:13 +0000 https://www.universalcargo.com/?p=10139 Reporting is starting to come in on the first quarter of the financial year for carriers. Ocean Network Express (ONE), formed a few years ago when Japan's big three ocean carriers – K Line, MOL, and NYK – joined forces, is having a good year so far. Actually, that might be an understatement, as Mike Wackett reports in the Loadstar that ONE's FY2020 Q1 profits are up 3,000% on last year:

Japanese carrier Ocean Network Express (ONE) has kicked off the quarterly financial results reporting season with a $167m net profit for April-June.
...
Additionally boosted by a 20% fall in the price of bunkers, to $348 per ton, and surcharges levied on shippers for low-sulphur fuel, ONE’s profit for the quarter soared by more than 3,000% over the $5m for the same quarter of 2019.

This story means more than merely an ocean carrier is doing well in the middle of a pandemic. This story acts as something of an update on recent Universal Cargo blogs on topics that are very pertinent to U.S. shippers. There are signals here relating to my predictions about the peak season and reasons to make shippers even more suspicious that carriers are profiteering as they've been accused of in 2020.

Find out all about it by reading the full post in Universal Cargo's blog.

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Ocean Network Express ONE cargo shipReporting is starting to come in on the first quarter of the financial year for carriers. Ocean Network Express (ONE), formed a few years ago when Japan’s big three ocean carriers – K Line, MOL, and NYK – joined forces, is having a good year so far. Actually, that might be an understatement, as Mike Wackett reports in the Loadstar that ONE’s FYQ1 profits are up 3,000% on last year:

Japanese carrier Ocean Network Express (ONE) has kicked off the quarterly financial results reporting season with a $167m net profit for April-June.

Additionally boosted by a 20% fall in the price of bunkers, to $348 per ton, and surcharges levied on shippers for low-sulphur fuel, ONE’s profit for the quarter soared by more than 3,000% over the $5m for the same quarter of 2019.

This story means more than merely an ocean carrier is doing well in the middle of a pandemic. This story acts as something of an update on recent Universal Cargo blogs on topics that are very pertinent to U.S. shippers. There are signals here relating to my predictions about the peak season and reasons to make shippers even more suspicious that carriers are profiteering as they’ve been accused of in 2020.

Peak Season Is Happening

Many predicted there would be no peak season this year because of shutdowns and economic downturn caused by the recession. While I agreed we would likely not see a peak season as big as we often do, I predicted we still would have a peak season in both a blog about what the peak season will look like and another about whether 2020’s high freight rates have reached their peak.

In the latter, I predicted the peak season would be strong enough and carriers disciplined enough that we had not yet seen the highest freight rates of the year. As August gets underway, it appears that at the very least my prediction of us having a peak season is coming to fruition with ONE signaling a recovery in volume.

A Journal of Commerce (JOC) article about ONE’s profits specifically credits the carrier with “saying pandemic-hit volumes are rebounding from the 20 percent drop it saw in the April through June period.”

Wackett’s Loadstar article quoted above credits ONE with indicating that 20% drop is being cut in half:

The carrier said “demand is gradually coming back” in the current quarter to approximately 10% less than last year.

Yes, we’re looking at less volume than last year, but volume is increasing and the gap is shrinking. As volume increases here in the peak season, ONE indicates it plans to continue to operate in a disciplined manner as the Loadstar article continues with:

ONE’s action plans include “a focus on operational excellence by closer collaboration with terminal operators, improvements in vessel stowage planning along with empty repositioning optimisation”.

If other carriers do likewise, which we’ve seen throughout 2020 (and even to a degree in 2019), we should see freight rates at least be maintained, if not rise, through the peak season that is already seeing an increase in cargo volume.

Profiteering Suspicions Only Increase

ONE has done nothing to quell shippers’ suspicions of profiteering from carriers during this pandemic. In fact, there are a couple things brought up in Wackett’s article that make shippers even more suspicious.

In the first quote above from the Loadstar article, Wackett writes:

Additionally boosted by a 20% fall in the price of bunkers, to $348 per ton, and surcharges levied on shippers for low-sulphur fuel, ONE’s profit for the quarter soared by more than 3,000% over the $5m for the same quarter of 2019.

Oil plunged to record depths this year. In fact, at one point something happened that has never happened before: oil hit negative prices. Despite this, carriers like ONE have still imposed low sulfur fuel surcharges on shippers.

Some shippers are outraged that not only did lower oil costs never get passed on to them, but they also paid fuel surcharges for expected fuel cost increases that never came to pass and that was never remediated.

Coming in to 2020, IMO 2020 was the story of the year. The new requirement of a 0.5% sulfur cap on the fuel emissions of ships had carriers charging fees for the more expensive, cleaner fuel before the rule even came into effect. Shippers were already suspicious of the fees, and a controversy was brewing. Then the pandemic struck, and oil prices crashed. Shippers argue clean fuel surcharges have been unfairly charged and were nothing more than an increase on rates under a false guise.

There’s one more item in Wackett’s article that likely raises shippers’ eyebrows:

From April, [ONE] suspended publication of its monthly liftings statistics for Asia-Europe and the transpacific, but has included the quarterly data in its results.

Shippers have long, and rightfully so, complained about carriers’ lack of transparency. Then, in the midst of a pandemic, posting a year-on-year 3,000% profit increase, ONE becomes less transparent rather than more forthcoming.

I still don’t want to go so far as to say carriers are profiteering. I do believe all the alliances they’ve been allowed to form over the last several years has allowed them to manipulate the market. I’ve been leery of allowing the consolidation of the industry through alliances as regulatory authorities around the globe have done. I haven’t been afraid to say regulators should rethink allowing carrier alliances.

All that being said, carriers could go a long way in alleviating shippers’ fears by being more transparent. The less transparent carriers are – and, traditionally, carriers have been extremely opaque in their practices – the more suspicious shippers will become over things like dropping capacity below demand, making large profits during a pandemic, and levying fuel surcharges when the oil market sinks.

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Rail Surcharges on Cargo Hit Shippers https://www.universalcargo.com/rail-surcharges-on-cargo-hit-shippers/ https://www.universalcargo.com/rail-surcharges-on-cargo-hit-shippers/#respond Thu, 30 Jul 2020 16:40:51 +0000 https://www.universalcargo.com/?p=10131 Surcharges aren't only the tools of ocean freight carriers. Rail companies can slap surcharges on cargo movement too. Indeed, U.S. shippers, right now, are seeing surcharges and gate restrictions from rail companies. Ari Ashe reports in the Journal of Commerce:

Pressure is building on the networks of Western US freight railroads, as reflected by Union Pacific Railroad (UP) assessing a $500 surcharge on certain shipments and BNSF Railway imposing gate restrictions at a Los Angeles terminal due to a surge of volume driven by e-commerce retailers.

In a media release entitled Addressing Intermodal Service Challenges in Southern California that BNSF published this week, the railway company actually calls the surge a "sharp rise in volume" that has happened over the past several weeks.

Find out what this surge in cargo volume actually is and more about the rail surcharges and gate restrictions by reading the full article in Universal Cargo's blog.

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cargo train BNSFSurcharges aren’t only the tools of ocean freight carriers. Rail companies can slap surcharges on cargo movement too. Indeed, U.S. shippers, right now, are seeing surcharges and gate restrictions from rail companies. Ari Ashe reports in the Journal of Commerce:

Pressure is building on the networks of Western US freight railroads, as reflected by Union Pacific Railroad (UP) assessing a $500 surcharge on certain shipments and BNSF Railway imposing gate restrictions at a Los Angeles terminal due to a surge of volume driven by e-commerce retailers.

In a media release entitled Addressing Intermodal Service Challenges in Southern California that BNSF published this week, the railway company actually calls the surge a “sharp rise in volume” that has happened over the past several weeks.

Aren’t Shipping Volumes Down Not Up?

In a couple blog posts this month about what the 2020 peak season will look like and if we’ve seen the peak of freight rates, I predicted that we will see a peak season with increased cargo volume despite many predicting otherwise. However, this sharp rise in volume BNSF is talking about is not 2020’s peak season rise.

While, in a strong peak season year, we can see international shipping’s peak season start early in July instead of being concentrated only in the months of August and September, that is not what is actually happening at the moment. And don’t let early peak season surcharges from ocean freight carriers make you think otherwise. The increased rail movement of goods is actually driven by e-commerce.

E-commerce has spiked over the last few months because of shelter-in-place or lockdown policies that were put into place because of the COVID-19 pandemic. The cargo moved by train is both domestic and international. Domestic shipping in particular has greatly increased as consumers are either unwilling or unable to go to brick and mortar stores during the pandemic. Anecdotally, I know many people who have done a fair amount of online shopping just to find items to help entertain their kids, who are unable to go out and play with friends like they would normally be able to do.

[Contact Universal Cargo to see how we can help you with your business’s domestic shipping.]

For those of you who prefer data-driven evidence over anecdotal evidence (and who doesn’t?), Ari Ashe shared, in a separate JOC article from the one quoted above, MasterCard research that paints a pretty good picture of how much e-commerce has grown during this pandemic:

According to Mastercard, more money was spent online in April and May than the last 12 Cyber Mondays combined. US e-commerce spending grew 93 percent in May year over year, the credit card company’s research arm said.

Will Rail Surcharges & Gate Restrictions Last?

Like ocean freight carriers do, rail companies can sometimes have trouble making surcharges stick. However, there’s a good chance we’ll continue to see both surcharges and gate restrictions from the railways over the next several months.

Many factors make consumers more likely to do shopping online that they would have gone to stores for in the past. The reopening of the economy is waffling back and forth. Many restrictions on businesses are being lifted only to be put back in place. Schools in many regions are not opening right away. The mainstream media and Democrats are emphasizing the most negative and fear-inducing sides of the pandemic in order to win the upcoming election.

Additionally, we are now hitting the traditional peak season months of international shipping, and, as I stated earlier, we should still see an increase in the importing and exporting of goods in preparation for the holiday seasons. Then, of course, we’ll see rails experience that seasonal increase in demand for the moving of goods from Black Friday and Cyber Monday through Christmas.

For those of you who are interested, I’ve included the full text of BNSF Railway’s press release about intermodal service challenges in Southern California below.

Click Here for Free Freight Rate Pricing

Addressing Intermodal Service Challenges in Southern California

BNSF operating teams are responding to service challenges affecting some intermodal shipments. Freight shipment demands, as influenced by the COVID-19 pandemic, have been volatile. In the past several weeks, a sharp rise in volume, primarily driven by e-commerce business, created some imbalances in resource availability at key BNSF hubs, including our Los Angeles-Hobart Intermodal Facility.

In response, BNSF has been re-deploying a significant number of locomotives, railcars and personnel to affected locations, particularly in Southern California. Gate allocations were put in place at Hobart to ease congestion and will be reduced as conditions improve at the facility. Off-site parking for both inbound and outbound shipments is being fully utilized, and we have also diverted some freight to alternate facilities in San Bernardino and Barstow with available capacity.

These actions, as they continue being implemented, are expected to provide the necessary capacity to meet demand levels. With similar adjustments made to meet increased freight demands at our Alliance Intermodal Facility in Fort Worth and facilities in the Chicago area, service performance has started to improve. The challenges of keeping pace with this volume surge, however, will require continued flexibility and collaboration.

Please contact your BNSF sales representative or BNSF Customer Support with any questions or concerns. We appreciate your business and will provide additional updates on our progress.

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Have These High Freight Rates Reached Their Peak? https://www.universalcargo.com/have-these-high-freight-rates-reached-their-peak/ https://www.universalcargo.com/have-these-high-freight-rates-reached-their-peak/#respond Wed, 22 Jul 2020 02:16:53 +0000 https://www.universalcargo.com/?p=10122 Ocean freight rates have been high in 2020. Extremely high. Ocean carriers have managed to hike freight rates in the middle of a global crisis when demand has been lower than normal by drastically decreasing capacity through blanked (cancelled) sailings. In fact, carriers have so effectively dropped supply artificially below demand – while tacking on general rate increases (GRIs), early peak seasons surcharges (PSSs), and even charges to protect cargo against being rolled to later shipments – that the shipping lines have been accused of profiteering from the pandemic.

Many shippers are exasperated as they've suffered delays and unfair fees because of all the blanked sailings while at some points paying more than double what freight rates were the year before. But it's possible shippers may have seen the worst of it. Have these high freight rates finally peaked? A small decline in freight rates here in July give hope that they may have.

Greg Miller wrote an American Shipper article last week highlighting that freight rates from China to the U.S. west coast (USWC) slipped by 4%. That's not a huge drop, especially when considering that those rates are still 65% higher than China-USWC freight rates were over the last two years, according to the article. However, the drop, small as it may be, comes as a bit of relief to shippers who have been watching freight rates increase, reaching a peak the week before.

As Miller reports this, he asks an interesting question:

Ocean container rates remain exceptionally high but may have finally hit their ceiling. Spot rates have not only stopped rising, they’ve pulled back by single digits. Is this a new plateau or the start of a longer-term reversal as liner alliances bring more capacity back online?

Unfortunately, there is a third possibility beyond the freight rates plateauing or starting a longer-term descent options Miller ponders. It's possible freight rates could start climbing again.

Read the full article for my prediction of how freight rates will behave as we move forward in 2020.

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Freight RatesOcean freight rates have been high in 2020. Extremely high. Ocean carriers have managed to hike freight rates in the middle of a global crisis when demand has been lower than normal by drastically decreasing capacity through blanked (cancelled) sailings. In fact, carriers have so effectively dropped supply artificially below demand – while tacking on general rate increases (GRIs), early peak seasons surcharges (PSSs), and even charges to protect cargo against being rolled to later shipments – that the shipping lines have been accused of profiteering from the pandemic.

Many shippers are exasperated as they’ve suffered delays and unfair fees because of all the blanked sailings while at some points paying more than double what freight rates were the year before. But it’s possible shippers may have seen the worst of it. Have these high freight rates finally peaked? A small decline in freight rates here in July give hope that they may have.

Greg Miller wrote an American Shipper article last week highlighting that freight rates from China to the U.S. west coast (USWC) slipped by 4%. That’s not a huge drop, especially when considering that those rates are still 65% higher than China-USWC freight rates were over the last two years, according to the article. However, the drop, small as it may be, comes as a bit of relief to shippers who have been watching freight rates increase, reaching a peak the week before.

As Miller reports this, he asks an interesting question:

Ocean container rates remain exceptionally high but may have finally hit their ceiling. Spot rates have not only stopped rising, they’ve pulled back by single digits. Is this a new plateau or the start of a longer-term reversal as liner alliances bring more capacity back online?

Unfortunately, there is a third possibility beyond the freight rates plateauing or starting a longer-term descent options Miller ponders. It’s possible freight rates could start climbing again.

Traditionally, this is the time of year freight rates do climb. The next two months are international shipping’s peak season. Actually, the peak season can stretch beyond August and September into October and even November as well as start early in July, depending on how strong that year’s peak season is. Normally, this is the time of year that shippers increase their importing activity (exporting to0, but generally to a lesser extent with U.S. shippers) in order to have stores and shelves stocked up for the back to school and holiday shopping seasons, especially the latter.

Despite predictions of decreased demand all through 2020, at the beginning of this month, I did predict international shipping would still have a peak season this year. I expect lower than normal volume but still an increase in shipping during these key months.

There has actually been an intermodal surge. However, most experts are very cautious about volume levels in the third quarter, during what are supposed to be the peak-seasoniest of peak season months, because of the unpredictability of responses to the pandemic and surges in cases of COVID-19 slowing down economic reopening efforts. Ari Ashe wrote a Journal of Commerce (JOC) article highlighting this cautious outlook, even as positive volume signs have taken place:

Despite a surge in intermodal demand since Memorial Day, J.B. Hunt Transport Services is remaining cautious on second-half volumes as it casts a wary eye on rising COVID-19 infection rates in the US.

While company executives cited positive demand conditions in intermodal rail and trucking since Memorial Day after a bleak April and May, they declined to provide guidance for the third quarter because of the economic uncertainty tied to the COVID-19 crisis.

Predicting what the global economy will do is never an easy thing. Experts often get it wrong and political agendas often sway predictions, especially concerning U.S. economic demand for importing and exporting within that global framework. On top of that, international shipping, especially in terms of freight rates but certainly in terms of demand as well, is always volatile. So how can we, in the middle of a pandemic and election year, even hope to answer the question of what will happen with freight rates in the upcoming months?

The simple answer: we can’t. However, while we can’t predict with certainty what freight rates will do, there are many factors we can look at to help avoid being shocked by what’s to come. Two factors we have to examine make it clear that we can’t rule out the third option that freight rates will do more climbing in the upcoming months.

Stronger Volume Than Predicted

shipping containers for import exportIt’s not surprising that predictions became very gloomy very quickly for international shipping when the novel coronavirus pandemic hit. Expectations were that international shipping volume would plummet. Certainly volume has decreased this year from what it would have been had there been no pandemic; however, volume has not fallen as much as predicted.

Ashe’s JOC article helps paint a picture of how expected volume and actual volume in 2020 are not lining up:

J.B. Hunt’s intermodal volumes were down 6 percent in April and 4 percent in May, but rose 5 percent in June on a year-over-year basis. 

In its first quarter call, J.B. Hunt said volume was “meaningfully down” through the first 15 days of April and that there was a chance second-quarter volumes would be down more than 10 percent versus 2019. That worst-case scenario didn’t materialize because of the strong uptick in June volume.


Combined laden imports into the ports of Los Angeles and Long Beach were up less than 0.5 percent year over year in June, according to PIERS, a sister product of JOC within IHS Markit. The Port of Los Angeles saw laden imports decline 6.1 percent to 369,304 TEU, but the Port of Long Beach saw inbound volume rise 8.7 percent to 332,722 TEU.

Stores closing down and many people not being able to work has certainly decreased volume. However, while in-person shopping has decreased, online shopping has increased. Perhaps online shopping, many businesses’ ability to adapt to allowing their employees to work from home, and trillions of dollars in government stimuli helped curb the expected decrease of demand for international shipping. Additionally, importing and exporting pandemic-related items like personal protection equipment (PPE) added volume too.

There’s reason to believe volume won’t be as strong during these upcoming peak season months as they would be in a “normal” year; however, stores are reopening and those big shopping seasons are on the way. We should expect some volume increase during these upcoming peak months. Increased demand typically puts upward pressure on freight rates.

There’s a question to ponder here: if the experts underestimated volume to this point, could they continue to do so through the rest of the year?

Carrier Discipline

cargo ship internationa shippingThe one thing giving carriers the benefit of the doubt of not profiteering from the pandemic is that volume or demand didn’t sink as low as experts predicted. The carriers did an exceptional job of removing capacity from trade routes in order to make supply closer to the projected demand. It could be argued that they did not intentionally sink supply under demand levels, demand just didn’t drop as low as expected.

Still, because all the major carriers are grouped into their alliances, they were basically able to coordinate their supply manipulation. That basically means the shipping industry is in an oligopoly situation. Without true competition in the market, carriers can control freight rates.

However, to maintain that freight rate control, carriers have to maintain discipline. It was not long ago that carriers would undercut each other’s freight rates or add competing capacity to shipping lanes that pushed freight rates down to record lows. Even in the recent years of just 3 carrier alliances controlling the oceans, carriers have fallen into rate wars while pushing toward being bigger, creating overcapacity. It is not inconceivable that the will power of one or two carriers breaks, starting rate wars that undercut all the progress they’ve made in raising freight rates.

Over the last couple years, unfortunately for shippers looking for lower rates, carriers have shown an impressive level of discipline to control capacity and rates. While I’m not willing to go so far as to say carriers definitely will maintain their discipline, they have finally showed themselves capable over an extended period of time (and during extra difficult periods between the pandemic and the U.S.-China trade war).

Prediction

While I want one of Miller’s options to be true that we’ve either seen the peak of freight rates in 2020 or that rates are about to go on a longer period of decline, I think we probably haven’t seen the peak of freight rates yet for the year.

It could be recency bias that makes me think carriers are likely to maintain discipline. For years, they appeared completely unable to do so. I wouldn’t even be surprised to see one of the biggest companies like Maersk, COSCO, or MSC purposely throw a wrench in the works by undercutting rates and adding capacity in order to take competitors’ market share and force some other carriers out of the market altogether. However, carriers are probably very happy to be pushing freight rates way up, setting themselves up to make billions when they were predicted to lose billions. It seems unlikely they’d want to mess up the good thing they have going for themselves right now.

Still, even working together as the carriers do in their alliances, I don’t think they’ll be able to manage perfect control over capacity in relation to demand throughout the rest 2020, and the peak season in particular. As unpredictable as this year is, I expect surges and drops in volume that will be impossible to see coming. While I think they’ll see more freight rate gains in the upcoming months, I believe there will be a couple moments when they react too strongly to volume increases and demand will fall suddenly under capacity, causing big drops in freight rates that they’ll have trouble covering with PSSs, GRIs, or some other fees like clean fuel surcharges. Of course, freight rate volatility is no new thing. Then again, it seems like it would be a pretty new thing in 2020 when we’ve pretty much only seen high freight rates.

Bottom line prediction: We haven’t seen the highest freight rates of the year yet, but volatility will give us moments of opportunity for much more reasonable rates.

Click Here for Free Freight Rate Pricing

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No-Roll Premiums Are Like Holding Cargo for Ransom https://www.universalcargo.com/no-roll-premiums-are-like-holding-cargo-for-ransom/ https://www.universalcargo.com/no-roll-premiums-are-like-holding-cargo-for-ransom/#respond Wed, 15 Jul 2020 02:06:44 +0000 https://www.universalcargo.com/?p=10120 No-roll premiums? What's that?

Hopefully, as a shipper, you've never heard of a no-roll premium. Unfortunately, many shippers are finding out about them right now as they're being forced to pay them. Maybe forced is too strong of a word. Let's go with coerced.

I usually try to be fairly neutral in these blog posts about international shipping news, but on this topic I can't be. This is disgusting. Importers and exporters shipping cargo from Europe to the Far East, the Far East to Europe, and from Asia to the U.S. are being hit with charges from carriers they should never see: no-roll premiums.

Read the full article in Universal Cargo's blog to find out what no-roll premiums are and what's happening with them.

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Import Shipping ContainersNo-roll premiums? What’s that?

Hopefully, as a shipper, you’ve never heard of a no-roll premium. Unfortunately, many shippers are finding out about them right now as they’re being forced to pay them. Maybe forced is too strong of a word. Let’s go with coerced.

I usually try to be fairly neutral in these blog posts about international shipping news, but on this topic I can’t be. This is disgusting. Importers and exporters shipping cargo from Europe to the Far East, the Far East to Europe, and from Asia to the U.S. are being hit with charges from carriers they should never see: no-roll premiums.

What Are No-Roll Premiums

If you’re an international shipper, you probably know all about general rate increases (GRIs) and peak season surcharges (PSSs) from ocean freight carriers.  However, there’s a good chance you’re less familiar with no-roll premiums. That one doesn’t even have an acronym international shipping professionals would likely recognize. I guess I could make call the charge an NRP, but I wouldn’t give it the satisfaction.

A no-roll premium is when carriers charge shippers money – extra money – to ensure their cargo doesn’t face rollover onto a later sailing. It’s basically a rate increase through threat of delaying your shipment.

You know what they call holding on to something that belongs to someone else unless they pay you more money than you’re owed? Apparently, they call that a no-roll premium. I call it ransom.

Shippers Paying $400-$500 No-Roll Premiums

Sam Whelan reported in an article published by the Loadstar:

Shipping lines are using rollovers to bump up freight rates, ‘forcing’ the vast majority of shippers to pay no-roll premiums.

According to Cas Pouderoyen, head of ocean freight at Agility, around 80% of shippers feel they have to pay premiums of $400 to $500 per container on the deepsea trades.

“Otherwise, odds are, you’re going to be rolled,” he said.

“That’s happening with cargo going Europe-to-Far East, Far East-to-Europe and transpacific-eastbound. The latter is the worst, in terms of guaranteed space.”

How Are Carriers Getting Away With No-Roll Premiums?

After years of struggling with lower than healthy freight rates, it seems ocean carriers have found the Viagra to keep freight rates up. That Viagra isn’t a little pill to create blood flow but blank sailing to create capacity control on shipping routes.

This is a subject that has shown up a great deal in Universal Cargo’s blog over the course of this year. Carriers have blank – ocean shipping’s fancy way of saying cancelled – hundreds of sailings in 2020, reducing capacity so much that freight rates have soared at a time when factors like reduced demand and plummeting oil prices should have put downward pressure on rates.

Of course, shippers never like blank sailings, especially when their cargo was supposed to be on a voyage that was blanked. The term blank sailing for shippers is almost synonymous with delays. And delays in receiving imports or exporting goods to customers overseas can often be quite costly for shippers. Many shippers have extra reason to hate that happening right now.

Wouldn’t you know, carriers finally figured out how to control capacity effectively to increase rates the same year a pandemic hits and causes many shippers to be in a more difficult financial place than perhaps they’ve ever been. Blank sailing after blank sailing has meant a decrease in service paired with an increase in cost.

Carriers have been able to effectively implement GRIs and even start pushing PSSs before reaching what is traditionally considered the peak season. Shippers have had no choice but to pay higher freight rates, even at amounts that are 100+% more expensive than they were the same time the year before. While paying more, shippers suffered delays from blanked sailing. Sometimes shippers saw cargo that was already delayed because its original sailing was blanked get rolled over again and possibly again because there was not enough space left on the next ships from all the other rolled over cargo being added or that next ship also being blanked.

In the middle of all this blank sailing and rollovers, carriers came up with the brilliant idea to charge a no-roll premium shippers could buy to make sure their cargo is priority to get on the next ship sailing out. If shippers choose not to pay this extra amount, that’s fine, but their cargo will probably experience rollover to make sure the shippers who paid no-roll premiums have the better service.

It should be noted that no-roll premiums do not create better service. These extra costs merely buy shippers the service they were supposed to get in the first place while creating incentive for carriers to provide worse service to shippers unwilling or unable to pay the extra $400-$500 per container.

Carriers Losing Benefit of Doubt

Last week, we blogged about how carriers are being accused of profiteering off of the global crisis happening with the coronavirus pandemic. The maritime research company Drewery concluded in response to these accusations that “capacity over-reductions [from carriers this year] look more like understandable misjudgements rather than anything more malicious” and is “inclined to give carriers the benefit of the doubt, for now.”

I wasn’t willing to go so far as to say carriers were profiteering, though I was already able to understand why shippers thought they were. Utilizing their alliances to shrink capacity extraordinarily, producing higher freight rates and profit at a time when losses seemed inevitable is enough to raise eyebrows. Still, capacity is something carriers control and demand is difficult to predict. It is not unreasonable to give the benefit of the doubt there. However, I find it much more difficult to extend the benefit of doubt when carriers implement no-roll premiums after putting their customers through rollover after rollover in the middle of an extremely economically challenging time. Correction: an extremely challenging economic time for many around the globe but not for carriers.

Click Here for Free Freight Rate Pricing

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Are Ocean Freight Carriers Profiteering from Global Crisis? https://www.universalcargo.com/are-ocean-freight-carriers-profiteering-from-global-crisis/ https://www.universalcargo.com/are-ocean-freight-carriers-profiteering-from-global-crisis/#respond Fri, 10 Jul 2020 01:37:05 +0000 https://www.universalcargo.com/?p=10116 A couple weeks ago, we posted a blog about how ocean freight carriers, in the middle of the coronavirus pandemic, went from being projected to lose as much as $23 billion in 2020 to looking like they'll make billions of dollars. As people in and around the international shipping industry see freight rates soaring and carriers having one of their most profitable years in recent memory, they are accusing carriers of profiteering from the crisis.

Find out all about it by reading the full article in Universal Cargo's blog.

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international shipping federal antitrust lawA couple weeks ago, we posted a blog about how ocean freight carriers, in the middle of the coronavirus pandemic, went from being projected to lose as much as $23 billion in 2020 to looking like they’ll make billions of dollars. As people in and around the international shipping industry see freight rates soaring and carriers having one of their most profitable years in recent memory, they are accusing carriers of profiteering from the crisis.

As we talked about in the aforementioned blog, decrease in demand (as the pandemic has caused) and lower oil prices (which sunk to historic lows as the oil market crashed from lockdowns around the world) typically create downward pressure on freight rates, decreasing what shippers pay to import and export goods. However, carriers managed to make freight rates soar, thanks largely to dramatically decreasing capacity through blank sailing.

The hundreds of blank sailings in 2020 represent decreased service from carriers while shippers have to pay more for the service. It’s not surprising that would upset shippers as better service is usually associated with higher costs. No one wants to pay more for less.

Accusations that Carriers Are Profiteering

The Journal of Commerce (JOC) published an article by Greg Knowles two days ago centering on Olaf Merk’s arguments at the International Trade Forum (ITF), for which he is administrator ports and shipping, about how regulators have failed to keep container shipping fair. Merk talks about the rates carriers charge not lining up with service, saying, “There is no perfect competition in container shipping. There are oligopolies, on some routes monopolies, so profits are not reflections of being great at providing value add to customers, but rather of monopoly rents.”

The Knowles-written JOC article also contains a quote from Merk speaking directly about the situation in 2020:

“The experience so far in 2020 shows that carriers have collectively been able to withdraw enough ship capacity — create scarcity — to push up freight rates,” he said, adding that competition regulators did not appear to be interested in probing the blank sailings.

The implication here seems clear. Merk is saying carriers removed more capacity from shipping lanes than the market demanded and regulators are not keeping these massive shipping lines in check.

Another JOC article, this one by Mark Szakonyi and published a day later than Knowles’s article, focuses on the backlash to carriers’ profitable but growingly controversial practices through the COVID-19 pandemic. Yes, carriers’ work in decreasing capacity is a big part of the article, but a section that stood out to me focused on controversy over rate increases through peak season surcharges (PSSs) — I told you in last week’s look at what the 2020 peak season will look like that the peak season apparently arrived early according to carriers.

Here’s the excerpt from Szakonyi’s article:

Unsurprisingly, there have been flare-ups between carriers and their customers. Take the trans-Pacific, where cargo owners and non-vessel operating common carriers (NVOs) aren’t technically required to pay peak season surcharges (PSSs) if their contracted cargo is exempt per service agreement. But when carriers have leverage, thanks to tightening capacity, shippers, and particularly forwarders, complain they can either accept the surcharges or find that their cargo has missed the scheduled sailing.

Drewery Gives Carriers Benefit of Doubt

There are more articles from the last few days you can check out dealing with the accusations being made that carriers are profiteering off of the global crisis. Greg Miller wrote an American Shipper article titled “Are trans-Pacific carriers guilty of price gouging?” Then there’s Mike Wackett’s article in the Loadstar titled “Carriers get benefit of the doubt on charges of profiteering from the crisis.”

You probably noticed that last title has more of a positive spin for carriers. The reason there’s a sudden surge in articles about carriers being accused of profiteering is the maritime research company Drewry just released a response to such accusations. Drewery’s response, as you probably already guessed, is to give carriers the benefit of the doubt.

Here’s how Wackett quoted Drewry in his Loadstar article:

On the accusations, Drewry said that, “given the highly unpredictable outlook for demand”, it was “inclined to give carriers the benefit of the doubt, for now”.

The consultant argued that “capacity over-suppression in some trades was always likely”, and noted that carriers were starting to reinstate blanked sailings to accommodate higher-than-expected demand, particularly on the eastbound transpacific route.

“That makes previous capacity over-reductions look more like understandable misjudgements rather than anything more malicious,” said Drewry.

“However, we might change our view if capacity continues to be kept significantly below market needs,” it added.

The caveat of “for now” Drewry puts on the benefit of doubt it extends to carriers is an important one. Carriers’ actions do need to be watched in relationship to the market, as Merk pointed out regulatory authorities seem unwilling to do, in order to know if they really are profiteering off the novel coronavirus.

Carriers History Gives Shippers Little Reason to Give Benefit of Doubt

At the same time, it’s not surprising that many shippers are not willing to extend carriers a benefit of doubt on the topic. As 2020 was first arriving, shippers were already warned, by credible sources like this Sam Whelan written article in the Loadstar, that carriers may be profiteering with IMO 2020 surcharges. Remember when the brewing controversy and supposed biggest story of 2020 was clean fuel surcharges and IMO 2020, respectively? Carriers were hitting shippers with clean fuel surcharges well before 2020 got here, much of it on presumed cost increases on fuel. Then oil prices crashed. Oil prices even went negative for the first time in history. But shippers never saw price drops accompany that much decreased shipping cost on fuel.

Shippers have also long been dismayed at the consolidation of ocean carriers through mergers, buyouts, Hanjin Shipping’s bankruptcy, and the arrangement of all the major carriers into just three alliances dominating the oceans and international shipping. It’s really that shrinking of competition that has made it possible for carriers to so effectively reduce capacity and bolster freight rates during this economically tumultuous time of COVID-19.

On top of all that, ocean carriers have a long history of running afoul of or being investigated under antitrust laws. Here’s just some of the posts in Universal Cargo’s blog alone on a portion of such run-ins carriers have had over recent years:

DOJ Antitrust Probe of Ocean Freight Carriers Is Over

China Fines Shipping Companies & Joins US & EU Antitrust Cooperation

Are Carriers, Imposing Emergency Bunker Surcharges, Really Cartels?

International Shipping Fought the Law & the Law Won

What’s Happening in International Shipping News? Top 5 Stories Including K-Line Guilty of Price Fixing

Holy Cargo Collusion, Batman–Shipping Companies Under Investigation!

Adding to this litany of shipper complaints, you can add the utter lack of transparency that carriers have historically employed. While I’m not willing to say carriers are profiteering right now, I can’t blame shippers for believing the carriers are.

What I think we’re seeing is what I was leery of a few years back when making and updating Universal Cargo’s Carrier Craziness Bracket as we all watched carriers flounder, merge, and join forces in alliances: competition has shrunk to the point carriers are able to control the ocean freight market.

Carrier Craziness Bracket

Universal Cargo’s Carrier Craziness Bracket, showing the crazy alliances, mergers, and bankruptcy in ocean freight shipping.

Click Here for Free Freight Rate Pricing

 

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What Will the 2020 Peak Season Look Like? https://www.universalcargo.com/what-will-the-2020-peak-season-look-like/ https://www.universalcargo.com/what-will-the-2020-peak-season-look-like/#respond Thu, 02 Jul 2020 22:51:48 +0000 https://www.universalcargo.com/?p=10103 We're fast approaching what's known as the peak season for international shipping. Traditionally, August and September are huge months for the international shipping industry as retailers stock up for the holiday shopping season. Often, things start revving up in July and continue to be strong through November and even into December. However, 2020 is not a typical year. Some have even suggested it won't have a peak season at all.

Can we even make any predictions about the peak season in a year when it seems like all predictions have turned out to be wrong? After all, the big story this year was supposed to be compliance with the new cleaner fuel mandates of IMO 2020 not shutdowns caused by a pandemic. Then all the shipping news outlets started running stories about how ocean carriers would lose billions of dollars in 2020 because of the novel coronavirus – based on analysis from shipping research experts, of course – yet carriers turned that around to likely make billions by year's end..

Despite all of this years unpredictability, there are expectations we can now have for the 2020 peak season. Read the full post in Universal Cargo's blog to find out what the 2020 peak season will likely look like.

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Ocean Freight Port

We’re fast approaching what’s known as the peak season for international shipping. Traditionally, August and September are huge months for the international shipping industry as retailers stock up for the holiday shopping season. Often, things start revving up in July and continue to be strong through November and even into December. However, 2020 is not a typical year. Some have even suggested it won’t have a peak season at all.

Can we even make any predictions about the peak season in a year when it seems like all predictions have turned out to be wrong? After all, the big story this year was supposed to be compliance with the new cleaner fuel mandates of IMO 2020 not shutdowns caused by a pandemic. Then all the shipping news outlets started running stories about how ocean carriers would lose billions of dollars in 2020 because of the novel coronavirus – based on analysis from shipping research experts, of course – yet carriers turned that around to likely make billions by year’s end..

Despite all of this years unpredictability, there are expectations we can now have for the 2020 peak season. Keep reading to find out what the 2020 peak season will likely look like.

Carriers Give Us Peak Season Prices Early

In a year marked by shutdowns and steep declines in demand, one would think freight rates would drop. However, ocean carriers have thwarted the downward freight rate pressure that comes with lower demand by shrinking supply.

I won’t spend a long time on this because we’ve covered it in previous blogs, but carriers have cancelled hundreds of sailings this year and continue to blank sail, dramatically decreasing capacity. Thus, it’s not as though the laws of supply and demand don’t apply this year, carriers simply decreased the supply end as fast or faster than COVID-19 shutdowns shrunk demand.

The result has been much higher freight rates in 2020 than in 2019 and many other years. We’ve already seen freight rates at levels that wouldn’t be expected until a strong peak season hit. Carriers have also had the discipline not to undercut each other’s rates – something they’ve often done in past years, causing rates to fall even during peak season – while continuing to manage low capacity.

If you read our blog post from last Tuesday, you’d know importing from China to the U.S. west coast was almost twice as expensive leading into that week as it was the same time last year:

Using the Shanghai Containerized Freight Index (SCFI), Mike Wackett reports in the Loadstar that Asia-US west coast spot rates were up last week 93% from the same week a year prior. For Asia-Europe, there’s a less massive but still very respectable year-on-year increase of 30%.

This week, Mike Wackett reports in the Loadstar that carriers are maintaining those rates. In fact, Asia-U.S. west coast even ticked up a little.

There’s good reason to believe carriers will continue to maintain high freight rates in these upcoming peak season months. Carriers have maintained good rate and capacity discipline not only all through 2020 but also through 2019. It’s possible that carriers have turned a corner when it comes to discipline.

General Rate Increases & Peak Season Surcharges

The General Rate Increase (GRI) and Peak Season Surcharge (PSS) are hallmarks of the peak season. Of course, discipline from ocean carriers is necessary to maintain these price hikes. As already mentioned, discipline has been a problem for carriers in the past but is something they’re currently doing well with. And, boy, have we seen GRIs piling up as a result.

As a matter of fact, the Journal of Commerce just ran an article by Bill Mongelluzzo about Trans-Pacific carriers issuing a whopping three GRI in a single month’s time!

With signs of US imports from Asia recovering, trans-Pacific carriers on Wednesday will impose a highly unusual third general rate increase (GRI) in one month’s time. Importers and forwarders say carriers, who filed July 1 GRIs as high as $1,500 with US regulators, this week are quoting figures between $250 and $800 per FEU.

There’s nothing new about carriers levying such charges as the summer-fall peak shipping season for retailers approaches. However, carriers already implemented GRIs on June 1 and June 15, so the July 1 increase will be the third in one month, an unusual occurrence even during periods of high demand. Carriers and their customers told JOC.com rates will continue to rise even though volumes are down almost 10 percent from the first five months of 2019, according to PIERS, a JOC.com sister company within IHS Markit.

On top of the GRIs, carriers are already talking about PSS too. This is the kind of thing you’d expect heading into a strong peak season rather than a weak or non-existent one.

Lower-Than-Normal Volumes But Still a Peak Season

Despite the warnings for most of the year that 2020 will not see a rebound in demand or a recovery for retailers, that does not mean we will see no peak season.

It is unlikely volume numbers will be anywhere near as high as they would have been had the novel coronavirus pandemic not struck; however, there is still demand for products as the holiday shopping season approaches. E-commerce has increased during this time and continues during the slow economic reopening process. Spiking and falling numbers of infections will make reopening uneven and in some places solidly delayed, but there is a strong signal from carriers that demand is coming back (other than the PSS and GRIs): less blank sailing.

I mentioned above that blank sailings are continuing from carriers, but we’re finally starting to see a significant drop in these cancellations just as we’re heading into peak season months.

According to that same JOC article mentioned above, citing Sea-Intelligence, carriers have only announced four blank sailings for July and August. This does not mean more won’t be announced, but it is a significant slow-down in blank sailing from what we’ve seen this year. It signals expectation of volume increase from carriers. In fact, carriers are even saying they’re starting to see movement toward recovery.

Mongelluzzo went on to report in his JOC article:

… Rolf Habben Jansen, CEO of Hapag-Lloyd, told JOC Uncharted he is starting to see encouraging signs of a recovery in the major east-west trades.

“We are experiencing a slow recovery into Q3 and a little bit more in Q4. I certainly see more encouraging signs today than four or six weeks ago,” he said.

Conclusion

While volume levels do not look to be as high as in years past, there will be a peak season as recovery is slowly taking place. If carriers can maintain the kind of discipline they’ve displayed throughout the year and for a while before, freight rates will be as high as in a strong peak season year with plenty of PSS and GRIs.

It can never be completely assumed that carriers won’t fall into old habits, making moves to grab market share from competitors. If that happens, a sudden drop in freight rates could take place. We’ve seen it happen before during peak seasons, but carriers do appear more dedicated than ever toward maintaining higher rates.

E-commerce has barely been mentioned above, but the important factor it is playing in international shipping demand is something we will get into in a future blog.

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How Did Carriers Go From Looking at Billions in Losses to Billions in Profit in 2020? https://www.universalcargo.com/how-did-carriers-go-from-looking-at-billions-in-losses-to-billions-in-profit-in-2020/ https://www.universalcargo.com/how-did-carriers-go-from-looking-at-billions-in-losses-to-billions-in-profit-in-2020/#respond Tue, 23 Jun 2020 23:36:37 +0000 https://www.universalcargo.com/?p=10101 Ocean freight carriers are supposed to lose billions of dollars in 2020, right? Wrong. They're going to make billions. Probably. As long as things continue the way they're going. Wait. What?

There's an old saying: never trust projections during a pandemic or an election year. Okay, that's not a saying, but it should be. In fact, I'm laying claim to it right now. Don't forget to credit me when you share the quote. Has the world changed so much in the last handful of weeks that international shipping headlines should be flashing projections that completely contradict the headline projections we've been seeing the last few months? Probably not, but it's clear those earlier projections were way off. Right?

No one ever knows if projections will pan out. It seems much more common that they don't than they do. I'd like to say that I hope you're not basing your life on projections, but all of us are right now. We've shut down economies across the globe based on worst-case pandemic infection, death, and death rate projections, some of which we know were wrong and some of which we'll never be able to know how accurate it was. As economies reopen, people are fighting over whether we've gone too far or haven't gone far enough, and the threat of re-closures looms.

While doctors and academics were presenting conflicting models about how many people would die due to COVID-19, experts in the international shipping industry were making predictions like ocean freight carriers would lose between $800 million and $23 billion in 2020.

Find out how carriers turned it around and what shippers are looking at right now in terms of freight rates by reading the full article in Universal Cargo's blog.

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Freight RatesOcean freight carriers are supposed to lose billions of dollars in 2020, right? Wrong. They’re going to make billions. Probably. As long as things continue the way they’re going. Wait. What?

There’s an old saying: never trust projections during a pandemic or an election year. Okay, that’s not a saying, but it should be. In fact, I’m laying claim to it right now. Don’t forget to credit me when you share the quote. Has the world changed so much in the last handful of weeks that international shipping headlines should be flashing projections that completely contradict the headline projections we’ve been seeing the last few months? Probably not, but it’s clear those earlier projections were way off. Right?

Changing Projections

No one ever knows if projections will pan out. It seems much more common that they don’t than they do. I’d like to say that I hope you’re not basing your life on projections, but all of us are right now. We’ve shut down economies across the globe based on worst-case pandemic infection, death, and death rate projections, some of which we know were wrong and some of which we’ll never be able to know how accurate it was. As economies reopen, people are fighting over whether we’ve gone too far or haven’t gone far enough, and the threat of re-closures looms.

While doctors and academics were presenting conflicting models about how many people would die due to COVID-19, experts in the international shipping industry were making predictions like ocean freight carriers would lose between $800 million and $23 billion in 2020.

Yeah, that’s not a wide range at all.

Despite how broad these projected losses were, they were apparently still completely wrong, as, halfway through the year, the same experts are now projecting carriers to rake in a profit of over $9 billion in 2020. Both the old projection and the new one come from maritime data and analysis company Sea-Intelligence and are being widely reported.

Bucking Projections

There’s nothing new about projections not coming true or being changed. However, the original projection itself may have helped it to not come true. Seeing such devastating numbers as $23 billion in losses may have helped motivated ocean carriers to take the aggressive action they have so far during this pandemic.

Perhaps it isn’t a simple case of the previous projections being wrong. Perhaps it’s more a matter of carriers strategizing to make sure the previous projections don’t come to pass. Carriers have done big things this year to make 2020 profitable.

In actuality, the biggest things carriers have done to make freight rates high and generate a profit may be three things they haven’t done.

1. Blank Sailings

You could call cancelling doing something, but, ultimately, it’s the action of not doing something. By not sailing ships, carriers have dramatically decreased capacity in 2020 and put tremendous upward pressure on freight rates. There are hundreds of sailings in 2020 that have been blanked.

We’ve obviously been talking about blank sailings a great deal this year. All of the following blog articles and more get into 2020 blank sailing:

Coronavirus & IMO 2020 Good News, Bad News

Coronavirus Effect on Ports Update

Big Roundup of Coronavirus Pandemic’s Effect on Ocean Freight Shipping

Blank Sailings Help Maersk Profit Despite COVID-19 — Will Blank Sailings Continue?

Carriers Unveil Q3 Blank Sailings & What it Means

Avoiding Freight Wars

This is an area where carriers have gotten into serious trouble in the past. Often, ocean carriers struggle to maintain high or even moderately healthy freight rates because they begin undercutting each other to try to take a larger cut of the market. So far in 2020, carriers have done an excellent job of not engaging in any trade wars that would cause freight rates drop when economic shutdowns already endanger the shipping companies with falls in demand.

Of course, we still have half the year left for carriers to revert to their old ways. If they do, freight rates could fall dramatically and projections could revert back to the shipping companies suffering losses instead of making profits.

Not Dropping Rates To Match Oil Price Drops

IMO 2020 was supposed to shoot oil and fuel prices way up for carriers, which they would pass on to shippers. In fact, carriers were preemptively passing these costs on to shippers in the latter parts of 2019. However, IMO 2020 quickly got overshadowed by the coronavirus pandemic and the oil market crashed. It crashed hard.

Plummeting oil prices often means a drop in freight rates. Despite oil dropping into the negatives for the first time in history, freight rates didn’t really drop with oil. Freight rates actually remained strong. Very strong. There were low sulfur fuel surcharges dropped during 2020, but shippers have not seen the kind of savings they could normally expect from such events in the oil market.

2020 Freight Rates

Carriers have been quite impressive in how successfully they kept freight rates up through this pandemic year despite incredible reductions in demand. It’s especially impressive when considering how often they’ve failed to keep freight rates up when demand has increased during many years in the past.

Using the Shanghai Containerized Freight Index (SCFI), Mike Wackett reports in the Loadstar that Asia-US west coast spot rates were up last week 93% from the same week a year prior. For Asia-Europe, there’s a less massive but still very respectable year-on-year increase of 30%.

That may sound like more bad news to shippers; however, there still is an angle that these higher freight rates can be viewed from. If carriers really did end up seeing $23 billion losses in 2020, we might end up with another Hanjin collapse situation, and shrinking competition is bad for shippers in terms of both freight rates and service in the long run.

Click Here for Free Freight Rate Pricing

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FMC Publishes Findings on Ocean Freight Challenges Due to Coronavirus https://www.universalcargo.com/fmc-publishes-findings-on-ocean-freight-challenges-due-to-coronavirus/ https://www.universalcargo.com/fmc-publishes-findings-on-ocean-freight-challenges-due-to-coronavirus/#respond Thu, 18 Jun 2020 22:57:59 +0000 https://www.universalcargo.com/?p=10100 The results are in. Of what, you ask? Of the Federal Maritime Commission's (FMC) "Fact Finding No. 29, International Ocean Transportation Supply Chain Engagement, in order to identify operational solutions to cargo delivery system challenges related to Coronavirus-19." Well, that was a mouthful. Let's simplify for a moment.

The FMC has a fact-finding initiative to address difficulties at the ports due to COVID-19. We are now learning things the initiative found.

We did a big round up of the effects of the coronavirus pandemic on ocean freight shipping a couple months ago that included the FMC calling upon industry stakeholders to join the commission's initiative. Commissioner Rebecca Dye heads up the initiative, and back in April she said over 50 industry stakeholders responded, wanting to take part.

The fact-finding initiative created Innovation Teams tasked with identifying challenges specific to their area of expertise and to their specific regions, as well as making suggested actions the FMC could make. The Innovation Teams for the San Pedro region completed those tasks. Commissioner Dye then had meetings with directors from the Ports of Los Angeles and Long Beach, ocean carrier chief executive officers, Southern California marine terminal operators, longshore labor leaders, and the FMC Innovation Teams themselves. From there, Commissioner Dye and the FMC shared "approaches to address the four critical operational challenges at the San Pedro Bay ports identified by Innovation Teams." Commissioner Dye and FMC also shared one action the FMC could take to facilitate discussion suggested by Innovation Teams.

Read the full article in Universal Cargo's blog to see the full findings the FMC shared

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coronavirusThe results are in. Of what, you ask? Of the Federal Maritime Commission’s (FMC) “Fact Finding No. 29, International Ocean Transportation Supply Chain Engagement, in order to identify operational solutions to cargo delivery system challenges related to Coronavirus-19.” Well, that was a mouthful. Let’s simplify for a moment.

The FMC has a fact-finding initiative to address difficulties at the ports due to COVID-19. We are now learning things the initiative found.

We did a big round up of the effects of the coronavirus pandemic on ocean freight shipping a couple months ago that included the FMC calling upon industry stakeholders to join the commission’s initiative. Commissioner Rebecca Dye heads up the initiative, and back in April she said over 50 industry stakeholders responded, wanting to take part.

The fact-finding initiative created Innovation Teams tasked with identifying challenges specific to their area of expertise and to their specific regions, as well as making suggested actions the FMC could make. The Innovation Teams for the San Pedro region completed those tasks. Commissioner Dye then had meetings with directors from the Ports of Los Angeles and Long Beach, ocean carrier chief executive officers, Southern California marine terminal operators, longshore labor leaders, and the FMC Innovation Teams themselves. From there, Commissioner Dye and the FMC shared “approaches to address the four critical operational challenges at the San Pedro Bay ports identified by Innovation Teams.” Commissioner Dye and FMC also shared one action the FMC could take to facilitate discussion suggested by Innovation Teams.

Keep reading to see the FMC initiative’s findings.

4 Critical Operational Challenges at Ports of LA & Long Beach

Port of Los Angeles Sunrise

Picture: Port of Los Angeles Sunrise by pete (wirralwater) – Flickr

I’m going to share here what the FMC published, but I’m changing its order a bit. Before we get to approaches that address the four critical operational challenges at the San Pedro Bay, I think we should see what those four critical operational challenges are.

The FMC’s publication included those four challenges in a Discussion Summary section. The section didn’t just include the problem, but the suggestions of approaches that should be taken. If you want to see the FMC’s quick list of suggested approaches, skip down to the next section. But since I like context before hearing statements, I’m sharing FMC’s discussion notes here first:

  1. Empty Container Returns: BCOs and their drayage trucking agents have expressed frustration with untimely notice when carriers’ empty containers are not being accepted at one terminal and truckers are directed to an alternative terminal. The complexity of the process is increased because carrier alliance members may call at multiple terminals at Los Angeles and Long Beach. Most parties agreed that the ideal approach would be to direct truckers to return empties to the terminal where they had picked up the loaded container, allowing them to make a dual move and reduce the number of chassis required.

With limited exceptions, suggestions included: (1) terminals refraining from cutoffs of empty returns mid-shift, (2) terminals adopting a goal of 7 days advance notice, but no less than 24 hours, for empty cutoffs, and (3) terminals allowing appointment-free returns during low use periods (such as night gates). Commissioner Dye noted that some San Pedro Bay terminals have already instituted these, or similar, practices.

  1. Terminal Gate Closure Notification: Under current conditions, terminals may decide that expected cargo volumes may not financially justify maintaining full gate hours. But BCOs and drayage companies need timely notice of any gate closures. Participants have suggested that MTOs adopt a goal of 7 days advance notice, but no less than 3 days.

Commissioner Dye pointed out that BCOs and drayage companies could improve the situation by letting terminals know when they no longer need appointments. “Rapid cancellation of unneeded appointments can help the whole system run more smoothly, and reduce the chassis availability situation, too.”

  1. Blank Sailing and Bypassed Port Notification: Until cargo volumes begin to increase substantially, carriers will respond with blanked sailings to keep vessel supply matched to vessel demand. It is important to both American exporters and importers, especially smaller shippers and their freight brokers, that adequate notification is given. Participants in the Fact Finding discussions have suggested that, at a minimum, shippers and truckers get 7 days notice for blanked sailings, and 72 hours notice for port bypass decisions.

It is vital that ocean carriers communicate their plans in a timely way to all parties who, in turn, coordinate their businesses around cargo availability. Notification should be made available on carrier websites, as well as direct notification to shipper customers, to accommodate truckers and other parties.

  1. Export Cargo Receiving Timeline (ERDs and Cut-offs): With respect to export cargo, changes to ship arrivals (schedule integrity, blanked sailings, port bypass) can affect the cargo’s earliest receiving date (ERD) and cutoff date for loading the container – especially for inland-based rail users. Missed sailings and rolled cargo can have a profound effect on the exporters’ financial arrangements. Participants in the fact finding have suggested a minimum of 7 days notice of changed ERDs– but more notice, especially for inland-based exporters, would be better. In addition, carriers’ and terminals’ information on the exporter’s cargo receiving timeline needs to be closely coordinated to prevent conflicts.

Identifying these approaches is meant to assist stakeholders in addressing the operational challenges in San Pedro Bay, and is not intended to suggest that these approaches are required by the Shipping Act of 1984 or the Commission’s regulations.

Innovation Teams’ 5 Suggestions

Okay, now let’s see the quick of the suggestions from within the discussion shared above plus the additional suggestion the Innovation Teams made for the FMC:

  1. Truckers should be directed to return empty containers to the terminal where they were picked up, allowing them to make dual moves and reduce the number of chassis required.
  2. Notice of terminal gate closures should be given no less than three days, and preferably seven days, before gate closing. At no time should a closure occur mid-shift.
  3. Notice of blank sailings should be given not only to beneficial cargo owners (BCOs), but also posted prominently on a carrier’s website, at least seven days in advance. Notice of bypassed ports should be posted at least 72 hours in advance.
  4. Carriers and terminals should immediately seek to collaborate regarding Export Cargo Receiving Timelines with the goal of better coordinating their interaction.
  5. That the Commission consider an Advisory Board consisting of ports, carriers, and MTOs in the interest of fostering and promoting greater collaboration across those three industry sectors.

Commissioner Dye added “I appreciate the willingness of our senior ocean carrier and marine terminal executives to address the four San Pedro supply chain operational challenges identified by the Innovation Teams. As we move into the third and fourth quarter of 2020, greater collaboration between ocean carriers and marine terminals will be critical to avoid cargo disruption and support a thriving American economy.”

Innovation Teams’ Suggestions for Other Ports Coming Soon

While the above information published by the FMC is obviously specific to the Ports of Los Angeles and Long Beach, such suggestions should soon be published for popular ports, such as the Port of New York and New Jersey, in other parts of the U.S.

FMC’s publication ended with a short section called “FF29 Regional Approach to Continue” that specifically addresses other ports:

Commissioner Dye stated that FF29 will continue a regional approach recommended by the Innovation Teams because freight delivery challenges differ in different ports around the country.  She also noted that the Commission’s recently published guidance on demurrage and detention has been well-received and may already be contributing to better operational environment among affected parties.

Commissioner Dye will continue regional meetings to identify practical port operational goals that can improve the international supply chain.

Dye will soon engage with industry leaders operating through the Port of New York and New Jersey and the Port of New Orleans.

I expect fairly similar suggestions but will be interested to see additional ideas that come out of East Coast ports. With New York having been hit so hard by COVID-19, there may be additional issues and insights brought to light from industry professionals working there.

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Interview with Leaders of PPE Sourcing Company Banah Trading https://www.universalcargo.com/interview-with-leaders-of-ppe-sourcing-company-banah-trading/ https://www.universalcargo.com/interview-with-leaders-of-ppe-sourcing-company-banah-trading/#respond Thu, 11 Jun 2020 21:38:46 +0000 https://www.universalcargo.com/?p=10091 Did you know Universal Cargo has a sister company, Banah Trading, that specializes in sourcing personal protective equipment (PPE) for businesses? Sister company is a particularly good term in this case because it brings to mind family, and family business is a great way to describe Banah Trading. Universal Cargo's CEO and president, Devin and Shirley Burke, respectively, are also CEO and president of Banah. Banah's COO is their son, Micah Burke.

I caught up with the three of them – virtually, keeping in the spirit of social distancing and COVID-19-related guidelines – for an interview covering topics about Banah Trading's services, business during the economic reopen, and working with family.

Read the interview in Universal Cargo's blog.

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Banah Trading logoDid you know Universal Cargo has a sister company, Banah Trading, that specializes in sourcing personal protective equipment (PPE) for businesses? Sister company is a particularly good term in this case because it brings to mind family, and family business is a great way to describe Banah Trading. Universal Cargo’s CEO and president, Devin and Shirley Burke, respectively, are also CEO and president of Banah. Banah’s COO is their son, Micah Burke.

I caught up with the three of them – virtually, keeping in the spirit of social distancing and COVID-19-related guidelines – for an interview covering topics about Banah Trading’s services, business during the economic reopen, and working with family.

Here’s what they shared with us:

Q: Banah Trading is like a sister company to Universal Cargo. Can you describe how the two companies work together?

Devin:

Banah was created once the pandemic caused a severe slowdown in US import-export trade, resulting in a near stoppage of shipments being handled by UC. This event simultaneously created a huge demand for PPE supplies in the US, which by and large come from Asia. Thus, Banah Trading established several reliable relationships that specialized in the manufacturing of all PPE supplies. This network actually already existed, as, for the past 20-odd years, UC offered, as one of many valued-added services, the ability to source product and provide Quality Control to their clients.

Presently Banah is both importing PPE supplies as a registered importing company with the FDA as well as brokering several products throughout their wide network of manufacturers, not only in Asia but also in Mexico and the US.

Devin & Micah Burke

Devin (right) & Micah Burke

Q: How can Banah help businesses as they’re either continuing to operate through this pandemic or finally being allowed to reopen?

Devin:

Banah obviously helps provide every product and service that goes along with [operating during this pandemic]. For example, we can provide testing kits as well as mobile testing labs for onsite facilitating. But also, with Banah’s relationship with UC, we can provide a full logistics service.

Banah can assist each client with a consulting call to assess needs, then offer several options available.

Q: Without using the name of clients, describe how Banah Trading has helped one of its business customers during this pandemic.

Shirley:

We received a request from the director of an assisted living home for the mentally disabled.  They are a small, privately-owned company serving the LA community.  
 
Their huge medical supply source started rejecting their small orders of medical grade masks for some unknown reason at the start of the pandemic.  
 
Banah Trading has just received a supply of the masks that she [the company’s owner] required for her nursing staff, and we were able to provide her with the much needed products in a timely manner.
Micah:
Banah Trading is currently providing a PPE care package to a private school in Connecticut. The goal is to create a “safe room” on-site that can be used to store the PPE items and provide a medically safe area for treatment, containment, and prevention.

Q: How can Banah help businesses as they’re either continuing to operate through this pandemic or finally being allowed to reopen?

Micah:

Banah Trading can help businesses by providing the essential PPE items needed to re-open safely and a buying process that is convenient and affordable. Our PPE Bundle is a collection of products that we recommend to get started, but everyone is encouraged to customize a care package because we understand every business is unique.

Q: How can people best assess the PPE products they need for their businesses and make sure they have both the proper products stocked and the appropriate amount of stock on hand?

Micah:

We recommend starting with our minimum order and then moving forward from there. The PPE Bundle represents those recommended quantities to start with.

Are there services Banah performs for companies outside of PPE sourcing?

Micah:

Banah Trading is focused on sourcing PPE, but we do offer full logistics service through our partner Universal Cargo.

Q: I’m curious about the name Banah. Why was it chosen for the name of the company?

Devin:

Banah means to build in Hebrew, God’s original language. Whereas the enemy of our souls tears down and destroys.

Q: Most people don’t have the chance to work at a company with such a family dynamic as Banah has. You’re the COO, your dad is the CEO, and your mom is the President. What is that family dynamic like inside the company?

The family dynamic has it’s advantages and disadvantages, but for the most part, we work really well together as a team because we’ve all found our role in the company, and we try to stay in our own lanes. It’s been a little tricky separating the family stuff with all the business talk, but that’s hard to avoid when we are all passionate about what we’re trying to accomplish here.

Shirley Burke with her two sons Micah (left) and Bryan

Shirley Burke with her two sons Micah (left) and Bryan

Q: Anyone who knows your mother, Shirley Burke, knows she’s a very strong, intelligent, and generous woman. What strengths does she bring to Banah as its President?

Micah:

The strengths she brings is her business mind, disciplined decision making, and the experience running UC for all these years. It’s obvious she has a gift for business and it shows given everything we’ve been able to accomplish in such a short amount of time.

Q: Your father, Devin Burke is known for his creativity, big-picture leadership, and inability to pass up the opportunity for a pun. What does he bring to Banah as its CEO and what’s something about him we wouldn’t know?

Micah:

Devin brings his passion for people and an incredible network of relationships he’s build over the years. He is an extremely optimistic person, and that helps us all stay on course and excited for the future. Something about him that you wouldn’t know… He’s terrible at remembering words to songs, he has maybe two dance moves total, and if he didn’t have Shirley, he’d eat garlic eggs and gluten free toast everyday of his life.

Q: What’s an area of strength you bring to Banah, as its COO, that creates a component to the team that neither Devin nor Shirley brings?

Micah:

One strength I was able to bring to Banah right away was my experience building a website and putting together marketing material. I learned a lot starting my own golf business. At the end of the day, though, I know who I am working for, so I just try and stay focused on what is asked of me and see that the vision laid out for Banah is carried out. I’m just trying to absorb as much info as I can and figure out ways to help the company grow.

Q: Do you have any advice for people who do work with family?

Micah:

I think it’s really easy to get emotional with family and let that affect the business relationship. We all know how to push each other’s buttons, so I think an awareness of that would help. And always lead with patience.

Q: What advice would you give to companies that are opening back up or trying to get off the ground during this economically challenging time of social distancing and extraordinary restrictions?

Micah:

Adaption is the name of the game now. It’s time to start thinking more creatively because what worked before might not work anymore. It’s not going to be easy by any means, so I’d say embrace the challenge head on.

Devin:

As for advice to others [especially B2B companies], look at the vast need right now both in the healthcare world but especially the private sector as companies start to open their businesses across the country and comply with their state and local guidelines. Then start reaching out to businesses, schools, chambers of commerce, etc.

Thank you so much for taking the time to share with us, Devin, Shirley, and Micah.

If you need PPE for your business, contact Banah Trading today through its website, by emailing them at micah@banahtrading.com, or by calling them at 310-367-6137.

Click Here for Free Freight Rate Pricing

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Carriers Unveil Q3 Blank Sailings & What it Means https://www.universalcargo.com/carriers-unveil-q3-blank-sailings-what-it-means/ https://www.universalcargo.com/carriers-unveil-q3-blank-sailings-what-it-means/#respond Thu, 04 Jun 2020 22:10:00 +0000 https://www.universalcargo.com/?p=10087 With the first half of 2020 marked by COVID-19 shutdowns around the world, first in China and eventually in the U.S., ocean carriers' biggest strategy for dealing with decreased shipping demand has been utilizing blank sailings. Maersk, the world's largest ocean carrier by capacity, even managed to post a nearly $200M profit after the first quarter, thanks in large part to blank sailing.

As we approach the end of the second quarter of 2020, many hope to see a great deal fewer cancellations from carriers in the third quarter. After all, things are starting to open back up. The hope is that shipping demand would return with reopenings. May was even being touted as the peak for blank sailings, and we'd start seeing a decrease in cancellations from here on out. However, carriers just announced a whole slew of blank sailings for Q3.

The 2M and THE Alliance combined have announced 220 blanked sailings. Find out all about it in Universal Cargo's blog.

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Blank Sailing

With the first half of 2020 marked by COVID-19 shutdowns around the world, first in China and eventually in the U.S., ocean carriers’ biggest strategy for dealing with decreased shipping demand has been utilizing blank sailings. Maersk, the world’s largest ocean carrier by capacity, even managed to post a nearly $200M profit after the first quarter, thanks in large part to blanked sailings.

As we approach the end of the second quarter of 2020, many hope to see a great deal fewer cancellations from carriers in the third quarter. After all, things are starting to open back up. The hope is that shipping demand would return with reopenings. May was even being touted as the peak for blank sailings, and we’d start seeing a decrease in cancellations from here on out. However, carriers just announced a whole slew of blank sailings for Q3.

The 2M and THE Alliance combined have announced 220 blanked sailings for Q3. Greg Knowler reported in a Journal of Commerce article:

THE Alliance of Hapag-Lloyd, Ocean Network Express, Yang Ming, and HMM, and the 2M Alliance of Maersk Line and Mediterranean Shipping Co., this week said 75 sailings will be canceled through September in a bid to match capacity with weak anticipated volume levels.
By June 1, before Wednesday’s third quarter network adjustments, the three alliances had announced a total of 126 void sailings on the trades between Asia and North America through August as a result of the impact of the coronavirus on demand, and 94 blanked sailings on Asia-Europe, according to Sea-Intelligence Maritime Consulting.

There are three major carrier alliances that dominate ocean freight shipping. You can bet the Ocean Alliance, the remaining carrier alliance that is between COSCO, CMA CGM, and Evergreen, will be announcing blank sailings to add to the ones from 2M and THE.

While it may not be as big of news to our main base of readers, U.S. shippers, but 2M is also continuing to cancel Asia to Europe service through the third quarter as well. Knowler writes later in his JOC article:

The 2M Alliance will suspend its joint Asia-Europe AE2/Swan and AE20/Dragon services for the full third quarter, removing 22 percent of their capacity from the trade. However, Sea-Intelligence pointed out that a fortnightly “sweeper” service to be deployed by MSC on both the Asia-North Europe and Asia-Med trades in the third quarter would offset the blank sailings, reducing capacity by 15 to 18 percent instead of 22 percent.

Blank Sailings Opportunity to Install Scrubbers

Shippers generally think of blank sailings as a bad thing because they are a decrease in service and can mean delays in receiving import goods or getting export goods to business partners or operations overseas. However, blank sailings, more than anything else, are an indication of demand in the international shipping industry. Thinking of blank sailings that way make them feel closer to neutral news in and of themselves. Right now, there might even be a way to look at the blank sailings going on as good news.

Coming into 2020, we all thought the biggest international shipping news stories would revolve around IMO 2020. The International Maritime Organization’s (IMO) mandate for ships to drop from a 3.5% sulfur cap on fuel emissions to a 0.5% one is very significant. Carriers were racing to get scrubber systems installed in ships, so they would meet the requirement by cleaning the higher sulfur fuel in ships’ engines. As 2019 was ending, it looked like the world fleet was not ready.

Getting scrubbers installed at shipyards was taking longer than expected. That problem was obviously exacerbated by COVID-19 shutdowns. However, the shutdowns slowed demand and caused so many blank sailings that we’re seeing record numbers of idle ships right now. Knowler’s JOC article has numbers on that as well:

Alphaliner has reported that a total of 11.6 percent of the container shipping fleet is now idle, reaching a record 2.72 million TEU by the end of May, with 20 percent of the capacity (64 ships) being fitted with scrubbers.

Decreased demand and, therefore, sailings give the world fleet the opportunity to catch up on scrubber installations, so, despite some controversy around scrubbers, carriers’ ships will be ready to meet IMO 2020 and demand — when demand returns. Now the question is…

When Will Demand Return?

There does not seem to be much optimism for a strong peak season this year. While online shopping demand has increased during the lockdowns and many believe will remain strong after reopening, there is not expected to be a huge jump in demand for shipping as physical stores reopen.

There are a couple reasons that the return of demand is expected to be gradual instead of immediate. One of the reasons is that many businesses are stocked after the lockdowns. Some imported goods early to beat tariff hikes on China (remember when the trade war was the world’s biggest story?). Some simply haven’t been able to sell their inventory because of the shutdown. Then you have unemployment and permanent business closures caused by the lockdowns that look likely to negatively impact overall customer spending and business importing and exporting in a significant way.

Adding these things up could mean a very slow recovery for international shipping demand.

However, there are a great many people who have been pent up but able to continue working from home. As things reopen, many will be wanting to get back into stores and businesses to shop outside of the house. It’s possible there could be a splurge that will help speed recovery and surprise those with a pessimistic view on the return of the economy and the shipping of goods around the world.

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Bill to Give Shippers Louder Voice in FMC Moves Forward in Senate https://www.universalcargo.com/bill-to-give-shippers-louder-voice-in-fmc-moves-forward-in-senate/ https://www.universalcargo.com/bill-to-give-shippers-louder-voice-in-fmc-moves-forward-in-senate/#respond Thu, 28 May 2020 19:28:22 +0000 https://www.universalcargo.com/?p=10085 Importers and exporters are on their way to getting a stronger voice with the Federal Maritime Commission (FMC).

By its own description, the FMC "is the independent federal agency responsible for regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer." It only makes sense that the voices of importers and exporters be heard by the commission.

There are, of course, means for shippers to raise concerns and file complaints with the FMC over issues that arise in the international shipping industry, like the unfair COVID-19-related detention fees shippers were hit with this year. However, the voices of shippers would be much stronger if there was a group of U.S. importers and exporters who were direct advisers to the FMC. That's exactly what a bill in Congress proposes to create.

Find out all about the bill and read its full text if you want to in Universal Cargo's blog.

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sleek container shipImporters and exporters are on their way to getting a stronger voice with the Federal Maritime Commission (FMC).

By its own description, the FMC “is the independent federal agency responsible for regulating the U.S. international ocean transportation system for the benefit of U.S. exporters, importers, and the U.S. consumer.” It only makes sense that the voices of importers and exporters be heard by the commission.

There are, of course, means for shippers to raise concerns and file complaints with the FMC over issues that arise in the international shipping industry, like the unfair COVID-19-related detention fees shippers were hit with this year. However, the voices of shippers would be much stronger if there was a group of U.S. importers and exporters who were direct advisers to the FMC. That’s exactly what a bill in Congress proposes to create.

Senator Roger Wicker, R-Mississippi, introduced the bill to Congress in November of last year that, as reported by Chris Gillis in an American Shipper article, was just approved by the U.S. Senate Commerce Committee. The bill is to establish a National Shipper Advisory Committee to the FMC made up of 24 U.S. shippers, half importers and half exporters.

This is exactly the kind of legislation I love. The bill is clear, specific, enactable, and contains no hidden agenda items. On top of that, the bill makes sense. It’s only logical that shippers, who have “particular expertise, knowledge, and experience” in ocean freight shipping should be advising the FMC “on policies relating to the competitiveness, reliability, integrity, and fairness of the international ocean freight delivery system.” Yes, those quotes come directly from the bill.

Being approved by the U.S. Senate Commerce Committee, which Senator Wicker is the chairman of, means the bill will go before the full Senate for consideration. Hey, look! That’s someone in Congress doing the exact thing they’re supposed to be doing — leading a committee in introducing and approving a bill that helps U.S. citizens and businesses in the arena pertaining to their committee. Why does that feel like a novel concept? On top of what I wrote about the bill in the previous paragraph, it is short. There should be no confusion or debating endless minutia within the bill. It’s likely this bill could have already been passed if the last six months weren’t filled by the Senate dealing with a partisan impeachment trial and the COVID-19 pandemic.

If the bill is passed and enacted, the 24 shippers who are nominated and appointed to the National Shipper Advisory Committee will serve three year terms. They can be reappointed. The committee would terminate September 30th, 2029.

So you can make up your own mind on it, here’s the full text of the bill to establish a National Shipper Advisory Committee to the FMC, which you can also read as a PDF published by Congress:

A BILL

To establish a National Shipper Advisory Committee.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Federal Maritime Commission National Shipper Advisory Committee Act of 2019’’.

SEC. 2. ADVISORY COMMITTEE.

Part B of subtitle IV of title 46, United States Code, is amended by adding at the end the following:

‘‘CHAPTER 424—NATIONAL SHIPPER ADVISORY COMMITTEE

‘‘§ 42401. Definitions

‘‘In this chapter:

‘‘(1) COMMISSION.—The term ‘Commission’ means the Federal Maritime Commission.

‘‘(2) COMMITTEE.—The term ‘Committee’ means the National Shipper Advisory Committee established by section 42402.

‘‘§ 42402. National Shipper Advisory Committee

‘‘(a) ESTABLISHMENT.—There is established a National Shipper Advisory Committee.

‘‘(b) FUNCTION.—The Committee shall advise the Federal Maritime Commission on policies relating to the competitiveness, reliability, integrity, and fairness of the international ocean freight delivery system.

‘‘(c) MEMBERSHIP.—

‘‘(1) IN GENERAL.—The Committee shall consist of 24 members appointed by the Commission in accordance with this section.

‘‘(2) EXPERTISE.—Each member of the Committee shall have particular expertise, knowledge, and experience in matters relating to the function of the Committee.

‘‘(3) REPRESENTATION.—Members of the Committee shall be appointed as follows:

‘‘(A) Twelve members shall represent entities who import cargo to the United States using ocean common carriers.

‘‘(B) Twelve members shall represent entities who export cargo from the United States using ocean common carriers.

‘‘§ 42403. Administration

‘‘(a) MEETINGS.—The Committee shall, not less than once each year, meet at the call of the Commission or a majority of the members of the Committee.

‘‘(b) EMPLOYEE STATUS.—A member of the Com-11mittee shall not be considered an employee of the Federal Government by reason of service on such Committee, except for the purposes of the following:

‘‘(1) Chapter 81 of title 5.

‘‘(2) Chapter 171 of title 28 and any other Federal law relating to tort liability.

‘‘(c) ACCEPTANCE OF VOLUNTEER SERVICES.—Notwithstanding any other provision of law, a member of the Committee may serve on such committee on a voluntary basis without pay.

‘‘(d) STATUS OF MEMBERS.—

‘‘(1) IN GENERAL.—Except as provided in paragraph (2), with respect to a member of the Committee whom the Commission appoints to represent an entity or group—

‘‘(A) the member is authorized to represent the interests of the applicable entity or group; and

‘‘(B) requirements under Federal law that would interfere with such representation and that apply to a special Government employee (as defined in section 202(a) of title 18), including requirements relating to employee conduct, political activities, ethics, conflicts of interest, and corruption, do not apply to the member.

‘‘(2) EXCEPTION.—Notwithstanding subsection (b), a member of the Committee shall be treated as a special Government employee for purposes of the committee service of the member if the member, without regard to service on the committee, is a special Government employee.

‘‘(e) SERVICE ON COMMITTEE.—

‘‘(1) SOLICITATION OF NOMINATIONS.—Before appointing an individual as a member of the Committee, the Commission shall publish a timely notice in the Federal Register soliciting nominations for membership on such Committee.

‘‘(2) APPOINTMENTS.—

‘‘(A) IN GENERAL.—After considering nominations received pursuant to a notice published under paragraph (1), the Commission may appoint a member to the Committee.

‘‘(B) PROHIBITION.—The Commission 6shall not seek, consider, or otherwise use infor-7mation concerning the political affiliation of a 8nominee in making an appointment to the Committee.

‘‘(3) SERVICE AT PLEASURE OF THE COMMISSION.—Each member of the Committee shall serve at the pleasure of the Commission.

‘‘(4) SECURITY BACKGROUND EXAMINATIONS.— The Commission may require an individual to have passed an appropriate security background examination before appointment to the Committee.

‘‘(5) PROHIBITION.—A Federal employee may not be appointed as a member of the Committee.

‘‘(6) TERMS.—

‘‘(A) IN GENERAL.—The term of each member of the Committee shall expire on December 31 of the third full year after the effective date of the appointment.

‘(B) CONTINUED SERVICE AFTER TERM.— When the term of a member of the Committee ends, the member, for a period not to exceed 1 year, may continue to serve as a member until a successor is appointed.

‘‘(7) VACANCIES.—A vacancy on the Committee shall be filled in the same manner as the original appointment.

‘‘(8) SPECIAL RULE FOR REAPPOINTMENTS.— Notwithstanding paragraphs (1) and (2), the Commission may reappoint a member of a committee for any term, other than the first term of the member, without soliciting, receiving, or considering nominations for such appointment.

‘‘(f) STAFF SERVICES.—The Commission shall furnish to the Committee any staff and services considered by the Commission to be necessary for the conduct of the Committee’s functions.

‘‘(g) CHAIR; VICECHAIR.—

‘‘(1) IN GENERAL.—The Committee shall elect a Chair and Vice Chair from among the committee’s members.

‘‘(2) VICE CHAIRMAN ACTING AS CHAIRMAN.— The Vice Chair shall act as Chair in the absence or incapacity of, or in the event of a vacancy in the office of, the Chair.

‘‘(h) SUBCOMMITTEES AND WORKING GROUPS.—

‘‘(1) IN GENERAL.—The Chair of the Committee may establish and disestablish subcommittees and working groups for any purpose consistent with the function of the Committee.

‘‘(2) PARTICIPANTS.—Subject to conditions imposed by the Chair, members of the Committee may be assigned to subcommittees and working groups established under paragraph (1).

‘‘(i) CONSULTATION, ADVICE, REPORTS, AND RECOMMENDATIONS.—

‘‘(1) CONSULTATION.—Before taking any significant action, the Commission shall consult with, and consider the information, advice, and recommendations of, the Committee if the function of the Committee is to advise the Commission on matters related to the significant action.

‘‘(2) ADVICE, REPORTS, AND RECOMMENDATIONS.—The Committee shall submit, in writing, to the Commission its advice, reports, and recommendations, in a form and at a frequency determined appropriate by the Committee.

‘‘(3) EXPLANATION OF ACTIONS TAKEN.—Not later than 60 days after the date on which the Commission receives recommendations from the Committee under paragraph (2), the Commission shall—

‘‘(A) publish the recommendations on a public website; and

‘‘(B) respond, in writing, to the Committee regarding the recommendations, including by providing an explanation of actions taken regarding the recommendations.

‘‘(4) SUBMISSION TO CONGRESS.—The Commission shall submit to the Committee on Transportation and Infrastructure of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate the advice, reports, and recommendations received from the Committee under paragraph (2).

‘‘(j) OBSERVERS.—The Commission may designate a representative to—

‘‘(1) attend any meeting of the Committee; and

‘‘(2) participate as an observer at such meeting.

‘‘(k) TERMINATION.—The Committee shall terminate on September 30, 2029.’’.

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Blank Sailings Help Maersk Profit Despite COVID-19 — Will Blank Sailings Continue? https://www.universalcargo.com/blank-sailings-help-maersk-profit-despite-covid-19-will-blank-sailings-continue/ https://www.universalcargo.com/blank-sailings-help-maersk-profit-despite-covid-19-will-blank-sailings-continue/#respond Thu, 14 May 2020 21:37:25 +0000 https://www.universalcargo.com/?p=10074 From when the novel coronavirus outbreak in China first started registering in international shipping news, stories have been published about how ocean freight carriers could or would lose millions to billions of dollars in 2020 because of the spreading disease that quickly escalated into a full-blown pandemic. As an example from one of many such stories over the last few months, Greg Miller reported in an American Shipper article:

In [Murphy’s] best-case scenario, in which volume decline 10% and rates hold relatively firm, carriers would lose an aggregate of $800 million. Under his worst-case scenario, in which both volumes and rates decline to the same degree they did in 2009, carriers would collectively lose $23 billion this year.

Therefore, it came as a surprise to many that Maersk, the world's largest ocean carrier by capacity, managed to post a profit for the first quarter of 2020. Mike Wackett reports in an article for the Loadstar:

The company recorded a net profit of $197m in the first quarter, compared with a loss of $69m in the same period of 2019, while group turnover edged up $0.3% to $9.6bn, “driven by ocean”, it said.

So how did Maersk manage to do better in the ocean freight business, posting a profit during the first quarter of this pandemic-stricken year, than the company did this time a year ago? Two words: blank sailings.

Find out all about it and if blank sailings will continue by reading the full article in Universal Cargo's blog.

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coronavirusFrom when the novel coronavirus outbreak in China first started registering in international shipping news, stories have been published about how ocean freight carriers could or would lose millions to billions of dollars in 2020 because of the spreading disease that quickly escalated into a full-blown pandemic. As an example from one of many such stories over the last few months, Greg Miller reported in an American Shipper article:

In [Murphy’s] best-case scenario, in which volume decline 10% and rates hold relatively firm, carriers would lose an aggregate of $800 million. Under his worst-case scenario, in which both volumes and rates decline to the same degree they did in 2009, carriers would collectively lose $23 billion this year.

Therefore, it came as a surprise to many that Maersk, the world’s largest ocean carrier by capacity, managed to post a profit for the first quarter of 2020. Mike Wackett reports in an article for the Loadstar:

The company recorded a net profit of $197m in the first quarter, compared with a loss of $69m in the same period of 2019, while group turnover edged up $0.3% to $9.6bn, “driven by ocean”, it said.

So how did Maersk manage to do better in the ocean freight business, posting a profit during the first quarter of this pandemic-stricken year, than the company did this time a year ago? Two words: blank sailings.

Blank Sailings

As we’ve rounded up the effects of the COVID-19 pandemic on international shipping, blank sailings have pretty consistently topped the list.

Blank Sailing

Blank sailings is the fancy term the international shipping industry uses for cancelled ship sailings. Blank sailings are commonly utilized by carriers and typically frustrating for shippers. For shippers, blank sailings mean delayed delivery of goods, but carriers use them to control capacity and increase profits.

During this pandemic, ship sailings have been cancelled by the hundreds.

Not only has this affected delivery time for goods, but all the blank sailings have created issues in getting needed shipping container supplies to port locations, even creating difficulty for many shippers to return containers on time. The latter has resulted in unfair coronavirus-related detention fees.

Some of the early blank sailings were due to port or terminal shutdowns over fear of spreading the novel coronavirus. However, most blank sailings have been about greatly reducing capacity to keep freight rates up during the significant drop in demand. Maersk’s first quarter profit, as well as the fact that freight rates have been higher so far this year compared to the same period last year, shows the blank sailing strategy has been effective.

Will Blank Sailings Continue?

Greg Knowler wrote an article for the Journal of Commerce that tells us, yes, Maersk will continue blank sailing through the quarter of the year we are in:

Maersk Line will cancel up to 140 sailings in the second quarter on the east-west trades as the carrier attempts to match its capacity with a predicted 20 to 25 percent decline in volume.

It was a strategy that was successfully deployed in the first three months of the year as the coronavirus disease 2019 (COVID-19) began to crush demand. The 90 sailings that were blanked as demand fell and the higher freight rates compensated for an increase in the price of low-sulfur fuel and allowed the carrier to report a profitable start to the year.

Of course, Maersk is not alone in cancelling containership voyages. Blank sailing has been happening across the industry from shipping lines in every carrier alliance. To get a feel for how much blank sailing is happening, here are the recently announced blank sailings compiled in Knowler’s article:

The 2M Alliance of Maersk Line and Mediterranean Shipping Co. has blanked 27 sailings on Asia-North Europe, withdrawing 511,940 TEU, while cutting 233,479 TEU from Asia-Med in 16 blank sailings. On Asia-US trades, 45 sailings have been blanked, withdrawing 369,432 TEU.

Ocean Alliance carriers (CMA CGM, Cosco Shipping, OOCL, and Evergreen) have now canceled 28 sailings on Asia-North Europe comprising 437,031 TEU, and 16 sailings on Asia-Med, withdrawing 152,460 TEU. Asia-US trades have seen 60 canceled sailings that have cut 578,115 TEU.

THE Alliance (Hapag-Lloyd, Yang Ming, and Ocean Network Express) has blanked 19 sailings of 297,100 TEU on Asia-North Europe, and 17 sailings on Asia-Med of 232,046 TEU. On Asia-US routes, 63 sailings have been blanked, removing 483,231 TEU.

Still, while we expect blank sailings to keep coming through this quarter, they could slow over the second half of the year as lockdowns over COVID-19 are easing. In fact, blank sailing announcements have already begun to slow from what we have been seeing through this year. Greg Miller wrote an American Shipper article that asks the question of whether carriers will scale back sailing cancellations:

Arrival schedules for May and June are set. U.S. ports will see double-digit declines in inbound capacity. Whether carriers will keep “blanking” (canceling) sailings on the same scale into the third quarter remains unknown — but not for much longer.

If mass cancellations extend into July at elevated May-June levels, it means that carriers are not receiving enough bookings from shippers, implying a weak recovery after social distancing restrictions are lifted. If carriers move back in the direction of pre-coronavirus scheduling levels, it’s a positive signal on demand.


The good news is that blank-sailing announcements have been waning.

According to Alan Murphy, CEO of Copenhagen-based Sea-Intelligence, “Over the last week, carriers have only announced an additional six blank sailings across the main deep-sea trades, which clearly shows that we have reached a plateau, where carriers are now only blanking very few additional sailings, and for the moment are satisfied that the currently announced blank-sailings program is sufficient to underpin the freight rate levels.”

While we’ll know more in the upcoming weeks, it does appear blank sailings will not continue at the level we’ve seen, but there is a big factor in how things will play out for U.S. shippers to take into account…

The Battle of Reopening

There is a growing conflict in the U.S. over the reopening of the economy. There is a great deal of fear over reopening. Obviously, the fear is that infections and deaths will spike if we do so. On the other side, the longer we remain shutdown, the deeper economic damage is done through the increase of businesses closed for good, jobs lost, and increases in mental health damages and people in poverty.

Not surprisingly, the Republicans and Democrats of congress have done more for the relief of big businesses like the airlines than small businesses and individuals during this crisis. One thing that means is the longer shutdowns continue, the more spending power of consumers wanes. That decrease in demand for goods means a decrease in demand for international shipping.

In the meantime, people are fighting over whether to reopen. From those I’ve spoken to, the ones who most want things to remain closed are people who are not largely impacted by the closures in a financial way. They are able to work from home or are retired and receiving a pension (most of whom likely fall in the higher risk groups for succumbing to the novel coronavirus). Many of those who desperately want the economy reopened have had their livelihood taken away or seriously put in jeopardy. They’re people whose businesses are closed or jobs have been lost or suspended.

Unfortunately, once an economy has been closed, it is difficult to reopen. And when more power is granted to a government and the people in control of it, the harder it is to get that power back. People, and therefore governments, do not easily give up power. However, lost freedom builds discontent and resentment, which can lead to revolt. We’re seeing some of that revolt now with protests and business owners refusing to obey shutdown orders and reopening against government and even court orders.

Unfortunately, we don’t know how the spread of the novel coronavirus will increase upon reopening. The experts disagree wildly. We don’t even know the death rate of this disease, not only because we have no way of knowing how many asymptomatic people are infected, but because there is controversy over cause of death reporting, highly varying statistics about death rates, and the problem of most reporting being focused on political agendas rather than the truth about what’s actually happening with the virus. I’ve seen death rate numbers being spread from significantly less than 0.01% all the way up to more than 5%. We know it is not nearly as high as that top end, but we have no way of knowing how low it actually is.

All of that does not mean being cautious is not a legitimate approach to reopening. There is a risk to health and lives here. However, we do know that the longer the shutdowns and social distancing rules remain in place, the more people will be without means to pay their bills and buy food, let alone buy goods and create demand anywhere close to what was seen before the pandemic started. How long this battle rages on will likely determine how deep of a recession or depression we fall into. That, obviously, will factor largely into how the international shipping industry looks through the rest of this year and beyond.

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6 Ways to Ensure You Choose the Right Freight Forwarding Incoterm https://www.universalcargo.com/6-ways-to-ensure-you-choose-the-right-freight-forwarding-incoterm/ https://www.universalcargo.com/6-ways-to-ensure-you-choose-the-right-freight-forwarding-incoterm/#respond Tue, 12 May 2020 18:52:11 +0000 https://www.universalcargo.com/?p=10071 This is a guest post by Darren Hann.

International Commercial Terms (Incoterms®) play a significant role when you are importing or exporting goods in and out of all major cities. Irrespective of whether it’s the finished product, Work in Progress (WIP) inventory, or raw material that you are importing or exporting, Incoterms® are a set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts.

They define the commercial parts, respective responsibilities, and risks of the importer and exporter involved in the transaction. As it is common that one or more freight forwarders take part in the movement of goods through the freight forwarding chain, an Incoterm also assists in deciding who will pay the freight forwarders for their part of work. Therefore, it is best to have crystal clear understanding of Incoterms® before you initiate any international freight forwarding movement.

Some companies mutually decide the Incoterms® without analyzing its impact and the associated risks and costs while others understand the complexity and importance of choosing the right Incoterm for their shipment. Expert freight forwarders have a deep understanding of all series of Incoterms® (2000 and 2010 plus the 2020 update) and who the responsibility lies with for the transaction. Consulting with experienced freight forwarding companies can assist your business to ensure a mutually beneficial Incoterm is selected for international sea freight and air freight services.

Read the full article in Universal Cargo's blog to learn 6 ways to ensure you have chosen the right freight forwarding Incoterm.

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This is a guest post by Darren Hann.

International Commercial Terms (Incoterms®) play a significant role when you are importing or exporting goods in and out of all major cities. Irrespective of whether it’s the finished product, Work in Progress (WIP) inventory, or raw material that you are importing or exporting, Incoterms® are a set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts.

They define the commercial parts, respective responsibilities, and risks of the importer and exporter involved in the transaction. As it is common that one or more freight forwarders take part in the movement of goods through the freight forwarding chain, an Incoterm also assists in deciding who will pay the freight forwarders for their part of work. Therefore, it is best to have crystal clear understanding of Incoterms® before you initiate any international freight forwarding movement.

Some companies mutually decide the Incoterms® without analyzing its impact and the associated risks and costs while others understand the complexity and importance of choosing the right Incoterm for their shipment. Expert freight forwarders have a deep understanding of all series of Incoterms® (2000 and 2010 plus the 2020 update) and who the responsibility lies with for the transaction. Consulting with experienced freight forwarding companies can assist your business to ensure a mutually beneficial Incoterm is selected for international sea freight and air freight services.

Read on to learn 6 ways to ensure you have chosen the right freight forwarding Incoterm.international shipping port cranes & containers

1) Obtain a Correct and Competitive Price for Your Product

Cost of shipping can be completely or partly included in the price of a product. In order to have a clear comparison of prices and to know their competitiveness, it is important that you compare the price based on the same Incoterm from supply/demand points, as the inclusion or non-inclusion of shipping costs can have a huge impact on product prices. Having a clear understanding of the Incoterm being used and requesting a quote with the same Incoterm will assist you to make a comparable decision.

2) Gain Competitive Freight Costs

Smart businesses know that Incoterms® define where respective responsibilities start and end for the parties involved in the sea freight or air freight transaction. Without this clarity, a business may not be able to make an effective comparison of freight forwarding quotes. A clear understanding of Incoterms® assists you to negotiate well and gain a competitive sea freight or air freight quote from a freight forwarding company.

Incoterms3) Meet Your Freight Lead Times

On-time delivery is one of the main objectives of freight forwarding. Choosing the right Incoterm plays a vital role in meeting your freight timelines and maintaining control over your goods. By choosing the right freight forwarding Incoterm you are likely to gain the flexibility to choose a transportation mode such as sea freight or air freight and/or the mix of these modes while maintaining freight lead times and keeping costs low.

4) Maintain Control and Visibility

The Incoterm you select will determine where your chosen freight forwarding company gains custody of the goods for onward movement. This further ensures that you maintain control and visibility on the movement of your goods. Ultimately, the Incoterm you choose will determine how much control and visibility you have on your goods while they move through the freight forwarding chain.

5) Procure the Right Insurance for Your Cargo

The risks associated with the movement of goods internationally either fall on the buyer or the seller depending on the Incoterm you have selected. By choosing the right Incoterm, you get to choose the point at which the risk falls. The procurement of insurance cover and the associated cost for your part of risk depends on the chosen point you transfer the risk.

You may be shipping to/from a disturbed territory, which can be a risk as there is no assurance that the goods will move safely through it. The insurance costs for these kinds of territories are generally very high. By engaging a freight forwarder, you are likely to make the right decision from a risk perspective that can save you time and additional cost for insurance cover.

6) Consider the Mode of Transportation

When choosing your freight forwarding Incoterm, don’t forget your preferred mode of transportation in the process. While some Incoterms are suited for movement through certain modes of transportation such as sea freight and air freight others are interchangeable. In some cases, the choice is also driven by the width of services being provided by freight forwarding companies.

While your business may require a certain mode and Incoterm, the freight forwarding company may not be able to accommodate the request. Expert 3PLs understand this and involve their freight forwarding partner from the initial stages to avoid any confusion and/or disruptions while moving the goods as they are committed to avoiding delays in delivery and unnecessary costs on your behalf.

For any business requiring sea freight and air freight services, Incoterms make international trade transparent for the buyer and seller to understand their level of responsibility as well as avoid disruptions, misunderstanding and contractual ambiguity. Ideally, shippers are aware of all Incoterms available and do their due diligence to choose the best term for each transaction.  Experienced international freight forwarders are likely to offer expert advice and assist you in choosing the best Incoterm for your requirements.

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Related Links About Incoterms

Incoterms 2020 — What Is Changing from Incoterms 2010

All Incoterms Made Fast & Simple in New Video Series

What’s the Deal With Incoterms?!

Incoterms Definitions Part 1: EXW, FCA, FAS, FOB

Incoterms Definitions Part 2: CFR, CIF, CPT, CIP

Incoterms Definitions Part 3: DAT, DAP, DDP

Darren Hann

This was a guest post by Darren Hann.

Author Bio

Darren Hann is a Commercial Manager at BCR Australia, one of Australia’s largest freight forwarding and third party logistics companies. BCR services all major cities in Australia, including Brisbane, Sydney and Melbourne.

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New U.S. Rule Changes on Exporting to China, Venezuela, and Russia https://www.universalcargo.com/new-u-s-rule-changes-on-exporting-to-china-venezuela-and-russia/ https://www.universalcargo.com/new-u-s-rule-changes-on-exporting-to-china-venezuela-and-russia/#respond Tue, 05 May 2020 21:00:44 +0000 https://www.universalcargo.com/?p=10069 The United States Bureau of Industry and Security (BIS) issued rule changes to two sets of export laws and a proposal to change a third. The changes that are now final rules will go into effect  on June 29th, 2020. The proposal is open for public comment until that same date.

The rule change that is getting the most attention is one that expands the licensing requirements on exports to China, Russia, or Venezuela that could be used to support those countries' militaries. Not surprising, most of the coverage of this rule change focuses on China. China is, of course, the biggest trade partner and the United States' current trade relations with China is interesting to say the least. We've gone from trade war to signing a trade deal to trade relation deterioration amidst the novel coronavirus pandemic that originated in Wuhan.

The government wants better visibility of what is getting shipped to China, Russia, and Venezuela that could be used for military purposes and the ability to better limit U.S. exporters from supplying those countries with materials or goods that in a way of looking at it, though the goods are paid for, could be considered military aid. Therefore, the U.S. is expanding controls on the exporting of goods that are for "military end use" or for "military end users."

Find out more by reading the full article in Universal Cargo's blog.

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customs importer paperworkThe United States Bureau of Industry and Security (BIS) issued rule changes to two sets of export laws and a proposal to change a third. The changes that are now final rules will go into effect  on June 29th, 2020. The proposal is open for public comment until that same date.

The rule changes getting the most attention are the ones expanding the licensing requirements on exports to China, Russia, or Venezuela that could be used to support those countries’ militaries. Not surprising, most of the coverage of this rule change focuses on China. China is, of course, the biggest trade partner and the United States’ current trade relations with China is interesting to say the least. We’ve gone from trade war to signing a trade deal to trade relation deterioration amidst the novel coronavirus pandemic that originated in Wuhan. But beyond that, the lines between civilian businesses and the government in China are very blurry.

The U.S. government wants better visibility of what is getting shipped to China, Russia, and Venezuela that could be used for military purposes and the ability to better limit U.S. exporters from supplying those countries with materials or goods that in a way of looking at it, though the goods are paid for, could be considered military aid. Therefore, the U.S. is expanding controls on the exporting of goods that are for “military end use” or for “military end users.”

Here’s the BIS published listing of the new rule and its summary from the Federal Register:

Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End Use or Military End Users in the People’s Republic of China, Russia, or Venezuela

Final rule, effective June 29, 2020

In this final rule, The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) to expand license requirements on exports, reexports, and transfers (in-country) of items intended for military end use or military end users in the People’s Republic of China (China), Russia, or Venezuela. Specifically, this rule expands the licensing requirements for China to include ‘‘military end users,’’ in addition to ‘‘military end use.’’ It broadens the list of items for which the licensing requirements and review policy apply and expands the definition of ‘‘military end use.’’

Next, it creates a new reason for control and the associated review policy for regional stability for certain items exported to China, Russia, or Venezuela, moving existing text related to this policy. Finally, it adds Electronic Export Information filing requirements in the Automated Export System for exports to China, Russia, and Venezuela.
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SUMMARY: The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) to expand license requirements on exports, reexports, and transfers (in-country) of items intended for military end use or military end users in the People’s Republic of China (China), Russia, or Venezuela. Specifically, this rule expands the licensing requirements for China to include ‘‘military end users,’’ in addition to ‘‘military end use.’’ It broadens the list of items for which the licensing requirements and review policy apply and expands the definition of ‘‘military end use.’’ Next, it creates a new reason for control and the associated review policy for regional stability for certain items exported to China, Russia, or Venezuela, moving existing text related to this policy. Finally, it adds Electronic Export Information filing requirements in the Automated Export System for exports to China, Russia, and Venezuela. This rule supports the objectives discussed in the National Security Strategy of the United States.

What Exactly Are Military End Users and Military End Use?

The natural question that pops up from this rule change is, “What are ‘military end users’ and ‘military end use’?”

If we’re talking China, obviously the People’s Liberation Army (PLA), and any of its branches, would be a military end user and using items to house or arm PLA soldiers would logically be classified military end use. However, military end user and end use is much broader in its scope than the obvious, at least according to a trade lawyer Karen Freifeld quoted in a Reuters article about these rule changes:

Washington trade lawyer Kevin Wolf said the rule changes for China are in response to its policy of military-civil fusion: finding military applications for civilian items.

He said the regulatory definitions of military use and user are broad and go beyond purchases by entities such as the People’s Liberation Army.

For example, Wolf said, if a car company in China repairs a military vehicle, that car company may now be a military end user, even if the item being exported is for another part of the business.

“A military end user is not limited to military organizations,” Wolf said. “A military end user is also a civilian company whose actions are intended to support the operation of a military item.”

I defer to Wolf’s superior knowledge on the subject of law; however, from reading the published law, it does not appear that the definition of military end user has expanded, but military end use certainly has. Here’s an excerpt on the definitions from the Federal Registrar:

The EAR’s current definition of military end users includes the army, navy, air force, marines and coast guard, plus the national guard/police, government intelligence and reconnaissance organizations; this rule does not modify that definition. The EAR’s current definition of military end use refers both to direct use (for parts, components or subsystems of weapons and other defense articles) and indirect use (weapon design and development, testing, repair and maintenance). This rule broadens the definition of military end use beyond any item for the ‘‘use,’’ ‘‘development,’’ or ‘‘production’’ to include any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, ‘‘development,’’ or ‘‘production,’’ of military items.

The law change absolutely does seem aimed at looking closer at end users that are not military organizations as I think Wolfe is actually saying, even though the definition of military end users itself does not change with the law update. In fact, the printed regulation actually states:

This expansion will require increased diligence with respect to the evaluation of end users in China, particularly in view of China’s widespread civil-military integration.

For an example of the kind of effect this rule change may have, Freifeld wrote in her article that this could specifically “hurt the semiconductor industry and sales of civil aviation parts and components to China.”

Getting Rid of Exceptions

There are goods and technologies that are controlled for national security reasons, requiring licenses for exporting them to countries on the BIS D:1 (National Security) list, which includes China, Russia, and Venezuela among many more nations. There were items among the goods and technologies controlled for national security that had exceptions so long as they were being exported to civil end users and not for military, terrorist, or other prohibited end uses. All exemptions to needing a license for such goods and technologies are being removed.

A JD Supra published article gives the following examples of items that enjoyed exeption:

Examples of the many items currently eligible for the license exception include certain human and animal pathogens, advanced anti-friction bearings, semiconductors and semiconductor design and production technology, telecommunications equipment, optics and radar technology, civil aircraft parts and components, and other aerospace technology.

Here’s the BIS published listing of this new rule change and its summary from the Federal Register:

Elimination of License Exception Civil End Users (CIV)
Final Rule, effective June 29, 2020

In this final rule, the Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) by removing License Exception Civil End Users (CIV) and requiring a license for national security controlled items on the Commerce Control List (CCL) to countries of national security concern. This will advance U.S. national security interests by allowing U.S. government review of these transactions to these countries prior to export, reexport or transfer (in-country) in accordance with current licensing policy for national security controlled items on the CCL. This rule also makes conforming changes to the CCL by removing the CIV paragraph from each Export Control Classification Number on the CCL where it appears.

SUMMARY: In this final rule, the Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) by removing License Exception Civil End Users (CIV) and requiring a license for national security- controlled items on the Commerce Control List (CCL) to countries of national security concern. This will advance U.S. national security interests by allowing U.S. government review of these transactions to these countries prior to export, reexport or transfer (in- country) in accordance with current licensing policy for national security- controlled items on the CCL. This rule also makes conforming changes to the CCL by removing the CIV paragraph from each Export Control Classification Number on the CCL where it appears.

You Can Still Weigh-In on Proposed Reexport Rule Change

A similar tightening of export rules is proposed that exporters could still weigh in on. This one would remove license exceptions on the reexport of items on the Commerce Control List.

You can read the full proposal by clicking here.

Of course, I’ll also include the BIS published listing of the new rule proposal and its summary from the Federal Register:

Modification of License Exception Additional Permissive Reexports (APR); Proposed rule

The Bureau of Industry and Security (BIS) proposes to amend the Export Administration Regulations (EAR) by modifying License Exception Additional Permissive Reexports (APR). Specifically, BIS is proposing to remove provisions which authorize reexports of certain national security-controlled items on the Commerce Control List (CCL) to gain better visibility into transactions of national security or foreign policy interest to the United States.

Comments must be received by BIS no later than June 29, 2020.

SUMMARY: In this rule, the Bureau of Industry and Security (BIS) proposes to amend the Export Administration Regulations (EAR) by modifying License Exception Additional Permissive Reexports (APR). Specifically, BIS is proposing to remove provisions which authorize reexports of certain national security-controlled items on the Commerce Control List (CCL) to gain better visibility into transactions of national security or foreign policy interest to the United States.

DATES: Comments must be received by BIS no later than June 29, 2020.

ADDRESSES: Comments on this rule may be submitted to the Federal rulemaking portal (www.regulations.gov). The regulations.gov ID for this rule is: BIS– 2020–0010. All relevant comments (including any personally identifying information) will be made available for public inspection and copying.

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90-Day Duty Deferment for Shippers Impacted by COVID-19 — Complete Guidelines from CBP https://www.universalcargo.com/90-day-duty-deferment-for-shippers-impacted-by-covid-19-complete-guidelines-from-cbp/ https://www.universalcargo.com/90-day-duty-deferment-for-shippers-impacted-by-covid-19-complete-guidelines-from-cbp/#respond Tue, 21 Apr 2020 20:19:11 +0000 https://www.universalcargo.com/?p=10043 President Trump signed an executive order on Friday, April 17th that includes a 90-day duty deferment on goods imported in March and April because of the COVID-19 crisis the country, along with the rest of the world, is facing.

This deferment is obviously good news for importers whose businesses are struggling amidst the shelter-in-place orders around the country. However, it is very important to note that this is not an across-the-board deferment on duties shippers must pay on import goods.

Antidumping-related tariffs like the steel and aluminum ones that are still in place are not included in this duty deferment nor are the 25% tariffs President Trump had put in place on the importing of many, many Chinese goods nor are some tariffs placed on European goods over the last couple years. Shippers should also not expect to get deposits they've made on estimated taxes, even if those Importers will definitely have to speak to their customs brokers about what qualifies for this deferment and what does not.

To find out more and see the full text on the deferment from the CBP, check out the full article in Universal Cargo's blog.

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Trump signs executive orderPresident Trump signed an executive order on Friday, April 17th that includes a 90-day duty deferment on goods imported in March and April because of the COVID-19 crisis the country, along with the rest of the world, is facing.

Not for Aluminum, Steel, or China Tariffs

This deferment is obviously good news for importers whose businesses are struggling amidst the shelter-in-place orders around the country. However, it is very important to note that this is not an across-the-board deferment on duties shippers must pay on import goods.

Antidumping-related tariffs like the steel and aluminum ones that are still in place are not included in this duty deferment nor are the 25% tariffs President Trump had put in place on the importing of many, many Chinese goods nor are some tariffs placed on European goods over the last couple years. Shippers should also not expect to get deposits they’ve made on estimated taxes, even if those Importers will definitely have to speak to their customs brokers about what qualifies for this deferment and what does not.

The U.S. Customs and Border Protection (CBP) lays it out as follows:

This temporary postponement is limited. This temporary postponement does not permit return of any deposits of estimated duties, taxes, and/or fees that have been paid. This temporary postponement also does not apply to any entry, or withdrawal from warehouse, for consumption, or any deposit of estimated duties, taxes, or fees for the entry, or withdrawal from warehouse, for consumption, where the entry summary includes any merchandise subject to one or more of the following: antidumping duties (assessed pursuant to 19 U.S.C. 1673 et seq.), countervailing duties (assessed pursuant to 19 U.S.C. 1671 et seq.), duties assessed pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862), duties assessed pursuant to Section 201 of the Trade Act of 1974 (19 U.S.C. 2251 et seq.), and duties assessed pursuant to Section 301 of the Trade Act of 1974 (19 U.S.C. 2411 et seq.). Accordingly, CBP anticipates that importers will file separate entries when a shipment contains both merchandise that is eligible for temporary postponement and merchandise that is ineligible (because of the above-specified trade remedies).

These are obviously some of the largest tariffs out there, resulting in some of the biggest duties shippers have to pay. It also makes sense that President Trump wouldn’t defer these tariffs as they’re part of larger strategies the administration is utilizing to fight trade inequities that the president sees as bad for the American public.

Some shipments imported by American shippers may include both tariffs that would qualify for deferment of the resulting duties and ones included above that do not. In such cases, shippers are able to declare separately to defer the applicable duties.

Qualification for Deferment

Just because shippers import goods that are not automatically disqualified from having their duties deferred does not mean they can automatically take advantage of this 90-day deferment.

Importers must actually be able to show their business has been impacted by COVID-19. This does not mean generally impacted. Pretty much everyone is generally impacted by the coronavirus pandemic. Businesses must be shut down or at least partially suspended for its duties on imports to be deferred.

Here’s clarification from the CBP:

To qualify for this temporary postponement, an importer must demonstrate a significant financial hardship. An eligible importer’s operation must be fully or partially suspended during March or April 2020 due to orders from a competent governmental authority limiting commerce, travel, or group meetings because of COVID-19, and as a result of such suspension, the gross receipts of such importer for March 13-31, 2020 or April 2020 are less than 60 percent of the gross receipts for the comparable period in 2019. An eligible importer need not file additional documentation with CBP to be eligible for this relief but must maintain documentation as part of its books and records establishing that it meets the requirements for relief.

We’ve included the CBP’s complete text about the deferment resulting from President Trump’s executive order below for you to read if you want more information. It includes contact information of whom you can contact in the CBP for more information beyond the text. We also suggest speaking to your customs broker about the deferment if you wish to apply for it.

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Complete Deferment Language from CBP

Here is the complete text from the document detailing the 90-day deferment published the U.S. Customs and Border Protection’s website:

9111-14

DEPARTMENT OF HOMELAND SECURITY

U.S. CUSTOMS and BORDER PROTECTION

DEPARTMENT OF THE TREASURY

19 CFR Part 24

USCBP-2020-0017

CBP Dec. 20-05

RIN 1515-AE54

Temporary Postponement of the Time to Deposit Certain Estimated Duties, Taxes, and Fees During the National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak

AGENCY: U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury.

ACTION: Temporary Final Rule.

SUMMARY: In light of the President’s Proclamation Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) (Presidential Proclamation 9994) under the National Emergencies Act on March 13, 2020, and the President’s Executive Order entitled “National Emergency Authority to Postpone The Time to Deposit Certain Estimated Duties, Taxes, and Fees” authorizing the Secretary of the Treasury to exercise the authority under section 318(a) of the Tariff Act of 1930, issued on April 18, 2020, the Secretary of the Treasury, in consultation with the designee of the Secretary of Homeland Security (U.S. Customs and Border Protection (CBP)), is amending the CBP regulations to temporarily postpone the deadline for importers of record with a significant financial hardship to deposit certain estimated duties, taxes, and fees that they would ordinarily be obligated to pay as of the date of entry, or withdrawal from warehouse, for consumption, for merchandise entered in March or April 2020, for a period of 90 days from the date that the deposit would otherwise have been due but for this emergency action. This temporary postponement does not permit return of any deposits of estimated duties, taxes, and/or fees that have been paid. This temporary postponement also does not apply to entries, or withdrawals from warehouse, subject to certain specified trade remedies, and any entry summary that includes merchandise subject to those trade remedies is not eligible under this rule.

DATES: Effective date: [INSERT DATE OF FILING FOR PUBLIC INSPECTION AT THE FEDERAL REGISTER]. Comments must be received by [INSERT DATE 30 DAYS AFTER DATE OF FILING FOR PUBLIC INSPECTION AT THE FEDERAL REGISTER].

ADDRESSES: You may submit comments, identified by docket number USCBP– 2020–0017, by one of the following methods:

• Federal eRulemaking Portal athttp://www.regulations.gov. Follow the instructions for submitting comments via Docket No. USCBP–2020–0017.

• Mail: Trade and Commercial Regulations Branch, Regulations and Rulings, Office of Trade, U.S. Customs and Border Protection, 90 K Street NE, 10th Floor, Washington, DC 20229– 1177.

Instructions: All submissions received must include the agency name and docket number for this rulemaking. All comments received will be posted without change to http://www.regulations.gov, including any personal information provided. For detailed instructions on submitting comments and additional information on the rulemaking process, see the Public Participation heading of the SUPPLEMENTARY INFORMATION section of this document.

Docket: For access to the docket to read background documents or comments received, go to http://www.regulations.gov. Due to the relevant COVID-19-related restrictions, CBP has temporarily suspended its on-site public inspection of the public comments.

FOR FURTHER INFORMATION CONTACT: Randy Mitchell, Director, Commercial Operations Revenue Entry Division, Office of Trade, U.S. Customs and Border Protection, 202-325-6532 or by email at otentrysummary@cbp.dhs.gov.

SUPPLEMENTARY INFORMATION:

I. Public Participation

Interested persons are invited to participate in this rulemaking by submitting written data, views, or arguments on all aspects of this temporary final rule. See ADDRESSES above forinformation on how to submit comments. CBP also invites comments that relate to the economic, environmental, or federalism effects that might result from this regulatory change.Comments that will provide the most assistance to CBP will reference a specific portion of the rule, explain the reason for any recommended change, and include data, information, or authority that support such recommended change.

II. Background

On March 13, 2020, the President issued Proclamation 9994, Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19), under the National Emergencies Act (50 U.S.C. 1601 et seq.) and found and proclaimed that the COVID-19 outbreak in the United States constitutes a national emergency, beginning March 1, 2020. On April 18, 2020, the President issued the Executive Order entitled “National Emergency Authority to Postpone The Time to Deposit the Payment of Certain Estimated Duties, Taxes, and Fees” (hereinafter “Postponement of Deposit EO”) authorizing the Secretary of the Treasury to respond to the national emergency declared by Presidential Proclamation 9994, pursuant to the authority in section 318(a) of the Tariff Act of 1930 (19 U.S.C. 1318(a)). Upon consultation by the Secretary of the Treasury with the designee of the Secretary of Homeland Security (U.S. Customs and Border Protection (CBP)), and for the reasons set forth below, CBP is amending its regulations to respond to the ongoing national emergency.

Due to the COVID-19 pandemic, local, state and national restrictions have forced the closure of offices of the importing community and those businesses have limited their operations and procedures. Many importers of record will be receiving diminished or no revenue during this time while still incurring costs, including the duties, taxes, and fees associated with imported merchandise for their clients and supply chains. Aggravating matters, many major retail chains and other businesses are closing for business—either voluntarily in response to the President’s call or following state or local government requirements.

As a result, many importers of record are undergoing significant financial hardship with operations fully or partially suspended during March or April 2020 due to orders from competent governmental authorities imposing limits on commerce, travel, or group meetings because of COVID-19. Many importers of record are also having difficulty authorizing payments for duties, taxes, and fees on imported merchandise. Employees are having difficulty getting to work or are having technical issues with working remotely, making it difficult to contact the individuals responsible for the release of funds, which is leading to delays in payments of duties, taxes, and fees.

Under 19 U.S.C. 1318(a), whenever the President shall by proclamation declare an emergency to exist by reason of a state of war, or otherwise, he may authorize the Secretary of the Treasury to extend during the continuance of such emergency the time prescribed for the performance of any act. To address the specific circumstances created by the COVID-19 pandemic, and without creating, for the avoidance of doubt, a binding precedent for future exercises of the authority granted by 19 U.S.C. 1318(a), the Secretary of the Treasury, in consultation with the designee of the Secretary of Homeland Security ( U.S. Customs and Border Protection (CBP)), under 19 U.S.C. 1318(a) and as authorized by the Postponement of Deposit EO, is amending the CBP regulations by adding a new section 24.1a to title 19 of the Code of Federal Regulations (19 CFR 24.1a) to temporarily postpone the deadline for importers of record to deposit certain estimated duties, taxes, and fees that they would ordinarily be obligated to payas of the date of entry, or withdrawal from warehouse, for consumption, for merchandise entered in March or April 2020, for a period of 90 days from the date that the deposit would otherwise have been due but for this emergency action. In addition, no interest that would otherwise accrue upon such estimated duties, taxes, and fees will accrue during the 90-day postponement period.

This emergency action is being taken in response to the extraordinary challenges facing U.S. individuals and businesses during the COVID-19 national emergency (which significantly affects the trade community), and is consistent with the Secretary of the Treasury’s decision to postpone due dates for Federal income tax payments under section 7508A(a) of the Internal Revenue Code (available at https://www.irs.gov/coronavirus).

This temporary postponement is limited. This temporary postponement does not permit return of any deposits of estimated duties, taxes, and/or fees that have been paid. This temporary postponement also does not apply to any entry, or withdrawal from warehouse, for consumption, or any deposit of estimated duties, taxes, or fees for the entry, or withdrawal from warehouse, for consumption, where the entry summary includes any merchandise subject to one or more of the following: antidumping duties (assessed pursuant to 19 U.S.C. 1673 et seq.), countervailing duties (assessed pursuant to 19 U.S.C. 1671 et seq.), duties assessed pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862), duties assessed pursuant to Section 201 of the Trade Act of 1974 (19 U.S.C. 2251 et seq.), and duties assessed pursuant to Section 301 of the Trade Act of 1974 (19 U.S.C. 2411 et seq.). Accordingly, CBP anticipates that importers will file separate entries when a shipment contains both merchandise that is eligible for temporary postponement and merchandise that is ineligible (because of the above-specified trade remedies).

To qualify for this temporary postponement, an importer must demonstrate a significant financial hardship. An eligible importer’s operation must be fully or partially suspended during March or April 2020 due to orders from a competent governmental authority limiting commerce, travel, or group meetings because of COVID-19, and as a result of such suspension, the gross receipts of such importer for March 13-31, 2020 or April 2020 are less than 60 percent of the gross receipts for the comparable period in 2019. An eligible importer need not file additional documentation with CBP to be eligible for this relief but must maintain documentation as part of its books and records establishing that it meets the requirements for relief.

This temporary postponement does not apply to deadlines for the payment of other debts to CBP, including but not limited to deadlines for the payment of bills for duties, taxes, fees, and interest determined to be due upon liquidation or reliquidation, deadlines for the payment of fees authorized pursuant to 19 U.S.C. 58c (except for merchandise processing fees and dutiable mail fees), or deadlines for the payment of any penalty or liquidated damages due to CBP.

CBP notes that for some types of entries, the time of entry is contingent (in part) upon the deposit of estimated duties, taxes, and fees. See, e.g., 19 CFR 141.68(b). To ensure clarity in the application of the temporary postponement vis-à-vis the time of entry, this emergency action includes a waiver of the regulatory requirement to deposit estimated duties, taxes, and fees for the purpose of establishing the time of entry in those instances where it would otherwise be required under 19 CFR 141.68. The time of entry can thus be established in the absence of the deposit of estimated duties, taxes, and fees postponed in accordance with this emergency action.

III. Statutory and Regulatory Requirements

A. Inapplicability of Notice and Delayed Effective Date

The Administrative Procedure Act (APA) requirements in 5 U.S.C. 553 govern agency rulemaking procedures. Section 553(b) of the APA generally requires notice and public comment before issuance of a final rule. In addition, section 553(d) of the APA requires that a final rule have a 30-day delayed effective date. The APA, however, provides exceptions from the prior notice and public comment requirement and the delayed effective date requirements, when an agency for good cause finds that such procedures are impracticable, unnecessary, or contrary to the public interest. 5 U.S.C. 553(b)(B), (d)(3). CBP finds that prior notice and comment are impracticable and contrary to the public interest and that good cause exists to issue this rule immediately.

As noted above, the ongoing unprecedented situation related to COVID-19 is having a nationwide impact, as demonstrated by the declaration of a national emergency by the President. The postponement of the payment period for the deposit of certain estimated duties, taxes, and fees as of the date of entry, or withdrawal from warehouse, for consumption, of merchandise imported into the United States supports American workers and businesses who are currently affected by COVID-19. To protect our public interests during the ongoing national emergency, the Secretary of the Treasury, in consultation with CBP, concludes, pursuant to 5 U.S.C. 553(b)(B), that there is good cause to dispense with prior public notice and the opportunity to comment on this rule before finalizing this rule. For the same reasons, the Secretary of the Treasury, in consultation with CBP, has determined, consistent with section 553(d)(3) of the APA, that there is good cause to make this temporary final rule effective immediately.

B. Executive Orders 13563, 12866 and 13771

Executive Orders 13563 and 12866 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Executive Order 13771 directs agencies to reduce regulation and control regulatory costs and provides that “for every one new regulation issued, at least two priorregulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”

This temporary final rule is a “significant regulatory action,” under section 3(f) of Executive Order 12866, but not an “economically significant regulatory action.” Accordingly, the Office of Management and Budget (OMB) has reviewed this regulation. This regulation has been prepared under the emergency flexibilities provided under section 6(a)(3)(D) of Executive Order 12866. The costs of this rule are considered de minimisfor purposes of Executive Order 13771. See OMB’s Memorandum titled “Guidance Implementing Executive Order 13771, Titled ‘Reducing Regulation and Controlling Regulatory Costs’ ” (April 5, 2017).

C. Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as amended by the Small Business Regulatory Enforcement and Fairness Act of 1996, requires an agency to prepare and make available to the public a regulatory flexibility analysis that describes the effect of a proposed rule on small entities (i.e., small businesses, small organizations, and small governmental jurisdictions) when the agency is required to publish a general notice of proposed rulemaking for a rule. Since a general notice of proposed rulemaking is not necessary for this rule, CBP is not required to prepare a regulatory flexibility analysis for this rule.

D. Paperwork Reduction Act

This temporary final rule does not i mpose an additional information collection burden under the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) and does not involve any materialchange to the existing approved information collection by OMB under assigned OMB control number 1651–0078. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number assigned by OMB.

E. Signing Authority

This document is being issued by CBP in accordance with § 0.1(a)(1) of the CBPRegulations (19 CFR 0.1(a)(1)) pertaining to the authority of the Secretary of the Treasury (or his/her delegate) to approve regulations related to certain customs revenue functions.

List of Subjects in 19 CFR Part 24

Accounting, Claims, Harbors, Reporting and recordkeeping requirements, Taxes.

Amendments to the Regulations

For the reasons stated above, part 24 of title 19 of the Code of Federal Regulations (19 CFR part 24) is a mended as set forth below:

PART 24—CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE

1. The general authority citation for part 24 continues to read and a new specific authority is added as follows:

Authority: 5 U.S.C. 301; 19 U.S.C. 58a–58c, 66, 1202 (General Note 3(i), Harmonized Tariff Schedule of the United States), 1505, 1520, 1624; 26 U.S.C. 4461, 4462; 31 U.S.C.3717, 9701; Pub. L. 107–296, 116 Stat. 2135 (6 U.S.C. 1 et seq.).

***

Section 24.1a also issued under 19 U.S.C. 1318;

*****

2. Part 24 is amended by adding section 24.1a, to read as follows:

§ 24.1a Temporary Postponement of Deadline to Deposit Certain Estimated Duties, Taxes, and Fees Because of the COVID-19 National Emergency

(a) General. Pursuant to the authority of 19 U.S.C. 1318(a), subject to the conditions in paragraphs (1) through ( 4) below, the deadline for the deposit of estimated duties, taxes, and fees that an importer of record would ordinarily be obligated to pay as of the date of entry, or withdrawal from warehouse, for consumption, of imported merchandise into the United States is postponed for a period of 90 days from the date that the deposit would otherwise have been due. No interest will accrue for the delayed deposit of such estimated duties, taxes, and fees during this 90-day temporary postponement.

(1) This temporary postponement applies only to entries, or withdrawals from warehouse, for consumption, made on or after March 1, 2020 and no later than April 30, 2020 by importers of record with a significant financial hardship. This temporary postponement does not permit return of any deposits of estimated duties, taxes, and/or fees that have been paid.

(2) Importers with a significant hardship. An importer will be considered to have a significant financial hardship if the operation of such importer is fully or partially suspended during March or April 2020 due to orders from a competent governmental authority limiting commerce, travel, or group meetings because of COVID-19, and as a result of such suspension, the gross receipts of such importer for March 13-31, 2020 or April 2020 are less than 60 percent of the gross receipts for the comparable period in 2019. An eligible importer need not file additional documentation with CBP to be eligible for this relief but must maintain documentation as part of its books and records establishing that it meets the requirements for relief.

(3) No penalty, liquidated damages claim, or other sanction will be imposed for the delayed deposit of estimated duties, taxes, and fees in accordance with a deadline postponed under this section.

(4) This temporary postponement does not apply to any entry, or withdrawal from warehouse, for consumption, or any deposit of estimated duties, taxes, or fees for the entry, or withdrawal from warehouse, for consumption, where the entry summary includes any merchandise subject to one or more of the following: antidumping duties (assessed pursuant to 19 U.S.C. 1673 et seq.), countervailing duties (assessed pursuant to 19 U.S.C. 1671 et seq.), duties assessed pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862), duties assessed pursuant to Section 201 of the Trade Act of 1974 (19 U.S.C. 2251 et seq.), and duties assessed pursuant to Section 301 of the Trade Act of 1974 (19 U.S.C. 2411 et seq.).

(b)Time of entry. For entries eligible for the temporary postponement of deposits under paragraph (a) of this section, the requirement to deposit estimated duties, taxes, and feesfor the purpose of establishing the time of entry stated in 19 CFR 141.68 is waived.

*****

Mark A. Morgan,

Acting Commissioner,

U.S. Customs and Border Protection

 

Approved:

 

Timothy E. Skud,

Deputy Assistant Secretary of the Treasury

 

The post 90-Day Duty Deferment for Shippers Impacted by COVID-19 — Complete Guidelines from CBP appeared first on Universal Cargo.

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Beware International Shipping & Business Fraud During COVID-19 Crisis https://www.universalcargo.com/beware-international-shipping-business-fraud-during-covid-19-crisis/ https://www.universalcargo.com/beware-international-shipping-business-fraud-during-covid-19-crisis/#respond Thu, 16 Apr 2020 21:38:02 +0000 https://www.universalcargo.com/?p=10039 The apparent cyber attack on MSC spotlights the increased risk of fraud, cyber attack, and cargo theft during the COVID-19 pandemic.

In the middle of all this highly increased working remotely because of novel-coronavirus-induced shelter-in-place orders and shutdowns, Mediterranean Shipping Company (MSC) websites and online booking platform went down. Many unconfirmed reports have called the outage a result of cyber attack.

Fortunately, as reported by many outlets, including American Shipper, "The online services of [MSC], the second largest container line in the world, are now back online after an extended outage due to a cyberattack."

We've seen cyber attacks before this pandemic, and with greater clarity about them, given, as Gavin van Marle says in a Loadstar article, "it was unclear whether MSC was the target of the attack or simply collateral damage." Probably the most notorious cyber attack in the industry happened a few years ago when Maersk was hit by a cyber attack, affecting the world's largest container line's operations around the world.

The attack on Maersk made it obvious that no business is invulnerable to these attacks, but that vulnerability is heightened right now. Find out more by reading the full article in Universal Cargo's blog.

The post Beware International Shipping & Business Fraud During COVID-19 Crisis appeared first on Universal Cargo.

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cargo ship in water overlooking sunsetThe apparent cyber attack on MSC spotlights the increased risk of fraud, cyber attack, and cargo theft during the COVID-19 pandemic.

In the middle of all this highly increased working remotely because of novel-coronavirus-induced shelter-in-place orders and shutdowns, Mediterranean Shipping Company (MSC) websites and online booking platform went down. Many unconfirmed reports have called the outage a result of cyber attack.

Fortunately, as reported by many outlets, including American Shipper, “The online services of [MSC], the second largest container line in the world, are now back online after an extended outage due to a cyberattack.”

We’ve seen cyber attacks before this pandemic, and with greater clarity about them, given, as Gavin van Marle says in a Loadstar article, “it was unclear whether MSC was the target of the attack or simply collateral damage.” Probably the most notorious cyber attack in the industry happened a few years ago when Maersk was hit by a cyber attack, affecting the world’s largest container line’s operations around the world.

The attack on Maersk made it obvious that no business is invulnerable to these attacks, but that vulnerability is heightened right now.

Increased Risk Due to Challenges from and Focus on Pandemic

A Hellenic Shipping News article warns stakeholders in the international supply chain to be alert, stating, “The current pandemic-induced dislocation and additional logistics challenges simply increase the risk [of fraud].” The article goes on to say, “fraudsters are already exploiting the current COVID-19 situation and users are highly exposed.”

With shipping news headlines like “Unprecedented disruption to supply chain slams US port volumes” from American Shipper and “Pandemic lengthens US truck driver delays, detention” from the Journal of Commerce, it’s obvious that the industry has challenges to focus on well beyond the normal. These additional challenges can make it harder to spot or fight fraud, theft attempts, and cyber attacks or, at the very least, reduce the focus that might normally be put on discovering and foiling these unlawful activities.

For an example of how security or law enforcement might decrease during these difficult times, consider the IMO 2020 situation. The new legislation reducing the allowable CO2 emission from ship fuel was supposed to be the big story this year. While the new rules did go into effect, enforcement of the new rules have dropped in priority, and I would say rightfully so, as health concerns over COVID-19 have taken precedence.

Here’s a blurb from a Hellenic Shipping article about the pandemic masking the true picture of IMO 2020 compliance:

“Three months on and the disruption to international shipping caused by Covid-19 has pushed sulphur cap issues well and truly from the headlines. Regulation 14.1.3 remains in force – however, where Port authorities globally are prioritising health and the movement of freight, enforcement action will perhaps be less of a priority.”

The UK’s Maritime and Coastguard Agency (MCA) recently announced that it was suspending vessel checks for compliance with low sulphur fuel regulations in order to keep freight moving, although it made clear that it will still inspect vessels where information is received indicating that an inspection would be appropriate.

Specific Supply Chain & Shipping Threats & Tips to Protect Your Business

Of course, that’s not to say there has been absolutely no enforcement of IMO 2020. We blogged recently about MSC being the first major ocean freight carrier to run afoul of the new regulation and raised questions about the enforcement measures taken on the infringement. Likewise, companies are not losing all sight of security because of the extra challenges faced during this pandemic.

However, this is a moment that fraudsters are likely to take as much advantage of as they possibly can. The first Hellenic Shipping News article mentioned in this post brings up fraudulent activity shippers and supply chain companies should be especially aware of. Those activities are:

  • Mandate fraud
  • CEO fraud
  • Round the corner theft
  • Cargo theft
  • Procurement fraud

I recently had someone attempt CEO fraud on me, contacting me via text, claiming to be Universal Cargo CEO Devin Burke. The fraud was easy to detect as it came from a different number than I know to be Mr. Burke’s and I also know how Devin communicates, which is very distinct and often includes the usage of puns. I blocked the number and that was the end of it. However, in a larger company where employees don’t have much or any contact with CEOs, it is conceivable that such a fraudster could trick an employee into believing he or she actually is the CEO and pulling sensitive information out of the employee.

All companies should make sure their employees are educated on how to avoid these frauds and not assume employees will be able to just spot them. Simple tips to teach include making sure employees know that CEOs or employers will only contact them through official means like official company emails or company phone numbers and to make sure they are not being contacted by a similar but slightly different email address or number. If a CEO suddenly contacts an employee he or she would not normally contact, especially asking information about the company, the employee, or company business, that’s a red flag and the identification of the CEO must be verified.

In the past, we’ve posted articles about protecting scams and cargo theft. Here are several:

7 Tips to Beat Cargo Theft by ID Theft Like Tom Brady Beat NFL Suspension

6 Risks in International Trade & How to Manage Them

 

Shippers Beware: How to Avoid Fake Freight Forwarder Scams

 

7 Tips to Avoid International Shipping Scams

7 Things Every Shipper Should Know About Peak Season Shipping

In recent years, Universal Cargo has also seen a number of companies and scammers pop up using similar names and logos to ours and even stolen content from our website in attempts to capitalize on Universal Cargo’s well-earned reputation through 30+ years of being a trusted freight forwarder. We saw so much of it, we made a video on the topic:

YouTube Video

On a final note, this article should not only be taken as a warning for shippers to remain or be extra vigilant of potential security threats during this pandemic, but it should also serve as a reminder of the importance of cargo insurance, which protects shippers against risks involved with importing and exporting goods.

Click Here for Free Freight Rate Pricing

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Importing Pandemic Supplies Requirements Laid Out by Customs Broker https://www.universalcargo.com/importing-medical-supplies/ https://www.universalcargo.com/importing-medical-supplies/#respond Thu, 09 Apr 2020 19:49:51 +0000 https://www.universalcargo.com/?p=10001 Universal Cargo's house customs broker, INLT gave a great webinar outlining the U.S. requirements around importing pandemic supplies during this COVID-19 crisis. We thought what they shared would be a great resource for organizations trying to get supplies, whether personal protective equipment (PPE) for individuals or medical supplies for hospitals, to the U.S.

Chris Reynolds and the INLT team were gracious enough to let us share their slides here in Universal Cargo's blog as a resource for you.

Below, you'll be able to see an image of each slide, covering things from FAQs to requirements and duty information on specific products like masks, gowns, and sanitizers to enforcement guidelines on the issue.

All the information in this post was current as of March 30th, 2020, but it should be noted that things are constantly, sometimes daily, changing when it comes to rules and requirements around the international shipping of pandemic-related items. Because of this, INLT warns that classifications and FDA regulations should be confirmed with your customs broker or attorney when actually shipping items found within this post.

Still, the information found below should be a very useful resource. Check it out in Universal Cargo's blog or share it with someone you know who could use it.

The post Importing Pandemic Supplies Requirements Laid Out by Customs Broker appeared first on Universal Cargo.

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Universal Cargo’s house customs broker, INLT gave a great webinar outlining the U.S. requirements around importing pandemic supplies during this COVID-19 crisis. We thought what they shared would be a great resource for organizations trying to get supplies, whether personal protective equipment (PPE) for individuals or medical supplies for hospitals, to the U.S.

Chris Reynolds and the INLT team were gracious enough to let us share their slides here in Universal Cargo’s blog as a resource for you.

Below, you’ll be able to see an image of each slide, covering things from FAQs to requirements and duty information on specific products like masks, gowns, and sanitizers to enforcement guidelines on the issue.

All the information in this post was current as of March 30th, 2020, but it should be noted that things are constantly, sometimes daily, changing when it comes to rules and requirements around the international shipping of pandemic-related items. Because of this, INLT warns that classifications and FDA regulations should be confirmed with your customs broker or attorney when actually shipping items found within this post.

Still, the information found below should be a very useful resource.

Before we get into the good stuff, we at Universal Cargo would just like to give a shout out and thank you to Chris Reynolds and the hard-working INLT team.

INLT’s Pandemic Supplies Webinar Slides

inlt pandemic supplies FAQs

INLT pandemic supplies FAQs

Frequently Asked Questions

U.S. import requirements for products in-demand due to the COVID-19 pandemic

Current as of March 30, 2020

inlt pandemic supplies webinar disclaimers

INLT pandemic supplies webinar disclaimers

DISCLAIMERS

  • The current novel coronavirus (COVID-19) pandemic evolves day-to-day as does the U.S. government’s regulatory response. Amazon, INLT, and its affiliates cannot guarantee that the content of this presentation reflects the latest federal legal requirements.
  • The information provided in this presentation is general in nature and is provided for educational purposes only. It does not constitute legal advice. Please consult with an attorney if you have questions about your specific legal rights or duties, or your customs broker for prospective shipments.
  • This training is not a substitute for reading the U.S. Harmonized Tariff Schedule, 21 C.F.R. Subchapter C, D, or H, 40 C.F.R. Parts 152-180, or any other federal regulations.
inlt pandemic supplies webinar commodity requirements

INLT pandemic supplies webinar commodity requirements

Commodity Requirements

inlt pandemic supplies webinar surgical masks

INLT pandemic supplies webinar surgical masks

Surgical Masks

HTSUS 6307.90.9889, 7%
Section 301 duties: exempt pursuant to 85 FR 15244

Regulated by FDA as a Class II Medical Device

If intended to provide liquid barrier protection

510(k) requirement not enforced Product code: FXX

If not marketed or intended for use as a medical device

FDA regulations do not apply

INLT Pandemic Supplies Webinar Medical Masks

INLT Pandemic Supplies Webinar Medical Masks

IMPORT REQUIREMENTS

Medical Masks

HTSUS 6307.90.9889, 7%
Section 301 duties: exempt pursuant to 85 FR 15244

Regulated by FDA as a Class II Medical Device

If intended for a medical purpose and not intended to provide liquid barrier protection

510(k) requirements and other FD&C Act requirements temporarily are not enforced Product code: FXX

If not marketed or intended for use as a medical device

FDA regulations do not apply

INLT pandemic supplies webinar n95 respirators

INLT pandemic supplies webinar n95 respirators

IMPORT REQUIREMENTS

N95 Respirators

HTSUS 6307.90.9889, 7%
Section 301 duties: exempt pursuant to 85 FR 15244

Regulated by FDA as a Class II Medical Device

If marketed or intended for use as a medical device

Regulated by FDA under NIOSH standards as a Class II Medical Device; CDC also recognized NIOSH standard equivalent standards
Product code: MSH

If not marketed or intended for use as a medical device

FDA regulations do not apply

INLT Pandemic Supplies N95 Respirators

INLT Pandemic Supplies N95 Respirators

IMPORT REQUIREMENTS

N95 Respirators

If respirator contains replaceable filters

HTSUS 9020.00.9000, 2.5%
Section 301 duties: does not appear on any published lists

If respirator does not contain replaceable filters

HTSUS 6307.90.9889, 7%
Section 301 duties: exempt pursuant to 85 FR 15244

If marketed or intended for use as a medical device:

Regulated by FDA under NIOSH standards as a Class II Medical Device; CDC also recognized NIOSH standard equivalent standards
Product code: MSH

If not marketed or intended for use as a medical device

FDA regulations do not apply

INLT Pandemic Supplies Webinar Plastic Gloves

INLT Pandemic Supplies Webinar Plastic Gloves

IMPORT REQUIREMENTS

Plastic Gloves

Surgical and for medical purposes only for best results

HTSUS 3926.20.1010, free
Section 301 duties: List 4B, not currently active

Regulated by FDA as a Class I Medical Device

510(k) required
Product codes: multiple based on material and use

INLT Pandemic Supplies Webinar Plastic Gloves Non Medical

INLT Pandemic Supplies Webinar Plastic Gloves Non Medical

IMPORT REQUIREMENTS

Plastic Gloves (not marketed or intended for use as medical device)

Seamless disposable gloves

HTSUS 3926.20.1020, free
Section 301 duties: List 4B, not currently active

Seamless gloves for repetitive use

HTSUS 3926.20.1050, free
Section 301 duties: List 4B, not currently active

Disposable gloves with seams

HTSUS 3926.20.4010, 6.5%
Section 301 duties: List 4B, not currently active

Repetitive use gloves with seams

HTSUS 3926.20.4050, 6.5%
Section 301 duties: List 4B, not currently active

INLT Pandemic Supplies Webinar Rubber Gloves 1

INLT Pandemic Supplies Webinar Rubber Gloves 1

IMPORT REQUIREMENTS

Rubber Gloves Part I

Regulated by FDA as a Class I Medical Device
510(k) required
Product code: multiple depending on material and use

Surgical gloves of natural rubber

HTSUS 4015.11.0110, free
Section 301 duties: does not appear on any published lists

Surgical gloves of synthetic rubber

HTSUS 4015.11.0150, free
Section 301 duties: does not appear on any published lists

INLT Pandemic Supplies Webinar Rubber Gloves 2

INLT Pandemic Supplies Webinar Rubber Gloves 2

IMPORT REQUIREMENTS

Rubber Gloves Part II

Regulated by FDA as a Class I Medical Device
510(k) required
Product code: multiple depending on material and use

Medical gloves of natural rubber

HTSUS 4015.19.0510, free
Section 301 duties: exempt pursuant to 85 FR 13970

Medical gloves of synthetic rubber

HTSUS 4015.19.0550, free
Section 301 duties: exempt pursuant to 85 FR 13970

INLT Pandemic Supplies Webinar Rubber Gloves 3

INLT Pandemic Supplies Webinar Rubber Gloves 3

IMPORT REQUIREMENTS

Rubber Gloves Part III (not marketed or intended for use as a medical device)

Seamless disposable gloves

HTSUS 4015.19.1010, 3%
Section 301 duties: exempt pursuant to 85 FR 15015

Seamless gloves for repetitive use

HTSUS 4015.19.1050, 3% Section 301 duties: List 3, 25%

Gloves with seams, either disposable or repetitive use

HTSUS 4015.19.5000, 14% Section 301 duties: List 3, 25%

INLT Pandemic Supplies Webinar Gowns 1

INLT Pandemic Supplies Webinar Gowns 1

IMPORT REQUIREMENTS

Gowns Part I

Nonwoven disposable designed for use in hospitals, clinics, laboratories or contaminated areas, made of felt or nonwovens, whether or not impregnated, coated, covered, or laminated, including spun-bonded.
HTSUS 6210.10.5000, free

Section 301 duties: exempt pursuant to 85 FR 13970
Most gowns are regulated by FDA as a Class II Medical Device

Product codes

  • FME: exam gowns
  • FYA: surgical gowns
  • FYB: patient gowns
  • FYC: surgical isolation gowns
  • OEA: non-surgical isolation gowns
  • FXO: surgical suit
INLT Pandemic Supplies Webinar Gowns 2

INLT Pandemic Supplies Webinar Gowns 2

IMPORT REQUIREMENTS

Gowns Part II

Other garments not marketed or intended for use as a medical device, made of felt or nonwovens, whether or not impregnated, coated, covered, or laminated, including spun- bonded.

Overalls and coveralls

HTSUS 6210.10.9010, 16%
Section 301 duties: List 4B, not currently active

Other garments

HTSUS 6210.10.9040, 16%
Section 301 duties: List 4B, not currently active

INLT Pandemic Supplies Webinar Isolation Suits & Biohazard Suits

INLT Pandemic Supplies Webinar Isolation Suits & Biohazard Suits

IMPORT REQUIREMENTS

Isolation Suits & Biohazard Suits

Regulated by FDA as a Class II Medical Device Product code: FXO

Of plastic sheeting marketed or intended for medical use

HTSUS 3926.20.9050, 5%
Section 301 duties: excluded pursuant to 85 FR 15015

Of plastic sheeting and not marketed or intended for medical use (e.g. industrial or other general use)
HTSUS 3926.20.9050, 5%
Section 301 duties: excluded pursuant to 85 FR 15015

INLT Pandemic Supplies Webinar Thermometers

INLT Pandemic Supplies Webinar Thermometers

IMPORT REQUIREMENTS

Thermometers

Regulated by FDA as a Class II medical device

Product codes

  • FLK: mercury thermometer
  • FLL: electric thermometer

Liquid filled thermometer

HTSUS 9025.11.2000, free
Section 301 duties: does not appear on any published lists

Digital thermometers

HTSUS 9025.19.8040, free
Section 301 duties: if valued at not over $11 then excluded pursuant to 84 FR 52552, otherwise they appear on List 2, 25%

Hand Sanitizers

INLT Pandemic Supplies Webinar Hand Sanitizers

IMPORT REQUIREMENTS

Hand Sanitizers

Regulated by FDA as a drug

80% or more by ethyl alcohol

HTSUS 2207.10.6090, 2.5% Section 301 duties: List 3, 25%

Liquid or gel, non-aromatic compounds (e.g. ethyl alcohol and isopropyl alcohol)

HTSUS 3808.94.5000, 5% Section 301 duties: List 3, 25%

Liquid or gel, aromatic compound (e.g. benzalkonium chloride)

HTSUS 3808.94.1000, 6.5% Section 301 duties: List 3, 25%

INLT Pandemic Supplies Webinar Surface Disinfectants

INLT Pandemic Supplies Webinar Surface Disinfectants

IMPORT REQUIREMENTS

Surface Disinfectants

Regulated by EPA as a pesticide

Hydrogen peroxide, put up for sale as a cleaning solution for surfaces

HTSUS 3808.94.5000, 5% Section 301 duties: List 3, 25%

Surface disinfectants, put up for retail sale containing aromatic compounds (e.g. benzalkonium chloride)
HTSUS 3808.94.1000, 6.5%
Section 301 duties: List 3, 25%

Surface disinfectants, put up for retail sale containing non-aromatic compounds (e.g. peroxyacids alcohol)
HTSUS 3808.94.1000, 6.5%
Section 301 duties: List 3, 25%

INLT Pandemic Supplies Webinar Medical Waste Bags

INLT Pandemic Supplies Webinar Medical Waste Bags

IMPORT REQUIREMENTS

Medical Waste Bags

Not regulated by FDA

Of polyethylene with any side over 75mm in length

HTSUS 3923.21.0095, 3%
Section 301 duties: excluded pursuant to 85 FR 15015

Of other plastics

HTSUS 3923.29.000, 3% Section 301 duties: List 3, 25%

INLT Pandemic Supplies Webinar Wash Cloths

INLT Pandemic Supplies Webinar Wash Cloths

IMPORT REQUIREMENTS

Wash Cloths

Not regulated by FDA, unless marketed for medical use

Microfiber cleaning cloths

HTSUS 6307.10.2030, 5.3% Section 301 duties: List 4A, 7.5%

Cotton cleaning cloths

HTSUS 6307.10.1090, 4.1% Section 301 duties: List 4A, 7.5%

INLT Pandemic Supplies Webinar FDA Regulations

INLT Pandemic Supplies Webinar FDA Regulations

FDA Regulations
Enforcement Guidelines in Light of COVID-19

INLT Pandemic Supplies Webinar FDA Overview

INLT Pandemic Supplies Webinar FDA Overview

FDA Overview

The Food and Drug Administration (FDA) is the federal agency that enforces the Federal Food, Drug, and Cosmetic Act (FD&C Act).

Products qualifying as medical devices or drugs cannot be imported or sold in the U.S. unless they comply with requirements of the FD&C Act.

INLT Pandemic Supplies Webinar Non-Medical Devices

INLT Pandemic Supplies Webinar Non-Medical Devices

Non-Medical Devices

U.S. Customs and Border Protection issued the following guidance for non-FDA-regulated personal protective equipment (PPE) imported for general purpose or industrial use:

  • PPE for general purpose or industrial use, i.e. products that are not intended for use to prevent disease or illness, are not regulated by FDA
  • PPE imports conforming to a general purpose or industrial use cannot be imported if they are intended to be distributed or marketed for medical use, absent compliance with applicable FDA requirements
INLT Pandemic Supplies Webinar Enforcement Policy for Face Masks and Respirators in Light of COVID-19 1

INLT Pandemic Supplies Webinar Enforcement Policy for Face Masks and Respirators in Light of COVID-19 1

Enforcement Policy for Face Masks and Respirators in Light of COVID-19

In light of the COVID-19 pandemic and as of March 30, 2020, FDA has temporarily changed its enforcement policy for certain face masks and respirators. In an attempt to expand the availability of general use face masks for the general public and respirators for health care professionals, FDA will not enforce certain requirements under the FD&C Act with respect to these products.

This selective enforcement policy will remain in effect for the duration of the COVID-19 public health emergency as declared by the Department of Health and Human Services, but could change at any time.

INLT Pandemic Supplies Webinar Enforcement Policy for Face Masks and Respirators in Light of COVID-19 2

INLT Pandemic Supplies Webinar Enforcement Policy for Face Masks and Respirators in Light of COVID-19 2

Enforcement Policy for Face Masks and Respirators in Light of COVID-19

THIS POLICY APPLIES TO

(See table in image above.)

INLT Pandemic Supplies Webinar Enforcement Policy for Face Masks and Respirators in Light of COVID-19 3

INLT Pandemic Supplies Webinar Enforcement Policy for Face Masks and Respirators in Light of COVID-19 3

Enforcement Policy for Face Masks and Respirators in Light of COVID-19

Face masks intended for a medical purpose, that are not intended to provide liquid barrier protection:

Where the face mask does not create an undue risk in light of the public health emergency, these masks can be distributed both to the general public and medical personnel without compliance with:

  • 510(k) requirements—2.1 C.F.R. Part 807.81
  • Reports or corrects and removals—21 C.F.R. Part 806
  • Registration and Listing requirements—21 C.F.R. Part 807
  • And Unique Device Identification requirements—21 C.F.R. Part 830
  • Quality system regulation requirements—21 C.F.R. Part 820

So long as…

  • The product includes labeling that accurately describes the product as a face mask (as opposed as a surgical mask) and includes a list of the body contacting materials (which does not include any drugs or biologics)
  • The product includes labeling that recommends against use in a surgical setting, or where significant exposure to liquid, bodily or other hazardous fluids, may be expected; use in a clinical setting where the infection risk level through inhalation exposure is high
  • The product is not intended for any use that would create an undue risk, for example, the labeling does not include users for antimicrobial or antiviral protection or related uses or uses for infection prevention or reduction or related issues and does not include particulate filtration claims
INLT Pandemic Supplies Webinar Enforcement Policy for Face Masks and Respirators in Light of COVID-19 4

INLT Pandemic Supplies Webinar Enforcement Policy for Face Masks and Respirators in Light of COVID-19 4

Enforcement Policy for Face Masks and Respirators in Light of COVID-19

Surgical masks intended to provide liquid barrier protection:

Where the face mask does not create an undue risk in light of the public health emergency, these masks can be distributed and used without prior submission of a premarket notification under section 510(k) if:

  • The product meets fluid resistance testing (liquid barrier performance) consistent with standard ASTM F1862
  • The product meets Class I or Class II flammability requirement per 16 CFR 1610 (unless labeled with a recommendation against use in the presence of high intensity heat source or flammable gas)
  • The product includes labeling that accurately describes the product as a surgical mask and includes a list of the body contacting materials (which does not include any drugs or biologics)
  • The product is not intended for any use that would create an undue risk, for example the labeling does not include uses for antimicrobial or antiviral protection or related uses or uses for infection prevention or reduction or related uses, and does not include particulate filtration claims
INLT Pandemic Supplies Webinar FAQ

INLT Pandemic Supplies Webinar FAQ

FAQ

Q: WHAT IS THE EUA ISSUED BY FDA FOR FACEMASKS?

Answer: On March 2, 2020, FDA issued an Emergency Use Authorization (EUA) in response to the insufficient supply of filtering facepiece respirators (FRRs). The EUA applies to:

  • All FRRs approved by the National Institute for Occupational Safety and Health (NIOSH) as non-powered air-purifying particulate FFRs
  • All NIOSH approved FRRs that have passed the manufacturers’ recommended shelf-life for use in healthcare settings

MORE INFO

  • The EUA applies mostly to manufacturers and strategic stockpilers of these items.
  • Manufacturers and stockpilers can request authorization from FDA to distribute these FRRs to healthcare personnel only even though they do not comply with federal regulations.
  • FRRs distributed under this EUA cannot be used by the general public.
  • On March 24, 2020, FDA issued a second EUA allowing for the distribution of certain non-NIOSH-approved FRRs so long as they were manufactured in specific non-U.S. jurisdictions to specific standards and/or have marketing authorization in certain non-U.S. regulatory jurisdictions. Authorization allows these products to be distributed to healthcare personnel only.
INLT Pandemic Supplies Webinar Thank You

INLT Pandemic Supplies Webinar Thank You

A “thank you” from INLT.

INLT Pandemic Supplies Webinar Resources

INLT Pandemic Supplies Webinar Resources

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Big Roundup of Coronavirus Pandemic’s Effect on Ocean Freight Shipping https://www.universalcargo.com/big-roundup-of-coronavirus-pandemics-affect-on-ocean-freight-shipping/ https://www.universalcargo.com/big-roundup-of-coronavirus-pandemics-affect-on-ocean-freight-shipping/#respond Tue, 07 Apr 2020 22:03:06 +0000 https://www.universalcargo.com/?p=9997 You won't find a more complete roundup of how the coronavirus pandemic is affecting international shipping, specifically the ocean freight sector, right now than this blog post here.

This article brings together the COVID-19 shipping news stories from sources all through the industry to help shippers get a grasp on what things look like for your imports and exports during this crisis.

Read the full article in Universal Cargo's blog to find out about blank sailing, risk for ocean freight carriers, industry solutions to pandemic's affect on shipping, and much more.

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You won’t find a more complete roundup of how the coronavirus pandemic is affecting international shipping, specifically the ocean freight sector, right now than this blog post here.

This article brings together the COVID-19 shipping news stories from sources all through the industry to help shippers get a grasp on what things look like for your imports and exports during this crisis.

Carriers’ Blank Sailings Soar

Picture of Port Yangshan by Bruno Corpet

Picture of Port Yangshan by Bruno Corpet

With places all over the world going into shutdown mode like has happened with shelter-in-place orders across the U.S. because of the COVID-19 pandemic, ocean freight carriers are cancelling ship sailings at numbers in the hundreds.

In fact, blank sailings jumped by more than 150 cancellations this last week. Costas Paris reported in the Wall Street Journal:

The service cancellations have grown from 45 last week to 212, according to Copenhagen-based consulting firm Sea-Intelligence ApS, a trend indicating that the summer peak season could be largely muted and that the shipping lines that carry most of the world’s manufactured and retail goods expect the economic fallout from the coronavirus pandemic to extend into the peak shipping season.

I believe it’s still too early to predict a muted peak season this summer. If economies reopen by July or August, an incredible surge could be seen in the peak season, potentially creating record numbers and extending the peak season. Of course, that would also depend upon economic recoveries. We’re in an unnatural recession caused by the surprise hit of a viral pandemic. However, we are in an international recession because of it, and the longer it drags on, potentially creating a worldwide depression, the larger the chance for a lack of resources to create the demand required for a quick rebound and that big peak season surge.

However, this blog is not about projections about what the peak season or rebound will look like, but what’s happening right now in the ocean freight industry.

Shipping Availability Exacerbated by Ship Crews in Lockdown

East Coast Port & Container ShipPlummeting demand because of shelter-in-place-like reactions to COVID-19 in countries around the world is not the only thing halting ship sailings. The ability to properly and legally crew ships (and airplanes for air freight).

The Financial Post published a Bloomberg Article that reports:

While unseen by most consumers, restrictions on crews are among the unprecedented challenges wrought by the virus, which has ground major economies to a halt.

“Most ports have stopped crew changes as part of a concerted effort to prevent the spread of the virus,” Philippine Transmarine Carriers Inc. Chief Executive Officer Gerardo Borromeo said. “Our problem is trying to solve a complex logistics issue of getting crew onto limited flights to countries that will allow such changes at their ports.”

About 100,000 seafarers each month need to be changed over from ships to comply with maritime rules that regulate safe working hours and crew welfare, according to a March 19 letter from the International Chamber of Shipping. If changeover restrictions continue there could be fewer available ships and higher freight costs, said Dario Alampay, chairman of the Filipino Shipowners Association.

Countries and ports should consider exemptions for seafarers similar to those granted to airline and health workers, according to the United Nations Conference on Trade and Development. Essential medicine and equipment is already being held up in several ports in Europe, it said.

I’m a free market guy myself, generally preferring less regulation on business rather than more. However, safety regulations (granted they are legitimately protecting workers and consumers) is where I’m for regulation.

Suspension of crew regulations during this time absolutely needs to be considered, but these regulations have to be looked at very carefully to avoid putting crews at peril or risk of exploitation.

Carriers Looking at Big-Time Losses

Freight RatesAll over the international shipping news stories, including the ocean freight articles quoted above, is Sea-Intelligence CEO Alan Murphy’s projection of giant losses for carriers in the midst of this coronavirus pandemic.

No, Alan Murphy is not connected to Murphy’s Law, but his projections probably feel that way for carriers. Greg Miller reports in an American Shipper article:

In [Murphy’s] best-case scenario, in which volume decline 10% and rates hold relatively firm, carriers would lose an aggregate of $800 million. Under his worst-case scenario, in which both volumes and rates decline to the same degree they did in 2009, carriers would collectively lose $23 billion this year.

Murphy actually says that all the cancellations already mentioned above are not strictly because of decreased demand, and there’s no mention of the issues of crews in lockdown. Rather, Murphy says there has been a shift in the cause of blank sailings from a reaction to demand to a preservation of freight rates, according to Miller’s article:

According to Sea-Intelligence CEO Alan Murphy, the liners’ drastic moves to slash services began as a reaction to shippers cancelling bookings due to social distancing and quarantines, but have morphed into a rate-protection strategy.

“It is clear that the primary purpose of the capacity reductions [is] to prevent a catastrophic drop in rate levels,” Murphy affirmed on Monday. “The cost savings are also important, as they too are measured in the billions, but they pale in comparison to the impact declining rate levels will have.”

The high end of Murphy’s projections are potentially “life-threatening,” according to a quote from Lars Jensen, CEO of SeaIntelligence Consulting, within the article. He points to cash flow as a key for carriers surviving this time.

The good news for ocean freight carriers, as pointed out in Miller’s article, is that they have managed to maintain freight rates so far. Their highly aggressive strategy of blank sailing appears to be working.

It should also be noted that many of the large shipping lines out there are government backed or supported. That certainly props up their likelihood of survival, however…

Carrier Loss Projection Plus Debt Level Creates Bankruptcy Danger

Take a look at how Greg Knowler, in a Journal of Commerce (JOC) article, compares Murphy’s high end loss projection to historical losses in the not-so-distant past:

Losses of this magnitude would be similar to those recorded during the global financial crisis in 2009, when carriers lost $20 billion, and while the industry rebounded in 2010 as inventories were replenished, the losses deeply undermined carrier finances. In the years that followed, slower volume growth and rate wars eroded revenues, and in 2011, annual losses reached $5 billion. In 2016, $3.5 billion in losses was recorded in the year that Hanjin Shipping went bankrupt.

Shippers who have been in international business for the last five years will remember the disruption caused by Hanjin’s collapse. When Hanjin collapsed, the world learned that even these giant shipping companies were not too big to fail.

As alluded to by Knowler in the quote from his JOC article above, it was not just the recession that caused Hanjin to sink. However, that does not mean a similar size loss suffered by carriers in 2020 to 2009’s losses wouldn’t put carriers in a very dangerous place, making another or multiple sinkings of major shipping lines a real possibility.

In fact, Knowler points out a big factor already present that would dangerously add to such losses by carriers: high debt. Here’s what Knowler reported about that:

The container shipping industry was already facing soaring industry-wide debt levels even before the coronavirus brought economies to a halt, with slowing volume growth levels over the past two years making the debts difficult to pare down.

Drewry estimated in the fourth quarter of last year that the overall debt for the world’s top 12 carriers exceeded $85 billion, with the combined debt-to-equity ratio of about 140 percent. But as the coronavirus impact on demand worsened across international supply chains, even the more profitable carriers were not immune. Moody’s Investor Service on March 31 changed its ratings outlook on Hapag-Lloyd and Maersk Line from “stable” to “negative.”

Losses plus high debt equals high risk for carriers. And there’s another danger that carriers face, which most might not think about.

Rumors Could Turn Carrier Collapse Fears into Reality

Hanjin Asia-U.S. Assets being bought by Korea Line

Hanjin Vienna picture by: Afrank99

In Knowler’s JOC article, he exposes how rumors about a carrier struggle to stay afloat could create the hole in the hull that causes it to sink. He writes:

Yet as significant as the financial pressures are on carriers, the rumor mill could be an even greater danger, Jensen warned.

“The problem with this unfolding situation is that if enough stakeholders ‘get the feeling’ that a particular carrier is about to go under, then it becomes a self-fulfilling prophecy irrespective of whether the carrier in question could have pulled through,” he said. “Suddenly, the carrier in question sees an even larger decline in volumes and is also met by demands from suppliers of repaying debts and paying up-front for services — and such a situation is hard to salvage.”

As I briefly talked about at the beginning of this article, it is impossible to project how the recovery from this pandemic-caused economic downturn will play out. Demand could take time to recover. More stable carriers could seize the opportunity to undercut the freight rates of more vulnerable competitors, resulting in more carrier collapses and the shrinking of competition.

Speaking of stronger carriers…

Maersk in Strong Position Compared to Competitors

Big DogIt seems Maersk has always been the top dog in the international shipping game. The moves that the world’s largest ocean carrier by capacity has been making give the shipping giant more options, more stability, and an advantage over its competitors.

Maersk has been working on becoming more complete in end-to-end services for shippers over the last couple years, and Mark Szakonyi highlights this in a JOC article:

Through its evolution to become a self-described integrator, Maersk said new capabilities, much of them gained by recent acquisitions, are allowing it to better service US importers amid the coronavirus disease 2019 (COVID-19) by speeding or slowing their container supply chains. 

This gaining of greater control of cargo owners’ shipments as they move through the supply chain is key to the largest container line transforming itself into a provider of integrated end-to-end logistics. The current environment of volatility in shipping due to COVID-19 provides a good test for Maersk’s bet that cargo owners want it to play a more active and larger role in managing their supply chain — and will pay extra for such services.

The article points out that revenue for these extra services declined in 2019, as Maersk is still in the process of figuring them out and implementing strategies around them, but the COVID-19 situation may provide more opportunity to capitalize on additional services.

The article brings up MSC’s new “Suspension of Transit” (SOT) service, allowing shippers to store shipping containers of goods in space at some of their port terminals around the world, that we blogged about last week. That service capitalizes on the risks of port congestion, demurrage, and detention fees shippers face during this time.

Maersk has flexibility in ways to capitalize on this situation. Szakonyi points out how Maersk can either slow down or speed up shipments as needed during this coronavirus pandemic:

For US importers looking to slow down their supply chains, Maersk offers storage in Asia depots, so that goods can be loaded onto US-bound vessels once demand returns. For shipments already on the water that need to be delayed, Maersk is trucking them off of US marine terminals where they are stored, mitigating demurrage costs, or rerouting them to another port, where the cargo owner has storage capacity. 

With the completion on Wednesday of Maersk’s acquisition of Performance Team, a warehousing and logistics company, the largest container line doubled its North American warehousing capacity, allowing it to store more shipments that importers don’t need yet. The $545 million acquisition adds 24 warehousing and transportation sites in 10 locations to Maersk’s warehouse footprint of 6 million square feet, bringing its total North American storage capacity to nearly 14.7 million square feet. 

For cargo owners that need their freight faster, Maersk’s emergency teams ensure shipments are loaded onto booked ships and “ring fenced” to ensure stowage space, allowing faster unloading and pick-up while keeping customs and other paperwork flowing for seamless handoffs in the physical world. The acquisition of Vandegrift in February 2019, which doubled Maersk’s organization of US-licensed customs brokers serving customers,  has enhanced this orchestration and allowed it to help importers reduce their tariff exposure.

Let’s not forget that it was Maersk who predicted a few years ago that carrier competition would end up shrinking to just 3 major global companies. If there was ever an event that could speed the industry toward Maersk’s prediction, this pandemic is it. Most shipping lines won’t be able to offer the kinds of services Maersk and MSC, the two largest carriers in the world, are able capitalize on here. That gives these international shipping leaders a major advantage. If Maersk and MSC got ruthless, they could help push competitors out of the market.

Another coronavirus-related news item has particular impact on Maersk and MSC…

Shipbuilding Takes a Hit

Ship Scrapyard Overcapacity

Ship Scrapyard pic by: Ctg4Rahat

Not surprisingly, new ship orders are drying up in the midst of the coronavirus pandemic. From everything already covered above, carriers aren’t looking to invest in more ships.

There was quite a bit of shipbuilding requests and orders happening because of the IMO 2020 fuel requirement changes. Of course, COVID-19 trumped IMO 2020 as the biggest originator of international shipping news stories in 2020.

Mike Wackett reports in The Loadstar:

… in view of the as-yet-unknown full impact of the coronavirus crisis on world trade, carriers will likely seek to invoke delay clauses in their contracts with yards, pushing back delivery for a year or more.

Furthermore, one industry source told The Loadstar: “Cancellations of orders cannot be ruled out, depending on what stage of the construction has been reached.”

2M Bitterness Maersk & MSCWith shipbuilding orders in place, MSC was set to overtake Maersk as the world’s biggest ocean freight carrier by capacity within the next year or two. This was actually one of the points of rising bitterness between the companies.

It will be interesting to see if the changes in ship ordering, whether through cancellations or delays will prevent MSC from overtaking Maersk’s throne.

With all the above rough stories, maybe we could end with something good…

Industry Members Respond to FMC’s Call for Innovation to Fight Impact of COVID-19

This might be a seemingly rare case of something conservative-minded people and liberal-minded people can come together on: cooperation of government and private industry to find solutions to a problem.

business partners selling overseasConservatives argue that our best solutions to societal problems come out of private, largely business (but religious and charitable too), organizations’ innovation. Liberals tend to look to government to step in. How about a cooperative blend of the two approaches?

Chris Gillis reports in American Shipper:

The U.S. Federal Maritime Commission (FMC) said there has been no shortage of container-shipping industry members willing to participate in its initiative to identify ways to overcome supply chain obstacles caused by the coronavirus pandemic.

“There was a very strong, positive response to the announcement of the teams with many inquiries about how to participate,” said FMC Commissioner Rebecca Dye…

Dye estimated that more than 50 industry stakeholders have already sought to join the FMC initiative’s teams.

Dye said the Supply Chain Innovation Teams will begin work this week to identify what actions can provide “immediate relief to the most pressing challenges the American freight delivery system faces from COVID-19 related disruptions.”

The commissioner has, so far, asked three questions of each team member:

  • What can the FMC do to provide relief or assistance to mitigate negative impacts on the supply chain related to COVID-19?
  • What can companies involved in ocean cargo delivery do to respond to existing supply chain challenges and bottlenecks?
  • What can supply chain participants do to strengthen the overall performance of the American freight delivery system?

Fighting this pandemic takes everyone from businesses to government to religious organizations to individuals. It’s good to see stories about some of the ways these various entities are stepping up.

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2 Good News International Shipping Stories in Midst of COVID-19 https://www.universalcargo.com/2-good-news-international-shipping-stories-in-midst-of-covid-19/ https://www.universalcargo.com/2-good-news-international-shipping-stories-in-midst-of-covid-19/#respond Thu, 02 Apr 2020 21:45:47 +0000 https://www.universalcargo.com/?p=9994 We could probably all use a little good news right now. Shippers, specifically, who are seeing blank (cancelled) sailings from ocean carriers, operating hours cut at port terminals, and the risk of detention and demurrage fees increase while their businesses may be forced to shut down during shelter-in-place orders across the U.S. during this pandemic, could use some good news.

Luckily, there are some positive international shipping stories in the middle of this COVID-19 pandemic. And I'm not just talking about projections of surges when we get past this crisis stage.

Read the full article in Universal Cargo's blog to check out two such good international shipping news stories about MSC adding a new service that could help shippers and ports during the coronavirus outbreak and Elon Musk shipping ventilators to hospitals around the world.

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We could probably all use a little good news right now. Shippers, specifically, who are seeing blank (cancelled) sailings from ocean carriers, operating hours cut at port terminals, and the risk of detention and demurrage fees increase while their businesses may be shut down during shelter-in-place orders across the U.S. in the wake of this pandemic, could use some good news.

Luckily, there are some positive international shipping stories in the middle of this COVID-19 pandemic. And I’m not just talking about projections of surges when we get past this crisis stage.

Here are two such good news stories.

MSC Offers New Storage Service that Could Help Shippers & Reduce Congestion at Ports

INNOVATION, MSC SANTHYA < KRVE 34 & MSC GAYANÉ — Flickr image by kees torn

INNOVATION, MSC SANTHYA < KRVE 34 & MSC GAYANÉ — Flickr image by kees torn

Let’s give MSC a positive spotlight as its coming off the negative one after being the first major carrier to run afoul of the new IMO 2020.

With a service they call “Suspension of Transit” (SOT), MSC is opening space in some of its terminals around the world for shippers to store containers of goods during this pandemic.

Gavin van Marle reports in a Loadstar article:

As consumer demand in Europe and North America drops off a cliff, fears have grown among logistics operators of an impending container congestion crisis at import destinations as shipments arranged before widespread social lockdowns have continued towards their destinations.

Sorry, sometimes you have to go through the bad news to give the context for the good news. Here’s where van Marle gets to the good news:

In response, MSC has introduced a suspension of transit (SOT) programme to help shippers and their freight service providers prevent container exports out of Asia building up at ports, by offering terminal yard storage capacity.

The line has secured capacity at some of its terminals at six ports – Bremerhaven in Germany, Busan in South Korea, King Abdullah Port in Saudi Arabia, Lome in Togo, Rodman PSA Panama International in Panama and Tekirdag Asyaport in Turkey.

Its customers can store laden containers there until port operations at import terminals are able to resume processing them.

Obviously, U.S. shippers would likely want to see U.S. ports where MSC owns terminals on the above list of ports where MSC is offering this service. But there are U.S. shippers who move goods all over the world, who could be directly affected by this.

MSC creating this service may also lead to the company expanding SOT to their U.S. terminals as well as other carriers, terminal operators, and companies with yard space at the ports to offer similar services.

The big thing is that there’s potential with this service and others like it if others follow suit to prevent or reduce congestion at ports and save shippers money in demurrage and detention fees, warehousing costs, and trucking costs during this pandemic. And maybe, it could lead to similar services moving forward after this crisis passes.

It should be specifically noted that this is a new service from MSC, not an act of charity; the storage is not being given away free. But that’s okay. Businesses seeing a need or problem and coming up with a creative solution is beneficial for both the business and those facing the problem. If you prefer charity to read about charity, keep reading through the second story and you won’t be disappointed. But first, here’s how MSC says the new service will help shippers on their website:

The MSC SOT programme provides potential cost savings for customers faced with high warehousing storage costs at destination, demurrage, per-diem and other charges. It will also free up space at origin factories and warehouses and avoid excess inventory at site, bringing cargo closer to destination markets and alleviating the risk of congestion or closure at ports of discharge.

The lead time will be reduced once operations resume at destination ports, and the programme will also add storage for beneficial cargo owners (BCOs) and non-vessel owning common carriers (NVOCCs), who would otherwise reach their full capacity.

Elon Musk Shipping Free Ventilators Around the World

Elon Musk

Picture of Elon Musk by Steve Jurvetson

We’re all in this fight against coronavirus together, doing our part as we social distance and stay home or go out and operate essential businesses. Doing those things are very important in the fight against COVID-19. Many look for additional ways they can help in the fight. Simple things like calling or video chatting with people to lift the spirits of those who are struggling with isolation can be powerful and inspiring. Giving a couple rolls of toilet paper to a neighbor who’s had trouble finding any could be an inspiring thing to do. Businesses and businesspeople are sometimes in the position to inspire us on a larger scale.

It’s inspiring to see businesses step up and produce the things hospitals around the world desperately need during this pandemic. Ford and GE producing ventilators, the My Pillow guy producing masks…

One I read about yesterday that was a feel-good, international-shipping-related story was  Tesla CEO and billionaire Elon Musk shipping ventilators to hospitals around the world for free. The story is in an article on a site called Futurism.com:

[Musk] has announced renewed efforts to supply hospitals around the country — and internationally — with life-saving equipment amid the coronavirus outbreak.

“We have extra FDA-approved ventilators,” he tweeted. “Will ship to hospitals worldwide within Tesla delivery regions. Device and shipping cost are free.”

He did, however, have one caveat: the ventilators need to be put to use immediately: “Only requirement is that the vents are needed immediately for patients, not stored in a warehouse.”

Ventilators from Elon MuskThe article goes on to talk about Musk having imported 1,255 ventilators from China that he donated to Los Angeles area hospitals last week.

Ventilators are a big source of focus during the coronavirus pandemic. Since COVID-19 can really hurt people’s respiratory system, hindering their ability to breathe, these machines are very important for helping people who get seriously ill from this disease. The federal government is getting ventilators out to hospitals, but President Trump has also been encouraging states, local governments, and hospitals to get them directly from suppliers where possible as well. It’s good to see a businessman like Musk step up and get respirators for hospitals as well, and not just here in the U.S. but around the world.

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Countries Ban Export of Masks & Medical Supplies in Face of Coronavirus, But Trump Leads U.S. in Opposite Direction https://www.universalcargo.com/countries-ban-export-of-masks-medical-supplies-in-face-of-coronavirus-but-trump-leads-u-s-in-opposite-direction/ https://www.universalcargo.com/countries-ban-export-of-masks-medical-supplies-in-face-of-coronavirus-but-trump-leads-u-s-in-opposite-direction/#comments Tue, 31 Mar 2020 21:44:01 +0000 https://www.universalcargo.com/?p=9991 As COVID-19 has spread from an epidemic in China to a world-wide pandemic, countries have restricted or banned the exporting of needed medical supplies such as face masks and ventilator tubes. A lot of countries have done this.

Scott Tong reports in an article on Marketplace.org:

With critical ventilators and medical safety gear in short supply globally, countries that manufacture these goods are racing to keep them inside their borders. Nearly three dozen governments have banned or limited exports in March alone, a new study finds.

Given that there are nearly 200 countries in the world (195 or 197 depending on who's counting), nearly 36 of them banning the export of masks and/or other needed medical gear in the midst of this world-wide crisis may not sound that, that big. We're talking about less than 18% of the countries in the world here, right? However, when you consider that, according to the International Monetary Fund (IMF), there are only 39 developed countries, or countries with "advanced economies" as IMF puts it, 36 suddenly becomes a much, much more significant number.

Find out more, including what the U.S. is doing, by reading the full article in Universal Cargo's blog.

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face masks COVID-19

Picture by Debora Cartagena, USCDCP

As COVID-19 has spread from an epidemic in China to a world-wide pandemic, countries have restricted or banned the exporting of needed medical supplies such as face masks and ventilator tubes. A lot of countries have done this.

Scott Tong reports in an article on Marketplace.org:

With critical ventilators and medical safety gear in short supply globally, countries that manufacture these goods are racing to keep them inside their borders. Nearly three dozen governments have banned or limited exports in March alone, a new study finds.

Given that there are nearly 200 countries in the world (195 or 197 depending on who’s counting), nearly 36 of them banning the export of masks and/or other needed medical gear in the midst of this world-wide crisis may not sound that, that big. We’re talking about less than 18% of the countries in the world here, right? However, when you consider that, according to the International Monetary Fund (IMF), there are only 39 developed countries, or countries with “advanced economies” as IMF puts it, 36 suddenly becomes a much, much more significant number.

You can’t blame countries that much for putting their people first and telling their producers of needed medical supplies, like masks or ventilators, that those supplies have to stay there to take care of their people rather than being shipped out to other countries. At the very least, you can understand the reason countries would ban the export of masks and other medical supplies right now when there are shortages of these supplies all around the world.

Frankly, you would expect President Trump to be the first world leader to push his country toward such protectionist policies. After all, isn’t “America first” one of his slogans? Isn’t he the poster child (or poster 73-year-old/most powerful man in the world) for protectionism with his tariffs and trade war on China? Heck, protectionism was the word of the day when Trump was elected. However, the message from President Trump has been quite the opposite.

The U.S. has not banned or restricted exporting masks, ventilators, or other crucial medical supplies — not in a bill from Congress and not in an executive order from the president. That’s not to say the president hasn’t issued executive orders over the coronavirus and specifically medical supplies related to the pandemic. President Trump has signed an executive order to boost the supply of masks; he signed an executive order against the hoarding and price-gouging of masks and other needed medical supplies; and he even signed an executive order to invoke the Defense Production Act, allowing him to force companies like General Motors (GM) to produce ventilators if they don’t step up to the plate like Ford and GE has.

It was when, in one of his daily briefings with his coronavirus task force, the president spoke about companies building ventilators that I noticed the stark contrast between the protectionist policies of blocking medical supplies from leaving to other countries and what President Trump was laying out as expectations for the U.S. Not only has President Trump not pushed for a ban on exporting masks or ventilators, he said in the briefing that the U.S. will produce not only ventilators for our country but ventilators to help other countries with their needs too.

In Friday’s (March 27th) coronavirus briefing, President Trump said:

… they [the United Kingdom] want ventilators. Italy wants ventilators. Spain wants ventilators. Germany wants ventilators. They’re all calling for ventilators. Well, we’re going to make a lot of ventilators, and we’ll take care of our needs, but we’re also going to help other countries.
That’s a pretty stark contrast to an anecdote in Tong’s Marketplace article about Germany stopping masks that were bound for Switzerlan:

According to Evenett, Germany even intercepted a shipment of Chinese-made masks bound for Switzerland.

“They were just trans-shipping through Germany, and they got caught up in this,” [Simon Evenett, international trade professor at the University of St. Gallen in Switzerland] said. “The Swiss went ballistic. And they called in the German ambassador and really gave him a telling off. The last I heard they were still in Germany.”

Tong points to the worry of Chad Bown, trade scholar and senior fellow at the Peterson Institute for International Economics, that countries will retaliate and trade walls will go up as a warning to what these protectionist moves could lead to in this time of global crisis. Bown even points to the trade war between the U.S. and China for how quickly trade restrictions can escalate. It almost seems ironic that President Trump and U.S. would lead in a way that is counter to these protectionist trade restrictions.

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The First IMO 2020 Violation Goes to MSC https://www.universalcargo.com/the-first-imo-2020-violation-goes-to-msc/ https://www.universalcargo.com/the-first-imo-2020-violation-goes-to-msc/#respond Thu, 26 Mar 2020 20:27:52 +0000 https://www.universalcargo.com/?p=9988 Let's take a break from the relentless COVID-19 news, kind of, to talk about a topic we thought would be dominating this year's international shipping news: IMO 2020. Leading up to the implementation of the International Maritime Organization's carbon emission mandate, there was much speculation on how well carriers would do at following the rules around limiting fuel carbon emissions to 0.5% from 3.5% and how likely actual enforcement of those rules would be. About a week and a half ago, a story started unfolding that gives us our first real look at violation and enforcement.

Mediterranean Shipping Company (MSC), the shipping line set to overtake Maersk as the world's largest carrier over the course of this year and next, was the first major carrier caught breaking the new IMO 2020 rules.

Find out all about what they did, what MSC has to say about it, the punishment, and more by reading the full article in Universal Cargo's blog.

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MSC Joanna

MSC Joanna – photo by Alf van Beem

Let’s take a break from the relentless COVID-19 news, kind of, to talk about a topic we thought would be dominating this year’s international shipping news: IMO 2020. Leading up to the implementation of the International Maritime Organization’s carbon emission mandate, there was much speculation on how well carriers would do at following the rules around limiting fuel carbon emissions to 0.5% from 3.5% and how likely actual enforcement of those rules would be.

About a week and a half ago, a story started unfolding that gives us our first real look at violation and enforcement.

MSC Ship Illegally Carries High Sulfur Fuel

Mediterranean Shipping Company (MSC), the shipping line set to overtake Maersk as the world’s largest carrier over the course of this year and next, was the first major carrier caught breaking the new IMO 2020 rules. Mike Wackett reported in a Loadstar article:

The 9,784 teu post-panamax MSC Joanna has been prohibited from operating in UAE waters for one year and its master banned indefinitely and facing legal action from the country’s Federal Transport Authority (FTA) after allegedly failing to comply with an order to debunker 700 tons of heavy fuel oil (HFO) before entering the Dubai port of Jebel Ali.

Subsequently, Greg Knowler gave more details on MSC’s infringement in a Journal of Commerce (JOC) article:

According to the UAE’s Federal Transport Authority, the 9,200 TEU MSC Joanna failed to debunker 700 tonnes of high-sulfur fuel before calling Jebel Ali on March 6, despite being given repeated warnings. The vessel then called at the UAE port of Khalifa, with a second call at Jebel Ali on March 13.

Both articles outline how carriers were given a grace period between the January 1st, 2020 date when IMO 2020 went into effect and full implementation on March 1st of the rule that ships not fitted with exhaust-gas-cleaning “scrubber” systems are not allowed to carry non-compliant, high sulfur fuels.

Seeing one of the very largest carriers in the world violate this IMO 2020 rule is certainly not good optics. It even looks worse when Wackett added the following in his Loadstar article:

Shipping lines – including Maersk and Hapag-Lloyd – founded the Trident Alliance, an industry lobby group aimed at ensuring a level playing field on the enforcement of the sulphur cap. MSC is not currently a member of the alliance.

It would almost seem as though MSC, skirting the IMO 2020 law while not joining other carriers in lobbying for fair enforcement of said law, is operating in a way that would give the vast shipping company a competitive edge over its competition that is in compliance. However, that might be a bit of a leap to judgment.

MSC’s Response to Violation

Immediately upon the breaking of this story, MSC reiterated its commitment to compliance with IMO 2020 and pointed to its large investment in scrubbers for the company’s very sizeable fleet. Indeed, MSC has been at the forefront of pushing forward the use of scrubbers for compliance with IMO 2020 through the lead up to the new requirements. In an article that Wackett wrote last year, he reports:

Of the 12 top-ranked carriers, Alphaliner said, MSC had the “most extensive scrubber programme”, with more than 200 ships expected to have systems installed.

That does show a considerable investment on MSC’s part in compliance with IMO 2020. It’s also to MSC’s credit that the company did not jump to the argument that the MSC Joanna is just one ship in its vast fleet. Such an argument would be like the company trying to trivialize the violation. Additionally, it would be easy for critics to say that it was just the one ship that got caught.

Instead, MSC said it was investigating how this violation could have occurred. There is, however, something I find a little off-putting in the way MSC said it was investigating what happened with the MSC Joanna. Wackett quotes MSC:

“We are closely investigating how it came about that the traditional marine fuel for EGCS [exhaust gas cleaning systems] installation testing was left on board the MSC Joanna in a sealed tank during its recent UAE port calls, as EGCS installation on this vessel has been delayed several months this year. MSC Joanna has used only compliant low-Sulphur fuel since IMO 2020 came into effect,” [an MSC spokesperson] said.

While MSC didn’t say something lame like this happened on just one of our many, many ships, it does sound like the company’s spokesperson was already making excuses, or at least pointing at mitigating circumstances, for the violation. The fuel was in a sealed tank. The fuel was left onboard, as if to say it had been planned to be removed. The fuel was for scrubber testing, which has the implication that it was not for use in the scrubber-less Joanna. The Joanna was supposed to have a scrubber system installed, but that got delayed. So maybe the fuel was for testing the scrubber the Joanna was supposed to have by this point.

It appears that last excuse is the one MSC is now going with. And they’re adding the coronavirus to the excuse. That’s why at the beginning of this article I said “kind of” about us taking a break from COVID-19. A Container Management articles reports:

[MSC] stated: “Many of the shipyards where EGCS installation has been taking place are in areas affected by the current COVID-19 pandemic and this has generated a large backlog of installations for shipowners.
“In particular, Chinese shipyards were closed or partially closed for a significant period of time following the extended Lunar New Year holiday as the country grappled with the new coronavirus outbreak. This has impacted shipowners’ schedules for retrofitting ships, as has been widely documented in the media”
The shipping line acknowledged that the MSC JOANNA is one of those ships which has subject to an EGCS delay and its installation is currently scheduled for June 2020.

Shipyards have actually been backed up on retrofitting ships with scrubbers since before COVID-19 hit. At the beginning of December last year, Universal Cargo posted an article about the world fleet not appearing ready for IMO 2020, including a section on ships stuck waiting for scrubbers.

IMO 2020 was not sprung on the international shipping industry. Preparation for it, including installation of scrubbers on ships, certainly could and, I believe, should have begun earlier than it did. However, the actual installation of scrubbers was slower than expected, causing delays, and the novel coronavirus outbreak in China, which spread through the world, certainly added to that.

That being said, scrubber installation does not create a legitimate excuse for the MSC Joanna violating IMO 2020 by carrying high sulfur fuel after warning and months of grace period to get within compliance.

The Punishment

Does that mean the punishment is appropriate for the crime? Here’s the punishment according to Insurance Marine News:

The UAE’s Federal Transport Authority (FTA) advised on March 16th that the MSC Joanna had been banned operating in its waters for one year and had banned the vessel’s captain from working on any ships calling at UAE ports. Reuters reported that the UAE said it had commenced legal action against the master for violating the regulations.

It should be noted that the captain and master referred to above is the same person. It’s unclear the exact legal action the master faces. Should the captain face career-threatening consequences for this violation? What consequences should MSC, as a company, face, if any? Is whatever punishment put toward the ship, its captain, and/or crew enough without laying specific sanctions on the company under which the ship sails enough?

I suppose the ship, its captain, and its crew could just be reassigned to different routes, which do not call on UAE ports. That might make small consequence, legal action against the ship’s master aside, to MSC and the Joanna.

This being the first big IMO 2020 violation, how it is punished sets a tone. Does the tone sound right? Will it make carriers less likely to violate IMO 2020 in the future or make them shrug their shoulders at the consequences. Or is it more the pressure from shippers and the rest of world to curb pollution and public image that is more likely to keep carriers in line than specific punishments for violations?

Let us know what you think. Do these sanctions seem like too much? Too little?

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Coronavirus Effect on Ports Update https://www.universalcargo.com/coronavirus-effect-on-ports-update/ https://www.universalcargo.com/coronavirus-effect-on-ports-update/#respond Thu, 19 Mar 2020 20:59:28 +0000 https://www.universalcargo.com/?p=9984 There have been concerns with all the shutdowns happening to fight the spread of COVID-19, the novel Wuhan coronavirus, that ports are also closing. It's not surprising people would think ports are shut down, as people all over the country are being asked or even mandated to stay at home and practice social distancing while businesses, schools, and churches are temporarily closed to avoid coronavirus spread. In Santa Clara county, where I live and fortunately already work remotely from home, a shelter-in-place order has been put into effect. However, leaving home for essential reasons is allowed and essential businesses are still open. Among essential businesses, exempt from the mandate to close their doors, are shipping businesses.

American shippers should know and be confident in the fact that ports are, of course, part of the shipping industry and are, therefore, still open.

Find out more by reading the full article in Universal Cargo's blog.

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Port of Long BeachThere have been concerns with all the shutdowns happening to fight the spread of COVID-19, the novel Wuhan coronavirus, that ports are also closing. It’s not surprising people would think ports are shut down, as people all over the country are being asked or even mandated to stay at home and practice social distancing while businesses, schools, and churches are temporarily closed to avoid coronavirus spread. In Santa Clara county, where I live and fortunately already work remotely from home, a shelter-in-place order has been put into effect. However, leaving home for essential reasons is allowed and essential businesses are still open. Among essential businesses, exempt from the mandate to close their doors, are shipping businesses.

American shippers should know and be confident in the fact that ports are, of course, part of the shipping industry and are, therefore, still open.

In fact, the Port of Los Angeles released a video yesterday (Wednesday, March 18th), in which Port of Los Angeles Executive Director Gene Seroka opens with the strong statement, “… the Port of Los Angeles is open for business and don’t let anyone tell you otherwise.”

YouTube Video

Of course, that’s not to say the ports do not have struggles with COVID-19. In fact, jumping to the opposite coast where the Ports of New York and New Jersey are, the man at the head of the port authority has tested positive for the coronavirus. Kim Link-Wills reports in an American Shipper article:

New York Gov. Andrew Cuomo announced Monday that Rick Cotton, executive director of the Port Authority of New York and New Jersey (PANYNJ), had tested positive for the coronavirus and was under quarantine.

That certainly has not closed those top ports on the East Coast. Of course, those who have worked closely with Cotton are being tested and working from home now and Cotton himself is self quarantined and asymptomatic, according to the article.

In the video above, Seroka says, “Thanks in large part to ongoing communications and vigilance in the areas of self health monitoring and social distancing in the workplace, there have been no land-side impacts to operations by COVID-19 in [the Port of Los Angeles] complex at this time.”

Indeed, the Port of Los Angeles reports on its website states, “There are currently no reports of any vessel impacts due to COVID-19 at any of the Port of Los Angeles terminals.” However, it is hard to understand how Seroka defines “land-side impacts to operations” as there certainly have been impacts at the ports, specifically at the Ports of Los Angeles and Long Beach, due to the coronavirus.

In fact, on the very same Q&A page that contained the above quote, the following is stated:

According to the most recent figures released by the PMA, work shifts at the ports of Los Angeles and Long Beach have declined since the beginning of the year as compared to this time last year.

We even posted an article a couple weeks ago about COVID-19-related detention fees shippers face from their inability to return empty containers because of the build-up of such containers and shift cancellations at the Ports of Los Angeles after the coronavirus outbreak extended the Spring Festival Holiday shutdown of manufacturing in China and resulted in so many blank sailings.

Since then, large container ships have been deployed to clear that backlog of empty containers and get the Ports of Los Angeles and Long Beach in a better place to handle a more normal amount of cargo.

China has actually been able to get the outbreak of COVID-19 under control enough to return the country back to manufacturing production. That likely plays a large role in the Port of Los Angeles reporting that cargo volumes are at 85% of normal volumes.

Of course, as China returned to a more normal state of production, COVID-19 moved into a full pandemic, continuing its spread in countries all over the globe, including, of course, the U.S. Certainly, that will shrink the amount of American exports shippers are and will be sending to the ports.

That does not mean that importing and exporting is over. There are plenty of shippers, including many of Universal Cargo’s own valued customers, who still need to get cargo exported out or imported in. The ports are operating for you and so is Universal Cargo.

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Coronavirus & IMO 2020 Good News, Bad News https://www.universalcargo.com/coronavirus-imo-2020-good-news-bad-news/ https://www.universalcargo.com/coronavirus-imo-2020-good-news-bad-news/#respond Thu, 12 Mar 2020 21:56:42 +0000 https://www.universalcargo.com/?p=9971 2020's international shipping news cycle so far has been an exercise in good news, bad news.

To get at what I'm talking about, let me introduce you to a fun book by Jeff Mack I read sometimes with my kids (yes, it's a children's book) called Good News, Bad News. The book just plays with an old writing device of alternating good and bad news. Good news — rabbit and mouse (I told you it's a children's book) are going on a picnic; bad news — it starts to rain. Of course, the events get more severe as the book goes along, like the bunny and mouse run into a cave to escape one danger only to find a bear inside the cave.

Check out the good news, bad news pattern of what's been happening in the shipping industry with IMO 2020 and the coronavirus by reading the full article in Universal Cargo's blog.

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Good News, Bad News2020’s international shipping news cycle so far has been an exercise in good news, bad news.

To get at what I’m talking about, let me introduce you to a fun book by Jeff Mack I read sometimes with my kids (yes, it’s a children’s book) called Good News, Bad News. The book just plays with an old writing device of alternating good and bad news. Good news — rabbit and mouse (I told you it’s a children’s book) are going on a picnic; bad news — it starts to rain. Of course, the events get more severe as the book goes along, like the bunny and mouse run into a cave to escape one danger only to find a bear inside the cave. If you want a more grown up example of this classic device, think about the greatest Christmas movie of all time: Die Hard. Die HardBad news — the roof John McClane (Bruce Willis) is on is about to explode. Good news — he ties himself to a fire hose and jumps to avoid being incinerated. Bad news — John is hanging on the side of a skyscraper. Good news — he busts through a window and gets inside. Bad news — the big, metal hose reel falls and the fire hose still tied to John starts pulling him out the window. You get the idea…

As this year started, all the international shipping worry was about how the transition to IMO 2020 would go. Carriers having to change ship fuel to much cleaner and more expensive fuel or retrofit ships with scrubber systems to meet the International Maritime Organization’s 0.5% carbon emission mandate was likely to cause disruptions and big cost increases for shippers. That was the bad news. But the new year brought good news — the launch of IMO 2020 was going pretty smoothly.

Then came some bad news. Controversies over low sulfur fuel charges and scrubbers were rising. Good news — fuel prices were looking more manageable than expected (in fact, now there have been big drops in low sulfur fuel prices). Bad news — a novel coronavirus broke out in China.

There was a shred of good news for the shipping industry with the initial outbreak of COVID-19, the name now given to the novel coronavirus. This terrible outbreak was happening during the Chinese New Year or Spring Harvest Festival, which is a time when China shuts down manufacturing anyway, meaning a viral outbreak hitting the country — terrible as that is — would at least have a much smaller economic impact on the world than it would normally have. Bad news. The outbreak was a full epidemic, extending the Chinese New Year shutdowns and significantly impacting shipping.

Good news — President Trump, despite being called xenophobic for doing it in the moment, immediately put a travel ban on China, preventing the virus from quickly spreading to America. Bad news — other countries did not, and the disease quickly hit Iran, Italy, Japan, and South Korea.  Those last two are especially big trade partners when the supply chain out of China is disrupted.

Good news came again as Universal Cargo heard from our sources like Seamaster that production was ramping back up in China after all the extended shutdowns from the coronavirus. Mike Wackett & Gavin van Marle even report in a Loadstar article:

… shipping activity in China appears to be picking up, according to new data from liner consultancy SeaIntelligence.

It says there is now a clear reduction in the number of announced blank sailings by carriers as trucking operations resume in China, leading to increased export cargo arriving at ports and ships are needed to handle the backlog of containers.

Of course, the bad news to go with the good news of China getting back in operation is that the coronavirus has officially hit pandemic levels according to the World Health Organization (WHO). European countries of Spain, France, and Germany are seeing cases spread fast, and the coronavirus is now hitting communities in the U.S.

Yesterday, President Trump announced a travel ban on Europe to the U.S. So despite China getting manufacturing and shipping back going, the spread of the coronavirus through other nations likely means more, probably much more, shipping disruption.

YouTube Video

msc mia

Photo of MSC Mia by Farid mernissi

But then we also see a piece of good news. The build up of empty shipping containers that has been causing shippers to get hit with detention fees for something out of their control is about to go away. The world’s biggest container ship is headed to the Ports of Los Angeles and Long Beach to clear that bad news backlog of empty shipping containers that piled up because of all the blank sailings that happened with China’s coronavirus shutdown. A Splash247 article by Sam Chambers gives all the details on that.

The repositioning of shipping containers will rebalance global supplies to get shipping ready to go, but the pandemic threatens to halt shipping anyway and mess up that rebalance before it’s actually gained. According to a Shipping Watch article by Tomas Kristiansen, the “new coronavirus wave could hit the container sector like the financial crisis.” That would be seriously bad news.

At least, there are a couple last pieces of good news shippers can cling to though. One can be found in the president’s address (above) to the nation. The president is issuing financial relief to businesses and individuals impacted by the virus.

The other piece of good news is the encouragement to take from China’s recovery from the epidemic within a couple months. That’s not to say coronavirus is all done in China; however, as stated above, the nation is getting back to normal in terms of production and shipping. When there’s the bad news of today’s (Thursday, March 12th) update on Worldometer’s coronavirus page of 272 new cases in the U.S., 595 in France, 779 in Germany, 782 in Spain, 1,075 in Iran, and 2,651 in Italy, China being down to just 18 new cases very good news. That’s much better than the hundreds of new cases per day China was seeing for a while. That should give optimism to other countries, especially the U.S., as they fight the coronavirus.

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Shippers Hit with Coronavirus-Related Detention Fees https://www.universalcargo.com/shippers-hit-with-coronavirus-related-detention-fees/ https://www.universalcargo.com/shippers-hit-with-coronavirus-related-detention-fees/#respond Thu, 05 Mar 2020 22:41:41 +0000 https://www.universalcargo.com/?p=9966 There have been a ton of blank sailings related to COVID-19, commonly referred to as the coronavirus or novel coronavirus. In fact, according to an advisory that Tommy Chan, Compliance Manager of Seamaster Global Forwarding, sent to Universal Cargo, "More than 100 additional blank sailings have been announced due to the extended Lunar New Year holidays and/or COVID- 19."

One of the worries that comes with these blank sailings is a supply shortage, especially in terms of empty shipping containers. Cancelled sailings have gone both ways, in and out of China, causing shippers and truckers in many cases to have trouble returning containers. Thankfully, we haven't really ended up with a major shipping container shortage, as Seamaster said in its advisory (which is from this week):

Currently, container equipment is sufficient in China, but the availability of Non-Operating Reefers (NOR) is diminishing. The US ports are not experiencing a major shortage, but it is a concern at inland points. Equipment supply is getting tight in Europe, while Germany is facing a shortage. In Asia and Oceania, there is no equipment shortage. 

That's good news, but there is bad news. Coronavirus preventing the return of empty containers results in fees and penalties. Find out all about it by reading the full article in Universal Cargo's blog.

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shipping containers for import exportThere have been a ton of blank sailings related to COVID-19, commonly referred to as the coronavirus or novel coronavirus. In fact, according to an advisory that Tommy Chan, Compliance Manager of Seamaster Global Forwarding, sent to Universal Cargo, “More than 100 additional blank sailings have been announced due to the extended Lunar New Year holidays and/or COVID- 19.”

One of the worries that comes with these blank sailings is a supply shortage, especially in terms of empty shipping containers. Cancelled sailings have gone both ways, in and out of China, causing shippers and truckers in many cases to have trouble returning containers. Thankfully, we haven’t really ended up with a major shipping container shortage, as Seamaster said in its advisory (which is from this week):

Currently, container equipment is sufficient in China, but the availability of Non-Operating Reefers (NOR) is diminishing. The US ports are not experiencing a major shortage, but it is a concern at inland points. Equipment supply is getting tight in Europe, while Germany is facing a shortage. In Asia and Oceania, there is no equipment shortage. 

That’s good news, but there is bad news. Coronavirus preventing the return of empty containers results in fees and penalties. Ari Ashe reports in the Journal of Commerce (JOC):

Shippers and truckers are raising the alarm on how blank sailings linked to the coronavirus disease 2019 (COVID-19) will cause a rash of detention penalties between $100 to $200 per day if it remains difficult to return empty containers to terminals in Los Angeles and Long Beach.

While Ocean Network Express (ONE) is waiving detention fees, according to a Feb. 25 advisory from the company, other steamship lines haven’t provided such amnesty, say motor carriers. Container lines may be reluctant to waive such fees, considering the volume slump caused by COVID-19 is costing them $300 to 350 million weekly, according to consultancy Sea-Intelligence Maritime Consulting.

It doesn’t seem fair that shippers and truckers should get strapped with these costs because of something that is completely out of their control. Of course, looking at it from the other angle, it probably isn’t fair that carriers should have to shoulder all of the costs from the coronavirus either.

However, I think there is a difference here. Carriers have been losing revenue (significant revenue) for a time because the COVID-19 outbreak extended the shutdown of the Chinese New Year and stopped much movement of goods in and out of the country that basically serves as the world’s biggest shipping hub. Now, production is ramping back up in China. When production and shipping slows for a time, it is usually followed by an increase to make up for it.

Don’t forget about one of the things we highlighted in our last blog about COVID-19’s effect on shipping — how the JOC’s own Peter Tirschwell pointed out that many think China’s “prolonged [manufacturing] shutdown is just a prelude to an overwhelming surge, and likely capacity shortages, that will materialize once factories are back to full production, fulfilling demand for a still very strong US economy.”

This is not to say that carriers ultimately will carry no losses from the coronavirus, but those losses should be mitigated by increases that follow this period of decrease. When you boil it down, carriers have been going through a time of diminished demand for service, though it comes from a different cause than the usual things like seasonal slumps or economic downturn.

Expensive fines like detention fees, on the other hand, have no mitigation. Those are just losses shippers (and sometimes truckers) suffer beyond the delays they’re already suffering in their supply chains. Being charged a fine when they are not actually doing anything wrong (a fine that carriers may be using to help mitigate their costs to boot) is, well, wrong. Even ONE’s waiving of detention fees does not mean its customers aren’t incurring extra costs in their shipping process. Ashe continues in the JOC article:

There are limits to the leniency carriers will show, however, with ONE saying it won’t reimburse for storage or escalating fees. That resistance is causing trucker and cargo owner frustration about being penalized for factors they argue are beyond their control. 

The article goes on to give an idea of just how hard it is for shippers and truckers to get empty containers back to the Ports of Los Angeles/Long Beach, the biggest/busiest ports by capacity in the country:

Some terminals last month began notifying beneficial cargo owners (BCOs) they would only issue appointments to return empty containers if the trucker retrieved a full container, known as a dual transaction. Other terminals began to refuse returns of all empty containers. Several terminal operators told JOC.com that is necessary because of the reduction of outbound vessel capacity needed to return the empties to Asia, and available terminal space is becoming scarce.

Ashe goes on to add 25 day or evening work shifts that have been cancelled because of reduced import volumes during this COVID-19 outbreak. That further reduces opportunity for container return.

This whole thing is tough on shippers incurring fees because they are not getting the extensions that would normally come from port closures due to a natural disaster despite basically facing the same situation of not being able to return containers to the port terminals.

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Coronavirus Disrupts Supply Chain, Highlights Overdependence on China, Gets Used in Politics https://www.universalcargo.com/coronavirus-disrupts-supply-chain-highlights-overdependence-on-china-gets-used-in-politics/ https://www.universalcargo.com/coronavirus-disrupts-supply-chain-highlights-overdependence-on-china-gets-used-in-politics/#respond Fri, 28 Feb 2020 01:51:54 +0000 https://www.universalcargo.com/?p=9955 Peter Tirschwell, in a Journal of Commerce (JOC) article, says the coronavirus outbreak is causing disruption "on a scale that has yet to be seen in container shipping’s more than 60-year history."

While many believe, as Tirschwell points out, China's "prolonged [manufacturing] shutdown is just a prelude to an overwhelming surge, and likely capacity shortages, that will materialize once factories are back to full production, fulfilling demand for a still very strong US economy," the immediate impact the virus has had on international trade is severe.

Tirschwell points out that 65 percent of trans-Pacific containerized imports still come from China, carriers blank sailed (cancelled) 46% of Asia-Europe trade capacity during this outbreak, and the annual Chinese New Year manufacturing shutdown was extended by several weeks to highlight just how disruptive the disease has been on shipping.

This article gets into that disruption from COVID-19 to the supply chain, the problem of dependency on China that it highlights, politics around the viral outbreak, and much more. Read it all in Universal Cargo's blog.

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Peter Tirschwell, in a Journal of Commerce (JOC) article, says the coronavirus outbreak is causing disruption “on a scale that has yet to be seen in container shipping’s more than 60-year history.”

While many believe, as Tirschwell points out, China’s “prolonged [manufacturing] shutdown is just a prelude to an overwhelming surge, and likely capacity shortages, that will materialize once factories are back to full production, fulfilling demand for a still very strong US economy,” the immediate impact the virus has had on international trade is severe.

Tirschwell points out that 65 percent of trans-Pacific containerized imports still come from China, carriers blank sailed (cancelled) 46% of Asia-Europe trade capacity during this outbreak, and the annual Chinese New Year manufacturing shutdown was extended by several weeks to highlight just how disruptive the disease has been on shipping.

Risk of Supply Chain Reliance on China Highlighted

One of the things Tirschwell brings up in the article is risk in the supply chain. He alludes to the risk of heavy reliance on China for sourcing goods. Tirschwell is certainly not the only nor the first to see this heavy reliance on China risk. He writes:

Part of the solution [for de-risking the supply chain overall] may be to flee from high-risk areas. The Trump tariffs appear to be leading to a flight from China as a sourcing country, and the coronavirus will likely strengthen that trend, given the single-country risk that it has exposed. Container lines are expanding capacity on Asia to the North American East Coast services and limiting interim port calls in the Middle East and Europe to make the services faster; that is a direct reflection of the shift to southeast Asia sourcing.

At Universal Cargo, we’ve helped many importers shift sourcing to countries other than China since the start of the trade war (as well as help shippers navigate their shipments to and from China). But now, shipping to and from some of those other source countries is starting to be affected by COVID-19, the official name for this new type of coronavirus that quickly reached epidemic levels in China.

Supply Chain Disruption Spreads to Other Countries With or Without COVID-19

Sam Whelan reports in the Loadstar:

Coronavirus in South Korea has prompted flight cancellations and factory closures, with reports of capacity problems at ports and airports.

Reminiscent of China’s sudden isolation in late January, airlines around the world have cancelled or suspended Korea flights following a surge in virus cases in the city of Daegu, North Gyeongsang province.

As of today, there are 1,146 confirmed cases of virus and 12 deaths, according to local media.

South Korea is not the shipping hub that China is, but there has been a decent amount goods sourcing moved from China to South Korea as a result of U.S. tariffs on Chinese goods. Back in June, it was reported by Jung Suk-yee in a Business Korea article that U.S. imports from South Korea were up 20.5% happening at the same time U.S. imports from China were dropping. Factory closures and flight cancellations in South Korea will certainly curb that market growth the country has obtained.

South Korea is now the first country outside of China to which the Centers for Disease Control and Prevention (CDC) has advised against all non-essential travel. Additionally, the CDC advises older and at-risk travelers to avoid Iran, Italy, and Japan, where there’s a range of between 200 and 900 confirmed COVID-19 cases per country.

Still, countries that have not seen COVID-19 outbreaks such as India, which has only 3 confirmed cases despite being the second most populous country in the world, is feeling the virus’s effects when it comes to shipping.

Alex Lennane and Gavin van Marle report in a Loadstar article:

Coronavirus is beginning to impact shipping operations in the Indian subcontinent.

Blanked westbound Asia-North Europe sailings mean export containers out of India that tranship at Colombo are not being picked up.

In addition, the widespread closure of automotive component production facilities is having a severe impact on India’s burgeoning car manufacturing industry.

The situation is being compounded by an increasing scarcity of containers for exporters.

One forwarder that procures empty 20ft containers in the Indian gateway of Nhava Sheva for automotive exports told The Loadstar that, while there was normally three-weeks’ worth of available empty boxes, “there is now barely two days’ stock”.

This is just an example of one country’s supply chains being affected. India is certainly not alone in this. And with each country that has its supply chain disrupted, one more difficult link is added to the U.S. supply chain.

Fear Over COVID-19 in the U.S.

Of course, the average American isn’t thinking about the supply chain. They’re thinking about their health. Fears of an outbreak in the U.S. were raised when CDC official Dr. Nancy Messonnier said Tuesday (February 25th):

We expect we will see community spread in this country. It’s not so much a question of if this will happen anymore, but rather more a question of exactly when this will happen and how many people in this country will have severe illness.

Despite this warning, the U.S. still has not experienced any real outbreaks. Outside of the 45 Americans brought home under quarantine after contracting COVID-19 on a cruise ship, there have only been 15 confirmed cases at the time of this article’s writing. Those diagnosed are under quarantine.

According to a Politico article, some are accusing Messonnier of intentionally undercutting the Trump Administration’s more reassuring message concerning the virus spreading to America — that it is under control — in order to hurt the president during this election year. The ones making this claim point to the fact that Messonnier is the sister of Rod Rosenstein, who was the former deputy attorney general in charge of the Mueller probe with the goal of removing President Trump from office.

Politics Over Spread and Treatment of Covid-19

House Minority Leader Kevin McCarthy held a press conference today (Thursday, February 27th) and addressed the issue of COVID-19. He started by bringing up President Trump’s assignment of Vice President Pence as head of the government’s response to the virus as an indication of how seriously the president is taking this situation. The congressional appropriation leaders, he said, are working on a bipartisan basis to appropriate the adequate amount of money needed to fight COVID-19, including supporting our health experts in working with industry to develop a vaccine and treatment.

“What is certain here is this is no time for politics.” Responding to attacks on President Trump’s response to COVID-19 from Speaker of the House Nancy Pelosi, Senate Minority Leader Chuck Schumer, and the Democrat Party’s presidential candidate frontrunner Bernie Sanders, McCarthy called upon members of Congress to drop partisanship and work together in order to keep the public safe.

Of course, the presidential hopefuls took OVID-19 as an opportunity to attack president Trump during their South Carolina debates. “This great genius has told us that this coronavirus is going to end in two months,” Sanders said with thick sarcasm about Trump. “April is the magical day that this great scientist we have in the White House has determined. I wish I was kidding. That is what he said.”

transportation isolation system coronavirusIn actuality, April is not a magical date President Trump pulled out of his hat. April is when the weather gets warmer and the cold season ends. The common cold is a coronavirus, like COVID-19, and gets its name because it spreads quickly when the weather is cold but does not when warmth and humidity pick up after the winter months end in April. It is believed COVID-19 will follow a similar contagion pattern, which makes sense out of Trump’s repeated statements about the epidemic outbreak such as “a lot of people think that goes away in April, with the heat, as the heat comes in.”

Meanwhile, drug companies are racing to test vaccines against COVID-19, according to a CNN article. That’s the biggest focus when it comes to the new coronavirus, containing and fighting it. That’s the strongest message McCarthy had in his press conference, which he emphasized with:

I do not think coronavirus should be added to anything. It should be standing on its own and it should move just like that an it should move fast. I think a real sign of not playing politics with it, making sure both sides are working together on and making sure the American public has the resources they need to combat this just as the president has requested.

Could OVID-19 Open a National Conversation About International Trade?

Yes, international trade is already a big talking point for President Trump. High among his administration’s priorities has been getting out of bad trade deals with other countries, putting in place trade deals that are good for the U.S., and reducing trade deficits with other countries.

COVID-19 clearly highlights the problem of America’s over-reliance on other countries, especially China, for our goods (as pointed in the JOC article quoted at the beginning of this post). This issue is clear enough now that our politicians and policymakers likely can’t ignore America’s supply chain in an election year. McCarthy had this to say on the subject:

“When we get back and we solve this problem, I think as a country we should take a deep breath and have a real discussion about the supply chain in America. Have we allowed too much to move out of the country? Are we reliant upon other countries to make sure our economy continues to move? And I think especially from those essential requirements we need from medicines, from minerals, and others, we should look at that at a different basis and not have ourselves in this situation again.”

President Trump has been pushing policies to increase U.S. manufacturing in his crusade against trade deficits with some success in returning production to the U.S. and reducing some of those deficits. It will be interesting to see if his policies get more congressional support. Ultimately, that will likely depend on who controls Congress as the two dominating parties of our country can’t help but oppose each other.

It is unlikely the Democratic Party will ever admit Trump did anything good in his presidency, but they may agree the U.S. needs to continue growing its manufacturing, which creates jobs and avoids the problematic dependency exposed by COVID-19. Perhaps the fight between the parties will shift to what types of policies best promote U.S. manufacturing.

Keep in mind that as U.S. manufacturing has and continues to grow, Universal Cargo can help you with your domestic shipping as well as your international shipping.

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Scrubbers Could Harm People Through Food Chain Per IMO Report https://www.universalcargo.com/could-scrubbers-poison-seafood-with-cancer-causing-toxins/ https://www.universalcargo.com/could-scrubbers-poison-seafood-with-cancer-causing-toxins/#respond Thu, 20 Feb 2020 22:56:50 +0000 https://www.universalcargo.com/?p=9947 What's worse, air pollution or pollution pumped into the ocean that could make the seafood you eat toxic?

The transition to the new IMO 2020 regulation that requires a sulfur emissions cap of 0.5% on ships' fuel has been very smooth so far. Of course, with the regulation having just gone into effect on January 1st, it is still too soon to know how well ocean carriers around the world are actually following the new regulation. But one of the biggest things for making the transition so smooth has been the allowance of carriers to retrofit ships with scrubbers, fuel cleaning systems, in order to continue to use higher-sulfur-content fuels.

The idea seems genius. Instead of having to buy more expensive, cleaner fuel all the time, carriers invest a one-time cost (yes, there will be maintenance costs here and there) in basically an onboard treatment plant inside a ship to remove harmful gasses from its engines and exhausts. However, we all know those pollutants don't just disappear. Critics of the scrubbers plan from the beginning have said scrubbers will dump the pollutants into the ocean rather than burning them into the air.

Despite this concern, carriers have moved forward with spending billions of dollars to install scrubbers on thousands of ships. What's crazy is the International Maritime Organization (IMO) compiled an internal report that says the use of scrubbers to comply with its IMO 2020 regulation "could harm humans by contaminating fish and crustaceans with toxins," according to the Guardian, which obtained the report.

Find out all about it by reading the entire article in Universal Cargo's blog.

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What’s worse, air pollution or pollution pumped into the ocean that could make the seafood you eat toxic?

Container Ship EmissionsThe transition to the new IMO 2020 regulation that requires a sulfur emissions cap of 0.5% on ships’ fuel has been very smooth so far. Of course, with the regulation having just gone into effect on January 1st, it is still too soon to know how well ocean carriers around the world are actually following the new regulation. But one of the biggest things for making the transition so smooth has been the allowance of carriers to retrofit ships with scrubbers, fuel cleaning systems, in order to continue to use higher-sulfur-content fuels.

Where Do Pollutants Go When Scrubbers Remove Them from Emissions?

The idea seems genius. Instead of having to buy more expensive, cleaner fuel all the time, carriers invest a one-time cost (yes, there will be maintenance costs here and there) in basically an onboard treatment plant inside a ship to remove harmful gasses from its engines and exhausts. However, we all know those pollutants don’t just disappear. Critics of the scrubbers plan from the beginning have said scrubbers will dump the pollutants into the ocean rather than burning them into the air.

Despite this concern, carriers have moved forward with spending billions of dollars to install scrubbers on thousands of ships. What’s crazy is the International Maritime Organization (IMO) compiled an internal report that says the use of scrubbers to comply with its IMO 2020 regulation “could harm humans by contaminating fish and crustaceans with toxins,” according to the Guardian, which obtained the report.

“Could” is a big word in that sentence. The IMO is uncertain about whether or not scrubbers dumping toxins into the ocean will harm our food chain because there just hasn’t been enough testing done to know for sure. In its article on the topic, the Guardian says:

In the report the IMO, the United Nations agency responsible for regulating shipping, says that there is insufficient “toxicity data” to be able to assess the risk to humans caused by the increased use of exhaust gas cleaning systems, which are also known as “scrubbers”.

Some of the pollutants deemed most concerning by experts that are pumped into the sea by scrubbers are polycyclic aromatic hydrocarbons (PAHs), which have been linked to skin, lung, bladder, liver and stomach cancers. Recently, doctors have researched and were able to find the best delta 8 cartridges that have good medicinal properties and are capable to cure any kind of cancer when it is diagnosed at its early stage itself. Along with that, they also found out that they can cure any kind of mental stress too.

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Low Sulfur Surcharge Controversy https://www.universalcargo.com/low-sulfur-surcharge-controversy/ https://www.universalcargo.com/low-sulfur-surcharge-controversy/#respond Thu, 13 Feb 2020 22:54:57 +0000 https://www.universalcargo.com/?p=9945 We promised to blog on this, so here it is... the controversy surrounding low sulfur surcharges.

Big news events affecting the international shipping industry, specifically the Phase One Trade Agreement with China and the coronavirus epidemic in China, have taken shippers' minds off the low sulfur surcharges that have come with IMO 2020. However, as the year continues and the shipping industry moves past its early-year slow period in ocean freight shipping, low sulfur surcharges are expected to persist and the controversy over them will likely only rise.

Low sulfur surcharges carriers charge shippers have been called unfair, unethical, and a few things that are probably inappropriate to type here. But are these fair labels to put on low sulfur surcharges? Find out by reading the full article in Universal Cargo's blog.

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We promised to blog on this, so here it is… the controversy surrounding low sulfur surcharges.

Big news events affecting the international shipping industry, specifically the Phase One Trade Agreement with China and the coronavirus epidemic in China, have taken shippers’ minds off the low sulfur surcharges that have come with IMO 2020. However, as the year continues and the shipping industry moves past its early-year slow period in ocean freight shipping, low sulfur surcharges are expected to persist and the controversy over them will likely only rise.

Low sulfur surcharges carriers charge shippers have been called unfair, unethical, and a few things that are probably inappropriate to type here. But are these fair labels to put on low sulfur surcharges?

It’s obvious IMO 2020’s sulfur cap of 0.5% on ship fuel, down from the previous cap of 3.5%, brings increased costs for carriers. They are forced to either use more expensive fuel or have their ships retrofitted with scrubbers, systems that clean the fuel in ships’ engines. So what’s so controversial about low sulfur surcharges to mitigate those costs?

There would probably be nothing controversial about such low sulfur surcharges if carriers implemented differently than they are.

Carriers’ Lack of Transparency

Ocean freight carriers are notorious for lacking in transparency. This has been a long-standing complaint from shippers. Blank sailings, transshipments, and general rate increases are just a few of the things carriers implemented over the years that have cost shippers money. Often, carriers have given little to no warning, explanation, or even clarity concerning the implementation of such potentially costly practices.

IMO 2020 actually presented an opportunity for carriers to gain shippers’ trust by showing transparency. If carriers were open about the cost increases of cleaner fuel or scrubbers on shipments and recoupment estimates from low sulfur surcharges, shippers could more readily accept low sulfur surcharges as reasonable.

However, carriers have not been transparent with their practices of implementing low sulfur surcharges. This leaves shippers suspecting carriers of using these fees to supplement freight rates that have been lower than carriers desire.

Timing of Low Sulfur Surcharges

From Megaships to Digitization

Picture: Ruth Hartnup

IMO 2020 went into effect January 1st of this year. However, some shippers’ eyebrows were raised when low sulfur surcharges went into effect earlier than that.

Carriers were well into the process of retrofitting ships with scrubbers by this point, which obviously costs money, and there were probably some costs involved with testing new fuels in engines (of course, the lack of transparency on any of this leaves shippers in the dark as to how much such costs might be). Because of this, there’s reason to believe carriers were justified in implementing surcharges before the actual 0.5% sulfur fuel cap went into effect.

Additionally, cleaner fuel would have to be bought in time for the IMO 2020 implementation. Why should carriers have to take that cost on themselves and then recoup it later rather than collect revenue for it during the lead-up?

That all sounds reasonable. However, that’s not the whole picture. International shipping’s peak season in 2019 wasn’t much of a peak season. The extended peak season from the year before, because of frontloading of goods to beat tariff hikes, along with frontloading throughout the year to beat tariff hike deadlines really shrunk the amount of goods that were moved during what is normally the busiest time of year. Along with a smaller quantity of shipments came falling freight rates during what was supposed to be the peak season.

The timing of the early low sulfur surcharges after a financially lackluster peak season for carriers gave rise for shippers to suspect carriers were actually using low sulfur surcharges to compensate for lower freight rates rather than cover costs of what was still an upcoming rule change. With no transparency, there was no way shippers could see their suspicions were not true.

Varying Low Sulfur Surcharges

The previous sections gave plenty reason for shippers to be suspicious of carriers’ low sulfur surcharges. However, this section brings the seemingly damning evidence, even if that evidence is circumstantial.

Different carriers were implementing very different low sulfur surcharges, sometimes with very similar ship sizes on the same routes or even the same exact ships because they’re in an alliance with each other.

An excellent American Shipper article on the topic by Mike King illustrates the inequities in December 2019 implementation of low sulfur surcharges:

[A] survey by Alphaliner… found thatlow-sulfur surcharges (LSS) on the Far East to North Europe route applied by lines Dec. 1 ranged from $71 per twenty-foot equivalent unit (TEU) to $135 per TEU (see below).

Source: Alphaliner

The analyst claimed carriers were failing to provide details of how the individual surcharges were calculated. Alphaliner also failed to find any correlation between the relative efficiency of the various carriers based on the average size of vessels deployed and the surcharge applied by carriers.

Drewry also noted that “while tracking spot rates in December, we have witnessed a wide variation in IMO surcharges depending on different carriers, different forwarders and different trade lanes”.

Illustrating its point, Alphaliner said Ocean Network Express (ONE) was applying a surcharge of $92 per TEU – a figure lower than nine out of the 10 carriers on the Far East-North Europe trade, even though the company currently deploys the smallest ships on this route.

Even within the same alliances that operate similar size ships, the analyst said there were significant variations in the charges applied.

“For example, MSC (Mediterranean Shipping Company) applies a Global Fuel Surcharge of $71 per TEU while [2M Alliance partner] Maersk’s Environmental Fuel Fee is 63% higher at $116 per TEU,” said Alphaliner.

“Maersk’s surcharge is also higher than HMM’s Environmental Compliance Charge (ECC) of $112 per TEU, even though HMM does not currently operate any of its own ships on the trade.”

Drewry believes that IMO 2020 charges are being used by carriers to boost spot rates which, as FreightWaves has noted, also bolsters lines in annual contract negotiations with shippers on the Asia-Europe trade.

Drewry is a well-respected maritime research firm. Its data analysis and opinion that carriers are using low sulfur surcharges to boost freight rates adds credence to shippers’ belief that something is afoul with these charges.

Call for Transparency from Carriers

I called the evidence in the previous section seemingly damning and circumstantial because we really don’t know how the cost breakdowns work for carriers. Perhaps, for example, some carriers in an alliance are spending more IMO 2020 money on routes they share ships on because they own the particular ships being used. The problem is we really don’t know.

From what we, even the maritime researchers among us, can see, carriers use of low sulfur surcharges appears dishonest. If carriers want shippers to trust them, operating with transparency is the only answer.

While shippers have bemoaned carriers’ lack of transparency for years and years, there has yet to be an organized enough demand for said transparency to force carriers to give up their traditionally opaque ways. If a carrier does want to gain an edge on its competitors, the easiest thing to do might be to give shippers what they want: transparency and accountability in shipping practices.

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Coronavirus Update on Global Trade in China & Hong Kong https://www.universalcargo.com/coronavirus-update-on-global-trade-in-china-hong-kong/ https://www.universalcargo.com/coronavirus-update-on-global-trade-in-china-hong-kong/#respond Tue, 11 Feb 2020 22:37:24 +0000 https://www.universalcargo.com/?p=9940 Many returned to work yesterday (February 10th) in China after the Spring Festival Holiday (Chinese New Year) shutdown was extended by the novel coronavirus that quickly spread from its epicenter in Wuhan. Of course, not all are back in offices and factories yet, especially in Wuhan itself, and some had already resumed work last week. But what we're seeing is production in China working on regaining momentum, even as the fight against this terrible epidemic rages on.

The last numbers I saw on the toll of COVID-19 (nCOV), as the new coronavirus is now named, are over 1,000 people dead and well over 40,000 people infected. Word from the World Health Organization (WHO) is that nCOV likely came from bats before finding another host and hitting Wuhan through a seafood market. I don't know if that bat origin is a guess because previous coronaviruses have been linked to bats or if the WHO has actually found a link to bats with nCOV. Even the language I've heard and read from the WHO is not unequivocal about the infection spreading from the seafood market that has since been shut down. That's a problem in general with nCOV right now. There is still much uncertainty surrounding it, its origin, and even its spread.

Not surprisingly, that leaves the Chinese and other governments, airlines that fly people and goods in and out of China, ocean carriers that ship cargo to and from the country, cruise lines, and more to be very cautious right now. And rightfully so. Of course, that has a major impact on international shipping. Airlines are still cancelling flights in and out of China, especially around the disease's epicenter. Shipping lines are doing many blank sailings around their routes in and out of China. There is even worry about importing goods from China.

It's easy for hysteria to spread when there is an outbreak like this. It will take time for fears to be soothed. It will take time for lines of industry and global trade to go back to normal. However, at Universal Cargo, we are hearing from our contacts in China about how things are progressing, and we think sharing that information could help in the process of soothing fear.

Tommy Chan, Ocean Freight Compliance Manager with Seamaster Global Forwarding in China, sent us an update letter on what's happening with Seamaster specifically and the shipping business in general in China, so check out the full article in Universal Cargo's blog, where we'll that inside information with you.

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citizens of wuhan lining up outside of a drug store to buy masks during the wuhan coronavirus outbreakMany returned to work yesterday (February 10th) in China after the Spring Festival Holiday (Chinese New Year) shutdown was extended by the novel coronavirus that quickly spread from its epicenter in Wuhan. Of course, not all are back in offices and factories yet, especially in Wuhan itself, and some had already resumed work last week. But what we’re seeing is production in China working on regaining momentum, even as the fight against this terrible epidemic rages on.

The last numbers I saw on the toll of COVID-19 (nCOV), as the new coronavirus is now named, are over 1,000 people dead and well over 40,000 people infected. Word from the World Health Organization (WHO) is that nCOV likely came from bats before finding another host and hitting Wuhan through a seafood market. I don’t know if that bat origin is a guess because previous coronaviruses have been linked to bats or if the WHO has actually found a link to bats with nCOV. Even the language I’ve heard and read from the WHO is not unequivocal about the infection spreading from the seafood market that has since been shut down. That’s a problem in general with nCOV right now. There is still much uncertainty surrounding it, its origin, and even its spread.

Not surprisingly, that leaves the Chinese and other governments, airlines that fly people and goods in and out of China, ocean carriers that ship cargo to and from the country, cruise lines, and more to be very cautious right now. And rightfully so. Of course, that has a major impact on international shipping. Airlines are still cancelling flights in and out of China, especially around the disease’s epicenter. Shipping lines are doing many blank sailings around their routes in and out of China. There is even worry about importing goods from China.

It’s easy for hysteria to spread when there is an outbreak like this. It will take time for fears to be soothed. It will take time for lines of industry and global trade to go back to normal. However, at Universal Cargo, we are hearing from our contacts in China about how things are progressing, and we think sharing that information could help in the process of soothing fear.

Tommy Chan, Ocean Freight Compliance Manager with Seamaster Global Forwarding in China, sent Universal Cargo an update letter on what’s happening with Seamaster specifically and the shipping business in general in China, so I thought I’d share some of that inside information with you.

Returning to Work

Like many businesses in China, Seamaster returned to the office (or offices) yesterday. Mr. Chan’s sharing of how Seamaster’s employees are returning to work gives insight into where in China operations are returning to full business versus the places that are limited by the coronavirus outbreak and efforts to contain it.

In Xiamen, Fuzhou, Shanghai, Qingdao, and Dalian, where Seamaster’s employees are doing a combination of working from home and returning to the office at flexible hours to avoid rush hour traffic, things are getting back to normal.

Things are not to that point yet in Shenzhen, Ningbo, and Tianjin. Mr Chan tells Universal Cargo government authorities and building management there “are exercising various preventive measures to contain the virus spread.” For a company like Seamaster, this does not stop business as they have off-site access to company systems and are able to work from home. This does mean that production in factories in those areas is still very much affected.

Over in Hong Kong, people were back at work on January 29th, so disruption is much less there.

Goods Production in China

Production was already touched on a little bit above, with factories still closed in areas most affected by nCOV in China. However, the Seamaster letter had more to share with Universal Cargo on the subject:

“Due to extended holidays and anti-nCOV measures, many factories in China remain closed and will not resume operations until mid/late February. Even as operations resume, a slow ramp up in production and exports can be expected. In anticipation of reduced exports, airlines and ocean liners have adjusted their capacities.”

Ocean Freight

The letter got more specific concerning ocean freight and its capacity around the epidemic in China.

“Capacity is expected to decline as carriers announce additional blank sailings,” Seamaster said. “So far, more than 80 additional sailings have been voided post-Chinese New Year, with more expected to be announced in the near future. Some carriers and port terminals have also announced an extension of free demurrage and we expect others will follow.”

If you’ve been following the news around nCOV, you’ve probably heard about cruise ships in quarantine, but ocean freight carriers are also dealing with quarantine rules with cargo ships.

“We have received advice from shipping lines on some emerging quarantine requirements imposed by
regulatory bodies,” continued Seamaster, “either on crew members or vessels that have visited or are from China. While the scope of this requirement is not global, quarantine rules require 15 days of monitoring to ensure that the virus, if present, is not passed on further during discharge at port or change of crew members. Ships may need to slow steam or change route to meet minimum requirements.”

Port Operations in China

With Seamaster’s assurance, we can report that all ports in china, except Wuhan, are now operational. Of course, that’s not to say that global trade moving along swimmingly in China….

Global Supply Chains

China is an enormous world hub for global trade. There’s no way an event like what we’ve seen with nCOV could happen without its affects rippling out across the world. The Seamaster letter says that with all of the aforementioned things, “we are going to see a major disruption to global ocean supply chains. The steep spike
in idle capacity could result in equipment imbalance as freight movements back to Asia outstrip capacity. Market rates, space and equipment will be fluid in the months ahead.”

Air Freight

Although Universal Cargo does provide air freight services, this blog tends to focus on ocean freight shipping more. That’s because ocean shipping moves much, much more of the world’s goods than air freight does. In fact, over 90% of world trade is carried by sea, according to the International Maritime Organization (IMO). However, air freight is increasing in popularity with the rise of online consumerism and expectations of quicker delivery of goods. nCOV is certainly affecting air freight.

As brought up earlier, Hong Kong is not being hit as hard, despite fears over and nearly 50 cases of nCOV. The Seamaster letter shares:

The HongKong Association of Freight Forwarders and Logistics (HAFFA) has advised that the
Hong Kong government’s suspension of passenger clearance will not affect freight services between China and Hong Kong. Cross-border trucking between China and Hong Kong continues to run, but it is highly recommended that bookings are made at least 2 days in advance to ensure driver availability.

Airfreight rates are expected to increase drastically, as a number of major airlines have cancelled passenger and freighter flights to and from China, severely impacting capacity.

Despite Hong Kong not being hit as hard, airlines are still cancelling flights to there as well as China. Air freight is already quite a bit more expensive than ocean freight, generally speaking. The hikes in air freight should considerably affect demand in the sector, already hampered by fears over nCOV.

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China Halves Tariffs & Coronavirus Epidemic Disrupts Shipping https://www.universalcargo.com/china-halves-tariffs-coronavirus-epidemic-disrupts-shipping/ https://www.universalcargo.com/china-halves-tariffs-coronavirus-epidemic-disrupts-shipping/#respond Thu, 06 Feb 2020 21:59:41 +0000 https://www.universalcargo.com/?p=9938 This post could be thought of as an update to both last week's post about how the coronavirus is affecting international trade with China and our three part series going through the Phase One Trade Agreement with China chapter by chapter.

Really, this post rounds up the news happening right now that directly affects U.S. shippers who import and export goods from and to China. Read the full article in Universal Cargo's blog to find out the latest.

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This post could be thought of as an update to both last week’s post about how the coronavirus is affecting international trade with China and our three part series going through the Phase One Trade Agreement with China chapter by chapter.

Really, this post rounds up the news happening right now that directly affects U.S. shippers who import and export goods from and to China.

Let’s start with the good.

China Slashes Tariffs on U.S. Goods

Phase One Trade Agreement with China SigningChina has cut tariffs in half on $75 billion worth of U.S. goods. Sherisse Pham and Steven Jiang report in a CNN article:

The reduction affects US goods that China imposed tariffs on last September. Starting next week, China will cut the additional 10% tariff rate it enacted back then on some goods to 5%. Other goods that were taxed an extra 5% will now be levied 2.5%, according to a statement from China’s State Council Tariff Commission.
 
These tariff rollbacks had been widely expected and were a gesture in response to the United States cutting its September round of tariffs by half in the “phase one” trade deal, according [to] Tommy Wu, an economist with Oxford Economics.

Like I said in the series that examined the Phase One Trade Agreement with China, there were likely verbal agreements around the written trade deal, such as the U.S. removing the official currency manipulator status it had put on China. Neither the U.S. halving any tariffs nor China halving these tariffs were in the written deal itself.

This is obviously good news for U.S. manufacturers exporting to China and is helpful for China reaching its spending on imports from the U.S. that is outlined in the written trade deal. Unfortunately, this good news comes with bad news…

Coronavirus Heavily Disrupting Shipping

citizens of wuhan lining up outside of a drug store to buy masks during the wuhan coronavirus outbreakThat same CNN article from above reports the Wuhan coronavirus “has killed 565 people, mostly in China, and infected more than 28,000 people in over 25 countries and territories” while another CNN article gets into the disruption to international shipping, including stranded ships, caused by the virus.

Hanna Ziady reports:

Shipping companies that carry goods from China to the rest of the world say they are reducing the number of seaborne vessels, as measures to stop the spread of the coronavirus crimp demand for their services and threaten to disrupt global supply chains.

The shutdowns mean that some ships can’t get into Chinese ports, as the loading and discharging of goods slows, said Guy Platten, secretary general of the International Chamber of Shipping, a trade body. Others are stuck in dock, waiting for workers to return to ports so that construction and repairs can be completed, Platten added.

Still more vessels are idling in “floating quarantined zones,” as countries such as Australia and Singapore refuse to allow ships that have called at Chinese ports to enter their own until the crew has been declared virus-free, added Sand. Platten said he knew of at least one crew that is running low on food because their ship has been idled for so long.

Giant shipping companies such as Maersk, MSC Mediterranean Shipping, Hapag-Lloyd and CMA-CGM have said that they have reduced the number of vessels on routes connecting China and Hong Kong with India, Canada, the United States and West Africa.

There’s no way to know the full impact this epidemic will have on shipping, but already it is significant. In fact, Gavin van Marle reports in the Loadstar:

The Chinese government’s decision to extend the new year holiday to 9 and 10 February, as it battles to contain the coronavirus outbreak, could lead to a 0.7% decline in global port throughput, according to new analysis from Alphaliner.

And the consultant says the reduction of China’s factory output as a result of the extended holiday is likely to lead to Chinese ports losing some 6m teu in volumes in the first quarter.

Coronavirus Delays Scrubber Installations on Ships

As the new year hit, many cargo ships were out of commission in order to be retrofit with scrubbers to meet the IMO 2020 0.5% sulfur cap on fuel. The coronavirus is causing delays in the installation of these systems that clean the fuel in ships’ engines.

There are a number of shipyards in China where these installations were happening, but the extension of the Chinese New Year shutdowns because of the new coronavirus is stopping work from being resumed on ships.

Speculation is that scrubber installations at shipyards in other countries will increase as the epidemic stops work in China. However, there are already longer waits for the installation of scrubbers at shipyards around the world than originally believed there would be. And it’s not like ships already stuck waiting at the Chinese shipyards are going to just be moved to other countries.

Therefore, the overall retrofitting process of the ships in the world fleet looks like it will be significantly delayed. This could impact capacity in the upcoming months when freight volumes naturally increase from this slower time of year. The potential capacity decrease could result in some upward pressure on freight rates.

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Regulations for Packaging and International Shipping Laboratory Specimen https://www.universalcargo.com/regulations-for-packaging-and-international-shipping-laboratory-specimen/ https://www.universalcargo.com/regulations-for-packaging-and-international-shipping-laboratory-specimen/#respond Tue, 04 Feb 2020 17:52:54 +0000 https://www.universalcargo.com/?p=9935 This is a guest post by Lucas Parker.

Efficient packaging and shipping methods are very important when it comes to shipping laboratory goods, especially if they are dangerous goods. This is why specific regulations exist in order to ensure that this type of transport runs as smoothly as possible. To find out about some of the most important aspects that you need to keep in mind when dealing with the packaging and shipping of laboratory specimens, read the full article in Universal Cargo's blog.

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This is a guest post by Lucas Parker.

doctor, lab, laboratory, medical, medicine, chemistry, test tube, shippingEfficient packaging and shipping methods are very important when it comes to shipping laboratory goods, especially if they are dangerous goods. This is why specific regulations exist in order to ensure that this type of transport runs as smoothly as possible. These are just some of the most important aspects that you need to keep in mind when dealing with the packaging and shipping of laboratory specimens.

The Classification of the Sample

The classification of the sample that is being shipped differs with each package. It determines a specific packaging method and training requirements that are to be applied. There are two main categories.

Category A refers to all the infectious substances that pose a danger of causing permanent disability or life-threatening diseases in both humans and animals. Some of the examples of these substances are Bacillus anthracis, Chlamydia psittaci, or Eastern equine encephalitis virus.

Category B refers to infectious substances that are not capable of causing permanent disability or fatal diseases. These substances are usually being transported for diagnostic or investigational purposes. For example, some samples that are suspicious for organisms fall under this category such as leptospirosis.

Training Requirements

The law requires the staff involved in the packaging to be properly trained on a regular basis. The training itself is also specific for both categories.

Category A requires very specific formal training and documentation for anyone who does the packaging process in this category.

The training requirements for category B are informal, but they must be documented too. This training is required for all staff that has responsibility for packages in this category.

General Packaging Guidelines

Both of these above-mentioned categories require a specific packaging method.

Category A requires a watertight primary container, absorbent material, and a watertight secondary container with the list of contents written on it. It also requires the United Nations rigid outer container with UN labelling on it.

For category B, it is important to have a leak-proof primary container, absorbent material, a leak-proof secondary container, and a rigid outer package with proper markings for this category. Cushioning material can always be added for extra protection.

Basic Triple Packaging System

The basic triple packaging system is the most common packing method, and it consists of three layers.

The first layer is the primary receptacle. It is a labelled primary, watertight, leak-proof receptacle wrapped in absorbent material.

Then comes the secondary receptacle. It is a second durable, leak-proof receptacle that ensures the safety of the primary receptacle.

The last layer is the outer shipping package. Once the secondary receptacle is inside the outer shipping package it is safe and protected from outside influences like water and physical damage that can occur in transit.

Requirements for Infectious Substances

The basic triple packaging system does, however, come with some additional specifications and documentation requirements. For instance, infectious substances can only be transported in packaging that meets the UN class 6.2 specifications and specific packaging instructions. By following these requirements you will ensure that your packaging will pass the strict performance test that includes a nine-metre drop test.

Another thing to keep in mind is that the outer shipping package needs to have the UN Specification Marking and it has to be UN-approved.

Lastly, hand carriage of infectious substances is prohibited, and there is a specific limit per package for transport by cargo aircraft.

Hazard Labels for Dangerous Goods

In order to get all the dangerous substances shipped, hazard labels have to be placed on the outer package.

There are specific hazard labels for each type of biological substance that is being shipped. So for instance, infectious substances and genetically modified microorganisms have their own hazard label, and non-infectious genetically modified microorganisms and carbon dioxide have their own hazard label.

It is also very important that the packages that contain liquid of infectious organisms are packed in the correct way. The closure of the inner package has to be upward and its upright position has to be indicated by two “Package Orientation” labels on two opposite sides of the packaging.

Transport Planning

One of the main responsibilities the sender has is to make sure that the packaging, labelling, and documentation of all the infectious substances and diagnostic specimens are correct.

In order for the transport to be efficient and run smoothly, all three parties have to cooperate. The transfer of infectious materials requires efficient coordination between the sender, the carrier, and the receiver.

It is in everyone’s best interest that the receiving laboratory receives their high-quality lab equipment in its best condition. The whole process of transport is there to ensure that the materials are transported safely, on time, and in good condition. This is why well-establishes communication and good partnership must exist between the three parties.

Requirements for Diagnostic Specimens

When it comes to diagnostic specimens, certain requirements have to be respected. For instance, diagnostic specimens have to be transported in packaging that meets specific instructions: (PI)650, but the packaging doesn’t require the UN specification marking. Also, the total volume in the outer package must not exceed 4L.

Next, the labelling of the outer packaging must contain three important pieces of information. The first one is the address label, which contains both the receiver’s and the shipper’s name, address, and telephone number and the statement “Diagnostic Specimen, Not Restricted, Packed in Compliance with Packing Instruction 650”.

Additionally, the packaging must contain the required shipping documents, which are to be fixed on the outer package. Among the shipping documents are a packing list, with all the necessary information about the package and the receiver, and an airway bill in case of shipping by air.

Lastly, if it is required, the package must also come with an import or export permit and declaration. However, the infectious substance label and the shipper’s declaration of dangerous goods aren’t required for diagnostic specimens.

Conclusion

In conclusion, there are many aspects you need to keep in mind and take care of when it comes to packaging and shipping laboratory specimens. It is important to make sure that all of them are covered in order to have a package delivered safely and on time.

This was a guest post by Lucas Parker.

Author Bio

Lucas Parker is a business consultant from Sydney, Australia and editor-in-chief at savingforserenity.com. He has a great passion for writing as well and contributes articles regularly at websites like e-architect.co.uk, smallbizdaily.com, valuewalk.com, talk-business.co.uk, and many more.

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How Does the Coronavirus Impact International Trade with China? https://www.universalcargo.com/how-does-the-coronavirus-impact-international-trade-with-china/ https://www.universalcargo.com/how-does-the-coronavirus-impact-international-trade-with-china/#respond Thu, 30 Jan 2020 21:31:12 +0000 https://www.universalcargo.com/?p=9934 It's scary. Over 7,711 people are confirmed as infected with the Wuhan coronavirus, which has already killed 170 people, according to the last numbers I saw from the New York Times.

The Wuhan coronavirus, so-called because it started in Wuhan and is in the coronavirus family of viruses that includes SARS, is a new disease that has quickly spread from its epicenter. It is an epidemic in China, but cases have begun to be reported around the world, including elsewhere in Asia, Australia, Europe, and North America. Yes, that includes some cases in the United States.

Governments as well as the scientific and medical communities are rushing to contain the virus, learn about it, and ultimately stop it. Nowhere is this a more dire need than in China, where there are more cases of this coronavirus than there were altogether of SARS during China's outbreak of that coronavirus in 2002 and 2003, again according to the New York Times.

Obviously, the threat to people's lives is the biggest concern when it comes to the Wuhan coronavirus. But its effects go beyond just health, including to the area of international trade and shipping, which is, of course, what Universal Cargo's blog is about.

If you import or export goods from or to China, to find out the kind of impact you're likely looking at, read the article in Universal Cargo's blog.

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citizens of wuhan lining up outside of a drug store to buy masks during the wuhan coronavirus outbreakIt’s scary. Over 7,711 people are confirmed as infected with the Wuhan coronavirus, which has already killed 170 people, according to the last numbers I saw from the New York Times.

The Wuhan coronavirus, so-called because it started in Wuhan and is in the coronavirus family of viruses that includes SARS, is a new disease that has quickly spread from its epicenter. It is an epidemic in China, but cases have begun to be reported around the world, including elsewhere in Asia, Australia, Europe, and North America. Yes, that includes some cases in the United States.

Governments as well as the scientific and medical communities are rushing to contain the virus, learn about it, and ultimately stop it. Nowhere is this a more dire need than in China, where there are more cases of this coronavirus than there were altogether of SARS during China’s outbreak of that coronavirus in 2002 and 2003, again according to the New York Times.

Obviously, the threat to people’s lives is the biggest concern when it comes to the Wuhan coronavirus. But its effects go beyond just health, including to the area of international trade and shipping, which is, of course, what Universal Cargo’s blog is about.

If you import or export goods from or to China, here’s the kind of impact you’re likely looking at.

Delayed Implementation of Phase One Trade Deal with China

Since we just did a three part series going through the Phase One Trade Agreement with China chapter by chapter, let’s start with the impact the Wuhan coronavirus could have on this trade deal.

In article 7.6 of the Phase One Deal, it states:

In the event that a natural disaster or other unforeseeable event outside the control of the Parties delays a Party from timely complying with its obligations under this Agreement, the Parties shall consult with each other.

I think the Wuhan coronavirus easily qualifies as a natural disaster or other unforeseeable event outside the control of the Parties. This disease is enough to put China in a state of disaster. Rightfully so, fighting the coronavirus deserves China’s full attention.

That full attention could come at the expense of getting regulations prepared to be in compliance with the Phase One Trade Agreement. While it’s not a certainty, I expect there to be consultation between China and the U.S. that would lead to an extended timeline for Chinese compliance with the deal.

Negative Impact on China’s Ability to Reach Trade Deal Totals of Imports from the U.S.

We’ll stay with the potential impacts on the Phase One Trade Agreement for just a moment more. The virus could make it hard for China to reach the $200 billion increase of spending on U.S. goods. This one comes from the South China Morning Post:

… with the outbreak driving down commodity prices and placing huge swathes of Chinese territory on lockdown, analysts are warning that import targets that already seemed aspirational have become even tougher to reach. The longer the crisis lasts, the worse the damage to China’s ability to meet the purchase target.

“The viral outbreak definitely throws a wrench into those [purchasing] plans, not just in terms of logistics — as major ports and transport links are closed or disrupted — but also in [terms of] policymaker attention,” said Nick Marro, global trade lead at The Economist Intelligence Unit in Hong Kong. “The country will be mobilising most of its resources to handle the outbreak, which is now the top item on the policy agenda. The trade war with the US inevitably has to come second.”

The arguments made in the article, and not just the quoted bit above, for the virus making it more difficult for China to reach its spending obligations on American products are good; however, I will play devil’s advocate here for just a moment.

While the cause or origin of the Wuhan coronavirus is still unknown according the articles I’ve read about it, I have seen and heard suspicions at best and accusations at worst that point a finger at Chinese agricultural goods as the genesis for the virus. Even if this, let’s call it a theory, turns out to be completely wrong, just the suspicion or rumors of dangerous agricultural goods in China could decrease the demand for it and increase the demand for agricultural goods from the U.S., helping China reach purchasing obligations.

All that being said, I think the expectation that the Wuhan coronavirus will make it harder for China to reach spending obligations harder is more likely. Even if it does not increase the difficulty, China could use the outbreak as an excuse for not importing as many billion-dollars-worth of American goods as agreed upon, and it would be hard to think that wasn’t a legitimate excuse.

Extended Closing of Chinese Markets

Factories and markets in China were already basically shut down for a while as the Wuhan coronavirus outbreak is coinciding with the country’s biggest holiday and festival, Chinese New Year. That shutdown is extended by the outbreak.

It is impossible to know how long and how wide spread extended shutdowns will be. That depends on how the efforts go in stopping this spreading pandemic. Obviously, the number one goal must be stopping the Wuhan coronavirus from continuing to spread.

Beyond the continued closure of factories, we are seeing transportation within China, including train and flight cancellation.

What this adds up to is a disruption in Chinese production. Perhaps the timing is as good as it can be for disruption because the peak season has passed as well as the time when U.S. importers frontload goods from China to beat the disruption that comes with Chinese New Year.

However, the disruption still points to a longer period before U.S. shippers can get back to importing from China. Fear of importing goods from the source of this coronavirus pandemic might also cause lower than normal demand for goods from China, which certainly could effect the international shipping market as a whole.

Cancelled Cargo Ship Sailings from China

This is already the time of year when carriers do a lot of blank sailings because of the aforementioned Chinese New Year. I would expect a dramatic increase in that because of the coronavirus outbreak.

A CMA CGM ship that was sailing from China has had 6 crew members “confirmed ill, suffering fever and high temperature,” according to a short article on PortandTerminal.com. While at first feared to be the coronavirus, a GCaptain article reports that the sick crew recovered and the Wuhan coronavirus was ruled out.

Despite that good news, the coronavirus scare on the ship is enough to cause shipping lines to be extra cautious about sailing cargo ships in and out of China.

Reduced Trade with China for the Time Being

In conclusion, international trade with China is being severely dampened by the Wuhan coronavirus. Shippers should expect both importing from and exporting to China to be at least slowed for a while and perhaps unavailable until the Wuhan coronavirus is brought under control.

Obviously, Universal Cargo will be watching what’s happening with trade in and out of China closely in order to serve your businesses’ needs well.

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Chapter By Chapter Look at Phase One Trade Agreement with China Part 3 https://www.universalcargo.com/chapter-by-chapter-look-at-phase-one-trade-agreement-with-china-part-3/ https://www.universalcargo.com/chapter-by-chapter-look-at-phase-one-trade-agreement-with-china-part-3/#respond Tue, 28 Jan 2020 23:25:37 +0000 https://www.universalcargo.com/?p=9922 You could call this phase three of the Phase One Trade Agreement with China breakdown, but we won't call this post that to avoid making it sound confusing. Still, this is the third part of our chapter by chapter look at the new deal.

In the first part of this blog series, we gave a little background on the new trade deal with China (as well as a bit on USMCA). Then we took a look at the first four chapters of the Phase One Trade Agreement. These chapters dealt most with regulation in areas of particular concern for the U.S., like intellectual property.

In part two, we looked at chapters five and six. It was here we found the spending obligations China agreed to.

Today's blog will wrap things up by getting into the last two chapters of the Phase One Trade Agreement with China, with chapter 7, deservedly so, getting a good deal of the attention. Finally, we'll wrap this thing up with an overall conclusion.

You can read the 91-page deal document, published by the Office of the United States Trade Representative (USTR), yourself. And you can check out what we thought of the deal after reading it by checking out Universal Cargo's blog.

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Phase One Trade Agreement with China SigningYou could call this phase three of the Phase One Trade Agreement with China breakdown, but we won’t call this post that to avoid making it sound confusing. Still, this is the third part of our chapter by chapter look at the new deal.

In the first part of this blog series, we gave a little background on the new trade deal with China (as well as a bit on USMCA). Then we took a look at the first four chapters of the Phase One Trade Agreement. These chapters dealt most with regulation in areas of particular concern for the U.S., like intellectual property.

In part two, we looked at chapters five and six. It was here we found the spending obligations China agreed to.

Today’s blog will wrap things up by getting into the last two chapters of the Phase One Trade Agreement with China, with chapter 7, deservedly so, getting a good deal of the attention. Finally, we’ll wrap this thing up with an overall conclusion.

I took the time to read the trade deal in its entirety and give my thoughts on it in these blog posts, but you don’t have to settle for my opinion on it. You can read the deal yourself by clicking here to go to the 91-page document published by the Office of the United States Trade Representative (USTR).

Chapter 7 — Dispute Resolution

The seventh chapter is an extremely important one in the trade deal with China and is titled Bilateral Evaluation and Dispute Resolution. Agreeing to do things is fine, but if there’s no mechanism to enforce following through with those commitments, a deal could ultimately not mean much. Chapter seven creates a mechanism for enforcement.

After an article to explain the purpose of chapter seven, the first thing the countries agree to in the chapter is to set up a Trade Framework Group, which includes the USTR and a Vice Premier of China, to meet on an ongoing basis to discuss the implementation of the agreement, problems with implementation, and arrange future work between the countries.

A group to discuss implementation may not sound like the strongest mechanism for enforcement. However, the agreement labels the paragraph discussing this group as “High-level Engagement,” and that is probably the main purpose of the group — to ensure high level government officials from both countries are involved in the trade partnership this trade deal lays out. Such a group is probably a necessary starting point — but, luckily, it is only the starting point when it comes to this implementation section.

Both countries are required to create a Bilateral Evaluation and Dispute Resolution Office that is open daily to do three things:

(a) assess specific issues relating to implementation of this Agreement, (b) receive complaints regarding implementation submitted by either Party, and (c) attempt to resolve disputes through consultations.

Articles in this chapter go on to give both countries the right to request information from the other that requires a response, establish a process of appeal if one country believes the other is not acting in accordance with the trade deal, and lay out how action can be taken if resolution to the complaint in appeal is not reached.

What really stands out to me in this section is the following line:

If the Party Complained Against considers that the action of the Complaining Party was taken in bad faith, the remedy is to withdraw from this Agreement by providing written notice of withdrawal to the Complaining Party.

This potentially is a way out of the trade deal. Here’s how that might look:

  1. China puts pressure on U.S. companies to transfer technology to Chinese companies (just an example).
  2. The U.S. submits an appeal to China’s Bilateral Evaluation and Dispute Resolution Office.
  3. China’s officials claim their assessment of the appeal shows the country’s actions do not violate the agreement.
  4. The U.S. takes the issue to China’s Vice Premier.
  5. Resolution is still not reach.
  6. The U.S. decides to invoke a tariff hike as a remedial measure.
  7. China says the tariff hike is done in bad faith, and gives written notice to withdraw from the trade agreement.

From reading article 7.5, it is possible for a faster process than what I just laid out to end the deal. The USTR or China’s Vice Premier could take an issue directly to the other without the lower appeal and assessment steps leading up to it, so the above sequences could start at number four. However, this also provides for a faster resolution of issues that arise, which is likely the intention.

An annex to the chapter puts timelines into place to resolve disputes: 10 working days to assess an appeal, 21 calendar days to reach an appeal resolution before the USTR and Vice Minister must be brought in, 45 calendar days from appeal date to reach resolution — which includes the time before and after the USTR and Vice Minister are brought in — and 30 calendar days to hold a meeting after it is requested by the complaining country if resolution is not reached.

If an urgent issue pops up, the USTR or China’s Vice Premier can request a meeting that is to be scheduled within 30 calendar days.

Because when I first started reading articles about the Phase One Trade Agreement with China, a big deal was made of the U.S.’s ability to impose tariffs if China does not follow through with its commitments, I think it’s worth noting that tariffs are not explicitly brought up in the chapter. Of course, they are not excluded, and tariffs have been President Trump’s go-to penalty to impose on China during the trade war. That makes tariffs a likely “remedy” the U.S. would use if resolution of an appeal was not reached.

However, the deal is open-ended on action the complaining party could take if the other country breaks the deal in some way. Here’s the language of the action the U.S. or China could take if the other does not follow through with its obligations under the agreement and a resolution is failed to be reached:

… the Complaining Party may resort to taking action based on facts provided during the consultations, including by suspending an obligation under this Agreement or by adopting a remedial measure in a proportionate way that it considers appropriate with the purpose of preventing the escalation of the situation and maintaining the normal bilateral trade relationship.

The important thing here is that measures imposed against the other country should be appropriate or in proportion to the action the complaining country has appealed. Therefore, escalation of tension should be avoided. However, deciding what is appropriate and in proportion is really up to the complaining party. The check to make sure the retaliation action really is proportionate is the ability of the other country to withdraw from the agreement with an argument that the remedy measure was taken in bad faith. Of course, leaving the agreement would likely reignite the trade war, and a strong bilateral trade relationship is beneficial for both countries.

In theory, the enforcement mechanism seems like a good one. Of course, we’ll have to watch to see how trade cooperation under this deal goes in practice.

Chapter 8 — Miscellaneous Provisions

Chapter 8 of the trade deal is actually titled Final Provisions. It is a short chapter that lays out some miscellaneous items like the countries may agree, in writing, to amend the Phase One Trade Deal and the annexes, appendices, and footnotes of the agreement are an integral part of it.

The most interesting thing I found in this section, beyond the ability amend the deal, is that it defines when the deal goes into force. That happens 30 days after signing, which would mean February 15th, or earlier, when the countries notify each other in writing of the completion of their respective applicable domestic procedures, if that should occur first.

The only other thing that grabbed my attention was the final article of the chapter, which reads simply, “The English and Chinese versions of this Agreement are equally authentic.”

That’s a pretty standard statement about both texts being authentic. It just made me think for a moment of the necessity for the Chinese translators for the U.S. and the English translators for the Chinese to do a meticulous job reading over the Chinese and English versions of the agreement to make sure there are no legal variations between the two.

Conclusion

The Phase One Trade Agreement with China appears to be an excellent deal for the U.S. As pointed out in the first two parts of this blog series, the deal is mostly full of concessions from China, addressing U.S. concerns about unfair trade practices between the countries and getting China to agree to import more goods from the U.S. to reduce the trade deficit between the countries. The latter should prove a boost to U.S. production and jobs. The former should open Chinese markets to American businesses in a fairer and more protected way.

The U.S. made concessions outside of the trade deal itself like removing the official label of currency manipulator from China and not implementing a scheduled set of tariff hikes back in December; however, most tariff increases President Trump has imposed on China remain in place.

At the heart of this agreement appears to be a striving for free and fair bilateral trade cooperation between the U.S. and China with the hope that trade disputes, should they arise, will be resolved without escalating tensions and trade war.

The Phase One Deal includes more than I expected when it was first announced that the trade deal with China would be broken into phases. Addressing intellectual property concerns, technology transfer abuses, agricultural bans, Chinese spending on U.S. goods, and more while the biggest U.S. concessions were removing some, but not nearly all, tariffs and a label that were imposed by President Trump in order to get a trade deal to address these issues in the first place suggests strong negotiation from the U.S. It also provides optimism for a Phase Two Trade Agreement down the road.

Additionally, if you’re a U.S. producer of goods, this deal makes it a good time for you to look into exporting to China.

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Chapter By Chapter Look at Phase One Trade Agreement with China Part 2 https://www.universalcargo.com/chapter-by-chapter-look-at-phase-one-trade-agreement-with-china-part-2/ https://www.universalcargo.com/chapter-by-chapter-look-at-phase-one-trade-agreement-with-china-part-2/#respond Thu, 23 Jan 2020 19:57:39 +0000 https://www.universalcargo.com/?p=9921 In the last blog, we began a chapter by chapter look at the new Phase One Trade Agreement with China. That post gave an introduction with background and looked at chapters 1-4 of the deal.

Today's blog brings you the next phase of that series, where we look at chapters 5 and 6 of the trade deal. While the chapters looked at in the previous post largely dealt with regulations — covering things like intellectual property protections, eliminating forced transfers of technology, and removing bans on U.S. products — that should help open up Chinese markets to American businesses, and in a fairer way, the chapters covered in this part are all about money.

You'll find out details about all that money China agreed to spend on U.S. goods you've probably heard about and more by reading the full post in Universal Cargo's blog.

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Phase One Trade Agreement with China SigningIn the last blog, we began a chapter by chapter look at the new Phase One Trade Agreement with China. That post gave an introduction with background and looked at chapters 1-4 of the deal. Click here to read part 1 of this series.

Today’s blog brings you the next phase of that series, where we look at chapters 5 and 6 of the trade deal. While the chapters looked at in the previous post largely dealt with regulations — covering things like intellectual property protections, eliminating forced transfers of technology, and removing bans on U.S. products — that should help open up Chinese markets to American businesses, and in a fairer way, the chapters covered in this part are all about money.

You’ll find out details about all that money China agreed to spend on U.S. goods you’ve probably heard about and more below.

Chapter 5 — Currency Manipulation & Devaluation

Chapter 5 is actually titled Macroeconomic Policies and Exchange Rate Matters and Transparency, which has one more “and” than I’d like it to, but that’s really of no consequence. The chapter is shorter than most of the chapters in the Phase One Trade Agreement. Perhaps that’s because it includes the following in its first article:

The Parties shall honor currency-related commitments each has undertaken in G20 communiqués, including to refrain from competitive devaluations and the targeting of exchange rates for competitive purposes.

You may recall President Trump and President Xi having dinner together in Argentina after a G20 summit just over a year ago, when the leaders called a ceasefire on the trade war. I won’t dive into the rabbit hole of tracking down all the commitments the U.S. and China have made in G20 communiqués between that and other G20 summits, but I do find the one commitment article 5.1 highlights interesting. That commitment, plus the articles that follow, show that what the U.S. is really concerned about with this chapter is China’s currency manipulation.

China is notorious for devaluing its currency. For this reason alone, I didn’t like the International Monetary Fund’s (IMF) decision back in 2015 to approve China’s renminbi as one of the world’s main central bank reserve currencies and did like Secretary of Treasury Steve Mnuchin’s move under President Trump’s direction in August to officially label China as a currency manipulator, even if the latter was just for leverage in the negotiation of this Phase One Trade Deal.

China agrees to the concession of refraining from competitive devaluations of its currency after the U.S. made the concession of removing its currency manipulator designation from China before the signing of this deal. Removing that designation is not something specifically stated in the deal; however, it may  be construed as part of the first statement in this chapter that “each Party shall respect the other Party’s autonomy in monetary policy…” Or perhaps removing the designation was showing good faith in China following through with its commitment not to devalue its currency. Either way, removing the designation was likely part of a verbal agreement to get China to sign the deal. A quid pro quo, if you will.

Beyond the agreement by the parties not to manipulate currency in this chapter, regular data disclosure policies are laid out for transparency and an enforcement mechanism is put in place of bringing in the IMF if bilateral resolution can’t be reached on issues that arise.

Chapter 6 — China Will Import More U.S. Goods

This is the most talked about and famous part of the Phase One Trade Deal. Chapter 6, entitled Expanding Trade, is where China’s commitment to import an increased amount of U.S. goods can be found.

President Trump hates the trade deficit the U.S. has with China, and this is a strong step in reducing it. Here’s China’s spending commitment:

During the two-year period from January 1, 2020 through December 31, 2021, China shall ensure that purchases and imports into China from the United States of the manufactured goods, agricultural goods, energy products, and services identified in Annex 6.1 exceed the corresponding 2017 baseline amount by no less than $200 billion.

The $200 billion increase in Chinese spending on U.S. goods is broken down both by year and industry sectors.

For U.S. manufactured goods, the increase from 2017’s baseline is at least $32.9 billion in 2020 and at least $44.8 billion in 2021.

For U.S. agricultural goods, China commits to spend $12.5 billion more in 2020 and $19.5 billion more in 2021.

When it comes to U.S. energy products, China is to spend no less than $18.5 billion above the corresponding 2017 baseline in 2020 and an increase of at least $33.9 billion in 2021.

For U.S. services, China must spend at least $12.8 billion more in 2020 and $25.1 billion more than the corresponding 2017 baseline in 2021.

The spending is not supposed to end after 2021. The article later states:

The Parties project that the trajectory of increases in the amounts of manufactured goods, agricultural goods, energy products, and services purchased and imported into China from the United States will continue in calendar years 2022 through 2025.

At the end of the chapter, there’s a whole annex listing goods in each of the above specified categories.

From President Trump’s focus on the spending China agreed to when he talks about the Phase One Trade Agreement, it seems that this is the part of the deal he is most proud of. That’s not surprising as it represents a fulfillment of one of the president’s biggest campaign promises: to bring down the trade deficit the U.S. has with China. It also helps with others: increasing U.S. production and jobs.

When the article states, “The United States shall ensure to take appropriate steps to facilitate the availability of U.S. goods and services to be purchased and imported into China” it is almost like a call to action for America to increase its production of goods and services.

Conclusion So Far and Moving Forward…

This blog series will be broken into three phases with the final part, covering the last two chapters of the deal, being posted on Tuesday. Therefore, I won’t make any final conclusions until then. However, there are general observations to be made so far.

The Phase One Deal is very U.S.-friendly so far, with almost all of its articles addressing concerns the U.S. has had with China. Reading, it would seem almost all the concessions in the deal are made by China. And spoiler alert, the last two chapters that we’ll look at next time are mainly concerned with dispute resolution with a few final provisions added at the end.

The biggest concessions the U.S. has made seem to be things done outside of the Phase One Trade Agreement itself with moves like removing the official currency manipulator label from China and cancelling the last round of tariff hikes that was scheduled for December. That has to make President Trump happy as that label and those tariff hikes were only put in place to induce China to sign a trade deal in the first place. Additionally, most of the tariff hikes President Trump placed on China during this trade war remain in place.

Click here for the final part of this series, diving into chapters 7 and 8 of the Phase One Trade Deal. As for now, China is committed to buy, so, exporters, this is a good time to sell.

Click Here for Free Freight Rate Pricing

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Chapter By Chapter Look at Phase One Trade Agreement with China Part 1 https://www.universalcargo.com/chapter-by-chapter-look-at-phase-one-trade-agreement-with-china/ https://www.universalcargo.com/chapter-by-chapter-look-at-phase-one-trade-agreement-with-china/#respond Wed, 22 Jan 2020 02:41:23 +0000 https://www.universalcargo.com/?p=9917 Though it seemed overshadowed in media coverage by shiny Nancy Pelosi pens, last week was a big news week for international trade. On Wednesday, January 15th, President Trump and China's chief trade negotiator, Vice-Premier Liu He signed the Phase One Trade Agreement. Then on Thursday, January 16th, the Senate passed the United States-Mexico-Canada Agreement (USMCA).

From this post's title, you know we're going to really get into one of those trade deals, but first a quick recap of the run-up to these signings.

Both the Phase One Trade Agreement with China and the USMCA are a long time coming.

The U.S. and China have been in a trade war for the last year and a half with escalating tariffs and trade deal negotiations that lingered on and on, usually with little clarity about actual progress being made. In October, a breakthrough came with the announcement that the deal would be broken up into phases and the first phase agreement was reached in principle.

Negotiations for the USMCA began in 2017. President Trump, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau signed the trade deal back in 2018. President Trump and his administration urged the Senate to ratify the agreement ever since.

Previous Universal Cargo (UC) blog posts can give you more information about USMCA. A guest post from Alexandra Reay shared 4 ways USMCA could benefit your business. Another UC post dug deep into a speech by Vice President Pence, trying to get insight into how trade negotiations with China were going but really highlighting USMCA in the process.

Today's blog starts a deep dive into the Phase One Trade Agreement with China. Now that it's here, everyone has questions. What's in the deal? All deals include give and take, so what concessions did the U.S. make? What concessions did China make?

I wanted to know myself and was tired of reading conflicting articles either bashing or praising the deal depending on the political bias of the news source, so I read the deal myself and set out to share what I see in it on a chapter by chapter (as the deal is broken into chapters) basis.

This undertaking turned out to be much more time consuming than I anticipated, so this blog will be broken into at least two phases, to be continued in Thursday's post. Today's post will cover the first four chapters.

Check it all out in Universal Cargo's blog.

The post Chapter By Chapter Look at Phase One Trade Agreement with China Part 1 appeared first on Universal Cargo.

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Though it seemed overshadowed in media coverage by shiny Nancy Pelosi pens, last week was a big news week for international trade. On Wednesday, January 15th, President Trump and China’s chief trade negotiator, Vice-Premier Liu He signed the Phase One Trade Agreement. Then on Thursday, January 16th, the Senate passed the United States-Mexico-Canada Agreement (USMCA).

From this post’s title, you know we’re going to really get into one of those trade deals, but first a quick recap of the run-up to these signings.

Both the Phase One Trade Agreement with China and the USMCA are a long time coming.

The U.S. and China have been in a trade war for the last year and a half with escalating tariffs and trade deal negotiations that lingered on and on, usually with little clarity about actual progress being made. In October, a breakthrough came with the announcement that the deal would be broken up into phases and the first phase agreement was reached in principle.

Negotiations for the USMCA began in 2017. President Trump, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau signed the trade deal back in 2018. President Trump and his administration urged the Senate to ratify the agreement ever since.

Previous Universal Cargo (UC) blog posts can give you more information about USMCA. A guest post from Alexandra Reay shared 4 ways USMCA could benefit your business. Another UC post dug deep into a speech by Vice President Pence, trying to get insight into how trade negotiations with China were going but really highlighting USMCA in the process.

Today’s blog starts a deep dive into the Phase One Trade Agreement with China. Now that it’s here, everyone has questions. What’s in the deal? All deals include give and take, so what concessions did the U.S. make? What concessions did China make?

I wanted to know myself and was tired of reading conflicting articles either bashing or praising the deal depending on the political bias of the news source, so I read the deal myself and set out to share what I see in it on a chapter by chapter (as the deal is broken into chapters) basis.

This undertaking turned out to be much more time consuming than I anticipated, so this blog will be broken into at least two phases, to be continued in Thursday’s post. Today’s post will cover the first four chapters.

What To Expect from This Look at the Phase One Trade Deal

President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

What this post is not is a breakdown of all the little details within the deal. Instead, I will go through each chapter and share overall impressions, highlighting some things that seem like a big deal to me. If, by chance, a chapter seems too general to be anything more than symbolic or just for show, I’ll share that.

The Office of the United States Trade Representative (USTR) published the newly signed Phase One Trade Agreement with China, titled within the document as Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China. That is my source for the information found in this article, but there are a couple concessions the U.S. made outside of the deal itself that will also be included eventually in these posts.

Here are my impressions from Chapters 1-4 of the Phase One Trade Agreement:

Chapter 1 — Intellectual Property

China made concessions in the deal pertaining to intellectual property. In fact, Chapter 1 of the deal is entitled Intellectual Property.

The chapter states that both countries “shall ensure fair, adequate, and effective protection and enforcement of intellectual property rights” and “ensure fair and equitable market access to persons of the other Party that rely upon intellectual property protection.”

The chapter has 11 sections containing 36 articles getting into how intellectual property (IP) shall be protected. However, article after article in section after section of the chapter, it is stated, “The United States affirms that existing U.S. measures afford treatment equivalent to that provided for in this Article.”

In other words, this section is more about China changing its unfair trade practices than anything else.

That does not mean, however, there is nothing that the U.S. agrees to in this section that isn’t equivalent to already-existent U.S. measures. For example, the U.S. agrees, along with China, “to strengthen enforcement cooperation with a view to reducing the amount of counterfeit and pirated goods, including those that are exported or in transit.”

Actually, the agreement was for the countries to “endeavor” to do so. Therefore, even here, there is no specific ways in which the U.S. is to strengthen such cooperation while there is a whole paragraph in this section on how China will strengthen border enforcement with things like increasing the “number of trained personnel to inspect, detain, seize, effect administrative forfeiture, and otherwise execute customs’ enforcement…” There are even time frames in place for how quickly China puts these new anti-counterfeit measures into practice.

From reading the chapter, what is laid out are guidelines for a series of laws China is required to create and enforce to protect trade secrets, patents, pharmaceutical-related IP, e-commerce platforms, trademarks, and software from individuals, groups or organizations, and even government or government officials.

The agreement gives China 30 working days to “promulgate an Action Plan to strengthen intellectual property protection aimed at promoting its high-quality growth. This Action Plan shall include, but not be limited to, measures that China will take to implement its obligations under this Chapter and the date by which each measure will go into effect.”

It’s obvious Trade Representative Robert Lighthizer and the rest of the Trump Administration’s team held IP as an utmost concern when negotiating this deal.

Chapter 2 — Technology Transfer

A complaint U.S. companies have had against China for years is forced technology transfers when trying to enter their goods into Chinese markets. This goes hand in hand with IP protection, but the second chapter of the Phase One Trade Agreement is focused purely on technology transfer.

This chapter of the deal is much shorter than the first. It protects individuals and businesses from being forced or pressured to transfer their technology to Chinese persons or businesses in order to have access to Chinese markets.

The language actually goes for both China and the U.S.; however, this obviously addresses a problem specific to access to Chinese markets.

The chapter also means that businesses or individuals are not to be pressured to use technologies owned by Chinese entities or individuals in order to access Chinese markets. This helps level the playing field for U.S. companies in the Chinese market, creating more opportunity for them.

Additionally, this chapter requires transparency and due process in licensing, administrative processes, and law enforcement.

Again, these are parameters that China is being required to work within and a series of laws and enforcement will need to be created.

Chapter 3 — Remove Agricultural Bans

Chapter three of the deal is another long one. It deals with agricultural cooperation and gets into a lot of specifics. As is the case with previous chapters, this one is much more about China doing something the U.S. wants, namely, allowing the import of various U.S. agricultural goods, than the U.S. doing something China wants.

However, this section does have more U.S. requirements to it than previous ones, but that’s because it is dealing with goods that can spread sickness and therefore need to be controlled more tightly.

The chapter gets into dairy products, baby formula, poultry, beef, pork, processed meat, aquatic products, rice, grains, pet food, animal feed, and more.

While there are plenty of provisions for examination of agricultural goods to make sure they are safe, in this chapter, China agrees to remove bans placed on many U.S. agricultural goods, including poultry, cattle, and pet food, and streamlines the process for making U.S. agricultural goods eligible for export to China.

This should open the Chinese market much wider for U.S. agricultural exporters and will likely pay great dividends down the road.

Chapter 4 — Financial Services & Majority Stakes

Financial services, dealt with in Chapter 4, is another big area of non-discriminatory market access that China is agreeing to.

In this section, China agrees to allow American companies to provide banking, credit rating, electronic payment, financial asset management, insurance, securities, fund management, futures, and related services in China.

While this section applies to more than these, three American companies are listed by name in this section: Mastercard, Visa, and American Express.

One point that stands out to me is in Article 4.7:

“China affirms that existing U.S.-invested securities joint ventures are allowed to retain their existing licenses when they become U.S.-controlled, U.S. majority-owned, or wholly U.S.- owned securities companies.”

Previously, China blocked American companies from being able to acquire majority stakes in a joint venture with a Chinese company in China. In my mind, this is an important bit of freedom and opportunity for American companies in China.

Overview So Far…

Four chapters in and I’m mainly seeing concessions from China. These are mainly deal points the U.S. was looking for in a trade deal with China. We’ll see if that continues in Chapter 5 and beyond as I continue this on Thursday.

Click here to read Part 2, diving into chapters 5 and 6 of the Phase One Trade Agreement with China.

Click Here for Free Freight Rate Pricing

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The 4 Forces Transforming Logistics, Supply Chain and Transportation Internationally https://www.universalcargo.com/the-4-forces-transforming-logistics-supply-chain-and-transportation-internationally/ https://www.universalcargo.com/the-4-forces-transforming-logistics-supply-chain-and-transportation-internationally/#respond Thu, 16 Jan 2020 19:42:16 +0000 https://www.universalcargo.com/?p=9909 This is a guest post by Arslan Hassan.

Combine ever-advancing technology with economic situations along with fluctuations in demand and the result is the occurrence of unprecedented changes in the logistics, transportation, and supply chain industries. According to the transportation-focus executives, these changes are widespread and are bringing about a new era of transformation in all the areas of this industry. Because of this, industries managing transportation or logistics must now rethink their strategies to accommodate the changes.

But, what exactly is the driving force for these changes? Read the article in Universal Cargo's blog to find out.

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logistics supply chain international shippingCombine ever-advancing technology with economic situations along with fluctuations in demand and the result is the occurrence of unprecedented changes in the logistics, transportation, and supply chain industries. According to the transportation-focus executives, these changes are widespread and are bringing about a new era of transformation in all the areas of this industry. Because of this, industries managing transportation or logistics must now rethink their strategies to accommodate the changes.

But, what exactly is the driving force for these changes? According to research by Forbes Insight, these four factors could be at play:

1. Changes in Economic and Industry Trends

Currently, the US economy is doing well. Combined with lower taxes, policy reforms, depreciation, and the trend to invest offshore money into the US market, overall demand is slowly gaining traction. The high amount of investments along with the revival of the US manufacturing process is also playing a crucial role in increasing the demand for more delivery vehicles on the roads.

All of this seems like a profitable scenario for producers and consumers alike. However, the shortage in the supply for vehicle drivers is pushing the transportation costs towards the expensive spectrum. Despite the increasing cost, freight demand’s indicators such as construction and manufacturing still remain strong. Assuming the fact that freight indicators’ demand will stay strong in the near future, it could lead to a robust trucking industry in the coming years.

2. Last-Mile Delivery Trend

last-mile logisticsThanks to giant online stores like Amazon, users now have increased demands for quick delivery channels. As the demand increases, certain changes or shifts are taking place in distribution patterns. The increase in consumers’ rapid demand fulfillment is compelling businesses to stock their goods at easily-accessible places that are close to the location of their customers.

This behavior has heightened expectations and customers no longer want to wait for a week to acquire a product when giant retailers like Amazon can provide the same goods within a day or two. The net impact of this behavior is massive since it is pressuring businesses to upgrade their transportation practices and constantly hone the last-mile delivery policy.

3. Driver-less Technology

Increased freight demand combined with the shortage of vehicle drivers can soon be addressed through driver-less or self-driving vehicles. Companies like Tesla and Embark are already in the initial phase of testing self-driving trucks that could accomplish a journey unsupervised for longer distances or between different states. As this technology is slowly gaining traction, AI-powered companies insist that the transportation department could soon be fully automated. If a future like this is in the cards, fleet industries along with other corporations must prepare their operations for such developments.

Tesla, Embark, or Starsky Robotics may paint a bright, fully-automated future for the fleet industry; however, this change may still be many years away from actual realization. According to Supply Chain Management’s managing director, full-fledged automated transportation still has many years to perfect its craft. In the meantime, small-scale changes along with incremental progress will enable certain automobile companies to achieve limited-scale pilots.

This will also create some space for platooning to flourish. Truck platooning takes place when a couple of vehicles line up through radio communication and follow the leading vehicle’s action simultaneously. Since this strategy saves considerable fuel, it is compelling many companies to test and implement it in their transportation channels. Any kind of success in the area of platooning can open doors for driver-less or remotely controlled vehicles.

Another solution that has been made possible due to various technological advancements is aerial delivery through drones. Having passed the testing phases, many companies are using drones to achieve smaller deliveries over shorter distances. However, it could be many years before the drone industry considerably impacts the local delivery channels.

The only downside to these technological advancements is that the automated systems can be easily hacked into. Once an unauthorized user gains access, the remotely-controlled drones or automated vehicles will start taking commands from an unknown user. From there, such users can contribute to traffic gridlocks, cause collisions with other vehicles, or steal valuable merchandise.    

4. Advances in Other Technologies

technological advancesThere is a string of other disruptive forces as well that are taking place on the sidelines. This ‘behind-the-scene’ technology is not directly influencing transportation or logistics; however, it is impacting the operations associated with transportation. Learning to incorporate Machine Learning, Artificial Intelligence, IoT, Blockchain, and other related tools in the existing operations could grant the early adopters with a much-needed competitive edge.

Preparations to deal with AI and its related branches are needed. From Magento Development Services to logistics and transportation business, AI is changing everything. So, it is necessary that companies introduce certain changes within their operations to accommodate the new technology.

That said, transport, logistics, and supply chain businesses are data-driven. But, with the added capabilities of AI or ML, such industries will be capable of making better and more lucrative decisions. The innovation of this magnitude will even change the operational capabilities of industries, allowing them to make real-time decisions. The long-term effects of these decisions will not only be beneficial for the involved industries but also save up on valuable fuel, etc.

Final Thoughts

Companies that deal with logistics, transportation, and supply chain business have a two-forked path ahead. On one path, they can take risks and be more open to all the changes. This course of action will go two ways, i.e. the risk will either pay off or fail miserably.

On the other hand, the second path is reserved for companies who want to sit and wait to see how well the risks pay off for other companies. If everything goes well for others, only then such companies will be more accepting of the disruptive changes. However, waiting to see how well these technological advances perform for others will put them in a precarious situation where their services could be reduced to being obsolete for not incorporating new technology.

These technological advances are a double-edged sword and corporations need to be on the top of their game in order to survive!

Click Here for Free Freight Rate Pricing

This was a guest post by Arslan Hassan.

Author Bio

Arslan Hassan is an electrical engineer with a passion for writing, designing and anything tech-related. His educational background in the technical field has given him the edge to write on many topics. He occasionally writes blog articles for Dynamologic Solutions.

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2 Major Factors to Affect Freight Rates in 2020 https://www.universalcargo.com/2-major-factors-to-affect-freight-rates-in-2020/ https://www.universalcargo.com/2-major-factors-to-affect-freight-rates-in-2020/#comments Tue, 14 Jan 2020 23:11:13 +0000 https://www.universalcargo.com/?p=9907 Freight rates in the international shipping industry are always volatile, especially for small to medium shippers who play the spot market for their import and export pricing.

There are many factors that affect freight rates, but in 2020 there are two factors that stand out as likely being the biggest factors in determining how much businesses will pay for their ocean freight shipping.

What's interesting is these factors are set to push freight rates in opposite directions. In today's article, we discuss those factors and I give my prediction for how freight rates will behave in 2020.

Check it all out in Universal Cargo's blog.

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Freight rates in the international shipping industry are always volatile, especially for small to medium shippers who play the spot market for their import and export pricing.

There are many factors that affect freight rates, but in 2020 there are two factors that stand out as likely being the biggest factors in determining how much businesses will pay for their ocean freight shipping.

What’s interesting is these factors are set to push freight rates in opposite directions. In today’s article, we discuss those factors and I give my prediction for how freight rates will behave in 2020.

Factor #1 — Overcapacity

If you were to look back over the last decade, or even two, you would likely find that the biggest factor plaguing ocean freight carriers is overcapacity. You would think that the executives of the world’s major shipping lines failed Economics 101 for how poorly they’ve managed supply and demand in the ocean freight sector.

Capacity has outpaced demand so much in ocean freight shipping that we’ve watched freight rates get pushed to unhealthy lows that have caused billions of dollars in losses for shipping lines and carrier competition to vastly shrink through mergers, buyouts, alliances, and even bankruptcy.

Last year, however, especially as the peak season (which was smaller than usual thanks to a bloated peak season the year before and frontloading of shipments to beat tariff hike deadlines) carriers showed better than normal discipline when it came to capacity management.

One would think the industry finally learned its supply and demand economy lessons and would stop overcapacity from plaguing shipping lines moving forward. Drewry, however, says that’s not the case. The shipping research company predicts 2020 will be another year marked by overcapacity.

Mike Wackett reports in the Loadstar:

2020 will prove another challenging year for ocean carriers in terms of capacity management, according to Drewry.

Drewry calculates that 1.2m teu of capacity will be added to the fleet this year, of which almost half comprises 23 20,000-plus teu ULCVs for HMM, CMA CGM and MSC.

According to Alphaliner data, the containership fleet grew by 4% in 2019, to 23.2m teu of capacity (5,337 ships), resulting from 1.06m teu of newbuild deliveries against 207,000 teu of ships sold for scrap.

And with demand growth predicted to remain weak, the ‘challenge’ from the orderbook is ever present.

An article by Chris Dupin in American Shipper also highlights Drewry’s projection of overcapacity for 2020:

How severe is the overcapacity? Drewry has created a proprietary global supply-demand index for the container shipping industry, and it said anytime it is below 100 represents overcapacity. Its quarterly Container Forecaster report calls for a tiny decrease of 0.4 points to 90.6 in 2020, highlighting “just how far carriers have to go to compensate for the industry’s structural overcapacity and reach a comfortable balance that will promote sustainable freight rate gains.”

Factor #2 — IMO 2020

The other big factor affecting freight rates this year is the newly-in-effect regulation known as IMO 2020, putting a 0.5% sulfur cap on ships’ fuel. While overcapacity creates downward pressure on freight rates, IMO 2020 pushes freight rates up in 2020.

Last week, we blogged about how things are going in the early days of the transition to IMO 2020. While freight rate increases have been only modestly bigger than recent historical gains this time of year, increased fuel costs are expected to cause shippers to see more freight rate increases as the year continues, especially in the form of low sulfur surcharges.

Costs that carriers incur through the installation of scrubbers that allow ships to use cheaper fuel will also be pushed off on shippers as much as shipping lines are able.

In fact, the lack of transparency from shipping lines has shippers and other logistics professionals concerned that low sulfur fuel fees will be used to hike freight rate prices beyond actual rises in fuel costs. That growing controversy is one we’ll cover in an upcoming blog.

Which Factor Will Win?

With overcapacity creating downward pressure on freight rates and IMO 2020 creating upward pressure, the question becomes, “Which factor will be greater?” Will shippers like freight rates in 2020 or hate them?

This time of year, especially once the Chinese New Year hits, often sees a bit of a lull in international shipping demand. This smaller demand combined with carriers already imposing low sulfur fuel fees and rate increases before IMO even went into effect on January 1st probably helped keep freight rates from seeing the hikes that many expected at the beginning of the year.

It is not likely we’ll see overcapacity and IMO 2020 balancing each other out through the year.

My money is on IMO 2020 becoming the larger factor, keeping prices higher than normal through most of 2020.

Despite Drewry’s warning of overcapacity in 2020, the research and consulting company seems to think carriers will be able to manage their overcapacity better than they have many years in the past. Part of what will help them do that is ships being out of commission in order to get scrubbers installed because of IMO 2020.

Last month, we published a blog post that highlighted how ships are stuck waiting for scrubbers to be installed. Installation is taking longer than expected, and that takes capacity off the water. So even though IMO 2020 creates upward pressure on rates, it’s a complicated enough issue that there are factors within it that help keep freight rates in check.

Of course, carriers need more than just the capacity of ships waiting for scrubber installation off the water. Sure, there will be some ship scrapping, but the big strategy shipping lines have been undertaking to check capacity is blank sailing.

There was a ton of blank sailing, which is when a sailing of a cargo ship is cancelled, last year. And it looks like carriers are planning to do even more of it this year.

Wackett’s Loadstar article gives details:

Drewry’s data reveals there were a massive 253 voided east-west sailings by the three alliances last year, significantly up on the 145 cancelled  in 2018. It said container lines had become “very adept at switching capacity around and hiding it when necessary”.

Indeed, one carrier source told The Loadstar recently the line intended to be “more aggressive” in its blanking programme this year.

“We cannot afford to let it (supply) get out of control again this year, and we must not be fooled again by over optimistic assessments for the peak season,” he said.

“If we don’t have enough ships, so be it, but at least those that do sail will make some money,” he added.

It’s not surprising that the carrier who shared the plan to be more aggressive with blank sailing did so anonymously. Blank sailings are very unpopular with shippers. And for good reason. Blank sailings can happen suddenly with little to no warning. Shippers are often left in the dark about where their cargo is. Worse, the delays blank sailings cause can be quite costly for shippers.

Prediction of Freight Rate Behavior in 2020

While the two major factors affecting freight rates in 2020 are pushing in opposite directions, the factors making ocean freight more expensive appear to be set to outweigh those that would make it less expensive.

My expectations are that freight rates will be generally higher in 2020 than 2019 and freight rate growth in general will end up being moderately more than we’ve seen in recent years.

However, there are x factors that could change that. It would not be surprising to see carriers fail to curb the overcapacity and engage in some pricing wars that put considerable downward pressure on freight rates. We’ve certainly seen carriers do this in recent years.

As controversy over low sulfur fees grows, carriers could find it hard to maintain rate increases and see them undercut by the competition. There’s even growing tension between 2M alliance members Maersk and MSC, which also happen to be the two biggest carriers in the world, right now that could factor largely into how the freight rate market plays out in 2020.

Expect volatility. Expect freight rate growth. And be ready for the unexpected.

Keep up on what’s happening in international shipping by checking back in here at Universal Cargo’s blog. We have new posts every Tuesday and Thursday. And we’re always ready to give you a quote on importing or exporting your goods.

Click Here for Free Freight Rate Pricing

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How Is IMO 2020 Launch Going? https://www.universalcargo.com/how-is-imo-2020-launch-going/ https://www.universalcargo.com/how-is-imo-2020-launch-going/#respond Thu, 09 Jan 2020 21:41:30 +0000 https://www.universalcargo.com/?p=9903 IMO 2020 went into effect on January 1st, requiring sea vessels, including container ships, to abide by a 0.5% sulfur cap on fuel or use scrubbers (systems that clean fuel in engines) in order to continue using cheaper fuel with up to 3.5% sulfur content.

We're barely a week in on the new rule going into effect, so it's too early to see all the effects IMO 2020 will have; however, some impact can already be seen.

This post rounds up the news surrounding IMO's early impact and helps us see how IMO 2020 will continue to affect international shipping and U.S. importers and exporters specifically.

Find out all about it by reading the full article in Universal Cargo's blog.

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IMO 2020 went into effect on January 1st, requiring sea vessels, including container ships, to abide by a 0.5% sulfur cap on fuel or use scrubbers (systems that clean fuel in engines) in order to continue using cheaper fuel with up to 3.5% sulfur content.

We’re barely a week in on the new rule going into effect, so it’s too early to see all the effects IMO 2020 will have; however, some impact can already be seen.

This post rounds up the news surrounding IMO’s early impact and helps us see how IMO 2020 will continue to affect international shipping and U.S. importers and exporters specifically.

Fuel Price Changes Creating Disruption in Oil Markets

The price on high sulfur fuel oil (HSFO), the 3.5% sulfur fuel ships with scrubbers can utilize, has plummeted. The price of low sulfur fuel oil (LSFO) and very low sulfur fuel oil (VLSFO), the 0.5% and 0.1% fuel all the ships without scrubbers must utilize has soared.

The big demand and price changes on different types of oil is creating some disruptions in the oil market. Richard Joswick reports in S&P Global:

IMO 2020 is disrupting multiple market segments but the pace of change varies, which itself is causing more disruption. HSFO prices collapsed in Q4 2019 and will stay weak. But 0.5% sulfur bunker fuel (VLSFO) prices have increased rapidly, are now steeply backwardated and trading at effective parity with marine gasoil. This indicates that the industry is straining to supply sufficient quantities of VLSFO despite drawing upon stockpiled low sulfur components from floating storage.

It’s going to take some time for the oil market to find equilibrium with the new and shifting levels of demand from the new fuel requirements in marine shipping.

What This Means for Container Shipping

There is good and bad news with the demand and price changes in the oil/fuel sector.

Let’s start with the good news.

The leading strategy for ocean carriers that handle global container shipping has been to install scrubbers in ships. Though many of those ships are yet to join the active fleet, there are still many that are already on the water. These ships get to utilize much, much cheaper fuel, which could help keep the price impact on shippers from rising too drastically.

Freight rates are still expected to rise with clean fuel fees being imposed on shippers by the carriers, of course, but the much lower fuel costs help balance the costs of installing scrubbers on ships, and may make low sulfur fuel surcharges less necessary.

Now the bad news.

Disruptions in the oil sector could trickle down to disruptions in the cargo shipping sector. Possible delays in obtaining the necessary marine fuel could delay voyages, resulting in unexpected blank sailings, and costs for shippers as they await the arrival of their goods.

In fact, we’re already starting to see idle ships awaiting fuel…

Idle Ships Awaiting Fuel in Asia

Mike Wackett reports in the Loadstar that shipping lines are feeling the bite of the rising LSFO:

… liner consultancy Alphaliner has reported instances of idle containerships waiting for compliant fuel.

The consultant said it had recorded “several cases of laden ships at anchor, apparently waiting for LSFO [low-sulphur fuel oil] bunkers”.

As the main bunkering hub in Asia, Singapore has seen high demand for LSFO push the price for the compliant fuel to over $700 per ton, from around $550 at the beginning of December.

Intra-Asia carriers will be particularly badly hit by this massive hike… Indeed, even regional carriers that have been able to secure low-sulphur fuel surcharges from customers will now find them inadequate to cover their additional operating costs.

And given already slim margins for intra-Asia carriers, some operators could be forced to rationalise networks and cull services in the coming weeks.

Transpacific cargo shipping so far has not seen this kind of disruption, and the upcoming Chinese New Year, when production in China basically stops for a little while and shipping demand significantly decreases, should help with the adjustment to the changes in fuel demand and production.

Smooth Initial Transition for Ocean Freight

The initial transition to IMO 2020 has appeared to be pretty smooth for the ocean freight sector with no major disruptions seen for U.S. shippers so far.

Of course, it is still early and the disruptions mentioned above do have the potential to spread to cargo shipping, affecting U.S. importers and exporters.

Rising Ocean Freight Rates with IMO 2020

Surprisingly, as IMO 2020 hit, freight rates did not make an initial jump that is significantly bigger than normal cargo shipping prices for this time of year.

That has industry experts warning shippers to prepare for more increases to strike.

Lars Jensen reported in the Journal of Commerce:

As of early January, the first spot rate readings in the new year have become available, and they basically show that rates should have increased quite a bit more than they did. As such, shippers need to brace themselves for more increases.

… the rate increases so far in 2020 are only $80 per FEU above the 10-year seasonal average development for the US West Coast and $38 per FEU higher for the US East Coast.

In the European trades, the same pattern emerges. In fact, the increase seen in rates from Asia to the Mediterranean in early 2020 is lower than the 10-year average for the same period.

The bottom line is that substantial part of the rate increases since Christmas — and even since the start of December — can be explained as normal seasonality. The carriers, therefore, cannot be said to have had a great deal of success in recouping low-sulfur fuel costs just yet.

As I mentioned earlier, much lower HSFO costs paired with the popularity in the use of scrubbers in the container shipping sector could be helping to keep freight rates and fees on shippers from soaring as much as they could with IMO 2020.

However, expect costs to rise…

More Low Sulfur Fuel Fees Will Be Imposed

Carriers were already beginning to impose low sulfur BAF fees at the end of 2018, and shippers should expect such fees to continue to be imposed as 2020 continues.

For example, the Loadstar article quoted above also made mention of CMA CGM’s announcement last week that it will be increasing its LSS20 (low-sulphur surcharge) on February 1st.

Therefore, even if freight rates themselves do not make significant jumps, it can be expected that shippers will be paying for the higher fuel costs through surcharges and fees.

There is actually much controversy brewing around low sulfur surcharges, their lack of transparency, and even whether or not they are ethical. We’ll get into that in an upcoming blog.

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Trade Deal with China Reached — No Tariff Hikes in December https://www.universalcargo.com/trade-deal-with-china-reached-no-tariff-hikes-in-december/ https://www.universalcargo.com/trade-deal-with-china-reached-no-tariff-hikes-in-december/#respond Wed, 18 Dec 2019 00:36:34 +0000 https://www.universalcargo.com/?p=9863 The 15% tariff hikes on Chinese goods that were scheduled to hit Sunday (December 15th) didn't happen. Instead, we got the Phase One Trade Deal just days earlier.

That's right, we finally have a trade deal with China. That doesn't mean this is the end of all tariffs, trade negotiations, or even the trade war. But this is big.

The U.S. and China agreeing to terms on the Phase One Trade Deal also means the retaliatory tariff hikes China was planning to implement on U.S. goods over the weekend (also on Sunday) were cancelled too.

Read the full article in Universal Cargo's blog to find out more about the trade deal with China.

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President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

The 15% tariff hikes on Chinese goods that were scheduled to hit Sunday (December 15th) didn’t happen. Instead, we got the Phase One Trade Deal just days earlier.

That’s right, we finally have a trade deal with China. That doesn’t mean this is the end of all tariffs, trade negotiations, or even the trade war. But this is big.

The U.S. and China agreeing to terms on the Phase One Trade Deal also means the retaliatory tariff hikes China was planning to implement on U.S. goods over the weekend (also on Sunday) were cancelled too.

Let’s get into what we know about the trade deal.

https://twitter.com/WhiteHouse/status/1205540981648613376

Build Up to Phase One Trade Deal

The impeachment drama has overshadowed the trade deal negotiations over the last few weeks in the national media, but there has been some serious build up to the Phase One Trade Deal, with major optimistic and pessimistic swings about whether or not it would actually happen, for close to a two-month period if you follow international shipping news and read Universal Cargo’s blog specifically.

While we’ve been waiting for a trade deal between the U.S. and China for about a year and half through this tariff-filled trade war, it wasn’t until the latter part of October that we started waiting for the Phase One Trade Deal. It was then that a new plan to break the trade deal up into phases was introduced.

The change in strategy to do a trade deal in phases came with progress we hadn’t previously seen in trade negotiations between the U.S. and China. Both sides were suddenly talking like a phase one deal was happening. Optimism skyrocketed. Trump made it clear he wanted to sign the deal at the Asia-Pacific Economic Cooperation (APEC) summit in mid-November. Then a problem hit.

The APEC summit was cancelled. Naturally, questions popped up about when and where this deal would be signed. Then questions became much more pessimistic. Would the Phase One Trade Deal get signed? Our blog posts on the topic went from “Is This the Month We See a U.S.-China Trade Deal?” at the beginning of November to “Phase One Trade Deal Looking Less Likely” by mid-November.

Part of that movement toward pessimism about a deal happening came with reports of China demanding removal of previously imposed tariffs, not just the ones that were supposed to happen on December 15th. President Trump kept saying the deal was close, but he also switched from talking about the Phase One Trade Deal as something that is happening to something that could happen with quotes like “… we will only accept a deal if it’s good for the United States and our workers and our great companies…”

Most figured between China now demanding roll-backs on tariffs beyond what President Trump would likely give for the Phase One Trade Deal and the Republican president being wrapped up in a Democrat-led impeachment, we would not be seeing a Phase One Trade Deal before the end of 2019.

However, it turned out those December-15th-scheduled tariff hikes created a strong enough deadline for a deal to be reached.

Previous Tariffs Remain

Obviously, the December 15th tariff hikes (from both countries) not happening is good news for U.S. shippers, both importers who source from China and exporters who manufacture or grow goods sold in China. But many shippers are hoping for more. They’re hoping this means all those other tariff hikes that happened during the trade war will go away too.

Since China wanting the removal of previous tariff hikes the U.S. imposed on the country’s goods during the trade war appeared to be the biggest hold-up of this deal being completed, it would not be strange to ask if those tariffs are being lifted as part of the Phase One Trade Deal. Maybe President Trump wanted a good headline in the middle of the impeachment so badly he gave China the tariff relief they wanted to get the deal done. It’s possible. After all, President Trump was willing to remove steel and aluminum tariffs on Canada and Mexico in getting his USMCA trade deal.

If  you were hoping for all those tariffs to go away, prepare to be disappointed.

While all the details of the Phase One China deal are not yet released, President Trump did say about the deal, “The tariffs will largely remain, 25% on 250 billion dollars…”

There is, however, that phrase “largely remain” in the president’s words. That implies that some of the previous tariff hikes were removed or reduced. We’ll have to see once the full deal is released what concessions the U.S. made when it came to tariffs. However, 25% on $250 billion worth of goods is the bulk of the tariffs President Trump imposed on China.

Why Do Previous Tariffs Remain?

It seems obvious, but those tariffs remain for the sake of negotiations. From the start of this trade war, President Trump has been using tariffs as bargaining chips. Remember when the 25% tariffs on $250 billion worth of Chinese goods was supposed to become 30%? That was supposed to happen October 15th, but an interim handshake deal in early October led to President Trump cancelling the increase.

Even this Phase One Trade Deal came only days before a tariff hike was supposed to hit. Tariffs are President Trump’s favorite piece of negotiating leverage. When speaking of the Phase One Deal, the president even spelled out that the tariffs are still there for negotiating the Phase Two Deal:

“… and we’ll use [the tariffs] for future negotiations on the Phase Two Deal. Because China would like to see the tariffs off and we, we’re okay with that. But they’ll be used as a negotiating table for the Phase Two Deal…

Does the Deal Help the Trade Deficit?

All the way back to his campaign trail on the way to the presidency, President Trump has railed upon the trade deficit with China. That’s part of what the trade war is about. Part of the Phase One Trade Deal is agreement from China to increase purchasing of U.S. goods.

David Lawder, Andrea Shalal, and Jeff Mason report in a Reuters article about the trade deal:

U.S. officials say China agreed to increase purchases of American products and services by at least $200 billion over the next two years – nearly doubling U.S. exports to China – with an expectation that the higher purchases will continue after that period.

The purchases include manufactured goods, agricultural goods, energy and services, and are expected to reduce the $419 billion U.S. trade deficit with China, officials said. China bought $130 billion in U.S. goods in 2017, before the trade war began, and $56 billion in services, U.S. data show.

China has made no mention of hard targets but has said it will import more U.S. wheat, rice, corn, energy, pharmaceuticals and financial services.

President Trump especially emphasized the agricultural part of that:

This is a very large deal, the China deal. It covers tremendous manufacturing, farming, a lot of rules, regulations. A lot of things are covered. It’s a phase one deal, but a lot of big things are covered. And I say affectionately, the farmers are going to have to go out and buy much larger tractors because it means a lot of business, a tremendous amount of business.

Intellectual Property Protections Unclear

We’re still waiting to see the details of the Phase One Trade Deal released. China’s unfair trade practices around the transfer of intellectual property (IP) is a central issue in the trade war between the U.S. and China.

One would think the rules and regulations President Trump included in his list of things covered in the deal would be in regard to things like forced IP transfer and other such unfair practices. However, it is unclear exactly what protections, rules, or regulations might be included in the deal.

The Reuters article does share the general information the U.S. Trade Representative (USTR) and China’s Vice Minister of Commerce gave on the topic:

USTR said the deal includes stronger Chinese legal protections for patents, trademarks, copyrights, including improved criminal and civil procedures to combat online infringement, pirated and counterfeit goods.

The deal contains commitments by China to follow through on previous pledges to eliminate any pressure for foreign companies to transfer technology to Chinese firms as a condition of market access, licensing or administrative approvals and to eliminate any government advantages for such transfers, according to USTR.

The U.S. trade agency also said China agreed to refrain from directly supporting outbound investment aimed at acquiring foreign technology to meet its industrial plans – transactions already restricted by stronger U.S. security reviews.

Chinese Vice Minister of Commerce Wang Shouwen said the two countries have reached a consensus on cracking down on counterfeit goods and stepping up protection of intellectual property, but at China’s own pace.

When Do Negotiations Start on the Phase Two Deal?

You’re so impatient. We don’t even know the details of Phase One and you’re already asking about Phase Two? What? You didn’t write that heading? If you’re wondering about this, President Trump says negotiations will start soon:

[China] would like to start [Phase Two Deal negotiations] immediately. And that’s okay with me. We were going to wait until after the election, but they’d like to start them sooner than that. And that’s okay. So we’ll start that negotiation soon.

It can be gathered from the president’s words that the urgency for the Phase Two Trade Deal isn’t as strong from the Trump Administration as it was for the Phase One Deal. There may be some political motivation in not rushing to get it done before the election. Perhaps President Trump wants to be able to say something along the lines of, “I got a Phase One Trade Deal done with China. If you want the Phase Two Deal, reelect me.”

At the same time, I suspect if the president is able to reach a phase two deal before the election, he would go for it.

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Top 10 International Shipping News Stories of 2019 https://www.universalcargo.com/top-10-international-shipping-news-stories-of-2019/ https://www.universalcargo.com/top-10-international-shipping-news-stories-of-2019/#respond Thu, 12 Dec 2019 21:10:59 +0000 https://www.universalcargo.com/?p=9861 Before 2020 hits, let's take a look back at 2019.

What happened in international shipping this year didn't happen in a bubble. Just like events of years past affected this year, the things that happened in 2019 will affect 2020 and beyond.

So what did happen in international shipping in 2019? Let's take a look with a top 10 list of stories that shaped the international shipping industry's 2019 and often 2020 and beyond as well.

See what stories made the list with links to them by reading the blog at UniversalCargo.com.

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Before 2020 hits, let’s take a look back at 2019.

What happened in international shipping this year didn’t happen in a bubble. Just like events of years past affected this year, the things that happened in 2019 will affect 2020 and beyond.

So what did happen in international shipping in 2019? Let’s take a look with a top 10 list of stories that shaped the international shipping industry’s 2019 and often 2020 and beyond as well.

#10 Government Shutdown Affects International Shipping

Government Shutdown's Effect on ShippingIt somehow seems like a long time ago now, but 2019 started out with a, well, not a bang… a big nothing. We had a government shutdown. Correction, we had a partial government shutdown. Basically, the year started and now ends with government infighting: the shutdown then and the impeachment fight now.

Of course, this was a big international shipping story for U.S. importers and exporters because the government shutdown impacted shipping. It shut down the Federal Maritime Commission (FMC) for a while and affected government staffing in shipping related areas. However, the U.S. Customs and Border Protection (CBP) continued to operate, though not completely unaffected, as an essential operation for national security.

Here’s a blog post to travel down memory lane to the start of 2019 and the government shutdown:

How the Government Shutdown is Affecting International Shipping

#9 Maersk Starts Random Container Inspections

Maersk is the top dog (at least for now—foreshadowing, wink, wink) in ocean freight shipping. As Maersk does, so do other shipping lines. Therefore, Maersk often shows up in big international shipping news stories.

Misdeclared cargo has been a problem for shipping lines and in ocean freight shipping in general for some time. Rising fires on cargo ships have been blamed on misdeclared, hazardous goods being transported in shipping containers.

In 2019, Maersk has decided to use random container inspections to fight this. It will be interesting to see if other carriers do likewise and this becomes a trend in 2020 and beyond.

Here’s the story:

Maersk Starting Random Container Inspections

#8 Drone Attack on Oil Facilities in Saudi Arabia

A drone attack in Saudi Arabia may sound like an event U.S. importers and exporters wouldn’t worry about. However, it was an impactful event because of the loss of fuel affects fuel prices, which affect shipping costs. The attack was an especially impactful event in light of the approaching IMO 2020, which *SPOILER ALERT* will show up later on this list.

Here’s the link to the Universal Cargo post that covers this news event and its impact on international shipping:

2 Big Effects of Drone Attack on International Shipping

#7 DOJ Ends Antitrust Probe on Ocean Freight Carriers

international shipping federal antitrust lawShipping lines were able to let out a sigh of relief in 2019 when the U.S. Department of Justice (JOC) ended its antitrust probe into all of the world’s biggest ocean freight carriers.

The industry has had plenty of trouble over the years from antitrust/price-fixing activity, some alleged and some proven in courts of law, by shipping lines. The way carrier alliances have come to dominate ocean freight in recent years has made many shippers, and apparently governments too, especially suspicious of collusion among shipping lines.

It looked like governments really might crack down on the ocean freight industry before the DOJ officially ended its probe.

DOJ Antitrust Probe of Ocean Freight Carriers Is Over

#6 Announcement of Incoterms Changing in 2020

We learned in 2019 of changes in Incoterms that will go into effect January 1st, 2020. Incoterms are generally updated every ten years, so seeing an update now is not surprising, but it is significant. This affects so many importers and exporters since Incoterms are used for international deals to define who is responsible for the shipping and insuring of goods.

Here’s a link to a Universal Cargo’s blog post sharing the changes being made:

Incoterms 2020 — What Is Changing from Incoterms 2010

#5 Bitterness Rises in Rivalry of Two Biggest Ocean Freight Carriers

2M Bitterness Maersk & MSCMSC looks like it might supplant Maersk as the biggest ocean carrier in the world after moves the shipping line made in 2019. MSC also managed to poach a Maersk executive to become its CEO. That bitterness is rising between the companies in the midst of these events is clear. A Maersk executive even said, “MSC are getting too big for their boots and we have a fight on our hands to stop them.”

If that fight leads to the 2M Alliance between Maersk and MSC splitting, we could see a complete reshuffling of all of the carrier alliances that shipping lines have come to depend on and that dominate the entire ocean freight industry.

Here are the blog articles:

MSC Makes Move to Overtake Maersk as Biggest Carrier

Things Getting Bitter Between Maersk & MSC in Their 2M Alliance

#4 ILWU Hit with $93M Verdict for Labor Practices at Port of Portland

The ILWU slowed down operations at the Port of Portland so much that shipping lines stopped calling on the port with container ships. A federal jury in 2019 ruled the ILWU has to pay $93.6 million for the illegal slowdowns and work stoppages perpetrated.

93+ million dollars is not a mere slap on the wrist. The ILWU says this threatens to bankrupt the union that owns the jobs all along West Coast ports. This news story could have a significant impact on U.S. shipping in 2020 and beyond, and, hopefully, will make the ILWU think twice before using such costly slowdown or strike tactics over contract contention or labor disputes in the future.

Here’s the story:

Jury Hits ILWU with $93M Verdict for What Union Did to Port of Portland

#3 U.S. Removes Steel & Aluminum Tariffs on Canada & Mexico

The U.S. lifted the steel and aluminum tariffs on Canada and Mexico after the successful negotiation of the United States-Mexico-Canada Agreement (USMCA). We’re still waiting for that agreement to be ratified, but it does create optimism regarding other tariffs the Trump Administration has imposed in that when a trade deal is reached, President Trump is willing to remove tariffs.

Here’s the story:

Steel & Aluminum Tariffs Lifted Between U.S., Canada, & Mexico

#2 IMO 2020 Preparation

In case you somehow haven’t heard, ship fuel has to be much cleaner in 2020 and moving forward. The International Maritime Organization’s (IMO) sulfur cap on fuel is dropping from 3.5% to 0.5% effective January 1st. The international shipping industry has been scrambling all year to prepare for this change, known as IMO 2020.

There’s only one thing that has dominated international shipping news more than IMO 2020 (which is why this is number 2), but we’ll get into that in just a moment. First, here’s more than half a dozen 2019 Universal Cargo articles that focus on IMO 2020:

2 Big Problems Ocean Freight Shipping Faces in 2019

Carriers Expect To Recoup IMO 2020 Fuel Costs Through Shipper Contracts

Could Cargo Ships Get a Speed Limit?

Ocean Freight Industry Needs to Test Low Sulfur Fuels Now

Will IMO 2020 Have a Grace Period on Implementation?

Fire, Water & Corrosion: Scrubbers May Be Dangerous IMO 2020 Answer

World Fleet Does Not Seem Ready for IMO 2020

#1 All Things Trade Deal & Trade War with China

There’s no surprise in what tops the list of 2019 news stories in international shipping. Could it be anything but the trade war with China?

Universal Cargo’s blog in 2019 probably could have been filled with nothing but updates about tariff announcements, from new tariff hikes to tariff exclusions or postponements, and updates about trade deal negotiations. Luckily, we didn’t decide to make every blog post in 2019 about the trade war.

Still, there’s probably nothing we covered in the blog more than trade war and trade deal negotiations with China. Below are a couple videos and links to more than a baker’s dozen worth of articles we posted about the trade war with China. You can watch the videos and read through the articles to see how things progressed with the trade war in 2019 (HINT: it will continue on in 2020).

YouTube Video

2 Big Problems Ocean Freight Shipping Faces in 2019

Shippers Indicted for Evading U.S. Tariffs on Furniture Imported from China

What’s Happening in U.S.-China Trade Talks? Trade War Update

US China Trade War Ramps Back Up: Tariffs on $200 Billion of Chinese Goods to Hit May 10th

China Announces Tariff Hikes on $60 Billion of U.S. Goods – Trade War Update

What’s Stalling U.S. – China Trade Deal Talks?

Tariffs on Chinese Goods Postponed Till After Peak Season

Freight Rates Down Despite Trade War Up

Trump Raises Tariffs on Chinese Goods Again!

What VP Pence’s Speech Says About China Trade Deal & China’s Response to Latest Tariff Announcement

New Round of Tariff Exclusions on Chinese Goods

New Strategy Yields US-China Trade Deal Progress

Is This the Month We See a U.S.-China Trade Deal?

Phase One Trade Deal Looking Less Likely

Made in Vietnam? Nope — Still Made in China — Shippers Beware

Tell Us What You Think

What did you think of this list? Were there any big international shipping news stories in 2019 that you think should have made the top 10 over these ones? Would you change the order? At Universal Cargo, we love hearing from you and helping you with all of your international shipping needs.

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International Shipping News Roundup: 5 Big Shipping News Stories Happening Right Now https://www.universalcargo.com/international-shipping-news-roundup-5-big-shipping-news-stories-happening-right-now/ https://www.universalcargo.com/international-shipping-news-roundup-5-big-shipping-news-stories-happening-right-now/#respond Tue, 10 Dec 2019 18:50:48 +0000 https://www.universalcargo.com/?p=9859 As 2019 draws to a close, a ton of things are happening in international shipping. You would think with the last three blogs getting into IMO 2020, Incoterm changes with Incoterms 2020, and the trade war with China, there would be no other big news stories happening.

Wrong.

Beyond the big topics listed, there are several significant international shipping news stories happening right now. So go to Universal Cargo's blog and read the article to learn about 5 shipping news stories worth your time that you might have missed.

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Universal Shipping News - China ShutdownsAs 2019 draws to a close, a ton of things are happening in international shipping. You would think with the last three blogs getting into IMO 2020, Incoterm changes with Incoterms 2020, and the trade war with China, there would be no other big news stories happening.

Wrong.

Beyond the big topics listed, there are several significant international shipping news stories happening right now. So here are 5 shipping news stories worth your time that you might have missed.

1. Michigan Missing Out on Big International Shipping Opportunities

Since I started out life in Michigan, let’s start out these international shipping news stories with one set in Michigan.

It turns out the Great Lakes State is missing out on utilizing the Great Lakes for international shipping while nearby states like Ohio and Illinois are able to.

Tom Henderson reports in Crain’s Detroit Business:

In May, the University of Michigan released a report on the impact on Michigan ports in general and the Port of Monroe in particular of contradictory policies by two regional offices of U.S. Customs and Border Protection on what can be shipped in and out. The Chicago CBP office has far more lenient policies on how shipping containers and crated cargo should be examined before entering or leaving ports than the Detroit office does.

Since the Chicago office regulates Ohio ports, cargo can go in and out of Cleveland and Toledo that can’t come in or out of Michigan’s 40 ports, which means a substantial loss of jobs and revenue here.

The article is a great read, and the study referred to in the above quote from it chronicles massive job and revenue losses for Detroit and Michigan in general from just two companies, Ford and Arauco, being thwarted from shipping out of Michigan ports. And where there are two, there are more.

The CBP needs to get on fixing this problem for Michigan. Not only is Michigan business being lost to other states, it’s being lost to Canada as well. That makes this a national problem, CBP.

Detroit has obviously suffered some economically trying times, though it is a city on the rise again. But even so, with Detroit and Michigan having to suffer through another dismal Lions season — yes, I am a lifelong fan, who has only had his team win one playoff game in his lifetime because it was the only playoff win for the Lions in the Super Bowl era — the least we could let them do is ship internationally from their own ports. And let’s not forget there are other cities in Michigan with economic difficulties, my hometown of Flint possibly being top on the list. The CBP shouldn’t be putting the state at a greater disadvantage.

2. U.S. and Vietnam Enter Customs Assistance Agreement

The background for this international shipping news story is the trade-war-with-China-related article referenced in the first paragraph of today’s blog. That article is about Vietnam cracking down with increased inspections on U.S.-bound goods because Chinese companies trying to bypass tariffs have been committing country of origin fraud.

The United States signing a customs assistance agreement with Vietnam is big. The U.S. not only can help stop tariff-avoiding country of origin fraud, but also help shippers importing from Vietnam avoid expensive delays because of all the inspection increases.

At least the U.S. can help with those things in theory. We already saw in the last story that the CBP can cause issues right here in our own country. However, there should be optimism that this agreement is a good thing and the partnership will help.

You can read a quick article on this by Chris Gillis in American Shipper.

3. East Coast Ports Poised to Take More Market Share from West Coast Ports

Since the 2014/2015 contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) resulted in port congestion, delays, and serious damage to U.S. shippers and the widening of the Panama Canal allowed bigger ships through the passageway, U.S. East Coase (USEC) ports have gained serious market share on U.S. West Coast (USWC) ports.

According to an American Shipper article by Greg Miller, that trend is going to continue:

During a discussion presented by investment bank Stifel on Dec. 6, [industry veteran John McCown, founder of Blue Alpha Capital and former CEO of liner company Trailer Bridge] noted that the East/Gulf Coast share of container imports among the top 10 U.S. ports has risen from 43% in 2015 to 47% this year. “I see that trend continuing to play out,” he asserted.

The article is a good one. The assertion that USEC will continue gaining market share is backed up by sections on the Panama Canal and U.S. population location, physical space for USEC ports to grow, and even the impacts of trade war.

4. Optimism Arises in Container Market

George Griffiths’s article in the Loadstar about this shipping news story uses the phrase “pessimism in container market recedes” in its headline. However, that seems like an awful pessimistic way to put positive news. Griffith writes:

November reversed some of the pessimistic sentiment that was emanating from carriers earlier in the year, as rates remained stronger, clinging on to the General Rate Increases (GRIs) introduced at the start of the month to a much greater degree than was previously expected by many market participants.

Reversal of pessimistic sentiment is optimistic sentiment, right?

Anyway, this article does a very good job of giving the current outlook of freight rate strength in light of current events. Griffith continues with:

The reason for this firming in rates is largely split between carriers’ ongoing employment of void sailings in the market, and a slight uptick in demand ahead of an early Chinese New Year, which is expected to significantly reduce export demand at the end of January from Asia.

While Griffith covers different markets in the article, the North American market is obviously of most interest to us. It isn’t the strongest among markets when it comes to carriers maintaining freight rates, but there is optimism to be had for carriers even here.

Griffith starts the North American market by talking about weak imports in the month of November and carriers struggling with slipping spot rates and holding on to their General Rate Increases (GRIs) from the start of November; however, Griffith ends the section with this:

Demand is expected to pick up going forward, however, as an early Chinese New Year gives rise to a spike in front loading, much like as was seen on the transpacific lanes last year, but this is expected to be more muted in 2019 due to the dearth of additional tariffs being imposed on container freight imports by both the US and China.

5. Carrier/Shipper Contracts Being Negotiated Under Big Stakes

Naturally, the freight rate market would bring us to contracts between shipping lines and shippers. Now, most shippers work within the spot rate market, but that does not mean they are unaffected by the contracts between carriers and BCOs (beneficial cargo owners).

BCOs are those big shippers like Walmart, Target, and Best Buy that can have direct contracts with carriers based on the volume of their imports and exports instead of working through freight forwarders and playing the spot market. Right now, carriers are working on getting the best contracts with BCOs that they can for 2020.

IMO 2020 creates high stakes for these contract negotiations. Back in April, Universal Cargo published a blog about there being expectations that carriers would be able to recoup IMO 2020 fuel costs through shipper contracts. Now we’re getting to the point when carriers are trying to achieve the results in those expectations.

A Mike King written article in American shipper gets into how high the stakes are for these contract negotiations in light of IMO 2020. The article is definitely worth a read as it also gets into leverage and carriers doing their best to push freight rates up right now in order to lock shippers into higher rates for 2020.

The expectation is that there will be higher freight rates in 2020, but right now is when the stage is being set for what kind market we’ll be looking at in the upcoming year.

Share News with Us

Those are the 5 more international shipping news items happening right now that we thought you should probably be aware of. Are there more happenings in international shipping that you think we should have shared? Let us know in the comments section.

We always love hearing from you, especially concerning news and events in the international shipping industry. And, of course, Universal Cargo is always here to help you with all of your international shipping needs.

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World Fleet Does Not Seem Ready for IMO 2020 https://www.universalcargo.com/world-fleet-does-not-seem-ready-for-imo-2020/ https://www.universalcargo.com/world-fleet-does-not-seem-ready-for-imo-2020/#comments Thu, 05 Dec 2019 23:40:22 +0000 https://www.universalcargo.com/?p=9855 We're less than a month away from New Year's Day when some big rule changes are to be implemented on the international shipping industry: Incoterms 2020 and IMO 2020 go into effect on January 1st. We talked about the changes from Incoterms 2010 with the Incoterms 2020 update in our previous blog post; today, we talk about IMO 2020.

By far, IMO 2020 is the scarier of the two new year implementations hitting international shipping. This is especially true as, with only a few weeks to go, the world fleet of cargo ships does not appear to be ready for the new rule.

In case you're not a regular reader of Universal Cargo's blog or don't keep up with international shipping news in general, IMO 2020 refers to the International Maritime Organization's (IMO) upcoming regulation change, requiring a 0.5% sulfur cap on ships’ fuel emissions, down from the current 3.5% limit. This is a big step in the effort to completely decarbonize ocean freight shipping. But are carriers and shipowners actually going to be able meet the new regulation once the ball drops for the new year or has the ball been dropped on this carbon reduction?

Find out by reading the full article in Universal Cargo's blog.

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Container Ship EmissionsWe’re less than a month away from New Year’s Day when some big rule changes are to be implemented on the international shipping industry: Incoterms 2020 and IMO 2020 go into effect on January 1st. We talked about the changes from Incoterms 2010 with the Incoterms 2020 update in our previous blog post; today, we talk about IMO 2020.

By far, IMO 2020 is the scarier of the two new year implementations hitting international shipping. This is especially true as, with only a few weeks to go, the world fleet of cargo ships does not appear to be ready for the new rule.

In case you’re not a regular reader of Universal Cargo’s blog or don’t keep up with international shipping news in general, IMO 2020 refers to the International Maritime Organization’s (IMO) upcoming regulation change, requiring a 0.5% sulfur cap on ships’ fuel emissions, down from the current 3.5% limit. This is a big step in the effort to completely decarbonize ocean freight shipping. But are carriers and shipowners actually going to be able meet the new regulation once the ball drops for the new year or has the ball been dropped on this carbon reduction?

Strategy Concerns for IMO 2020

Part of the plan to meet IMO 2020 is obviously cleaner fuel. There are a number of concerns that go with cleaner fuel. It’s more expensive. Can enough be produced to support the world fleet? Has new, cleaner fuel been properly tested to make sure it does not put ships, cargo, and crew in danger? Perhaps these concerns are why carriers and shipowners turned even more heavily toward another strategy to meet IMO 2020.

That strategy is scrubbers, which are systems that act as onboard treatment plants to remove harmful gasses from ship engines and exhausts.

Scrubbers come with a couple concerns as well. Do scrubbers actually just replace air pollution with water pollution? Could scrubbers create dangers for ships, cargo, and crew? Despite these concerns, 3,000 ships have been scheduled to have scrubbers installed in them by 2020. However, just because ships are scheduled to have scrubbers installed by 2020 does not mean it’s successfully happening. And that’s a new concern that has popped up with Scrubbers…

Ships Stuck Waiting for Scrubbers

There is growing concern over the length of time it takes to get scrubbers installed in ships. The retrofitting, or at least the waiting for the retrofitting, is taking much longer than initially believed. Many ships are docked now, either having a fuel cleaning system installed or waiting to have one installed.

According to an article by Mike Wackett in the Loadstar, the ocean freight industry’s idle fleet has reached 225 ships, with over 60% of the capacity that’s represented by it being idle due to scrubber retrofitting. Cargo ships come in different sizes, so there’s not a direct ratio of capacity to number of ships to calculate exactly how many of those 225 ships are out for scrubber installation. But luckily, Wackett gives us those numbers too:

Based on consultant Alphaliner’s latest data, there are 83 ships, with a total capacity of 839,130 teu, either undergoing scrubber retrofits or at anchor awaiting their turn at shipyards.

Luckily, the months right after the new year are traditionally a slower time of year for international shipping. Carriers can get away with less capacity, and even need to have capacity discipline to keep downward pressure on freight rates from being unhealthy for them. However, 83 ships and over 839,000 TEU of capacity is quite a bit to have out of commission without a clear idea of when they’ll be available again.

There’s the rub. Shipyards can’t keep up with the demand for retrofitting ships with scrubbers. Wackett, in the Loadstar article, calls what’s happening with the retrofits a snarl-up:

Containership owners and ocean carriers are increasingly concerned at the time vessels are out of service for the installation of exhaust gas cleaning systems.

According to the latest assessment from shipbroker Clarksons, the average time required for a scrubber installation increased to 62 days in October, from 48 days in July. Indeed, one broker told The Loadstarrecently his owner had “written off” a ship for three months.

He explained: “The ship has joined a big queue at the yard in China, they don’t know when [the retrofit] will get started and then they have to ballast it back to Europe and phase it back into the trade. It’s a bit of a nightmare really.”

He added: “Apparently they promised the owner the scrubber could be done in five to six weeks, but it seems like that was a tad optimistic.”

Alphaliner said: “Owners are reporting significant delays at shipyards currently straining to cope with the large number of retrofit projects, due to limited access to trained labour and subcontractors.”

Final Thoughts

Wackett’s article, illuminating the delays and backups happening with scrubber installation on ships, is enough to make one wonder if enough ships will be retrofitted in time for the world fleet to be ready to go for IMO 2020.

Maybe there’ll be enough ships between those already fitted with scrubbers and those using cleaner fuel that the world fleet will be able to handle the lighter volume that comes at the beginning of the year. Perhaps a grace period will be created. Or maybe, we’ll see consequences like fines enforced on carriers and shipowners unable to comply with IMO 2020.

No matter which of the above outcomes we see, you can guarantee shipyards are rushing, even scrambling, to retrofit ships with scrubbers. And that might cause even bigger problems.

There’s reason to be concerned that things will start going wrong on ships within the next couple years because all these scrubbers are being installed under such a stressful rush. We’ve already seen dangerous situations created because of scrubber malfunction attributed to design flaws and shoddy workmanship from shipyards while installing the systems.

We’ll start seeing how this all plays out next month.

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Incoterms 2020 — What Is Changing from Incoterms 2010 https://www.universalcargo.com/incoterms-2020-what-is-changing-from-incoterms-2010/ https://www.universalcargo.com/incoterms-2020-what-is-changing-from-incoterms-2010/#respond Tue, 03 Dec 2019 23:07:43 +0000 https://www.universalcargo.com/?p=9850 2020 is less than a month away, and it's not an exaggeration to say it will be one of the most eventful new years the international shipping industry has ever seen. First, IMO 2020 goes into effect on January 1st, with its 0.5% sulfur cap on ships' fuel. While we've covered IMO 2020 quite a bit in Universal Cargo's blog, there's a second big change being implemented on January 1st that we haven't talked about.

Incoterms 2020 go into effect on New Year's Day.

Published by the International Chamber of Commerce (ICC) since 1936, Incoterms standardize international deals with terms or phrases that define who, whether seller or buyer, is responsible for the various portions of transportation and insurance of goods.

While the ICC could update Incoterms at any time, they tend to do so about every ten years. Incoterms 2020 is not a complete overhaul of the 2010 Incoterms we've come to know and love, but there are significant changes that we'll share in this post.

At the end of the post, ICC's current 2010 Incoterms and descriptions are reproduced with ICC's permission. You can get even more details on the Incoterms as they currently stand by checking out a blog and video series we did on them.

Read the full article in Universal Cargo's blog to learn about what's changing with Incoterms in the 2020 update.

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Incoterms2020 is less than a month away, and it’s not an exaggeration to say it will be one of the most eventful new years the international shipping industry has ever seen. First, IMO 2020 goes into effect on January 1st, with its 0.5% sulfur cap on ships’ fuel. While we’ve covered IMO 2020 quite a bit in Universal Cargo’s blog, there’s a second big change being implemented on January 1st that we haven’t talked about.

Incoterms 2020 go into effect on New Year’s Day.

Published by the International Chamber of Commerce (ICC) since 1936, Incoterms standardize international deals with terms or phrases that define who, whether seller or buyer, is responsible for the various portions of transportation and insurance of goods.

While the ICC could update Incoterms at any time, they tend to do so about every ten years. Incoterms 2020 is not a complete overhaul of the 2010 Incoterms we’ve come to know and love, but there are significant changes that we’ll share in this post.

At the end of the post, ICC’s current 2010 Incoterms and descriptions are reproduced with ICC’s permission. You can get even more details on the Incoterms as they currently stand by checking out a blog and video series we did on them:

What’s the Deal with Incoterms?

Incoterms Definitions Part 1: EXW, FCA, FAS, FOB

Incoterms Definitions Part 2: CFR, CIF, CPT, CIP

Incoterms Definitions Part 3: DAT, DAP, DDP

Here are the Incoterm changes the 2020 update brings.

2020 Incoterms Changes

FCA On-Board Bill of Lading for Sellers Option

This is a significant change happening with the 2020 Incoterms update as it pertains to the Bill of Lading, which is probably the most fundamental document when it comes to ocean freight shipping. For FCA, or Free Carrier, deals, the 2020 Incoterms update allows buyers to instruct carriers to issue a bill of lading with an on-board notation to sellers.

Normally, this document would not be issued to sellers in FCA deals. However, that was problematic because buyers sometimes need the document. For example, a bank may require the seller to present a bill of lading with the on-board notation to prove the goods have been delivered before the bank will release money to the seller from a deal that used a letter of credit.

DPU — Delivered at Place Unloaded

This might be the most obvious change in the 2020 Incoterms update because there’ll be a new name on the list of Incoterms while an old name disappears.

The Incoterm DAT is getting a name change. DAT stood for Delivered at Terminal. The problem with the Incoterm as it stood is that goods aren’t always delivered at the terminal. The seller and buyer may decide on a different delivery location. Therefore, the name is being changed to DPU — Delivered at Place Unloaded. Outside of the name change to better reflect all the deals it pertains to, the deal itself does not change, keeping the risk with the seller through the unloading of the goods.

CIP Insurance

The new Incoterms 2020 rules will require sellers to purchase a higher level of insurance in CIP, or Carriage and Insurance Paid to, deals. Previously, sellers were required to get the minimum level of coverage listed in Clause C of Institute Cargo Clauses; the 2020 Incoterms update will require sellers to purchase insurance of at least 110% as listed in Clause A of Institute Cargo Clauses.

This change is only for CIP deals. CIF — or Cost, Insurance and Freight — will not see a change in insurance requirements.

DIY Sellers

DIY stands for do-it-yourself. The 2020 Incoterms update recognizes that not all sellers ship through a third party. It is now explicitly stated within Incoterms that sellers may arrange for transportation themselves or they can, of course, contract third party delivery of goods, which it was traditionally assumed they would do.

Security and Customs

The language in the 2020 Incoterms update is more specific than it previously was regarding who pays and is responsible for customs clearance costs and risks. This isn’t the biggest change on who is responsible for customs, but it is more precise and should ensure everyone is clear on this point.

Also included in Incoterms 2020 is language covering security requirements, an area of ever increasing scrutiny when it comes to importing and exporting goods.

ICC’s Incoterms List & Descriptions

The following comes directly from the ICC, who sells books and products laying out all the details about Incoterms.

RULES FOR ANY MODE OR MODES OF TRANSPORT

  • EXW – Ex Works

“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e., works, factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.

  • FCA – Free Carrier

“Free Carrier” means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.

  • CPT – Carriage Paid to

“Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

  • CIP – Carriage and Insurance Paid to

“Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination. The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

  • DAT – Delivered at Terminal (changing to DPU — Delivered at Place Unloaded)

“Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.

  • DAP – Delivered at Place

“Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.

  • DDP – Delivered Duty Paid

“Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

  • FAS – Free Alongside Ship

“Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.

  • FOB – Free On Board

“Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.

  • CFR – Cost and Freight

“Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

  • CIF – Cost, Insurance and Freight

“Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

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Made in Vietnam? Nope — Still Made in China — Shippers Beware https://www.universalcargo.com/made-in-vietnam-nope-still-made-in-china-shippers-beware/ https://www.universalcargo.com/made-in-vietnam-nope-still-made-in-china-shippers-beware/#respond Tue, 26 Nov 2019 22:32:55 +0000 https://www.universalcargo.com/?p=9848 Last week, one of our partners in Vietnam emailed Universal Cargo about the country's customs significantly increasing inspection "ratio on all cargo bound to the states." The change in procedure that has Vietnam customs carefully checking cargo destined for the U.S. may cause shippers to suffer delays and carriers to face shortfalls, according to the agent.

The reason Vietnamese customs are increasing inspections on cargo headed for the U.S. is a recent rise in customs of origin fraud to beat tariffs on Chinese goods.

Find out all about it by reading the full article in Universal Cargo's blog.

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Last week, one of our partners in Vietnam emailed Universal Cargo about the country’s customs significantly increasing inspection “ratio on all cargo bound to the states.” The change in procedure that has Vietnam customs carefully checking cargo destined for the U.S. may cause shippers to suffer delays and carriers to face shortfalls, according to the agent.

Country Origin Fraud

made in ChinaThe reason Vietnamese customs are increasing inspections on cargo headed for the U.S. is a recent rise in customs of origin fraud to beat tariffs on Chinese goods.

Vietnam is one of the top countries Chinese companies have tried moving goods through in order to circumvent tariffs. Obviously, falsely claiming another country is the point of origin for goods in attempts to avoid tariffs is illegal. But illegal or not, country of origin fraud has surged since the trade war began, especially in Vietnam.

Nguyen Dieu Tu Uyen reported in a Bloomberg article:

“We’ve seen trade-fraud activities increase strongly since the trade war started,” [Au Anh Tuan, head of customs control and supervision in the General Department of Vietnam Customs] said. “We’ve increased cooperation with U.S. authorities to fight against that. We’re taking drastic steps, including compiling a list of 25 items to watch.”

Furniture Among Top Goods in Country of Origin Fraud

Electronics is an obvious category Vietnam is being wary of. Another category under scrutiny that many Universal Cargo customers need to aware of is furniture — wooden furniture in particular. Nguyen Dieu Tu Uyen reports:

Customs officials are focusing on “highly suspicious” sectors — such as electronic components and wooden furniture — that have seen annual exports surge by more than 15%, said Mai Xuan Thanh, deputy director general of the customs department. Hundreds of domestic and foreign companies are under “special scrutiny for suspect exports,” he said.

One of Universal Cargo’s specialties for over 30 years has been helping businesses in the furniture industry import and export furniture. We suggest our clients in the furniture industry, and all industries for that matter, be knowledgeable about your suppliers. The last thing you want is to get caught up in country of origin fraud.

Vietnam’s Crackdown on Country of Origin Fraud

The Bloomberg article continued about Vietnam’s crackdown on country of origin fraud:

Through October, Vietnamese customs had uncovered about 14 significant cases this year of exports with fake labels.

Beginning Dec. 27, Vietnam will suspend transshipment and temporary imports of plywood products headed to the U.S., Industry and Trade Minister Tran Tuan Anh said earlier this month. The National Steering Committee for Anti-Smuggling and Trade Fraud ordered provinces along the country’s borders to step up inspections of goods being imported.

Vietnamese customs last month said it discovered and seized about $4.3 billion of Chinese aluminum falsely labeled “Made in Vietnam” that was meant to be shipped overseas, mostly to the U.S.

There is still more Vietnam could and might do in this fight. A Viêt Nam News article challenges that better state management is needed in the country of origin (C/O) area to avoid trade fraud.

Relevant agencies such as the Ministry of Industry and Trade, the Ministry of Finance, VCCI, the Ministry of Planning and Investment, and the General Department of Customs should strengthen cooperation to solve problems relating to C/O, [Deputy Minister of Industry and Trade Trần Quốc Khánh] said.

The Ministry of Industry and Trade (MoIT) also needs to authorise VCCI to issue more C/O types under the free trade agreements (FTAs) so that the MoIT can reduce its workload related to granting C/O and strengthen the State management in this issue.

At a working day between the Prime Minister’s working team, the VCCI and relevant ministries and agencies on C/O and trade fraud of goods origin in Hà Nội on November 15, Dũng said, according to a report from the General Department of Customs, there was a sudden increase in some goods items exported to the US market and some items imported from China to Việt Nam.

Therefore, the State should have warnings about fraud, counterfeiting and evasion of trade remedies and strengthen close supervision to ensure the economic stability.

More Shippers Impacted Than Those Involved in Tariff Circumvention Through Vietnam

Of course, what Vietnam is doing with the inspections is enough to potentially impact many U.S. shippers, not just those importing from a supplier attempting to circumvent tariffs on China. This is especially true if the potential shortfalls Universal Cargo’s partner in Vietnam warned carriers could face causes any blank sailings where all the cargo scheduled to be shipped has to wait for the next scheduled sailing.

In the meantime, Vietnam is not the only country Chinese suppliers and their U.S. business partners (knowingly or unwittingly) are committing origin fraud through.

A couple months ago, an NPR article by Scott Horsley retold the findings of a report of a U.S inspector making a surprise inspection on a “pencil factory” in the Philippines:

The inspector saw no evidence of manufacturing, though some pencils were being sharpened. And there were boxes and boxes of finished pencils, with labels saying they were made in China.

The inspector “witnessed staff repacking what appeared to be Chinese origin products into boxes labeled ‘Made in Philippines,’ ” the report said.

It would not be surprising to see countries like the Philippines follow Vietnam’s lead and increase inspections on goods heading to the U.S. Universal Cargo will certainly be keeping an eye on whether shippers are starting to suffer delays because of them.

And here’s a little something for you to consider this Christmas: when you buy a product that says “made in Vietnam” or “made in the Philippines,” is it really made in China?

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Things Getting Bitter Between Maersk & MSC in Their 2M Alliance https://www.universalcargo.com/things-getting-bitter-between-maersk-msc-in-their-2m-alliance/ https://www.universalcargo.com/things-getting-bitter-between-maersk-msc-in-their-2m-alliance/#respond Thu, 21 Nov 2019 22:44:40 +0000 https://www.universalcargo.com/?p=9846 Mediterranean Shipping Company (MSC), the world's second largest ocean freight carrier by capacity for the moment, put out a press release on Monday concerning its executive leadership:

MSC Mediterranean Shipping Company, a global leader in transportation and logistics, is pleased to announce that Søren Toft will join as Chief Executive Officer.

Normally, we don't publish blog posts about carriers' executive moves, except this one has the potential to send waves through the landscape (or oceanscape?) of carrier alliances dominating ocean freight shipping.

Why? Glad you asked.

Søren Toft just happens to be the chief operating officer (COO) of MSC's biggest competitor (actually, every ocean carrier's biggest competitor) but also MSC's 2M carrier alliance partner, Maersk. MSC poaching Maersk's COO is a source of bitterness between the alliance partners.

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Mediterranean Shipping Company (MSC), the world’s second largest ocean freight carrier by capacity for the moment, put out a press release on Monday concerning its executive leadership:

MSC Mediterranean Shipping Company, a global leader in transportation and logistics, is pleased to announce that Søren Toft will join as Chief Executive Officer.

2M Bitterness Maersk & MSCNormally, we don’t publish blog posts about carriers’ executive moves, except this one has the potential to send waves through the landscape (or oceanscape?) of carrier alliances dominating ocean freight shipping.

Why? Glad you asked.

Executive Poaching

Søren Toft just happens to be the chief operating officer (COO) of MSC’s biggest competitor (actually, every ocean carrier’s biggest competitor) but also MSC’s 2M carrier alliance partner, Maersk. MSC poaching Maersk’s COO is a source of bitterness between the alliance partners.

Mike Wackett reported in an article on the Loadstar:

Effectively, Mr Toft is on “gardening leave” from Maersk while the legal issues are agreed, but one source told The Loadstar yesterday Maersk “would not make it easy” and that the poaching of this star executive had left a “bitter taste” in the day-to-day 2M relationship.

Growing Bitterness in 2M Alliance

MSC’s move to snatch away Maersk’s COO is actually just the latest event in a rift that has been growing between the shipping lines for years.

Last month, we posted a blog about MSC making moves to usurp Maersk’s throne as the world’s largest carrier by capacity. The bitterness is almost palpable when you read the Maersk quote we pulled from another Mike Wackett Loadstar article:

A senior Maersk manager said, “MSC are getting too big for their boots and we have a fight on our hands to stop them.”

Those certainly don’t sound like the cooperative words from one company about another with which it’s in alliance. While bitterness seems to have ramped up over this month and last, it was all the way back in 2016 when signs of trouble between the carriers were first seen.

In a blog post titled “Is There Trouble in 2M Alliance?” we highlighted the moment when the honeymoon ended between Maersk and MSC and the cracks in their alliance became visible.

It was shortly after Hanjin Shipping collapsed. Maersk and MSC moved in with their 2M Alliance to scoop up vacated market share. Then things got weird when Maersk announced a joint service, but MSC, instead, moved forward with a service that didn’t include Maersk.

What Does All This Mean for Shippers?

International shipping is dominated by three major carrier alliances. Many bemoan this as shrunken carrier competition. Universal Cargo’s old Carrier Craziness Bracket, below, shows that competition shrinkage.

Carrier Craziness Bracket

Universal Cargo’s Carrier Craziness Bracket, showing the crazy alliances, mergers, and bankruptcy in ocean freight shipping.

Now, there is the conspiracy theorist in me who thinks it’s possible that the bitterness and rift between Maersk and MSC is all show to mask that the executive from the one company is joining the leadership of the other company in some big pricing collusion plot. However, it is much more likely that the rift and bitterness is real.

If the strife between the world’s largest ocean carriers is enough to split up their alliance, we would likely see a reshuffling of alliances happen very quickly. Such an event would come with serious service changes and could mean shipping interruptions for importers and exporters.

Additionally, in the reshuffle, some carriers may get left out. Carrier alliances have basically become a necessity for shipping lines to survive in the international shipping industry. It wouldn’t be surprising to see more carrier buyouts, mergers, or even bankruptcy in such a situation, getting us closer to Maersk’s prediction of the industry shrinking to just 3 global carriers.

For shippers, this would be bad news. Less competition almost always means worse service and higher rates.

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Freight Rates Drop — Is 2019 Outlook Changed? https://www.universalcargo.com/freight-rates-drop-is-2019-outlook-changed/ https://www.universalcargo.com/freight-rates-drop-is-2019-outlook-changed/#respond Tue, 19 Nov 2019 20:56:28 +0000 https://www.universalcargo.com/?p=9843 In case anyone actually needed more evidence for the volatility of freight rates, ocean shipping prices just swung in the opposite direction again. After blogging just a week ago about a surge in freight rates and analysts predicting carriers to be able to maintain the increase in ocean shipping prices through the end of 2019, transpacific freight rates drop again.

An American Shipper article reports:

After a brief November surge, spot rates for ocean freight appear headed lower again as container volumes disappoint. 

Find out all about what's happening with Ocean Freight rates, the peak season, and what this means for the outlook on the rest of the year by reading the full article in Universal Cargo's blog.

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In case anyone actually needed more evidence for the volatility of freight rates, ocean shipping prices just swung in the opposite direction again. After blogging just a week ago about a surge in freight rates and analysts predicting carriers to be able to maintain the increase in ocean shipping prices through the end of 2019, transpacific freight rates drop again.

An American Shipper article reports:

After a brief November surge, spot rates for ocean freight appear headed lower again as container volumes disappoint. 

End of the Peak Season

International Shipping Cargo Ship Freight ForwarderEarly November is generally considered the last hurrah of international shipping’s peak season. Though some consider the whole month as part of the peak season, goods need to arrive in early November in order to be on shelves in time for the biggest shopping day of the year, Black Friday. Importing volume can remain strong through the rest of November for the continued holiday shopping season, but it’s not unusual to see volumes and freight rates fall after the first week or two.

Therefore, seeing freight rates drop right now is not surprising, except, of course, for the fact industry analysts were predicting the higher rates to hold amidst the December 15th tariff increase deadline, reduced ship capacity, and surcharges from carriers.

Forty-foot equivalent unit (FEU) freight rates from China to the U.S. West Coast (USWC) fell by about 5% over the last week according to numbers included in the American Shipper article from the Freightos’ Baltic Daily Index. Rates from China to U.S. East Coast (USEC) fell a little over 3.5%.

These aren’t astronomical drops by any means, with China to USWC actually being up 13% from the start of October, according to the article. Of course, that was when we saw falling freight rates instead of usual peak season increases, largely due to factors like all the frontloading of cargo by shippers to beat the various tariff hikes. Still, these drops are a good indicator that the peak season’s zenith — because we’d hate to say peak season’s peak — has passed. The American Shipper article adds:

Freightos Chief Marketing Officer Ethan Buchman said in a statement that peak season prices “hit their zenith in early November.” Last year, peak season ocean freight rates dropped 8% between the middle and end of November.

Freight Rate Drops May Be Twice as Big

It’s worth noting that the freight rate drops may actually be larger than was reported in American Shipper. In a Journal of Commerce (JOC) article, Bill Mongelluzzo reports larger drops than the ones listed above:

The West Coast spot rate was … down 11.8 percent from … last week. The East Coast rate was down 6.8 percent… according to the Shanghai Containerized Freight Index (SCFI) published in the JOC Shipping & Logistics Pricing Hub.

That’s more than double the drop for USWC and not too far off that for USEC.

Is the Freight Rate Outlook for Remaining 2019 Changed?

While the numbers are a little bit different because they come from different data sources, the authors of both articles agree cargo volume disappoints, causing dropping rates and a short-lived peak season. However — and this isn’t the first time I’ll say this — smaller peak season with less cargo volume should have been expected for 2019 after last year’s inflated peak season and all the other moments of frontloading cargo to beat tariffs that led up to it.

These drops probably shouldn’t be seen as a negation of the experts’ predictions about sustained freight rates for the remainder of 2019. IMO 2020 related fees and capacity shrinkage is still happening, and there is reason to believe a healthy amount of cargo is still moving here in November, with the American Shipper article including:

The National Retail Federation has said container volumes coming into U.S. are expected to reach 1.97 million twenty-foot equivalent units (TEUs) in November, the highest level for the year and up 9% from a year earlier.

Still, this is fast to see drops after predictions of maintained freight rate levels. Of course, freight rates will always fluctuate, even during periods sustained discipline to keep rates strong. Dips and jumps should always be expected in this industry.

Perhaps the biggest takeaways are that freight rates are always volatile and predictions of ocean freight pricing, while helpful in planning, only go so far.

Click Here for Free Freight Rate Pricing

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Phase One Trade Deal Looking Less Likely https://www.universalcargo.com/phase-one-trade-deal-looking-less-likely/ https://www.universalcargo.com/phase-one-trade-deal-looking-less-likely/#respond Thu, 14 Nov 2019 23:49:28 +0000 https://www.universalcargo.com/?p=9839 The much toted Phase One Trade Deal between the U.S. and China was hoped to be signed this weekend on the 16th or 17th of November. With the 17th being my birthday, I would have accepted the deal as a nice birthday present. However, it doesn't look like I'll be seeing that particular present this weekend.

Of course, those potential signing dates were picked to line up with the Asia-Pacific Economic Cooperation (APEC) summit, not my birthday. But it's not because the APEC summit was cancelled that we're not seeing a trade deal signed.

Despite both Washington and Beijing talking like the Phase One Trade Deal was close to being ready for signing just a few weeks ago, giving the world a sense that a new negotiation strategy was resulting in a breakthrough, recent words from President Trump put that sentiment in doubt.

Keep reading to find out the latest in Universal Cargo's blog.

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The much toted Phase One Trade Deal between the U.S. and China was hoped to be signed this weekend on the 16th or 17th of November. With the 17th being my birthday, I would have accepted the deal as a nice birthday present. However, it doesn’t look like I’ll be seeing that particular present this weekend.

Of course, those potential signing dates were picked to line up with the Asia-Pacific Economic Cooperation (APEC) summit, not my birthday. But it’s not because the APEC summit was cancelled that we’re not seeing a trade deal signed.

Despite both Washington and Beijing talking like the Phase One Trade Deal was close to being ready for signing just a few weeks ago, giving the world a sense that a new negotiation strategy was resulting in a breakthrough, recent words from President Trump put that sentiment in doubt.

Trump’s Words that Cast Doubt on Phase One Trade Deal

President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

It’s not like the president is talking negatively about the trade deal. He is still very positive in his words about it happening, but there are a couple changes worth noting. Changes that cast doubt about this deal happening this week, this month, or maybe even at all.

President Trump is no longer saying the Phase One Trade Deal is happening but that it could happen.

“We’re close,” the president said about a trade deal with China in a speech this week at the Economic Club of New York. “A significant Phase One Trade Deal with China could happen. It could happen soon.”

There’s an obvious shift in the confidence of the Phase One Trade Deal being reached and signed with the switch from saying we basically have a deal that just needs to be written up and signed to the deal could happen. Even if we’re saying it could happen soon.

Perhaps even more telling are the next words from President Trump in the same speech:

“… we will only accept a deal if it’s good for the United States and our workers and our great companies…”

With those words, President Trump seems to be preparing us for the possible outcome of a deal not being reached at all.

The president is certainly not coming out and saying no deal is coming. In fact, he maintains that things are moving and moving quickly toward a deal. However, reasons for doubt are increasing.

What’s Holding Up the Phase One Trade Deal with China?

According to a Wall Street Journal article by Chao Deng, Lingling Wei, and William Mauldin, the Phase One Trade Deal has hit a snag over farm purchases:

Mr. Trump has said that China has agreed to buy up to $50 billion of soybeans, pork and other agricultural products from the U.S. annually. But China is leery of putting a numerical commitment in the text of an agreement, according to people familiar with the matter.

Yun Li wrote a CNBC article saying in its headline the deal is being held up “because of disagreement on a number of issues.” However, the only issue the article actually adds as one holding up the deal, in addition to the afore-mentioned agricultural purchases issue, is China wanting the U.S. to remove previous tariff hikes:

China is insisting on a rollback of existing tariffs as part of that deal, but the U.S. has showed opposition to such a removal.

This issue may actually be the main holdup of the trade deal. We talked about it in a previous blog post that asks if this is the month we see a U.S.-China trade deal.

It All Comes Back to Tariffs

That China wants the U.S. to cancel upcoming and remove previously implemented tariffs as part of the deal has been widely reported.

From piecing together statements and news accounts, the original Phase One Trade Deal, which the U.S. and China said less than a month ago they’d come together on in principle, included the U.S. at least postponing the upcoming tariffs scheduled for December 15th.

It is extremely unlikely that U.S. negotiators would have agreed for the deal to include any clauses stating the U.S. would not implement any further tariffs. Tariffs are, after all, President Trump’s favorite weapon for creating leverage on China.

It’s impossible to know with certainty all that is happening between the U.S. and China regarding the trade deal without being in the negotiating rooms. However, there is enough information out there to put together a likely timeline of events around the current trade deal strife:

  1. China and the U.S. come together on a deal in principle, knowing they’ll have to fine tune a written version.
  2. China asks the deal to include strong guarantees against the U.S. implementing tariffs on Chinese goods along with rollbacks on already implemented tariffs.
  3. The U.S. refuses the addition.
  4. China says it will no longer agree to the U.S. ask of $50 billion in spending on U.S. agricultural goods if the U.S. does not include the tariff rollbacks and guarantee.

There certainly could be, and undoubtedly is, more happening behind the scenes than is being reported. However, there’s enough information to reasonably believe this deal got snagged on China’s tariff demand. Additionally, the upcoming December 15th tariff hike is the closest thing this deal has to a deadline.

It all comes back to tariffs.

Will we get a Phase One Trade Deal soon? Well, I’m not staking my birthday happiness on it.

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Big Change in Freight Rates & How They’ll Behave the Rest of 2019 https://www.universalcargo.com/big-change-in-freight-rates-how-theyll-behave-the-rest-of-2019/ https://www.universalcargo.com/big-change-in-freight-rates-how-theyll-behave-the-rest-of-2019/#respond Tue, 12 Nov 2019 19:50:05 +0000 https://www.universalcargo.com/?p=9837 This year, freight rates in the traditionally peak season months have behaved untraditionally. Instead of seeing higher freight rates, this peak season was full of falling freight rates. However, there has been a stark change since the end of October.

Freight Rates Rise

A combination of factors like increased importing to beat the December-15th-scheduled tariff hike, General Rate Increases (GRIs), and capacity decreases from carriers resulted in a period over the last couple weeks of transpacific freight rates rising after that period of them falling.

Find out all about it and what freight rates are to look like for the rest of the year by reading the whole article in Universal Cargo's blog.

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Freight RatesThis year, freight rates in the traditionally peak season months have behaved untraditionally. Instead of seeing higher freight rates, this peak season was full of falling freight rates. However, there has been a stark change since the end of October.

Freight Rates Rise

A combination of factors like increased importing to beat the December-15th-scheduled tariff hike, General Rate Increases (GRIs), and capacity decreases from carriers resulted in a period over the last couple weeks of transpacific freight rates rising after that period of them falling.

Last week (on November 4th, 2019), Greg Knowler reported in the Journal of Commerce (JOC):

Spot rates on the trans-Pacific rose strongly last week as capacity withdrawals, general rate increases, and cargo being shipped early to avoid United States tariffs due to go into effect Dec. 15 tipped the supply-demand balance in favor of carriers.

The latest reading of the Shanghai Containerized Freight Index (SCFI) shows the rate from Shanghai to the US West Coast rose 16.7 percent… although the rate is 36 percent below the same week last year.

Shanghai-US East Coast rates rose 8 percent… still 39 percent lower than the year-ago period…

Freight rates continued rising, with Mike King reporting yesterday (November 11th) in an American Shipper article:

The Freightos Baltic China/East Asia to North America West Coast 40-foot container index rose 9.5% week-on-week… on November 10.

And, while rates from China/East Asia to the North America East Coast made only a marginal gain over the week, the Freightos Baltic China/East Asia to North Europe 40-foot container index also recorded a significant jump, up 4.71% week-on-week… November 10.

Freight Rate Outlook for Rest of 2019

Often, carriers have struggled to maintain GRIs and capacity discipline, resulting in freight rate surges being short lived before those rates start falling again. However, international shipping industry analysts think carriers will be able to maintain the increases in freight rates they’ve managed at the end of October and beginning of November.

Actually, freight rates are not merely expected to be maintained at the current level but to continue to rise, according to the maritime research company Drewry.

King’s American Shipper article goes on to outline Drewry’s findings on the topic:

Drewry now expects rates to further increase, arguing that capacity cuts by carriers and higher bunker surcharges as IMO 2020 low sulfur fuels are phased in will continue to fuel rate inflation on the key Asia-Europe and trans-Pacific trades.

The current idle container fleet has surged to just over 1 million TEU, or 4.5% of the total cellular fleet, as of the first week of November.

“That represents an extra 400,000 TEU added to the inactive fleet in one month, which can be attributed to more ships being sent to dry-dock for exhaust scrubbers in readiness for the new IMO 2020 low-sulfur fuel regulations,” said Drewry.

While a bigger idle fleet does not automatically produce higher freight rates, Drewry believes that demand is now strong enough to ensure that capacity cuts translate into “more positive utilization and freight rates.”

Adding to the inflationary momentum is the fact that carriers are beginning to transition to higher new bunker surcharges related to IMO 2020.

“This process is expected to ramp up for December and should contribute to a strong end to the year for carriers, running contrary to what was seen at the end of 2018,” noted Drewry.

Conclusion for Shippers

These factors (IMO related ship idling and fees) contributing to rising freight rates that Drewry is talking about are very specific, even extraordinary to this year. That makes these freight rates not very indicative of the actual market. Drewry even calls year-on-year comparisons with this one “almost useless” because of it.

Comparing to other years aside, this does give shippers an idea of how the rest of the year should play out in terms of freight rates. International shipping’s freight rate market is always volatile, but there are factors that should bolster prices as we head into 2020.

Click Here for Free Freight Rate Pricing

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Jury Hits ILWU with $93M Verdict for What Union Did to Port of Portland https://www.universalcargo.com/jury-hits-ilwu-with-93m-verdict-for-what-union-did-to-port-of-portland/ https://www.universalcargo.com/jury-hits-ilwu-with-93m-verdict-for-what-union-did-to-port-of-portland/#respond Thu, 07 Nov 2019 23:38:00 +0000 https://www.universalcargo.com/?p=9836 In March of 2015, I wrote a Universal Cargo blog post about how the International Longshore and Warehouse Union (ILWU) should pay damages for what the union did at the Port of Portland. Today's post could almost be an update to that blog.

A federal jury has ruled the ILWU to pay $93.6 million for the illegal slowdowns and work stoppages at the Port of Portland that resulted in containerships no longer calling on the port.

Chris Dupin reported in an American Shipper article:

A federal jury has awarded $93.6 million to ICTSI Oregon, the former operator of the Port of Portland’s Terminal 6, after members of the International Longshore and Warehouse Union (ILWU) engaged in illegal work practices such as work slowdowns and stoppages.

The work slowdowns and stoppages by the ILWU Local 8 at the Port of Portland were atrocious. Not only did they cause containerships to stop calling on the port, they eventually led to ICTSI having to shut down its Port of Portland terminal.

ICTSI being awarded $93.6 million in a federal jury decision makes sense; however, ICTSI was not the only one to suffer damages from the ILWU's actions.

Read the full article in Universal Cargo's blog.

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In March of 2015, I wrote a Universal Cargo blog post about how the International Longshore and Warehouse Union (ILWU) should pay damages for what the union did at the Port of Portland. Today’s post could almost be an update to that blog.

Freight Rates

A federal jury has ruled the ILWU to pay $93.6 million for the illegal slowdowns and work stoppages at the Port of Portland that resulted in containerships no longer calling on the port.

Chris Dupin reported in an American Shipper article:

A federal jury has awarded $93.6 million to ICTSI Oregon, the former operator of the Port of Portland’s Terminal 6, after members of the International Longshore and Warehouse Union (ILWU) engaged in illegal work practices such as work slowdowns and stoppages.

The work slowdowns and stoppages by the ILWU Local 8 at the Port of Portland were atrocious. Not only did they cause containerships to stop calling on the port, they eventually led to ICTSI having to shut down its Port of Portland terminal.

ICTSI being awarded $93.6 million in a federal jury decision makes sense; however, ICTSI was not the only one to suffer damages from the ILWU’s actions.

Portland Shippers Suffered Losses Due to ILWU

In my aforementioned blog post, I actually wrote that the ILWU Local 8 — the part of the union that disrupted the supply chain through the Port of Portland — should pay damages to Portland shippers.

Slowdowns and delays always have costs for shippers. Sometimes, those costs are very high. The ILWU caused slowdowns, delays, and congestion for years at the Port of Portland.

According to Dupin’s American Shipper article, that the ILWU and its Local 8 engaged in unlawful job actions between May 21st, 2012 and August 13th, 2013 was accepted as proven fact from previous court decisions during the proceedings that awarded ICTSI damages from ILWU. But labor slowdowns to deliberately hurt the port terminal did not in any way stop in 2013.

Not only did the Portland branch of the ILWU’s tactics continue, but Local 8 really took advantage of a period in 2014 when there was no contract between the ILWU and PMA. I couldn’t even tell you how many updates we posted in blogs and social media about congestion and slowdowns at Portland as the ILWU there did things like slowing crane operations to just 7.5 moves per hour. The standard at that time, according to the Journal of Commerce (JOC), was 30 moves per hour, and the Port of Charleston had crane productivity at 40 moves per hour.

Of course, such slowdowns didn’t happen only during the ILWU-PMA contract negotiation period because these slowdowns had nothing to do with those negotiations (I’ll get to what they were about in the next section). By summer of 2015, containerships had basically stopped calling on the port because of how costly the poor productivity was there.

Sad Shipping Story

In fact, a ship calling on the Port of Portland actually became a newsworthy event at that point. In August of 2015, I wrote a blog for Universal Cargo about how sad it was that the first containership to call on the port in 3 months was making headlines — headlines merely for calling on the port.

When carriers like Hanjin (yes, the major carrier that went bankrupt later was the containership line that called on the Port of Portland most frequently) stopped calling on the Port of Portland, Conrad Wilson wrote an article, published on OPB.org, that went into the chaotic state shippers near the Port of Portland were in:

David Braman, the general manager of Mitchell Brothers Truck Line, said Hanjin’s departure has left many businesses that ship using containers in a state of “chaos.”

“We’re getting inundated with phone call after phone call from people looking for rates,” he said. “Nobody really knowing how they’re going to [get] their freight moved from point to point.”

While some businesses and farmers may turn to East Coast or Gulf ports, most of the goods that were moving through the Port of Portland are now heading to the ports of Seattle and Tacoma, Braman said.

Right now, businesses here have two options: Move containers by rail or truck.

But those trips to Puget Sound shipping terminals can be four times as costly as a trip to the Port of Portland.
Northwest Container, the rail option, has been so busy recently it’s had to close early most days and even turn containers away.

Braman said everything that can’t get on the train has to move by truck. And there’s a shortage there, too.

“There’s not enough equipment to service the area any more,” he said. “Something’s going to get left behind. And we’re all in that same predicament. There’s nobody here that’s up to this speed yet.”[2]

The increased costs of importing and exporting remains for shippers in the Portland area as they must pay for truck or rail services to and from farther away ports.

What Caused Labor Tension at the Port of Portland?

The source of tension for all the conflict that caused the downfall of container shipping through the Port of Portland is actually stupid and petty.

The ILWU hard-timed the Port of Portland, causing container shipping to cease at the port, forcing shippers to change their supply chain, eliminating ICTSI’s terminal’s profitability, costing the union jobs at the port, and now resulting in a $93 million penalty to the union — all this and more — over two jobs.

Two jobs!

These weren’t even jobs taken away from the ILWU. These were jobs that never belonged to the ILWU. There were two jobs monitoring, plugging, and unplugging reefer shipping containers at the Port of Portland that the International Brotherhood of Electrical Workers had been doing for the previous 30 years. The ILWU decided those jobs should belong to it.

Because these two jobs that historically never belonged to the ILWU were not awarded to the union, the ILWU knowingly destroyed business at the port.

Hanjin announced it would stop calling on the Port of Portland, ending almost 20 years of serving the port, because of how bad the productivity became. Knowing Hanjin pulling out from the port would be disastrous, the Port of Portland offered the carrier incentives to stay. That would only buy the port a little bit of time if it couldn’t get cooperation from ILWU.

Despite the fact that the pullout would “end a $250,000 weekly payroll for longshore workers who load and unload the vessels at Terminal 6,” said to the JOC at the time, the union persisted with slowdowns until Hanjin, and the other carriers like Hapag-Lloyd, gave up on the port.

The ILWU knew it would cost union jobs to drive carriers away from the Port of Portland, but it was willing to do so in order to — one could only surmise — show its power for future leverage on its employers. It is unlikely the ILWU foresaw a $93 million penalty for its actions.

The price may be more than the union can bear as Dupin’s American Shipper article ends with:

According to the Oregonian, attorneys for the ILWU asked the judge to delay entering the judgment against the union until Nov. 12, saying it would impose a heavy burden on the union, possibly bankrupting it.

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Is This the Month We See a U.S.-China Trade Deal? https://www.universalcargo.com/is-this-the-month-we-see-a-u-s-china-trade-deal/ https://www.universalcargo.com/is-this-the-month-we-see-a-u-s-china-trade-deal/#respond Tue, 05 Nov 2019 22:56:48 +0000 https://www.universalcargo.com/?p=9833

Last month, we finally saw progress in trade negotiations between the U.S. and China. A change in negotiation strategy has the two sides working out multiple smaller deals instead of one massive trade deal. President Trump even toted a Phase One Trade Deal as being worked out by negotiators.

US China Trade War

While maybe not completely free of exaggeration, since some work still has to be done on the deal before it can be signed, the president's words were not as hyperbolic as his critics would assume. Beijing also talked about progress in the trade talks and a Phase One Deal as if it were about to drop.

The Trump Administration's plan on the Phase One Trade Deal was to finalize it by and sign it at the Asia-Pacific Economic Cooperation (APEC) summit this month. But there's a problem. The APEC summit has been cancelled.

Ankit Panda reported in the Diplomat:

Chilean President Sebastián Piñera announced on Wednesday that Santiago would no longer host two upcoming major international summits, the Asia-Pacific Economic Cooperation summit and the 2019 United Nations Climate Change Conference, also known as COP25.

The APEC summit was supposed to happen on November 16th and 17th. Now we have a question: Will the Phase One Trade Deal still be signed around that time? Or even this month at all?

Find out all the latest by reading the full article in Universal Cargo's blog.

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Last month, we finally saw progress in trade negotiations between the U.S. and China. A change in negotiation strategy has the two sides working out multiple smaller deals instead of one massive trade deal. President Trump even toted a Phase One Trade Deal as being worked out by negotiators.

US China Trade War

While maybe not completely free of exaggeration, since some work still has to be done on the deal before it can be signed, the president’s words were not as hyperbolic as his critics would assume. Beijing also talked about progress in the trade talks and a Phase One Deal as if it were about to drop.

The Trump Administration’s plan on the Phase One Trade Deal was to finalize it by and sign it at the Asia-Pacific Economic Cooperation (APEC) summit this month. But there’s a problem. The APEC summit has been cancelled.

Ankit Panda reported in the Diplomat:

Chilean President Sebastián Piñera announced on Wednesday that Santiago would no longer host two upcoming major international summits, the Asia-Pacific Economic Cooperation summit and the 2019 United Nations Climate Change Conference, also known as COP25.

The APEC summit was supposed to happen on November 16th and 17th. Now we have a question: Will the Phase One Trade Deal still be signed around that time? Or even this month at all?

Could Tariff Roll-Back Negotiations Delay Phase One Deal?

China is pushing for more tariff roll-backs in the Phase One Trade Deal according to a Reuters article by David Lawder and Andrea Shalal:

China is pushing U.S. President Donald Trump to remove more tariffs imposed in September as part of a “phase one” U.S.-China trade deal, people familiar with the negotiations said on Monday.

Another source briefed on the talks said Chinese negotiators want Washington to drop 15% tariffs on about $125 billion worth of Chinese goods that went into effect on Sept. 1. They are also seeking relief from earlier 25% tariffs on about $250 billion of imports from machinery and semiconductors to furniture. 

A person familiar with China’s negotiating position said it is continuing to press Washington to “remove all tariffs as soon as possible.”

It is practically inconceivable that President Trump would agree to the removal of all tariffs he’s imposed during this trade war in the Phase One Deal. However, reducing or removing some of the tariffs could certainly happen. China wanting tariffs removed gives U.S. negotiators a bargaining chip to ask for something they want for China. However, China already feels like it is conceding more than the U.S. in the Phase One Trade Deal according an article by Wendy Wu in the South China Morning Post:

… a person familiar with the internal government discussions said there were still concerns that China might have made too many concessions while the United States should have been more responsive to China’s key concerns.

If China really feels the deal is uneven and we’re looking at a period of new demands, proposals, or compromises being put forward, negotiations could get slowed down and this deal delayed.

New Deadline for Phase One Deal

Many are calling this Phase One Trade Deal the U.S. and China are working on a ceasefire to the trade war. The most well-known detail of the deal is that it would postpone any upcoming tariff hikes the U.S. has planned on Chinese goods.

The next big date for tariff hikes on the calendar is December 15th. Most of a group of $300 billion worth of Chinese goods that had previously been scheduled for tariff hikes were postponed to that December date so those tariffs would miss international shipping’s peak season and not cause a potential negative impact on the Christmas and holiday shopping season. Originally, those December 15th tariff hikes were to be 10% increases, but that was increased to 15%.

If the Phase One Trade Deal does fail to be completed and signed by the original November 16th/17th target, the new deadline becomes December 15th to stop those 15% tariff hikes from hitting. Or at the very least postpone them.

A postponement may not be enough for China. In that South China Morning Post article, Wu wrote:

Beijing wants Washington to make a solid commitment towards removing tariffs, saying that without this move a visit to the US by President Xi Jinping would be politically difficult, according to a source familiar with internal government discussions.

Conclusion

Optimism is still high for this deal to be made imminently. New signing locations are even being suggested, with Trump suggesting Iowa. Anirudha Bhagat even reported in Market Realist article that stocks soaring because of the optimism over a U.S.-China trade deal.

However, China’s pushing for a more tariff roll-backs and desire for a bigger commitment from the U.S. on removing tariffs is enough to have us anxiously eyeing negotiations as those mid November and December dates approach.

I think everyone is ready for an end to these tariff hikes and the U.S.-China Trade War.

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The Controversy Over Arctic Shipping https://www.universalcargo.com/the-controversy-over-arctic-shipping/ https://www.universalcargo.com/the-controversy-over-arctic-shipping/#respond Thu, 31 Oct 2019 23:56:43 +0000 https://www.universalcargo.com/?p=9825 The outlook on shipping through the Arctic is changing. And I'm not just talking about the changes in climate making shipping through the North Pole possible. Ocean freight carriers are coming out and saying just because we can ship through the Arctic doesn't mean we should. That's a change from the attitude the international shipping industry has had on shipping through the Arctic.

Yes, global warming and glacier melting along with ever-developing shipping technologies are opening up Arctic routes that would greatly shorten shipping distances. Shorter distances mean less fuel, time, and money spent on shipments. Certainly, expending less fuel would mean reduced pollution, so Arctic shipping must be the green way to go, right?

Not so fast.

A quick look at recent shipping headlines is enough to see that carriers are vowing not to ship through the Arctic, citing negative environmental impact as the reason. The Arctic has a fragile ecosystem that could be seriously threatened by Arctic shipping. Also, big, ice-breaking ships could speed the melting of ice caps, which could potentially impact global climate.

Carriers, Russia, and China are deep in the controversy over Arctic shipping. Find out all about it by reading the full article in Universal Cargo's blog.

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Arctic Shipping

ARCTIC OCEAN Ð The Canadian Coast Guard Ship Louis S. St-Laurent makes an approach to the Coast Guard Cutter Healy in the Arctic Ocean Sept. 5, 2009. The two ships are taking part in a multi-year, multi-agency Arctic survey that will help define the Arctic continental shelf.

The outlook on shipping through the Arctic is changing. And I’m not just talking about the changes in climate making shipping through the North Pole possible. Ocean freight carriers are coming out and saying just because we can ship through the Arctic doesn’t mean we should. That’s a change from the attitude the international shipping industry has had on shipping through the Arctic.

Yes, global warming and glacier melting along with ever-developing shipping technologies are opening up Arctic routes that would greatly shorten shipping distances. Shorter distances mean less fuel, time, and money spent on shipments. Certainly, expending less fuel would mean reduced pollution, so Arctic shipping must be the green way to go, right?

Not so fast.

A quick look at recent shipping headlines is enough to see that carriers are vowing not to ship through the Arctic, citing negative environmental impact as the reason. The Arctic has a fragile ecosystem that could be seriously threatened by Arctic shipping. Also, big, ice-breaking ships could speed the melting of ice caps, which could potentially impact global climate.

CMA CGM, MSC, and Hapag-Lloyd Say No to Arctic Shipping

In August, CMA CGM announced it wouldn’t ship through the Arctic for environmental reasons. In a Seatrade Maritime News article the company was quoted:

“The use of the Northern Sea Route will represent a significant danger to the unique natural ecosystems of this part of the world, mainly due to the numerous threats posed by accidents, oil pollution or collisions with marine wildlife,” CMA CGM said.

“To avoid posing a greater threat to this fragile environment, Rodolphe Saadé has decided that none of the CMA CGM Group’s 500 vessels will use the Northern Sea Route along Siberia, which is now open due to climate change.”

By October, similar sentiments were being heard from Hapag-Lloyd as quoted in another Seatrade Maritime News article:

Asked about using Arctic sea routes, Jörg Erdmann, senior director sustainability at Hapag-Lloyd, said: “Hapag-Lloyd does not use the Northwest Passage or the Northeast Passage as shipping routes right now, nor are there any plans to do so in the future.

“The particles produced by the combustion of carbon-based fossils and fuels contribute to global warming, which can in turn harm our ecosystems. As long as there are no guarantees that these passages can be navigated without negatively impacting the environment, using them is out of the question for Hapag-Lloyd, as well.”

A couple weeks ago, MSC joined the previous two ocean freight carriers in shunning Arctic shipping. Greg Knowler reported on it in a Journal of Commerce (JOC) article that includes a nice little quote from MSC on the subject:

In its rejection of the Arctic option, MSC said in a statement it was convinced the 21 million containers it transports annually could be transported around the world without passing through the northern corridor.

“As a responsible company with a longstanding nautical heritage and passion for the sea, MSC finds the disappearance of Arctic ice to be profoundly disturbing,” said Diego Aponte, president and CEO of the MSC Group.

Russia Is Pushing for Arctic Shipping

Not everyone is turning away from Arctic shipping amidst environmental concerns.

Russia, for example, is like the honey badger — it doesn’t give a [expletive censored for professionalism, damn it]. Obviously having a large stake in the Northern Sea Route, Russia is pushing for Arctic shipping. In fact, Russia is offering Arctic shipping incentives and developing a state-run containership operator.

An article in Insurance Journal by Olga Tanas and Dina Khrennikova about Russia aiming to boost Arctic shipping by subsidizing higher costs — including insurance since we’re talking about an Insurance Journal article here — highlights how hard Russia is pushing for Arctic shipping. Here are some of those highlights:

Russia wants to make its Arctic waters more attractive to shippers than the Suez Canal and could be willing to compensate for potential risks to make that happen.

[Russia’s Ministry of Far East and Arctic Development Alexander Krutikov], together with Russian think-tank Skolkovo, is working on a project to create a state-run container ship operator. The company would cover the cost of any risks associated with transporting international cargoes via the Arctic’s icy waters, including possible delivery disruptions and higher insurance payments.

“The state pays for the Arctic exposure and the shippers cover the remaining costs themselves,” [Deputy Minister Alexander Krutikov] said in an interview. The resulting costs for shipping companies “should be lower than in the Suez Canal, at least at the first stage,” to promote the route.

The bulk of the 20.2 million tons of cargo which were shipped via the [Northern Sea Route] last year was LNG from Novatek PJSC’s Yamal LNG plant and crude from Gazprom Neft PJSC’s Novoportovskoye field. By 2024, Russia aims to increase shipments via the Northern Sea Route to as much as 80 million tons per year.

“The task is to make the Northern Sea Route safe and economically viable for shippers, attractive both in terms of quality and price,” Putin said at the international Arctic Forum in April. Russia aims to launch round-the-year navigation along the Northern Sea Route by 2030, according to Russian media reports, citing a draft of the Arctic Development program.

Year-round navigation would require a great deal of ice breaking at this point.

What Will Maersk Do?

Maersk, the world’s biggest ocean freight carrier, has been exploring Arctic shipping with Russia. Stine Jacobsen and Jacob Gronholt-Pedersen reported in a Reuters article published back in June:

… Maersk is now exploring the possibility of offering a service in cooperation with Russia’s nuclear-powered icebreaker company Rosatomflot, High North News reported on Friday. 

“We have experienced growing demand for transport of goods from the Far East to West Russia, which we are currently exploring the possibilities of offering together with Atomflot,” Maersk, the world’s biggest container shipping group, confirmed in an emailed statement to Reuters.

A little over a year ago, Maersk sent the first containership of goods through the Arctic. At that time, Maersk said:

This is a trial designed to explore an unknown route for container shipping and to collect scientific data. Currently, we do not see the Northern Sea Route as an alternative to our usual routes.

Maersk has long been the most influential carrier in the ocean freight industry. Typically, as Maersk goes, so goes the rest of the carriers. It will be interesting to see if this time Maersk is the one that follows, joining CMA CGM, MSC, and Happy-Lloyd in shunning Arctic shipping.

Certainly, if Maersk does decide to denounce Arctic shipping, many other carriers will do so too. Of course, that would be a change of direction for Maersk.

China Pushes Forward in Arctic Shipping

Even if Maersk does join the trend against Arctic shipping, it is unlikely we’ll see an end of it. Not only is Russia pushing hard for Arctic shipping, but China shows no signs of slowing down in its Arctic shipping ventures. In fact, state-run carrier COSCO is really ramping up its Arctic shipping.

Malte Humpert reported earlier this year in a High North News article:

This year [COSCO] aims to conduct at least 14 transits – full voyages from Asia to Europe or vice versa – along the burgeoning [Northern Sea Route]. At least ten different vessels are scheduled to travel through the Arctic, with one vessel, Tian Hui, expected to make three full transits. This number of transits in a single year would be a first for a non-icebreaking vessel.

We were posting blogs about China shipping through the Arctic all the way back in 2012 and 2013 with the articles Freight News: China Shipping Breakthrough Could Lower Freight Rates and China is Shipping Through the Arctic!

After all these years of investing in Arctic shipping, it’s hard to imagine China would move away from it because of environmental concerns. China thinks of Arctic shipping as the new Silk Road.

Conclusion

The conclusion is there is no conclusion on Arctic shipping. There’s a building controversy. Arctic shipping has many advantages to offer shippers and shipping companies, but concerns over its environmental impact are growing.

Russia and China certainly aren’t abandoning Arctic shipping, but many major shipping companies are.

Global warming is a hot-button topic. International pressure has been placed on shipping to eliminate carbon emissions. Soon pressure may be applied to the issue of Arctic shipping. However, Arctic shipping won’t be given up without a fight.

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Fire, Water & Corrosion: Scrubbers May Be Dangerous IMO 2020 Answer https://www.universalcargo.com/fire-water-corrosion-scrubbers-may-be-dangerous-imo-2020-answer/ https://www.universalcargo.com/fire-water-corrosion-scrubbers-may-be-dangerous-imo-2020-answer/#respond Tue, 29 Oct 2019 23:53:18 +0000 https://www.universalcargo.com/?p=9816 Ocean carriers' biggest answer to meeting the International Maritime Organization’s (IMO) upcoming 0.5% sulfur cap on fuel (IMO 2020) might not be the answer after all. Or better stated, it might be a dangerous answer.

The IMO 2020 solution we're talking about here are systems acting as onboard treatment plants to remove harmful gasses from ship engines and exhausts called "scrubbers."

Maritime insurance provider Gard released an article where its author, Loss Prevention Executive Siddharth Mahajan, highlighted claims of dangerous fires, corrosion, and thermal shock Gard has seen with scrubbers.

Find out all about it by reading the full article in Universal Cargo's blog.

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Scrubber Malfunction Floods Ship Engine

scrubber malfunction from @Sam_Eckett tweeted video

Ocean carriers’ biggest answer to meeting the International Maritime Organization’s (IMO) upcoming 0.5% sulfur cap on fuel (IMO 2020) might not be the answer after all. Or better stated, it might be a dangerous answer.

The IMO 2020 solution we’re talking about here are systems acting as onboard treatment plants to remove harmful gasses from ship engines and exhausts called “scrubbers.”

Maritime insurance provider Gard released an article where its author, Loss Prevention Executive Siddharth Mahajan, highlighted claims of dangerous fires, corrosion, and thermal shock Gard has seen with scrubbers.

Scrubber Related Fires

The fires have been happening with the installation and retrofitting of scrubbers to ships.

Gard has seen a few fire incidents where sparks from welding, metal cutting, and other hot work activities fell into the inner chamber of the scrubber through uncovered openings, and in one case the fire also spread to the engine room through glass reinforced epoxy (GRE) piping. Heat generated from the steel cutting for the supporting brackets, also contributed to the build up of heat inside the scrubber.

Obviously, such fires are dangerous to the people working at the ship yards and are costly. However, such fires are no peculiar to scrubbers, according to Mahajan. Fire is a danger anywhere on a ship where welding, cutting, or grinding work is happening.

Hopefully, more careful procedures like covering and double checking openings on scrubbers will be adapted to help avoid such fires in the future.

Scrubber Related Corrosion

Corrosion appears to be a bigger problem with scrubbers that, according to the Gard article, will be installed on nearly 3,000 ships by 2020.

Within a year, corrosion could present serious danger to the crew and cargo on containerships with scrubbers.

Check out what Mahajan wrote about corrosion cases involving scrubbers:

Scrubber waste is corrosive, and we have seen a few incidents where within 10-15 months of the open loop scrubber being installed, corrosion of overboard distance piece or in its immediate vicinity has resulted in water ingress into areas such as the engine room, ballast tanks and cargo holds. Absence of or poor application of protective coatings on the inside of the pipe and at the welds, along with poor application of paint on hull plating near the washwater discharge were identified as the causes of accelerated corrosion. In all these cases, temporary repairs to plug the leak were carried out by divers followed by permanent repairs at a yard.

Workmanship plays a big role in these corrosion cases, but obviously so does the very nature of scrubbers themselves in creating corrosive waste.

With a rush to get scrubbers on ships ahead of IMO 2020 that goes into effect in just a couple months, it’s scary to think we could see a bunch of water leaks in ships about a year from now.

Check out this scary video that was tweeted about a month and a half ago of water pouring down onto the main engine of a ship. The extremely dangerous situation is attributed to a corrosion related scrubber malfunction.

Scrubbers & Thermal Shock

This last scrubber related damage to a ship brings up a few issues.

Here’s the case as Mahajan describes it:

A vessel was regularly trading in Northern Europe and had installed an open loop scrubber. It had to changeover to low sulphur fuel when visiting a port that had regulations in place banning discharge of washwater from open loop scrubbers. It was still required to run the scrubber in dry mode, i.e. with washwater supply pumps turned off, to allow for the passage of hot exhaust gasses with a temperature of nearly 400° C. After departure from port, washwater pumps would be started and cold sea water sprayed through the nozzles inside the scrubber. During inspection of the scrubber by crew, damage was noticed to the nozzles, demister housing and the drains.

A survey was carried out and indicated a variety of concurrent causes, such as thermal shock, poor workmanship by the yard, for example, only spot welding done on demister supporting plates; and poor design. The scrubber had been in service for nearly two years.

Let me start at the end. The scrubber was in use for two years before it was discovered it had both design flaws and shoddy workmanship done on it.

The ocean freight industry is being flooded by scrubbers — no pun intended. With so many being rushed out onto ships to meet the need of complying with IMO 2020, the possibilities for design flaws and workers at ship yards cutting corners with tactics like spot welding are immense.

Many potentially dangerous problems could be building up in and around scrubbers that ships’ owners, captains, and crews have no idea about. Ultimately, these issues could be putting not only ships and cargo but also seamen’s lives at risk.

Conclusion

Critics of scrubbers have said the systems replace polluting the air with polluting the water. Those defending scrubbers have said the amount of pollution the systems would put in the water is negligible.

While the water pollution created by scrubbers may be much less than air pollution, if scrubbers cause ship malfunctions or floodings from corrosion or other problems caused by design flaws or shoddy workmanship, that could lead to bigger pollution events like oil spills from sunken ships.

That Gard is spotting these problems now and giving strategies to reduce the risk of more cases like the ones Mahajan highlights in the Gard article is good. But at the same time, the article is eye-opening. There seems to be a great deal of risk with all the scrubbers hitting the seas.

Still, the industry has put too many eggs in the scrubbers basket for thousands of them hitting the waters to be anything but inevitable now.

All ships using more expensive, cleaner fuels that make scrubbers unnecessary is not feasible as IMO 2020 hits on January 1st. Other options like electric and sail powered ships certainly are not ready to take over the world’s cargo vessel fleet. Going back to wind power is an idea with little traction. But electric ships are stirring much excitement. With that excitement, their potential, and electric ships being tested on the waters, their day will probably come; however, that’s not likely to happen for at least a couple more decades — at least not in a dominant way.

In the meantime, we seem stuck with scrubbers and all their potential dangers. Hopefully, scrubbers will only a short-term fix for the problem of compliance with IMO 2020. If better solutions aren’t moved toward quickly, there could be some serious problems in a year or two.

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Related Articles

Will IMO 2020 Have a Grace Period on Implementation?

Ocean Freight Industry Needs to Test Low Sulfur Fuels Now

Could Cargo Ships Get a Speed Limit?

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New Strategy Yields US-China Trade Deal Progress https://www.universalcargo.com/new-strategy-yields-us-china-trade-deal-progress/ https://www.universalcargo.com/new-strategy-yields-us-china-trade-deal-progress/#respond Thu, 24 Oct 2019 22:33:55 +0000 https://www.universalcargo.com/?p=9805 We finally have good news on the U.S.-China trade deal front. And it isn't just President Trump saying progress is being made in negotiations either. Through a tense year-plus of tariff hikes and trade war between the U.S. and China, President Trump has often said negotiations are going well. But this time, Beijing is saying progress is being made too.

That's a big change from the words and tones coming out of Washington and Beijing not matching up with each other, which we've seen more often than not throughout this last year-plus of tariff hikes and trade war.

What has changed is the strategy for the negotiations. Instead of reaching one overarching trade deal, the countries are making smaller deals in phases. This keeps difficult negotiating points from holding up all the areas the U.S. and China can reach agreement on.

Find out all about it by reading the full article in Universal Cargo's blog.

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US China Trade WarWe finally have good news on the U.S.-China trade deal front. And it isn’t just President Trump saying progress is being made in negotiations either. Through a tense year-plus of tariff hikes and trade war between the U.S. and China, President Trump has often said negotiations are going well. But this time, Beijing is saying progress is being made too.

That’s a big change from the words and tones coming out of Washington and Beijing not matching up with each other, which we’ve seen more often than not throughout this year-plus of tariff hikes and trade war.

What has changed is the strategy for the negotiations. Instead of reaching one overarching trade deal, the countries are making smaller deals in phases. This keeps difficult negotiating points from holding up all the areas the U.S. and China can reach agreement on.

Phase One of U.S.-China Trade Deal

President Trump is toting a tentative Phase One Deal that would increase intellectual property protections, which should make U.S. shippers who export to China happy, and delay upcoming tariff hikes, which should make U.S. shippers who import from China happy.

Robert Delaney, Mark Magnier, Owen Churchill, and Lee Jeong-ho reported in a South China Morning Post article:

US President Donald Trump said his negotiators have reached a “substantial phase-one deal” that will delay the implementation of more US tariffs on Chinese imports after two days of high-level trade negotiations that aimed to move the two countries closer to a conclusion of a bruising bilateral trade war.

Speaking in the Oval Office, Trump touted a deal that includes intellectual property protections and purchases of US agricultural products worth as much as US$50 billion after US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer met with Chinese Vice Premier Liu He for two days in Washington.

Phase-One Deal Timeline

In another South China Morning Post article published today (October 24th, 2019), Aidan Yao gives us a timeline of when the Phase One U.S.-China Trade Deal is expected to be finalized:

Between now and mid-November, the two sides will engage in further discussions to finalise the details of an agreement to be signed by presidents Xi Jinping and Donald Trump at the upcoming summit of the Asia-Pacific Economic Cooperation forum. While no one can rule out the risk of a reversal, the chance of a genuine truce is arguably at its highest since the trade war started.

That timeline echoes President Trump’s words on when this deal is expected to be signed, as reported in that first South China Morning Post, which was published about two weeks ago:

The “phase one” deal would take three to five weeks to write and work on a second phase deal would begin as soon as the first was signed, Trump said, adding that it might be ratified by himself and Xi during the Asia-Pacific Economic Cooperation (APEC) leaders’ meeting in Chile in mid-November.

Of course, critics point out that this Phase One deal could fall apart before being signed. Certainly, Lighthizer’s words to the president in a Cabinet meeting on October 21st allow for some doubt:

… our target is to have a phase-one deal done by the time you go to Chile.  And while there are still some issues we have to resolve, we’re working towards that goal.

However, while there are “some issues” to getting the deal written and ready to sign, China is echoing the Trump Administration’s positivity for a Phase One Deal being reached.

A Bloomberg article quotes China’s Vice Premier Liu He as saying:

“China and the U.S. have made substantial progress in many aspects, and laid an important foundation for a phase one agreement.”

According to President Trump, unlike the United States-Mexico-Canada Agreement (USMCA), when the trade deal with China is done between the U.S. and China, it can immediately be signed and enacted instead of being delayed or possibly blocked by Congress.

That means we could actually see a deal between the U.S. and China in the upcoming weeks. However, we’ll still be a long way from finished with this long, hard negotiation period.

How Many Trade Deal Phases Will There Be?

The strategy for breaking down the trade deal between China and the U.S. into multiple smaller deals leads naturally to the question of how many of these deals will there be.

The Trump Administration has mentioned three stages, but potentially, there could be as many stages as it takes to come to agreement on all the issues fueling the trade war, supposing such agreements can be reached.

The Phase One China Trade Deal is already being criticized. Critics call the issues agreed upon in it as “low hanging fruit,” dubbing this a “temporary truce” in the trade war.

President-elect Trump w/ US & Chinese flags
Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

However, any actual deal between the U.S. and China regarding trade is a big step in the right direction. Both intellectual property and the trade deficit, Trump’s biggest cited issues at the start of this trade war, are at least partially addressed.

Of course, one would definitely think phases two and three will be more difficult to negotiate than the first phase. Well, maybe not everyone. President Trump stated negotiations will be easier after the first phase of trade negotiations, at least in regards to phase two, in the Cabinet meeting brought up above:

… things in phase two are easier than phase one, but it’s so big.  Like, as an example, on the agricultural products, it’s so big that we thought doing phases would be good.  But actually, the things in the second phase are, in many ways, a lot easier than the things in the first phase.  So we’ll see how that goes.

Maybe that statement about ease is true or maybe it’s just the president’s hyperbolic form of speech. I suppose if you consider all of the trade negotiations to this point as lead up to the Phase One Deal then the Phase Two Deal would almost have to be easier.

Likely, the absolute hardest issues are being saved for Phase Three (or possibly beyond). Let’s just hope this new strategy takes trade deal negotiations all the way to the finish line on however many phases are needed.

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MSC Makes Move to Overtake Maersk as Biggest Carrier https://www.universalcargo.com/msc-makes-move-to-overtake-maersk-as-biggest-carrier/ https://www.universalcargo.com/msc-makes-move-to-overtake-maersk-as-biggest-carrier/#respond Tue, 22 Oct 2019 19:59:27 +0000 https://www.universalcargo.com/?p=9800 Maersk predicted, a couple years ago, that carrier competition would shrink to just 3 global companies. Of course, Maersk is at the top of the list of carriers expected to be left if its prediction comes to pass. After all, Maersk is, and always will be, the world's biggest ocean carrier, right?

Not so fast. It looks like the Mediterranean Shipping Company (MSC), Maersk's partner in the 2M Alliance, is setting up to surpass Maersk and become the world's number one ocean carrier by capacity.

Find out all about it and the fight it's setting up between Maersk and MSC by reading the full article in Universal Cargo's blog.

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Maersk predicted, a couple years ago, that carrier competition would shrink to just 3 global companies. Of course, Maersk is at the top of the list of carriers expected to be left if its prediction comes to pass. After all, Maersk is, and always will be, the world’s biggest ocean carrier, right?

East Coast Port & Container ShipNot so fast. It looks like the Mediterranean Shipping Company (MSC), Maersk’s partner in the 2M Alliance, is setting up to surpass Maersk and become the world’s number one ocean carrier by capacity.

Mike Wackett reports in the Loadstar:

MSC is on course to overtake alliance partner Maersk as the biggest ocean carrier by capacity within the next two years.

A new order for five 23,000 teu ULCVs from the South Korean Daewoo yard will take the Geneva-based carrier’s orderbook to 16 vessels, for a massive 305,352 teu, according to Alphaliner data.

This will propel MSC’s fleet, including current chartered tonnage, to just under 4m teu, a capacity level Maersk has said it wants to stick at.

This would not change my predictions of which three carriers — Maersk, MSC, and COSCO — would be the last standing if carrier competition did indeed dwindle so low. I don’t think anyone would make a final three list without the Danish shipping company on it. However, MSC might be making a statement about who the big dog in international shipping is.

Contrasting Carrier Strategies

What we’re really seeing here is a divergence in strategy between the world’s largest ocean carriers.

A few years ago, Maersk divided its company into two divisions — one to focus on oil, the other on shipping. At that time, Maersk shared its strategy change for ocean shipping dominance, moving away from ordering new ships, like MSC is doing now, and instead going after growth through buyouts of smaller competitors.

“If Maersk Line needs to grow, it doesn’t make sense to order new ships as there are already too many ships in the market,” Maersk’s Chairman of the Board had said. “So if we want to grow, we need to do it through acquisitions, so that we don’t flood the market with more ships.”

In his Loadstar article, Wackett quoted Maersk CEO Soren Skou as saying:

We want to remain disciplined on capacity and stick to our guidance of around 4m teu of deployed capacity because it helps us drive utilisation up and unit costs down.

It makes sense that in recent years Maersk would take “a bearish view on ordering,” as Wackett put it. Carriers have struggled with overcapacity in the ocean shipping industry, and as a result suffered some heavy losses over the years, sometimes in the billions of dollars.

In a Wall Street Journal article, Costas Paris couldn’t help but bring up “falling freight rates and weak trade growth” when writing about MSC exercising an option under a previous order to buy these new ship.

Supply and Demand in Ocean Shipping

Capacity in relation to demand is always one of — if not THE — biggest factor in driving freight rates down. It’s no wonder Paris seems to be scratching his head over this ship order as he reports in the same article that freight rates from Asia to Europe are the lowest they’ve been in three years and Trans-Pacific rates are the lowest they’ve been all year. And this is happening in traditional peak season, when rates are usually higher because of increased demand.

However, I believe most screaming we’re hearing about an impending recession because of a slower than usual peak season is alarmist. Spending is still strong and the peak season is greatly affected by front loading imports to beat tariffs because of the U.S.-China trade war. The world economy will ebb and flow as always.

That doesn’t mean more capacity in the industry couldn’t hurt carriers. Overcapacity is probably the biggest threat to carriers bottom lines. And right now carriers also have to navigate the shift to more stringent fuel emission requirements with IMO 2020. Perhaps this move and other ship orders will help move us a little closer to Maersk’s prediction of only three global carriers standing. Maybe smaller carriers will be unable to withstand more downward pressure on freight rates caused by increased capacity following IMO 2020.

On the other hand, no one can really predict how world trade will grow. I read those predictions all the time and watch the analysts constantly adjust their predictions. Perhaps demand match or exceed capacity growth. Perhaps ship scrapping will see a significant increase with older ships that can’t meet IMO 2020 requirements getting retired, stopping capacity growth.

Battle Between the Big Dogs of Shipping

Big DogOf course, ship ordering and scrapping happens all the time. International shipping is extremely volatile with no one knowing exactly how supply and demand will meet up. What’s actually more interesting is how MSC setting itself up to surpass Maersk in capacity affects things between the world’s top two ocean carriers.

Maersk does not seem happy about MSC trying to take its spot as the largest ocean carrier. Wackett’s Loadstar article ends by quoting a senior Maersk manager saying, “MSC are getting too big for their boots and we have a fight on our hands to stop them.”

Those are some strong words coming out of Maersk toward MSC. Of course, would one expect Maersk to sit back quietly as someone took its crown?

How exactly will Maersk fight MSC? Will this impact their alliance with each other. Will Maersk increase its intensity in acquiring other carriers to outpace MSC? It will be interesting to see which one — Maersk or MSC — comes out the top dog.

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7 Ways Inventory Tracking Has Changed in Modern Warehousing https://www.universalcargo.com/7-ways-inventory-tracking-has-changed-in-modern-warehousing/ https://www.universalcargo.com/7-ways-inventory-tracking-has-changed-in-modern-warehousing/#comments Thu, 17 Oct 2019 19:52:37 +0000 https://www.universalcargo.com/?p=9799 This is a guest post by Christina Morrison.

Accurately tracking and maintaining inventory has long been one of the major challenges for warehouses and distribution centers. And as e-commerce has increased in importance, so has warehousing. That adds up to a lot of new inventory management challenges for warehouse staff. 

The size and scope of these challenges has sometimes made the industry slow to change. The change, however, is unmistakably here and happening in front of our eyes. Innovators in the industry have developed robust new tools to tackle inventory issues, and warehouse and logistics staff now have unprecedented power and control over inventory management systems. These seven trends are all results of the inventory management revolution, and they’re all happening now.

Find out about these 7 trends by reading the full article in Universal Cargo's blog.

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This is a guest post by Christina Morrison.

Note from the editor: With warehousing being an important part of the supply chain for countless importers and exporters and Universal Cargo helping many such shippers, especially those who import for e-commerce business, with our Warehousing Services, we thought we’d post the occasional blog on the topic like this one from Christina Morrison.

Introduction

inventory management

Accurately tracking and maintaining inventory has long been one of the major challenges for warehouses and distribution centers. And as e-commerce has increased in importance, so has warehousing. That adds up to a lot of new inventory management challenges for warehouse staff. 

The size and scope of these challenges has sometimes made the industry slow to change. The change, however, is unmistakably here and happening in front of our eyes. Innovators in the industry have developed robust new tools to tackle inventory issues, and warehouse and logistics staff now have unprecedented power and control over inventory management systems. These seven trends are all results of the inventory management revolution, and they’re all happening now.

1. Warehousing has taken on a bigger role. 

With innovators and disruptors blazing new frontiers in e-commerce every day, it’s sometimes easy to forget what powers those innovations. The work of warehouse and distribution staff is the lifeblood of e-commerce. Without these vital elements, few of the innovations of the past two decades would be possible. 

Warehouses in the e-commerce era must often take on a variety of roles and play all of them well. Many warehouses now perform value-added services including product assembly and customization. That’s also made it even more vital to develop efficient inventory processes as warehouse staff are consistently asked to do more with the same resources. 

2. New and improved tracking systems have boosted efficiency.

As warehousing and logistics take on expanded importance in the 21st century business, inventory tracking has had to grow and evolve as well. These days, a warehouse that does its day-to-day inventory tracking manually is living in the past. Using ERP distribution software or systems that automatically adjust inventory and sync it with invoices is the new gold standard for the most successful companies in e-commerce.

That said, doing an old-fashioned physical inventory count is still occasionally necessary to ensure your inventory’s accuracy and security. Fortunately, barcode and RFID scanning technologies have been vital difference-makers in improving the efficiency of inventory counting. These technologies have become even more effective with the 21st century’s advent of the mobile-powered workplace. 

3. Mobile devices have created on-the-go offices for workers.

The tools available to the modern warehouse worker don’t stop at scanners and RFID devices. Phones and tablets are often perfect warehouse tools that offer great potential to increase picking productivity and accuracy when paired with the right software. Distribution ERP software systems now often include support for mobile apps and other options for taking your warehouse workforce mobile. 

4. Lean systems like JIT have become increasingly commonplace. 

JIT and ERP in warehousing

With more sophisticated inventory monitoring increasingly available, many businesses have begun to interrogate their inventory practices, looking for fat they can trim. Just-in-time (JIT) inventory management is one popular option for streamlining supply chain and inventory operations. This model aims to greatly reduce the amount of inventory needed in a warehouse by manufacturing and storing only enough product to fill demand

JIT can pay big dividends in reducing waste, but it requires finely-tuned coordination between different departments. Thus, it’s important that a business considering implementing these strategies have the technological resources to make it run smoothly. Manufacturing ERP systems are a virtual necessity to have a functional JIT system, and many different types of ERP manufacturing software are available to address the special challenges of each individual sector. When these systems are properly implemented and paired with a lean and responsive JIT system, the cost reductions and profitability gains can be considerable. Just ask Toyota, which pioneered these systems and used them to aid their ascent in the auto industry. 

5. Technology now allows non-traditional tracking and storage methods.

With digital inventory management technology advancing so rapidly, new and innovative practices are being introduced every day. One such method is what’s been referred to as “Chaotic Storage.” In this warehousing model, items aren’t stored according to a preset floor plan that staff memorize and use. Rather, their locations are managed entirely by the sophisticated computer models that compile the pick lists. 

So, although the storage systems might seem like anarchy at first, there’s actually a method behind them that’s apparent only to the algorithms. The results? You might recognize the name of the company that employs this system—it’s called Amazon.

6. More powerful inventory monitoring helps smooth out supply chains.

Supply chain management is increasingly a make-or-break factor for success in e-commerce. And although there are a wide variety of supply chain strategies such as drop shipping and direct sourcing now available to eCommerce retailers, most of these strategies have one major point in common: They require a well-implemented inventory control system.

Today’s technically advanced inventory monitoring systems are increasingly integrated into the hearts of supply chains themselves. By bringing together multiple systems into one, these manufacturers can gain a holistic perspective into how their supply chains behave. Through these insights, they can often turn inventory more quickly, make better use of warehouse space, improve customer service and more. 

7. Smart warehouses are setting the new pace. 

The next frontier in inventory management? Full automation—or at least a much smarter warehouse. e-commerce is only becoming more complex as channels continue to proliferate, and warehouse inventory technology is working hard to keep up.

technology and warehousing

A smart warehouse doesn’t have to be a hyper-automated, Amazon-style operation. Many businesses have started making their warehouses smarter by using automation technology to streamline their operations. Whether it’s automatic billing to reduce paperwork or computer-generated pick routes to optimize picking efficiency, there are plenty of steps that distributors can take to automate commonplace inventory tasks, often without making a particularly large investment. 

Other companies are going the Internet of Things (IoT) route, which can include everything up to implementing ambitious solutions such as robotic pickers. Whichever path an organization chooses to pursue, it’s clear that inventory systems will continue to become smarter as eCommerce expands.

Today’s inventory tracking systems are more robust, powerful and convenient than ever. Inventory management tools exist that address nearly every niche and need in manufacturing and distribution. Businesses that invest in their futures by developing robust inventory systems are likely to see improved outcomes, especially as the field’s innovators push forward to new frontiers. 

Click Here for Free Freight Rate Pricing

This was a guest post by Christina Morrison.

Author Bio

Christina serves as the General Manager for Top 10 ERP. She specializes in the development and management of Business to Business online properties which support businesses within specific industries with software evaluation tools and resources.

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U.S. Forces China Out of Port of Long Beach Terminal Ownership https://www.universalcargo.com/u-s-forces-china-out-of-port-of-long-beach-terminal-ownership/ https://www.universalcargo.com/u-s-forces-china-out-of-port-of-long-beach-terminal-ownership/#comments Wed, 16 Oct 2019 00:47:23 +0000 https://www.universalcargo.com/?p=9792 It's probably not a good idea for a country you're fighting in a trade war to control one of your biggest ports. That's a situation that was set to happen because of COSCO Shipping's deal to buy Orient Overseas International Limited (OOIL) back in 2017 and President Trump starting a battle of escalating tariff hikes with China in 2018.

OOIL owns the Long Beach Container Terminal. That's the company that operates the Long Beach Container Terminal at the Port of Long Beach. Yes, the company shares the same name as the terminal, rather than OOIL using an Orient Overseas moniker.

COSCO shipping is a Chinese state-owned company. Taking over its Hong Kong based rival OOIL means COSCO would take over Long Beach Container Terminal. You can connect those dots with the transitive property.

While the topic didn't get much press, probably because this is the generally thought of as dull topic of international shipping we're talking about here, the Trump Administration obviously didn't like the idea of the Chinese government controlling the operations at one of America's most important ports. Yes, this could fairly be classified as a national security issue.

Get the whole story by reading the rest in Universal Cargo's blog.

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It’s probably not a good idea for a country you’re fighting in a trade war to control one of your biggest ports. That’s a situation that was set to happen because of COSCO Shipping’s deal to buy Orient Overseas International Limited (OOIL) back in 2017 and President Trump starting a battle of escalating tariff hikes with China in 2018.

Who Owns the Long Beach Container Terminal?

OOIL owns the Long Beach Container Terminal. That’s the company that operates the Long Beach Container Terminal at the Port of Long Beach. Yes, the company shares the same name as the terminal, rather than OOIL using an Orient Overseas moniker.

COSCO Shipping is a Chinese state-owned company. Taking over its Hong Kong-based rival OOIL means COSCO would take over Long Beach Container Terminal. You can connect those dots with the transitive property.

While the topic didn’t get much press, probably because this is generally thought of as a dull topic of international shipping we’re talking about here, the Trump Administration obviously didn’t like the idea of the Chinese government controlling the operations at one of America’s most important ports. Yes, this could fairly be classified as a national security issue.

U.S. Response to OOIL & COSCO – Timeline

Therefore, the U.S. government required OOIL to sell the Long Beach Container Terminal. It took some time for OOIL to find a buyer and the sale to get approval, but things are moving forward with the transaction. Though that isn’t to say the process of regulatory approval is complete.

Back in April, Chester Yung reported in the Wall Street Journal:

Orient Overseas (International) Ltd. said Tuesday that it would sell the Long Beach Container Terminal business in Southern California to a consortium led by Macquarie Infrastructure Partners for $1.78 billion.

The sale by the unit of China-based Cosco Shipping Holdings Co. is being undertaken pursuant to the National Security Agreement entered into by Orient Overseas, fellow Cosco Shipping unit Faulkner Global Holdings Ltd., the U.S. Homeland Security Department and the U.S. Justice Department last July. Under that agreement, Orient Overseas had committed to divest itself of ownership of the Long Beach Container Terminal business.

Then last month, Samantha Mehlinger reported in the Long Beach Business Journal:

The Long Beach Board of Harbor Commissioners on September 9 approved an agreement transferring the lease to operate Long Beach Container Terminal from Orient Overseas International Line (OOIL) to Macquarie Infrastructure Partners (MIP).

Foreign investments in such important things to national security and the U.S. economy as ports is a serious thing. However, it is outside the consciousness of most citizens and not something talked about much in the press.

Why Is this Story Surfacing Now?

What suddenly seems to have garnered some attention to this story is a Judicial Watch article on the topic. A few people emailed me the article, asking for a blog on the topic.

I am glad the article was sent to me even though Judicial Watch is a bit too politically slanted for my taste (however, what isn’t at this point?), with one section reading:

It all started with a 40-year container terminal lease between the Port of Long Beach in southern California and Hong Kong. The Obama administration proudly signed the agreement in 2012 giving China control of America’s second-largest container port behind the nearby Port of Los Angeles. One of the Trump administration’s first big moves was to get the Communists out of the Port of Long Beach.

The article is hyperbolic, but it is not completely wrong either. China is buying up shipping assets and port terminals around the world. Take Europe for example. An article from NPR, which is politically slanted in a very different direction than is Judicial Watch, states:

In the past decade, Chinese companies have acquired stakes in 13 ports in Europe, including in Greece, Spain and, most recently, Belgium, according to a study by the Organization for Economic Cooperation and Development. Those ports handle about 10 percent of Europe’s shipping container capacity.

China’s increased control in ports also increases the country’s influence over other nations. It also gives them strategic advantages should conflict arise.

It should also be noted that on top of gaining operational control in ports around the world, 6 of the world’s 10 busiest ports last year were in China itself, according to South China Morning Post. I doubt China is relinquishing control of those ports to other countries.

There’s a certain global dominance China is striving for in international shipping and global business. The U.S. should be wary of giving China that dominance at the ports.

Click Here for Free Freight Rate Pricing

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Super Typhoon Hagibis Threatens Japan and Supply Chain https://www.universalcargo.com/super-typhoon-hagibis-threatens-japan-and-supply-chain/ https://www.universalcargo.com/super-typhoon-hagibis-threatens-japan-and-supply-chain/#respond Thu, 10 Oct 2019 21:01:29 +0000 https://www.universalcargo.com/?p=9789 Hagibis means speed in Tagalog — a fitting name for a super typhoon with winds of 160 miles per hour. Unfortunately, those winds are speeding toward one of the world's most populous cities, Tokyo.

Its winds aren't expected to be quite that strong when Hagibis makes landfall; however, they'll still be strong enough to threaten lives, destroy property, and interrupt the supply chain with likely closures of the ports of Tokyo, Kirarazu and Yokohama, according to a Freight Waves article by Nick Austin, Director of Weather Analytics and Senior Meteorologist.

Winds are still expected to be 90 to 100 miles per hour when Hagibis makes

The damage Hagibis is likely to cause would be on a historic scale according to an article by Karen Zraick in the New York Times:

Jeff Masters, a meteorologist with the magazine Scientific American, said that if Hagibis proceeds as predicted, it could become one of the most damaging typhoons in Japanese history.

“If it hits Tokyo Bay like some of the current forecasts are saying, then it’s going to be a multibillion dollar disaster,” Dr. Masters said.

The most important thing to worry about in an event like this is the lives that are in danger. Then you start thinking about the potential property damage — the loss of homes and businesses. Then there's the economic impact that affects people's lives.

Since Universal Cargo's blog is about international shipping, we share information about Hagibis's effects on the supply chain. And the potential impact there is significant.

Keep reading in Universal Cargo's blog.

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Super Typhoon Hagibis NASA image

Super Typhoon Hagibis NASA image

Hagibis means speed in Tagalog — a fitting name for a super typhoon with winds of 160 miles per hour. Unfortunately, those winds are speeding toward one of the world’s most populous cities, Tokyo.

Its winds aren’t expected to be quite that strong when Hagibis makes landfall; however, they’ll still be strong enough to threaten lives, destroy property, and interrupt the supply chain with likely closures of the ports of Tokyo, Kirarazu and Yokohama, according to a Freight Waves article by Nick Austin, Director of Weather Analytics and Senior Meteorologist.

Winds are still expected to be 90 to 100 miles per hour when Hagibis makes landfall.

The damage Hagibis is likely to cause would be on a historic scale according to an article by Karen Zraick in the New York Times:

Jeff Masters, a meteorologist with the magazine Scientific American, said that if Hagibis proceeds as predicted, it could become one of the most damaging typhoons in Japanese history.

“If it hits Tokyo Bay like some of the current forecasts are saying, then it’s going to be a multibillion dollar disaster,” Dr. Masters said.

The most important thing to worry about in an event like this is the lives that are in danger. Then you start thinking about the potential property damage — the loss of homes and businesses. Then there’s the economic impact that affects people’s lives.

Since Universal Cargo’s blog is about international shipping, we share information about Hagibis’s effects on the supply chain. And the potential impact there is significant.

Japan is the 4th biggest trading partner with the U.S. according the United States Census Bureau. With the trade war happening with China, there are even U.S. importers who have diverted their sourcing from China to Japan. Shippers who import from Japan, including those who moved their sourcing to Japan from China because of tariff hikes, will likely see delays if the goods they’re importing are scheduled to go through the major Port of Tokyo (or the ports of Kirarazu or Yokohama) in the upcoming weeks.

There is obviously also risk for those who source their manufacturing directly in Tokyo and its surrounding areas with Hagibis expected to make landfall in Tokyo Bay on Saturday, October 12th. 

Not surprisingly, as we approach Saturday, air and rail cancellations have already begun. An Accuweather article by Eric Leister and Maura Kelly reports:

As Super Typhoon Hagibis crept closer to mainland Japan Thursday, officials in the country began taking precautionary measures ahead of the storm’s potentially life-threatening impacts.

According to the Japan Times, rail operators and airlines have already begun issuing cancellation notices for scheduled departures this weekend. 

Japanese broadcaster NHK reported that All Nippon Airways was cancelling all domestic flights on Saturday to and from Haneda and Narita airports in the Tokyo area, while Japan Airlines was cancelling nearly all of its flights.

Flooding from Hagibis will likely cause street and rail closures after the storm strikes. These could add to congestion at the Japanese ports as they’re trying to recover from closure and any damage that may occur.

If you are importing from Japan or exporting to Japan through Universal Cargo, our team will communicate with you about any interruptions, delays, or issues caused by Super Typhoon Hagibis concerning your cargo.

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Shipping Strategy Tips for E-Commerce Businesses https://www.universalcargo.com/shipping-strategy-tips-for-e-commerce-businesses/ https://www.universalcargo.com/shipping-strategy-tips-for-e-commerce-businesses/#respond Tue, 08 Oct 2019 17:08:48 +0000 https://www.universalcargo.com/?p=9781 This is a guest post by Dakota Murphey.

Note from the editor: While most of our blog content is focused on international shipping itself, many of Universal Cargo's blog readers and customers import to sell online. Not only that, but Universal Cargo also helps businesses with e-commerce needs like warehousing, domestic shipping, and additional services. Therefore, we believe the following e-commerce focused article from Dakota Murphey will be beneficial for many people within our readership.

E-commerce and shipping go hand in hand. For the customer, the ability to order online is only as convenient as the satisfactory delivery of the purchased goods. According to a recent industry study, two-thirds of UK online shoppers make cross-border purchases (54%  of U.S. digital shoppers and 67% of global consumers make cross-border purchases according to Invesp), while excessive shipping costs and slow delivery times are the two main reasons why transactions are aborted. Further frustration is caused by poor packaging, wrong shipments, and unclear return policies.

For the online retailer in an increasingly crowded market, this makes order processing, fulfillment, and shipping business critical drivers for sales and returning customers. With that in mind, here are some valuable strategy tips for e-commerce businesses to consider.

Get all the tips by reading the full article in Universal Cargo's blog.

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This is a guest post by Dakota Murphey.

Note from the editor: While most of our blog content is focused on international shipping itself, many of Universal Cargo’s blog readers and customers import to sell online. Not only that, but Universal Cargo also helps businesses with e-commerce needs like warehousing, domestic shipping, and additional services. Therefore, we believe the following e-commerce shipping focused article from Dakota Murphey will be beneficial for many people within our readership.

Introduction

E-commerce and shipping go hand in hand. For the customer, the ability to order online is only as convenient as the satisfactory delivery of the purchased goods. According to a recent industry study, two-thirds of UK online shoppers make cross-border purchases (54%  of U.S. digital shoppers and 67% of global consumers make cross-border purchases according to Invesp), while excessive shipping costs and slow delivery times are the two main reasons why transactions are aborted. Further frustration is caused by poor packaging, wrong shipments, and unclear return policies.

For the online retailer in an increasingly crowded market, this makes order processing, fulfillment, and shipping business critical drivers for sales and returning customers. With that in mind, here are some valuable strategy tips for e-commerce businesses to consider.

1. Shipping as a Marketing Technique

Place information about delivery, shipping and returns front and centre on your website so they grab attention and positively influence the visitor to make a purchase. That way, your shipping strategy can be used as a marketing tool as well as the first step of an e-commerce transaction. Childsplay Clothing is a great example of how this might look:

ecommerce site marketing shipping

Delivery and shipping options offered on the site should be flexible to best serve your customers’ needs and might include:

  • Free shipping

With 9 out of 10 online customers prepared to abandon their shopping cart if fast and free shipping is not available, this shipping option also acts as a powerful marketing technique. Experiment with different ways to use it and see how it affects sales. Set a spending threshold for free shipping to apply and gently encourage consumers to spend more. Use free shipping as a promotional, time limited offer, or for special products only. Offer free shipping for standard delivery times and charge extra for next day delivery.

  • Flat rate shipping

With this option, a flat rate shipping cost is applied for each order, regardless of its value, dimensions, or physical weight. The advantage to the customer is that they know the exact cost upfront and can budget for it. Though not quite as popular as free shipping, it does encourage the purchase of bigger and bulkier items. With fixed rate shipping, the merchant sets the amount required to cover the cost of packaging and shipping.

  • Table rate shipping

A fully customizable shipping solution, table rate shipping is the exact opposite of flat rate shipping. Here, the retailer can set different shipping cost levels, taking into account a large variety of factors. These will typically include the delivery destination (e.g. radius from warehouse location), the order value, number of items ordered, the product size and weight, and specific product types.

  • Live shipping rates from a carrier

Though not typically used as a promotional strategy, obtaining exact shipping costs direct from carriers such as UPS, FedEx, or DHL has the advantage of letting customers know that they are getting the best carrier and most competitive price for their order. Live shipping rates can be a great strategy for B2B shipments where rates are calculated precisely according to size, weight, quantity, location, and value. Packaging and order fulfillment costs can be added as a surcharge.

2. Use of shipping software and tools

Streamlining your e-commerce order processing, fulfillment, and shipping processes to be most efficient is going to involve the use of business shipping tools. Basic postal services such as UPS or FedEx will schedule pickups and track orders, so that your customers know where their order is in the delivery journey and when they can expect to receive it. A business account, either direct or via a broker can offer the retailer discount shipping, and often includes free packaging supplies too.

More in-depth tools are available via shipping software that integrates with your e-commerce site and provides a much more tailored solution to your shipping needs. There are many platforms available via subscription, all of which also offer a wealth of support via live chat and email helpdesks. Here’s a good example of different plans available for both small businesses and larger online stores:

shipping plans chart

Source: ShipStation

3. Packaging as an Unboxing Experience

A successful shipping policy in place, it’s time to turn your attention to preparing the purchased goods for shipping. In today’s mature marketplace, packaging has come a long way from a humdrum functional object that protects goods in transit.

How will the items be introduced to the customer? It is important not to neglect the right design for your packaging as a golden opportunity to stand out from your competitors and make a strong brand statement. Many online customers, having been deprived of the traditional high street retail experience, are really looking forward to receiving and unpacking their order. Unboxing can be an emotional experience that leaves a lasting impression and forms a loyal bond with the customer.

While designed packaging may be less important than practicality for B2B transactions, the discerning retail customer, particularly at the designer end of the market, will definitely respond to well crafted packages, ideally with some personal touches. Here’s an excellent example of how branding and packaging can complement each other perfectly:

YouTube Video

Click Here for Free Freight Rate Pricing

This was a guest post by Dakota Murphey.

Dakota Murphey

Author Bio

Dakota Murphey has a wealth of knowledge within the international shipping industry and enjoys incorporating her experiences of travel and marketing in her writing. 

 

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6 Supply Chain Management Issues That Hurt the Bottom Line https://www.universalcargo.com/6-supply-chain-management-issues-that-hurt-the-bottom-line/ https://www.universalcargo.com/6-supply-chain-management-issues-that-hurt-the-bottom-line/#comments Thu, 03 Oct 2019 17:27:07 +0000 https://www.universalcargo.com/?p=9779 This is a guest post by Christina Morrison.

An efficient and reliable supply chain has always been key to success in many different sectors. However, with ever-increasing competition for warehouse and truck space, as well as an ongoing labor shortage, today’s supply chain environment is tighter and more competitive than it’s ever been. That leaves very little room for mistakes—but even so, many supply chain problems can be frustratingly difficult to pin down and deal with. 

That’s why businesses must practice the sometimes-overlooked art of supply chain analysis to get a better picture of which factors may be involved. When drawing up plans for a new business or troubleshooting existing issues, it’s important to proactively address the issues before they become unmanageable. 

Read the full article in Universal Cargo's blog to find out about six common supply chain management problems that can create major headaches for any business.

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This is a guest post by Christina Morrison.

An efficient and reliable supply chain has always been key to success in many different sectors. However, with ever-increasing competition for warehouse and truck space, as well as an ongoing labor shortage, today’s supply chain environment is tighter and more competitive than it’s ever been. That leaves very little room for mistakes—but even so, many supply chain problems can be frustratingly difficult to pin down and deal with. 

Supply Chain ManagementThat’s why businesses must practice the sometimes-overlooked art of supply chain analysis to get a better picture of which factors may be involved. When drawing up plans for a new business or troubleshooting existing issues, it’s important to proactively address the issues before they become unmanageable. 

The following six common supply chain management problems can create major headaches for any business. The good news is that none of them are insurmountable—but they do require smart application of resources to solve, and the first step in that process is to identify and target them. 

1. Lack of Inventory Visibility

When a supply chain doesn’t give its stakeholders a good idea of what is and isn’t in stock, it’s not performing one of the key functions of a supply chain. Out-of-stocks and surpluses can create big imbalances that hurt supply chain performance, so it’s critical for businesses to aggressively tackle these issues. 

Using a robust distribution software solution is often cited as one of the best ways to do it. These advanced software products can help a business get a handle on inventory issues, and many of them integrate with physical inventory control systems such as barcode and RFID scanners. Furthermore, new cloud-based options for these software systems have brought down their upfront and deployment costs, and there are now options available at a variety of price points. 

2. Inflexible Operations

The weather won’t always be sunny, traffic will sometimes be unmanageable, and human error will creep in. When these eventualities occur, the supply chain must have the flexibility to react without creating a major disturbance. Moreover, supply and demand themselves are often subject to volatile swings—so the supply chain must be ready.

Building a flexible supply chain isn’t easy and requires some creativity. Moreover, it requires time spent to develop good relationships with a wide network of suppliers and carriers, as well as management leadership that understands the importance of collaborative planning processes. A unilateral plan is often an inflexible one, so the businesses that find the greatest supply chain success are usually the ones able to cultivate seamless collaboration up and down the chain. 

3. Poor Resource Utilization

From suboptimal warehouse layouts to inefficient routing practices, resource utilization can be a big issue in logistics. Many businesses don’t realize that they could be leveraging their pre-existing capacities more than they do, resulting in wasteful spending and unseized opportunities. 

warehousingEnterprise resource planning (ERP) software can provide great opportunities to get a new perspective on how a business is utilizing its resources. By consolidating multiple data streams into a single flexible platform, distribution and manufacturing ERP software provides a holistic picture of a company’s supply chain health. For businesses using ERP to address resource utilization, reporting functions are a key area to look at since they can offer useful insights about resource use. 

4. Outdated Equipment

In an industry as capital-intensive as logistics, many businesses will wait until the absolute last minute possible to replace expensive equipment. It’s somewhat understandable—after all, replacing or retrofitting a fleet of fuel-inefficient tractor-trailers is hardly cheap. However, outdated equipment has its costs as well: increased materials consumption, decreased efficiency, and potential safety issues.

While few businesses are up to the challenge of replacing all of their outdated equipment simultaneously, it’s important to conduct periodic technological audits and to identify what needs replacement. That can be anything from vehicle fleets to legacy on premises ERP systems that have been supplanted by superior cloud-based models. 

5. Last Mile Inefficiency

The last mile has always been one of the most challenging elements of the supply chain, and it’s only growing in importance. Businesses that can’t meet their needs of last mile transportation are unlikely to succeed in customer-focused markets such as eCommerce retail, particularly when industry giants like Amazon are offering ever-more-competitive delivery options. 

Developing robust last mile logistics solutions requires a true focus on customer satisfaction and integrated supply chain relationships. Minimizing touch points, expanding distribution networks, and establishing solid operating procedures are all common areas for improvement on the last mile. For many businesses, adding white glove delivery also fulfills an important niche and adds significant value for the customer. Finally, predictive analytics also has high potential to improve last mile delivery thanks to its ability to help allocate resources more effectively. 

6. International Hiccups

Today’s supply chain is often a global operation, and going international multiplies the complexity of a logistics operation many times over. Customs protocols, complex regulations, and political instability can all contribute to bumpy international operations. Clearing these hurdles is a big challenge for businesses seeking to enter the international realm and, all too often, they contribute to stalled growth and failed plans. 

global businessNetworking comes to the rescue again here. Businesses need to find supply chain partners in their target international markets that can provide the help they need with customs and transportation systems around the globe. Creating international logistics connections can take a great deal of time and effort, but the returns quickly pay for themselves when it’s time to expand. And naturally, not every business will have the capacity to create a true international network—so, for those that can’t, it’s important to work with a freight broker or carrier that does have that capacity. 

The global supply chain looks much different than it did 10 years ago, and it shows no signs of slowing down its rapid evolution. Focusing on these bottom-line issues, however, can help businesses maintain a smooth supply chain that fosters growth and provides reliable performance across markets. 

Click Here for Free Freight Rate Pricing

This is a guest post by Christina Morrison.

Author Bio

Christina serves as the General Manager for Top 10 ERP. She specializes in the development and management of Business to Business online properties which support businesses within specific industries with software evaluation tools and resources.

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Shippers Can Take Advantage of Falling Freight Rates This “Peak Season” https://www.universalcargo.com/shippers-can-take-advantage-of-falling-freight-rates-this-peak-season/ https://www.universalcargo.com/shippers-can-take-advantage-of-falling-freight-rates-this-peak-season/#respond Tue, 01 Oct 2019 22:21:18 +0000 https://www.universalcargo.com/?p=9775 Normally, freight rates increase this time of year during international shipping's peak season when shippers are importing more goods than usual to stock up for the big holiday shopping season. However, "peak" is a very strong word for this season. It even seems the opposite of what's happening right now. Instead of climbing freight rates, pricing on international shipping is falling right now.

This year's weak peak season, if you still want to call it that, doesn't really come as a surprise. Last year's very bloated peak season and a series of shipping influxes from even before then to now in order to beat tariff hikes in the Sino-American trade war had shippers front-loading their imports from China. I wrote in Universal Cargo's blog back in April, after last year's engorged and prolonged peak season, that "transpacific cargo quantity could still be impacted as [2019] continues by all that cargo front-loading."

2019's transpacific cargo quantity certainly is being impacted, especially now, during the peak season. And shippers have the opportunity to take advantage of it.

Find out what's happening with freight rates and what they're projected to do through the rest of the year by reading the full article in Universal Cargo's blog.

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shipping containers supply chain

Shipping Containers Picture: https://unsplash.com/photos/tjX_sniNzgQ

Normally, freight rates increase this time of year during international shipping’s peak season when shippers are importing more goods than usual to stock up for the big holiday shopping season. However, “peak” is a very strong word for this season. It even seems the opposite of what’s happening right now. Instead of climbing freight rates, pricing on international shipping is falling right now.

This year’s weak peak season, if you still want to call it that, doesn’t really come as a surprise. Last year’s very bloated peak season and a series of shipping influxes from even before then to now in order to beat tariff hikes in the Sino-American trade war had shippers front-loading their imports from China. I wrote in Universal Cargo’s blog back in April, after last year’s engorged and prolonged peak season, that “transpacific cargo quantity could still be impacted as [2019] continues by all that cargo front-loading.”

2019’s transpacific cargo quantity certainly is being impacted, especially now, during the peak season. And shippers have the opportunity to take advantage of it.

Big Transpacific Freight Rate Drop

Hellenic Shipping News reported yesterday (September 30th, 2019):

Spot rates on the Freightos Baltic Daily Index (SONAR: FBXD.CNAW) for China-North America West Coast fell 8% from last week… Since the beginning of the year, container rates have dropped a full 34%, despite it being the middle of peak season.

The drop is even steeper compared to last year’s peak season, which saw the start of container front-loading from China ahead of tariff increases. September spot rates are now down 43% from a year earlier and down 14% from 2017.

These dropping freight rates make this a great time for shippers to import goods, especially if they’re importing from China and want to beat the next round of tariff hikes currently scheduled to hit December 15th.

However, it is not only transpacific rates from China to the U.S. that are unseasonably low right now.

Lower Rates Not Just for Transpacific

Mike Wackett reported in the Loadstar last week (on Wednesday, September 25th) that heavy freight rate drops are happening for not only USWC but also Europe:

According to Alphaliner, carriers are already touting heavily discounted rates, of below $500 per teu for Europe and 40ft rates of less than $1,100 for the US west coast.

Container spot rates, as recorded by the Shanghai Containerized Freight Index (SCFI), have fallen to a four-month low and are some 18% below the level of a year ago in a soft market weakened by trade wars and other macroeconomic concerns which have pushed supply-demand in container trades further out of kilter.

Trade War Not the Only Cause

The trade war with China obviously plays a big role in the slower than normal peak season we’re in with lower rates. However, the trade war is not the only thing causing freight rates to fall, as can be seen from Europe also seeing declining freight rates.

Last year, ocean carriers did a good job of limiting capacity to keep freight rates higher. For years, carriers have struggled with overcapacity, putting them on the wrong side of the supply vs. demand equation and creating downward pressure on rates.

Carriers are now losing grip on the control they showed over capacity in 2018. Despite carriers utilizing blank sailing, capacity looks to be heading for a steeper than healthy rise for the shipping lines.

The rest of the year looks better for shippers than carriers from reading Wackett’s Loadstar article:

[Alphaliner] warned that “further rate weakness” was expected for the remainder of the year, due to “ineffective” capacity management by container lines.

“While voiding sailings can be useful for dealing with seasonal short-term drops in cargo demand, it has proven ineffective as a sustainable strategy to cope with a structural decline in cargo volume growth,” said Alphaliner.

Carriers now had “limited room” to remove ships for extended periods due to the considerable cost overheads of keeping ULCVs idle without earning revenue, it added.

The consultant also noted that there was a “steady stream” of newbuild tonnage due to be received by carriers in the coming months and that the scrapping of older ships remained at a low level.

Carriers Could Still Have Freight Rates Bounce Back

The most stable thing about international shipping’s freight rates is they’re always volatile. Falling freight rates right now do not mean there couldn’t be a quick rise in those shipping prices real soon. In fact, there are a couple factors that suggest Alphaliner may be wrong in their assessment of the rest of the year.

Alphaliner is right that voiding sailings is not a very sustainable strategy, but it can be effective for carriers in bursts. And carriers do have a whole burst of blank sailings or sailing cancellations coming up.

On top of shipping lines making a push to reduce capacity in the face of this weak peak season, demand may be about to make a jump before the December tariffs hike hits. That’s something we’ve seen again and again during this trade war with China.

The Hellenic Shipping News article says:

“Trans-Pacific pricing remains at the mercy of the trade tariff war,” Buchman said in a note. The most recent tariff change “carries less clout than predecessors due to the short, five week notice and the limited scope of goods affected.

“Given the weak peak season prices, carriers will be banking on post-Golden Week increases, as well as the December 15 tariff change, to shore up prices. With a significantly longer four month notice, there’s a better chance that this tariff increase will lead to increased shipping – and freight rates – come October and November.”

The downturn in the trans-Pacific trade is forcing lines to cut more sailings. U.K.-based PR News Service said the Ocean Alliance plans to cut up to seven sailings from between October 15 and December 2, 2019 in order to come up with the weak demand. This comes on top of the nine weekly sailings from Asia to the U.S. West Coast that were already cancelled due to the slowdown during China’s Golden Week celebration.

The latest round of voided sailings includes two, 8,830 TEU sailings for the Port of Long Beach at the end of November and start of December. Two weekly services into the Port of Los Angeles will also be cut in mid-December, one with 13,940 TEU in capacity and another with 6,680 TEU of capacity. A Seattle sailing of a 10,800-TEU capacity service will also be dropped in December. A 9,940 TEU service into Prince Rupert will blank a December sailing, as will a 5,580 TEU service in Vancouver.

Conclusion

Now is a good moment for shippers to take advantage of shipping rates and import goods. Many shippers got ahead of the holiday season by front-loading their importing during last year’s peak season that bled into the early part of this year. However, healthy American spending may have depleted that stock a bit.

There is some disagreement from the experts as to how freight rates will behave over the next couple months. However, volatility always remains a constant in the international shipping industry. As a rule of thumb, it’s always a good idea to import while the importing is good.

Of course, there are other options than importing from China. Universal Cargo can help you with it all, whether sourcing from a different country or sourcing and shipping domestically.

Click Here for Free Freight Rate Pricing

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New Round of Tariff Exclusions on Chinese Goods https://www.universalcargo.com/new-round-of-tariff-exclusions-on-chinese-goods/ https://www.universalcargo.com/new-round-of-tariff-exclusions-on-chinese-goods/#respond Tue, 24 Sep 2019 19:35:59 +0000 https://www.universalcargo.com/?p=9769 Last week, the U.S. Trade Representative (USTR) issued more tariff exclusions on Chinese goods.

Section 301 tariffs have obviously had a big impact on U.S. shippers who import from China. And these tariff hikes just seem to keep coming, with Trump announcing late last month another 5% increase on $550 billion worth of Chinese goods.

Of course, companies have been taking advantage of the process put in place to file for exemptions to these tariffs. Jen Ackerman even reported in the Wall Street Journal (WSJ) that one company has applied for over 10,000 exemptions.

Obviously, not all exemption applications have been accepted; however, there are hundreds of exemptions the USTR has granted over three tranches.

When exemptions are granted, they can be taken advantage of by all U.S. shippers who import those goods. However, it is important to note that exemptions are not granted to every product classified by the HTS number a good is listed under on the lists. Therefore, shippers must carefully read the product descriptions also included in USTR exclusion lists to make sure the products they import qualify for exemption.

These exemptions are also retroactive, so shippers can recover money spent in duties on goods they've already imported during these Section 301 tariff hikes.

Read the full article in Universal Cargo's blog for links to the lists of all three tranches of Section 301 tariff exemptions plus quick overviews of the lists, including the amount of items in the lists and how long the exclusions last.

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President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

Last week, the U.S. Trade Representative (USTR) issued more tariff exclusions on Chinese goods.

Section 301 tariffs have obviously had a big impact on U.S. shippers who import from China. And these tariff hikes just seem to keep coming, with Trump announcing late last month another 5% increase on $550 billion worth of Chinese goods.

Of course, companies have been taking advantage of the process put in place to file for exemptions to these tariffs. Jen Ackerman even reported in the Wall Street Journal (WSJ) that one company has applied for over 10,000 exemptions.

Obviously, not all exemption applications have been accepted; however, there are hundreds of exemptions the USTR has granted over three tranches.

When exemptions are granted, they can be taken advantage of by all U.S. shippers who import those goods. However, it is important to note that exemptions are not granted to every product classified by the HTS number a good is listed under on the lists. Therefore, shippers must carefully read the product descriptions also included in USTR exclusion lists to make sure the products they import qualify for exemption.

These exemptions are also retroactive, so shippers can recover money spent in duties on goods they’ve already imported during these Section 301 tariff hikes.

Below, we’ll give links to the lists of all three tranches of Section 301 tariff exemptions plus quick overviews of the lists, including the amount of items in the lists and how long the exclusions last (from data provided by Chris Reynolds of INLT, Universal Cargo’s house customs broker):

List 1 — Section 301 Tariff Exemptions in 1st Tranche

The first tranche of exemptions includes 310 specially prepared product descriptions and covers 724 separate requests. These exemptions will be in effect for one year following publication in the Federal Register.

For the retroactive timeline, List 1 tariffs went into effect July 6, 2018.

Click here to see the first tranche.

List 2 — Section 301 Tariff Exemptions in 2nd Tranche

The second tranche of exemptions includes 89 product descriptions and covers 400 requests. These exemptions will be in effect for one year following publication in the Federal Register.

For the retroactive timeline, List 2 tariffs went into effect August 23, 2018.

Click here to see the second tranche.

List 3 — Section 301 Tariff Exemptions in 3rd Tranche

The third tranche of exemptions includes 38 product descriptions that cover 46 exemption requests. These exemptions will remain in effect until August 7, 2020, slightly less than the full year granted to the first two exemptions. The reason, according to the USTR, is a full year would result in disparities in the effective periods between exemptions granted early in the exemption process and those granted later.

For the retroactive timeline, List 3 tariffs went into effect September 24, 2018.

Click here to see the third tranche.

Click Here for Free Freight Rate Pricing

GOOD RELATED READ: Insight from VP on President Trump’s Goal with Tariffs on China

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2 Big Effects of Drone Attack on International Shipping https://www.universalcargo.com/2-big-effects-of-drone-attack-on-international-shipping/ https://www.universalcargo.com/2-big-effects-of-drone-attack-on-international-shipping/#respond Tue, 17 Sep 2019 19:14:50 +0000 https://www.universalcargo.com/?p=9753 In case you missed the big news this weekend, a drone attack hit two oil facilities in Saudi Arabia on Saturday (September 14th, 2019). Here's a brief summary from an Aljazeera news article:

The pre-dawn attacks on Saturday knocked out more than half of crude output from the world's top exporter - five percent of the global oil supply - and cut output by 5.7 million barrels per day.

You may be thinking, "What does an attack in Saudi Arabia have to do with me?" A lot, actually. Beyond the large geopolitical fallouts from these drone attacks, U.S. shippers could be significantly impacted when it comes to importing and exporting goods.

Read the full article in Universal Cargo's blog to find out about two significant impacts the drone attacks on Saudi Arabia oil facilities could have on American shippers.

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U.S.satellite image drone attack on saudi arabian oil facility

U.S. government released satellite image drone attack on saudi arabian oil facility

In case you missed the big news this weekend, a drone attack hit two oil facilities in Saudi Arabia on Saturday (September 14th, 2019). Here’s a brief summary from an Aljazeera news article:

The pre-dawn attacks on Saturday knocked out more than half of crude output from the world’s top exporter – five percent of the global oil supply – and cut output by 5.7 million barrels per day.

You may be thinking, “What does an attack in Saudi Arabia have to do with me?” A lot, actually. Beyond the large geopolitical fallouts from these drone attacks, U.S. shippers could be significantly impacted when it comes to importing and exporting goods.

Here are two significant impacts the drone attacks on Saudi Arabia oil facilities could have on American shippers.

1. Exasperated IMO 2020 Fuel Hikes

Perhaps 5% doesn’t sound like a huge number. However, 5% of the world’s oil supply being taken out is very significant when it comes to fuel prices. And this couldn’t come at a worse time as the international shipping industry is preparing for IMO 2020, when cleaner, more expensive fuel is needed for container ships to meet the International Maritime Organization’s (IMO) 5% carbon emission limit on fuel, which goes into effect on January 1st of the upcoming year.

Fuel prices, not surprisingly, have already spiked as a result of the drone attacks. Plus, it just so happens that the oil facilities hit are ones that were helping to produce the cleaner fuel needed for IMO 2020.

Greg Miller reported in an American Shipper article:

Price-reporting company Argus confirmed on Sept. 16 that Singapore marine fuel (bunker) prices were up “sharply.” It cited increases of 8-12% from Sept. 13.

According to Amit Mehrotra, transportation analyst at Deutsche Bank, “The attack will primarily impact Saudi’s production of lighter crude grades, Arab Extra Light and Arab Light. These light crude grades generally produce more mid-distillates at the expense of residual output and thus are seeing increased demand on the back of IMO 2020 sulfur fuel regulations.

“For this reason, lost production of light crude oil could make it more difficult for the global refining industry to meet the IMO 2020 demand shift while also driving a widening of fuel price spreads,” said Mehrotra, referring to the spread between low-sulfur compliant fuels and the heavy fuel oil to be used by ships with scrubbers.

This fuel bunker price increase is certainly not a problem unique to U.S. shippers. Reduced oil production and spiking prices during the IMO 2020 transition means higher costs for the entire international shipping industry. Of course, U.S. shippers are in no way immune.

2. Expedited U.S. – China Trade Deal

The trade war between the U.S. and China just seems to escalate and escalate with more and more tariff hikes and trade negotiations that show no indications of a trade deal happening soon.

The drone attacks actually might help resolve the US-China trade war with a trade deal happening sooner than its previous trajectory indicated. Upon hearing the news, my mind immediately went to the impact this attack would have on fuel prices as we’re heading for IMO 2020, but a positive impact of expediting a U.S.-China trade deal never occurred to me until I read Miller’s American Shipper article.

Miller talks about the U.S. government’s allegations that Iran was involved in the attacks as part of an Iranian strategy to threaten regional oil infrastructure in retaliation to U.S. sanctions. He then brings up how China continues to buy Iranian oil and how that’s an important talking point in upcoming trade negotiations. Then Miller adds this interesting nugget:

Furthermore, the vulnerability of Saudi infrastructure might make China more amenable to a trade deal with the U.S., because U.S. crude has just become more attractive to Chinese buyers.

China’s purchasing of U.S. oil has fallen during the trade war, but the country may need to increase its buying of U.S. crude in order to replace what it has been purchasing from Saudi Arabia.

Miller gives some good data point on this in his article:

According to data from the Energy Information Administration (EIA), China was buying over 100,000 barrels per day (b/d) of U.S. crude in late 2018, but volumes fell sharply during the first half of this year as trade tensions increased, and China instituted a 5% tariff on U.S. crude last month. China is importing around 1.8 million barrels per day (b/d) of crude from Saudi Arabia, accounting for a quarter of Saudi Arabia’s 7.3 million b/d in (pre-attack) crude exports.

Miller makes a good point when he writes, “If it is in China’s interests to buy U.S. crude as an alternative to Middle East crude due to geopolitical unrest threatening its main supplier in that region, it could create an additional incentive to get a trade deal done…”

Obviously, a trade deal getting done between the U.S. and China would be great news for U.S. shippers who import or export from or to China. However, there is another possible outcome I could see.

What if China decided to up its crude purchasing from Iran to replace Saudi Arabia as its top oil supplier? This would increase tensions between China and the U.S., seriously hindering the completion of a trade deal.

Hopefully, the economic importance of trade between China and the U.S. plus political backlash from purchasing more oil from Iran if America’s evidence of Iran being responsible for the attacks is compelling would push China toward U.S. crude over Iranian crude, resulting in an expedited trade deal rather than increased tensions.

Conclusion

Obviously, the geopolitical implications of the drone attacks on Saudi Arabia’s oil facilities go way beyond its effects on international shipping.

With the U.S. indicating the attacks came from Iran and gathering evidence to present at the UN General Assembly, President Trump is going to have to decide how to respond.

Many would deem a military response appropriate. However, it’s hard to imagine Trump making a move like targeting Iranian oil facilities with a missile strike resulting in anything other than escalation. Getting the U.S. involved in another Middle-Eastern war would likely be a highly unpopular thing, which might give a president heading into an election year pause. Of course, doing nothing would show weakness, and likely also hurt Trump in the 2020 election.

Hopefully, the president will make the correct decision, regardless of its re-election implications. However, I wouldn’t want to be the one who had to decide what the right thing to do is.

While we here at Universal Cargo have to keep an eye on how events around the world are affecting international shipping, everyone should keep an eye on this situation, as such an act of aggression could lead to farther reaching conflict and war.

Click Here for Free Freight Rate Pricing

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3 Consequences of Brexit That Will Affect U.S. Shippers https://www.universalcargo.com/3-consequences-of-brexit-that-will-affect-u-s-shippers/ https://www.universalcargo.com/3-consequences-of-brexit-that-will-affect-u-s-shippers/#comments Thu, 12 Sep 2019 17:21:47 +0000 https://www.universalcargo.com/?p=9751 This is a guest post by Jamie Costello.

The UK is relatively small, yet it’s one of the globe's most influential and important regions to world trade and economy. This encouraged a major global interest in the UK Referendum vote and the announcement of Brexit. On June 23rd 2016, the majority of the UK nation chose to leave the EU, which is now due to happen on October 31st, 2019. UK residents decided through the vote that the costs of free movement with immigration outweighed remaining in the unified monetary body.

Although the vote, in essence, relates predominantly to the relations between the European Union and the UK, the vote is still likely to have an affect globally on industries and other countries across the world. In particular, U.S. shipping is likely to be affected by Brexit, and there are several consequences that it can have that businesses should be aware of.

Read the full article to find out about 3 big consequences of Brexit that will affect U.S. shippers.

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This is a guest post by Jamie Costello.

BrexitThe UK is relatively small, yet it’s one of the globe’s most influential and important regions to world trade and economy. This encouraged a major global interest in the UK Referendum vote and the announcement of Brexit. On June 23rd 2016, the majority of the UK nation chose to leave the EU, which is now due to happen on October 31st, 2019. UK residents decided through the vote that the costs of free movement with immigration outweighed remaining in the unified monetary body.

Although the vote, in essence, relates predominantly to the relations between the European Union and the UK, the vote is still likely to have an affect globally on industries and other countries across the world. In particular, U.S. shipping is likely to be affected by Brexit, and there are several consequences it can have that businesses should be aware of.

Here are 3 consequences of Brexit that will affect U.S. shippers:

1. The Weak Pound

When it was announced that the UK will be leaving the European Union, the British pound fell by 7.5 percent against the U.S dollar. This means that goods sold by U.S. retailers will be automatically more expensive for consumers from Britain, and exports will be less affordable to the UK. This would also affect the U.S. farming and manufacturing sectors when it comes to trade and shipping. The UK is currently America’s 2nd largest market for exports.

2. Impact on UK hubs

For the UK to leave the EU, it’s not going to be an overnight process. This means that it’s unlikely to affect shipping services straight away and there will be time before any dramatic changes will come into place. In the long term, however, there may be difficulties for those in the e-market and online shopping business. This is because many of their hubs and warehouses are based in the UK and it will likely encourage U.S. sellers to move away their warehouses currently based in EU countries to avoid dealing with new market rules formed internally.

3. Border Clearance Issues

There is already a border issue occurring internally in the UK with the backstop agreement currently being negotiated. There will be a similar issue when it comes to the shipping and clearance of goods that are being transferred between the UK, the EU and the U.S. With many hubs for businesses and retailers currently based in the UK, transferring goods between customs barriers from the UK into the EU won’t be as easy as it is today with the other 27 member states. As a result, there will be cost and time increases when goods require to be processed. 

Conclusion

The UK exiting the EU isn’t exactly the ideal scenario for many industries. Luckily, there won’t be such a large, sudden impact on the shipping industry as compared to the impacts on such things as applying for a UK visa, drops in the economy affecting the dollar, and new trade agreements, which will bring up new scenarios. However, long term impacts should be considered and preparation is key to making sure that the impacts aren’t too dramatic.

Click Here for Free Freight Rate Pricing

This was a guest post by Jamie Costello.

Author Bio

Jamie CostelloJamie Costello is a Legal Assistant for a small PR company based in the UK. He’s had a career in the legal path for almost 2 years and brings with him great knowledge taken from his past roles and education. He tends to regularly research topics that surround legal issues to keep up to date with his industry, and for this particular article, he refers to the research he’s been doing around Brexit and its legal impact on topics such as employment and career opportunities.

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FMC Finally Addresses Unfair Demurrage & Detention Charges https://www.universalcargo.com/fmc-finally-addresses-unfair-demurrage-detention-charges/ https://www.universalcargo.com/fmc-finally-addresses-unfair-demurrage-detention-charges/#comments Tue, 10 Sep 2019 18:16:01 +0000 https://www.universalcargo.com/?p=9746 The Federal Maritime Commission (FMC) announced in a press release on Friday (September 6th, 2019) that it would "address detention and demurrage charge issues" by adopting a set of recommendations Commissioner Rebecca Dye made.

Unfair Practices and Fees

One of shippers' biggest complaints in the international shipping industry is unfair detention and demurrage fees carriers levy against them. Actually, it's not just shippers making these complaints but trucking companies and freight forwarders too.

They are right to complain.

Despite best efforts to pick up cargo from port terminals and return equipment on time, truckers, shippers, and freight forwarders are often hit with big fees over delays completely out of their control. Demurrage and detention fees really seem to have ballooned over the last decade, not coincidentally during a time when ocean carriers, collecting the fees, have struggled with profitability.

Continue reading the article in Universal Cargo's blog and learn about Commissioner Dye's recommendations.

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The Federal Maritime Commission (FMC) announced in a press release on Friday (September 6th, 2019) that it would “address detention and demurrage charge issues” by adopting a set of recommendations Commissioner Rebecca Dye made.

Unfair Practices and Fees

One of shippers’ biggest complaints in the international shipping industry is unfair detention and demurrage fees carriers levy against them. Actually, it’s not just shippers making these complaints but trucking companies and freight forwarders too.

They are right to complain.

Despite best efforts to pick up cargo from port terminals and return equipment on time, truckers, shippers, and freight forwarders are often hit with big fees over delays completely out of their control. Demurrage and detention fees really seem to have ballooned over the last decade, not coincidentally during a time when ocean carriers, collecting the fees, have struggled with profitability.

In a Journal of Commerce (JOC) article back in February, Ari Ashe wrote:

Ten years ago, these fines were rare, but today they are quite common. Beneficial cargo owners (BCOs) want to retrieve their goods from ports, but terminal congestion, bad weather, chassis shortages, or other unforeseen factors can get in the way. It’s easy to pay $10,000 in fines per year in detention and demurrage, but that figure can balloon to $100,000 or more in certain circumstances. Detention and demurrage weren’t major issues until 2014, when longshore labor strife paralyzed ports on the US West Coast and wreaked havoc on the supply chains that depend on them. Income from these penalties increased 90 percent in 2014 and 86 percent in 2015, according to the Federal Maritime Commission. They jumped 30 percent in 2017 and remain above pre-2014 levels.

Andrew Nutting, senior logistics manager for 1A Auto, told JOC.com some BCOs pay $1 million annually in penalties, but most do not. Shippers moving more than 500 containers annually, however, generally incur more than $10,000 in detention and demurrage fines, and a six-figure total is not uncommon, he said.

Obviously, these big demurrage and detention costs are unfair to shippers and ultimately affect prices consumers have to pay for goods. Therefore, shippers are right to turn to the FMC over this problem. After all, the FMC’s mission is to “ensure a competitive and reliable international ocean transportation supply system that supports the U.S. economy and protects the public from unfair and deceptive practices.”

Commissioner Dye’s Recommendations

Commissioner Rebecca Dye led an 18-month fact finding investigation into demurrage and detention fees. While you can read her full Fact Finding 28 Final Report here, Commissioner Dye also made recommendations to her fellow FMC commissioners in a letter dated August 27th, 2019. Here are the recommendations in her letter:

I recommend that the Commission issue the attached Notice of Proposed Rulemaking, which proposes an interpretive rule that clarifies how the Commission will assess the reasonableness of demurrage and detention practices. The rule flows from the longstanding principle that practices imposed by tariffs, which are implied contracts by law, must be tailored to meet their intended purpose. In the case of demurrage and detention charges, the purpose is to act as financial incentives to cargo interests to retrieve cargo and return equipment.

These financial incentives operate to ensure that cargo interests do everything customarily required to be positioned to retrieve cargo and return equipment within the time allotted. Absent extenuating circumstances, however, when incentives no longer function because shippers are prevented from picking up cargo or returning containers within time allotted, charges should be suspended.

Focusing on this incentive principle and cargo availability, and supporting innovations such as a “push notice” of container availability, will improve port performance and overall freight delivery system effectiveness.

The interpretive rule also includes other factors that the Commission may consider as contributing to the reasonableness inquiry. These considerations include the existence, accessibility, and transparency of demurrage and detention policies, including dispute resolution policies (and related concepts such as clear bills and evidence guidelines), and clarified language.

Also, consistent with my Final Report, I recommend that the Commission establish a Shipper Advisory Board to allow us to evaluate the implementation of the Fact Finding No. 28 recommendations and to obtain the advice of American importers and exporters concerning other Commission matters.

I further recommend that the Commission continue to support the Memphis Supply Chain Innovation Team in its efforts to improve the performance of the international ocean container freight delivery system.

Push Notifications

The “push notice” idea Commissioner Dye mentions in her recommendations is a good one but also brings some controversy as it’s a tool terminal operators would have to create. Some terminal operators say, possibly out of not wanting the time and cost burden of creating an automated system to notify cargo interests and truckers that their cargo is available for pickup, “push notifications” won’t be effective.

Here’s an excerpt from the Fact Finding 28 Report that discusses “push notifications”:

Some marine terminal operators were amenable to the idea of “push notifications” that affirmatively notify a cargo interest or trucker that a container is available. But others stated that there was nothing unreasonable about relying on cargo interests to track their own cargo. One marine terminal operator suggested that it could be useful if a system could automatically generate a notification when the availability clock started, similar to how airline passengers receive an email notifying them that they can check in for a flight. Another terminal operator pointed out that it provides advanced availability functionality that allows cargo interests to determine the future availability of a container, and make an appointment, five days prior to the arrival of a vessel.

The problem, according to some marine terminal operators, was that cargo interests and truckers do not use available information to their advantage and often wait until the last free day to attempt to retrieve containers. In other words, the terminal operators stated, they are being asked to create tools that are not effective for the market.

Cargo interests stated that the Commission should require carrier websites to uniformly provide information about container availability, free time, and holds. They also believed that marine terminal operators should notify carriers about, and post on their webpages, any yard closures. Cargo interests also advocated a push notification system wherein carriers would send notification of container availability to cargo interests via email or other electronic means. Ocean transportation intermediaries asserted that vessel arrival notices should be updated after vessel arrival to provide information about the last free day and the free time window for container return.

Final Thought

Addressing the demurrage and detention fee issue in international shipping is overdue, but shippers should be happy to finally see something being done.

Ultimately, let’s hope the adoption of Commissioner Dye’s recommendations will result in shippers being protected from unfair demurrage and detention charges, even making such fees rare like they were a decade ago.

Click Here for Free Freight Rate Pricing

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6 Risks in International Trade & How to Manage Them https://www.universalcargo.com/6-risks-in-international-trade-how-to-manage-them/ https://www.universalcargo.com/6-risks-in-international-trade-how-to-manage-them/#comments Tue, 03 Sep 2019 16:55:03 +0000 https://www.universalcargo.com/?p=9735 This is a guest post by Ummul Fidha.

Risk Management Picture — Nick Youngson CC BY-SA 3.0 Alpha Stock Images
Businesses involved in international trade have to deal not just with risks locally but also other business development risks such as ethics, transportation, intellectual property, credit, currency, and a lot more. 

These risks can obstruct the smooth running of the business, and hence, appropriate measures need to be taken to limit their effects. Read the full article in Universal Cargo's blog for 6 risks commonly faced by businesses involved in international trade and the effective ways to manage them.

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This is a guest post by Ummul Fidha.

Risk Management

Risk Management Picture — Nick Youngson CC BY-SA 3.0 Alpha Stock Images

Businesses involved in international trade have to deal not just with risks locally but also other business development risks such as ethics, transportation, intellectual property, credit, currency, and a lot more. 

These risks can obstruct the smooth running of the business, and hence, appropriate measures need to be taken to limit their effects. Here are 6 risks commonly faced by businesses involved in international trade and the effective ways to manage them. 

1.   Credit Risk 

Counterparty or credit risk is the risk associated with not collecting an account receivable. There are numerous ways in which businesses can guard themselves against this risk while expanding to global markets. 

✔     Take payment in full [or a decent percentage of money upfront]

Taking 100 percent of the amount owed, or a fair percentage, before rendering the services at the time of the placement of an order can be used to cut down administrative expenses and finance charges. This eliminates the risk of non-payment. Although this may be difficult for new businesses and exporters, it can be worked out with little negotiations. 

✔     Letter of credit 

This refers to a commitment issued by a financial institution wherein the institution agrees to pay a set amount to the service/product provider in exchange for delivery within a set timeframe. This offers protection to both the seller and the buyer. It includes a detailed description of the shipment as well as the terms of sale.

There are several other techniques available for limiting credit risk. You can try what works best for you. 

2.   Intellectual Property Risk

This risk involves third parties making unauthorized use of the strategic information of a business or property that affects the value of services or products offered by a business, either directly or indirectly. 

These risks increase tenfold when doing business overseas because of the difficulties that exist in defeating business rights remotely. This can be avoided by registering the corporate names as well as the trademarks before signing an agreement in any country. 

It will also be beneficial to constantly modify and improve your services or products to remain ahead of the competition.  

3.   Foreign Exchange Risk

This usually concerns the accounts payable and receivable for contracts that are, or soon would be, in force. Foreign exchange rates are in flux constantly. Hence, businesses would be forced to make conversions of the funds generated overseas at rates lower than what is budgeted. 

This is the reason why it is crucial for businesses to have an appropriate exchange policy in place. This will help in –

●     Stabilizing profit margins over sales made 

●     Mitigating the negative impact of fluctuating rates on sales and procurements 

●     Enhancing cash flow control 

●     Simplifying domestic and foreign pricing

Businesses need to identify foreign exchange risks to frame an effective policy. It is also essential to recognize the tools available for hedging these risks and carry out a comparative analysis on a regular basis for selecting the best tool available. 

4.   Ethics Risks  

It is vital to maintain a high ethical standard when offering any product or service in a global market. Companies may face certain questions pertaining to their values at any point while doing international trade

Social conditions and customs vary from country to country, and hence, it is necessary to be especially vigilant. You need to make sure that your foreign suppliers and partners adhere to your values and rules regardless of where they operate from.     

5.   Shipping Risks 

Whether you are shipping goods abroad or locally, you may face issues such as contamination, seizure, accident, vandalism, theft, loss, and breakage. Before shipping any goods to the buyers, you need to make sure to have sufficient insurance

Stacked cargo containers

The International Chamber of Commerce has laid down rules for each party involved in international trade and their responsibilities with regard to shipping risk. It is best to go through the rules and take necessary precautionary steps. 

6.   Country and Political Risks

These are risks such as non-tariff trade barriers, central bank exchange regulations, or ban on the sale of certain products in specific countries. For instance, several countries have banned products obtained from threatened animal species. 

There would be certain things that would never be under your control, such as sanctions, and you must be prepared in order to overcome them. You can find more information on such restrictions by checking the official website of the Ministry of Foreign Affairs and Trade for the specific country. 

✔     Exchange Control Regulations 

Several developing nations operate certain exchange control regulations that are associated with the flow of money from and to their country. You need to identify if these regulations are effective in the country which you intend to trade with. This is because these can delay your payments.

✔     Prohibited Goods

You need to make sure to carry out basic research on the import/export allowances offered by the country you are interested to carry out your business in. There are many products that are prohibited or restricted in some countries. 

For instance, what is acceptable in China may not be allowed in New Zealand. You need to make sure to check out all the rules pertaining to your target market in the country you are interested to carry out trade with.    

Whenever you are exporting certain products, it is essential to get them verified so that they meet the requirements of the country you would be exporting to. It is mandatory to obtain an export certificate before you actually commence trading globally. 

Customs will then verify the details associated with your export certificate. It is better to be familiar with all the rules that you are governed with while trading globally, rather than face hurdles at a later stage. This will help you operate your business without any hassles once you have set your roots. 

Click Here for Free Freight Rate Pricing

This was a guest post by Ummul Fidha.

Author Bio

Ummul Fidha works as a Growth Assistant at AirTract.Com, a social platform wherein people ask questions, write articles, and share knowledge and experience. A Math graduate, who turned her passion into digital marketing, Fidha is now keen to develop SEO friendly content and build website traffic. She loves to dedicate her leisure time to creative stuff and design arts.

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What VP Pence’s Speech Says About China Trade Deal & China’s Response to Latest Tariff Announcement https://www.universalcargo.com/what-vp-pences-speech-says-about-china-trade-deal-chinas-response-to-latest-tariff-announcement/ https://www.universalcargo.com/what-vp-pences-speech-says-about-china-trade-deal-chinas-response-to-latest-tariff-announcement/#comments Thu, 29 Aug 2019 18:32:51 +0000 https://www.universalcargo.com/?p=9733 With President Trump's announcement last week that he's raising tariffs again on Chinese goods, we're seeking insight into trade negotiations between the countries. Is there anything coming out of the Trump Administration to give us hints on how trade negotiations are going with China? Is a trade deal close? Far away? Will the trade war with China keep escalating and escalating? Or is there an actual end in sight?

While the answers to these questions elude, there may be some real clues in a speech Vice President Mike Pence gave. He spoke at the Detroit Economic Club just days before the president announced an additional 5% increase on tariffs across approximately $550 billion worth of Chinese goods to go into effect on October 1st (perhaps not coincidentally, the 70th anniversary of deceased Chinese Communist Party leader Mao Zedong establishing the People’s Republic of China).

In the last blog, we promised to break down what we can take away about the trade war with China from the VP's speech at the Detroit Economic Club. Now it's time to deliver.

Read the 3 big takeaways about the trade deal negotiation with China from Vice President Pence's speech and an update on China's response to Trump's latest tariff announcement in the full article in Universal Cargo's blog.

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With President Trump’s announcement last week that he’s raising tariffs again on Chinese goods, we’re seeking insight into trade negotiations between the countries. Is there anything coming out of the Trump Administration to give us hints on how trade negotiations are going with China? Is a trade deal close? Far away? Will the trade war with China keep escalating and escalating? Or is there an actual end in sight? While the answers to these questions elude, there may be some real clues in a speech Vice President Mike Pence gave. He spoke at the Detroit Economic Club just days before the president announced an additional 5% increase on tariffs across approximately $550 billion worth of Chinese goods to go into effect on October 1st (perhaps not coincidentally, the 70th anniversary of deceased Chinese Communist Party leader Mao Zedong establishing the People’s Republic of China). In the last blog, we promised to break down what we can take away about the trade war with China from the VP’s speech at the Detroit Economic Club. Now it’s time to deliver. Below are 3 takeaways about the trade deal negotiation with China from Vice President Pence’s speech. After that, there’s a quick update on China’s response to Trump’s latest tariff announcement.

1. USMCA Talk May Mean Trade Deal Is Not Close

One success the Trump Administration has had is negotiating the United States-Mexico-Canada Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA), but there’s an asterisk on that success: The deal has to be ratified in order to actually go into effect. With that denouement to the USMCA drama in mind, the president and vice president are urging Congress to pass the deal. Of course, they’re up against some Democrats, who would love to take this victory away from Trump, working to block the deal’s passage. That means USMCA held a prominent place in the VP’s speech, and it is relevant to the China Trade War discussion. After, as expected, talking about the economic benefits of the USMCA and how it’s superior to NAFTA, the vice president went on to say, “… make no doubt about it, by passing the USMCA, we’ll strengthen the president’s hand in negotiations with China.” This makes me think despite things like Trump saying “China wants a trade deal badly” and “China called last night” to resume trade negotiations, as reported by the BBC (on August 27th, 2019), that the administration doesn’t think we’re that close to a trade deal with China. This is evidence on top of evidence, really. Not only is the president continuing to increase tariffs, but he’s also looking for other tools to increase U.S. leverage on China (labeling China as a currency manipulator is a smaller tool President Trump has recently added to his leverage). Looking at the USMCA as potential leverage may be the closest thing to an admittance by the administration that it’ll take more than tariffs to get China to come to a trade deal that meets U.S. demands. Perhaps this is nothing more than the vice president saying the USMCA provides the U.S. with more leverage against against China. The deal certainly should help strengthen U.S. trade in North America, in turn, helping lessen the impact of decreased trade with China. However, even if Vice President Pence speaking about the USMCA was strictly to raise public support for the deal and further urge Congress to pass it, bringing it up as something to “strengthen the president’s hand in negotiations with China” when most don’t predict ratification —if the deal is indeed ratified — happening before year’s end does not bode well for a Sino-American trade deal being reached soon. I would also add it makes it appear that the Trump administration itself does not believe a trade deal will be reached soon.

2. Politics Outside of Economic Factors Play Large Role in Trade Negotiations

Despite emphasis on the financial/economic implications of our trade situation with China, the vice president brought up several political issues the United States has with China. You can see this page to check out these excerpts from Pence’s speech:
17 years ago, America agreed to give Beijing open access to our economy. We brought China into the World Trade Organization. Previous administrations—of one party and another—made the choice in the hope that freedom in China would expand in all of its forms if we opened our markets to them. And I’m not talking about just economically but also politically, with a new found respect for classical liberal principles, the rule of law, private property, personal liberty, and religious freedom. We hoped to see an expansion of the entire family of human rights in China.
But over the last 17 years, we haven’t seen it. In fact, the Chinese communist party has used an arsenal of policies inconsistent with free and fair trade. Policies like tariffs and quotas, currency manipulation, forced technology transfer, intellectual property theft, and industrial subsidies, all the while not becoming a freer society, but actually in so many ways, moving China in the opposite direction.
… for the United States to make a deal with China, Beijing needs to honor its commitments, beginning with the commitment China made in 1984 to respect the integrity of Hong Kong’s laws through the Sino-British joint declaration. As the president said yesterday, it’ll be much harder for us to make a deal if something violent happens in Hong Kong. And I want to assure you our administration will continue to urge Beijing to act in a humanitarian manner. And urge China and the demonstrators in Hong Kong to resolve their differences peaceably.
Yes, the unrest happening right now in Hong Kong as civic rights demonstrators protest the Chinese government and China moves troops over the border, where it has stockpiled soldiers and tanks, is playing a role in these negotiations. There are those who fear a repeat of the Tiananmen Square Massacre, when China shocked the world by sending in its military and killing hundreds of student protesters, who criticized government corruption and called for democratic reform. A quick list of other political issues, beyond trade practices, Vice President Pence brought up are mainly human rights in nature:
  • Rule of Law
  • Private Property
  • Personal Freedom
  • Religious Persecution
Presidential candidates and presidents have long bemoaned civic rights, or the lack thereof, in China. However, our presidents have generally been weak to act on these convictions. President George H. W. Bush worked hard to maintain a “friendly” relationship with China both before and after the atrocity at Tiananmen Square, which happened the same year he went from vice president to president. One of the factors that helped Bill Clinton wrest away what would have been H. W. Bush’s second presidential term (though Ross Perot and President Bush’s “Read my lips — no new taxes” campaign promise biting him in the butt are probably more memorable factors) was criticizing Bush’s softness on China’s human rights. However, President Clinton underestimated the complexity of the Sino-American relationship and flip-flopped on the topic, removing all human rights issues he confusedly and rather lamely tried to attach to the trading status of China. It might have been one of the popular president’s greatest failures during his incumbency. On his way to presidential election, George W. Bush called President Clinton out on China. In the early days of his presidency, it actually looked like President George W. was going to be stronger on China than his predecessors, despite family history. Then 9/11 hit, and almost all of his shows of strength went toward Iraq (which many would call a misdirection). With all the enemies his war on terror and Iraq brought, President George W. Bush’s China policy ended up looking much more like his father’s friendly relations one. When President Barack Obama followed the younger President Bush in office, China was experiencing huge economic growth that well out-paced America’s, and China was also growing more aggressive. President Obama, like President Trump, bemoaned China’s unfair trade practices. He also implemented tariffs in an attempt to curb China’s dumping practices in the U.S. Of course, not nearly to the level President Trump would later levy duties. On the political side, President Obama’s rhetoric bemoaning China’s human rights violations sounded good. There was hope for action, but in practice, President Obama was much more of a diplomat than a challenger to China. In fact, by the end of his presidency, there was very little to be heard about human rights in his dealings with China, even though he was very public about the matter earlier on. Perhaps the bigger indictment on President Obama’s China policy is he did nothing to stop China from building militarized islands in the South China Sea as the country aggressively pushed its claim on virtually all of the sea’s waters over any claims of its neighboring countries or claims of international waters, where the world’s busiest international trade shipping lanes are. The Obama administration did, at least, send warships through the disputed waters, raising tensions between the countries as the Obama presidency was nearing an end. Ultimately, even though each president saw human rights violations and political issues with China, each chose trade and ease of relationship over action for political, social, or humanitarian change in China. President Trump seems to be going down a much more difficult path. China will not easily enact outside-desired change or give in to political, social, or humanitarian demands. Therefore, these issues playing a role in the trade negotiations and/or deal, regardless of such demands being right, inevitably shrink the odds of a deal being reached in a shorter rather than longer timeframe.

3. Trump’s Primary Goal Not Deal With China

Does President Trump want a trade deal with China? Absolutely. I do believe, however, there’s another outcome with which he’d be just as, if not more, happy. That outcome is manufacturing moving away from China back to the U.S. Over and over again, Vice President Pence brought up American jobs in his speech. Right at the top, he specifically talked of Trump’s primary focus on American manufacturing, saying, “Though one administration after another allowed unfair trade deals to hollow out American manufacturing all across the heartland of this country, this president pledged to put American jobs and American workers first, and that’s exactly what we’ve done….” As Pence began his motif of American jobs, workers, and manufacturing with the above quote, he pointed to a list of items to support how the administration kept Trump’s pledge. His list included withdrawing the U.S. from the Transpacific Partnership, putting China on notice “that the era of economic surrender is over”,  opening up European markets to more American agricultural products, negotiating a new trade deal with South Korea, and negotiating the USMCA. But I think one of the most telling things in the vice president’s list was when he said the following: “… we appointed the toughest and smartest trade negotiators in the history of this country to fight on behalf of American workers.” The trade negotiations aren’t as much about beating China as they are about increasing U.S. manufacturing and jobs, which is foundational in economic growth. Though he’d be happier with a deal that includes a large increase of U.S. manufactured goods being exported to China, I think President Trump would be perfectly happy to levy enormous tariffs on China and never reach a deal if it meant U.S. moved a majority of its Chinese sourcing to domestic manufacturing. Of course, that would mean sourcing couldn’t just switch to importing from other countries, something we’ve already seen starting to happen in 2019. President Trump obviously realizes his goals of increased U.S. manufacturing require more than just a change in the trade situation with China. China just gets the most attention because its our biggest trade partner with the biggest trade deficit and the most obvious unfair trade practices. President Trump is taking aim at all the countries the U.S. has a trade deficit with. He said at the recent G7 summit that all the countries with which the U.S. has trade deficits “have no choice” but to make trade with U.S. fair or the U.S. won’t continue to deal with those countries:
Our farmers have been hurt. Our workers have been hurt. Our companies have moved out and moved to Mexico and other countries, including Canada. Now we are going to fix that situation. And if it’s not fixed, we’re not going to deal with these countries…. So we’re negotiating very hard tariffs and barriers. As an example, the European Union is brutal to the United States…. The gig is up…. They can’t believe they got away with it. Canada can’t believe they got away with it. Mexico! We have a hundred billion dollar trade deficit with Mexico… … a lot of these countries actually smile at me when I’m talking. And the smile is we couldn’t believe we got away with it…. It’s going to change. They have no choice. If it’s not going to change, we’re not going to deal with them.
This whole shifting of manufacturing back to the U.S. is a big part of why the USMCA is such an important deal for the Trump administration. Vice President Pence’s speech spent time on the USMCA’s potential to increase U.S. manufacturing:
… the USMCA levels the playing field for American workers and puts American jobs first. Under the USMCA, 75% of auto parts in duty free cars must be made right here in North America and 40% of them must be made by workers making what is essentially the hourly average wage here in the United States. We believe that will eliminate the historic incentive to manufacture outside the United States. It’ll eliminate the incentive to move jobs south of the border. The USMCA is a huge improvement on NAFTA. In fact, according to the International Trade Commission, the USMCA will add more than $68 billion to our economy and create another 176,000 American jobs.
Thus, President Trump wants to negotiate deals with countries around the world that will increase U.S. manufacturing, as he believes the USMCA will, but ultimately appears to have no problem hindering trade with countries with which such deals can’t be reached. The primary goal is not trade deals — not even in trade negotiations with China. The primary goal is growing U.S. manufacturing and American jobs along with it.

Quick Update on Aftermath of Trump’s Latest Tariff Increase Announcement

Yun Li reported in a CNBC article that Trump said the U.S. and China are to resume talks today (Thursday, August 29th). President Trump’s tariff announcement also seems to have been an effective response to China’s tariff announcement that preceded it, judging by China’s response that Li reported:
China softened its stance Thursday saying it’s willing to resolve the trade war with a “calm attitude” and indicating it won’t retaliate against Trump’s new tariff threat immediately. China also said the Chinese and U.S. trade delegations have maintained “effective” communication. “China has plenty of means for countermeasures, but under the current situation, the question that should be discussed right now is about removing the U.S.′ new tariffs on $550 billion in Chinese goods to prevent escalation of the trade war,” Gao Feng, spokesman for China’s Ministry of Commerce, said Thursday.
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Trump Raises Tariffs on Chinese Goods Again! https://www.universalcargo.com/trump-raises-tariffs-on-chinese-goods-again/ https://www.universalcargo.com/trump-raises-tariffs-on-chinese-goods-again/#respond Tue, 27 Aug 2019 19:41:35 +0000 https://www.universalcargo.com/?p=9726 You thought those 25% tariffs on $250 billion worth of products imported from China were high? Well, starting October 1st, they're going to be increased to 30% according to tweets from President Trump .

Not only is President Trump raising the 25% tariffs on Chinese goods to 30%, the upcoming 10% tariffs on approximately $300 billion worth of Chinese goods, much of which the Trump administration postponed to December 15th, are being increased to 15%.

Read the full article at UniversalCargo.com.

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You thought those 25% tariffs on $250 billion worth of products imported from China were high? Well, starting October 1st, they’re going to be increased to 30% according to tweets from President Trump .

President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

Not only is President Trump raising the 25% tariffs on Chinese goods to 30%, the upcoming 10% tariffs on approximately $300 billion worth of Chinese goods, much of which the Trump administration postponed to December 15th, are being increased to 15%.

Here’s what President Trump tweeted on Friday (August 23rd, 2019):

For many years China (and many other countries) has been taking advantage of the United States on Trade, Intellectual Property Theft, and much more. Our Country has been losing HUNDREDS OF BILLIONS OF DOLLARS a year to China, with no end in sight. Sadly, past Administrations have allowed China to get so far ahead of Fair and Balanced Trade that it has become a great burden to the American Taxpayer. As President, I can no longer allow this to happen! In the spirit of achieving Fair Trade, we must Balance this very unfair Trading Relationship. China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!). Starting on October 1st, the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25%, will be taxed at 30%. Additionally, the remaining 300 BILLION DOLLARS of goods and products from China, that was being taxed from September 1st at 10%, will now be taxed at 15%. Thank you for your attention to this matter!

As referenced in President Trump’s tweets, these tariff increases were announced in response to China’s latest tariff increase announcement that came earlier the same day. The U.S. Trade Representative also laid out this news in a press release issued on Friday. Here’s its full text:

Today, China announced it will impose unjustified tariffs targeting U.S. products.  In response to China’s decision, and in order to achieve the objectives of the China Section 301 investigation, President Trump has instructed the United States Trade Representative (USTR) to increase by 5% the tariffs on approximately $550 billion worth of Chinese imports.  For the 25% tariffs on approximately $250 billion worth of Chinese imports, USTR will begin the process of increasing the tariff rate to 30%, effective October 1 following a notice and comment period.  For the 10% tariffs on approximately $300 billion worth of Chinese imports that the President announced earlier this month, the tariffs will now be 15%, effective on the already scheduled dates for tariff increases on these imports. 

Hardball With China

Many reporters and news outlets spun the news of President Trump postponing tariffs until after the international shipping peak season as the president showing weakness in the trade war with China — a weakness Beijing would take advantage of.

China did follow the announcement of delayed tariffs from the U.S. by announcing a tariff hike of their own; however, Trump responding by raising tariffs by another 5% across about $550 billion worth of Chinese goods shows the administration is not lightening up in the trade war with China.

Earlier in the week, on Monday (August 19th, 2019), Vice President Mike Pence reiterated the administration’s strong stance on China in a speech at the Detroit Economic Club. “We put China on notice that the era of economic surrender is over,” he said. Later in the speech, Vice President Pence added, “By standing strong on our trade imbalance and structural issues with China, we’ll protect American jobs and prosperity for generations to come.”

It is clear that President Trump plans to continue playing hardball with China, not wavering on his stance that the U.S. has been in a very unfair trade partnership with the country and that has to change. But what else is clear?

While the vice president’s speech was clearly part of the campaigning process to reelect President Trump as we move closer to the 2020 election year, there are takeaways to help give us some insight on where we are in the trade war and deal negotiations with China.

In the next blog, we’ll break down things we learned about the trade war and Trump’s outlook on trade deal negotiations with China.

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Freight Rates Down Despite Trade War Up https://www.universalcargo.com/freight-rates-down-despite-trade-war-up/ https://www.universalcargo.com/freight-rates-down-despite-trade-war-up/#comments Tue, 20 Aug 2019 21:23:29 +0000 https://www.universalcargo.com/?p=9712 The trade war between the U.S. and China drags on without an end in sight. However, things are not all bad news for U.S. importers. Shippers who import from China got good news last week as Trump delayed the latest round of tariff hikes until after the peak season. But that's not all of the good news that came out of last week.

Peak season news continued on a good trend as freight rates actually dropped.

Peak season is a time of increased international shipping as businesses prepare for the big shopping holiday season. Normally, that means increasing freight rates with the uptick in demand. This year, carriers have been doing a good job of utilizing blank sailings, rollovers, and removing ship capacity from major shipping lines to keep freight rates high. Something they've struggled with in recent years. However, transpacific shipping just saw a big drop in freight rates.

Alexander Whiteman reported in the Loadstar that last week saw "stark declines reported across US east and west coast routes, with rates dropping 4.4% and 7.2%, respectively."

The results of tariffs so far are not what has been projected. Learn more about how the trade war with China is impacting international shipping and the economy by reading the full blog at UniversalCargo.com.

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Freight Rates

The trade war between the U.S. and China drags on without an end in sight. However, things are not all bad news for U.S. importers. Shippers who import from China got good news last week as Trump delayed the latest round of tariff hikes until after the peak season. But that’s not all of the good news that came out of last week.

Peak season news continued on a good trend as freight rates actually dropped.

Peak season is a time of increased international shipping as businesses prepare for the big shopping holiday season. Normally, that means higher freight rates with the uptick in demand. This year, carriers have been doing a good job of utilizing blank sailings, rollovers, and removing ship capacity from major shipping lines to keep freight rates high. Something they’ve struggled with in recent years. However, transpacific shipping just saw a big drop in freight rates.

Alexander Whiteman reported in the Loadstar that last week saw “stark declines reported across US east and west coast routes, with rates dropping 4.4% and 7.2%, respectively.”

Common Assumptions of Falling Peak Season Freight Rates

Freight rates falling during peak season would likely make someone think two things:

  1. Demand is falling below expectations.
  2. Carriers aren’t doing well.

The obvious place to point a finger is at the ongoing trade war with China. Tariffs have certainly negatively affected the amount of goods being shipped between the U.S. and China.

Politically Influenced Spins on Tariffs & Trade War

As we’re approaching an election year, there is heavy spin being put on all trade war and tariff related news. That spin includes predictions of the U.S. consumer likely paying much, much more for goods in the upcoming holiday season and year, which will cause an economic downturn or even recession for the U.S. There are also forecasters who have been saying this trade war will be disastrous for the international shipping industry and carriers. On the other hand, you have Trump saying China pays for all the tariffs and the effects on U.S. consumers are and will continue to be little to none.

Spins in both directions are too extreme. Which is closer to the truth?

Part of the argument that the trade war will hurt consumers is tariffs are cutting into imports from China, meaning fewer goods are being imported in the U.S. in general. Lower supply means higher prices, right? And obviously, going with that is less volume for ocean carriers to ship, which deeply hurts the already struggling shipping lines.

Actual Effects of Trade War So Far

Despite the above argument, there has not been a huge drop in U.S. imports. Instead, there has been a shift in sourcing, and despite last week’s drop in freight rates, ocean carriers are doing quite well.

Major carriers, like Maersk, are reporting some very positive numbers for 2019 so far. Mike Wackett reported in a Loadstar article:

Maersk Group recorded an underlying net profit of $134m in the second quarter of the year, compared with just $15m in the same period last year, which the company attributes to an improved performance by its liner division.

“Q2 was a quarter of solid progress. Ebitda was up 17% and cash flow improved 86%, year on year, driven by continued recovery in Ocean,” said chief executive Soren Skou.

Maersk actually says the trade war is quite manageable according to an article by Chris Dupin in American Shipper:

[Maersk CEO Søren Skou said,] “… the impact from the U.S.-China tariffs and trade tensions on global trade has been quite manageable for us, so far.”

He said that global container trade was up about 2 percent in the first half of 2019. U.S. imports have slowed, but he said “the drag from tariffs has been less than expected.”

He said U.S. imports from China have fallen about 7 percent in the first half of the year, but that Pacific trade grew 1 percent and total imports to the U.S. grew 2.5 percent in the first half of the year. He noted that sourcing patterns are changing, with imports of goods to the U.S. from outside of China grew at “close to double digits in the first half.”

He noted that new sourcing locations can actually benefit Maersk because “they entail higher freight rates and new opportunities for us to sell logistics services.”

Skou also said there is “quite some anecdotal evidence that tariffs are being circumvented to some extent by shipping stuff out of China to other destinations in Asia and then sending it on to the U.S.”   

“European-related trade, where we are most exposed, had strong volume growth in the first half, around 5 percent, in part because of trade diversion resulting from the U.S.-China trade tensions.”

He said the impact from tariffs is being moderated by several factors. He said consumer spending remains fairly robust, supported by good labor markets and consumer confidence. He also said the goods affected by tariffs represent only about 4 percent of U.S. consumer spending. He also said the strong dollar relative to the Chinese yuan has helped to blunt the impact of the tariffs. And he said Chinese exporters and U.S. importers have absorbed some of the increased costs through lower margins.

Projections of How Tariffs Will Impact Upcoming Year

All of the above from Maersk is not to say there are no negative impacts of the trade war. Dupin’s article continues with more from Skou:

Looking forward, he said the 25 percent tariff hike in April 2018 on $250 billion of U.S. imports from China and the latest 10 percent tariff announced on $300 billion of U.S. imports from China, if implemented in full, could reduce global trade by up to 1 percent in the next year and further escalation could cause further slowing of the U.S. economy and be negative for Maersk.

Again, these are projections. These impacts could be far less than Maersk’s CEO is predicting here. It should be remembered that Maersk is, probably obviously, against tariffs. Skou prefaced all of his above remarks with, “We don’t believe that tariffs are good for the global economy and we do not welcome them.” That could help paint Maersk’s predictions about tariff negative.

Their previous projections were too negative, so the next ones could easily be the same. There’s certainly no reason to think sourcing shifts won’t continue to happen. 

If sourcing continues moving away from China as it has started to do, serious pressure could be put on China to get a trade deal done — even with Chinese manufacturing trying to skirt the tariffs by shipping through intermediate countries. Pressure on China to get a deal done is certainly President’s Trump’s hope in all this. That and increased U.S. manufacturing, creating more jobs and stimulating the economy.

Of course, Skou could be correct in his projections. If there is a strong enough negative impact through less global trade, higher prices, and economic downturn, that could hurt Trump in the upcoming election year.

Unfortunately, I don’t think we’ll really be able to see the whether the ultimate outcome of Trump’s tariffs and this trade war is positive, negative, or a giant wash for several years.

Domestic Sourcing

In the meantime, sourcing is not only shifting to other countries. U.S. manufacturing could take advantage of decreased importing from China.

If you want to source and ship domestically, Universal Cargo can help you with that. Among our services as a freight forwarder has always been door to door shipping. Thus, we’re used to shipping goods across the U.S., not just importing from other countries, and we can help your company with your domestic shipping.

If you already ship with us, just talk to your Account Executive/Manager about domestic shipping. If you’re new to the Universal Cargo family, contact us and we’ll be happy to quote you on your shipping needs.

Click Here for Free Freight Rate Pricing

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Tariffs on Chinese Goods Postponed Till After Peak Season https://www.universalcargo.com/tariffs-on-chinese-goods-postponed-till-after-peak-season/ https://www.universalcargo.com/tariffs-on-chinese-goods-postponed-till-after-peak-season/#respond Thu, 15 Aug 2019 22:56:52 +0000 https://www.universalcargo.com/?p=9704 There's good news for U.S. retailers and shippers who import from China, and probably U.S. consumers too, as they prepare for the 2019 holiday season. Many, many items from list 4 of the Section 301 tariffs, which were scheduled to add an additional 10% tariffs on approximately $300 billion worth of Chinese imports, have been delayed from September 1st to December 15th, 2019.

Yes, that means relief from expected cost hikes during this year's international shipping peak season, which is rolling now in the months before the holidays hit. September is always a big peak season month.

Find out the details about the tariff delay, tariff exclusions, what effects tariffs are having, and more by reading the full article in Universal Cargo's blog.

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US China Trade WarThere’s good news for U.S. retailers and shippers who import from China, and probably U.S. consumers too, as they prepare for the 2019 holiday season. Many, many items from list 4 of the Section 301 tariffs, which were scheduled to add an additional 10% tariffs on approximately $300 billion worth of Chinese imports, have been delayed from September 1st to December 15th, 2019.

Yes, that means relief from expected cost hikes during this year’s international shipping peak season, which is rolling now in the months before the holidays hit. September is always a big peak season month.

The United States Trade Representative (USTR) made the announcement in a press release on Tuesday (August 13th, 2019).

… as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain articles.  Products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing. 

The USTR press release included a list, labeled List 4B, of all the Chinese goods having their tariff hike date backed up to December 15th.

In an email, Chris Reynolds of Universal Cargo’s house customs broker INLT, expanded on the details about the list, saying:

It includes chemicals, food, camping gear, blankets, baby items, sports equipment, watches, clocks, small appliances, wooden hangers, fireworks, and a wide variety of clothes and electronics, among other things. In total, the list covers more than 650 tariff lines.

Not all Chinese goods scheduled for the September 1st 10% tariff increase were delayed. The USTR also included a list labeled 4A of Chinese goods still subject to increased duties on that date, as originally announced back on May 17th, 2019.

However, there are a number of items that have been removed from that 4A list and not placed on the 4B list. These are products that will not have the 10% tariff hike applied to them at all. They “are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent,” according to the USTR.

Reynolds shared a little more detail about the Chinese goods now excluded from the 10% tariff hike, which we’ll now pass on to you, so you don’t have to try to compare the new lists to the old ones to figure out how many and what kind of items are being excluded altogether:

Out of the nearly 4,000 tariff lines that were included in the proposed List 4 in May, only 25 items did not make the final version of either the September 1 or the December 15 lists. These tariff lines cover child car seats, cranes used to unload shipping containers, Bibles, shipping containers, and certain fish that are generally caught in U.S. waters but processed in China.

The Spin on the Tariff Delay

Several news outlets are spinning this tariff delay as Trump “blinking” or “showing weakness” that is now giving China the upper hand in the trade war.

In one such CNBC article, Kate Rooney wrote:

In backing off on China tariffs Tuesday, President Donald Trump showed just how much pain the U.S. could tolerate — and China may use that to its advantage, key voices on Wall Street say.

Others take that line of thought a step further, like Jeffry Bartash, who writes in a MarketWatch article, headlining that the tariff delay exposes a weak link in Trump’s China trade strategy:

By delaying import tariffs on iPhones and other popular electronics made in China, the Trump administration has finally admitted that duties on foreign imports can hit the wallets of American businesses and consumers — and maybe even hurt the president’s reelection chances.

For months White House officials have claimed China was paying almost the full cost of U.S. tariffs on hundreds of billions of dollars in largely industrial imports. Yet President Trump admitted on Tuesday when he postponed a new 10% tariff on some $150 billion in Chinese-made consumer goods that he was worried about the harm it would do during the holiday shopping season.

What Trump Said About Tariff Delay

So did President Trump admit “he was worried about the harm [tariffs] would do during the holiday season?

Here’s what he said when talking to reporters on Tuesday about the tariff delay:

“We’re doing this for Christmas season just in case the tariffs would have an impact on U.S. customers, which so far, they’ve had virtually none. The only impact there’s been is we’ve collected almost 60 billion dollars from China, compliments of China. But just in case they might have an impact on people, what we’ve done is we’ve delayed it so they won’t be relevant for the Christmas shopping season.”

It is obvious the delay is to avoid price increases of products during the holiday season that the increased cost of importing goods would cause.

It makes sense to hold off on these tariff increases through the peak season to avoid the economic cost of increased goods during the big holiday season. Most believe a trade deal between the U.S. and China is not coming anytime soon, so why not wait until after the economically crucial peak season to hit with these tariffs?

As I listened to Trump’s comments, I’m not sure about the accuracy of Trump’s statement that there has been virtually no impact on U.S. customers so far. He may be right. Anecdotally, I haven’t noticed an increase in goods when shopping, though I’m not the biggest shopper. I also haven’t found data on price points rising yet; however, there are plenty of projections about how the prices of goods will go up from tariff increases.

The statement, however, that really gives me pause is Trump saying we’ve collected $60 billion from China through the tariffs he’s implemented so far. That all of that money is compliments of China.

Tariffs are definitely impacting China. And sometimes tariffs are paid by the seller in China rather than the buyer in the U.S. For example, if a Delivery Duty Paid (DDP incoterm) deal type is used, then the seller pays the custom clearance duties. That is a common deal type; however, in many deal types the importer/buyer rather than the exporter/seller pays the duties.

Very often, tariffs are paid by the U.S. importer who buys the products. Furthermore, it’s likely the cost of the sale in deals where the exporter/seller in China is paying these higher duties would increase because of the tariff hikes.

How Tariffs Are Hurting China

The biggest way tariffs hurt China is by sourcing being moved away from the country. China certainly remains the biggest manufacturing partner of the U.S.; however, U.S. importing has seen clear shifting away from China this year.

Greg Knowler reported in the Journal of Commerce (JOC):

US imports from China declined 5 percent in the first six months of the year against the same period in 2018, while imports from Vietnam were up 30.5 percent, according to data from PIERS, a JOC sister company within IHS Markit. US imports from Southeast Asia reached 1.6 million TEU in the January-June period, up almost 300,000 TEU, or 23.1 percent, over the first half of 2018.

China is by far the US’ largest trading partner — 5.1 million TEU crossed the Pacific eastward in the first half of the year. Vietnam, long a favored alternative to manufacturing in China, exported 705,246 TEU to the US in the period.

Other Southeast Asia nations have also experienced robust growth in the first half compared with the same period in 2018. US imports from Thailand rose 19.6 percent, Malaysia 22 percent, Indonesia 11.5 percent, and Cambodia 38.8 percent.

So to lay out those changes to be easily seen and read, here are the U.S. import changes per country PIERS research found:

  • China down 5%
  • Vietname up 30.5%
  • Thailand up 19.6%
  • Malaysia up 22%
  • Indonesia up 11.5%
  • Cambodia up 38.8%

Universal Cargo is ready to help you continue importing from China or source from other countries. But not only that…

Domestic Sourcing

Sourcing doesn’t only have to come from other countries. Likely one of Trump’s biggest goals in hiking tariffs on China is to boost manufacturing of goods here in the U.S.

If you want to source and ship domestically, this is also something Universal Cargo can help you with. Among our services as a freight forwarder has always been door to door shipping. Thus, we’re used to shipping goods across the U.S. and can help your company with your domestic shipping, not only your international shipping.

If you already ship with us, just talk to your Account Executive/Manager about domestic shipping. If you’re new to the Universal Cargo family, contact us and we’ll be happy to quote you on your shipping needs.

Click Here for Free Freight Rate Pricing

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1st Round of List 3 Tariff Exclusions Are Out! https://www.universalcargo.com/1st-round-of-list-3-tariff-exclusions-are-out/ https://www.universalcargo.com/1st-round-of-list-3-tariff-exclusions-are-out/#comments Thu, 08 Aug 2019 16:51:48 +0000 https://www.universalcargo.com/?p=9698

We finally have official exclusions from President Trump's tariff hikes on $200 billion worth of Chinese goods. Find out below if the goods you import from China can be excluded from these expensive 25% tariffs.

INLT, Universal Cargo's excellent house customs broker, keeps us informed on all the latest developments when it comes to customs clearance. And, of course, we share that intel with you.

Therefore, there's no surprise that INLT's Chris Reynolds sent Universal Cargo an email right after the U.S. Trade Representative (USTR) published exclusions to the hefty tariffs shippers who import from China are currently facing. Reynolds wrote:

The U.S. Trade Representative issued the first set of exclusions from the third tranche of $200 billion in Section 301 tariffs on goods from China. The list of exclusions, provided below, takes effect retroactively from September 24, 2018 and will remain effective for one year following the publication of the notice.

Please read each exclusion carefully. Goods that are merely classified under the HTS number provided below will not qualify for the exclusion unless they satisfy all descriptive requirements.

See the full 1st list of excluded items in Universal Cargo's blog to see if you can get some of your tariff money back.

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YouTube Video

We finally have official exclusions from President Trump’s tariff hikes on $200 billion worth of Chinese goods. Find out below if the goods you import from China can be excluded from these expensive 25% tariffs.

INLT, Universal Cargo’s excellent house customs broker, keeps us informed on all the latest developments when it comes to customs clearance. And, of course, we share that intel with you.

Therefore, there’s no surprise that INLT’s Chris Reynolds sent Universal Cargo an email right after the U.S. Trade Representative (USTR) published exclusions to the hefty tariffs shippers who import from China are currently facing. Reynolds wrote:

The U.S. Trade Representative issued the first set of exclusions from the third tranche of $200 billion in Section 301 tariffs on goods from China. The list of exclusions, provided below, takes effect retroactively from September 24, 2018 and will remain effective for one year following the publication of the notice.

Please read each exclusion carefully. Goods that are merely classified under the HTS number provided below will not qualify for the exclusion unless they satisfy all descriptive requirements.

List of Excluded Goods

Here’s the list of items excluded from the tariffs hike:

  •         Plastic containers. Container units of plastics, each comprising a tub and lid therefore, configured or fitted for the conveyance, packing, or dispensing of wet wipes (described in statistical reporting number 3923.10.9000)
  •         Polypropylene plastic caps. Injection molded polypropylene plastic caps or lids each weighing not over 24 grams designed for dispensing wet wipes (described in statistical reporting number 3923.50.0000)
  •         Kayak paddles. Kayak paddles, double ended, with shafts of aluminum and blades of fiberglass reinforced nylon (described in statistical reporting number 3926.90.3000)
  •         Polyester yarn. High tenacity polyester yarn not over 600 decitex (described in statistical reporting number 5402.20.3010)
  •         Nonwoven fabrics. Nonwovens weighing more than 25 g/m2 but not more than 70 g/m2 in rolls, not impregnated coated or covered (described in statistical reporting number 5603.92.0090)
  •         Pet cages. Pet cages of steel (described in statistical reporting number 7323.99.9080)
  •         Shopping carts. Carts, not mechanically propelled, each with three or four wheels, of the kind used for household shopping (described in statistical reporting number 8716.80.5090)
  •         Truck trailer brackets. Truck trailer skirt brackets, other than parts of general use of Section XV (described in statistical reporting number 8716.90.5060)
  •         Inflatable boats. Inflatable boats, other than kayaks and canoes, with over 20 gauge polyvinyl chloride (PVC), each valued at $500 or less and weighing not over 52 kg (described in statistical reporting number 8903.10.0060)
  •         Inflatable kayaks and canoes. Inflatable kayaks and canoes, with over 20 gauge polyvinyl chloride (PVC), each valued at $500 or less and weighing not over 22 kg (described in statistical reporting number 8903.10.0060)

Background of Duties & Exclusion Requirements

Originally, the tariff hike that went into effect on September 24th, 2018 “only” imposed additional 10% duties on $200 billion worth (annually) of imported goods from China. However, the USTR later modified the tariff hike to raise the additional duties on the Chinese goods to 25%. With that modification, the USTR also established a process to request exclusions from the tariff hikes.

The USTR lists three factors petitioners are required to address when requesting exclusion. Those factors are:

  •  Whether the particular product is available only from China and specifically whether the particular product and/or a comparable product is available from sources in the United States and/or third countries.
  •  Whether the imposition of additional duties on the particular product would cause severe economic harm to the requestor or other U.S. interests.
  •  Whether the particular product is strategically important or related to “Made in China2025” or other Chinese industrial programs.

You Can Still Apply for Exclusions

It was June 24, 2019 when the USTR gave notice of the updates to this Section 301 tariff hike. And the deadline for applying for exclusion has not yet been reached.

That means this publication of goods with tariff exclusions is not the final, all-inclusive list of goods that will receive exclusion. Of course, that information is already implied by calling the above list the first round of exclusions on the third tranche of the $200 billion in Section 301 tariffs on goods from China. The USTR has promised to regularly update and post the status of these pending tariff exclusion decisions.

From what the USTR has said in statements, including the publication of the above list, the final determination of whether or not an exclusion is granted (dependent upon the request meeting the given requirements) is based on if it would “undermine the objective of the Section 301 investigation.”

The actual deadline for submitting an exclusion request is September 30, 2019. We’re still in the early days of August, but the end of next month will be here before you know it, so get those exclusion requests submitted as quickly as possible if you still want to apply.

It should, of course, be remembered that once an item has been granted exclusion, that exclusion goes for all shippers who import that product — not merely stakeholder who applied for the exclusion.

Click Here for Free Freight Rate Pricing

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Will IMO 2020 Have a Grace Period on Implementation? https://www.universalcargo.com/will-imo-2020-have-a-grace-period-on-implementation/ https://www.universalcargo.com/will-imo-2020-have-a-grace-period-on-implementation/#respond Thu, 01 Aug 2019 11:11:41 +0000 https://www.universalcargo.com/?p=9693

In only 5 months, starting on January 1st, 2020, cargo ships have to meet the International Maritime Organization's (IMO) new 0.5% sulfur cap on fuel known as IMO 2020. Or do they?

Mike Wackett wrote in an article for the Loadstar:

Growing safety concerns around the IMO’s 0.5% sulphur cap on marine fuels has led to talk of a period of “permitted noncompliance” following the 1 January implementation.


Will countries give a grace period for the implementation of IMO 2020? Find out more by reading the full article in Universal Cargo's blog.

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In only 5 months, starting on January 1st, 2020, cargo ships have to meet the International Maritime Organization’s (IMO) new 0.5% sulfur cap on fuel known as IMO 2020. Or do they?

Mike Wackett wrote in an article for the Loadstar:

Growing safety concerns around the IMO’s 0.5% sulphur cap on marine fuels has led to talk of a period of “permitted noncompliance” following the 1 January implementation.

Safety Concern Over IMO 2020

Just last week, we posted an article here in Universal Cargo’s blog about the need to test low sulfur fuels now because of safety concerns being raised over implementation of the upcoming IMO 2020.

The biggest safety concern brought up in that article is the increased chance of engine failure due to the inadvertent mixing of incompatible products from new low sulfur fuels getting mixed, creating sludge in ships’ engines.

Such outcomes would put seafarer’s lives at risk as well as increase the risk of damage or loss to cargo being shipped around the world.

Nations Consider “Soft Start” on IMO 2020

According to Wackett’s article, such safety concerns are growing traction, resulting in countries considering a grace period for ships to become compliant with the new lower sulfur fuel regulations.

Countries are also taking into consideration the possible economic impact the new cleaner fuel rule may have when deciding on how strict to be about enforcing the new requirements. Wackett reports that while some countries are considering a grace period for IMO 2020, Indonesia has already decided it will not be enforcing the new rule come January 1st:

… Indonesia has announced that, because of the threat of an increase in prices for consumer goods, it will continue to allow its flag-state vessels to burn 3.5% sulphur content fuel within its coastal waters after 1 January, and until the cost and availability of compliant fuel improves.

And other countries are reported to be considering their options, all of which will send ripples of concern through to the IMO headquarters in London.

Each of the 91 state signatories of the MARPOL Annex V1 regulation is required to enforce the new maximum sulphur content rules within their territorial waters, but some nations are beginning to call for a “soft start” to IMO 2020.

Environmental Impact of Ocean Freight Shipping

Environmentalists likely won’t be happy at the idea of a delayed start to the ocean freight industry switching to cleaner fuel. The industry has long been criticized for its environmental impact through CO2 greenhouse gas emissions.

Despite container ships having the lowest CO2 footprint per TEU transported of any mode of cargo transport, as illustrated in the CO2 comparison graph below, ocean shipping as a whole still creates greenhouse gas pollution comparable to a large country. This is due to the fact that 90% of the world’s goods are transported through ocean freight shipping.

ICS CO2 Shipping Chart

A 2018 article by Zoë Schlanger published by Quartz says, “If shipping were a country, it would be the world’s sixth-biggest greenhouse gas emitter.”

IMO 2020 Preparation Lagging

Obviously, there is a need for the fuel emission reduction the IMO is putting into place. Unfortunately, the industry just seems to be failing to meet the deadline for implementation of the new rule despite years of lead-up and notice for IMO 2020.

Whose Burden Is IMO 2020 Anyway?

Preparing for IMO 2020 has long been touted as the biggest problem the ocean freight industry faces 2019. It has been thought of as an especially hard burden for shipping lines.

However, some carriers have been prepping ships for a while now with “scrubbers” to remove harmful gasses from engines and exhaust to meet the IMO 2020 requirements. And while ships without scrubbers will have to switch to more expensive cleaner fuel, carriers are expected to recoup those costs through shipper contracts.

Of course, the increased cost of cleaner ocean freight shipping would get passed along to the shipper, and eventually, the consumer. The question now is just how fast will that actually happen.

Questions Surrounding IMO 2020

Will we see a grace period for IMO 2020 as the new year hits? How long would such a grace period last? Is such a grace period fair to carriers that have already heavily invested in becoming compliant to IMO 2020?

Universal Cargo will be monitoring these questions and more as the answers become clearer with the approach of IMO 2020.

Click Here for Free Freight Rate Pricing

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Ocean Freight Industry Needs to Test Low Sulfur Fuels Now https://www.universalcargo.com/ocean-freight-industry-needs-to-test-low-sulfur-fuels-now/ https://www.universalcargo.com/ocean-freight-industry-needs-to-test-low-sulfur-fuels-now/#comments Thu, 25 Jul 2019 17:30:11 +0000 https://www.universalcargo.com/?p=9684 Less than half a year away from the IMO 2020 cleaner fuel mandate, the International Association of Dry Cargo Shipowners (INTERCARGO) put out a media release raising safety concerns around the implementation of the upcoming global sulfur limit on fuel.

Find out what ocean freight shipping's biggest concern should be when it comes to switching to cleaner fuels in 2020 and the steps that need to happen in preparation for the change by reading the full article in Universal Cargo's blog.

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Ocean Freight

Less than half a year away from the IMO 2020 cleaner fuel mandate, the International Association of Dry Cargo Shipowners (INTERCARGO) put out a media release raising safety concerns around the implementation of the upcoming global sulfur limit on fuel.

Here’s what the association, which has had consultative status at the International Maritime Organization (IMO) since 1993, had to say:

With 1 January 2020 less than five and a half months away, INTERCARGO expresses its growing concern in view of the magnitude of the challenge lying ahead for the industry and the need for a smooth transition.

The global availability of safe compliant fuels remains a key question largely unanswered. The requirement for the sulphur content of fuel oil used by ships operating outside designated emission control areas not to exceed 0.50% as of 1 January 2020 marks a sea change in the marine fuels’ supply chain.

It is extremely worrying that compliant fuels have so far been made available only in a limited number of ports and under unfavourable terms for voluntary early testing by ships, as Charterers/Operators are not currently obliged to purchase future compliant fuel. Hence, the practical testing of new fuels and crew training, which is only possible under real conditions aboard ships, is very limited and pushed to the end of year – this situation creates significant safety implications for the operation of ships, which could eventually threaten the safety of seafarers, ships, and cargoes, as well as the marine environment.

I have to admit that as I’ve considered the challenge — or problem — the ocean freight industry faces in switching to cleaner fuel when the new year hits, I have not considered adverse effects the new fuel may have on engines or ships as a whole nor the safety concerns that come along with that for ships’ crews.

The main issues I’ve considered are the higher costs of the cleaner fuel that is about to be required and the availability of said fuel.

Perhaps if I were a mechanical or nautical engineer, I would have immediately wondered if the fuel switch might cause issues such as — let’s go with worse case scenario — engine failure, which obviously would put cargo at risk but, even worse, risk the lives of seafarers.

Is there an increased risk of engine failure with the fuel change? To be honest, I had no idea. This was the first time it crossed my mind. Could the risk of fire, which is already a major problem onboard cargo ships, increase? Again, I didn’t know.

Therefore, I decided to do the most common thing people do nowadays when they don’t know something: I turned to Google. A quick search to see if anyone was talking about such potential increased risks as engine failure or cargo ship fires that may come with the switch to cleaner fuels for IMO 2020 led me to an excellent article on the topic published on gCaptain.

The article is actually credited to Ellen Milligan of Bloomberg and was published back in September of last year (2018) as IMO 2020 was really starting to rise in the general international shipping consciousness as a very significant challenge the industry might struggle to prepare for in 2019. This article specifically focused on the fear of engine failure with the switch to low sulfur fuel.

Milligan wrote:

Add oil tankers breaking down at sea to the list of things shipping companies are worrying about as they brace for a once-in-a-generation overhaul to the kind of fuel the industry must consume.

Now more and more of the world’s largest shipping companies and trade groups, already mindful of spiraling costs, are saying there’s a safety risk too. Their primary worry is the lack of a single fuel type that complies with the rules. Since refineries across the world are coming up with different solutions to meet the sulfur-reduction target, owners say their ships’ engines could be damaged by inadvertently mixing incompatible products.

While individual fuels may not be problematic, mixes could be dangerous, according to Dragos Rauta, technical director at the trade group better known as Intertanko.

“The way the different products work together can produce instability of fuel which can create sediments that can damage the pumps and engines eventually,” he said.

The issues could ultimately stop a ship’s engine, something that would be particularly dangerous in bad weather in busy shipping lanes close to land, according to Rauta.

Shipowners say extensive — and more frequent — testing will need to take place to ensure fuels are trusted, but that would take time and money at a time when fuel bills may well be rising anyway.

It looks like the answer to my question of whether the fuel switch might cause engine failures, spurred by INTERCARGO’s media release, is yes, engine failures are a legitimate concern.

Testing, like Milligan informs us shipowners say is needed, is urged in INTERCARGO’s media release:

In anticipation of the new fuels made available for practical testing aboard ships well before the end of 2019, it is urged that:

  • the fuel supply industry provides the market with significant volumes of compliant fuels at many ports around the world, so that all sectors can be serviced, including the dry bulk sector
  • the Charterers/Operators start purchasing these fuels
  • the Publicly Available Specification (PAS) related to the 0.50% limit is made available as soon as possible to provide guidance on the application of the existing ISO 8217 specification for marine fuels
  • the ship Owners/Operators enhance crew training. Seafarers deserve our special consideration, as the industry will largely rely on their skills for managing the new compliant fuels aboard ships on the high seas to ensure a smooth implementation of this drastic change.

Unfortunately, as we here at Universal Cargo have been keeping an eye on how things are progressing toward IMO 2020, we haven’t seen much in terms of practical testing. Most of IMO 2020 prep has to do with strategies for handling the switch to cleaner fuels, carriers’ ability to handle the increased costs, and the question of using “scrubbers” to be compliant versus straight switches to cleaner fuels for individual ships.

Waiting for the last moment to really test new, cleaner fuels while training crews for any specific protocol changes that may come with that is a terrible idea. Testing needs to happen now. Really, it should have already been happening. I’ve had to write about too many disasters involving cargo ships with the tragic deaths of crew members. To think more such stories could happen in the future because IMO 2020 is not being properly prepared for is dreadful.

Click Here for Free Freight Rate Pricing

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What’s Stalling U.S. – China Trade Deal Talks? https://www.universalcargo.com/whats-stalling-u-s-china-trade-deal-talks/ https://www.universalcargo.com/whats-stalling-u-s-china-trade-deal-talks/#respond Thu, 18 Jul 2019 16:57:19 +0000 https://www.universalcargo.com/?p=9681 Asking what's stalling trade deal talks between China and the U.S. presupposes the negotiations are indeed stalled. And, boy, are they stalled.

Talks Broke Down in March

At the beginning of the year, there was plenty of optimism to be found about U.S.-China trade deal negotiations. Reports were generally positive about the direction in which talks were going. Then March arrived, and that optimism came crashing down as President Trump announced previously delayed tariffs hikes on $200 billion worth of Chinese goods would be going into effect.

Of course, within days, China announced retaliatory tariffs, and it felt like the whole trade war was starting over.

Find out what's stalling trade deal negotiations between the U.S. and China by reading the whole article in Universal Cargo's blog.

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Asking what’s stalling trade deal talks between China and the U.S. presupposes the negotiations are indeed stalled. And, boy, are they stalled.

Talks Broke Down in March

US China Trade War

At the beginning of the year, there was plenty of optimism to be found about U.S.-China trade deal negotiations. Reports were generally positive about the direction in which talks were going. Then March arrived, and that optimism came crashing down as President Trump announced previously delayed tariffs hikes on $200 billion worth of Chinese goods would be going into effect.

Of course, within days, China announced retaliatory tariffs, and it felt like the whole trade war was starting over.

In the months that have followed, we’ve yet to see any momentum regained on trade talks between the countries. There have been a few stories of note relating to the U.S. – China trade deal negotiations, like trade talks between the U.S., EU, and Japan taking aim at China; however, it wasn’t until two weeks ago that a news story really gave an inkling of hope that negotiations might start rolling toward a deal again.

President Trump & President Xi Agree to Resume Negotiations

The above referenced story, headlining many major news sites, was President Trump and President Xi meeting and agreeing to resume trade talks. Peter Baker and Keith Bradsher reported in the New York Times on June 29th:

President Trump and President Xi Jinping of China agreed on Saturday to resume trade talks after a seven-week breakdown…

The agreement, brokered during more than an hour of discussion between the leaders, did not by itself signal any major breakthrough in resolving the fundamental conflict. But it represented a temporary cease-fire to give negotiators another chance to forge a permanent accord governing the vast flow of goods and services between the two nations.

Ceasefire Déjà Vu

Does this story sound familiar? It should. It’s very reminiscent of when Presidents Trump and Xi met on December 1st of last year, calling a 90-day trade war ceasefire in order to conduct trade deal negotiations. The ceasefire delayed those hikes to 25% tariffs on $200 billion worth of Chinese goods that at the time was scheduled to take place January 1st, 2019. But, obviously, it didn’t stop them.

The ceasefire did, however, come as a major relief at the time to U.S. shippers who import goods from China. Yet even on the day that birthed relief and optimism — or perhaps wishful thinking — that a trade deal with China would soon be reached, came an escalation in tension and reason to believe a trade deal was not within sight.

I wrote at the time:

In one country, President Donald Trump and President Xi Jinping ate dinner together and worked out a ceasefire on the trade war between the U.S. and China. In another country, an arrest was happening to escalate that war….

The arrest happened in Canada and may have a major impact on how fruitful the negotiations between the U.S. and China will be over this 90-day period. To say that impact is not likely to be positive would be a significant understatement.
CFO of Chinese tech giant Huawei, Meng Wanzhou, was arrested in Canada on Saturday with the U.S. seeking extradition.

Huawei Technologies at Center of Trade Deal

China’s tech giant Huawei still plays a pivotal role in trade talks between the U.S. and China, as Baker and Bradsher’s New York Times article goes on to say:

Mr. Trump promised to hold off on his threat to slap new 25 percent tariffs on $300 billion in Chinese imports, and he agreed to lift some restrictions on Huawei, the Chinese technology giant at the center of a dispute between the nations.

Shippers’ hopes of never seeing those 25% tariffs on 300 billion more dollars worth of Chinese goods are likely dampened by the eventual implementation that occurred with the previous set of tariff hikes.

Especially with trade deal talks stalled by, you guessed it, Huawei Technologies. William Mauldin and Chao Deng reported in an article published by the Wall Street Journal:

Progress toward a U.S.-China trade deal has stalled while the Trump administration determines how to address Beijing’s demands that it ease restrictions on Huawei Technologies Co., people familiar with the talks said.

At that time, Mr. Trump said the U.S. would allow some U.S. firms to sell products to Huawei, the Shenzhen-based telecommunications giant that Beijing sees as a strategic priority and Washington considers a national-security threat.

Yet so far administration officials haven’t reached consensus on which semiconductor chips and other products can be provided to Huawei without triggering security concerns or giving the company a strategic edge.

Trade Deal Talks Are Stalled by Conflict Over Huawei

Yes, there are many complexities involved in the trade talks between the U.S. and China, but it looks like none of those can be worked out until some kind of compromise is reached concerning Huawei.

The Huawei issue is stalling U.S.-China trade deal talks.

When some resolution is reached on Huawei, we should see the countries back at the negotiation table with rumors circulating about negotiations going well. The truth of those rumors will probably be debatable. I wouldn’t hold my breath that a trade deal is coming anytime really soon.

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Unmanned Automated Truck Tested on Public Highway (w/ Video) https://www.universalcargo.com/unmanned-automated-truck-tested-on-public-highway-w-video/ https://www.universalcargo.com/unmanned-automated-truck-tested-on-public-highway-w-video/#respond Tue, 02 Jul 2019 21:00:42 +0000 https://www.universalcargo.com/?p=9651

If you were driving on the Florida Turnpike at the right moment on Father's Day, just a couple weeks ago (June 16th, 2019), you could have looked over at a truck driving next to you with no driver inside.

Actually, you didn't even have to be there to see it. Here's a video that Starsky Robotics posted on Youtube of the unmanned autonomous truck driving around:

Check out the video and read about the implications and concerns over unmanned automated trucks by reading the whole article in Universal Cargo's blog.

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Unmanned Automated Truck on Road courtesy of Starsky Robotics

If you were driving on the Florida Turnpike at the right moment on Father’s Day, just a couple weeks ago (June 16th, 2019), you could have looked over at a truck driving next to you with no driver inside.

Actually, you didn’t even have to be there to see it. Below is a video that Starsky Robotics posted on Youtube of the unmanned autonomous truck driving around in traffic.

YouTube Video

Sharing the story behind the video, Clarissa Hawes reported in an article published by Freight Waves:

Starsky Robotics tested its fully unmanned autonomous truck on a 9.4-mile stretch of public highway on the Florida Turnpike on June 16. The company had previously been testing its self-driving technology on private roads.

“We are now the only autonomous company that’s testing trucks without having people in the cabs on public roads with the motoring public,” Stefan Seltz-Axmacher told FreightWaves. “This is the biggest step forward in the autonomous industry.”

A couple years ago, we posted a blog headlining with the question “Are Truckers Not Part of the Future of International Shipping” as the race to get automated trucks on the road was heating up. However, Starsky’s new unmanned “autonomous” trucks do not actually mean no drivers. Yes, autonomous sounds like a strong word as there actually was a driver, as you can see in the above video. It’s just that the driver operating the unmanned truck was a couple hundred miles away. Hawes’s article gives the details:

A remote operator sitting in an office in Jacksonville, Florida, about 200 miles away, handled the first and last mile operations of the truck, which was approximately 0.2 miles of the 9.4-mile trip, he said.

The operator, who has 20-plus years of long-haul trucking experience, remotely navigated the truck from the rest area onto the highway, ordered a lane change, then helped direct the truck back off of the highway, through the toll plaza, and parked it safely at its final destination

Implications for the International Shipping Industry

This story obviously has huge implications for the international shipping industry.

For years, a trucker shortage problem has been an increasing source of alarm for the industry and the U.S. economy in general. Truckers being able to operate trucks remotely for shifts and then go home to their families instead of being on the road for days, weeks, or even longer could help solve the trucker shortage problem by attracting more people to the job while decreasing turnover.

Remotely operated trucks also mean the potential for trucks to be driven 24/7, dramatically increasing the speed of deliveries, especially long distance ones.

Road safety could also see improvements from not having overly tired drivers on the road.

Concerns Over Unmanned Autonomous Trucks

On the other hand, some will worry that there are several factors that make an unmanned truck less safe for those on the road with it. For example, not actually being in the truck would prevent a driver from feeling factors like wind, tire traction, uneven or bumpy roads, etc, which need to be accounted for to help avoid accidents, such as a truck overturning.

Of course, Starsky Robotics undoubtedly has thought about all these factors and certainly has censors monitoring these issues and more. Where does automation come into the process? And can censors sending a driver information, even in real time, really replace the driver actually being in the seat?

When I showed my wife Starsky’s above video of the unmanned autonomous truck, she immediately said, “It’s boring as [expletive removed] and simultaneously scary as hell.” She then even added the word “horrifying”. Okay, so it’s not her thing, but it is not unreasonable for people to have reactions like my wife’s and be worried about virtually-operated trucks on the road.

Most of us have probably played a driving video game, crashing multiple times despite being a good driver in real life. And a remote driver does look like someone who’s playing an expensive video game. Of course, in video games you’re generally not trying to drive a vehicle at safe speeds while following all traffic laws, so there are certainly problems with the comparison.

Beyond the possibly dubious video game comparison, many concerning questions can and should be raised in the early years of driverless and automated vehicles. A few that pop to mind: What happens if the connection between remote driver and truck is lost or delayed? What failsafes are in place to avoid this? Could the remote operating controls be hacked?

I could list more concerns like the ones above, but that’s enough to make people’s misgivings over unmanned autonomous trucks understandable

Unmanned Autonomous Vehicles Moving Forward

While many will find this technological advancement scary, there is much to be excited about when it comes to unmanned autonomous vehicles. While the technology is being advanced in more than just the international shipping industry, international shipping will benefit greatly from this kind of technology in more than just trucks.

Every leg of cargo’s journey when being imported or exported could be moved through autonomous and unmanned vehicles and technology. We’re talking about the trucks moving cargo containers, automated port terminals transferring containers and loading them onto ships, and even the ships themselves being autonomous.

We’ve posted at least a couple blogs about automated cargo ships, which show that automated ships are coming along just as fast as trucks: “World’s first autonomous cargo ship is on its way” and “Could this container ship be the biggest thing to hit transpacific shipping?”

With investments already made, technology already developed, and potential benefits so great, unmanned autonomous vehicles are definitely part of the future. Caution must be used to make sure warranted concerns are addressed, but this is something that’s generating much excitement and momentum.

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MSC’s C-TPAT Suspended After Drug Bust https://www.universalcargo.com/mscs-c-tpat-suspended-after-drug-bust/ https://www.universalcargo.com/mscs-c-tpat-suspended-after-drug-bust/#respond Tue, 25 Jun 2019 17:43:38 +0000 https://www.universalcargo.com/?p=9633 U.S. Customs & Border Protection (CBP) suspended MSC's Customs-Trade Partnership Against Terrorism (C-TPAT) certification after a historic drug bust was made on a ship of the world's second biggest ocean carrier.

The U.S. Attorney broke the news via Twitter last week on Tuesday, June 18th that 16.5 tons of cocaine was seized from a large ship at the Packer Marine Terminal at the Port of Philadelphia. It was a historic seizure, being the largest ever for the Eastern District of Pennsylvania, according to the tweet.

It turned out, the large ship was the MSC Gayane.

Read the full story in Universal Cargo's blog.

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YouTube Video

INNOVATION, MSC SANTHYA < KRVE 34 & MSC GAYANÉ — Flickr image by kees torn
INNOVATION, MSC SANTHYA < KRVE 34 & MSC GAYANÉ — Flickr image by kees torn

The U.S. Attorney broke the news via Twitter last week on Tuesday, June 18th that 16.5 tons of cocaine was seized from a large ship at the Packer Marine Terminal at the Port of Philadelphia. It was a historic seizure, being the largest ever for the Eastern District of Pennsylvania, according to the tweet.

It turned out, the large ship was the MSC Gayane.

Obviously, the story quickly hit mainstream media outlets, as you would expect a huge drug bust seizing 16.5 tons of cocaine to do.

According to the couples rehab California, there’s no shortage of news outlets to quote for the details surrounding the fallout of this historic bust; however, let’s go with a fellow online international shipping focused resource, the Maritime Executive. In an article about MSC’s C-TPAT being suspended, the Maritime Executive highlights that this is the second large drug bust involving an MSC ship this year while giving further details:

Six crewmembers from the MSC Gayane have been charged in connection with the seizure of 15.5 tonnes of cocaine at the port of Philadelphia on Monday. The record-setting haul has an estimated street value of $1 billion. It was the second bust involving an MSC ship at the port since March, when authorities seized about 1,200 pounds of cocaine from containers aboard the MSC Desiree. 

According to Fonofaavae Tiasaga, a crewmember from the Gayane who has pleaded guilty to smuggling charges, the container ship’s crew brought the cocaine aboard in high-seas transfers involving 14 separate boats, which met up with the boxship while she was under way between Peru and Panama. These waters are known as a hotbed of smuggling activity, and they are the primary geographic focus of the U.S. Coast Guard’s at-sea interdiction campaign in the Eastern Pacific.

Of course, MSC had to do some damage control and reach out to their customers regarding this whole mess. Therefore, last week, MSC sent out the following customer advisory:

MSC GAYANE

MSC CUSTOMER ADVISORY

20 June 2019, Geneva, Switzerland

As you may be aware, the container ship MSC Gayane was recently involved in a law enforcement operation while calling the port of Philadelphia, in which a large quantity of contraband was discovered onboard.

MSC takes this matter very seriously and is grateful to the authorities for identifying any suspected abuse of its services and operations.

As a consequence of these events, U.S. Customs and Border Protection (CBP) has temporarily suspended – not revoked – our Customs Trade Partnership (C-TPAT) certification.

MSC has not been restricted from doing business in, or suspended from operating in, the US market and this action does not prevent customers doing business with MSC.

Furthermore, customers should only expect minimal disruption as a result of the C-TPAT certification issue. For example, there could possibly be additional inspections on certain containers coming from South and Central America to the USA. There will be no impact on customs clearance for cargo, which is flowing regularly in and out of the USA.

We are actively seeking to assure the authorities that our certification can be reinstated as soon as possible.

Notwithstanding the suspension of C-TPAT status MSC will continue to comply with the requirements of the program.

MSC has a longstanding history of cooperating with U.S. federal law enforcement agencies and was one of the first carriers to participate in C-TPAT after its inception in 2001. C-TPAT is a voluntary partnership between governments and carriers to ensure supply chain security.

MSC will continue to collaborate with authorities worldwide, to ensure our vessels are secure and can deliver our customers’ cargo safely and reliably. We appreciate your patience and continued business, and we will keep you informed as soon as we learn more details.

Here’s a little bit more information about C-TPAT from Universal Cargo’s C-TPAT page:

C-TPAT is a voluntary government-business initiative that builds cooperative relationships that strengthen and improve overall international supply chain and U.S. border security. C-TPAT is widely recognized as one of the most effective means of providing the highest level of cargo security through close cooperation with international supply chain businesses such as importers, carriers, consolidators, licensed customs brokers, and manufacturers. Through this initiative, U.S. Customs and Border Protection (CBP) is asking businesses to ensure the integrity of their security practices and communicate and verify the security guidelines of their business partners within the supply chain.

Being C-TPAT validated, which Universal Cargo obviously is, is important in the international shipping industry. There are, of course, extra security practices and requirements that come along with C-TPAT certification; however, the additional responsibility is well worth helping protect the supply chain, cargo, ports, and national security.

The CBP’s suspension of MSC’s C-TPAT validation seems more than justified while it investigates security lapses that would allow the cocaine smuggling on MSC ships to occur.

It’s hard to know if these drug busts will end up having much of an impact on MSC’s business (most probably doubt it will), but it’s obvious the carrier’s security standards need tightening as crew members themselves from the major shipping line’s ships were allegedly (let’s keep things legal here) smuggling the cocaine.

CBS 3 Philly reported:

Detention hearings are scheduled in Philadelphia for six crew members of a Swiss-owned container ship following the seizure of more than 35,000 pounds, or more than 15,800 kilograms, of cocaine. The six crew members of the MSC Gayane are scheduled for 1:30 p.m. Monday detention hearings on charges of conspiracy to possess cocaine aboard a ship.

Monday’s court hearing will determine if they will remain in federal custody. If convicted, they face life in prison.

No matter the outcome of the MSC Gayane’s crew members’ hearings or the CBP’s decisions regarding MSC’s C-TPAT validation, the world’s second largest ocean freight carrier will have some trust to gain back as they move forward from these events.

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SeaIntelligence Says End of Shipping Alliances Would Skyrocket Freight Rates https://www.universalcargo.com/seaintelligence-says-end-of-shipping-alliances-would-skyrocket-freight-rates/ https://www.universalcargo.com/seaintelligence-says-end-of-shipping-alliances-would-skyrocket-freight-rates/#respond Thu, 20 Jun 2019 19:47:08 +0000 https://www.universalcargo.com/?p=9623 What would happen if ocean freight carrier alliances were brought to an end?




Many shippers would cheer as they're currently seeking to make such an outcome a reality. But would it really be good news for shippers?




SeaIntelligence Consulting's CEO, Partner Lars Jensen says no.




As much as shippers may see carrier alliances as a way shipping lines are skirting antitrust laws (and there's reason for distrust with recent price-fixing investigations into carriers, even some charges resulting in a K-Line executive pleading guilty to price fixing in 2014 and an NYK exec pleading guilty of price fixing in 2015), it's the vessel sharing agreements under which carriers work together being broken up that shippers should really worry about. That according to Mr. Jensen, who says an end to carrier alliances will cause freight rates to skyrocket.




Read the full article in Universal Cargo's blog.

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What would happen if ocean freight carrier alliances were brought to an end?

Many shippers would cheer as they’re currently seeking to make such an outcome a reality. But would it really be good news for shippers?

SeaIntelligence Consulting’s CEO, Partner Lars Jensen says no.

As much as shippers may see carrier alliances as a way shipping lines are skirting antitrust laws (and there’s reason for distrust with recent price-fixing investigations into carriers, even some charges resulting in a K-Line executive pleading guilty to price fixing in 2014 and an NYK exec pleading guilty of price fixing in 2015), it’s the vessel sharing agreements, under which carriers work together, being broken up that shippers should really worry about. That according to Mr. Jensen, who says an end to carrier alliances will cause freight rates to skyrocket.

Carrier Craziness Bracket

In an article for the Loadstar, Gavin van Marle reports remarks Mr. Jensen made on Tuesday (June 18th, 2019) at the TOC Container Supply Chain event in Rotterdam:

Shipper opposition to deepsea liner shipping alliances may be dangerously misplaced, delegates at the TOC Container Supply Chain event in Rotterdam heard yesterday.
Lars Jensen, chief executive and partner of SeaIntelligence Consulting, said efforts by some to bar container lines from operating in alliances, claiming they have become anti-competitive, would result in freight rates “skyrocketing”.

Mr. van Marle makes it clear the impetus for Mr. Jensen’s words is the European Commission’s regulators assessing whether or not to extend EU’s Block Exemption Regulation (BER) for five years. The BER is the EU’s legislation that covers vessel-sharing agreements (VSAs), which are commonly referred to as carrier alliances, essentially exempting these agreements from being antitrust law violations.

BER does not give carriers a carte blanche when it comes to antitrust rules. Carriers, for example, are not allowed to communicate and cooperate in regards to freight rate points. VSA cooperation is supposed to be strictly limited to ship sharing matters.

Of course, shippers have been suspicious from the start of carrier alliances that cooperation bleeds into price point sharing and reduces competition between carriers.

Because shippers see VSAs or carrier alliances as a reduction in carrier competition, potentially exacerbating the poor quality of customer service carriers are notorious for and increasing freight rates, there are shippers attempting to persuade regulators not to extend the BER.

Obviously, Mr. Jensen argues shippers will not get what they’re hoping for if they succeed in keeping the BER from getting extended. In his Loadstar article, Mr. van Marle continues to quote Mr. Jensen as the SeaIntelligence CEO explains why ending the BER will be expensive for shippers:

Mr Jensen said: “If the anti-trust exemption isn’t extended, it doesn’t necessarily mean shipping lines can’t run alliances. It may well just mean the lines have higher hoops to jump through, and I doubt that they will do that.

“But it will mean a lot of legal costs and the carriers will have to recoup those costs and the only [way] they can do that is through higher rates,” he added.

“However, if shipping alliances are outlawed altogether, then freight rates will skyrocket, because alliances are the only way that carriers can operate ultra-large container vessels (ULCVs) effectively.”

I have long had mixed feelings about carrier alliances, myself. Yes, they are a reduction of carrier competition in the international shipping industry, and I’m not a fan of shrinking that competition. Smaller competition (in any industry) usually means higher prices and lower service.

However, the incredible financial losses carriers have suffered over the last many years (and, yes, I would argue those losses are largely by their own doing) and the very tight profit margins carriers seem to be working within has made carrier alliances basically a necessity in reducing costs and keeping these big shipping companies from sinking like Hanjin did a few years back. There is also the argument that VSAs create more ability and flexibility for carriers to offer more sailings, so that’s a case where carrier alliances could increase service instead of decreasing it.

Overall, I’ve considered carrier alliances a necessary evil in the ocean freight sector.

I’m actually of the opinion that if the carrier alliances ended suddenly today, several carriers would have trouble competing with the top dogs of the industry like Maersk and suffer the same fate as Hanjin or at least be forced into mergers or buyouts. We possibly might even eventually reach Maersk’s prediction of carrier competition shrinking to only 3 global companies.

Such a low competition situation would almost certainly mean higher freight rates for shippers.

While my position on the situation of carrier alliances is not as extreme as Mr. Jensen’s, whose final quote in the Loadstar article is, “So I am of the opinion that shippers should pray the lines are allowed to continue to operate alliances,” I do think the sudden disbanding of VSAs would not be in the overall interest of shippers.

But what do you think? Feel free to share in the comments section below.

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No More Duties Credit on 25% Tariffed Imports from China https://www.universalcargo.com/no-more-duties-credit-on-25-tariffed-imports-from-china/ https://www.universalcargo.com/no-more-duties-credit-on-25-tariffed-imports-from-china/#comments Thu, 13 Jun 2019 18:11:39 +0000 https://www.universalcargo.com/?p=9620 The U.S.-China trade war, with President Trump's implementation of tariff increases to 25% on Chinese products, has significantly impacted the customs clearance process, obviously. The increased cost of tariffs presents an importing challenge the likes of which the international shipping industry has not seen in many years.




In particular, the much higher duties on imports from China affects the way we here at Universal Cargo are able to serve our clients who import from China.




For years, Universal Cargo has been able to advance payments of U.S. duties for our customers, allowing clients to pay us later with credit terms. 25% tariffs on imports from China make duties too high to continue this service because of the cash flow challenges they create.




Effective Saturday, June 15th, Universal Cargo will no longer provide this service of advancing duties credit.




Advancing U.S. duties for shippers who import through us, allowed Universal Cargo to help customers get through customs clearance smoothly and avoid delays and fees that can result from untimely payment of duties.




However, Universal Cargo can still help customers make sure their duties are paid promptly, keeping their import process moving smoothly. We can set our shippers up with Universal Cargo's house customs broker, INLT, to create a US Customs account.




Read the full article in Universal Cargo's blog.

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customs importer paperworkThe U.S.-China trade war, with President Trump’s implementation of tariff increases to 25% on Chinese products, has significantly impacted the customs clearance process, obviously. The increased cost of tariffs presents an importing challenge the likes of which the international shipping industry has not seen in many years.

In particular, the much higher duties on imports from China affects the way we here at Universal Cargo are able to serve our clients who import from China.

For years, Universal Cargo has been able to advance payments of U.S. duties for our customers, allowing clients to pay us later with credit terms. 25% tariffs on imports from China make duties too high to continue this service because of the cash flow challenges they create.

Effective Saturday, June 15th, Universal Cargo will no longer provide this service of advancing duties credit.

Advancing U.S. duties for shippers who import through us, allowed Universal Cargo to help customers get through customs clearance smoothly and avoid delays and fees that can result from untimely payment of duties.

However, Universal Cargo can still help customers make sure their duties are paid promptly, keeping their import process moving smoothly. We can set our shippers up with Universal Cargo’s house customs broker, INLT, to create a US Customs account.

Universal Cargo customers can contact their Account Executive to walk them through everything they need to do to make sure they are set up and ready to pay their duties if they’ve previously been utilizing this service from Universal Cargo rather than already paying duties directly themselves.

In fact, there’s a good chance that if you’re one of our customers, you’ve heard from Universal Cargo about this already. Last week, Universal Cargo sent out letters to our customers about this change of service on 25% tariffed imports from China, advising our customers to set up U.S. customs accounts through INLT.

Here’s the content of the letter:

Universal Cargo is gratified to have been able to support your company’s customs clearance needs for the past number of years, and we sincerely appreciate your faith in us to serve you.

The upheaval in U.S. Customs duties with regards to imported goods from China in the last year has presented the shipping and importing industry with challenges not seen in many years.  With the latest increase in duties from 10% to 25%, Universal Cargo has had to implement a number of  changes to our terms of service for our customers in order to survive the cash flow challenges.

As you know, typically, Universal Cargo has been able to advance U.S. duties on behalf of our customers and await payment from our customers with credit terms.

We regret to have to advise you that we are no longer able to continue to advance these extensive duties payments even for our best customers.

Your best alternative would likely be to create a U.S. Customs account through our customs broker, INLT, Inc. that would permit direct periodic payment via wire or ACH to U.S. Customs.  While there are no specific credit terms available, this method of payment often results in some allowance of time (usually one to three weeks) to pay beyond the date of arrival of the imported goods. We highly encourage you to sign up for PMS & ACH as soon as you can, as there is a backlog of about 4 weeks.

Please let your Sales Expert know what information you will need to determine your options, and they will connect you with the right resources.

Effective for shipping arrivals June 15 or later, we regret that Universal Cargo will no longer be able to advance the duties fees on behalf of our customers.

Please feel free to reach out to us if we can assist in any way with this transition.

Click Here for Free Freight Rate Pricing

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U.S., EU, & Japan Trade Talks Take Aim at China https://www.universalcargo.com/u-s-eu-japan-trade-talks-take-aim-at-china/ https://www.universalcargo.com/u-s-eu-japan-trade-talks-take-aim-at-china/#respond Thu, 23 May 2019 20:04:07 +0000 https://www.universalcargo.com/?p=9581 A trilateral trade meeting between the U.S., EU, and Japan after President Trump's decision to postpone a decision on whether or not to impose tariffs on automobile and auto part imports to the U.S. adds to a busy couple weeks in terms of U.S. trade relations and tariffs news.




First, the U.S.-China trade war intensified as the U.S. implemented a tariffs hike on $200 billion worth of Chinese goods and moved forward plans for tariff hikes on approximately $300 billion worth of more Chinese goods. Second, China announced retaliatory tariffs on $60 billion worth of U.S. goods. Third, the U.S., Canada, and Mexico agreed to lift Section 232 tariffs on steel and aluminum as well as all retaliatory tariffs, removing a major obstacle to moving forward with the United States-Mexico-Canada Agreement (USMCA), which was successfully negotiated to replace the North American Free Trade Agreement (NAFTA).




On the same day the U.S., Canada, and Mexico announced the removal of Section 232 tariffs (Friday, May 17th, 2019), came the announcement that President Trump would wait six months to deciding to tariff automobile imports. That puts the deadline right before 2020 — election year.




Read the whole article in Universal Cargo's blog.

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A trilateral trade meeting between the U.S., EU, and Japan after President Trump’s decision to postpone a decision on whether or not to impose tariffs on automobile and auto part imports to the U.S. adds to a busy couple weeks in terms of U.S. trade relations and tariffs news.

Current Trade War & Tariffs Happenings

First, the U.S.-China trade war intensified as the U.S. implemented a tariffs hike on $200 billion worth of Chinese goods and moved forward plans for tariff hikes on approximately $300 billion worth of more Chinese goods. Second, China announced retaliatory tariffs on $60 billion worth of U.S. goods. Third, the U.S., Canada, and Mexico agreed to lift Section 232 tariffs on steel and aluminum as well as all retaliatory tariffs, removing a major obstacle to moving forward with the United States-Mexico-Canada Agreement (USMCA), which was successfully negotiated to replace the North American Free Trade Agreement (NAFTA).

On the same day the U.S., Canada, and Mexico announced the removal of Section 232 tariffs (Friday, May 17th, 2019), came the announcement that President Trump would wait six months to deciding to tariff automobile imports. That puts the deadline right before 2020 — election year.

Trade Politics with EU and Japan

It seems President Trump is trying to put an election year deadline on a trade deal with the EU and Japan through this tariff decision deadline. Maybe it’ll work and he’ll get a deal that he can use in his 2020 re-election bid. At this point, countries know President Trump isn’t afraid to implement tariffs, so EU and Japan might be extra motivated to get a deal done with the U.S. at the threat of auto tariffs.

Implementing such tariffs right now, however, would be detrimental to a bigger goal of President Trump’s. Beyond timing the deadline to get a deal with the EU and Japan for a possible election year polling boost, it’s obvious President Trump didn’t want to go into trade talks this week with the EU and Japan having just alienated them with auto tariffs when he wants them as allies against his biggest target: China.

Trilateral Trade Talks

Robert Lighthizer, United States Trade Representative; Cecilia Malmström, European Commissioner for Trade; and Hiroshige Seko, Minister of Economy, Trade, and Industry of Japan met in Paris today (May 23, 2019), and while their joint statement about the trilateral meeting doesn’t specifically mention China, it’s obvious the topics they highlight are aimed at China.

Here are some quotes from the statement, often talking about “third countries” — the equivalent of a third party not present at the talks — that make it obvious they are talking about China.

The Ministers advanced discussions on their shared objective to address non market-oriented policies and practices of third countries that lead to severe overcapacity, create unfair competitive conditions for their workers and businesses, hinder the development and use of innovative technologies, and undermine the proper functioning of international trade and discussed various tools needed to deal with these problems.

They reiterated their concerns, reviewed ongoing work, and agreed to deepen their cooperation in all areas covered by the Ministerial Statements issued in Washington DC, New York, and Paris, including nonmarket policies and practices, market-oriented conditions, forced technology transfer policies and practices, industrial subsidies and state-owned enterprises, WTO reform, and digital trade and e-commerce.

The Ministers shared growing concerns about third parties’ developing State Enterprises into national champions, disrupting market-oriented trade, and directing those State Enterprises to dominate global markets….

In the area of forced technology transfers, Ministers confirmed their agreement to cooperate on enforcement, on the development of new rules, on investment review for national security purposes, on export controls and further take stock of this cooperation.

Talks Focus on China

State-owned enterprises, subsidies, forced technology transfer policies… Yup, all the complaints President Trump keeps talking about with China.

If that’s not enough to convince you the joint statement is referring to China, the word “China” is actually hidden invisibly in the header of the USTR.gov page containing the statement that can only be found by doing a search for it.

Universal Cargo Keeps You Informed

As trade and tariff news continues to develop, we’ll continue to keep you updated here in Universal Cargo’s blog as we’re always keeping an eye on the things that affect international shipping to make sure your imports and exports go as smoothly as possible.

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Steel & Aluminum Tariffs Lifted Between U.S., Canada, & Mexico https://www.universalcargo.com/steel-aluminum-tariffs-lifted-between-u-s-canada-mexico/ https://www.universalcargo.com/steel-aluminum-tariffs-lifted-between-u-s-canada-mexico/#respond Tue, 21 May 2019 18:59:04 +0000 https://www.universalcargo.com/?p=9576 While the tariff situation between the U.S. and China has been heating up, the tariff situation between the U.S., Canada, and Mexico has been cooling off.




On Friday (May 17th, 2019), the Office of the U.S. Trade Representative (USTR) announced the lifting of Section 232 tariffs on steel and aluminum imported from Canada and Mexico.




Not just that, but Canada and Mexico also agreed to remove all retaliatory tariffs they'd imposed on U.S. goods.




To find out more about the deal between the U.S., Canada, and Mexico as well as read press releases from the three countries, read the full blog on UniversalCargo.com.

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NAFTA logo
NAFTA logo by Nicoguaro.

While the tariff situation between the U.S. and China has been heating up, the tariff situation between the U.S., Canada, and Mexico has been cooling off.

On Friday (May 17th, 2019), the Office of the U.S. Trade Representative (USTR) announced the lifting of Section 232 tariffs on steel and aluminum imported from Canada and Mexico.

Not just that, but Canada and Mexico also agreed to remove all retaliatory tariffs they’d imposed on U.S. goods.

The U.S. did reserve the right to reinstitute the tariffs should there be a surge in steel and aluminum imports from Canada or Mexico. However, Canada and Mexico’s retaliations, should these tariffs be re-imposed, would be limited to steel and aluminum products instead of goods spanning a wide array of industries.

President Trump’s administration is especially concerned with Chinese steel and aluminum dumping coming through the United States’ North American neighbors. In joint statements the United States made with each Canada and Mexico, the countries announced agreement to implement effective measures to ensure subsidized or dumped steel and aluminum (as is a common Chinese practice) does not get exported to the United States via its neighbor’s territories.

Obviously, this removal of tariffs is welcome news for U.S. shippers who import and export from and to Canada and Mexico. It also shows President Trump’s willingness to remove tariffs upon reaching trade deals with other countries, which gives a sliver of hope that the tariffs on Chinese goods could be removed, if only the U.S. and China can actually reach a trade deal.

Here is Friday’s press release from the USTR about Section 232 tariffs on Canada and Mexico:

Washington, DC –Today, the United States announced an agreement with Canada and Mexico to remove the Section 232 tariffs for steel and aluminum imports from those countries and for the removal of all retaliatory tariffs imposed on American goods by those countries.  The agreement provides for aggressive monitoring and a mechanism to prevent surges in imports of steel and aluminum. If surges in imports of specific steel and aluminum products occur, the United States may re-impose Section 232 tariffs on those products. Any retaliation by Canada and Mexico would then be limited to steel and aluminum products. This agreement is great news for American farmers that have been subject to retaliatory tariffs from Canada and Mexico. At the same time, the Agreement will continue to protect America’s steel and aluminum industries.

Here’s the joint statement between the U.S. and Canada:

After extensive discussions on trade in steel and aluminum covered by the action taken pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862), the United States and Canada have reached an understanding as follows:

  1. The United States and Canada agree to eliminate, no later than two days from the issuance of this statement:

a. All tariffs the United States imposed under Section 232 on imports of aluminum and steel products from Canada; and 

b. All tariffs Canada imposed in retaliation for the Section 232 action taken by the United States (identified in Customs Notice 18-08 Surtaxes Imposed on Certain Products Originating in the United States, issued by the Canada Border Services Agency on June 29, 2018 and revised on July 11, 2018).

The United States and Canada agree to terminate all pending litigation between them in the World Trade Organization regarding the Section 232 action.

The United States and Canada will implement effective measures to:

a. Prevent the importation of aluminum and steel that is unfairly subsidized and/or sold at dumped prices; and

b. Prevent the transshipment of aluminum and steel made outside of Canada or the United States to the other country. Canada and the United States will consult together on these measures.

The United States and Canada will establish an agreed-upon process for monitoring aluminum and steel trade between them. In monitoring for surges, either country may treat products made with steel that is melted and poured in North America separately from products that are not.

In the event that imports of aluminum or steel products surge meaningfully beyond historic volumes of trade over a period of time, with consideration of market share, the importing country may request consultations with the exporting country. After such consultations, the importing party may impose duties of 25 percent for steel and 10 percent for aluminum in respect to the individual product(s) where the surge took place (on the basis of the individual product categories set forth in the attached chart). If the importing party takes such action, the exporting country agrees to retaliate only in the affected sector (i.e., aluminum and aluminum-containing products or steel).

Here’s the joint statement from the U.S. and Mexico:

After extensive discussions on trade in steel and aluminum covered by the action taken pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862), the United States and Mexico have reached an understanding as follows:

The United States and Mexico agree to eliminate, no later than two days from the issuance of this statement:

a. All tariffs the United States imposed under Section 232 on imports of aluminum and steel products from Mexico; and

b. All tariffs Mexico imposed in retaliation for the Section 232 action taken by the United States (identified in the Decrees published in Mexico’s Official Gazette on June 5, 2018 and August 17, 2018).

The United States and Mexico agree to terminate all pending litigation between them in the World Trade Organization regarding the Section 232 action.

The United States and Mexico will implement effective measures to:

a. Prevent the importation of aluminum and steel that is unfairly subsidized and/or sold at dumped prices; and

b. Prevent the transshipment of aluminum and steel made outside of Mexico or the United States to the other country. Mexico and the United States will consult together on these measures.

The United States and Mexico will establish an agreed-upon process for monitoring aluminum and steel trade between them. In monitoring for surges, either country may treat products made with steel that is melted and poured in North America separately from products that are not.

In the event that imports of aluminum or steel products surge meaningfully beyond historic volumes of trade over a period of time, with consideration of market share, the importing country may request consultations with the exporting country. After such consultations, the importing party may impose duties of 25 percent for steel and 10 percent for aluminum in respect to the individual product(s) where the surge took place (on the basis of the individual product categories set forth in the attached chart). If the importing party takes such action, the exporting country agrees to retaliate only in the affected sector (i.e., aluminum and aluminum-containing products or steel). In assessing whether there has been a surge in steel imports, the United States will consider that new investment in the United States may require an additional 225,000 metric tons of billet from Mexico; Mexico will consider that new investment in Mexico may require an additional 200,000 metric tons of cold-rolled steel from the United States.

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How To Be Heard at Public Hearing on Tariff Hikes of $300 Billion of Chinese Goods https://www.universalcargo.com/how-to-be-heard-at-public-hearing-on-tariff-hikes-of-300-billion-of-chinese-goods/ https://www.universalcargo.com/how-to-be-heard-at-public-hearing-on-tariff-hikes-of-300-billion-of-chinese-goods/#respond Thu, 16 May 2019 19:03:04 +0000 https://www.universalcargo.com/?p=9573 Don't like the tariff hikes on imports from China? Do these tariffs hurt your business? Here comes your chance to be heard by the Office of the United States Trade Representative on the topic.




Things are moving forward for basically all Chinese goods imported in the United States to carry a 25% tariff. While such tariff increases have already been placed on approximately $250 billion worth of Chinese goods, shippers do have a chance to appear at a public hearing on the planned tariffs hike of the approximately $300 billion worth of remaining Chinese goods.




A public hearing for the next Section 301 action of increasing tariffs on approximately $300 billion worth of Chinese goods is scheduled for June 17th, 2019.




A public hearing for the next Section 301 action of increasing tariffs on approximately $300 billion worth of Chinese goods is scheduled for June 17th, 2019.




Go to Universal Cargo's blog to see instructions on how to submit written comments or request to testify at the public hearing.

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US China Trade WarDon’t like the tariff hikes on imports from China? Do these tariffs hurt your business? Here comes your chance to be heard by the Office of the United States Trade Representative on the topic.

Things are moving forward for basically all Chinese goods imported in the United States to carry a 25% tariff. While such tariff increases have already been placed on approximately $250 billion worth of Chinese goods, shippers do have a chance to appear at a public hearing on the planned tariffs hike of the approximately $300 billion worth of remaining Chinese goods.

On May 10th, 2019, U.S. Trade Representative Robert Lighthizer said the following in a statement release:

“Earlier today, at the direction of the President, the United States increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. The President also ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion.”

The process for public notice and comment will be published shortly in the Federal Register. The details will be on the USTR website on Monday as we begin the process prior to a final decision on these tariffs.

The notice for public comment has now been published. A public hearing for the next Section 301 action of increasing tariffs on approximately $300 billion worth of Chinese goods is scheduled for June 17th, 2019.

The hearing will be held in the main hearing room of the U.S. International Trade Commission, 500 E Street SW Washington DC 20436 at 9:30 a.m.

Despite President Trump’s tweets that make it sound like the Chinese government pays the tariffs on Chinese goods, shippers know the importer of record actually pays the tariffs. That means many importers will likely want to be heard about the effect of these tariffs on their businesses.

Where China actually pays for these tariffs is in economic impact through U.S. businesses sourcing elsewhere than China (which is something Universal Cargo can help you with) because of the increased cost of importing from China. Of course, there are U.S. importers who may not be able to just move their sourcing away from China and want their voices heard.

When it comes to the public hearing, there are two options you have to be heard. You can request to appear and give testimony or you can submit written comments. The following covers how to do both.

How To Request to Appear and Give Testimony at Section 301 Action Hearing

People can’t just show up to the hearing and start speaking about why these tariffs should not happen. If you want to give testimony, here’s what you need to do to gain consideration:

File a request to appear and a summary of expected testimony at the public by June 10th, 2019.

A summary of testimony is required in submissions to be considered to appear at the hearing. Testimony at the hearing is limited to five minutes, after which Section 301 Committee members may choose to ask questions.

Requests to appear must be in English and sent electronically via www.regulations.gov. Here’s how USTR instructs to submit:

Enter docket number USTR-2019-0004 on the home page and click “search.”

The site will provide a search-results page listing all documents associated with this docket. Find a reference to this notice and click on the link titled ‘comment now!’.

In the ‘comment’ field, include the name, address, email address, and telephone number of the person presenting the testimony.

Attach a summary of the proposed testimony, and a pre-hearing submission if provided, by using the ‘upload file’ field. The file name should include both the name of the person who will be presenting testimony and the entity they represent.

In addition, submit a request to appear and a PDF of the summary of proposed testimony by email to 301investigation@ustr.eop.gov.

In the subject line of the email, include the name of the person who will be presenting testimony, followed by “request to appear.” Make sure to include the name, address, email address, and telephone number of the person presenting testimony in the body of the email message.

How To Submit Written Comments to Section 301 Action Hearing

You don’t have to actually testify at the hearing to have your voice heard. U.S. shippers (and others) may submit written comments right up to the day of hearings (June 17, 2019).

Here’s how the USTR says you may submit written comments:

All submissions must be in English and sent electronically via www.regulations.gov.

Enter docket number USTR-2019-0004 on the home page and click “search.”

The site will provide a search-results page listing all documents associated with this docket. Find a reference to this notice and click on the link titled “comment now!”

There is a “comment” field and an “upload file” field. Type “see attached” in the comment field and upload a Microsoft Word (.doc) or Adobe Acrobat (.pdf) file containing your comments.

File names should reflect the name of the person or entity submitting the comments.

Do not attach separate cover letters to electronic submissions; rather, include any information that might appear in a cover letter in the comments themselves. Similarly, to the extent possible, include any exhibits, annexes, or other attachments in the same file as the comment itself, rather than submitting them as separate files.

For any comments submitted electronically that contain business confidential information, the file name of the business confidential version should begin with the characters ‘BC’. Any page containing business confidential information must be clearly marked “BUSINESS CONFIDENTIAL” on the top of that page and the submission should clearly indicate, via brackets, highlighting, or other means, the specific information that is business confidential. If you request business confidential treatment, you must certify in writing that disclosure of the information would endanger trade secrets or profitability, and that the information would not customarily be released to the public.

Filers of submissions containing business confidential information also must submit a public version of their comments. The file name of the public version should begin with the character “P”.

The “BC” and “P” should be followed by the name of the person or entity submitting the comments or rebuttal comments. If these procedures are not sufficient to protect business confidential information or otherwise protect business interests, please contact the USTR Tech Transfer Section 301 line at (202) 395–5725 to discuss whether alternative arrangements are possible.

How To Submit Post-Hearing Rebuttal Comments

For those who want to submit rebuttals to testimony and comments of the hearing may do so.

The due date for submissions of post-hearing rebuttal comments is seven days after the last day of the public hearing.

Follow the same instructions for submitting written comments to submit post-hearing rebuttal comments.

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China Announces Tariff Hikes on $60 Billion of U.S. Goods – Trade War Update https://www.universalcargo.com/china-announces-tariff-hikes-on-60-billion-of-u-s-goods-trade-war-update/ https://www.universalcargo.com/china-announces-tariff-hikes-on-60-billion-of-u-s-goods-trade-war-update/#comments Tue, 14 May 2019 20:38:38 +0000 https://www.universalcargo.com/?p=9570 As expected, China retaliated against the U.S. for the tariffs hike President Trump ordered on $200 billion worth of Chinese goods. China announced its plan for tariff increases on $60 billion worth of U.S. goods on Monday (May 13th, 2019), just three days after the U.S. implemented its latest tariffs increase.




The tariffs hike the U.S. implemented on imports from China was from 10% to 25%. Similarly, China is raising tariffs on U.S. exports that were previously tariffed at 10%. The difference is tariffs on some of those goods are increasing to 20% while the tariffs on others are being increased to 25%.




It's possible U.S. shippers who export to China may not actually see these tariff increases hit their goods, but it would require the countries coming to agreement on a trade deal before the end of the month.




To see the complete list of U.S. goods China is putting a 25% tariff on, check out the whole post in Universal Cargo's blog.

The post China Announces Tariff Hikes on $60 Billion of U.S. Goods – Trade War Update appeared first on Universal Cargo.

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YouTube Video

As expected, China retaliated against the U.S. for the tariffs hike President Trump ordered on $200 billion worth of Chinese goods. China announced its plan for tariff increases on $60 billion worth of U.S. goods on Monday (May 13th, 2019), just three days after the U.S. implemented its latest tariffs increase.

President-elect Trump w/ US & Chinese flags
Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

The tariffs hike the U.S. implemented on imports from China was from 10% to 25%. Similarly, China is raising tariffs on U.S. exports that were previously tariffed at 10%. The difference is tariffs on some of those goods are increasing to 20% while the tariffs on others are being increased to 25%.

It’s possible U.S. shippers who export tariff targeted goods to China may not actually see these tariff increases hit their goods, but it would probably require the countries coming to agreement on a trade deal before the end of the month.

Ana Swanson and Keith Bradsher reported in a New York Times article:

Both China and the United States have left a window for negotiators to try to reach a deal before the latest round of higher tariffs goes into effect. China said it would delay the higher rates until June 1, while Mr. Trump’s new 25 percent rate affects only products sent to the United States as of May 10, leaving a two- to four-week gap from the time most goods leave China by boat to when they arrive at an American port.

That doesn’t give much time for China and the U.S. to come together on this trade deal; however, it does give a tiny glimmer of hope that the trade war escalation could be halted. At the very least, it adds credence to President Trump’s words Monday that were reported by NBC News:

“We’ll let you know in three or four weeks if [the trade talks are] successful,” President Trump said. In three weeks we’ll see if there’s a deal or if China and the U.S. fight it out with these tariffs and the likely rounds to follow, like the tariffs increase the U.S. is planning next on $300 billion worth of Chinese goods.

If China’s tariffs on U.S. goods go into effect on June 1st, there are 2,493 products that will see the hike to 25% tariffs. Amanda Shendruk & Heather Timmons, in a Quartz article, did the work of Google translating the list of all those products China’s Ministry of Finance announced they were targeting with the tariffs hike to 25%. While Google translate leaves room for error, the Quartz list is organized by category and includes HTS codes for each product. The list is included below.

Click Here for Free Freight Rate Pricing

Food

ItemHTS code
Frozen peas7102100
Frozen other legumes7102900
Frozen spinach7103000
Frozen other berries8112000
Other frozen fruits and nuts8119090
Peel of citrus fruit or melon8140000
Unroasted coffee not immersed in caffeine9011100
Unroasted coffee with caffeine soaked9011200
Roasted coffee without caffeine9012100
Roasted coffee with caffeine soaked9012200
Flower tea with a net weight of ≤ 3kg9021010
Other green teas with a net weight of ≤3kg9021090
Other green teas with a net weight > 3kg9022090
Oolong tea with a net weight of ≤3kg9023010
Other fermented, semi-fermented black teas with a net weight of ≤ 3kg9023090
Other fermented, semi-fermented black teas with a net weight > 3 kg9024090
Unground pepper9041100
Ground pepper9041200
Pepper has been ground9042200
Other unground cinnamon and cinnamon flowers9061900
Crushed cumin9093200
Ginger has been ground9101200
Mixed seasoning9109100
Other flavorings9109900
Fine powder of wheat or mixed wheat11010000
Other cereal fines11029090
Wheat semolina and coarse powder11031100
Other processed oats11042200
Other cereals processed by other processing11042990
Potato powder tablets, granules and pellets11052000
Fruit and nut powder and powder11063000
Unbaked malt11071000
Braised malt11072000
Potato starch11081300
Tapioca starch11081400
Other starch11081900
Gluten11090000
Other sunflower seeds12060090
Other mustard12075090
Other oily kernels and fruits12079999
Other plants mainly used as medicines12119039
Mainly used as a spice plant12119050
Other insecticidal and bactericidal plants12119099
Other seaweed and algae12122190
Sweet almonds12129912
Other cores and nuts for human consumption12129999
Licorice juice and extract13021200
Pectin, pectate and pectate13022000
Agar13023100
Other vegetable gums and thickeners13023990
Bamboo14011000
Other plant products14049090
Cod liver oil and its fractions15041000
Other animal oils, fats and their fractions15060000
Virgin soybean oil and its fractions15071000
Other soy oil and its fractions15079000
Virgin peanut oil and its fractions15081000
Other peanut oil and its fractions15089000
Virgin olive oil and its fractions15091000
Other oil olive oil and its fractions15099000
Extra virgin sunflower oil or safflower oil and its fractions15121100
Other sunflower oil or safflower oil and its fractions15121900
Virgin coconut oil and its fractions15131100
Other coconut oil and its fractions15131900
Virgin low-sauerkraut souric acid oil and its fractions15141100
Other rapeseed oil or mustard oil and its fractions15149900
Other corn oil and its fractions15152900
Castor oil and its fractions15153000
Sesame oil and its fractions15155000
Hydrogenated, esterified or oleoylated animal fats15161000
Hydrogenated, esterified or oleoylated vegetable fats15162000
Margarine15171000
Shortening15179010
Mixed edible fats or products15179090
Crude glycerin, glycerin water and glycerine lye15200000
Meat or edible chopped homogenized food16021000
Manufactured or preserved pig hind legs and meat pieces16024100
Other prepared or preserved beef, chopped meat and blood16025090
Other cane sugar, unscented or colored17011400
Sugar17019910
Maple sugar and maple syrup17022000
Glucose and syrup, no fructose or fructose content below 20%17023000
Chemically pure fructose17025000
Whole or broken cocoa beans, raw or roasted18010000
Not defatted cocoa cream18031000
Cocoa butter, cocoa butter18040000
Cocoa powder without added sugar or other sweet substances18050000
Cocoa-containing foods with a net weight of >2kg18062000
Other non-sandwich block or strip containing cocoa food, net weight ≤ 2kg18063200
Retail packaging formula for infants and young children19011010
Other unlisted foods19019000
Uncooked or uncooked egg-containing pasta19021100
Stuffed pasta, whether cooked or otherwise prepared19022000
Ready-to-eat or quick-cooked noodles19023030
Foods made from unroasted cereal flakes and mixed unbaked foods19042000
Sweet cookies19053100
Waffles and Holy Communion19053200
Rusks, toast and similar toast19054000
Cucumbers and gherkins made or preserved with vinegar or acetic acid20011000
Other fruits, vegetables and edible plants prepared or preserved with vinegar or acetic acid20019090
Whole or sliced ​​canned tomatoes, not made with vinegar20021010
Canned white mushrooms, not made of vinegar20031011
Other canned mushrooms, not made with vinegar20039010
Other frozen vegetables and mixed vegetables made from vinegar20049000
Unfrozen potatoes made without vinegar20052000
Unfrozen peas made without vinegar20054000
Other canned kidney beans and kidney beans, not made of vinegar20055119
Canned peas and kidney beans, not made with vinegar20055910
Unfrozen olive oil made from vinegar20057000
Unfrozen sweet corn made from vinegar20058000
Other unfrozen vegetables and mixed vegetables, not made with vinegar20059999
Candied olives20060020
Other candied vegetables, fruits, nuts, peels, etc.20060090
Cooked citrus fruit20079100
Other cooked jams, jellies, purees, canned fruit20079910
Other cooked jams, jellies, purees, fruit pastes20079990
Other peanuts not made with vinegar20081190
Other nuts and kernels not made of vinegar20081999
Apricots made without vinegar20085000
Peach (including nectarine) canned20087010
Assorted fruits made without vinegar20089700
Seasoned seaweed20089931
Grapefruit (including pomelo) juice with a Brix value not exceeding 2020092100
Other grapefruit (including pomelo) juice20092900
Lemon juice with a Brix value not exceeding 2020093110
Lemon juice with a Brix value over 2020093910
Pineapple juice with a Brix value not exceeding 2020094100
Other pineapple juice20094900
Grape juice with a Brix value not exceeding 30, including wine grape juice20096100
Other apple juice20097900
Mango juice20098912
Passion fruit juice20098913
Guava juice20098914
Other unmixed vegetable juice20098920
Mixed fruit juice20099010
Mixed vegetable juice, mixed juice of fruits and vegetables20099090
Coffee concentrate21011100
Products based on coffee concentrate or coffee21011200
Tea, mate tea concentrated juice and its products21012000
Active yeast21021000
Inactive yeast; other single-celled microorganisms that have died21022000
Soy sauce21031000
Ice cream and other iced foods (with or without cocoa)21050000

Beverages

ItemHTS code
Coconut juice21069040
Soft drinks (unflavored, sweetened or other sweet substances)22011020
Packaged natural water22019011
Unpackaged natural water22019019
Other water, ice and snow (unflavored, sweetened or otherwise sweet)22019090
Non-alcoholic beer22029100
Other non-alcoholic drinks, excluding fruit juice vegetable juice22029900
Malt brewed beer22030000
Grape sparkling wine22041000
Freshly brewed wine in small packages22042100
Large-packaged wine made from fresh grapes22042900
Small package of miso and similar wine22051000
Other fermented beverages; other unsorted fermented beverage mixtures22060090
Unmodified ethanol, alcohol concentration ≥80% by volume22071000
Hard liquor made from distilled wine22082000
Gin22085000
Liqueur and Cordier22087000
Tequila22089010
Liquor22089020
Other distilled spirits and alcoholic beverages22089090

Mineral Products

ItemHTS code
Edible salt25010011
Other salt25010019
Uncalcined pyrite25020000
Sulfur, except sublimation, precipitation and colloidal sulfur25030000
Spheroidized graphite25041091
Other natural graphite25049000
Other natural sand, whether or not colored25059000
Quartzite25062000
Kaolin soil similar25070090
White chalk25090000
Milled apatite25102010
Other siliceous fossil coarse powder and siliceous soil25120090
Pumice25131000
Marble and travertine25151100
Rectangular marble and travertine25151200
Other limestone monument or building stone; wax stone25152000
Granite25161100
Rectangular granite25161200
Sandstone25162000
Other monument or building stone25169000
Pebble, gravel and gravel, boulder and vermiculite, whether or not heat treated25171000
Groces, crumbs and powders from various stone materials25174900
Uncalcined or sintered dolomite25181000
Fused magnesia25199010
Sintered magnesia ore (calcium burnt)25199020
Alkaline burnt magnesium (light burnt magnesium)25199030
Raw gypsum; anhydrite25201000
Quicklime25221000
Slaked lime25222000
Cement clinker25231000
Alumina cement25233000
Other asbestos25249090
Undisturbed mica and split mica flakes25251000
Natural borax and its concentrate, whether or not calcined25280010
Borate; natural crude boric acid25280090
Feldspar25291000
Leucite; nepheline and nepheline syenite25293000
Unexpanded meteorites and perlite25301020
Rare earth metal ore25309020
Other mineral products25309099
Sintered iron ore and concentrate26011200
Manganese ore and its concentrate26020000
Copper ore and concentrate26030000
Nickel ore and its concentrate26040000
Zinc ore and concentrate26080000
Titanium ore and its concentrate26140000
Zirconium ore and its concentrate26151000
Other vanadium ore and its concentrate26159090
Other precious metal ores and concentrates26169000
Other mineral sands and concentrates26179090
LNG27111100

Chemical Products

ItemHTS code
Chlorine28011000
Iodine28012000
Bromine28013020
Argon28042100
Boron, bismuth28045000
Diameter <7.5cm single crystal silicon rod for the electronics industry28046120
Other silicon containing <99.99% silicon28046900
Arsenic28048000
Other selenium28049090
Calcium28051200
Other rare earth metals, cerium and lanthanum which have been mixed or fused to each other28053029
Xulfuric acid, fuming sulfuric acid28070000
Nitric acid and sulfonic acid28080000
Other phosphoric acid and metaphosphoric acid, pyrophosphate28092019
Other hydrogen fluoride (hydrofluoric acid)28111190
Carbon dioxide28112100
Other non-metallic chlorides and oxychlorides28121900
Ammonia28141000
Ammonia water28142000
Solid sodium hydroxide28151100
Sodium peroxide and potassium peroxide28153000
Magnesium hydroxide and magnesium peroxide28161000
Brown corundum28181010
Alumina28182000
Other cobalt oxides and hydroxides; commercial cobalt oxide28220090
Titanium oxide28230000
Other strontium, barium and its inorganic salts28251090
Vanadium pentoxide28253010
Other vanadium oxides and hydroxides28253090
Antimony oxide​​28258000
Tungsten trioxide28259012
Tin dioxide28259031
Anhydrous aluminum fluoride28261210
Fluorosilicate28269010
Lithium hexafluorophosphate28269020
Fluoroaluminate and other fluoro complex salts28269090
Ammonium chloride for non-fertilizers28271090
Calcium Chloride28272000
Nickel chloride28273500
Lithium chloride28273910
Zirconium oxychloride and hydroxide chloride28274910
Sodium bromide and potassium bromide28275100
Other bromides and bromines28275900
Iodide and iodine oxide28276000
Other hypochlorite; chlorite; hypobromite28289000
Sodium dithionate28311010
Sodium sulfite28321000
Sodium sulfate28331100
Magnesium sulfate28332100
Aluminum sulfate28332200
Barium sulfate28332700
Ferrous sulfate28332910
Chromium sulphate28332920
Potassium nitrate for non-fertilizers28342190
Hypophosphite and phosphite28351000
Food grade calcium orthophosphate (dicalcium phosphate)28352520
Trisodium phosphate28352910
Food grade sodium tripolyphosphate (sodium tripolyphosphate)28353110
Barium carbonate28366000
Lithium carbonate28369100
Bismuth carbonate28369200
Magnesium carbonate28369910
Commercial ammonium carbonate and other ammonium carbonates28369940
Potassium cyanide28371910
Other cyanide and oxycyanide28371990
Cyanide complex28372000
Other sodium silicates; commercial sodium silicate28391990
Other chromate and dichromate; perchromate28415000
Other metal acid salts and permetalates28419000
Lithium nickel cobalt manganese oxide28429030
Lithium iron phosphate28429040
Colloidal precious metals28431000
Natural uranium and its compounds28441000
U235 Enriched uranium, thorium and their compounds28442000
Radioactive cobalt and radioactive cobalt salts28444020
Antimony oxide28469011
Yttrium oxide28469017
Other rare earth oxides28469019
Mixed rare earth carbonate28469048
Other compounds of bismuth28469093
Other compounds of bismuth28469096
Hydrogen peroxide28470000
Drinking distilled water28539010
2-methyl propylene29012330
Isoprene29012420
Acetylene29012920
Cyclohexane29021100
Other naphthenes, cycloolefins and cyclodecene29021990
Toluene29023000
O-xylene29024100
Meta-xylene29024200
P-xylene29024300
Mixed xylene isomer29024400
Ethylbenzene29026000
Isopropyl benzene29027000
Saturated chlorinated derivatives of other acyclic hydrocarbons29031990
Tetrachloroethylene29032300
Other halogenated derivatives such as cycloalkanes or cyclic olefins29038900
Chlorobenzene and p-dichlorobenzene29039190
Methanol29051100
Isopropanol29051220
N-octanol29051610
Other octanol29051690
Decylene, cetyl alcohol and stearyl alcohol29051700
Other acyclic terpene alcohol29052290
Other unsaturated monohydric alcohols29052900
2-ethyl-2-(hydroxymethyl)propane-1,3-diol (trimethylolpropane)29054100
Pentaerythritol29054200
Mannitol29054300
Glycerol (glycerol)29054500
Menthol29061100
Benzyl alcohol29062100
Other aromatic alcohols and their derivatives29062990
O-cresol29071212
Other cresol (p-cresol)29071219
4,4′-isopropylidene biphenol (bisphenol A) and its salts29072300
Other derivatives of halogenated, sulphonated, nitrated or nitrosated phenols and phenols29089990
2,2′-oxydiethanol (diethylene glycol)29094100
Ether phenols, ether phenols and their halogenated, sulphonated, nitrated or nitrosated derivatives29095000
1-Chloro-2,3-epoxypropane (epichlorohydrin)29103000
Acetal, hemiacetal, whether or not containing other oxy groups, and their halogenation, sulfonation, nitrification, or Nitrosated derivative29110000
Benzaldehyde29122100
Aldol29124910
Other aldehyde ethers, aldehydes, other oxy-containing aldehydes29124990
Halogenated, sulphonated, nitrated, or nitrosated derivatives of the products listed in heading 291229130000
Butanone29141200
Musk ketone and methyl musk ketone29142300
Acetophenone29143910
Other aromatic ketones containing no other oxy groups29143990
Keto alcohol and keto aldehyde29144000
Other ketones29145019
2-Hydroxy-4-methoxybenzophenone29145020
Containing other oxy-containing ketones29145090
Unclear translation29146100
Halogenated, sulphonated, nitrated or nitrosated derivatives of other ketones and oximes29146900
Formate29151200
Formate29151300
Other glacial acetic acid (glacial acetic acid)29152119
Other acetic acid29152190
Vinyl acetate29153200
Mono-, di-, trichloroacetic acid and its salts and esters29154000
Propionate and ester29155090
Stearic acid29157010
Acrylic acid and its salts29161100
Isooctyl acrylate29161240
Methacrylic acid and its salts29161300
Methacrylate29161400
Other (cycloalkane, cycloalkenyl, cyclodecene) monocarboxylic acids and their derivatives29162090
Benzoyl peroxide and benzoyl chloride29163200
Adipic acid and its salts and esters29171200
Azelaic acid and its salts and esters29171310
Maleic anhydride29171400
Tetrahydrophthalic anhydride29172010
Dioctyl phthalate29173200
Other terephthalic acid29173619
Dimethyl terephthalate29173700
Isophthalic acid29173910
Tartaric acid29181200
Tartrate and tartaric acid ester29181300
Other phenolic groups but not other oxycarboxylic acids and their anhydrides29182900
Aniline and its salts and derivatives29214200
Diphenylamine and its salts and derivatives29214400
1-Naphthylamine, 2-naphthylamine and its salts and derivatives29214500
M-, p-phenylenediamine, diaminotoluene and its salts and derivatives29215190
Other aromatic polyamines and their salts and derivatives29215900
Other amino (naphthol, phenol) and ether, ester, salt29222990
Other aminoaldehydes, aminoketones, aminoguanidines and their salts29223990
Lysine29224110
Glutamic acid29224210
Sodium glutamate29224220
Tranexamic acid29224911
Other amino alcohol phenols, amino acid phenols and other oxy-containing amino compounds29225090
Ureide and its salts and derivatives29242100
Aspartame29242930
Other cyclic amides (including cyclic carbamates)29242990
Saccharin and its salts29251100
Other imines and their salts and derivatives29252900
Diazo compounds, azo compounds and azo compounds29270000
2,4 and 2,6 toluene diisocyanate mixture (toluene diisocyanate TDI)29291010
Diphenylmethane diisocyanate (pure MDI)29291030
Methionine (methionine)29304000
Bismuth alanine (cystine)29309010
Dithiocarbonate (or salt) [xanthogenate (or salt)]29309020
Other organophosphorus derivatives29313990
2-furfural29321200
Dimethylphenylpyrazolone (antipyrine) and its derivatives29331100
Other structurally non-fused pyrazole ring compounds (whether or not hydrogenated)29331990
Piperidine (hexahydropyridine)29333210
Other compounds containing quinoline or isoquinoline ring systems (but not further fused)29334900
Other compounds having a pyrimidine ring or a piperazine ring (whether or not hydrogenated)29335990
Melamine (melamine)29336100
Other isocyanuric acid chlorinated derivatives29336929
Other heterocyclic compounds containing only nitrogen heteroatoms29339900
Other compounds containing a non-fused thiazole ring (whether or not hydrogenated)29341090
Sultone and sultam29349910
Unmixed vitamin A and its derivatives29362100
Unmixed vitamin B1 and its derivatives29362200
Unmixed vitamin B2 and its derivatives29362300
Unmixed D or DL-pantothenic acid and its derivatives29362400
Unmixed vitamin B12 and its derivatives29362600
Recombinant human insulin and its salts29371210
Other insulin and its salts29371290
Other peptide hormones, protein hormones, glycoprotein hormones and their derivatives and similar structures29371900
Halogenated derivatives of other corticosteroids29372290
Halogenated derivatives of other corticosteroids29372390
Other steroid hormones and their derivatives and similar structures29372900
Prostaglandins, thromboxanes and leukotrienes and their derivatives and structural analogues29375000
Other natural or synthetically prepared glycosides and their salts, ethers, esters and other derivatives29389090
Other opioids and their derivatives, and their salts29391900
Other alkaloids and their salts and derivatives29398000
6 Aminopenicillanic acid (6APA)29411093
Gentamicin and its salts and derivatives29419010
Other cephalosporins and their derivatives and their salts29419059
Adhesive plaster30051010
X-ray contrast agent; diagnostic reagent30063000
Chemical contraceptives based on hormones30066010
Ok for ostomy appliances30069100
Urea31021000
Sodium nitrate31025000
Other mineral nitrogen fertilizers and chemical nitrogen fertilizers31029090
Pure potassium chloride31042020
Other potassium chloride31042090
Potassium sulfate31043000
Manufactured into flakes and similar shapes or fertilizers with a gross weight not exceeding 10 kg31051000
Fertilizers containing nitrogen, phosphorus and potassium31052000
Ammonium dihydrogen phosphate and mixtures of ammonium dihydrogen phosphate and diammonium hydrogen phosphate31054000
Hardwood Extract32011000
Other plant extracts32019010
Tannic acid and its derivatives32019090
Organic synthetic tanning materials32021000
Inorganic tanning materials; tanning preparations; pre-industrial enzyme preparations32029000
Other plant matter colourings and preparations based on them;32030019
Disperse dyes and articles based on them32041100
Acid dyes and mordant dyes and articles based on them; mord dyes and ingredient product32041200
Basic dyes and products based on them32041300
Reactive dyes and articles based on them32041600
Sulfurized black (sulfurated black) and products based on it32041911
Other sulphur dyes and articles based on them32041919
Carotene and carotenoids32049020
Ultramarine and its basic products32064100
Zinc white32064210
Pigments and products based on bismuth vanadate32064911
Modulate pigments, sunscreens, colorants and similar products32071000
珐琅 and glaze, glaze (glaze) and similar products32072000
Light enamel and similar products32073000
Polyester paints and varnishes, soluble in non-aqueous media32081000
Ethylene polymer paints and varnishes dispersed or dissolved in non-aqueous media32082020
Other polymer paints and varnishes in water-soluble media based on fluororesin32099020
Semiconductor device packaging materials32141010
Laurel oil33012940
Iris33013010
Mixed spices and products for the production of beverages, ≤0.5%33021010
Perfume and toilet water33030000
Lip Cosmetics33041000
Eye cosmetics33042000
Finger (toe) cosmetics33043000
Powder, whether pressed or not33049100
Skin care and other beauty products33049900
Shampoo33051000
Perm33052000
Styling agent33053000
Other hair care products33059000
Washing soap34011100
Laundry soap34011910
Non-striped soap34012000
Textile material, leather and other material treatment agents without mineral oil34039100
Other dental products containing plaster34070020
Casein35011000
Unexposed imaging film37012000
PS version (pre-coated photosensitive version) (any side over 255mm)37013022
CTP version (over 255mm on either side)37013024
Other unexposed films and hard sheets for photoengraving (no more than 255 mm on either side)37019920
Unrolled X-ray photographic film in rolls37021000
Unexposed, dry photoresist film for the manufacture of printed circuit boards, widths > 610 mm, lengths > 200 m37024221
Unexposed, non-perforated film for photolithography, width > 610 mm, length > 200 m37024229
Red or infrared laser film, width > 610 mm, length > 200 m37024292
Other unexposed, perforated film, width > 610 mm, length > 200 m37024299
Unexposed photoresist dry film for the manufacture of printed circuit boards, 105mm37024422
Non-perforated unexposed film for photolithography, 105mm37024429
Other non-perforated unexposed film, 105mm37024490
Flushing of film and photo chemicals or unmixed products for photography37079010
Surface treated spheroidized graphite38019010
Turpentine, wood turpentine and turpentine38051000
Pine oil based on α terpineol38059010
Crude dipentene; sulfite turpentine and other crude p-isopropylphenylmethane; other terpenes oil38059090
Rosin38061010
Other goods listed in Note 38 of Chapter 3838086900
Other retail packaging insecticides38089119
Fungicide for retail packaging38089210
Herbicides for retail packaging38089311
Starch material finishing agent for textile, paper making, tanning and other industries38091000
2,2,4-Trimethyl-1,2-dihydroquinoline (TMQ) oligomer mixture38123100
Mixed alkylbenzenes and mixed alkyl naphthalenes38170000
Stearic acid for industrial use38231100
Oleic acid38231200
Other industrial monocarboxylic fatty acids; refined acid oils38231900
Industrial fatty alcohol38237000
Superplasticizer38244010
1,1,1-trichloroethane (methyl chloroform) containing methane, ethane, propane halogenated mixture38247600
Other mixtures containing halogenated derivatives of methane, ethane and propane38247900
Ethylene oxide containing mixtures and products38248100
Mixture containing more than 50% talc38249991
By-products of the chemical industry and related industries not listed in other tax items38259000
Biodiesel and mixtures thereof38260000

Plastics, Rubber, etc.

ItemHTS code
Polyisobutylene in primary form39022000
Primary shaped modified non-available polystyrene39031910
Other polystyrene in primary shape39031990
Primary shape styrene-acrylonitrile copolymer39032000
Modified acrylonitrile-butadiene-styrene copolymer of primary shape39033010
Other acrylonitrile-butadiene-styrene copolymer39033090
PVC paste resin39041010
Other vinyl chloride copolymers of primary shape39044000
Other primary forms of polyvinyl acetate39051900
Aqueous dispersion of vinyl acetate copolymer39052100
Other primary shapes of vinyl acetate copolymer39052900
Primary shape polymethyl methacrylate39061000
Polyacrylamide39069010
Polytetramethylene ether glycol39072010
Primary shape alkyd resin39075000
High viscosity polyethylene terephthalate chips39076110
Polyamide-6 slice39081012
Primary shape urea resin and urethane resin39091000
Poly(methylene phenyl isocyanate) (crude MDI, polymeric MDI)39093100
Other amino resins of other primary shapes39093900
Primary shape nitrocellulose39122000
Alkyd and salts and esters of primary shape39131000
Monofilaments, rods, rods, profiles and profiles made of ethylene polymers39161000
Vinyl chloride polymer profiles39162010
Monofilaments, rods, rods and profiles of vinyl chloride polymers39162090
Monofilaments, rods, rods and profile profiles made of polyamide39169010
Artificial casing made of hardening protein or cellulosic material39171000
Hard tube made of propylene polymer39172200
Floor coverings made of vinyl chloride polymer39181090
Capsule reflective film of width ≤ 20cm39191091
Other capsule reflective film39199010
Battery separator made of ethylene polymer39201010
Styrene polymer non-foam plastic sheet, sheet, film, foil, etc.39203000
Unsaturated polyester sheets, sheets, films, foils and strips39206300
Cellulose acetate sheets, sheets, films, foils and strips39207300
Plates, sheets, foils and strips of cellulose derivatives39207900
Foamed PVC artificial leather and synthetic leather39211210
Foamed polyvinyl chloride sheets, sheets, strips, foils and strips39211290
Foamed polyurethane artificial leather and synthetic leather39211310
Plastic bathtub, shower tray and sink39221000
Plastic reels, tweezers, tubes and similar articles39234000
Other household appliances and sanitary or toiletries39249000
Plastic enamels, cabinets, cans, barrels and similar containers39251000
Plastic products for office or school39261000
Other primary shapes of natural rubber40012900
Carbox styrene butadiene rubber latex40021110
Oil-filled styrene butadiene rubber40021912
Soluble styrene butadiene rubber without any processing40021915
Oil-filled polystyrene butadiene rubber40021916
Primary shape butadiene rubber40022010
Primary shape neoprene rubber40024910
Chloroprene rubber sheets, sheets, strips40024990
Nitrile rubber latex40025100
Isoprene rubber sheets, sheets, strips40026090
4001 Mixture of listed products with the products listed in this serial number40028000
Ointment extracted from oils40029990
Unvulcanized composite rubber solution and dispersion40052000
Tread-filled tire treads for refractory tires40061000
Vulcanized rubber thread and rope40070000
Pipes with attachments reinforced with or s40093200
Metal reinforced vulcanized rubber conveyor belts and strips40101100
Trapezoidal section V rib ring drive belt 60cm40103100
New pneumatic rubber tires for motorcycles40114000
Herringbone tread tire for agriculture and forestry vehicles40117010
Herringbone treads for construction, mining or industrial vehicles up to 61 cm in size40118011
Ring size over 61cm Herringbone tread tire for construction, mining or industrial vehicles40118012
Tires for construction, mining or industrial vehicles of up to 61 cm40118091
Other new pneumatic rubber tires40119090
Old pneumatic rubber tires for automobiles40122010
Used pneumatic rubber tires for other purposes40122090
Others with solid or semi-solid tyres40129090
Other rubber inner tubes40139090
Condom40141000
Vulcanized rubber surgical gloves40151100
Other gloves made of vulcanized rubber40151900
Other vulcanized rubber articles and accessories40159090
Eraser made of vulcanized rubber40169200
Vulcanized rubber ship or docking pad40169400
Hard rubber of various shapes40170010

Raw Hides and Skins

ItemHTS code
Unsliced ​​whole raw cowhide without reversal treatment41012019
Sheep or lamb hide with hair41021000
Other blue wet cowhide41041911
Full grain unsliced ​​or grained dry leather41044100
Other dry leather41044990
Blue wet pigskin41063110
Fully grained unsliced ​​whole cow leather41071110
Whole grain cow leather41071210
Others have been tidying up the whole cow leather41071990
Fully grained unsplit non-whole cow leather41079100
Unclear translation41079200
Others are not whole cow leather41079990
Unprocessed sheep or lamb leather41120000
Hairless goat or baby goat leather further processed41131000
Hairless pig leather with further processing41132000
Other hairless leather that has been further processed41139000
Patent leather and laminated patent leather; metallized leather41142000
Recycled leather41151000
Saddlery and harness for all kinds of animals42010000
Clothes box made of leather and recycled leather42021110
Other bags made of leather and recycled leather42021190
Handbag in leather or recycled leather42022100
Handbags made of plastic or textile materials42022200
Wallet in leather or recycled leather42023100
Other containers made of leather or recycled leather42029100
Other containers made of plastic or textile materials42029200
Clothing made of leather or recycled leather42031000
Leather or recycled leather for sports gloves42032100
Protective gloves made of leather or recycled leather42032910
Other gloves made of leather or recycled leather42032990
Leather or recycled leather belt42033010
Other accessories for leather or recycled leather42034000
Leather or recycled leather seat cover42050010
Leather or recycled leather products for machine, machine or other technical purpose42050020
Other untwisted, tailed, claw43019090
The entire mink skin that has not been sewn43021100
Unfurled precious fur43021910
Other furs not yet sewn43021990
Head, tail, claws and other pieces that have not been sewn43022000
Fur clothes43031010
Other articles made of fur43039000
Artificial fur products43040020

Wood and Articles of Wood

ItemHTS code
Non-coniferous wood chips or wood pellets44012200
Sawdust, wood waste and debris, unbonded44014000
Other charcoal, whether or not agglomerated44029000
Softwood logs treated with preservatives44031100
Pinus koraiensis and Pinus sylvestris var. mongolica with cross-section dimensions of 15 cm and above44032110
Larch logs, with a cross-section of 15 cm or more44032130
Other fir and spruce logs, cross-sections up to 15 cm44032400
Beech (Oak) logs44039100
Birch logs with a cross-section of 15 cm or more44039500
Poplar logs44039700
Beech logs44039800
Other unlisted temperate non-coniferous logs44039980
Other logs other than coniferous wood, tropical wood treated by other methods44039990
Wood and wood flour44050000
Longitudinal, slit, planed or rotary cut pine and pine wood with a thickness of more than 6 mm44071110
Longitudinal sawing, slitting, planing or rotary cutting of radiata pine wood with a thickness of more than 6 mm44071120
Longitudinal, slit, planed or cut-cut fir and spruce for thickness over 6 mm44071200
Teak wood, longitudinally sawing, slitting, planing or cutting, whether or not planed, sanded or end-joined Combined, thickness over 6 mm44072910
Bologna wood, longitudinally sawed, slitted, sliced ​​or cut, whether flattened, sanded or ended Bonding, thickness over 6 mm44072930
Other tropical wood timber, by longitudinal sawing, slitting, slicing or cutting, whether or not planed, Sanding or end jointing, thickness over 6 mm44072990
Oak ( oak) wood, longitudinally sawing, slitting, planing or cutting, whether or not planed, sanded Or end joints, thickness greater than 6 mm44079100
Phytosanaceae (beech) wood, longitudinally sawed, slitted, sliced ​​or cut, whether or not Flat, sanded or end joined, thickness over 6 mm44079200
Birch wood, longitudinally sawing, slitting, planing or cutting, whether or not planed, sanded or end-joined Combined, thickness over 6 mm44079600
Other mahogany wood, by longitudinal sawing, slitting, slicing or cutting, whether or not planed, sanded or end44079910
Other softwood veneers not exceeding 6 mm thick44081090
Other veneer veneer veneers not exceeding 6 mm in thickness44083119
Other veneer of tropical wood veneer of non-red liu Anmu, whether planed, sanded, spliced ​​or end Joint joint, thickness not exceeding 6 mm44083919
Other veneer of tropical wood, not tiling, whether flattened, sanded, spliced ​​or End joint, thickness not exceeding 6 mm44083990
Other temperate non-coniferous veneer veneers, whether planed, sanded, spliced ​​or end Bonding, thickness not exceeding 6 mm44089021
Other temperate non-coniferous wood, whether planed, sanded, spliced ​​or joined, thick44089091
Other non-coniferous wood made of continuous shape on either side, end or side (including unfilled44092990
Wooden particle board, whether or not bonded with resin or other organic binder44101100
Wood Oriented Strand Board (OSB), whether or not bonded with resin or other organic binders44101200
Other wooden similar panels (eg, waffle panels), whether or not resin or other organic binders44101900
Medium density wood fibreboard with a thickness not exceeding 5 mm, density exceeding 0.8 g per cubic centimeter, not44111211
Medium density wood fibreboard, more than 5 mm thick but not exceeding 9 mm, density exceeding cubic centimeters44111319
Medium density wood fibreboard with a thickness of more than 9 mm, density exceeding 0.8 g per cubic centimeter, machine44111419
Medium-density wood fibreboard with a thickness of more than 9 mm radiated, with a density exceeding every cubic centimeter44111421
Other medium-density wood fibre boards of more than 9 mm thickness, density exceeding 0.5 g per cubic centimeter,44111429
Other medium density wood fibreboards of more than 9 mm thickness, machined or covered44111499
Other wood fibreboard, density exceeding 0.8 g per cubic centimeter, not machined or covered44119210
Other wood fibreboard, density exceeding 0.8 g per cubic centimeter, machined or covered44119290
Other wood fibreboards, density exceeding 0.5 g per cubic centimeter, but not exceeding 0.8 per cubic centimeter44119390
Other wood fibreboards, density exceeding 0.35 g per cubic centimeter, but not exceeding 0.5 per cubic centimeter44119410
Other bamboo plywood made of slab, not exceeding 6 mm thick44121019
At least one of the surface layers is tropical wood, each layer not exceeding 6 mm thick, only made of thin wood44123100
The other at least one surface layer is the following non-coniferous wood: eucalyptus, ash, Cyclobalanopsis (beech)44123300
Other at least one surface layer is temperate non-coniferous wood (except for non-coniferous wood of subheading 4412.3300)44123410
Other at least one surface is non-coniferous not specified in subheadings 4412.3300 and 4412.341044123490
Other upper and lower layers are coniferous, each layer not exceeding 6 mm in thickness, only made of thin wood44123900
At least one surface is non-coniferous wood core plywood, side slat core plywood and lath core44129410
At least one other wooden veneer with non-coniferous wood44129910
Other wooden multi-layer boards44129999
Fortified wood in blocks, plates, strips or profiles44130000
Wooden boxes, boxes, crates, drums and similar packaging containers, cable reels44151000
Other wooden pallets, box pallets and other wooden pallets or other wooden pallets44152090
Other wooden tools, tool holders, tool holders, brooms and brushes, and wooden handles, and hoe44170090
Other wooden windows, French-style (floor) windows and wooden frames44181090
Wooden doors and their frames and sills44182000
Wooden columns and beams44186000
Other assembled multi-layer floors44187500
Other wood products for construction44189900
Woodcut figurines and other decorations44201011
Other wooden and bamboo figurines and other decorations44201090
Jewelry or knives wooden boxes and similar articles; non-floor wooden furniture44209090
Wooden hangers44211000
Bamboo round sticks, round bars, ice fruit sticks, tabs and similar disposable products44219110
Other unlisted wood products44219990
Granular or powdered cork (softwood, cork or cork)45019020
Natural cork stopper45031000
Blocks, plates, sheets, strips, solid cylinders, discs or pressed bricks of brick or tile of any shape45041000
Other pressed cork and its products45049000
Bamboo mats, mats and curtains46012100
Baskets and other products46021910
Baskets and other products, prepared from other plant materials46021990
Other products of non-plant braiding materials46029000
Other fibrous cellulose chemical pulp47069200

Paper and Paper Products

ItemHTS code
Rolled newsprint48010010
Sheets and other newsprint48010090
Other hand made paper and cardboard48021090
Photographic base paper48022010
Other uncoated paper and paper for writing, printing or similar purposes, weighing less than 40 grams per square metre. The board does not contain fibers obtained by mechanical or chemical-mechanical methods or contains the aforementioned fibers not exceed48025400
Weights of 40 grams and more per square meter, but not exceeding 150 grams, in the form of writing, printing or Other uncoated paper and paperboard for similar purposes, excluding mechanical or chemical-mechanical methods The obtained fiber or the aforemen48025500
Weight per square metre of 40 grams and above, but not exceeding 150 grams, in sheets, and unfolded48025600
Other writing, printing or class, weighing 40 g or more, but not exceeding 150 g.48025700
Sheets, and unfolded one side not exceeding 435 mm, the other side not exceeding 297 mm Other uncoated paper and paperboard for writing, printing or similar purposes, containing mechanical means or The mechanical-mechanical method produces more than 10% of48026200
Other uncoated paper and paperboard for writing, printing or similar purposes, containing mechanical means or Chemical-mechanical methods produce more than 10% of the total fiber weight48026900
Other corrugated base paper48051900
Tough cardboard with a weight of more than 150 grams per square meter48052500
Plant parchment48061000
Greaseproof paper48062000
Composite paper and cardboard in rolls or sheets48070000
Corrugated paper and cardboard, whether or not perforated48081000
Single or double coated kaolin or other inorganic materials in rolls or sheets (whether or not bonded)48109200
Multicolored coated paper of more than 150 grams per square metre of bleached in rolls or sheets paper48115110
Self-printed carbon paper48162000
Paper boxes, bags and clips with various paper stationery48173000
Paper bag with a bottom width of 40 cm and above48193000
Other paper bags, including tapered bags48194000
Paper containers, mail trays, storage boxes and the like used in paper offices, shops and similar places48196000
Paper exercise book48202000
Bobbins, reels, pulp, paper or cardboard (whether perforated or hardened) for textile yarns48221000
Other plates, plates, pots, cups and similar articles made of non-wooden pulp48236910
Pressed or molded pulp products48237000
Other flooring made of paper or cardboard48239010
Hand-painted design manuscripts for architectural, engineering, industrial, commercial, topographic or similar purposes; hand49060000
Other transfer decals (pattern paper for transfer printing)49089000
Printed calendars, including calendar cores49100000
Other printed matter of paper49119910

Textiles

ItemHTS code
Other mulberry silk ≥85%50072019
Other woven fabrics 绢 85%50072039
Other woven fabrics of yarn ≥ 85%50072090
Other woven fabrics, unbleached or bleached, <85%50079010
Silk <85% other woven fabric50079090
Uncombed fat-containing shearing wool51011100
Wool falling51031010
Carded wool yarn, not put up for retail sale51062000
Combed pure wool yarn for retail sale51071000
Combing and blended wool yarn for retail sale51072000
Carded yarn of not less than 85% by weight of cashmere51081011
Non-commercial carded yarns of 85% or less by weight of animal51081090
Non-commercial combed yarns of 85% or less by weight of animal fines51082090
Other wool yarn for retail sale51099090
Other animal hair content of 85% or more by weight, not more than 300 g per square meter51111119
Wool machine with a wool content of 85% or more and weighing not more than 300 g per square metre fabric51111190
Other animal fine hair content of 85% or more by weight, more than 300 g per square meter51111919
Woollen fabrics with a wool content of 85% or more and more than 300 gram per square metre51111990
Carded wool with synthetic filaments51112000
Carded wool fabric mixed with chemical staple fibres51113000
Carded woolen fabric blended with other fibres51119000
Weight ≤ 200g / square meter combed wool cloth51121100
Weight >200g/m2 combed full felt51121900
Blended wool fabric with synthetic filaments51122000
Combing with chemical fiber staple fiber51123000
Blended with other fibres51129000
Combed cotton52030000
Non-retail cotton sewing thread for retail sale52041100
Non-retail carded coarse cotton single yarn52051100
Cotton single yarn, non-retail carding52051200
Cotton single yarn, non-retail combed52052200
Non-retailed combed fine cotton single yarn52052400
Multi-strand yarn of cotton combed, not put up for retail sale52054300
Single yarn of blended cotton, not put up for retail52061200
Single yarn of combed cotton, not put up for retail sale52062300
Multiple or cabled yarn of mixed carded cotton52063100
Cotton yarn for retail sale52071000
Unbleached lightweight cotton plain fabric52081100
Unbleached lighter cotton plain weave52081200
Unbleached lightweight other cotton woven fabric52081900
Bleached lighter cotton plain weave52082200
Bleached lightweight other cotton woven fabric52082900
Dyed lightweight cotton plain weave52083100
Lighter cotton jersey with dyed52083200
Lightweight other cotton woven fabric dyed52083900
Yarn-dyed lighter cotton plain weave52084200
Lightweight cotton three or four-line twill52084300
Lightweight other cotton woven fabric52084900
Printed lightweight cotton plain weave52085100
Lighter cotton jersey52085200
Lightweight other cotton woven fabric52085990
Unbleached heavy cotton plain weave52091100
Unbleached heavy cotton three or four-line twill52091200
Unbleached heavy other cotton woven fabric52091900
Bleached heavy cotton plain weave52092100
Bleached heavy cotton three or four-line twill52092200
Heavy other cotton woven fabrics bleached52092900
Dyed heavy cotton plain weave52093100
Dyed heavy cotton three or four-line twill52093200
Dyed heavy other cotton woven fabric52093900
Yarn-dyed heavy cotton plain weave52094100
Yarn-dyed heavy cotton denim (labor cloth)52094200
Other three- or four-line twill woven fabric, including double-faced twill woven fabric52094300
Yarn-dyed heavy other cotton woven fabric52094900
Printed heavy cotton plain weave52095100
Printed heavy other cotton woven fabric52095900
Unbleached lightweight muslin mixed with man-made fibres52101100
Unbleached lightweight other cotton fabric blended with man-made fibres52101990
Lightweight muslin mixed with chemical fiber dyed52103100
Lightweight three- or four-line twill cotton dyed from man-made fibres52103200
Lightweight other cotton fabric blended with chemical fiber52103900
Lightweight jersey fabric blended with man-made fibres52104100
Lightweight three- or four-line twill cotton with chemical fiber blended yarn-dyed52104910
Lightweight other cotton fabric blended with man-made fibres52104990
Lightweight jersey with chemical fiber blended print52105100
Lightweight cotton fabric with synthetic fibres52105990
Unbleached heavy muslin mixed with man-made fibres52111100
Chemical fiber blend unbleached heavy three or four thread twill52111200
Heavy other cotton fabric blended with chemical fiber52112000
Heavy muslin mixed with chemical fiber dyed52113100
Heavy-duty three- or four-line twill cotton dyed from man-made fibres52113200
Heavy other cotton fabric dyed with chemical fiber52113900
Heavy woven cotton fabric blended with man-made fibres52114100
Heavy denim with chemical fiber blended yarn-dyed52114200
Other three- or four-line twill woven fabrics blended with man-made fibres, including double-faced twill woven fabric52114300
Heavy other cotton fabric with chemical fiber blended yarn-dyed52114900
Heavy woven cotton fabric with chemical fiber blended printing52115100
Other blended lightweight cotton fabric dyed52121300
Yarn-dyed other blended lightweight cotton cloth52121400
Other blended lightweight cotton fabric52121500
Other blended heavy cotton fabric, unbleached52122100
Other blended heavy cotton fabric dyed52122300
Yarn-dyed other blended heavy cotton fabric52122400
Other blended heavy cotton fabric52122500
Multi-strand yarn or cable53062000
Unbleached full linen woven fabric53091110
Other full linen woven fabric53091900
Unbleached blended linen woven fabric53092110
Other blended linen woven fabric53092900
Synthetic filament yarn for retail sale54011020
Filament high-strength yarns, of other aromatic polyamides, not put up for retail sale54021190
Polyamide-6 spun filament high-strength yarn, not put up for retail sale54021910
Polyamide-6,6 spun filament high-strength yarn, not put up for retail sale54021920
Filament high-strength yarns of other nylon or other polyamides, not put up for retail sale54021990
Non-retail polyester filament high strength yarn54022000
Fine elastic yarn of polyamide-6, not put up for retail sale54023111
Polyamide-6,6 spun fine stretch yarn, not put up for retail sale54023112
Other fine nylon elastic yarns not for retail sale54023119
Other fine nylon textured yarn, not put up for retail sale54023190
Other coarse nylon elastic yarn not for retail sale54023219
Non-retail polyester stretch yarn54023310
Other polyester textured yarns not put up for retail sale54023390
Polypropylene textured yarn for retail sale54023400
Other synthetic filament yarns, not put up for retail sale54023900
Elastic spandex yarn, untwisted or twisted, not exceeding 50 rpm54024410
Other single yarns of polyamide-6, not twisted or twisted, not exceeding 50 rpm.54024510
Other polyester yarn, untwisted or twisted, not exceeding 50 rpm54024700
Other polypropylene yarn, untwisted or twisted, not exceeding 50 rpm54024800
Twisted single yarn of polyamide-6, not put up for retail sale, s.54025110
Other polyester twisted single yarn, not put up for retail sale, s.54025200
Polypropylene twisted single yarn, not put up for retail sale, s.54025300
Multiple yarns of polycaprolactam (nylon-6), not put up for retail sale54026110
Polyamide-6,6 multi-strand yarn, not put up for retail sale54026120
Other nylon multi-strand yarn, not put up for retail sale54026190
Non-retail polyester multi-strand yarn54026200
Polypropylene yarn, not put up for retail sale54026300
Spandex multi-strand yarn, not put up for retail sale54026920
Multiple rayon filament yarn or cable, not put up for retail sale54034900
Nylon or other polyamide high-strength yarn woven fabric54071010
Polyester high strength yarn woven fabric54071020
Plain nylon cloth, unbleached or bleached54074100
Dyed pure nylon cloth54074200
Yarn-dyed pure nylon fabric54074300
Printed nylon cloth54074400
Unbleached or bleached pure polyester textured filament fabric54075100
Dyed pure polyester textured filament fabric54075200
Yarn-dyed pure polyester textured filament fabric54075300
Printed pure polyester textured filament fabric54075400
Other pure polyester non-deformed filament fabric54076100
Other pure polyester filament fabric54076900
Unbleached or bleached other pure synthetic filament fabric54077100
Other pure synthetic filament fabric dyed54077200
Yarn-dyed other pure synthetic filament fabric54077300
Other pure synthetic filament fabric54077400
Unblended or bleached cotton-blend synthetic filament fabric54078100
Dyed and cotton blended synthetic filament fabric54078200
Yarn-dyed and cotton-blend synthetic filament fabric54078300
Other blended synthetic filament fabrics, not bleached or bleached54079100
Other blended synthetic filament fabrics dyed54079200
Other blended synthetic filament fabric54079400
Unbleached or bleached woven fabric of viscose filaments54082110
Unbleached or bleached woven fabric of other artificial filaments54082190
Pure viscose filament dyeing woven fabric54082210
Other artificial filament dyeing woven fabrics54082290
Pure viscose filament yarn woven fabric54082310
Other artificial filament yarn looms54082390
Dyed human filament yarn blended fabric54083200
Yarn-dyed human filament yarn blended fabric54083300
Printed man’s filament blended fabric54083400
Nylon or other polyamide filament tow55011000
Polyacrylonitrile filament tow55013000
Other synthetic filament tow55019000
Uncombed poly(m-phenylene isophthalamide) spun synthetic staple fiber55031110
Unblended other aromatic polyamide spun synthetic staple fibers55031190
Uncombed polyester staple fiber55032000
Uncombed polyacrylonitrile synthetic staple fiber55033000
Uncombed polypropylene staple fiber55034000
Unblended fiber staples made of polyphenylene sulfide55039010
Other undyed synthetic staple fibers55039090
Other uncombed viscose staple fibers55041090
Other rayon staple fibers, uncombed55049000
Comb poly-m-phenylene isophthalamide fiber staple fiber55061011
Combed nylon or other polyamide staple fibers55061090
Combed polyester staple fiber55062000
Combed rayon staple fiber55070000
Sewing thread spun from synthetic staple fibers55081000
Non-retailed pure nylon staple fiber multi-strand yarn55091200
Single yarn of polyester staple fibers not put up for retail sale55092100
Multi-strand yarn of polyester staple fibers, not put up for retail sale55092200
Multi-strand yarn of pure polyacrylonitrile staple fibers, not put up for retail sale55093200
Multiple other synthetic staple fibers, not put up for retail sale55094200
Polyester staple yarn of non-retail and man-made staple fibers55095100
Non-retail and wool blended polyester staple yarn55095200
Non-retail and cotton blended polyester staple yarn55095300
Non-retail and wool blended acrylic staple yarn55096100
Non-retailed rayon staple fibers55101200
Non-retail and wool blended rayon staple yarn55102000
Blended synthetic staple fibre yarn for retail sale55112000
Pure polyester cloth not bleached or bleached55121100
Other pure polyester fabric55121900
Other synthetic fabrics, not bleached or bleached55129100
Other pure synthetic fabric55129900
Lightweight polyester jersey with cotton blended dyed55132100
Other lightweight polyester fabrics mixed with cotton55132390
Lightweight synthetic fabrics, blended with cotton55132900
Lightweight polyester jersey with cotton-dyed yarn-dyed55133100
Heavy polyester plain weave bleached with cotton55141120
Blend of other synthetic fibers, unbleached or bleached, with cotton55141990
Heavy polyester plain weave dyed with cotton55142100
Heavy polyester twill with cotton blended dyed55142200
Other heavy polyester fabrics mixed with cotton55142300
Heavy other synthetic fabrics dyed with cotton55142900
Heavy polyester plain weave with cotton blended yarn55143010
Heavy other synthetic fabrics, blended with cotton55143090
Polyester fabric blended with viscose staple fibers55151100
Polyester fabric blended with chemical filaments55151200
Polyester fabric blended with wool55151300
Polyester fabric blended with other fibers55151900
Acrylic fabric blended with other fibers55152900
Other synthetic staple fibre fabrics blended with chemical fibre filaments55159100
Pure rayon staple fabric, unbleached or bleached55161100
Yarn-dyed rayon staple fiber cloth55161300
Printed rayon staple fiber cloth55161400
Dyed rayon fabric blended with chemical filaments55162200
Yarn-dyed rayon fabric blended with wool55163300
Unbleached or bleached rayon fabric blended with cotton55164100
Dyed rayon fabric blended with cotton55164200
Dyed rayon fabric blended with other fibers55169200
Yarn-dyed rayon fabric blended with other fibers55169300
Printed rayon fabric blended with other fibers55169400
Cotton batt and other batt products56012100
Fleece and other batt products of other materials56012900
Other felts not impregnated or coated56022100
≤25g per square meter impregnated filament yarn non-woven fabric56031110
Other chemical fiber filament nonwoven fabrics, ≤ 25g per square meter56031190
Other nonwoven fabrics, ≤ 25g per square meter56039190
Metal yarn containing56050000
Thick spiral spiral flower line (except for goods of tax item 5605 and horsehair coarse spiral thread); chenille thread56060000
Other articles made of yarn, flat strips, ropes, cords and cables56090000
Wool-knotted woven carpets and other flooring products57011000
Silk knotted woven carpet and floor coverings57019020
Kellymand other hand-woven carpets
Unfinished chemical fiber piled carpets and flooring products57023200
Chemical fiber piled carpets and flooring products57024200
Wool non-woven piles and flooring products57029100
Chemical fiber non-raised carpet and flooring products57029200
Other non-woven fabrics and flooring products made of other textile materials57029900
Other chemical fiber tufted carpets and other tufted flooring products57033000
Wool pile fabric and chenille fabric58011000
Cut pile of cotton corduroy58012200
Cotton uncut velvet fabric (rib fabric)58012710
Cotton woven piled pile fabric58012720
Chemical fiber woven weft fabric without cut pile58013100
Cut pile of chemical fiber corduroy58013200
Other chemical fiber weft fabrics58013300
Wool and chenille fabrics of silk and silk58019010
Fleece fabrics and chenille fabrics of other materials58019090
Chemical fiber tufted fabric58023040
Cotton mesh gauze and other mesh fabrics58041020
Chemical fiber mesh gauze and other mesh fabrics58041030
Chemical fiber mechanism lace58042100
Cotton lace58042920
Cotton or linen narrow pile fabrics and chenille fabrics58061010
Narrow fabrics with elastic yarns ≥5%58062000
Other narrow woven fabrics, of cotton58063100
Other narrow woven fabrics, of other materials58063990
Woven non-embroidered textile material labels, badges, etc.58071000
Threading58081000
Non-embroidered decorative straps, tassels, pompons58089000
Embroidery without a base fabric58101000
Chemical fiber fabrics58109200
Other textile materials, see the bottom fabric embroidery58109900
Chemical fiber textile coated with glue or starch59011020
Made of canvas59019010
Cotton or linen tracing cloth, hard lining in caps, etc.59019091
Other textile fabric tracing cloth, hard lining in caps, etc.59019099
Polyester-6 (nylon-6) cord fabric59021010
Cord fabric made of polyamide-6,6 (nylon-6,6)59021020
Other cord fabrics made of nylon and other high-strength yarns59021090
Viscose fiber high-strength yarn cord fabric59029000
Artificial leather impregnated and coated with polyvinyl chloride59031020
Artificial leather impregnated with polyurethane59032020
Other textiles impregnated and coated with polyurethane59032090
Rubber coated rubber tape with width ≤ 20cm59061010
Knitted or crocheted textiles treated with rubber59069100
Rubber-treated wide other insulating cloth or tape59069910
Insulating cloth or tape impregnated with other materials59070010
Other knitted fabrics, such as rubberized fabrics, and woven fabrics59111090
Knitted or crocheted plush fabric60011000
Cotton knit or crocheted pile pile fabric60012100
Cotton knit or crocheted pile fabric60019100
Chemical fiber knitted or crocheted pile fabric60019200
Other fabric knitted or crocheted pile fabric60019900
Knitted or crocheted fabric of synthetic fibers with rubber thread ≤ 3060029030
Threaded or crocheted fabric of other textile materials, ≤ 30cm60029090
Width ≤ 30cm Other cotton knit, crocheted fabric60032000
≤30cm wide, knitted or crocheted fabric made of synthetic fiber60033000
Width > 30cm, elastic yarn ≥ 5% cotton knit, crochet60041010
Width > 30cm, elastic yarn ≥ 5% synthetic fiber knitted, crocheted fabric60041030
Knitted, crocheted fabric of elastic yarn ≥5% man-made fibers, width > 30cm60041040
Width > 30cm, elastic yarn ≥ 5% other textile materials knitted, crocheted60041090
Width >30cm cotton knit, crocheted fabric with rubber thread60049010
Width > 30cm Knitted or crocheted fabric of synthetic fibers with rubber thread60049030
Knitted, crocheted fabric of man-made fibers, s.60049040
Widths > 30cm Knitted, crocheted fabrics of other textile materials with rubber thread60049090
Captions of the synthetic fibers for antimalarial webs60053500
Other warp knitted fabrics of dyed synthetic fibers60053700
Other warp knitted fabrics of other yarn-dyed synthetic fibers60053800
Other warp knitted fabrics of dyed man-made fibers60054200
Other warp knitted fabrics of yarn-dyed man-made fibers60054300
Other textile materials warp knitted fabric60059090
Other knitted or crocheted fabrics of wool or fine animal hair60061000
Other knitted or crocheted fabrics, unbleached or bleached60062100
Other knitted or crocheted fabrics of dyed cotton60062200
Other knitted or crocheted fabric of yarn-dyed cotton60062300
Other knitted or crocheted fabrics, of cotton60062400
Other knitted or crocheted fabrics of unbleached or bleached synthetic fibers60063100
Other knitted or crocheted fabrics of dyed synthetic fibers60063200
Other knitted or crocheted fabric of yarn-dyed synthetic fibers60063300
Other knitted or crocheted fabrics, of synthetic synthetic fibers60063400
Other knitted or crocheted fabrics of dyed man-made fibers60064200
Other knitted or crocheted fabric of yarn-dyed rayon60064300
Knitted or crocheted fabrics not listed60069000

Apparel

ItemHTS code
Cotton knit or crocheted men’s overcoats, windbreakers61012000
Man-made knit or crocheted men’s coats, windbreakers61013000
Men’s or girls’ overcoats, windbreakers, knitted or crocheted, of other textile materials61019090
Cotton knit or crocheted women’s coats, windbreakers61022000
Women’s or girls’ overcoats, windbreakers, knitted or crocheted61023000
Men’s or boys’ jackets, knitted or crocheted61033100
Cotton knit or crocheted men’s shirt61033200
Knitted or crocheted men’s shirts, of synthetic fibers61033300
Men’s or girls’ shirts, knitted or crocheted, of other textile materials61033900
Men’s or boys’ trousers, knitted or crocheted61034100
Cotton knit or crocheted men’s trousers61034200
Men’s or boys’ trousers, knitted or crocheted61034300
Men’s or boys’ trousers, knitted or crocheted, of other textile materials61034900
Cotton knit or crocheted women’s casual wear61042200
Woolen knitted blouse61043100
Cotton knit blouse61043200
Women’s jersey with synthetic fibers61043300
Knitted blouses, of other textile materials61043900
Wool knitted or crocheted dress61044100
Cotton knit or crocheted dress61044200
Knitted or crocheted dress of synthetic fibers61044300
Knitted or crocheted dress61044400
Knitted or crocheted dresses of other textile materials61044900
Wool knitted or crocheted skirts and skirts61045100
Cotton knit skirt and culottes61045200
Knitted or crocheted skirts and culottes, of synthetic fibers61045300
Knitted or crocheted skirts and skirts of other textile materials61045900
Knitted or crocheted trousers61046100
Cotton knit or crocheted pants61046200
Knitted or crocheted trousers, of synthetic fibers61046300
Knitted or crocheted trousers, of other textile materials61046900
Cotton knit or crocheted men’s shirt61051000
Knitted or crocheted men’s shirts, of chemical fibers61052000
Knitted or crocheted men’s shirts, of other textile materials61059000
Cotton knit or crochet blouse61061000
Chemical fiber knitted or crocheted blouse61062000
Knitted or crocheted blouses, of other textile materials61069000
Cotton knit or crocheted men’s underwear61071100
Knitted or crocheted men’s underwear, of other textile materials61071990
Knitted or crocheted men’s bathrobes and dressing gowns61079910
Knitted or crocheted men’s bathrobes, dressing gowns, of other textile materials61079990
Cotton knit or crocheted briefs and panties61082100
Women’s or girls’ briefs and panties, knitted or crocheted, of …61082200
Cotton knit or crocheted pajamas and sleepwear61083100
Women’s or girls’ pajamas and pajamas, knitted or crocheted, …61083200
Women’s or girls’ bathrobes and dressing gowns, knitted or crocheted, of cotton61089100
Women’s or girls’ bathrobes and dressing gowns, of synthetic fibers61089200
Cotton knit or crocheted T-shirts, undershirts61091000
Knitted or crocheted T-shirts and undershirts, of silk and silk61099010
Knitted or crocheted T-shirts, undershirts, of other textile materials61099090
Wool knitted or crocheted pullover61101100
Other goat fine knit or crochet pullover61101910
Other knitted or crocheted pullovers61101990
Cotton knit or crochet pullover61102000
Chemical fiber knitted or crocheted pullover61103000
Knitted or crocheted pullovers made of silk and silk61109010
Knitted or crocheted pullovers of other textile materials61109090
Cotton knit or crocheted baby clothing and accessories61112000
Knitted or crocheted baby garments and accessories61113000
Cotton knit or crocheted sportswear61121100
Knitted or crocheted sportswear in synthetic fibers61121200
Knitted or crocheted sportswear, of other textile materials61121900
Women’s or girls’ swimsuits, knitted or crocheted, of synthetic fibers61124100
Women’s or girls’ swimsuits, knitted or crocheted, of other textile materials61124900
Coated knitted or crocheted garments61130000
Other fabrics knitted or crocheted, of cotton61142000
Other clothing made of chemical fiber knitted or crocheted61143000
Other clothing, knitted or crocheted61149010
Other clothing, knitted or crocheted, of other textile materials61149090
Thin silk fabric of pantyhose61152100
Thick synthetic silk pantyhose61152200
Knitted tights and tights, of other textile materials61152990
Women’s stockings and stockings with a fineness of 67 dtex or less61153000
Cotton knit or crocheted socks and other hosiery61159500
Knitted or crocheted socks and other hosiery, of synthetic fibers61159600
Plastic or rubber-impregnated knitted or crocheted gloves61161000
Other knitted or crocheted gloves, of synthetic fibers61169300
Cashmere headband, scarf61171011
Other animal hair hoods, scarves61171019
Headbands and scarves made of wool61171020
Other headscarves and scarves61171090
Knitted or crocheted tie and bow tie61178010
Knitting or crocheting of other clothing accessories61178090
Other knitted or crocheted clothing parts61179000
Men’s down jacket made of chemical fiber62011310
Man’s coat, cloak, man-made62011390
Men’s or boys’ overcoats, capes, of other textile materials62011900
Men’s hooded jacket with cold hood and windbreaker62019100
Men’s other down jackets, of cotton62019210
Men’s hooded jacket with cotton hood and windbreaker62019290
Men’s other down jackets made of chemical fiber62019310
Men’s winter jackets and windbreakers62019390
Men’s winter jackets, windbreakers, of other textile materials62019900
Women’s down jacket made of chemical fiber62021310
Women’s coats, cloaks, of man-made fibers62021390
Women’s or girls’ overcoats and cloaks, of other textile materials62021900
Women’s hooded jacket with cold hood and windbreaker62029100
Women’s hooded jacket with cotton hood and windbreaker62029290
Women’s other down jackets made of chemical fiber62029310
Women’s hooded hooded jacket with thermal fibers, windbreaker62029390
Women’s or girls’ hooded jackets, of other textile materials62029900
Men’s suits, of other textile materials62031990
Men’s Men’s Casual Wear Set62032200
Men’s Casual Wear Set62032300
Men’s shirts, cotton62033200
Men’s shirts, synthetic62033300
Men’s shirts, silk and silk62033910
Men’s or boys’ jackets, of other textile materials62033990
Men’s trousers, overalls, etc.62034100
Men’s or boys’ trousers and overalls, of cotton62034290
Men’s or boys’ trousers and overalls62034390
Men’s or boys’ trousers and overalls, of other textile materials62034990
Women’s blouse, cotton62043200
Women’s blouse with synthetic fibers62043300
Women’s tops made of silk and silk62043910
Women’s tops, of other textile materials62043990
Woolen dress62044100
Cotton dress62044200
Women’s dress with synthetic fiber62044300
Women’s silk women’s dress62044400
Silk and silk dress62044910
Dresses of other textile materials62044990
Woolen skirts and culottes62045100
Cotton skirt and skirt62045200
Synthetic skirts and culottes62045300
Silk and silk skirts and culottes62045910
Women’s skirts and skirts, of other textile materials62045990
Women’s trousers and overalls62046100
Women’s trousers and overalls, of cotton62046200
Women’s trousers and overalls made of synthetic fibers62046300
Women’s trousers and overalls, of other textile materials62046900
Cotton men’s shirt62052000
Men’s shirt made of chemical fiber62053000
Men’s shirts made of silk and silk62059010
Woolen shirts62059020
Men’s shirts, of other textile materials62059090
Women’s and women’s shirts, silk and silk62061000
Woolen blouse62062000
Cotton blouse62063000
Chemical fiber blouse62064000
Cotton men’s underwear62071100
Men’s long nightgowns and sleepwear62072100
Men’s bathrobes and dressing gowns, of cotton62079100
Men’s bathrobes and dressing gowns62079920
Chemical fiber long slips and slips62081100
Women’s pajamas and sleepwear in cotton62082100
Women’s pajamas and sleepwear made of chemical fibers62082200
Women’s pajamas and sleepwear made of silk and silk62082910
Women’s vest, underwear, cotton62089100
Women’s vests, underwear, man-made62089200
Women’s vests, underwear, of other textile materials62089990
Cotton baby clothes and accessories62092000
Baby clothes and accessories for synthetic fibers62093000
Cotton or linen felt or non-woven clothing62101020
Men’s coats of fabric treated with plastics, rubber, etc.62102000
Other men’s clothing made of fabrics treated with plastics, rubber, etc.62104000
Other women’s clothing made of fabrics treated with plastics, rubber, etc.62105000
Men’s swimming suit62111100
Women’s swimming suit62111200
Ski clothing, of other textile materials62112090
Men’s sportswear, cotton62113220
Men’s Arab gown made of chemical fiber62113310
Men’s sportswear, man-made62113320
Other men’s clothing, of chemical fibers62113390
Men’s or boys’ sportswear and other clothing62113920
Men’s sportswear, of other textile materials62113990
Women’s sportswear, cotton62114210
Women’s or girls’ other cotton clothing62114290
Women’s sportswear, chemical fiber62114310
Other women’s clothing made of chemical fiber62114390
Women’s sportswear, silk and silk62114910
Women’s sportswear, of other textile materials62114990
Chemical fiber bra62121010
Bras of other textile materials62121090
Chemical fiber belts and belts62122010
Belts and belts, of other textile materials62122090
Chemical fiber corset62123010
Corsets, of other textile materials62123090
Chemical fiber suspenders, garters62129010
Other cotton handkerchiefs62132090
Handbags made of other textile materials62139090
Synthetic shawl and headscarf62143000
Shakers, headscarves, of other textile materials62149000
Tie and bow tie made of silk and silk62151000
Chemical fiber tie and bow tie62152000
Ties and bow ties from other textile materials62159000
Non-knit non-crocheted gloves62160000
Non-knit non-crocheted socks and socks62171010
Non-knitted, non-crocheted clothing or accessories62171090
Non-knitted, non-crocheted clothing or clothing parts62179000

Footwear

ItemHTS code
Ski boots with rubber and plastic bottoms and faces64021200
Other sports boots, rubber and plastic bases and surfaces64021900
Rubber and plastic shoes embellished with shoe noodle strips on the sole64022000
Other rubber and plastic boots64029100
Other rubber and plastic footwear for rubber uppers64029910
Other rubber and plastic footwear for plastic uppers64029929
Other sports footwear with leather uppers64031900
Short leather boots with a small leather outsole leather lower than the calf64035111
Short boots with large leather outsole leather lower than the calf64035119
Other large size leather outsole leather short boots64035199
Leather outsole leather upper boots64035900
Other short leather boots with lower leather lower than the calf64039111
Other short-legged boots with smaller leather lower than the calf64039119
Other small size leather face short boots64039191
Other large size leather face short boots64039199
Other footwear for leather facing64039900
Sports footwear with uppers made of textile materials64041100
Slippers made of rubber or plastic outsole64041910
Other footwear for the uppers of textile materials64041990
Other footwear for textile materials64052000
Footwear made of rubber, plastic, leather and other materials made from recycled leather outsole64059010
Other materials made of other materials, outsole, footwear64059090
Upper and parts thereof, except hard lining64061000
Rubber outsole and heel64062010
Plastic outsole and heel64062020
Movable insole, heel pad and similar64069091
Leggings, leggings and similar parts and parts thereof64069092

Other Textiles

ItemHTS code
Cotton blankets and travel blankets63013000
Synthetic blankets and travel blankets63014000
Blankets and travel blankets, of other textile materials63019000
Cotton printed sheets63022110
Cotton printed bed fabrics63022190
Fabric fabrics for chemical fiber printing63022290
Silk and silk fabric printed bed fabrics63022910
Other cotton sheets63023191
Other cotton bed products63023199
Other bed linen articles, of linen embroidery63023921
Other tablecloth fabrics, of cotton63025190
Other tablecloth fabrics made of chemical fiber63025390
Cotton bath towel63026010
Cotton wash and kitchen towel fabric63026090
Other cotton and kitchen products, of cotton63029100
Other sanitary and kitchen fabric products made of chemical fiber63029300
Cotton non-woven non-crocheted curtains63039100
Non-woven non-crocheted curtains of other textile materials63039900
Non-hand knitted bed cover63041129
Non-woven non-crocheted bed covers made of cotton or linen63041929
Other decorative articles, not hand-knitted63049129
Cotton other non-knitted, non-crocheted embroidery products63049210
Cotton goods bags63052000
Soft goods storage and transportation soft bags made of chemical fiber63053200
Other goods bags made of polyethylene or polypropylene flat strips63053300
Other textile material packaging bags63059000
Synthetic fabrics, canopies and awnings63061200
Synthetic tent63062200

Stone, Plaster, Cement, etc.

ItemHTS code
Simple cutting and with a flat marble and products68022110
Marble, travertine and wax stone68029110
Other marble, travertine and wax stone and products68029190
Other processed granite and products68029390
Stone carvings made of other stone68029910
Other processed stone and products68029990
Other stone grinding, stone grinding and similar products made of other adhesive abrasives or ceramics68042290
Rolls of bitumen or similar raw materials68071000
Other shapes of bitumen or similar raw materials68079000
Panels, plates, tiles, bricks and similar articles68080000
Only paper veneers or reinforced unfinished plasterboard, sheets, bricks, tiles and the like68091100
Other gypsum products68099000
Artificial stone bricks, tiles, flat stones and the like68101910
Other bricks, tiles, flat stones and similar articles made of cement or concrete68101990
Other products made of cement, concrete or artificial stone68109990
Other sheets, boards, bricks, tiles and similar articles containing asbestos68114020
Other sheets, sheets and similar products made of asbestos-free cellulose cement or similar materials68118200
Other products not containing asbestos68118990
Other clothing made of asbestos or asbestos68129100
Asbestos-free brake linings, brake pads68138100
Adhesive or replica mica plates, sheets, strips68141000
Other processed mica and its products68149000
Products containing magnesite, dolomite or chromite68159100
Basalt fiber and its products68159940
Siliceous fossil powder or bricks, blocks, tiles and other ceramics similar to silica69010000
Other refractory bricks, blocks, tiles and similar refractory ceramic building materials69029000
Other veneer or tile with water absorption ≤0.5% by weight69072190
0.5% by weight < water absorption ≤ 10% and its maximum surface area with a side length of <7 cm69072210
Other veneer, tile, 0.5% by weight < ≥ 10% water absorption69072290
Other veneer, tile, with water absorption >10% by weight69072390
Other facing ceramics69074090
Porcelain washbasin, bathtub and similar fixed sanitary equipment69101000
Ceramic washbasins, bathtubs and similar fixtures69109000
Bone china tableware69111011
Other porcelain tableware69111019
Other porcelain kitchen appliances69111029
Other household or washing porcelain69119000
Ceramic tableware69120010
Ceramic kitchen appliances69120090
Porcelain figurine and other decorative porcelain products69131000
Ceramic statues and other decorative ceramics69139000
Unprocessed glass ball70021000
Waveguide quartz glass tube for optical fibers70023110
Cast, rolled colored non-wired glass sheets, sheets70031200
Drawn and blown colored glass sheets, sheets70042000
Wire float or polished glass plates, sheets70053000
Glass of taxation 7003-7005 not framed or assembled with other materials70060000
Other tempered safety glass70071900
Other laminated safety glass70072900
Other multi-layer insulation and acoustic glass components70080090
Other framed glass mirrors70099200
Glass ampoules70101000
Glass stoppers, caps and similar sealers70102000
Volume ≥ 1 liter of bulk containers for shipment or preservation70109010
Glass containers of volume exceeding 0.15 liters but not exceeding 0.33 liters for shipment or storage70109030
Glass extra small containers for containers or for storage up to 0.15 liters70109090
Unsealed glass casing and glass parts for electric lamps70111000
Glass ceramics for dining tables, kitchens, bathrooms, offices, interiors or similar70131000
Lead crystal glass goblet70132200
Other glass goblets70132800
Other cups made of lead crystal70133300
Other glasses70133700
Lead crystal glass dining table, kitchen utensils70134100
Other glass dining tables, kitchen utensils70134900
Other lead crystal glassware70139100
Other glassware70139900
Optical element blanks for optical instruments70140010
Other optical glass elements and glass optics not optically processed70140090
Watch glass70159010
Other unprocessed glass of heading 701570159090
Glass mosaics and other small pieces of glass for inlays or similar decorations70161000
Floral lead glazing and similar articles70169010
Glass beads, imitation pearls, imitation stones, etc.70181000
Glass beads not exceeding 1 mm in diameter70182000
Glass fiber roving70191200
Glass filament plain fabric with a width of more than 30 cm, weighing not more than 250 g per square meter, single70195200
Conductive glass70200011

Precious, Semi-Precious Stones, etc.

ItemHTS code
Other processed cultured pearls71012290
Industrial diamonds, unprocessed or simply processed71022100
Other industrial diamonds71022900
Unprocessed or simply processed non-industrial diamonds71023100
Other non-industrial diamonds71023900
Unprocessed or semi-precious stones71031000
Other processed rubies, sapphires, emeralds71039100
Crystal71039920
Other gemstones or semi-precious stones processed by other71039990
Piezoelectric Quartz71041000
Unprocessed or reconstituted with other precious or semi-precious stones71042090
Industrial sapphire71049012
Other non-industrial synthetic other gems or semi-precious stones71049099
Natural or synthetic gemstone or semi-precious stone powder71059000
Non-flaky silver powder with an average particle size of less than 3 microns71061011
Unwrought silver with a purity of 99.99% or more71069110
Other unwrought silver71069190
Semi-finished silver with a purity of 99.99% and above71069210
Non-monetary semi-finished gold71081300
Gold-coated materials based on base metal or silver71090000
Unwrought or powdered platinum71101100
Plate, flake platinum71101910
Unwrought or powdered palladium71102100
Unwrought or powdered71103100
Board, sheet rhodium71103910
Unwrought or powdered rhodium, osmium, ruthenium71104100
Plates, flakes, enamel, enamel71104910
Other semi-finished iridium, osmium, ruthenium71104990
Platinum-plated material based on base metal, silver or gold71110000
Other silver jewelery and parts thereof71131190
Other precious metal jewelery with diamonds and parts thereof71131991
Other precious metal jewelery and parts thereof71131999
Precious metal jewelery in base metal with diamonds71132010
Other precious metal jewelery based on base metal71132090
Other precious metal gold and silver parts and parts71141900
Natural or cultured pearl products71161000
Gemstone or semi-precious stones71162000
Cufflinks and buckles in enamel metal71171100
Other imitation jewelery made of base metal71171900
Imitation jewelery of unlisted materials71179000

Base Metals, and Articles of Base Metals

ItemHTS code
Alloy pig iron, mirror iron72015000
Ferromanganese, carbon content ≤ 2%72021900
Ferrosilicon, silicon content >55%72022100
Ferrochrome, carbon content ≤ 4%72024900
Nickel iron72026000
Ferrotitanium and titanium ferrotitanium72029100
Ferrovanadium containing 75% or more by weight of vanadium72029210
NdFeB magnetic powder72029912
Iron products directly reduced from iron ore72031000
Pig iron, mirror iron and steel pellets72051000
Iron and non-alloy steel ingots72061000
Steel billet of rectangular section with width < twice the thickness, C<0.25%72071100
Other billets with carbon content <0.25%72071900
Rolled embossed hot rolled coil72081000
Thickness ≥ 4.75mm Other pickled hot rolled coil72082500
Other 3mm≤Thickness <4.75mm Other pickled hot rolled coil72082690
Other pickled hot rolled coils of thickness <1.5 mm72082710
Other pickled hot rolled coils of other thickness <3mm72082790
Other hot rolled coils of thickness <1.5mm72083910
Other hot rolled coils of other thickness <3mm72083990
Other hot rolled non-coil, thickness >50mm72085110
Other hot rolled non-rolled sheets of thickness > 20 mm but not exceeding 50 mm72085120
Other hot rolled non-coil, other thickness > 10mm72085190
4.75mm ≤ thickness ≤ 10mm hot rolled non-coil72085200
Hot rolled non-coil with thickness <1.5mm72085410
Other hot rolled non-coil of thickness <3mm72085490
Other hot rolled iron or non-alloy steel wide flat rolled products72089000
Other cold rolled coils of thickness ≥ 3mm72091590
Cold rolled coils with yield strengths greater than 275 N/mm2, 1 mm < thickness < 3 mm72091610
Other cold rolled coils of 1 mm < thickness < 3 mm72091690
Cold rolled coils with yield strengths greater than 275 N/mm2, 0.5 mm ≤ thickness ≤ 1 mm72091710
Other cold rolled coils of 0.5 mm ≤ thickness ≤ 1 mm72091790
Other cold rolled coils of thickness <0.5mm72091890
Cold rolled non-coiled material of 0.5 mm ≤ thickness ≤ 1 mm72092700
Cold rolled non-coil with thickness <0.5mm72092800
Other cold rolled iron or non-alloy steel wide flat rolled products72099000
Galvanized iron or non-alloy steel wide sheet72103000
Other wrought iron or non-alloy steel wide plates galvanized72104900
Chrome-plated ferrous or non-alloy steel wide sheet72105000
Iron-wide flat sheet material plated or coated with aluminum-zinc alloy72106100
Other plated or aluminized iron wide flat rolled products72106900
Iron or non-alloy steel having a thickness of less than 1.5 mm, painted or coated, having a width of 600 mm or more72107010
Other lacquered or coated iron or non-alloy steel wide flat rolled products72107090
Cold rolled other iron or non-alloy steel narrow plates72112900
Hot working of strips and rods with rolled patterns72142000
Hot-working free-cutting steel bars and rods72143000
Hot processing of other bars and rods72149900
Cold-processed other free-cutting steel bars and rods72151000
Other bars or rods for cold or cold forming72155000
Other bars and rods of iron and non-alloy steel72159000
Section height <80mmU steel72161090
Hot working section height <80mm angle steel72162100
Hot working section height <80mm T-shaped steel72162200
Hot working section height ≥80mm channel steel72163100
I-beams with a section height of more than 200 mm72163210
Other hot working section height ≥ 80mm I-beam72163290
Other H-shaped steel with 200mm72163319
Other H-shaped steel with 80mm≤section height≤200mm72163390
Hot working section height ≥ 80mm angle steel72164010
Hot working other angles, profiles and profiles72165090
Cold-working other angles, profiles and profiles72166900
Cold-working of other sheet angles, profiles and profiles72169100
Uncoated or coated iron or non-alloy steel wire72171000
Plated or galvanized iron or non-alloy steel wire72172000
Plated or copper coated wire and non-alloy wire72173010
Wire and non-alloy steel wire plated or coated with other base metals72173090
Semi-finished stainless steel with rectangular cross section72189100
Other stainless steel semi-finished products72189900
Thickness >10mm Hot rolled stainless steel wide coil72191100
4.75mm≤thickness ≤10mm hot rolled stainless steel wide coil72191200
Other stainless steel wide rolls, not soaked, 3 mm or more but less than 4.75 mm72191319
Other pickled stainless steel wide coils of 3 mm or more but less than 4.75 mm thick72191329
Other stainless steel wide coils, not pickled, less than 3 mm thick72191419
4.75mm≤thickness ≤10mm hot rolled stainless steel plate72192200
3mm≤thickness<4.75mm hot rolled stainless steel plate72192300
Thickness <0.5mm hot rolled stainless steel slab72192430
3mm≤thickness<4.75mm cold rolled stainless steel wide plate72193200
Other 1mm72193390
0.5mm≤thickness≤1mm Cold rolled stainless steel wide plate72193400
Hot rolled stainless steel narrow strip thickness ≥ 4.75mm72201100
Cold rolled stainless steel narrow strips with a thickness of 0.35 mm or less72202020
Cold rolled stainless steel narrow strips with a thickness of 3 mm and above72202040
Irregular coiled stainless steel hot rolled strips, rods72210000
Hot working other cross-section stainless steel bars72221900
Stainless steel wire72230000
Other alloy ingots and other primary shapes72241000
Other alloy billets72249090
Oriented silicon electric steel wide plate72251100
Other silicon electric steel wide plates72251900
Width ≥ 600mm Hot rolled other alloy steel coil72253000
Tool steel width ≥ 600mm72254010
Boron-containing alloy steel with a width ≥ 600mm72254091
Width 600mm Cold rolled other alloy steel sheet72255000
Other alloy steel wide flat rolled products of electrogalvanized72259100
Other plated or zinc coated other alloy steel wide plates72259200
Other alloy steel flat rolled products of width ≥ 600mm72259990
High speed steel flat rolled products with width <600mm72262000
Tool steel width <600mm72269110
Boron-containing alloy steel with a width <600mm72269191
Other rolled steel sheets of alloy steel, not further processed, except hot-rolled, less than 600 mm in width72269199
Other alloy steel narrow flat rolled products of electrogalvanized72269910
Other alloy steel hot rolled strips and rods of irregular coils made of boron alloy steel72279010
Other high speed steel strips and rods72281000
Other bars and rods of silicon-manganese steel72282000
Other bars and rods of boron-containing alloy steel, not further processed except hot rolled, hot drawn or hot extruded72283010
Other bars and rods, not further processed except hot rolled, hot drawn or hot extruded72283090
Other alloy steel forged bars and rods72284000
Cold-formed or cold-worked bars and rods of other alloy steels72285000
Other alloy steel bars and rods72286000
Other alloy steel angles, profiles and profiles72287090
Silicon-manganese steel wire72292000
Other alloy steel wire72299090
Steel sheet pile73011000
Welded steel angles, profiles and profiles73012000
Rail73021000
Steel materials for railroad tracks for other railways73029090
Other cast iron pipes and hollow profiles73030090
Non-stainless steel oil or day having an outer diameter of 215.9 mm or more but not exceeding 406.4 mm73041910
Non-stainless steel or natural gas casings not exceeding 114.3 mm in outside diameter73041930
Other non-stainless steel oil or gas casing73041990
Other stainless steel casings and conduits for oil drilling73042400
Casings, conduits and drill pipes for drilling oil and gas with yield strengths less than 552 MPa73042910
Cold-drawn or cold-rolled steel seamless boiler tubes73043110
Non-cold or cold drawn iron seamless boiler tubes73043910
Cold drawn or cold rolled stainless steel seamless boiler tubes73044110
Other seamless pipes of stainless steel, not cold or cold rolled73044990
Other seamless steel tubes, cold drawn or cold rolled73045190
Seamless circular cross section of other alloy steels, not cold or cold rolled73045990
Longitudinal submerged arc welding of crude oil and natural gas73051100
Other thick steel pipes longitudinally welded73053100
Other oil and gas pipelines73061900
Other iron or non-alloy rounds with a wall thickness of 0.7 mm or less and an outer diameter not exceeding 10 mm73063011
Other iron or non-alloy round-section welded pipes with an outer diameter exceeding 10 mm73063090
Round section welded pipe of other alloy steel73065000
Steel butt weldment not listed73079300
Steel doors and windows and their frames, thresholds73083000
Other steel structures and components73089000
Steel container for materials, 50L≤ volume ≤300L73101000
Welded or crimped cans and cans with a volume of less than 50 liters73102110
Uninsulated steel strands, ropes, cables73121000
Woven fabric made of stainless steel73141400
Plated or galvanized fine steel wire mesh welded at intersection73143100
Other steel wire mesh, fences and grilles73144900
Mesh steel plate73145000
Other roller chains73151190
Japanese word link chain73158100
Other welded chains73158200
Unlisted chain73158900
Non-hinged chain parts73159000
Other wood screws73181200
Other pins73194090
Leaf springs and reeds for railway vehicles73201010
Other springs for railway vehicles73209010
Gas fuel household stove73211100
Other non-electric household appliances73218900
Non-electric household appliances parts73219000
Other non-electrical heating central heating radiators and their parts73221900
Enamel cast iron dining table, kitchen and other household appliances and parts thereof73239200
Stainless steel dining table, kitchen or other household appliances and parts thereof73239300
Other enamel steel table, kitchen and other household appliances and parts73239490
Other non-enamel steel table, kitchen and other household appliances and parts73239900
Cast iron bathtub73242100
Other steel bathtub73242900
Other non-forgeable cast iron products73251090
Unregistered malleable cast iron products, not put up for industrial use73259990
Unrefined copper, copper anode for electrolytic refining74020000
Cathode refined copper with a copper content exceeding 99.9935% by weight74031111
Other cathode refined copper74031119
Refining copper billets74031300
Unwrought copper-zinc alloy (brass)74032100
Copper mother alloy74050000
Other copper alloy flakes74062090
Other refined copper bars, rods and profiles and profiles74071090
Straightness not more than 0.5 mm / m copper-zinc alloy strips, rods74072111
Other copper-zinc alloy strips, rods74072119
Other brass bars, rods and profiles and profiles74072190
Refined copper wire with a maximum cross-sectional dimension >6mm74081100
Refined copper wire with section size ≤6mm74081900
Copper nickel zinc lead alloy (lead German silver) wire74082210
Other coiled copper sheets, sheets, strips of thickness exceeding 0.15 mm74091190
Other refined copper plates, sheets, strips74091900
Rolled brass plates, sheets, strips74092100
Other brass plates, sheets, strips74092900
Rolled bronze sheets, sheets, strips74093100
Other bronze plates, sheets, strips74093900
White copper or German silver plates, sheets, belts74094000
Unlined copper foil74101100
Copper clad laminate for printed circuits74102110
Other refined copper foil with backing74102190
White copper or German silver foil with backing74102210
Other copper alloy foil with backing74102290
Refining copper pipe with inner (outer) threads or fins with an outer diameter of 25 mm or less74111011
Other refined copper pipes with an outer diameter of 25 mm or less74111019
Refined copper tube with an outer diameter of more than 70 mm74111020
Coiled brass tube74112110
Copper-zinc alloy (brass) tube74112190
White copper or German silver pipe fittings74122010
Uninsulated copper wire strands, cables, braids, etc.74130000
Other table, kitchen or other household appliances and parts thereof74181090
Copper sanitary ware and parts thereof74182000
Copper chain and its parts74191000
Copper spring74199920
Copper wire cloth (including endless belt)74199930
Nickel oxide sinter, other intermediate products of nickel75012090
The total amount of nickel and cobalt by weight is 99.99% or more, but the cobalt content is not more than 0.005%.75021010
Other non-alloy nickel75021090
Non-alloy nickel powder and flake powder75040010
Cloth made of nickel wire75081010
Industrial nickel wire mesh and grille75081080
Nickel anode for electroplating75089010
Uncalcined non-aluminum alloys containing 99.95% by weight or more by weight76011010
Other uncalcined non-aluminum alloy76011090
Unwrought aluminum alloy76012000
Flaky aluminum powder76032000
Unalloyed aluminium profiles and profiles76041090
Thick wire made of pure aluminum76051100
Filaments made of pure aluminium76051900
0.3mm ≤ thickness <0.36mm non-alloyed aluminum and plastic composite rectangular strip76061121
Other non-alloy aluminum rectangular aluminum sheet strips with 0.3mm ≤ thickness <0.36mm76061129
Other plates, sheets and strips of rectangular, of pure aluminium76061199
Aluminum alloy rectangular sheet with thickness <0.28mm76061220
0.35mm76061251
Other aluminum alloy rectangular strips with 0.35mm76061259
Non-rectangular plates, sheets and strips of pure aluminium76069100
Unlined back foil with a thickness not exceeding 0.007 mm76071110
Unlined back foil without further processing after rolling76071190
Other unlined back foil76071900
Pure aluminum tube76081000
Aluminum alloy tubes with an outer diameter not exceeding 10 cm76082010
Aluminum alloy tubes with an outer diameter of more than 10 cm and a wall thickness not exceeding 25 mm76082091
Aluminum hose container76121000
Aluminum cans and cans76129010
Other tableware, kitchen and other household appliances and parts thereof76151090
Unwrought lead-bismuth alloy78019100
Other lead alloys not wrought78019900
Lead and lead alloy sheets, foils of thickness > 0.2 mm78041900
Uncalcined zinc containing 99.995% by weight or more of zinc79011110
Unwrought zinc alloy79012000
Zinc End79031000
Zinc and zinc alloy strips, rods, profiles, wires79040000
Other non-industrial zinc products79070090
Unwrought non-alloyed tin80011000
Solder containing less than 0.1% by weight of lead80012021
Other solder80012029
Tin and tin alloy strips, rods, profiles, wires80030000
Tin and tin alloy plates, sheets and strips, thickness > 0.2 mm80070020
Other tin products80070090
Unwrought molybdenum and molybdenum waste81029400
Forged rolled molybdenum rods, profiles, sheets with foil81029500
Molybdenum wire81029600
Tantalum powder with a bulk density of less than 2.2 g/cm381032011
Unforged magnesium containing ≥99.8% magnesium81041100
Graded magnesium crumb, scraps, granules; powder81043000
Magnesium products81049020
Intermediate products and powders obtained from cobalt bismuth and other cobalt smelting81052090
Unwrought cadmium, powder81072000
Titanium sponge81082021
Unwrought antimony81101010
Antimony powder81101020
Unwrought manganese; manganese waste and scrap; powder81110010
Unwrought crucible, powder81121200
Unwrought indium81129230
Germanium and its products81129910
Vanadium and its products81129920
Pick, spade, rake82013000
One-handed agricultural scissors such as pruning shears82015000
Two-handed agricultural shears such as pruning82016000
Hand saw82021000
Circular saw blade with steel working parts82023100
Circular saw blades with natural or synthetic diamond, cubic boron nitride working parts82023910
Other circular saw blades, including parts82023990
Steel files, rafts and similar tools82031000
Interchangeable wrench sleeve82042000
Metal drawing or extrusion die with super hard parts82072010
Other metal drawing or extrusion moulds82072090
Forging or stamping tools82073000
Tapping tool82074000
Drilling tool with working parts of other materials82075090
Boring or reaming tool with super-hard material parts82076010
Other boring or reaming tools82076090
Milling tool with working parts made of natural or synthetic diamond or cubic boron nitride82077010
Other milling tools82077090
Other cemented metalworking knives and blades82081019
Knives and blades for woodworking machinery82082000
Knives and blades for other machines or machinery82089000
Unassembled tool cermet plates82090010
Cermet bars and rods with a grain size of less than 0.8 μm82090021
Other tiling rods and rods for unassembled tools82090029
Cermet inserts for unassembled tools82090030
Knife-based package82111000
Knife blade fixed knife82119100
Replaceable blade cutter82119300
Shank handle82119500
Scissors, tailor scissors and similar products, scissors82130000
Manicure and pedicure (including nail files)82142000
Hair clippers, choppers and other mouthparts82149000
A kitchen or table set containing at least one precious metal plated82151000
Other non-kitchen kitchen or tableware with precious metal plating82159100
Other non-kitchen kitchen or tableware82159900
Key83017000
Hinge (folded leaf)83021000
Castors for metal brackets83022000
Metal parts and bases for construction83024100
Metal fittings and stands for furniture83024200
Automatic door closer83026000
Doors for safes, cabinets, vaults83030000
Staples83052000
Sculptures of precious metals and other decorations83062100
Photo frames, picture frames and similar frames, mirrors83063000

Machinery and Mechanical Appliances

ItemHTS code
Other steam boilers84021900
Steam boilers and superheated boiler parts84029000
Household type hot water boiler for central heating84031010
Condenser for water and other steam power plants84042000
Parts for auxiliary equipment for central heating and hot water boilers84049010
Parts for other auxiliary equipment84049090
40MW84068110
Turbine parts84069000
14kW < other diesel engines with power <132.39kW84089092
Other marine engine parts84099910
Turbine and water wheel, power ≤1000kW84101100
Concrete pump84134000
Other reciprocating drain pumps84135090
Other gear rotary pumps84136029
Other blade rotary pumps84136039
Radial piston pump84136050
Axial piston pump84136060
Vacuum pump84141000
Refrigerator and freezer compressors with power ≤0.4kW84143011
0.4kW84143012
0.4kW84143013
Non-motor driven compressor84143090
Ventilation fan with power ≤ 125 watts84145120
Power ≤125 W, fan with rotating wind deflector84145130
Wall fan with power ≤ 125 watts84145193
Power ≤ 125 watts other fans, fans84145199
Other ceiling fans84145910
Other ventilation fans84145920
Centrifugal fan84145930
Other fans, fans84145990
Range hood84146010
Ventilation hood or recirculation hood with a maximum side length ≤120cm84146090
Engine supercharger84148030
Air conditioning parts with cooling capacity ≤ 4 kcal / hour84159010
Other furnace burners using gaseous fuels84162019
Furnace burners using other fuels84162090
Other non-electric furnaces and ovens84178090
Volume > 500L refrigeration-freezing combination machine84181010
200L84181020
Volume >150L Compressed household refrigerator84182110
50L84182120
Compression heat pump, heading 8415 for air conditioning84186120
Other heat pumps, heading 8415, except for air conditioning84186190
Other refrigeration units84186920
Special furniture parts for refrigerating or freezing equipment84189100
Refrigeration equipment parts with a cooling temperature >-40 ° C and a capacity > 500 L84189992
Gas fast water heater84191100
Agricultural product dryer84193100
Wood, pulp, paper or cardboard dryer84193200
Empty84194010
Distillation column84194020
Other distillation or distillation equipment84194090
Parts for water heaters84199010
Calender or other rolling machine84201000
Roller for calender or other rolling machines84209100
Centrifugal dryers with a dry weight of ≤10kg84211210
Dehydrator84211910
Solid-liquid separator84211920
Ship ballast water treatment equipment84212191
Other filter presses84212910
Household gas filtration and purification machines and devices84213910
Electric bag composite dust collector84213924
Other dust collectors for industrial use84213929
Flue gas desulfurization device84213940
Household dishwasher84221100
Non-domestic dishwasher84221900
Beverage and liquid food filling equipment84223010
Other packaging machines84223030
Other sealing machines, etc.84223090
Other packaging or packing machines84224000
Parts for dishwashers84229010
Beverage and liquid food filling equipment parts84229020
Taxation 8422 Other unlisted machine parts84229090
Weight scale, baby scale and household scale84231000
Electronic belt scale84232010
Scales for continuous weighing on other conveyor belts84232090
Quantitative packing scale84233010
Quantitative sorting scale84233020
Batching scale84233030
Other constant scales, material dosing scales84233090
Pricing scale with a maximum weighing of ≤30kg84238110
Spring balances with a maximum weighing ≤ 30kg84238120
Other places in the balance84238910
Other railway scales84238920
Portable sprayer for agriculture or gardening84244100
Boat washing machine84248991
Other non-electric winches and winches84253990
Hydraulic hoist for lifting vehicles84254290
Universal bridge crane84261120
Gantry crane84261930
Portal crane and seat jib crane84263000
Crawler crane84264910
Other lifting equipment84269900
Other lifts and dump cranes84281090
Other belt continuous cargo lifting, conveyor84283300
Roller continuous cargo lifting, conveyor84283920
Stacking and reclaiming machinery84289031
Other handling machinery84289039
Handling robot84289040
Track-type tractor with power ≤ 235.36kW84291190
Other motorized roller84294019
Track excavator84295212
Non-self-propelled drilling or drilling machinery84304900
Other self-propelled unlisted machinery84305090
Engineering drilling rig with drill pipe diameter ≤3m​​84306919
Drive axles and their parts for machinery listed in heading 842784312010
Buckets, buckets, grabs and buckets84314100
Other drilling unit parts84314390
Drive axles and their parts for construction machinery84314920
Other no-till direct planters84323129
Other no-till direct transplanter84323139
Fertilizer spreader84324200
Site preparation or tillage machinery, rolling machine parts84329000
Other harvesters84335990
Dairy processing machine84342000
Machine for the production of sweets, cocoa powder, chocolate84382000
Sugar machine84383000
Brewing machine84384000
Machine for making cellulose pulp84391000
Paper or cardboard finishing machine84393000
Machine parts for the manufacture or finishing of paper and cardboard84399900
Lock binding machine84401010
Other bookbinding machines84401090
Parts of bookbinding machines84409000
Paper Cutter84411000
Molded machine for pulp, paper or cardboard products84414000
Other machines for the manufacture of pulp and paper products84418090
Computer-to-plate equipment84423021
To make plates, machines and equipment84423029
Other machines, apparatus and equipment for casting and plate making84423090
Parts for casting, typesetting and plate making machines84424000
Types, prints, sheets and other parts84425000
Photogravure printing machine84431700
Rotary screen printing machine84431921
Flat screen printing machine84431922
Electrostatic photosensitive multifunction machine84433110
Other multifunction machines84433190
Stylus printer84433211
Laser printer84433212
Inkjet printer84433213
Other fax machines or typewriters that can be connected to the network84433290
Other independent teletypewriters84433990
Parts and accessories for conventional printing presses84439190
Auxiliary machines for digital printing equipment84439910
Thermal Printhead84439921
Parts for other printers, copiers, facsimile machines84439990
Chemical fiber deformation machine84440040
Chemical fiber cutting machine84440050
Other chemical fiber processing machines84440090
Other textile fiber carding machines84451190
Doubling machine or twisting machine84453000
Automatic winder84454010
Other winders, shakers84454090
Looms with width ≤ 30cm84461000
Air jet loom of width > 30cm84463050
Circular knitting machine with cylinder diameter ≤165mm84471100
Circular knitting machine with cylinder diameter > 165mm84471200
Flat weft knitting machine84472020
Other auxiliary machines listed in headings 8444 to 844784481900
Spinneret or spinneret84482020
Other accessories for fiber extruders and their auxiliary machines84482090
Steel wire cloth84483100
Other accessories for textile fiber pretreatment machines84483200
Air splicer84483930
Other accessories for the heading 8445 machines84483990
Reed, healds and heald frames for loom84484200
Other accessories for weaving machines and their auxiliary machines84484990
Knitting machine with No. 28 needle84485120
Sinks, other knitting needles and forming parts84485190
Taxation 8441 Other accessories for machines84485900
Needle punching machine84490010
Full-automatic washing machine with a drying capacity of ≤10kg84501110
Drum type automatic washing machine with a drying capacity of ≤10kg84501120
Other fully automatic washing machines with a drying capacity of ≤10kg84501190
Washing machine parts with a drying capacity of ≤10kg84509010
Dry cleaning machine84511000
Dryer with a drying capacity of ≤10kg84512100
Ironing machine and extruder (including melt press)84513000
Washing, bleaching or dyeing machine84514000
Multi-function household sewing machine84521010
Manual household sewing machine84521091
Non-home automatic sewing machine84522110
Non-domestic automatic overlock sewing machine84522120
Non-domestic automatic stretch sewing machine84522130
Other non-domestic automatic sewing machines84522190
Other non-domestic non-automatic sewing machines84522900
Sewing machine needle84523000
Other parts for household sewing machines84529019
Other parts for other sewing machines84529099
Rawhide, leather processing, tanning or processing machines84531000
Footwear making or repairing machines84532000
Parts of the machines listed in heading 845384539000
Other ingots and ladle for metal smelting and casting84542090
Parts for other billet continuous casting machines84549029
Machine tools for processing various materials with laser84561100
Machine tools for processing various materials with ultrasonic waves84562000
CNC machine tools for the treatment of various materials by electrical discharge84563010
Vertical Machining Center for Machining Metals84571010
Horizontal Machining Center for Machining Metals84571020
Machining of metal gantry machining centers84571030
Milling and lathe machining center for machining metals84571091
Single-station combination machine tool for machining metal84572000
Multi-station combination machine tool for machining metal84573000
CNC horizontal lathe for cutting metal84581100
Vertical CNC machine tools for cutting metals84589110
Other CNC machine tools for cutting metals84589120
Other lathes for cutting metal84589900
CNC drilling machine for cutting metal84592100
Other drilling machines for cutting metals84592900
CNC boring machine for cutting metal84594100
Other trampolines for cutting metal84594900
Other CNC milling machines for cutting metals84596190
High precision CNC surface grinder84601210
Other high precision surface grinders84601910
High precision CNC centerless grinding machine84602210
High precision crankshaft grinder84602311
Other high precision CNC cylindrical grinding machines84602319
High precision internal grinding machine84602411
Other high precision CNC grinding machines84602419
CNC sharpening (tool or tool) machine84603100
Other sharpening (tool or tool) machine tools84603900
Grinding machine84604020
Grinder84609010
Other finishing machines, such as grinding84609090
Broaching machine84613000
Gear Grinder84614011
Other CNC gear processing machines84614019
Non-CNC gear processing machine84614090
Sawing machine or cutting machine84615000
Unlisted machine tools for heading 846184619090
CNC forging or stamping machine and forging hammer84621010
Non-CNC forging or stamping machine tools and forging hammers84621090
CNC straightening machine84622110
Other bending, folding, straightening or leveling CNC machine tools84622190
Other sheet metal working machines other than CNC84622990
Other CNC cutting machine tools84623190
Non-CNC plate with cross shear84623920
Automatic change mode CNC stepping press84624111
Other CNC punch presses84624119
Other CNC punching, slotting machine, punching and shearing machine84624190
Non-CNC punching, slotting machine, punching and shearing machine84624900
Metal Profile Extrusion Machine84629110
Other hydraulic presses84629190
Other mechanical presses84629910
Unlisted machine tools for tariff head 846284629990
Wire drawing machine84631020
Thread rolling mill84632000
Wire processing machine84633000
Fret saw84641020
Other sawing machines for processing minerals and other materials84641090
Glass grinding or polishing machine84642010
Other grinding or polishing machines for processing minerals and other materials84642090
Cutting machine84649011
Engraving machine84649012
Other glass cold-working machines84649019
Unlisted machine tools for other tax items 846484649090
Composite mechanical machining machine84651000
Sawing machines for processing materials such as wood84659100
Planing, milling or cutting machines for processing materials such as wood84659200
Machine for bending or assembling materials such as wood84659400
Drilling or chiseling machines for processing materials such as wood84659500
Machine for cutting, cutting or scraping materials such as wood84659600
Other machine tools for processing materials such as wood84659900
Tool holder and self-starting die cutting head84661000
Workholding fixture84662000
Indexing heads and other accessories dedicated to machine tools84663000
Accessories for machines listed in heading 846584669200
Tool magazine and automatic tool changer84669310
Electric drill84672100
Other electric saws84672290
Electric sanding tool84672910
Other parts for portable power tools84679910
Other welding machines and devices84688000
Electronic calculator and pocket data recording and playback machine84701000
Other electronic calculator84702900
Point of sale terminal teller machine84705010
Postage stamping machine, ticket vending machine and similar machines84709000
Tablet84713010
Portable automatic data processing equipment with weight ≤ 10kg84713090
Terminals for large, large, medium and small computers84716040
Scanner84716050
Keyboard84716071
Mouse84716072
Automatic processing of other input or output components of the device84716090
Hard Drive84717010
Optical drive84717030
Other components of automatic data processing equipment84718000
ATM84729010
Excavator84729021
Stapler84729022
Other office machines84729090
Accessories for electronic calculators listed in heading 847084732100
Accessories for other machines listed in heading 847084732900
Digital Large, Medium and Small Computer Accessories84733010
Other spare parts for computers listed in heading 847184733090
ATM machine with cash dispenser and recirculating machine84734010
Word processor, typewriter accessories84734020
Other office machine accessories listed in heading 847284734090
Machine accessories listed in heading 8469-847284735000
Ball Milling and Milling Machine84742020
Other crushing and milling machines84742090
Concrete or mortar mixing machine84743100
Solid Mineral Roll Forming Machine84748010
Machine for the manufacture of optical fibers and their preforms84752100
Continuous glass hot bending furnace84752911
Glass fiber drawing machine84752912
Other glass thermal processing equipment84752919
Manufacture or thermal processing machines for other glass and its products84752990
Beverage vending machine with heating or cooling unit84762100
Parts of the machines listed in heading 847684769000
Injection Molding Machine84771010
Other injection machines for processing rubber or plastic84771090
Plastic granulator84772010
Plastic Blow Molding Machine84774010
Plastic Calendering Machine84774020
Other vacuum molding and thermoforming machines84774090
Pneumatic tyre moulding or refurbishing and inner tube moulding or moulding machines84775100
Other molding or molding machines84775990
Other rubber or plastic processing machines84778000
Asphalt paver84791021
Machine for extracting processed animal or vegetable oils84792000
Machine for the manufacture of ropes or cables84794000
Multifunctional Industrial Robot84795010
Other passenger boarding (ship) bridge84797900
Winding machine84798110
Ship steering gear and gyro stabilizer84798910
Automatic plug-in machine84798961
Automatic placement machine84798962
Automated three-dimensional storage equipment84798992
Metal casting box84801000
Type mold base plate84802000
Die-casting mould84804110
Dies for powder metallurgy84804120
Capsule mould for vulcanized tyres84807110
Injection moulding or stamping for other plastics or rubber84807190
Electronic expansion valve84818031
Deep groove ball bearings84821020
Angular contact bearing84821030
Marine diesel engine crankshaft84831011
Planetary gear reducer84834020
Flywheels, pulleys and pulley blocks84835000
Micromotors with a housing size of 20 mm and above but no more than 39 mm85011091
Other micromotors with an output power not exceeding 37.5 watts85011099
Multiphase AC motor with an output power not exceeding 750 watts85015100
Multiphase AC motors with an output power exceeding 750 watts but not exceeding 75 kW85015200
Generator set with ignited piston internal combustion engine85022000
Wind driven generator set85023100
Motor parts for subheadings 8501.1010 and 8501.109185030010
Sub-units 8501.6420 and 8501.6430 listed generator parts85030020
Parts for generator sets listed in subheading 8502.310085030030
Dedicated or used primarily for other parts of the machines listed in heading 8501 or 850285030090
Liquid medium transformers with a rated capacity exceeding 650 kVA but not exceeding 10 MVA85042200
Liquid dielectric transformers with a rated capacity exceeding 10 mega volts but less than 220 mega volts85042311
Liquid medium transformers rated at 500 megavolt-amperes and above85042329
Other transformers with rated capacity not exceeding 1 kVA85043190
Regulated power supply for machines listed in heading 847185044013
Inverter85044030
Semiconductor module with variable current function (static converter)85044091
Other inductors85045000
Subheads 8504.2321, 8504.2329 List of transformer parts85049011
Other transformer parts85049019
Other stationary converters and inductor parts85049090
Rare earth permanent magnet85051110
Other permanent magnets and articles prepared for permanent magnets after magnetization85051900
Electromagnetic couplings, clutches and brakes85052000
Electromagnets; electromagnets or permanent magnet chucks, clamps; parts for goods listed in heading 850985059090
Other alkaline zinc-manganese batteries85061019
Other primary batteries and primary battery packs of manganese dioxide85061090
Primary battery and primary battery pack of silver oxide85064000
Lithium primary battery and primary battery pack85065000
Zinc air primary battery and primary battery pack85066000
Start lead-acid battery for piston engine85071000
Nickel-metal hydride storage battery85075000
Lithium ion battery85076000
Other battery parts85079090
Electric vacuum cleaners with a power not exceeding 1500 watts and a dust collecting container volume not exceeding 20 liters85081100
Other electric vacuum cleaners85081900
Other vacuum cleaners85086000
Parts for vacuum cleaners listed in subheading 8508.110085087010
Fruit or vegetable juicer85094010
Kitchen waste processor85098020
Other household electric appliances (except vacuum cleaners for taxation 8508)85098090
Parts for household electric appliances (except vacuum cleaners for taxation 8508)85099000
Electric shaver85101000
Electric hair clipper85102000
Electric Epilator85103000
Parts of goods listed in heading 851085109000
Other ignition magnets, permanent magnet DC generators and magnetic flywheels85112090
Engine starter motor with output power of 132.39 kW (180 hp) and above85114091
Other starter motors and dual-purpose starter generators85114099
Other generators85115090
Parts of various other devices listed in heading 851185119090
Lighting or visual signalling devices for bicycles85121000
Other self-powered portable electric lights85131090
Flashlight parts85139010
Other self-powered portable electric light parts85139090
Parts for steelmaking electric furnace85149010
Other brazing machines and devices85151900
Resistance welding robot85152120
Other resistance welding machines and devices85152900
Arc (including plasma arc) welding robot85153120
Spiral Welded Pipe Machine85153191
Laser welding robot85158010
Storage radiator85162100
Radiant space heater85162920
Fan space heater85162931
Liquid filled space heater85162932
Other electrical space heaters85162990
Electric hair dryer85163100
Microwave oven85165000
Induction Cooker85166010
Electric oven85166050
Other electric furnaces, electric cookers, electric heating plates, heating rings, barbecues and roasters85166090
Drip coffee maker85167110
Distilled percolating coffee machine85167120
Pump coffee machine85167130
Slice toaster (toaster)85167220
Other electric baking pan85167290
Electric water dispenser85167910
Other electric heating appliances85167990
Parts of other goods listed in heading 851685169090
Cordless telephone85171100
Handheld (including car) radiotelephone85171210
Walkie talkie85171220
Other telephones for cellular or wireless networks85171290
Mobile communication base station85176110
Wavelength division multiplexing optical transmission equipment85176222
IP telephone signal conversion equipment85176233
Router85176236
Cable network interface card85176237
Wireless network interface card85176292
Wireless access fixed station85176293
Wireless headset85176294
Other equipment for receiving, converting and transmitting or reproducing sound, images or other data85176299
Parts for digital program-controlled telephones or telegraph switches85177010
Parts for hand-held radiotelephones (excluding antennas)85177030
Interphone parts (excluding antennas)85177040
Equipment antennas and parts thereof, heading 851785177070
Other parts for equipment listed in heading 851785177090
Microphone (microphone) and its frame85181000
Single speaker85182100
Other speakers85182900
Headphones, earphones85183000
Parts of goods listed in heading 851885189000
Turntable (phono turntable)85193000
Cassette tape recorder with sound reproduction device85198112
Laser record player without recording function85198121
Flash memory type sound recording device equipped with sound reproducing device85198131
Other phonographs without recording devices (with or without loudspeakers)85198910
Digital Video Disc (DVD) Player85219012
Other laser disc players85219019
Accessories for turntables or record players85229010
Magnetic head85229022
Movement of laser disc player85229031
Other parts and accessories for video signal recording or playback equipment85229039
Other parts for sound recording or playback equipment85229099
Unrecorded disk85232911
Unrecorded tapes over 6.5 mm wide85232923
Unrecorded optical media85234100
Unrecorded flash memory85235110
Unrecorded “smart card”85235210
Other semiconductor media not recorded85235910
Non-special purpose broadcast television cameras85258012
Other television cameras not for special purposes85258013
Single-lens reflex digital camera for non-special use85258022
Other interchangeable lens digital cameras for non-special purpose85258025
Other digital cameras not for special purposes85258029
Broadcast-grade video camcorder for non-special purpose85258032
Household video camcorder for non-special use85258033
Other video camcorders, not for special purposes85258039
Other included (playing) sound combination machine85279100
Radio with clock85279200
Other radio broadcast receiving equipment85279900
Other color LCD monitors, automatic data processing equipment for connection to heading 847185285212
Other color monitors, automatic data processing systems for tariffs 847185285291
Other monochrome monitors85285990
Other color projectors, automatic data processing equipment for connection to heading 847185286220
Other color projectors85286910
Other color television receivers without display85287180
LCD color analog TV85287221
LCD color digital TV85287222
Other color digital television85287292
Antennas or antenna reflectors and parts thereof for radios and their combines, television receivers85291020
Non-special purpose imaging module85299042
Other TV cameras, video camcorders, parts for digital cameras85299049
Radar equipment and other parts for radio navigation equipment85299050
Other parts for radios and their combination machines85299060
Other components for color television receivers85299081
Plasma imaging assembly and its parts85299082
Organic light emitting diode display85299083
Other parts of equipment or equipment listed in headings 8525 to 852885299090
Display panel with liquid crystal device (LCD) or light emitting diode (LED)85312000
Buzzer85318010
50/60 Hertz circuit with fixed capacitor, reactive power is not less than 0.5 thousand85321000
Chip tantalum capacitor85322110
Chip Aluminum Electrolytic Capacitor85322210
Other aluminum electrolytic capacitors85322290
Single layer ceramic capacitor85322300
Chip multilayer ceramic capacitor85322410
Other paper media or plastic dielectric capacitors85322590
Other fixed capacitors85322900
Variable or adjustable (fine tuning) capacitor85323000
Synthetic or film fixed carbon resistors85331000
Chip-type fixed resistors up to 20 watts rated85332110
Wirewound varistor with rated power greater than 20 watts, including varistors and potentiometers85333900
Other variable resistors, including varistors and potentiometers85334000
Parts of goods listed in heading 853385339000
4 or more printed circuits85340010
Print circuits of up to 4 layers85340090
Fuses for lines over 1000 volts85351000
Automatic circuit breaker for lines with voltages exceeding 1 kV, less than 72.5 kV85352100
Automatic circuit breakers for lines with voltages up to 72.5 kV and not exceeding 220 kV85352910
Automatic circuit breakers for lines with voltages above 220 kV but not exceeding 750 kV85352920
Other disconnectors and disconnectors85353090
Surge arrester, voltage limiter and surge suppressor85354000
For fuses with voltages up to 1000 volts85361000
Automatic circuit breaker for lines up to 1000 volts85362000
Other circuit protection devices for voltages up to 1000 volts85363000
Relay for voltages up to 36 volts85364110
Relay for voltages exceeding 36 volts but not exceeding 60 volts85364190
Relay for voltages over 60 volts85364900
For other switches up to 1000 volts85365000
Plugs and sockets for lines up to 1000 volts85366900
For other CNC devices with voltages up to 1000 volts85371019
Fully enclosed modular high voltage switchgear for lines up to 500 kV and above85372010
Sub-area 8537.2010 Disks, plates, tables, cabinets and other bases for goods listed85381010
Other parts of the equipment listed in headings 8535 to 853785389000
Tungsten halogen lamp for scientific research and medical use85392110
Incandescent light bulbs with a power not exceeding 200 watts and rated voltages exceeding 100 volts (for research and medical purposes)85392290
Incandescent bulbs with voltages up to 12 volts85392991
Sodium vapor lamp85393230
Mercury vapor lamp85393240
Metal halide lamp85393290
Other discharge lamps85393990
Light Emitting Diode (LED) Bulb (Tube)85395000
Parts of goods listed in heading 853985399000
Image tube and image intensifier tube; other photocathode tubes85402090
Magnetron85407100
Other pipes listed in heading 854085408900
Other parts for goods listed in heading 854085409990
Diode, except photodiode or LED85411000
Transistors with less than 1 watt of power dissipation85412100
Transistors with a power dissipation greater than or equal to 1 watt85412900
Semiconductor switching element, two-terminal AC switching element and three-terminal thyristor switching element85413000
Light Emitting Diode85414010
Solar cell85414020
Other photosensitive semiconductor devices85414090
Assembled piezoelectric crystal85416000
Parts for metal and mineral detectors85439030
Other parts for goods listed in heading 854385439090
Connector cable with rated voltage not exceeding 80 volts85444211
Other connector electrical conductors with rated voltage not exceeding 80 volts85444219
Other connector electrical conductors with rated voltages exceeding 80 volts but not exceeding 1000 volts85444229
Cables with a rated voltage exceeding 35 kV but not exceeding 110 kV85446013
Other cables with a rated voltage exceeding 1000 volts85446019
Carbon electrode for furnace85451100
Carbon brush85452000
Glass insulators85461000
Insulated porcelain bushings for power transmission and transformation lines85462010
Other insulators85469000
Other insulating parts85479090
Machines or equipment, 85 Electrical equipment, not elsewhere specified85489000

Vehicles, Aircraft, Vessels

ItemHTS code
Non-driving bogies for railway or tramway vehicles86071200
Axle for railway or tramway vehicles86071910
Steering wheels and parts for railway or tramway vehicles86071990
Air brakes and parts for railway or tramway vehicles86072100
Hooks, other couplings, bumpers and their parts for railway or tramway vehicles86073000
Other parts for railway or tramway locomotives86079100
Other track fixtures, signalling, safety or traffic management equipment and parts86080090
20 ft. other containers86090019
Other containers86090090
Sailing boat89039100
Other recreational or sport boats, boats and canoes89039900
Floating or submersible drilling or production platform89052000
Other vessels not characterized by navigation89059090
Other motor boats not listed89069010
Non-motorized ship89069020
Unmade or incomplete ship, including ship segmentation89069030

Optical, Photographic, Measuring, and Medical Items

ItemHTS code
Sheets and plates made of polarizing materials90012000
Other spectacle lenses made of glass90014099
Sunglasses made of non-glass material90015091
Other spectacle lenses, not made of glass90015099
SLR camera lens90021131
Other camera lenses90021139
Projector, photo enlarger and objective lens for shrinking machine90021190
Objective lens for cameras or projectors90021910
Other objective lenses not listed in heading 900290021990
Filters for cameras90022010
Plastic frames90031100
Frames made of metal materials90031910
Spectacle frame parts90039000
Other glasses, windshields and similar articles90049090
Binoculars90051000
Other telescope accessories90059090
Special purpose camera; comparison camera90063000
One-time imaging camera90064000
Using other cameras with a film width of 35 mm90065300
Discharge type (electronic) flash unit90066100
Flash bulb90066910
Accessories for one imaging camera90069120
Camera autofocus component90069191
Shutter assembly for other cameras90069192
Photoflash unit and flash bulb parts90069900
Non-digital projector90072090
Automatic developing device and equipment for special photographic film90101020
Automatic developing device and equipment for other film90101099
Other printing equipment for special photography90105022
Other printing equipment for photographic purposes90105029
Accessories for special photofinishing equipment90109020
Stereo microscope90111000
Telescope sights for weapons, periscope telescopes and telescopes as parts of instruments or appliances90131000
Magnifying glass90138010
LCD panel90138030
Other liquid crystal devices and optical instruments90138090
Parts and accessories for instruments and appliances listed in subheading 9013.803090139020
Parts and accessories for other instruments and apparatus listed in heading 901390139090
Range finder90151000
Theodolite and tachymeter90152000
Level90153000
Photogrammetric instruments and devices90154000
Balances with a sensation of more than 0.1 mg but not exceeding 50 mg90160090
Parts and accessories for instruments and apparatus listed in heading 901790179000
Tubular metal needle90183210
Dental drill90184100
Massage apparatus90191010
Teaching Head90230010
Gas meter90281010
Water meter90282010
Single-phase electronic (static) watt-hour meter90283013
Three-phase electronic (static) watt-hour meter90283014
Parts and accessories for industrial measuring instruments90289010
Revolution meter90291010
Inductance and capacitance tester with recording device90308410
Contour Projector90314910
Grating measuring device90314920

Miscellaneous Manufactured Articles

ItemHTS code
Dual-purpose chair for leather or recycled leather94014010
Dual-purpose chair for bed94014090
Bamboo seat94015200
Rattan seat94015300
Upholstered wooden frame with leather or recycled leather94016110
Other wooden frame seating94016900
Upholstered metal frame for leather or recycled leather94017110
Stone seat94018010
Kitchen wooden furniture94034000
Other wooden furniture for bedroom94035099
Other mahogany furniture94036010
Other lacquered wood furniture94036091
Other wooden furniture94036099
Stone furniture94038920
Furniture made of other materials94038990
Parts of the items listed in heading 940394039000
Other materials made of mats94042900
Other sleeping bags94043090
Down or feather-filled bedding94049010
Bedding filled with animal hair94049020
Silk-filled bedding94049030
Electrical table lamp, bedside lamp, floor lamp94052000
Complete sets of lamps for Christmas trees94053000
Non-electrical lamps and lighting fixtures94055000
Other mobile homes94069000
Toy animals95030021
Other dolls95030029
Intelligence toy95030060
Toys and models with powerplant95030083
Other unlisted toys95030089
Parts of toys95030090
Video game controllers and equipment parts and accessories for use with television receivers95045011
Chinese chess, chess, checkers and other chess supplies95049030
Mahjong and similar table games95049040
Christmas items95051000
Windsurfing95062100
Other golf equipment95063900
Table tennis95064010
Other tennis rackets, badminton rackets or similar rackets95065900
Basketball, football, volleyball95066210
Other ball95066900
Fishing rod95071000
Fishing reel95073000

Live Animals, Animal Products

ItemHTS code
Other horses1012900
Other animals1069090
Fresh or cold boned lamb2042200
Dried smoked, salted beef2102000
Other meat and chopped meat, dried, smoked, salted2109900
Smoked salmon and Donauze fish3054120
Natural honey4090000
Other bee products4100049
Other food animal products4100090

Other

ItemHTS code
Coral and Aquatic Shells, Bone Powder and Waste5080010
Coral and Aquatic Shells, Bone5080090
Other animal products not listed, dead animals5119990
Other non-species live plants6029099
Other fresh flower arrangements and flower buds6031900
Dried and dyed flower arrangements and flower buds6039000
Fresh moss and lichens6042010
Fresh plant branches, leaves, etc.6042090
Other plant branches, leaves, etc.6049090
Whole or diced salted pig casings (except for pig large intestines)5040011
Whole or diced salted sheep casings5040012
Other animal stomach5040029
Vinegar and vinegar substitutes made with acetic acid22090000
Other animal slag powders and pellets not suitable for human consumption23012090
Other solid residue obtained by refining soybean oil23040090
Other residues from refined vegetable oils other than 2304 or 230523069000
Hair net65050010
Hooked Caps65050020
Caps made of knitted or woven fabric65050099
Unnamed caps made of other materials65069990
Folding umbrella66019100
Other umbrellas66019900
Walking sticks, walking sticks, whip and similar articles66020000
Ribs66032000
Other accessories and accessories for umbrellas, walking sticks and whip66039000
Silk or silk, flowers, leaves, fruits and products thereof67029020
Other materials for the production of flowers, leaves, fruits and their products67029090
Human hair and wig materials processed by carding, sparse, etc.67030000
Other wigs made of synthetic textile materials67041900
Wigs made of other materials67049000
Other electronic watches with mechanical indication91021100
Other electronic watches with photoelectric display91021200
Other electronic watches91021900
Other self-winding mechanical watches91022100
Other non-self-winding mechanical watches91022900
Electric drive electronic pocket watch and other electronic watches91029100
Mechanical clock with watch movement91039000
Dish clocks and similar clocks for vehicles and ships91040000
Electronic alarm clock91051100
Electronic wall clock91052100
Mechanical wall clock91052900
Other electronic clocks91059190
Complete electronic clock core assembled91091000
Bell case91122000
Watch straps and parts thereof91132000
Non-metallic watch straps and parts thereof91139000
Clocks, other parts of the watch91149090
Upright piano92011000
Bowed stringed instrument92021000
Keyboard organ, reed organ and similar instruments92059010
Harmonica92059030
Other wind instruments, except for amusement club organ and hand-operated organ92059090
Keyboard instrument that generates or expands sound by electricity92071000
Other musical instruments not listed92089000
Accessories for piano92099100
Parts and accessories for musical instruments listed in heading 920792099400
Metronome, tuning fork and tuning tube92099910
Mechanical device for music box92099920
Other processed animal material engraving materials and products thereof96019000
Wire brush as part of the vehicle96035019
Snap and its parts96061000
Buttons made of plastic, not wrapped in textile material96062100
Buttons made of base metal, not wrapped with textile materials96062200
Other buttons96062900
Button cores and other parts of buttons96063000
Zipper with enamel metal teeth96071100
Other zippers96071900
Zipper parts96072000
Hand date stamp, seal stamp, number stamp and similar stamp96110000
Inflatable pocket gas lighter96132000
Pipe and pipe head96140010
Cigarette holder and parts thereof96140090
Monopod, bipod, tripod and the like96200000
Used or unused stamps97040010

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US China Trade War Ramps Back Up: Tariffs on $200 Billion of Chinese Goods to Hit May 10th https://www.universalcargo.com/us-china-trade-war-ramps-back-up-tariffs-on-200-billion-of-chinese-goods-to-hit-may-10th/ https://www.universalcargo.com/us-china-trade-war-ramps-back-up-tariffs-on-200-billion-of-chinese-goods-to-hit-may-10th/#respond Tue, 07 May 2019 20:16:07 +0000 https://www.universalcargo.com/?p=9549 For a while now, optimism has been high that the U.S.-China trade talks have been going well and the tariffs increase on $200 billion worth of Chinese products that was originally scheduled for January 1st, 2019 would not happen.




All that optimism came crashing down on Sunday when President Trump tweeted the 10% tariffs on U.S. imports of those of $200 billion worth of Chinese products would increase to 25% on Friday (May 10th, 2019).




Additionally, the president wrote in his tweets, "325 Billions Dollars [sic] of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%."




Read the whole story about Friday's tariffs hike on imports from China on Universal Cargo's blog.

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YouTube Video

US China Trade War

For a while now, optimism has been high that the U.S.-China trade talks have been going well and the tariffs increase on $200 billion worth of Chinese products that was originally scheduled for January 1st, 2019 would not happen.

All that optimism came crashing down on Sunday when President Trump tweeted the 10% tariffs on U.S. imports of those of $200 billion worth of Chinese products would increase to 25% on Friday (May 10th, 2019).

Additionally, the president wrote in his tweets, “325 Billions Dollars [sic] of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%.”

Trade War Negotiations Recap Leading to This Point

On Saturday, December 1st, 2019, President Trump and President Xi Jinping ate dinner together and worked out a ceasefire on the trade war between the U.S. and China. The big news of the ceasefire was a 90-day negotiation period during which the previously scheduled tariff increases would be postponed.

Negotiations seemed to be progressing in the first months after the new year, but there was no news of an emerging deal as the March 2nd deadline approached. However, President Trump said he would continue to delay the tariffs hike if the U.S. and China were “close” to reaching a trade deal or if “the deal is going in the right direction.”

Things must have been going in the right direction as March 2nd came and went with the tariffs hike’s continued delay. Then a couple more months of negotiations passed without a deal being reached.

The trade negotiations are obviously not public, but what has been shared with the public about the negotiations has been generally positive, pointing toward a deal being eventually reached.

However, trade negotiations between the U.S. and China lingered through March, all of April, and into May with no concrete news to tell us if a deal were closer or further away, except for the no news of the tariffs hike not being implemented and negotiations not being halted.

The no news was, at least, reason for optimism. Until the sudden announcement that the tariffs would hit this week.

What Caused Sudden End to Tariff Delay?

It seems negotiations took a big step backward as China tried to renegotiate items or language previously agreed upon in the negotiations, frustrating and angering the U.S. side of the talks.

President Trump wrote in his tweet, “The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”

Paul Wiseman and Joe McDonald of the Associated Press wrote an article published on PBS.org, reporting:

Treasury Secretary Steven Mnuchin, who briefed reporters with Lighthizer, said that Trump officials learned over the weekend that Chinese officials “were trying to go back on some of the language” that had been negotiated in 10 earlier rounds of talks. Mnuchin and Lighthizer offered no details of China’s alleged backsliding, and there was no immediate response from Beijing.

China May Walk Away from Talks

Reportedly, China may walk away from talks after President Trump’s announcement that the tariffs hike will go into effect Friday.

Despite speculation of China walking away, the country has not officially withdrawn, but a small delay on Beijing’s part has been reported.

Wiseman and McDonald report in their article that “a Chinese trade delegation is expected to arrive in Washington to resume negotiations on Thursday, a day later than originally planned.”

That article sums up China’s dilemma in continuing talks as well I’ve seen in any other article on the subject:

Beijing is wrestling with an internal conflict: It is eager to end a trade fight that has battered Chinese exporters, but it doesn’t want to look like it’s bowing to the Trump administration’s demands for far-reaching concessions.

Trump’s threat makes going ahead with talks “very difficult politically” for Xi’s government, said Jake Parker, vice president of the U.S.-China Business Council. He said the Chinese public might “view this as a capitulation” if Beijing reached an agreement before Trump’s Friday deadline.

Conclusion

Shippers who import from China have been dreading seeing these tariffs imposed. There was hope for several months that the U.S. and China would reach a deal that would not merely delay the jump from 10% to 25% tariffs on $200 billion worth of Chinese goods but stop the tariffs hike from happening altogether.

The odds of the U.S. and China reaching a complete trade deal by Friday must be astronomically unlikely. That means the biggest hope for these tariffs not striking on Friday is China agreeing to keep the previously negotiated items unchanged and to not revisit the issues again.

I wouldn’t presume to say what China will do, but with the strong internal pressure not to give into U.S. demands, it seems unlikely China will make enough concessions by Friday to avoid the tariffs hike hitting on May 10th.

Trump has absolutely shown a willingness to impose tariffs during his presidency, so the next round of tariff hikes on $325 billion worth of Chinese goods should not be taken as an idle threat either.

These costly tariffs and tariff threats could be enough to keep China at the negotiation table and push the country toward a deal with the U.S. Or trade talks could break down completely, leaving President Trump to follow an alternative plan to fighting China’s unfair trade practices and ending the trade imbalance between the U.S. and China.

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Could Cargo Ships Get a Speed Limit? https://www.universalcargo.com/could-cargo-ships-get-a-speed-limit/ https://www.universalcargo.com/could-cargo-ships-get-a-speed-limit/#respond Thu, 02 May 2019 20:21:30 +0000 https://www.universalcargo.com/?p=9548 One of the biggest issues of our time is global warming. The ocean freight sector of the international shipping industry, in particular, faces an incredible challenge of reducing its greenhouse gas (GHG) emissions to help fight the changing of our planet's climate.




As a matter of fact, the biggest problem ocean freight carriers currently face is meeting the IMO 2020 cleaner fuel mandate that drops the sulfur cap on fuel for cargo ships to 0.5% effective January 1st, 2020. Despite the fact carriers are now expected to recoup the significantly higher fuel costs of IMO 2020 through BCO contracts, reaching compliance with this mandate will be no easy feat for container carriers.




Now there's another carbon emission reducing requirement that the IMO is being asked to put on container carriers: a mandatory speed measure (or speed limit) on ships.




In an open letter to the IMO member states signed by 113 shipping companies and 9 environmental groups, the signatories "express [their] strong support for the IMO implementing mandatory regulation of global ship speeds differentiated across ship type and size categories."




While a mandate requiring ships to slow down, slow steam (SS), or even super slow steam (SSS) doesn't only affect containerships, this blog article will focus on what a speed limit on containerships specifically would mean for the international shipping industry.




Read the entire article in Universal Cargo's blog to see the arguments for and against a containership speed limit.

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International Shipping Cargo Ship Freight ForwarderOne of the biggest issues of our time is global warming. The ocean freight sector of the international shipping industry, in particular, faces an incredible challenge of reducing its greenhouse gas (GHG) emissions to help fight the changing of our planet’s climate.

As a matter of fact, the biggest problem ocean freight carriers currently face is meeting the IMO 2020 cleaner fuel mandate that drops the sulfur cap on fuel for cargo ships to 0.5% effective January 1st, 2020. Despite the fact carriers are now expected to recoup the significantly higher fuel costs of IMO 2020 through BCO contracts, reaching compliance with this mandate will be no easy feat for container carriers.

Now there’s another carbon emission reducing requirement that the IMO is being asked to put on container carriers: a mandatory speed measure on ships.

In an open letter to the IMO member states signed by 113 shipping companies and 9 environmental groups, the signatories “express [their] strong support for the IMO implementing mandatory regulation of global ship speeds differentiated across ship type and size categories.”

While a mandate requiring ships to slow down, slow steam (SS), or even super slow steam (SSS) doesn’t only affect containerships, this blog article will focus on what a speed limit on containerships would mean for the international shipping industry.

Argument for Regulating Containership Speed

At the end of 2007, the Great Recession hit the U.S. economy and spread to the global economy by 2009. Ocean freight demand was way below previously expected levels, contributing to huge overcapacity, downward pressure on freight rates, and big financial struggles for container carriers.

SS and SSS became common practice by container carriers after the economic downturn hit in order to save money on fuel. Sailing at slower speeds meant using less fuel and, as a result, reducing carbon emissions on sailings.

In the letter supporting a mandatory IMO speed measure, its signatories say that reduction of the global fleet’s operational speed “led to dramatic reductions in GHG emissions.” The letter goes on to say:

“This speaks to the real-world effectiveness of a potential prescriptive speed measure in helping achieve reduction targets. However, recent studies also suggest that ships are speeding up again as global demand recovers. Should this trend continue, any GHG gains from slow steaming over recent years will disappear.

Slow Steaming Likely Remains Without Regulation

Despite the letter to IMO member states saying studies suggest ships are speeding up, there’s reason to believe containerships will slow down in the upcoming year anyway.

Fuel costs are increasing significantly with IMO 2020 and carriers still struggle to maintain profitability. Carriers will be looking for more than just BCO contracts to recoup fuel costs. SS and SSS are expected to be utilized for containerships to burn less fuel and even help them reach required emission levels in general.

Slowing down ships is one of the easiest strategies carriers employ to save money. And carriers are looking for any means possible to improve profitability.

However, SS and SSS wouldn’t be utilized on all shipping routes, and regulating speed should certainly reduce containership speed more than the normal forces of business would cause. Additionally, as the industry adapts over time to more expensive, cleaner fuel, SS and SSS may get utilized less, which regulation would help prevent.

How Would Containership Speed Limits Be Enforced?

There would have to be serious thought and work put into how containership speed limits would be enforced. Certainly there won’t be ocean patrol ships out there turning on flashing lights and pulling over cargo ships.

The expectation is that a mandatory speed measure would be placed on the average speed of a carrier’s fleet rather than a specific number of knots each ship must travel under.

Checking that carriers are in compliance with speed regulations would probably be done through requiring carriers to turn in paperwork or be audited showing an average speed across all their ships sailing within a mandatory average speed.

However, a speed measure on ships would likely need to take into account different types of ships, making speed allowances vary based on the type of fuel or power used to propel particular ships. Ships that burn cleaner fuel could be allowed to sail faster while electric ships could have no speed limits put on them at all.

Additionally problematic is that with the incredibly high lack of transparency from carriers in the international shipping industry, some carriers may be able to find ways to skirt this regulation if they really want to.

Argument Against Slow Steaming Rule

Not surprisingly, there are no container shipping lines in the list of shipping company signatories on the letter calling for a mandatory speed measure on ships.

In fact, container carriers are arguing against an IMO speed measure. Interestingly, part of their argument is that such regulation could actually increase carbon emissions in the container shipping sector.

Peter Tirschwell wrote an article in the Journal of Commerce (JOC) that highlights carriers’ argument, calling the limiting of containership vessel speeds a solution “with cosmetic appeal” that “could have deep economic ramifications and possibly undermine efforts to achieve stated goals for carbon dioxide reduction.” The article explains:

Container ship services operate mostly on weekly schedules, supporting global supply chains in food, consumer, and industrial products that require predictable transport services, even if those services are frequently delayed. Mandating slow-steaming would require additional ships to maintain weekly schedules, which would add more carbon to the air, not to mention potentially denying operators the flexibility needed to avoid situations such as dangerous weather.

According to Hapag-Lloyd spokesperson Nils Haupt, “If we reduce speed in a loop from Hamburg to Singapore which requires 12 ships, to stay on schedule and maintain a regular weekly service, you would need a 13th or 14th ship, which means investment and additional CO2 [carbon dioxide] pollution. This is something that bulk carriers and tankers don’t have to take into account, but for containers it would be harsh investment and wouldn’t really solve the program,” he said.

As Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation, said bluntly via Twitter, “This is the wrong approach and should not be supported.”

The Complete Letter to IMO Member States

Here is the letter to IMO member states supporting a mandatory speed measure be put in place on ships in its entirety, though the two pages of signatory shipping companies and environmental groups is not included:

Open letter to IMO Member States supporting mandatory speed measure to reduce shipping emissions

30/April/2019

Effectively addressing climate change is possibly the greatest challenge of our time. In 2015 world governments agreed in Paris that global temperature rise must be limited to well below 2°C, while aiming for 1.5°C compared to pre-industrial levels. A recent IPCC 1.5° Special Report also recommended “deep emissions reductions” to achieve these temperature goals.

In responding to this global challenge, member states of the International Maritime Organisation (IMO) agreed in April 2018 on an Initial GHG Strategy for international shipping. The strategy calls for shipping emissions to peak as soon as possible, for shipping’s carbon intensity to be reduced by at least 40% by 2030 and for total emissions to be cut by at least 50% by 2050 compared to 2008, while aiming for full decarbonisation. To do so, new operational measures will need to be implemented for both the existing fleet and new ships and immediate reductions achieved by 2023.

Since the April 2018 agreement several candidate measures have been proposed including speed regulations for all ships. Recent history shows that reducing the global fleet’s operational speed after the 2008 economic crash led to dramatic reductions in GHG emissions. This speaks to the real-world effectiveness of a potential prescriptive speed measure in helping achieve reduction targets. However, recent studies also suggest that ships are speeding up again as global demand recovers. Should this trend continue, any GHG gains from slow steaming over recent years will disappear.

The signatories to this letter unite in stressing the urgent need for shipping to make its appropriate contribution to addressing climate change. As the initial step we express our strong support for the IMO implementing mandatory regulation of global ship speeds differentiated across ship type and size categories. Our preference would be to set maximum annual average speeds for container ships, and maximum absolute speeds for the remaining ship types, which take account of minimum speed requirements. Such a regulation should be implemented as soon as possible and the obligation for compliance should be placed both on shipowners and operators, including charterers.

We call on all Parties at the forthcoming MEPC74 to support this move.

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4 Ocean Carrier International Shipping News Stories https://www.universalcargo.com/4-ocean-carrier-international-shipping-news-stories/ https://www.universalcargo.com/4-ocean-carrier-international-shipping-news-stories/#respond Tue, 30 Apr 2019 21:49:39 +0000 https://www.universalcargo.com/?p=9546 There are a number of stories about ocean freight carriers making headlines right now. So let's round up the top ones and put them all in one blog.




Read Universal Cargo's newest blog for the top four shipping line news stories spanning big names like Maersk, Cosco, and ONE and hitting big topics like profits, services, and possible deception:

The post 4 Ocean Carrier International Shipping News Stories appeared first on Universal Cargo.

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cargo ship in water overlooking sunsetThere are a number of stories about ocean freight carriers making headlines right now. So let’s round them up and put them all in one blog.

Here are four shipping line news stories spanning big names like Maersk, Cosco, and ONE and hitting big topics like profits, services, and possible deception:

1. Maersk Adding Online Customs Clearance Service

In a recent blog post about why BCOs are choosing to ship through NVOCCs and freight forwarders instead of directly with ocean carriers, one of the six reasons I brought up was how carriers have removed services while NVOCCs and freight forwarders have added services for shippers.

Well, Maersk is bucking that trend by adding an online customs clearance service for its customers. This service isn’t available to U.S. shippers yet; however, it is expected to be by the end of the year.

Alex Lennane reports in the Loadstar:

Maersk has taken another step towards becoming an integrated company by offering digital customs clearance for ocean customers.

Its new online shipping management platform is available in seven European countries and will be rolled out worldwide by the end of the year.

It gives customers full compliance with local customs rules online, with pricing displayed for all import and export declarations. 

The product has so far been launched in Germany, France, Denmark, the Netherlands, Poland, the UK and Spain. 


Maersk tends to be a trend setter with carriers. It will be interesting to see if others try to follow suit by offering similar customs clearance services for their cargo shipments. Of course, Maersk has been making acquisitions like that of New Jersey-based customs broker Vendegrift to be able to add services like this, so the leading carrier has yet another head start.

2. Cosco’s Profits Up in 2019 Q1 But May Mean Nothing

Cosco is the first carrier to report its first quarter financial results for 2019, and the numbers they report are positive.

Mike Wackett reports in the Loadstar:

Cosco Shipping Holdings has posted a net profit of Rmb687m ($102m) for the first three months of the year.

This follows the Chinese state-owned container liner and terminal group’s $251m positive return last year, which, said Alphaliner, included $230m of subsidies from the Chinese government. 

Chinese government subsidies certainly make the profits of the state-owned carrier look better. That’s 91.6% of Cosco’s positive return for 2018 coming from Chinese subsidies!

While most look at Cosco reporting increased net profit a positive sign for ocean carriers in general, it’s hard to compare Cosco’s numbers to those of its competitors.

Alessandro Pasetti wrote a Loadstar Premium article about Cosco’s solid Q1 financial numbers meaning “nothing — or very close to nothing.”

Pasetti’s article highlights how Cosco’s operating performance cannot be properly gauged with no comparable international accounting standards, how it appears that Cosco’s acquisition of OOCL shows up on the P&L but not on the balance sheet, and how some of Cosco’s liabilities are “mildly disturbing.”

So, yes, Cosco is presenting positive financials for the first quarter with its acquisition of OOCL, but those numbers may not be as good as they appear.

And that first quarter should have been boosted some as a prolonged peak season spilled extra cargo movement into the first quarter of the year while shippers were still trying to beat tariff increases in the US-China trade war.

3. FMC Adds OOCL to Controlled Carrier List

Speaking of Cosco’s acquisition of OOCL, that acquisition is causing OOCL to be added to the Federal Register’s list of controlled carriers.

Chris Gillis reports in American Shipper:

The U.S. Federal Maritime Commission has added Orient Overseas Container Line Limited (OOCL) and OOCL (Europe) Ltd. to its list of controlled carriers due to their recent acquisition by COSCO Shipping Holdings Co. Ltd.

The FMC defines a controlled carrier as an ocean common carrier that is directly or indirectly owned or controlled by a foreign government. In this case, the Chinese government has ownership in COSCO. 

The FMC is given special oversight over controlled carriers in order to protect U.S. shippers (and competing carriers) from rates, charges, or regulations that are unjust or unreasonable from foreign state manipulation.

4. Japan’s Big 3 Don’t Have Biggest Year with ONE

NYK, MOL, and “K” Line saw revenue declines in their 2018-19 fiscal year with the operating of their jointly owned container carrier called Ocean Network Express or ONE, reported Chris Dupin in an American Shipper article.

Dupin wrote that ONE reported a $586 million loss before going on to detail the financial results NYK, MOL, and “K” Line reported for the fiscal year:

Nippon Yusen Kaisha [NYK] said revenue decreased to 1.83 trillion yen ($16.4 billion at today’s exchange rate) for the year ending March 31, compared to 2.18 trillion yen the prior fiscal year.

Mitsui O.S.K. Lines (MOL) had revenue of 1.23 trillion yen in the 2018-19 fiscal year, a decline from 1.65 trillion yen the prior fiscal year. Operating profit was 37.7 billion yen in fiscal 2018-19 compared with 22.7 billion the prior year.

Ordinary profit was also up, 38.6 billion yen in the year ending March 31 compared to 31.45 billion yen the prior year. Profit attributable to the owners of the parent was 26.8 billion yen compared to the loss the prior year of 47.4 billion yen.

Kawasaki Kisen Kaisha reported revenue for the year ending March 31 of 837 billion yen ($7.5 billion), a decline from 1.16 trillion yen the prior fiscal year. The company had an operating loss of 24.7 billion yen in the 2018-19 fiscal year compared to an operating profit of 7.2 billion yen the prior year; an ordinary loss of 48.9 billion yen compared to an ordinary profit of 2 billion yen the prior year; and a loss attributable to owners of the parent was 111 billion yen compared to a profit attributable to owners of the parent of 10.4 billion yen the prior year.


All three companies project this to be a better fiscal year with actually lower revenues but higher profits. We’ll find out next year if they’re right.

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6 Reasons BCOs Are Leaving Carrier Contracts for Freight Forwarders & NVOCCs https://www.universalcargo.com/6-reasons-bcos-are-leaving-carrier-contracts-for-freight-forwarders-nvoccs/ https://www.universalcargo.com/6-reasons-bcos-are-leaving-carrier-contracts-for-freight-forwarders-nvoccs/#respond Thu, 25 Apr 2019 23:23:11 +0000 https://www.universalcargo.com/?p=9535 The share of shipments in the international shipping industry going to freight forwarders and Non-Vessel-Operating Common Carriers (NVOCC) is increasing.




Furthermore, it is not just small to medium shippers, who are not big enough to have direct access to shipping lines, who are importing and exporting through freight forwarders and NVOCCs. Beneficial cargo owners (BCO) are also moving more of their cargo through freight forwarders and NVOCCs.You may not be a BCO the size of Target, Wal-Mart, or Best Buy, but you may import or export enough cargo to deal directly with carriers. Certainly, cutting out the middle man in transactions seems like a good idea. However, you may want to consider why other other BCOs are choosing to forego shipping wholesale to work with an intermediary company when it comes to sailing their cargo.




Read the article in Universal Cargo's blog to find out the 6 reasons BCOs are shipping some or all of their cargo through freight forwarders or NVOCCs instead of directly through ocean carriers.

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Know how to evaluate a freight forwarding company in the USAThe share of shipments in the international shipping industry going to freight forwarders and Non-Vessel-Operating Common Carriers (NVOCC) is increasing.

Furthermore, it is not just small to medium shippers, who are not big enough to have direct access to shipping lines, who are importing and exporting through freight forwarders and NVOCCs. Beneficial cargo owners (BCO) are also moving more of their cargo through freight forwarders and NVOCCs.

You may not be a BCO the size of Target, Wal-Mart, or Best Buy, but you may import or export enough cargo to deal directly with carriers. Certainly, cutting out the middle man in transactions seems like a good idea. However, you may want to consider why other BCOs are choosing to forego shipping wholesale to work with an intermediary company when it comes to sailing their cargo.

Here are 6 reasons BCOs are shipping some or all of their cargo through freight forwarders or NVOCCs instead of directly through ocean carriers:

1. To Avoid Unfavorable Contracts

BCOs have traditionally been in win-lose contracts with ocean carriers for importing and exporting their goods. The BCO and carrier would play some kind of high-low gambling game when negotiating contracts relying on projections or sheer guesses of what the extremely volatile freight rates would be on the open market for the upcoming year.

Once the contract was locked into place, someone would win and someone would lose. Either the BCO would get a fixed rate that’s better than what the market freight rates would become and win while its carrier lost or the BCO would pay a higher rate than the spot market averaged for freight movement and lose while the carrier won.

Of course, BCOs lose all too often in this scenario for their liking, especially in recent years when overcapacity was pushing freight rates down to record lows.

To avoid being stuck in bad contracts, where BCOs are paying more than market value for their international shipping, BCOs have hired freight forwarders or NVOCCs to get them the better rates of the spot market.

2. For Flexible Contracts

BCOs can actually be in win-win situations with freight forwarders or NVOCCs by signing ongoing contracts without locking the BCOs into fixed rates.

The contract negotiations between a BCO and carrier can be arduous, and once the deal is set, it’ll typically be a year before carriers will sit down with with them again (unless a carrier wants to get a BCO to pay more than their contracted rates) to hash out a new deal that may or may not be more in line with what’s happening in the industry.

Thanks to new rules issued by the Federal Maritime Commission (FMC) in June of 2018, BCOs can sign very flexible, easily changed contracts with NVOCCs and freight forwarders.

Bill Mongelluzzo reported in the Journal of Commerce (JOC) when the rules were issued:

The Federal Maritime Commission (FMC) Wednesday issued a final rule relieving non-vessel operating common carriers (NVOCCs) from certain filing requirements that interfered with the latter’s ability to respond quickly to the changing needs of their beneficial cargo owner (BCO) customers in today’s fast-paced ocean shipping contracting environment.

The FMC is simplifying NVOCC requirements involving two common contracting tools — negotiated rate arrangements (NRAs) and NVOCC service arrangements (NSAs)…. Key provisions in the rule will allow NRAs to be amended at any time, and NRAs will be allowed to address both terms of service as well as freight rates. BCO acceptance of NRA terms will be established by the booking of the shipment….

… “The changes that will be made to NRAs and NSAs will remove impediments on the ability of NVOCCs and their customers to negotiate a single business arrangement that serves the interests of both parties,” said commissioner Rebecca Dye.

Many BCOs find these flexible contracts they sign with freight forwarders or NVOCCs to be much better than win-lose contracts BCOs sign with carriers

3. For Better Customer Service

To say carriers aren’t known for strong customer service would be a major understatement. In fact, Hyundai Merchant Marine (HMM) recently made headlines just for saying it would focus on customer service. It’s no wonder HMM hasn’t been able to turn a quarterly profit since 2012.

At Universal Cargo, it’s hard to imagine running a business without focusing on customer service. As a trusted freight forwarder for over 30 years, Universal Cargo’s focus has always been customer service, which is why we’ve thrived.

In fact, our core CARE values are all about our customer and how we can serve them better: C – Customers, A – Available, R – Resourceful, E – Evolving.

Yet as unimaginable as running a business without focus on customer service seems, it is more the norm when it comes to ocean carriers than the exception.

In a recent Universal Cargo blog post about how pathetic those HMM headlines are, I wrote, “Only in the ocean freight sector of the international shipping industry would a business saying it’s going to focus on customers make headlines.”

I would argue carriers’ focus on what is best for themselves instead of their customers is the biggest factor in their near-pandemic level of profitability struggles over recent years.

4. For Better Reliability

That focus on themselves instead of their customers has helped carriers become notoriously unreliable.

Blank sailings, transhipments, overbooking, roll-overs… I was going to say shippers see all of these things and more from carriers, delaying cargo shipments; however, shippers often don’t see it at all.

Lacking in transparency, carriers commonly do the above things with no warning and all too often without even a notification to shippers. That means cargo can be delayed for days or weeks without shippers having any idea where their cargo is.

Freight forwarders and NVOCCs import and export shippers’ goods through these carriers, so they are also subject to shipping lines’ reliability issues, but BCOs switching to freight forwarders or NVOCCs often find increased reliability because of the switch. Why?

Experienced freight forwarders and NVOCCs work hard and have the know-how to get the smoothest shipment possible for their customers’ cargo. Not only are they paying attention to which carriers are doing a lot of blank sailing and transhipments and on what routes, but freight forwarders and NVOCCs are also monitoring other factors that could disrupt, delay, or prove costly for shippers.

Other factors that could affect shippers’ bottom line in the ocean freight shipping process include but are certainly not limited to dockworker union strife, port congestion, specific port fees, rail and trucking options to and from various ports, international and country specific shipping laws, and improperly filled out or filed paperwork.

It’s not surprising that many BCOs are finding companies focused on what’s best for the shipper through all facets of the shipping process rather than carriers that are focused on doing what’s best for themselves results in better reliability.

5. For Superior Loyalty to Customer

Traditional thinking would make one suppose that a company would be most loyal to its biggest customers. After all, they are its biggest source of revenue. However, carriers do not always show this loyalty to their BCOs.

Especially when the peak season arrives and demand pushes freight rates to their highest, carriers sometimes prioritized the higher priced spot market shipments over the contractually lower priced cargo of their BCOs. Sometimes, carriers even try to renegotiate BCO contracts to get their BCOs to pay more than is contractually obligated.

Mike Wackett reported in the Loadstar:

… 28% of BCOs complained that their provider had attempted to renegotiate their contract during peak season, notwithstanding that they had complied fully with the terms of minimum/maximum quantities.

“During peak season, there’s a scramble to shore up profitability, frequently at the expense of contractual commitments, to the extent of burning relationships,” said Mr Schreiber. “That runs against the more customer-centric path that forwarders and carriers spend much of their time advocating.”

Those burned relationships have helped push BCOs to freight forwarders and NVOCCs.

6. For Additional Services

In the last decade, carriers have made moves like no longer owning and supplying chassis required to move the shipping containers they transport. This example was a cost cutting move by carriers, but it cost shippers through delays, port congestion, and chassis fees.

Many freight forwarders moved in the opposite direction of carriers, looking for services they could add that would further support their customers.

Shippers have always been able to get door to door imports and exports through freight forwarders and NVOCCs, who arrange door to port and port to door trucking and rail for shipments instead of only port to port shipping. In house customs brokers has also been a long staple of freight forwarders and NVOCCs, so the shippers they serve could get their customs clearance handled without having to go to another vender.

Now, there are freight forwarders and NVOCCs adding additional services, like we do here at Universal Cargo with our warehousing services, which provides our customers with the following service options:

  • Amazon Prep
  • Cross Docking
  • Labeling
  • Order Fulfillment / Pick & Pack
  • Short Term Storage
  • Long Term Storage

Conclusion

Freight forwarders and NVOCCs’ international shipping market share is increasing, getting contributions from unsatisfied BCOs leaving carriers.

Bill Mongelluzzo reported in a JOC article in June of last year (2018):

Freight forwarders, also known as non-vessel operating common carriers (NVOCCs), in the first half increased their share of US imports from Asia by 1.7 percentage points from calendar year 2017, according to PIERS, a JOC.com sister product. NVOCCs now control 44.6 percent of containerized imports on the largest US trade lane, up from 36.8 percent in 2013.

BCOs more than ever require timely delivery of shipments to satisfy consumer demand in this era of e-commerce, so the rolling of shipments in Asia because of vessel overbooking is working at cross-purposes to their needs. “BCOs are very frustrated about the rolling of freight in Asia, particularly China,” said Jon Slangerup, CEO of American Global Logistics.

If you’re a BCO wanting to see how a focus on customer service can help your business, contact Universal Cargo. You won’t just get our hard working team taking care of you, but you’ll also get an account executive and an operations account manager dedicated to making sure you get personalized, 24/7 service.

Click Here for Free Freight Rate Pricing

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BlockChain Race: Maersk Gets Second Carrier to Join Its Platform https://www.universalcargo.com/blockchain-race-maersk-gets-second-carrier-to-join-its-platform/ https://www.universalcargo.com/blockchain-race-maersk-gets-second-carrier-to-join-its-platform/#respond Wed, 24 Apr 2019 00:21:10 +0000 https://www.universalcargo.com/?p=9538 Maersk and IBM edged forward in the BlockChain race. However, don't let anyone fool you into thinking they'll be doing a victory lap anytime soon.



It was November the last time we blogged about the BlockChain race in the international shipping industry. Because of the great potential BlockChain technology has to improve the industry in many ways, including much needed transparency, fraud and theft protection, and supply chain cohesion, several companies are competing to have the industry's preeminent platform.




Read the article in Universal Cargo's blog to see what progress Maersk & IBM's TradeLens made in the race and how it stands against competitor Oracle with CargoSmart.

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blockchain
BlockChain Picture by: Wikimedia user Davidstankiewicz

Maersk and IBM edged forward in the BlockChain race. However, don’t let anyone fool you into thinking they’ll be doing a victory lap anytime soon.

BlockChain Platform Race in International Shipping

It was November the last time we blogged about the BlockChain race in the international shipping industry. Because of the great potential blockchain development technology has to improve the industry in many ways, including much needed transparency, fraud and theft protection, and supply chain cohesion, several companies are competing to have the industry’s preeminent platform.

Maersk & IBM’s TradeLens Struggles

Getting the biggest headlines of the BlockChain competitors is Maersk and IBM. They formed a joint venture at the beginning of 2018 to release a blockchain-based platform called TradeLens, which the companies had been developing since 2016. The headlines, however, weren’t enough to induce ocean freight carriers to sign on to a platform owned by their biggest competitor, so TradeLens stalled.

As a matter of fact, only one carrier (outside of Maersk, of course) signed up for Maersk and IBM’s BlockChain platform: Pacific International Lines (PIL). And PIL isn’t exactly the biggest shipping line in the world.j

ZIM Joins Maersk & IBM’s TradeLens

Finally, close to half a year later, Maersk and IBM have gotten a second carrier to sign up. This time it’s ZIM Integrated Shipping Services. The Loadstar published a brief article by Alexander Whiteman that reports:

For all those naysayers, Maersk may in fact have its day, as yet another “competitor” signs up to its TradeLens blockchain platform. While “competitor” may be accurate, in that this new signee does offer a container shipping service, Zim can hardly be compared with Maersk in terms of market dominance. That said, as Splash 24/7 reports, the Israeli carrier is now the second non-Maersk shipping line to join the platform, following Pacific International Lines. Some had questioned the willingness of carriers to utilise a platform operated by their biggest competitor, but with PIL and Zim, entering the arena, maybe this will signal the start of others coming aboard.

TradeLens Far From Taking Off

Despite Whiteman’s opening sentence, this news won’t do much silencing of naysayers. Two carriers that are much, much smaller than Maersk signing up for TradeLens shouldn’t strike much fear in competitors that Maersk’s platform is taking off. Seeing big competitors like MSC, ONE, or Cosco join TradeLens would likely make BlockChain platform competitors nervous.C

Cosco & Other Carriers Have Eyes Set on Oracle

Cosco, of course, is very unlikely to sign up for Maersk’s BlockChain platform when it’s got stakes in a competing platform called Oracle with CargoSmart.

Cosco owns CargoSmart, a shipping tech company. Its technology is to power Oracle, which has a consortium called Global Shipping Business Network (GSBN) behind it. GSBN has more than TradeLens’s three carriers. It has Cosco/OOCL — obviously — CMA CGM, Evergreen, Yang Ming, DP World, Hutchison Ports, PSA, and Shanghai International Port.

I would say that Oracle with CargoSmart is leading the international shipping BlockChain platform race, but there still isn’t even a proof of concept for the consortium’s platform yet.

Oracle Vs. TradeLens?

It’s hard to pick which of these platforms is ahead of the other. TradeLens, with IBM’s technological support has a viable platform. However, Maersk’s ownership role scares away competing carriers.

Oracle with CargoSmart has more carrier support, but is not nearly as ready to go as TradeLens.

Maersk has to be hoping it can win more carriers over before GSBN has Oracle ready to operate, while CargoSmart and GSBN must be pushing to get their technology ready to launch while carriers are still shying away from TradeLens.

All the while, another BlockChain platform called Accenture quietly goes about business with some big international shipping names like APL and Kuehne + Nagel onboard.

Click Here for Free Freight Rate Pricing

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Will ILWU Opposing Automation Cause Port Disruption? https://www.universalcargo.com/will-ilwu-opposing-automation-cause-port-disruption/ https://www.universalcargo.com/will-ilwu-opposing-automation-cause-port-disruption/#comments Tue, 16 Apr 2019 22:27:11 +0000 https://www.universalcargo.com/?p=9525 Despite the fact their Master Contract permits port automation by terminal operators, the International Longshore & Warehouse Union (ILWU) is fighting hard against APM Terminals' plan to automate its Pier 400 terminal at the Port of Los Angeles.




The ILWU isn't one to let a little thing like no legal grounds prevent it from fighting automation, so the union has been staging protests while trying to get the Los Angeles Board of Harbor Commissioners to turn down APM Terminals' construction permit.




Shippers worry that this fight may escalate from protest marches and appeals against automation to ILWU slowdowns and strikes at the ports. Adding to these fears, one local news outlet apparently even misreported the ILWU's actions today (Tuesday, April 16th, 2019) as a strike.




Read the whole story about what happened today and the ILWU tension rising at the ports in Universal Cargo's blog.

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YouTube Video

chassis-hanjin-pool-of-pools-congestionDespite the fact their Master Contract permits port automation by terminal operators, the International Longshore & Warehouse Union (ILWU) is fighting hard against APM Terminals’ plan to automate its Pier 400 terminal at the Port of Los Angeles.

The ILWU isn’t one to let a little thing like no legal grounds prevent it from fighting automation, so the union has been staging protests while trying to get the Los Angeles Board of Harbor Commissioners to turn down APM Terminals’ construction permit.

Shippers worry that this fight may escalate from protest marches and appeals against automation to ILWU slowdowns and strikes at the ports. Adding to these fears, one local news outlet apparently even misreported the ILWU’s actions today (Tuesday, April 16th, 2019) as a strike:

Board of Harbor Commissioners Postpone Vote on Pier 400 Automation Permit

What happened today is that the union succeeded in delaying (and not for the first time) modernization upgrades at Pier 400 for at least another month.

The Board of Harbor Commissioners was supposed to vote on whether or not to uphold the previous approval of a coastal development permit for APM Terminals to upgrade Pier 400. Thanks to a letter the board received today from Los Angeles Mayor Eric Garcetti, the vote was postponed for 30 more days (in what is basically the repeat of events that happened a month ago), Donna Littlejohn reported in the Press-Telegram.

ILWU March Against Automation a Short-Term Success

Leading up to today’s (Tuesday, April 16th, 2019) would-be vote, the ILWU scheduled a march that the union said would have over 2,000 marchers, including local political leaders and Uber and Lyft drivers, who are trying to form a union themselves.

While I’ve seen no confirmed numbers of how many marchers there actually were this morning, the march did take place, with the below Twitter post by Press-Telegram photojournalist Brittany Murray showing video of marchers chanting, “Who are we? ILWU!”

The event was a bit anticlimactic as Littlejohn describes the result of the vote being postponed as follows:

Audience members, who were up early to get to the meeting on time, appeared disappointed in what amounted to a five-minute announcement following all the buildup.

Even though there was disappointment from the crowd upon hearing the vote was postponed, this should be seen as something of a victory for the ILWU, which is showing its strength in delaying the modernization and automation of Pier 400.

Murray tweeted another video of ILWU Vice President Gary Herrera encouraging his union members after the event, saying:

Every time we show up in numbers, every time we come, what they do is they get a little bit more nervous and nervous and nervous…. What’s happening today is they’re nervous, guys…. They need to do what we asked them to do. And what did we ask? We asked that they go back to their table, and they get more information. That they see the effects of what it’s going to do to our surrounding communities. What they’re gonna see the effects what’s gonna happen to the work force [sic.]. We asked for that, and we’re getting it right now.


Were Lessons Learned from ILWU Actions at the Port of Portland?

There’s good reason for nervousness when the ILWU gathers disgruntled about something.

Think back about when the ILWU got disgruntled over just two jobs at the Port of Portland traditionally belonging to another union. Despite it being against their contract and court orders, the ILWU local 8 repeatedly slowed down and shutdown port operations until Hanjin—back when it was still a major ocean carrier and handled almost 80% of the cargo shippers imported and exported through the Port of Portland, stopped calling on the port.

That obviously hurt shippers whose best practices were shipping through the Port of Portland; hurt the local economy; hurt the port; hurt the struggling Hanjin, which eventually went bankrupt; and hurt ILWU dockworkers who lost their jobs. All of that hurt was over two jobs plugging in and unplugging reefer containers.

The ILWU effectively shut down containerships calling on the Port of Portland over not being given two jobs that traditionally never belonged to the union. How much more would the ILWU be willing to flex its power over the risk of losing jobs that traditionally belong to it through automation?

ILWU Tries to Circumvent Master Contract to Fight Automation

This permit, which is usually just perfunctory, for the Pier 400 modernization construction was originally approved back in January, but afraid automation resulting from the upgrades would cost union jobs, the ILWU immediately appealed. While the Portland fiasco shows the union isn’t above taking action against its contract, ILWU obviously can’t fight the modernization and automation on the grounds of its Master Agreement. As mentioned above, the Master Agreement permits automation, so on what grounds is ILWU leadership appealing the permit?

Chris Dupin answers that in an American Shipper article:

They are asking for an expansive reading of the CEQA regulation, saying that the economic impact of job losses at the facility on the surrounding community should be taken into account as part of the environmental impact of the changes APMT wants to make.

In other words, the ILWU is arguing that the loss of jobs caused by automation is an environmental issue, and this permit should, therefore, be denied on environmental grounds.

I don’t want to say that argument makes no sense, so let’s just say from a legal and logical perspective, the ILWU’s argument for its appeal does not seem to hold water (which might be something of importance out on the docks).

While there is certainly interplay between economic and environmental issues, they are separate. Job loss is an economic not an environmental issue. When it comes to the modernization APM Terminals proposes for Pier 400, the construction would actually result in a reduction the terminal’s environmental impact.

It’s hard to see any honest hearing of this appeal resulting in anything other than rejecting the appeal and approving the permit. That’s why each delayed vote is a win for the ILWU.

ILWU & APM Terminals Talk During Permit Delay

As the delays continue, there’s opportunity for the ILWU and APM Terminals to talk, and possibly reach some sort of agreement, regarding the upgrades to Pier 400. Mayor Garcetti requested the continued delay in order for the parties to spend more time at the negotiation table on this “complex” issue, as Littlejohn reported:

“At my invitation, the ILWU and APM Terminals have met and are in talks regarding the proposed project at Pier 400,” said Garcetti’s letter, dated April 16 and read at the commission meeting. “Throughout the discussions I led at City Hall, I was encouraged by the leadership shown by both parties.”

ILWU May Not See the Forest for the Trees

It’s understandable that the ILWU would fight anything that may result in the loss of union jobs. However, these modernization/automation upgrades are important for the port terminals to stay competitive and meet environmental requirements placed upon them.

The Pacific Maritime Association (PMA) granted the ILWU an increase in coast-wide retirement benefits to over $95,000 per year for the ILA to grant terminals owners the right to automate because of automation’s necessity in remaining competitive.

The ILWU should not overlook the importance of the competitiveness of its employers, as they did at the Port of Portland. Rather than gaining two jobs at the port, the ILWU lost almost all the jobs supporting container movements there. Losing marketshare from West Coast ports to East Coast ports puts ILWU jobs in jeopardy.

Automation Supports Competitiveness Necessary for ILWU Jobs

ILWU slowdowns at West Coast ports during its contentious contract negotiations with the PMA were a huge factor causing congestion that resulted in big market losses in cargo movement from West Coast to East and Gulf Coast ports. The PMA is trying to emphasize to the union how the loss of cargo through West Coast ports like the Port of Los Angeles is a threat to ILWU jobs.

Bill Mongelluzzo reported in a Journal of Commerce (JOC) article:

PMA on Monday released a study…

The study stated that Los Angeles-Long Beach continues to lose trans-Pacific discretionary cargo, which can move through either the West, Gulf or East coasts, or through Canada, to eastern US destinations, because of the higher costs of cargo handling in Southern California…. About one-third of the container volume handled at the port complex is discretionary, the study stated.

Some of the higher costs in Southern California are due to environmental requirements under the joint Los Angeles-Long Beach Clean Air Action Plan, which since 2006 has reduced harmful diesel emissions from port-related activities by more than 80 percent.

Another important factor is the much higher intermodal rail costs from the West Coast….

According to the PMA report released Monday, Los Angeles-Long Beach in 2003 handled 56 percent of discretionary imports from Asia, and in 2018 that share was down to 46 percent. “Without a competitive response by the Pacific Southwest ports and terminal operators, after 2025, the East Coast and Gulf Coast ports will exceed (Pacific Southwest ports) for total discretionary cargo. By 2030, the East Coast and Gulf Coast ports will achieve 46 percent market share of discretionary cargo, given their continuing port and rail investments and the increased container charges at the PSW ports.”

Automation is one way to balance the increased environmental costs Los Angeles-Long Beach will face under the CAAP by reducing cargo-handling costs through greater efficiency, thereby protecting longshore jobs by mitigating diversion of discretionary cargo to other ports.

Conclusion

Shippers, looking at history, have reason to fear this argument will not be well received by the ILWU and negotiations over a contentious issue could result in slowdowns and disruption at the ports.

Click Here for Free Freight Rate Pricing

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Are You in Compliance With New TSCA Requirements, Shippers? https://www.universalcargo.com/are-you-in-compliance-with-new-tsca-requirements-shippers/ https://www.universalcargo.com/are-you-in-compliance-with-new-tsca-requirements-shippers/#respond Tue, 09 Apr 2019 21:09:18 +0000 https://www.universalcargo.com/?p=9521 There's a new import certification requirement of which U.S. shippers of goods containing composite wood need to be especially aware. It is actually worth it for all importers to be aware, as there are forms for shippers in general to certify that their goods are either in compliance with applicable rules or not subject to them.




What rules are we talking about?Well, on March 22nd, 2019, Formaldehyde Emission Standards for Composite Wood Products final rule pursuant to Title VI of the Toxic Substances Control Act (TSCA) went into effect. Yes that's a mouthful, so let's cover what it means.




The final rule creates requirements on three composite woods:




-hardwood plywoodmedium


-density fiberboard (MDF, which includes thin-MDF)


particleboard




There are many, many goods commonly manufactured with one or more of these composite woods. In an article by Chris Reynolds of INLT, Universal Cargo's house customs broker, Reynold's lists examples of such goods: furniture, kitchen cabinets, flooring, picture frames, and wooden children’s toys. However, products containing composite wood are certainly not limited to these.




This new final rule requirements affect many Universal Cargo clients as we serve a great deal of importers in the furniture industry. Of course, our furniture importing friends are not our only customers we are making sure are in compliance during the import process.




The big thing to know is that the final rule subjects products with composite woods to labelling and certification requirements.




Find out more by reading the full article in Universal Cargo's blog.

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New TSCA Title VI Import Certification Requirements and Who It Affects

toxic substances control actThere’s a new import certification requirement of which U.S. shippers of goods containing composite wood need to be especially aware. It is actually worth it for all importers to be aware, as there are forms for shippers in general to certify that their goods are either in compliance with applicable rules or not subject to them.

What rules are we talking about?

Well, on March 22nd, 2019, Formaldehyde Emission Standards for Composite Wood Products final rule pursuant to Title VI of the Toxic Substances Control Act (TSCA) went into effect. Yes that’s a mouthful, so let’s cover what it means.

The final rule creates requirements on three composite woods:

  • hardwood plywood
  • medium-density fiberboard (MDF, which includes thin-MDF)
  • particleboard

There are many, many goods commonly manufactured with one or more of these composite woods. In an article by Chris Reynolds of INLT, Universal Cargo’s house customs broker, Reynold’s lists examples of such goods: furniture, kitchen cabinets, flooring, picture frames, and wooden children’s toys. However, products containing composite wood are certainly not limited to these.

This new final rule requirements affect many Universal Cargo clients as we serve a great deal of importers in the furniture industry. Of course, our furniture importing friends are not our only customers we are making sure are in compliance during the import process.

The big thing to know is that the final rule subjects products with composite woods to labelling and certification requirements.

Determining If Your Product Falls Under New TSCA Formaldehyde Final Rule Requirements

On a page the EPA posted on its website titled Frequent Questions for Regulated Stakeholders about Implementing the Formaldehyde Standards for Composite Wood Products Act, the following products are listed as not being covered by the final rule:

  • Hardboard
  • Structural plywood
  • Structural panels
  • Structural composite lumber
  • Military-specified plywood
  • Curved plywood
  • Oriented strand board
  • Prefabricated wood I-joists
  • Finger-jointed lumber
  • Wood packaging, such as pallets, crates, spools, and/or dunnage (this exempts wood packaging from the TSCA Title VI emission standards even if the wood packaging might otherwise, in the absence of the exemption, be regulated);
  • Composite wood products used inside a new vehicle other than a recreational vehicle [Note: Mobile homes and/or trailer homes are considered manufactured housing and are regulated under TSCA Title VI]
  • Composite wood products used inside new rail cars, boats, aerospace craft, or aircraft
  • Windows that contain composite wood products, if the windows contain less than 5% composite wood product by volume
  • Exterior doors and garage doors that contain composite wood products, if the doors are made from composite wood products manufactured with NAF or ULEF resins, or the doors contain less than 3% composite wood product by volume.

Even with the above lists of the three composite woods covered and the products not covered by the final rule, there is still room for many shippers to wonder whether the product they’re importing falls under the new requirement or is exempt.

The U.S. Customs and Border Patrol (CBP) website has a Tips for Trade when filing an EPA TSCA Certification in ACE page that gives the following instructions to receive help determining if you fall under the new labeling and import certification regulation:

To determine if you need to file the TSCA Section 13, ODS, or TSCA Title VI Import Certifications, please contact the TSCA Hotline at (202) 554-1404. The TSCA Hotline operates Monday through Friday, from 8:30 a.m. to 5:00 p.m. Eastern time. You can also send an email to tsca-hotline@epa.gov.

Another option is using INLT’s HTS lookup tool to check whether your product is subject to these regulations. Reynolds gives the instructions: “If the HTS is flagged as EP7, a positive certification statement is required. It cannot be disclaimed.”

Of course, if you ship through Universal Cargo, we always work hard to guide you through the import and export process to make sure you meet all requirements with your cargo, so its shipment goes as smoothly as possible.

What Does the TSCA Title VI Import Labelling Require?

Reynold’s INLT article sums up the final rule import labelling as follows:

On March 22, all composite wood panels manufactured in or imported into the United States must be TSCA Title VI compliant and the label on composite wood panels must include the panel producer’s name, lot number, an EPA-recognized TSCA Title VI Third-Party Certifier number, and a TSCA Title VI compliance statement. Prior to this date, the CARB ATCM Phase II label satisfied the requirement.

Similarly, the labels on finished goods imported into the United States must include the fabricator’s name, the date the finished good was produced (in month/year format), and a TSCA Title VI compliance statement.

Leila Nourani, in an article on the National Law Review website, breaks down the labeling a little further, especially in relation to products’ California Air Resources Board (CARB) requirements, which, of course, is very important for those importing to California:

… composite wood products must be labeled as TSCA Title VI compliant, and just having a label indicating California CARB II compliance is no longer sufficient.

In order to be compliant with the new TSCA Title VI labelling requirements, fabricators of finished goods that contain composite wood products must label every finished good they produce, or every box or bundle containing finished goods.

Finished goods that comply with TSCA Title VI and are labeled as TSCA Title VI compliant will be accepted as being compliant with California CARB’s standards, because the TSCA Title VI and CARB standards are identical. However, CARB recommends labeling panels and finished goods offered for sale in California as being compliant with both sets of regulations, because retailers and consumers are familiar with the CARB Phase II label already.

In order for a label to be both California CARB II and federal TSCA Title VI Compliant as of March 22, 2019, it is recommended that both the finished good and/or its box is labelled as follows:

    1. The label may be applied as a stamp, tag, or sticker;
  1. The label must include, in legible English text:
    1. Fabricator’s name;
    2. The date the finished good was produced (in month/year format);
    3. A statement that the finished goods are TSCA Title VI compliant, i.e. “TSCA Title VI Compliant” or similar;
    4. A marking to denote that the finished goods are CARB Phase II Compliant, i.e. “California 93120 Phase 2 Compliant for Formaldehyde” or similar;
    5. If all of the composite wood product used in the finished good was made with no-added formaldehyde-based resins, or ultra low-emitting formaldehyde resins it shall be labelled as such, e.g. “Produced with all NAF-based products” or “Produced with all ULEF-based products.”

The regulations specify the minimum information required for a label, but do not specify the format, color, size, or font for the label.

What Does TSCA Certification Look Like?

Shippers, and not just those importing products falling under the TSCA formaldehyde final rule, have forms in their paperwork certifying TSCA compliance.

If importing wood, there’s a form where the shipper fills out information, including a bill of lading or reference number and product description; check a box stating either “I certify that the regulated composite wood products, component parts or finished goods imported in this shipment comply with all applicable rules or orders under TSCA Title VI” or “I certify there are no composite wood products, component parts or finished goods in this shipment”; and sign.

Then there’s the TSCA chemical certification form.

This form is similar to the wood one explained above, requiring importers to check a box stating either that all chemical substances in their shipments comply with all applicable rules or orders under TSCA or that all chemical substances in their shipments are not subject to TSCA before signing.

About TSCA

TSCA, administered by the EPA, regulates chemicals, both new and existing. It’s designed to protect the public from “unreasonable risk of injury to health or the environment” by regulating the manufacture, shipping, and sale of chemicals, affecting importing and exporting requirements of many goods.

Although the final rule discussed in this blog just went into effect on March 22nd, TSCA has been around since 1976 with additional sections being added over the years.

Click Here for Free Freight Rate Pricing

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Carriers Expect To Recoup IMO 2020 Fuel Costs Through Shipper Contracts https://www.universalcargo.com/carriers-expect-to-recoup-imo-2020-fuel-costs-through-shipper-contracts/ https://www.universalcargo.com/carriers-expect-to-recoup-imo-2020-fuel-costs-through-shipper-contracts/#respond Thu, 04 Apr 2019 21:34:19 +0000 https://www.universalcargo.com/?p=9522 We're finally seeing news on how carriers will pass higher fuel costs, which are on the way, to shippers.




It seems that all the news around the International Maritime Organization's 2020 cleaner fuel mandate (IMO 2020) has been gloom and doom for carriers. You know, things like MOL President and CEO Junichiro Ikeda saying, “We’re all going to go bust.”




Comments like that almost made it feel like carriers were trying to create hysteria over IMO 2020. How could these (giant) companies that already struggle with profitability possibly survive the higher cost of meeting a 0.5% sulfur cap on their fuel starting next year? All the carriers will go out of business and the world's ocean freight industry will collapse!




Thanks for the commentary, Chicken Little, er, Mr. Ikeda.Yes, carriers have often made poor business management decisions that helped them achieve years with losses measured in the billions of dollars (enough to make some question if carriers are just bad at business), but did anyone really believe these companies would just sit back and take the higher fuel costs coming in 2020 all on themselves?




Shippers knew these costs would trickle down to them.




Read the full story in Universal Cargo's blog.

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We’re finally seeing news on how carriers will pass higher fuel costs, which are on the way, to shippers.

IMO Cleaner Fuel Mandate Histeria

Container Ship EmissionsIt seems that all the news around the International Maritime Organization’s 2020 cleaner fuel mandate (IMO 2020) has been gloom and doom for carriers. You know, things like MOL President and CEO Junichiro Ikeda saying, “We’re all going to go bust.”

Comments like that almost made it feel like carriers were trying to create hysteria over IMO 2020. How could these (giant) companies that already struggle with profitability possibly survive the higher cost of meeting a 0.5% sulfur cap on their fuel starting next year? All the carriers will go out of business and the world’s ocean freight industry will collapse!

Thanks for the commentary, Chicken Little, er, Mr. Ikeda.

Yes, carriers have often made poor business management decisions that helped them achieve years with losses measured in the billions of dollars (enough to make some question if carriers are just bad at business), but did anyone really believe these companies would just sit back and take the higher fuel costs coming in 2020 all on themselves?

Shippers knew these costs would trickle down to them.

Still, carriers seemed scared. And not without reason. Carrier competition in the international shipping industry has been shrinking over recent years. Poor capacity management and rate wars from carriers created an overcapacity plague and such downward pressure on freight rates to not just unhealthy but unsustainable levels for carriers. Over and over again, carriers tried to bolster rates through things like general rate increases (GRI) only to be unable maintain them (often from undercutting each other).

Therefore, it would not be hard to imagine some carriers floundering in the wake of IMO 2020’s higher fuel costs. In fact, there’s little reason to think carrier competition won’t continue to shrink (even though it feels a little bit more stable than a couple years ago). Still, no one seems to think 2020 will be the year Maersk’s prediction that carrier competition shrinks to just 3 global companies will come to fruition.

Carriers Will Pass Increased Fuel Costs to Shippers

Now we’re seeing our first positive headlines concerning carriers and IMO 2020 as Bill Mongelluzzo writes an article in the Journal of Commerce (JOC) titled “Carriers gaining confidence in low-sulfur fuel negotiations.”

The article spotlights how carriers think they will recoup not just some of their cost increases from the more expensive cleaner fuel but all of those costs:

Container carriers and beneficial cargo owners (BCOs) tell JOC.com they are separating fuel and freight costs in annual service contracts, despite a historical preference for “all-in” contract rates. Even more importantly, carriers and shippers are developing bunker fuel adjustment factors, either proposed by the carrier or the shipper, leaving the actual cost of low-sulfur fuel as the only variable to be plugged in later this year.

Carrier Fuel Cost Recoupment Actually Good for Shippers?

Shippers always like the idea of paying less money on their imports and exports, so initially, fuel costs being separated out and passed on to shippers doesn’t sound like a good thing. However, thinking about the problems caused by these increased costs being shouldered by carriers gives reason to think of this as not only good for carriers but beneficial for shippers too.

Mongelluzzo also wrote in his JOC article:

[Carriers fully recouping higher operating costs is] a positive sign not just for carriers, but also for shippers, who could see increased blank sailings and even canceled service strings if the container shipping industry is forced to slash capacity because it can’t shoulder the billions in extra annual costs to meet the International Maritime Organization’s (IMO’s) mandate.

We just posted a couple weeks ago about the expectation of increased transhipment expected in the upcoming year because of IMO 2020. Shippers hate transhipment because of the costly delays and increased risks of cargo loss and damage that come along with it.

If carriers are fully recouping their higher fuel costs, that eliminates the need to so through fewer direct port calls, which was to be the cause of increased transhipment.

Conclusion

Maybe all the IMO 2020 carrier hysteria was designed to make shippers to see a need for carriers to recoup these higher fuel costs. Even if it was, that doesn’t make the recoupment any less necessary.

Though it sometimes feels like the way of the international shipping industry is carriers versus shippers, it should not be viewed that way. Carriers provide the service importers and exporters need to be, well, importers and exporters. In any industry, healthy service providers are optimal for consumers of that service.

Shippers thought record low freight rates were great. However, those low rates became costly when they played into Hanjin’s collapse — delaying cargo for many, many shippers — shrunk carrier competition, or decreased sailings.

Similarly, shippers don’t like seeing these fuel costs fall to them. However, avoiding the decreases in service and carrier competition and likely increases of costly issues on shipping container moves probably makes this cost worth it for shippers in the long run.

Click Here for Free Freight Rate Pricing

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Freight Rates Increase with Carrier GRIs After Slump https://www.universalcargo.com/freight-rates-increase-with-carrier-gris-after-slump/ https://www.universalcargo.com/freight-rates-increase-with-carrier-gris-after-slump/#respond Tue, 02 Apr 2019 18:05:56 +0000 https://www.universalcargo.com/?p=9516 Two weeks ago, when this blog last checked in on freight rates, they were falling. Massively. This week, transpacific freight rates rise significantly with a wave of General Rate Increases (GRI), getting out of the whirlpool freight rates were spinning down.




Gavin van Marle reported in the Loadstar on Friday, using the Shanghai Containerized Freight Index (SCFI), that this week would see double-digit increases in freight rates on Asia to North America routes.




SCFI had China to US West Coast rates set to grow 22.3% and China to US East Coast rates set to rise 12.7%. And we do appear to be seeing that come to fruition.




For the full article, including a list of April GRIs, read the blog on UniversalCargo.com

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Shipping Containers Need Contents VerifiedTwo weeks ago, when this blog last checked in on freight rates, they were falling. Massively. This week, transpacific freight rates rise significantly with a wave of General Rate Increases (GRI), getting out of the whirlpool freight rates were spinning down.

Gavin van Marle reported in the Loadstar on Friday, using the Shanghai Containerized Freight Index (SCFI), that this week would see double-digit increases in freight rates on Asia to North America routes.

SCFI had China to US West Coast rates set to grow 22.3% and China to US East Coast rates set to rise 12.7%. And we do appear to be seeing that come to fruition.

Mr. van Marle pointed out that this rise in freight rates was anticipated with a series of GRIs from carriers. The article is absolutely right in that there’s a wave of GRIs this week. Many GRIs went into effect yesterday, April 1st. Sorry, shippers, but that was not an April Fool’s joke.

While freight rates are a very volatile thing in the international shipping industry, these freight rate increases should at least hold for a few weeks. That’s because there’s also a second wave of GRIs scheduled to hit in two weeks on April 15th. The below image is from a spreadsheet listing GRIs raising transpacific freight rates this month.

April GRIs

For those of you who have trouble reading the information in the picture, the chart’s information is also printed at the end of this article. In the meantime, here are a few noteworthy highlights from the information:

Often, the 20′ container GRIs are only slightly lower than the ones for the 40′ containers. Usually, there is also a little bump up in the GRI amount total from 40′ containers to 40HQ and another increment added for 45′ containers.

The most common GRI amounts hitting are $850 – $900 per TEU (twenty-foot equivalent unit) and $1,000 per FEU (forty-foot equivalent unit).

Carriers have struggled to maintain GRIs like these in the past because one or more carriers decide to undercut the others’ rates to make a market share grab. However, with the greater discipline carriers have shown lately in managing capacity and increasing freight rates, the recent falling of freight rates notwithstanding, carriers should be optimistic in their ability to avoid negating these GRIs.

This is a good time for carriers to implement and maintain GRIs as van Market points out that this rise in freight rates coincides with rising utilization after the traditional post-Chinese New Year slump.

That slump was magnified this year by the engorged and extended peak season when U.S. shippers front-loaded their imports from China to beat trade war tariff increases. Transpacific cargo quantity could still be impacted as the year continues by all that cargo front-loading. So utilization versus carrier capacity will be something to keep an eye on moving forward.

In the meantime, Universal Cargo is always keeping an eye on freight rates and ready to supply you with the best service possible on your international shipping.

Click Here for Free Freight Rate Pricing

Carrier Surcharge item Effective date 20‘ 40’ 40HQ 45′ 53 Remark
EMC GRI 1-Apr-19 360 400 400 506 Asia to USA/Canada
COSCO GRI 1-Apr-19 640 800 900 1013 Asia to USA/Canada
HMM GRI 1-Apr-19 900 1000 1125 1266 Asia to USA/Canada
HMM GRI 15-Apr-19 900 1000 1125 1266 Asia to USA/Canada
CMA GRI 1-Apr-19 900 1000 1125 1266 1600 Asia to USA/Canada
CMA GRI 15-Apr-19 900 1000 1125 1266 1600 All Asia, Far East, and Bangladesh Ports of Load to USA/Canada
CMA GRI 15-Apr-19 900 1000 1125 1266 1600 All Asia (includes Far East) Ports of Load to USA/Canada
Hapag-Lloyd GRI 1-Apr-19 560 700 700 East Asia to North America (USA and Canada) to USA/Canada
HAMBURG GRI 1-Apr-19 480 600 600 Asia to USA/Canada
HAMBURG GRI 15-Apr-19 480 600 600 Asia to USA/Canada
ZIM GRI 1-Apr-19 900 1000 1000 1266 from the Far East to US & Canada
APL GRI 1-Apr-19 850 1000 1125 1266 Asia to USA/Canada
APL GRI 15-Apr-19 850 1000 1125 1266 Asia to USA/Canada
APL PSS 15-Apr-19 850 1000 1125 1266 Asia to USA/Canada (EXCEPT GUAM; HAWAII; MARIANA ISLANDS; PUERTO RICO AND VIRGIN ISLANDS)
YML GRI 1-Apr-19 900 1000 1125 1266 from the Far East to US & Canada
SM LINE GRI 1-Apr-19 850 1000 1125 1266 Eastbound Asia to US/Eastbound Far East to Canada
SM LINE GRI 15-Apr-19 850 1000 1125 1266 Eastbound Asia to US/Eastbound Far East to Canada

 

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You Won’t Believe How Pathetic This Ocean Freight Headline Is https://www.universalcargo.com/you-wont-believe-how-pathetic-this-ocean-freight-headline-is/ https://www.universalcargo.com/you-wont-believe-how-pathetic-this-ocean-freight-headline-is/#comments Thu, 28 Mar 2019 21:03:17 +0000 https://www.universalcargo.com/?p=9507 Hyundai Merchant Marine (HMM) made headlines this week for doing something all businesses should do — focusing on customers. Correction: HMM made headlines for saying it would focus on customers.




Only in the ocean freight sector of the international shipping industry would a business saying it's going to focus on customers make headlines.




I don't say headlines like "New HMM CEO targets customer focus for turnaround" on a Greg Knowler written article in the Journal of Commerce (JOC) are pathetic because they are poorly written. I say they're pathetic because these headlines highlight how much ocean freight carriers ignore the most basic tenets of business.




Businesses are supposed to focus on customers!




Keep reading in Universal Cargo's blog.

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The following article is an editorial blog post.

Hyundai Merchant Marine (HMM) made headlines this week for doing something all businesses should do — focusing on customers. Correction: HMM made headlines for saying it would focus on customers.

Only in the ocean freight sector of the international shipping industry would a business saying it’s going to focus on customers make headlines.

I don’t say headlines like “New HMM CEO targets customer focus for turnaround” on a Greg Knowler written article in the Journal of Commerce (JOC) are pathetic because they are poorly written. I say they’re pathetic because these headlines highlight how much ocean freight carriers ignore the most basic tenets of business.

Businesses are supposed to focus on customers!

You don’t have to be an economist or business dynamo to know that. I’d say it’s business 101, but it’s probably assumed you’d know businesses are supposed to focus on customers before ever taking a business class.

Does this basic concept somehow not apply to ocean freight shipping businesses? Yes, that’s a rhetorical question, but apparently we have to answer it for carriers anyway. No!

Ocean freight carriers need to focus on customer service!

Shipping lines are notoriously bad when it comes to both reliability and transparency — Oh, and those just happen to be the two biggest things shippers want from carriers.

It’s no wonder ocean freight carriers struggle with profitability. I don’t think I need to go over how carriers have suffered losses in recent years measured in the billions of dollars as that has popped up over and over again in posts on Universal Cargo’s blog. I’ve eased up on bringing it up recently because I figured our regular readers were tired of hearing about it.

What caused carrier losses?

Carriers point at things like fuel costs and downward pressure on freight rates as reasons for losses, but I point where carriers never seem to point: at their history of dismal customer service.

Downward pressure on freight rates is mainly self-inflicted by carriers’ ignoring another basic tenet of business — supply and demand — by creating overcapacity through poor capacity management. And let’s not mention all the rate wars (oops, I just did), where carriers undercut each other’s freight rate pricing and even their own General Rate Increases (GRI) to try to nab a little bit more market share.

Want more market share, carriers? Try better customer service.

Shippers would be willing to pay for better service to prevent costly delays and losses, not to mention the simple peace of mind better service would bring.

IMO 2020 can’t be blamed for poor profitability.

Carriers are right that the IMO 2020 cleaner fuel mandate is costly. Their fuel and fuel related expenses will go up. And we’re hearing tons about that from carriers.

But the upcoming rule change can’t be blamed for poor profitability or loss carriers have experienced in the past.

Fuel prices in general have often been blamed for profit issues by carriers. However, oil bunkers have always fluctuated with great unpredictability, jumping up and tumbling down. It’s part of the business that carriers should be good at planning for by now. And speaking of planning…

IMO 2020 is not an excuse for carriers’ poor customer service.

There has literally been years for carriers to plan for switching to cleaner fuel. Why does it seem like carriers are suddenly in scramble mode to comply. The 0.5% sulfur cap was by no means just sprung on carriers.

Carriers’ reliability issues and lack of transparency has been here long before IMO 2020, and only looks to increase with it.

The expected plan from carriers for the IMO 2020 cleaner fuel mandate’s higher fuel costs is fewer direct port calls — yeah, that sounds like something shippers want — and as a result, more transhipment — that’s something shippers will hate.

Transhipment means less transparency, longer and less predictable transit times, increased risk of cargo damage or loss… Actually, let me sum it up more simply with the theme of this post: it means poorer customer service. If that’s possible.

Carriers are not too big to fail.

Carriers have long been thought of as too big to fail. After all, international shipping is needed for the modern global economy. And it seems like governments are always ready to bail carriers out.

But it doesn’t matter how big a company is. If it doesn’t serve its customers well and can’t make a profit, eventually it will become impossible to maintain.

Everyone seemed shocked when the major carrier Hanjin Shipping collapsed a few years ago, but nobody should have been. Carriers were busy stacking years of loss on top of each other.

What’s surprising is more carriers didn’t collapse.

Carriers have repeatedly made moves, even giant trends, that are completely self-centered, ignoring the needs of the rest of the industry, including their customers.

Megaships? Who would those benefit other than carriers, who were trying to decrease costs by moving more cargo at once? Not the ports that weren’t big enough to handle these huge ships. Definitely not shippers who saw their risk increase from cargo all being moved together and paid pricey costs as congestion from all those shipping containers landing at once delayed cargo.

Dumping chassis? Again, it was convenient and “cost-effective” for carriers to stop supplying the necessary chassis to move shipping containers. But did getting rid of that service help their customers or the ports? Of course, not. Chassis shortage, congestion, and extra fees were all foreseeable results.

When the businesses within an industry are not focused on the customers, competition shrinks. We’ve watched competition shrink in ocean shipping beyond Hanjin’s collapse as carriers formed alliances, merged, got bought out… all before turning to the last resort: customer service.

Customer service is carriers’ desperation move.

I’d applaud HMM for the words Knowler’s JOC article quoted from its statement that its new CEO would “focus on a customer’s view on handling HMM’s current issues in order to lead managerial innovation and strengthen its sales competitiveness,” but how can you really applaud a dying company for in desperation saying it will focus on customer service.

It’s amazing HMM didn’t collapse before Hanjin did. In the months leading up to Hanjin’s collapse, headlines were full of stories about HMM heading for receivership.

Want another amazing fact? Knowler writes in his JOC article that HMM “hasn’t turned a quarterly profit since 2012.” Forget annual profit. HMM can’t even turn a quarterly profit!

Yes, it’s time to finally turn to customer service HMM. And not just in word but in deed. It’s way past time. That goes for all the ocean freight carriers out there. You want to really innovate the industry and become profitable, carriers? Start making moves that are for shippers, you know, your customers.

Click Here for Free Freight Rate Pricing

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WARNING: Shippers Liable for Trucking Companies’ Unfair Labor Practices https://www.universalcargo.com/warning-shippers-liable-for-trucking-companies-unfair-labor-practices/ https://www.universalcargo.com/warning-shippers-liable-for-trucking-companies-unfair-labor-practices/#comments Tue, 26 Mar 2019 20:30:13 +0000 https://www.universalcargo.com/?p=9499 Shippers need to be extra careful about the trucking companies they hire to transport their shipping containers to and from the ports. If not, shippers could find themselves liable in legal action against the trucking companies from truckers over unfair labor practices.




Read the blog to know how to avoid hiring a trucking company that opens you up to liability from their trucker employment practices.

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End of Truckers?Shippers need to be extra careful about the trucking companies they hire to transport their shipping containers to and from the ports. If not, shippers could find themselves liable in legal action against the trucking companies from truckers over unfair labor practices.

Truckers Strike & Litigate Over Employment Classification

Despite the development of automated vehicles creating doubt over truckers’ future in international shipping, truckers are an absolutely essential part of the supply chain. Unfortunately, truckers have not often been treated or paid commensurately with their value in the industry or even how much they actually work.

Regular readers of Universal Cargo’s blog may remember us posting about truckers strikes at the Ports of Los Angeles and Long Beach in 2015 and 2017. However, even though truckers were striking at the ports, it wasn’t the ports that truckers had the problem with.

Their employment classification was truckers’ biggest issue.

Truckers felt exploited and cheated out of fair wages and benefits while being forced to take on truck expenses by being classified as independent contractors — what they call a misclassification. Taking the issue to court, truckers had already been awarded millions in lawsuits by the time of the strike in 2017.

However, the companies truckers work for appealed the rulings, and the battle raged on, remaining a huge issue to this day.

Chris Dupin reported last week in American Shipper, “The U.S. Supreme Court has declined to hear an appeal by the California Trucking Association (CTA) of a decision by the 9th Circuit Court of Appeals on the employment classification of truck drivers.”

Shippers Liable If They Hire Trucking Companies With Unsatisfied Court Judgments

Even though this battle has been happening right in the supply chain of U.S. shippers importing and exporting goods, it has been relatively easy for shippers to ignore. The sporadic truckers strikes at the ports have had little impact on operations. Even the trucker shortage that has been going on for years now hasn’t stopped shippers from getting their goods trucked in and out of ports.

However, this section, especially the last two paragraphs, of Dupin’s article should catch shippers’ attention:

In January, the office of California’s labor commissioner said it had received more than 1,000 port trucking wage claims and issued 448 decisions in favor of the truck drivers with more than $50 million in wages owed since 2011. The vast majority of the cases filed by truck drivers with the labor commissioner’s office involve drivers out of the ports.

Under a law (SB 1402) that went into effect this year, the California Labor Commissioner has begun posting a list of port trucking companies with unsatisfied final court judgments, tax assessments or tax liens. Retailers and other businesses that hire companies on the list are jointly and severally liable for future labor and employment law violations committed by these companies.

That means shippers, the customers who contract with the listed motor carriers, will now share civil legal responsibility and civil liability for the full amount found due for unpaid wages, unreimbursed expenses, damages, penalties and applicable interest owed to a driver, the state said.

List of Trucking Companies with Outstanding Judgments

Obviously, shippers should be careful about hiring trucking companies from the California Labor Commissioner’s list because doing so could open them up to costly liabilities.

We’ve pasted the latest list (as of March 26th, 2019) in this blog below, but the Labor Commissioner’s Office updates the list monthly, removing companies that have satisfied or settled their court judgments and adding port drayage motor carriers with unsatisfied final court judgments, tax assessments, or tax liens.

The list can be found on the State of California Department of Industrial Relations’ website, which states that the list must be updated by the 5th of each month and details the names, addresses, and essential information of the port drayage motor carriers listed.

Of course, when importing door to door through Universal Cargo, we make sure your cargo isn’t being trucked by a company that would open you up to this liability.

Click Here for Free Freight Rate Pricing

Judgment Reference Name

Company/Employer

As a Successor To

Primary Address

Judgment Amount

J-59806

Absolute Intermodal LLC

N/A

6602 W GRANT ST, PHOENIX, AZ 85043

$124,572.89

J-59233

ACCOLADE MANAGEMENT COMPANY, a California corporation

N/A

728 West 139th Street, Gardena, CA 90247

$25,444.01

J-59738

CLIMAN MOTOR FREIGHT, LLC., A CALIFORNIA LIMITED LIABILITY COMPANY

N/A

111 W. Ocean Blvd., Suite 400, Long Beach,, CA, 90802

$6,851.62

J-59748

CLIMAN MOTOR FREIGHT, LLC., A CALIFORNIA LIMITED LIABILITY COMPANY

N/A

111 W. Ocean Blvd., Suite 400, Long Beach,, CA 90802

$11,248.22

J-59757

CLIMAN MOTOR FREIGHT, LLC., A CALIFORNIA LIMITED LIABILITY COMPANY

N/A

111 WEST OCEAN BLVD., #400, LONG BEACH,, CA 90802

$11,273.30

J-58558

CONTAINER INTERMODAL TRANSPORT, INC.

N/A

816 N Henry Ford, Wilmington, CA 90744

$7,890.36

J-58838

DLS INTERNATIONAL SERVICES, LLC

N/A

2803 E. 208th Street, Carson, CA 90810

$ 71,837.11

J-59597

EXPEDITED FREIGHT SERVICES, INC.

N/A

15245 TEXACO AVENUE, PARAMOUNT, CA 90723

$23,749.34

J-58821

GOLDEN TRANZ INC

N/A

7800 VIA TORTONA, Burbank, CA 91504

$5,606.83

J-58448

GTD, INC.

N/A

10801 Norwalk Blvd., Santa Fe Springs, CA 90670

$25,645.90

J-58521

HARBOR CHOICE EXPRESS LTD. CORP.

N/A

14611 S. Broadway, Gardena, CA 90248

 $27,318.80

J-59353

HRT TRUCKING, INC., A TEXAS CORPORATION

N/A

c/o Caroline Tseng, agent for service 2525 El Presidio St., CARSON, CA 90810

$86,827.89

J-54571

HRT TRUCKING, INC., A TEXAS CORPORATION

N/A

10820 Westpark Dr., Houston, TX 77042

$53,374.95

J-54570

HRT TRUCKING, INC., A TEXAS CORPORATION

N/A

10820 Westpark Dr., Houston, TX 77042

$53,374.95

J-59802

Krisda, Inc.

N/A

1661 E 32ND ST, LONG BEACH, CA 90807

$77,067.62

J-59078

LHB TRUCKING, INC., a California Corporation

N/A

4223 Independence Ave., South Gate, CA 90280

$80,404.45

J-59079

MSTL, INC., A CALIFORNIA CORPORATION

N/A

14900 SOUTH AVALON BLVD, GARDENA, CA 90248

$80,223.17

J-59080

Nani Service, Inc.

MSTL, INC., A CALIFORNIA CORPORATION

1200 W. Walnut St., Compton, CA 90220

$80,223.17

J-58719

AMAX Trucking, Inc.

Pacgran, Inc.

19300 S ALAMEDA ST, COMPTON CA 90221

$71,795.18

J-58720

AMAX Trucking, Inc.

Pacgran, Inc.

19300 S ALAMEDA ST, COMPTON CA 90221

$58,954.25

J-58735

AMAX Trucking, Inc.

Pacgran, Inc.

19300 S ALAMEDA ST, COMPTON CA 90221

$48,165.46

J-58736

AMAX Trucking, Inc.

Pacgran, Inc.

19300 S ALAMEDA ST, COMPTON CA 90221

$90,919.88

J-58849

AMAX Trucking, Inc.

Pacgran, Inc.

19300 S ALAMEDA ST, COMPTON CA 90221

$45,496.79

J-59585

PEREZ BROTHERS TRANSPORT LLC, a California limited liability company

   N/A

1300 SOUTH ATLANTIC AVE, Compton, CA 90220

$141,980.21

J-59758

SPRINT TRANSPORTS INC., a California corporation

N/A

15902-A Halliburton Road #228, Hacienda Heights, CA 91745

$60,926.43

J-58719

Pacgran, Inc.

N/A

1350 Valley Vista, Diamond Bar, CA 91765

$71,795.18

J-58720

Pacgran, Inc.

N/A

880 Sunset Place, Diamond Bar, CA 91765

$58,954.25

J-58735

Pacgran, Inc.

N/A

1350 Valley Vista, Diamond Bar, CA 91765

$48,165.46

J-58736

Pacgran, Inc.

N/A

880 Sunset Place, Diamond Bar, CA 91765

$90,919.88

J-58849

Pacgran, Inc.

N/A

2250 E. 69th Street, Long Beach, CA 90805

$45,496.79

J-60262

Royalty Freight, Inc

N/A

3728 W. McKinley Ave., Fresno, CA 93722

$33,407.08

J-60262

Royalty Carriers, Inc.

N/A

3728 W. McKinley Ave., Fresno, CA 93722

$33,407.08

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Shippers Will Hate Expected Carrier Strategy https://www.universalcargo.com/shippers-will-hate-expected-carrier-strategy/ https://www.universalcargo.com/shippers-will-hate-expected-carrier-strategy/#comments Thu, 21 Mar 2019 20:40:24 +0000 https://www.universalcargo.com/?p=9498 It's coming: the cleaner fuel mandate. The International Maritime Organization's (IMO) o.5% sulfur cap hits in 2020. Carriers know their fuel costs are about to jump. Shippers know they'll in some way be paying more on imports and exports to help cover those costs.




Obviously, shippers never like to see the cost of shipping increase, but analysts are predicting a result from the fuel mandate that shippers will absolutely hate.




"Analysts predict that the impact of IMO 2020 will mean slower ships and more transhipment," Mike Wackett writes in the Loadstar.




Slower ships isn't really the biggest deal. It increases transit time, but over recent years, slow steaming has been a common enough practice from carriers to reduce costs by burning less fuel on sailings. Slow steaming can increase voyage times across the ocean by three or four days, but that's nothing compared the kind of delays transhipment can create.




Keep reading in Universal Cargo's blog.

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YouTube Video

It’s coming: the cleaner fuel mandate. The International Maritime Organization’s (IMO) o.5% sulfur cap hits in 2020. Carriers know their fuel costs are about to jump. Shippers know they’ll in some way be paying more on imports and exports to help cover those costs.

Obviously, shippers never like to see the cost of shipping increase, but analysts are predicting a result from the fuel mandate that shippers will absolutely hate.

“Analysts predict that the impact of IMO 2020 will mean slower ships and more transhipment,” Mike Wackett writes in the Loadstar.

Slower ships isn’t really the biggest deal. It increases transit time, but over recent years, slow steaming has been a common enough practice from carriers to reduce costs by burning less fuel on sailings. Slow steaming can increase voyage times across the ocean by three or four days, but that’s nothing compared the kind of delays transhipment can create.

What Is Transhipment and Its Risks?

Transhipment, sometimes spelled transshipment, already happens all too often in ocean freight shipping.

Simply put, transhipment is when cargo is transferred from one ship to another instead of being taken by one ship from port of origin to port of destination.

Of course, what really happens with transhipment is often not so simple. Transhipment adds extra ports that the cargo actually hits the docks of between the port of origin and port of destination for cargo. Cargo tends not to be directly or immediately loaded from one cargo ship to the next. Instead, it tends to wait at the port, possibly getting moved around between holding areas, for whatever ship it will get loaded onto next.

Transhipment increases the risk of damage or loss to cargo. It also has a tendency to very significantly and unexpectedly delay cargo from reaching its destination.

Because carriers are often not very transparent with their operations, shippers often don’t even know transhipment is happening to their  cargo. Carriers leaving them completely in the dark, shippers often know neither how long their cargo will be waiting for the next ship it will be loaded on nor even what port the cargo is waiting at.

Shippers can feel like their cargo just disappeared.

Why 2020 Sulfur Cap Is Expected to Increase Transhipment

Chris Dupin wrote an article in American Shipper about Drewry, the maritime research company, predicting slow steaming and transhipment to increase.

“One potential side-effect from the new regulations could be greater slow steaming and use of transshipment,” [Drewry in its Container Insight Weekly newsletter] explained, saying that as the sailing speed of ships is reduced and round voyages are extended “carriers will drop ports from rotations to ensure that transit times to key points remain competitive.”

Drewry said fewer direct port calls will result in greater need for transshipment and feeder operations.

Research “shows that in the past there is a reasonably high correlation between incidences of transshipment globally (as a percentage of total port throughput) and bunker prices,” [Drewry] said.

The quick summary: higher fuel costs, fewer direct port calls, more transhipment.

Conclusion

Shippers want more reliability and transparency from carriers, which have not provided either very well with their traditional handling of international ocean freight shipping.

Unfortunately, 2020 is setting up for carriers to take a step back in both areas, as transhipment tends to decrease both reliability and transparency.

Combining increased transhipment with even more slow steaming means 2020 could see significantly slower delivery times on the import and export of goods.

Drewry’s prediction of slower ships and more transhipment sounds like a warning to shippers. However, carriers should be warned too. Charging more for worse service is not good business. Businesses that struggle with profitability, as carriers have over the last several years, can’t afford bad business.

Click Here for Free Freight Rate Pricing

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Falling Freight Rates & 2019 Transpacific Shipping Outlook https://www.universalcargo.com/falling-freight-rates-2019-transpacific-shipping-outlook/ https://www.universalcargo.com/falling-freight-rates-2019-transpacific-shipping-outlook/#respond Tue, 19 Mar 2019 20:27:53 +0000 https://www.universalcargo.com/?p=9491 International shipping spot rates are, not surprisingly, falling at the moment. But they have been falling massively.




Freight rate pricing tends to fall after the Chinese New Year as demand is typically low this time of year. Right now, demand is even lower than normal because of shippers moving up imports to beat tariff increase deadlines from the U.S., China trade war.




After the prolonged peak season, because of all that front-loading of imports, freight rates have been sliding down with Mike Wackett reporting in the Loadstar that spot rates from Asia to the U.S. West Coast fell (USWC) 6% per FEU (40' equivalent unit) last week, continuing a trend that brings those rates to 51%  lower than their November peak.




Asia to U.S. East Coast (USEC) rates fell 6% last week for a total of a 39% decrease from the November peak, according to Wackett. His data source is the Shanghai Containerized Freight Index (SCFI).




Read the whole article in Universal Cargo's blog.

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Containership import export business logisticsInternational shipping spot rates are, not surprisingly, falling at the moment. But they have been falling massively.

Freight rate pricing tends to fall after the Chinese New Year as demand is typically low this time of year. Right now, demand is even lower than normal because of shippers moving up imports to beat tariff increase deadlines from the U.S., China trade war.

After the prolonged peak season, because of all that front-loading of imports, freight rates have been sliding down with Mike Wackett reporting in the Loadstar that spot rates from Asia to the U.S. West Coast fell (USWC) 6% per FEU (40′ equivalent unit) last week, continuing a trend that brings those rates to 51%  lower than their November peak.

Asia to U.S. East Coast (USEC) rates fell 6% last week for a total of a 39% decrease from the November peak, according to Wackett. His data source is the Shanghai Containerized Freight Index (SCFI).

Despite these massive drops, freight rates still aren’t as low as they were this time last year, according to Wackett’s article where he reported numbers that would represent a little under 18% and 15% per FEU increases for Asia to USWC and Asia to USEC shipments, respectively, over last year.

Higher freight rates over this time last year can mainly be attributed to better, more disciplined capacity management from carriers than they have pulled off in the past.

Still, the current falling freight rates make this a great time for U.S. businesspeople to import from China, especially with the latest round of tariff increases on Chinese goods postponed during trade talks.

The spot rate market performance tends to play a part in carriers’ annual contract negotiations with the big shippers, like your Wal-Marts, whose large quantity of imports garners them their own freight rates outside of the spot market.

In international shipping, these big companies are known as BCOs, which stands for Beneficial Cargo Owners.

According to Wackett’s article, current falling freight rates are making it difficult for carriers to land the kind of contracts they want with the BCOs.

The softness in the market … has come at the worst possible time for carriers serving the [transpacific] route.

At last week’s TPM conference in Long Beach, they were anxious to court their BCO customers and sign them up to new contracts, commencing 1 May.

However, aspirations of 20% uplifts in new contracts had to be tempered considerably, and The Loadstar was told that some carriers were content to keep the status quo on freight rates as long as they could get agreement to their new BAF formulae.

BAF stands for Bunker Adjustment Factor, and is going to play a big factor in shipping costs leading into next year when the new International Maritime Organization’s (IMO) cleaner fuel mandate goes into effect.

The IMO mandate puts a sulfur cap of 0.5% on the fuel of cargo ships starting in 2020. The cost of meeting this mandate is significant and the biggest problem the international shipping industry faces in 2o19.

BAFs will be used to try to recoup some of the higher fuel costs carriers are facing.

If carriers cannot secure better rates in their BCO contracts while facing those increased costs from cleaner fuel upgrades, it’s guaranteed they will do everything in their power to push pricing up in the spot rate market where small to medium shippers get their freight rates.

Of course, carriers don’t always succeed in such endeavors, but their recent capacity discipline does bode well for future efforts.

Freight rates are always volatile, but this will be a particularly interesting year to keep an eye on them.

Click Here for Free Freight Rate Pricing

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ConRo Ship Catches Fire & Sinks https://www.universalcargo.com/conro-ship-catches-fire-sinks/ https://www.universalcargo.com/conro-ship-catches-fire-sinks/#comments Thu, 14 Mar 2019 20:32:52 +0000 https://www.universalcargo.com/?p=9490 A combination container and RORO ship called the Grande America caught fire and sunk.




Read the blog for all the details.

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Grande America fireOn Sunday, a ConRo ship caught fire, and it is now sunk.

[A ConRo ship is a combination container and RORO ship. RORO stands for roll-on/roll-off because such ships are designed to transport wheeled vehicles that are literally rolled on and off the vessels.]

Jon Shumake reports in American Shipper:

The fire-stricken Italian-flagged ConRo vessel Grande America sank Tuesday afternoon about 180 nautical miles off the French coasts, according to the French Atlantic Maritime Prefecture, after a fire broke out Sunday night that caused all 27 people on board to abandon ship in the Bay of Biscay.

The Grande America, owned and operated by the Italian Grimaldi Group, was en route from Hamburg in Germany to Casablanca in Morocco when the fire started in a container loaded on the weather deck before spreading to other nearby containers.

No One Was Killed

Thankfully, despite the loss of the Grande America, no lives were lost. The American Shipper article continues:

The Grimaldi Group said Monday in a press release the ship’s master decided shortly after 2 a.m. Monday to abandon ship with all on board — 26 crew members and one passenger — aboard a single lifeboat. They were safely evacuated onto the Royal Navy frigate HMS Argyll after the lifeboat sustained damage on the heavy seas and was unable to make headway.

Still, having their ship go up in flames followed by their lifeboat (that was made up of fiberglass board marine) getting damaged in heavy seas sounds like a scary experience for the crew and passenger of the Grande America.

Oil Slick

There is another scary side to this story. That’s the environmental impact side.

A BBC News article reports that France is bracing for oil spill damage from the event:

French authorities are bracing for a huge oil slick to hit the country’s coastline after an Italian ship capsized near La Rochelle on Tuesday.

… 2,200 tonnes of fuel has reportedly spilled into the ocean.

A slick 10km (6 miles) long and 1km wide is expected to reach Brittany, northwest France, by 17 March.

Four ships have been sent to limit the spill, and preparations are under way for a clean-up operation on land.

There was more on the Grande America than oil that is an environmental concern.

Containers of Hazardous Materials

The BBC News article also reports:

Grimaldi Lines, which operates the ship, said in a statement that 365 containers had been onboard, 45 of which contained “hazardous materials”.

Among them were 10 tonnes of hydrochloric acid and 70 tonnes of sulphuric acid, according to Vice Adm Jean-Louis Lozier, head of the regional maritime authority.

Hazardous materials on the Grande America are a concern not only for contaminating the water but also for contaminating the atmosphere with what burned and turned into air pollution.

In the past, hazardous materials on ships have caused or made fires worse on container ships. The cause of the fire on the Grande America is still under investigation. I’ve read conflicting theories in articles of whether the fire started in the RORO vehicles and spread to the containers or if it started in the containers themselves.

Therefore, it remains unclear if hazardous materials played a role in starting the fire.

Importance of Cargo Insurance

Shippers’ need to protect themselves with cargo insurance from loss and damage of goods during international shipping is magnified by one of the many concerning details about this story.

That detail? Events like this ConRo ship’s fire are common.

At the end of the American Shipper article, Shumake writes:

The fire on the now-sunken ship was the third serious containership fire in 2019. In January, fires broke out on both the 7,150-TEU Yantian Express and the 9,200-TEU APL Vancouver.

This is the third serious containership fire in 2019? We haven’t even gotten through three months in 2019 yet!

And fire isn’t even the only danger container ships, along with all their cargo, face. There are storms, collisions, running aground…

Through the years, we’ve posted many, many blogs on stories of containerships, along with their cargo, getting damaged or lost. And we don’t post a blog about every ship that has something like this happen to it.

I did a quick search through Universal Cargo’s blog and found one such story after another. Here’s just a handful of them (in no particular order):

Tragic Fire on Maersk Megaship Shows Need for Container Contents Verification in Shipping

Cargo Ship Sinks in Hurricane Joaquin, Crew Missing at Sea

Oil, Fire & Death: Cargo Ship & Tanker Collide in East China Sea

Investigations in Deadly Collision Between NYK Containership & US Destroyer

Maersk Container Ship Catches Fire After Collision by China

Aground Megaship Pulled Free by a Dozen Tugboats

Crazy Cargo Ship Crash Video

Rena Splits, More Oil Spills, and Shipping Containers Dump in Sea

These things happen way too often for anyone to risk shipping without insurance.

Click Here for Free Freight Rate Pricing

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Could Trouble Be Brewing with Dockworkers at West Coast Ports? https://www.universalcargo.com/could-trouble-be-brewing-with-dockworkers-at-west-coast-ports/ https://www.universalcargo.com/could-trouble-be-brewing-with-dockworkers-at-west-coast-ports/#respond Tue, 12 Mar 2019 22:24:41 +0000 https://www.universalcargo.com/?p=9480 There's tension building with the dockworkers at West Coast ports.




Shippers have been feeling good about stability at the ports because of the contract extension and new contract the ILWU and ILA respectively have agreed to before reaching the last contract expiration date.




However, automation is still an issue of contention between port employers and longshoremen. Contracts or no, inevitable movement toward port automation could result in trouble at the ports.




Read the blog at UniversalCargo.com for the full story.

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There’s a rule in journalism that says don’t bury the lead, so I’ll just say it before giving the background on this story:

There’s tension building with the dockworkers at West Coast ports.

Contentious Dockworker Contract Negotiations Hurt Shippers

What do we want? Stability at the ports! When do we want it? Forever!

That could be the rallying cheer of U.S. shippers, especially after all the disruption at the ports in 2014 and ’15 during the contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) that left agricultural exports rotting on the docks and kept import goods from reaching retail shelves in time for the holiday season.

It seemed that every single time an expiration date would approach and hit for a dockworkers master contract at the ports, shippers would have to pay a price through costly delays from slowdowns, lockouts, and/or strikes at the ports.

But then a miracle happened. At least what seemed like a miracle.

Current Contract Situation Between Longshoremen Unions and the Ports

The ILWU went against longstanding dockworker union policy and signed an early contract extension in 2017 that goes all the way to 2022. That put pressure on the East and Gulf Coast ports and dockworkers to follow suit, which the United States Maritime Alliance (USMX) and International Longshoremen’s Association (ILA) did last year with agreement on a new 6-year master contract before the contract they were on expired.

Suddenly, shippers were breathing easier, feeling there was more stability in the relationships between the employers and dockworkers unions at U.S. ports than ever before. But now headlines like the following from Peter Tirschwell at the Journal of Commerce (JOC) hit:

Automation Plans Expose Rising ILWU Tensions

Tirschwell wrote in the JOC article:

… dockworker efforts in recent weeks to overturn Los Angeles port approval of an APM Terminals plan to introduce automated container-handling equipment in a section of Pier 400 devoted to reefer containers suggests labor relations may be entering a new period of uncertainty.

The issue has exposed tensions between labor and management on the West Coast and has opened a new chapter in the rivalry between the ILWU and East and Gulf Coast dockworkers represented by the International Longshoremen’s Association (ILA).

Tirschwell’s article is a great read, highlighting the ways the ILWU is fighting against APM Terminals’ port automation despite the dockworkers master contract allowing automation and barring the union from fighting it, West Coast ports’ market share dropping from 57% to 48% since 2005 because of labor disruption, the need for automation to help pay for the cost of the 2017 Clean Air Action Plan’s mandate for terminals to operate zero-emission equipment by 2030, and ILA’s promise to show its longshoremen’s work would be “far better than any robot or equipment would” be at productivity with New York-New Jersey dockworkers starting a new gang system to achieve a minimum of 30 crane moves per hour.

Trouble Rising from Dockworker Unions Over Automation

Port of Long BeachYes, that’s a lot. But the most important takeaway is that trouble is brewing at the ports.

Right now, tensions from the ILWU could be well on their way to causing disruption at West Coast ports, and the country’s busiest ports by capacity, the Ports of Los Angeles and Long Beach, in particular.

When it comes down to it, automation is the most contentious issue between dockworkers and employers at the ports. That makes sense as automation is the biggest threat to dockworkers’ jobs.

The West Coast master contract grants the PMA more rights in automating terminals than the East and Gulf Coast master contract grants the USMX. However, none of the ports are without rights when it comes to automation. And automation seems inevitable at the ports, no matter what coast they’re on.

One thing can be guaranteed. Coming automation at ports will meet resistance from longshoremen and their unions. That’s enough to cause worry for shippers. As the sad story of the Port of Portland proved, contracts are not a guarantee against the unions flexing their power in a very costly way for the other members of the supply chain.

Click Here for Free Freight Rate Pricing

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Shippers Beware: How to Avoid Fake Freight Forwarder Scams https://www.universalcargo.com/shippers-beware-how-to-avoid-fake-freight-forwarder-scams/ https://www.universalcargo.com/shippers-beware-how-to-avoid-fake-freight-forwarder-scams/#comments Fri, 08 Mar 2019 00:12:43 +0000 https://www.universalcargo.com/?p=9476 We've noticed an uptick recently in international shipping scams by fraudulent individuals or companies impersonating freight forwarders.




We here at Universal Cargo hate to see shippers, whether importing and exporting goods or just sending packages internationally, get cheated. Therefore, this blog is to help you spot and avoid unscrupulous individuals or businesses posing as freight forwarders.




Read the blog to learn about 2 common international shipping scams we've been noticing lately and how to avoid them.

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YouTube Video

International Shipping Freight Forwarder ScamsWe’ve noticed an uptick recently in international shipping scams by fraudulent individuals or companies impersonating freight forwarders.

We here at Universal Cargo hate to see shippers, whether importing and exporting goods or just sending packages internationally, get cheated. Therefore, this blog is to help you spot and avoid unscrupulous individuals or businesses posing as freight forwarders.

Here are 2 common scams we’ve been noticing lately and how to avoid them:

Duplicate or Similar Name Scam

The first thing shippers should check when considering a new freight forwarder is the company’s business name.

Stealing the names of trusted and experienced freight forwarders is common practice among scammers trying to cheat shippers out of money.

It’s possible for two companies in the same industry to have similar names; however, when new businesses pop up with the same or very similar names to long established freight forwarders, the proprietors of those new businesses are trying to use the older company’s brand recognition to gain trust and customers for themselves.

These new businesses may be complete scams, aimed at stealing money given to them, or just new freight forwarders trying to seem more experienced than they actually are. Inexperienced freight forwarders, who lack the expertise and industry network that comes with years of experience in the international shipping business, can be extremely costly for shippers.

Scammers may create similar names by changing one word in a multiple word business name, adding an additional word or letter to the original name, utilizing rhymes, or changing the name only slightly to make it plural or singular.

You don’t want to ship through someone who’s stealing another shipping company’s name.

How To Avoid This Scam

Check the URL

Just looking at the website’s URL in the address bar might be enough to raise red flags about a freight forwarder you’re considering.

Make sure the company name is not misspelled.

If the URL is a misspelled version of the company name, that’s a big red flag.

Don’t use a freight forwarder that doesn’t have its own domain.

Another big red flag is if the freight forwarder is using free hosting for its site. Real freight forwarders will have their own domain, so if the URL contains a hosting website in its address like Wix, Hubspot, Homestead, etc, etc, you’re not looking at a real freight forwarder.

Be wary of surprising URLs.

Sometimes a company may not be able to get its name followed by dotcom as its URL. Someone may have beaten them to that domain. But if their domain is not the company’s name, it’s a good idea to question why that is. You know, just to make sure it’s not because they’re stealing the name from a legitimate company that owns that URL.

How do you check? Well, that brings us to…

Google the Company Name

If you Google a company name only to find the website of another, more established freight forwarder, that’s a big red flag.

If the name is exactly the same or extremely similar to that of an established company, the newer company has probably unscrupulously stolen the name. It may not even be a company at all but a fraudulent individual trying to get you to pay for services he or she can’t provide.

Stolen Website Scam

Often a scammer can be spotted by having a website that’s riddled with mistakes and poor English. However, some scammers go full out in avoiding that by cloning an established company’s website, claiming it as their own.

You could be looking at a fantastic website full of blogs, videos, credentials, and the like, and have no idea it’s been completely stolen from another company’s site.

Someone willing to steal a freight forwarder’s site is definitely willing to steal a shipper’s money. In fact, it’s hard to imagine any other intentions such scammers could have.

How To Avoid This Scam

Unfortunately, the stolen website scam is easy to get bamboozled by. But there are things for which to check that give this scam away.

Check Logo Quality

Often, scammers that clone websites do it with a changed business name (possibly using the similar name scam) in order to have the URL match the business’s name.

This means they have to change the logo from the original website to reflect the new name.

It’s likely the new logo ends up not matching the rest of the website in quality. It may look pixelated or poorly altered, with colors not matching inside letters with closed spaces like “a”, “e”, or “o”.

On first glance, it’s easy to overlook these little details. But when you see it, this is a dead giveaway for a stolen website.

Check Content Consistency

The cloned site may contain blogs and videos, like we do here at UniversalCargo.com. There’s a good chance that the scammer will have copied that content onto the cloned site, but it still contains references to the original company that will help you spot the website you’re on is a clone.

A site that is schizophrenic about its own name is probably a clone. Crazy, right?

Watch Videos for Logo & Company Name

Take the time to watch a video or two on the site. Do the videos contain the logo at any point or say the company’s name? If they don’t match up with the logo and URL of the site you’re on, you’re probably looking at a cloned site set up to scam you.

Check Blog for References to Company

Often on a cloned site, blogs are copied with only internal link addresses changed, so you’ll contact scammer and not the actual company when you click on them. This means if blog posts or articles refer to the company that created them, they’ll refer to the original company and not the name on the cloned site.

It’s possible the cloner was good enough to change such references, but there are also other giveaways in blogs…

Check Blog Backlog

Cloned sites will often not have all of the blog content from the original site because of the time it would take to update all the links. Scammers hope visitors to the site will only take the time to look at recent entries. Older blogs may have pictures and links to click on for reading them but not really exist.

Check Latest Blog Entry Date

Cloned sites are often not updated. So if the site you’re on has a regular blog with, for example, weekly posts, as Universal Cargo has, but the blog suddenly stopped posting for several weeks or months, maybe even years, you could be looking at a cloned site.

This alone does not necessarily mean you’re looking at a cloned site. It’s possible the company discontinued its blog. You could always ask the freight forwarder about that.

Conclusion

The stolen name and website scams are two common fraudulent practice used to impersonate freight forwarders, but are not the only scams to watch out for when shipping internationally.

When choosing a freight forwarder, do your research. Make sure they are reputable with years of experience, can offer references, and are who they say they are.

Over the years, we’ve published a number of posts here in Universal Cargo’s blog about choosing a freight forwarder. Here’s a handful of helpful blogs on the topic:

5 Hints for How to Choose an International Shipping Company

Can Anyone Be a Freight Forwarder?

Choosing a Company Offering Freight Forwarding Services – 8 Essential Tips for Making the Right Choice

How To Evaluate a Freight Forwarding Company

5 Tips on How To Choose a Freight Forwarder

Click Here for Free Freight Rate Pricing

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DOJ Antitrust Probe of Ocean Freight Carriers Is Over https://www.universalcargo.com/doj-antitrust-probe-of-ocean-freight-carriers-is-over/ https://www.universalcargo.com/doj-antitrust-probe-of-ocean-freight-carriers-is-over/#respond Thu, 28 Feb 2019 22:39:08 +0000 https://www.universalcargo.com/?p=9463 A couple years ago in San Francisco, the world's major ocean freight carriers were holding a biannual Box Club meeting when the U.S. Department of Justice (DOJ) burst in on them with a raiding party of antitrust investigators, who handed subpoenas to major shipping line CEOs.




Ooh, the drama.




Now, the drama is over as the DOJ has dropped its antitrust probe into container shipping companies, according to an American Shipper article by Chris Dupin:




The U.S. Department of Justice has reportedly dropped an investigation of major container carriers that began nearly two years ago. The Department of Justice did not immediately respond to a request for comment, but several shipping companies caught up in the probe said on or off the record that they were told the investigation had ended, clearing both their individual companies and the container shipping industry more generally.




That the DOJ dropping this investigation clears the container shipping industry feels like a bit of a stretch. Regular readers of Universal Cargo's blog may remember a great deal of suspicion and trouble regarding antitrust laws ocean carriers have run into in recent years.




Read the whole story in Universal Cargo's blog.

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international shipping federal antitrust lawA couple years ago in San Francisco, the world’s major ocean freight carriers were holding a biannual Box Club meeting when the U.S. Department of Justice (DOJ) burst in on them with a raiding party of antitrust investigators, who handed subpoenas to major shipping line CEOs.

Ooh, the drama.

Now, the drama is over as the DOJ has dropped its antitrust probe into container shipping companies, according to an American Shipper article by Chris Dupin:

The U.S. Department of Justice has reportedly dropped an investigation of major container carriers that began nearly two years ago.

The Department of Justice did not immediately respond to a request for comment, but several shipping companies caught up in the probe said on or off the record that they were told the investigation had ended, clearing both their individual companies and the container shipping industry more generally.

That the DOJ dropping this investigation clears the container shipping industry feels like a bit of a stretch. Regular readers of Universal Cargo’s blog may remember a great deal of suspicion and trouble regarding antitrust laws ocean carriers have run into in recent years.

Yes, in 2017, we got into the DOJ’s raid on the Box Club in an article asking the question is it time to change or replace the Ocean Shipping Reform Act, but we posted an article just this summer about carriers being called cartels when the top ocean shipping companies announced emergency bunker surcharges almost simultaneously causing shippers to shout collusion and unfair business practices. But those posts are just the tip of the iceberg when it comes to carriers and price fixing.

We first posted a blog on international shipping price fixing investigations back in 2013 with:

Holy Cargo Collusion, Batman – Shipping Companies Under Investigation!

Then back in October of 2014, we blogged about Kawasaki Kisen Kaisha Ltd. (K-Line) pleading guilty to price fixing with:

What’s Happening in International Shipping News? Top 5 Stories

Next, we shared with our readers, in February of 2015, that K-Line Executive Hiroshige Tanioka pleaded guilty for his involvement in a price fixing conspiracy in the blog:

International Shipping Fought the Law & the Law Won

It didn’t take long for us to announce a third shipping executive who pleaded guilty to price fixing. March of 2015 brought an announcement from the FBI that an executive from Japan-based Nippon Yusen Kabushiki Kaisha (NYK) pleaded guilty and we shared it in our blog:

FBI Takes Down NYK Exec for International Shipping Price Fixing

Phew, 2015 was a big year for antitrust action against carriers. And the above listed posts weren’t even all of it. China fined over 20 shipping lines for antitrust or price fixing related activities that year and then met with the U.S. and European maritime regulators about closer antitrust cooperation, which we covered in yet another post:

China Fines Shipping Companies & Joins US & EU Antitrust Cooperation

While all that is not a comprehensive list of all the antitrust activity surrounding ocean carriers over recent years, it is enough to say that the DOJ dropping its probe into the shipping lines hardly clears the industry of any wrongdoing when it comes to price fixing.

However, this looming investigation being over must be a weight off of carriers that already face 2 big problems in 2019 between what the trade war fallout will be and reaching the cleaner fuel mandate that goes into effect in 2020. The latter of which is an especially expensive and worrisome problem for carriers that made MOL’s president say, “We’re all going to go bust.”

Dupin’s American Shipper article quotes spokesmen from top shipping companies Maersk, MSC, and Hapag-Lloyd all predictably saying things along the lines of being pleased the investigation is closed without them having been charged with violations of antitrust laws. What I find more interesting in the article is a quick summary of the members of the Box Club, which has been reduced since the investigation started due to shrinking carrier competition in the ocean freight industry:

At the time the investigation began the 18 members of the Box Club were China COSCO Shipping, CMA CGM, Crowley, Evergreen Line, Hamburg Süd, Hapag-Lloyd, Hyundai Merchant Marine (HMM), “K” Line, Maersk Line, MOL, MSC, NYK, OOCL, Pacific International Lines, United Arab Shipping Co. (UASC), Wan Hai, Yang Ming and ZIM. Since that time the membership of the group has been reduced as the three Japanese carriers have been replaced by Ocean Network Express, Hamburg Sud has been removed as a result of its acquisition by Maersk and UASC has been removed as it was acquired by Hapag-Lloyd.

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Will a Ballpark Really Get Built in the Port of Oakland? https://www.universalcargo.com/will-a-ballpark-really-get-built-in-the-port-of-oakland/ https://www.universalcargo.com/will-a-ballpark-really-get-built-in-the-port-of-oakland/#respond Thu, 21 Feb 2019 22:23:46 +0000 https://www.universalcargo.com/?p=9462 A's Want to Build a Ballpark in the Port of Oakland




The Oakland Athletics, lovingly known by their fans as the A's, don't want to play baseball at the Oakland Coliseum anymore. Their plan? Build a new ballpark in the Port of Oakland.




I've been to the Oakland Coliseum a couple times and would say I don't blame them for wanting a new park, but I was actually there for football games—not to root for the Raiders, who also are abandoning the Coliseum (and Oakland in general), but to root for the visiting Detroit Lions. I thought the Coliseum must be the worst football field in the NFL, but that was mainly because it was actually a baseball field with sand and all. I figured it was probably fine for a baseball team.

The A's obviously don't agree that's it's fine for a baseball team. At least not an MLB baseball team. That led them to unveiling plans for a new ballpark at the Port of Oakland back in November. But building a ballpark at the Port of Oakland? Is that really a good idea?




This post goes into reasons it's a bad idea to build a ballpark at the port, at least as far as shippers are concerned. It also contains news of a coalition against the ballpark and gets into the likelihood of the ballpark being built at the port.

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A’s Want to Build a Ballpark in the Port of Oakland
A's new stadium at Port of Oakland's Howard Terminal

Oakland A’s New Stadium Design courtesy of Bjarke Ingels Group

The Oakland Athletics, lovingly known by their fans as the A’s, don’t want to play baseball at the Oakland Coliseum anymore. Their plan? Build a new ballpark in the Port of Oakland.

I’ve been to the Oakland Coliseum a couple times and would say I don’t blame them for wanting a new park, but I was actually there for football games—not to root for the Raiders, who also are abandoning the Coliseum (and Oakland in general), but to root for the visiting Detroit Lions. I thought the Coliseum must be the worst football field in the NFL, but that was mainly because it was actually a baseball field with sand and all. I figured it was probably fine for a baseball team.

The A’s obviously don’t agree that it’s fine for a baseball team. At least not an MLB baseball team. That led them to unveiling plans for a new ballpark at the Port of Oakland back in November. But building a ballpark at the Port of Oakland? Is that really a good idea?

Obvious Reasons a Ballpark at the Port of Oakland Is Bad for Shippers

When I first read that the A’s wanted to build a ballpark in the Port of Oakland, my first reaction was that’s a bad idea. There are two main reasons I thought this with a possible third.

Obvious Reason #1 – Loss of Valuable Space

The first reason I thought this ballpark would be a bad idea is that space at ports is a big commodity. Even if the space at the Port of Oakland they were thinking of using for this ballpark isn’t currently a spot where there’s an active terminal, there always seems to be a growing need for more space to store or hold shipping containers and chassis.

But let’s say this space isn’t fully needed for container or chassis storage at the moment, world trade keeps growing — even if growth isn’t as large currently as it was once forecast to be. Trade growth means the number of TEU’s of cargo going through the port keeps getting bigger. That means that even if the space isn’t needed now, it may be needed in the future.

Giving up space at the port to a permanent structure like a ballpark reduces the port’s ability to grow its capacity to meet future demands of cargo movement.

Obvious Reason #2 – Traffic Congestion at the Port

Have you ever been to a professional sports game? Did you drive? How long did you spend sitting in your car before and after the game?

All the extra traffic going in and out of the port for games could cause traffic congestion that truckers who transport shipping containers to and from the Port of Oakland may get caught in.

Congestion with trucks getting in and out of ports with cargo containers directly affects port congestion, which causes costly delays for shippers.

Really, both reasons #1 and #2 equate to possible increased congestion at the Port of Oakland, which is the last thing shippers whose cargo moves through it want to see.

Possible Reason #3 That Is Probably Silly on Second Thought

In the CBS article from back in November that I read about the A’s unveiling of their plans for a ballpark at the port, it said this ballpark would be the smallest park in the MLB. That made me think there would be an increased chance for big league hitters to literally knock the ball out of the park.

I imagined such balls potentially causing problems at the port.

However, on second thought, I imagine it would be unlikely for balls hit out of the park to become a hazard at the port. I don’t know how far such balls might travel, but surely the stadium would not be designed or built in such a way to allow baseballs crashing down where longshoremen are working.

But that didn’t stop my brain from picturing a dockworker on a crane getting popped on his hardhat while operating a crane and bumping a lever that drops a shipping container on his buddies.

That just got really dark. Or cartoonish. Depending on how you picture it. Either way, very unlikely. Flying baseballs probably aren’t a real problem. Not to mention, it’s unlikely such a ball could damage cargo inside a shipping container or a metal crane, etc.

So the thought is silly… Right?

Coalition Opposes the Ballpark at the Port

There’s a large group booing the port ballpark plan as passionately as I heard Raider Nation booing the Lions during my visits to the Coliseum. That’s pretty passionately if you’ve never seen a Raiders game. Chris Dupin reported just two days ago (February 19th) in an American Shipper article:

A coalition of business trade associations, labor unions and environmental groups is asking California state legislators not to pass legislation that would further relax environmental protection laws so that a new ballpark for the Oakland Athletics could be built on the Port of Oakland’s Charles P. Howard Terminal.

The coalition, which includes the Pacific Merchant Shipping Association, Harbor Trucking Association, various International Longshore and Warehouse Union locals, Sierra Club chapters, Agriculture Transportation Association and another dozen organizations asked state lawmakers “to avoid the introduction of any bills which would further erode the state environmental laws that apply to a stadium project,” adding they “would oppose any legislation relaxing the environmental laws that apply to the construction of a stadium project at Howard Terminal.”

It turns out, the coalition has two of the three initial concerns I had about building a ballpark at the terminal.

The coalition worries about “possible obstacles to trucks moving to and from marine terminals” according to Dupin’s article. And it turns out, the space at the terminal the A’s are after actually is being used for international shipping related business. Dupin writes:

Howard Terminal is currently used by truckers for short-term parking of tractors and containers. Mike Jacob, vice president and general counsel for the PMSA, told the BCDC (San Francisco Bay Conservation and Development Commission) that just because the terminal is no longer under long-term lease from the Port of Oakland does not mean it is not performing an important role in the port.

Not only does the coalition share my number one and number two concerns, but the coalition also adds a third and fourth concern that are far more substantial than my probably silly one about flying baseballs.

Listed in the American Shipper article are “infringement of the buffer around the port that separates it from housing” and a desire “to make sure the stadium and housing would not be subsidized by seaport revenues.”

And, of course, I’m not even mentioning the “relaxing the environmental laws that apply to the construction of a stadium project at Howard Terminal” brought up in the initial quote from Dupin’s article.

These are adding up to a lot of arguments against the A’s new park. Which brings us to…

Likelihood of BallPark Getting Built at Port of Oakland

Despite my initial reaction that a ballpark at the Port of Oakland is a bad idea, a waterfront ballpark like this does actually sound really cool.

Certainly, the A’s organization has put significant time and money into this plan. Chris Dupin’s article even lists some things that happened to move the ballpark closer to a reality:

The San Francisco Bay Conservation and Development Commission (BCDC) voted 15-4 on Jan. 17 to study possibly removing Howard Terminal as a “port priority use area” from the BCDC’s San Francisco Bay Plan and Seaport Plan.

The commission also approved a contract with the Oakland A’s for the BCDC and consultants to conduct the analysis required by the commission to consider removing that port priority use area designation from the terminal.

At the same time, the BCDC voted to begin the process of updating that San Francisco Bay Plan and Seaport Plan, which encompasses not only the Port of Oakland but the ports of San Francisco, Redwood City, Richmond and Benicia.

However, there are a great many obstacles to making these ballpark plans a reality.

Andy Dolich, a sports business consultant and former top executive with the A’s, 49ers, and Warriors, wrote a whole article about why this ballpark won’t happen, even calling it a fantasy right in the title.

In the article, Dolich goes through a viability checklist for the project that gives no less than 11 items that add up to the conclusion that the ballpark at the Port of Oakland’s Howard Terminal will never happen.

In the end, the ballpark seems unlikely to happen. Or just a fantasy, as Dolich says. But then again, didn’t all the things that people managed to accomplish across the full scope of history start as fantasy, including the ports and all the structures in and around them? This is where I’d insert Jim Carrey from Dumb and Dumber saying, “So you’re telling me there’s a chance.”

Heck, why not?

YouTube Video

Yes, there’s a chance this ballpark could happen. But the odds are not good, as Mary Swanson told Lloyd his chances were with her.

While that wasn’t good news for Lloyd, despite his optimism, it probably is good news for shippers importing and exporting through the Port of Oakland.

Click Here for Free Freight Rate Pricing

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What’s Happening in U.S.-China Trade Talks? Trade War Update https://www.universalcargo.com/whats-happening-in-u-s-china-trade-talks-trade-war-update/ https://www.universalcargo.com/whats-happening-in-u-s-china-trade-talks-trade-war-update/#respond Tue, 19 Feb 2019 21:19:52 +0000 https://www.universalcargo.com/?p=9457 What’s the deal with the trade war with China? Are tariffs on Chinese goods about to start rising again? Is a trade deal close? This blog gives you the lowdown on where everything stands and what we at Universal Cargo believe it all means. Quick Ceasefire Recap During a dinner meeting in Buenos Aires on December […]

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US China Trade WarWhat’s the deal with the trade war with China? Are tariffs on Chinese goods about to start rising again? Is a trade deal close?

This blog gives you the lowdown on where everything stands and what we at Universal Cargo believe it all means.

Quick Ceasefire Recap

During a dinner meeting in Buenos Aires on December 1, 2018 between President Donald Trump and President Xi Jinping, a 90-day ceasefire was called to the trade war for a period of trade negotiation between the countries.

This ceasefire postponed a hike of U.S. tariffs from 10% to 25% on $200 billion worth of Chinese goods that was supposed to take effect on January 1st, 2019.

But now, we’re fast approaching the deadline for negotiations to reach a trade agreement with the tariff hike scheduled hit on March 2nd.

Trump May Delay Tariff Hike Again

Shippers who import from China certainly hope tariff hikes won’t happen on March 2nd. Many have hoped that, even if a trade deal is not reached in time, the March 2nd tariff increase will be postponed.

Now there is more than just hope that will happen. Trump himself said he may delay them.

Brian Bradley reported in American Shipper:

“There is a possibility” President Donald Trump will extend the March 2 deadline for raising tariffs on China, depending on if the U.S. and China are “close” to reaching an agreement to resolve trade tensions or if “the deal is going in the right direction,” Trump said in remarks at the White House on Friday.

“I would do that at the same tariffs that we’re charging now,” he said. “I would not increase the tariffs.”

That Trump said he’s willing to delay the tariff hike on top of the fact he has done so before gives shippers reasonable hope that the tariff increase won’t hit on March 2nd.

Of course, progress of the negotiations is the deciding factor. Naturally, this brings us to the trade talks themselves…

New Round of Negotiations Begin Today in Washington

The White House released a statement yesterday (February 18th, 2019), that trade talks between China and the U.S. will resume today (February 19th, 2019) in Washington D.C.

Here’s the information from the statement:

Today, President Donald J. Trump announced that the United States will welcome an official delegation from China for a series of meetings starting on February 19, 2019, to discuss the trade relationship between the two countries.

Principal-level meetings will begin on February 21, 2019.  For the United States, these meetings will be led by United States Trade Representative Robert Lighthizer and will include Secretary of the Treasury Steven Mnuchin, Secretary of Commerce Wilbur Ross, Assistant to the President for Economic Policy Larry Kudlow, and Assistant to the President for Trade and Manufacturing Policy Peter Navarro.  These meetings will be preceded by deputy-level meetings that will begin on February 19, 2019, led by Deputy United States Trade Representative Jeffrey Gerrish.

… The two sides will also discuss China’s pledge to purchase a substantial amount of goods and services from the United States.

The meetings will take place in the Office of the United States Trade Representative and the Eisenhower Executive Office Building at the White House.

That let’s us know when and where trade talks are happening at the moment, but not how they’re going.

Will a Trade Agreement Be Reached?

It is almost unanimously believed that trade issues between the U.S. and China are too complex for an agreement to be reached by the March 1st deadline.

However, while the governments aren’t opening the doors to the negotiating rooms to let people see exactly how talks are going, reports from those involved use positive words like “productive,” “progress,” and “picking up.”

Of course, those positive words go along with phrases like “we still have a long way to go,” as Steve Censky, U.S. Department of Agriculture’s Deputy Secretary, was quoted as saying along with all those positive things in a Bloomberg article that was published today.

The person who most importantly must feel confident that talks are moving toward resolution, President Trump so he’ll continue to delay tariff hikes, sounds very positive on the subject. He tweeted two days ago (February 17th):

Trump China Trade Deal Tweet

“Important meetings and calls on China Trade Deal, and more, today with my staff. Big progress being made on soooo many different fronts! Our Country has such fantastic potential for future growth and greatness on an even higher level!”

The president’s tweets tend to ring with hyperbole, but they do give a good semblance of how Trump feels about things. The positive tone combined with his referring to a China Trade Deal rather than talks or negotiations is a good sign that President Trump feels things are moving in the correct direction for a deal to be reached and increased tariffs not be needed.

In a CNN article, Donna Borak and Daniel Shane quoted President Trump as saying in regard to a China Trade Deal:

“I’m thinking about doing something very different,” Trump said at a Rose Garden press conference. “Any deal I make, toward the end I’m going to bring Schumer — at least offer him — and Pelosi. I’m going to say, ‘Please join me on the deal.'”

While this is highlighting a political move, and probably a wise one, of President Trump inviting top Democrats and political rivals into the finalizing of a trade deal with China that they’ll likely criticize, it again suggests the president thinks that deal is on the way.

Conclusion

At Universal Cargo, we believe the March 2nd tariff hike will be postponed and likely eventually cancelled as trade negotiations between the U.S. and China continue and eventually reach a deal.

However, we are prepared for the possibility of the tariff increase to still hit March 2nd. At Universal Cargo, we prepare for all possibilities when it comes to importing and exporting your goods.

While trade negotiations could break down causing the trade war between the U.S. and China to escalate again, it is likely the negotiations will eventually end in a deal that officially signals the end of the U.S.-China trade war.

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What Is the Best Incoterm for Importing from China? https://www.universalcargo.com/what-is-the-best-incoterm-for-importing-from-china/ https://www.universalcargo.com/what-is-the-best-incoterm-for-importing-from-china/#comments Tue, 12 Feb 2019 22:31:18 +0000 https://www.universalcargo.com/?p=9442 In this blog we'll answer a frequently asked question (FAQ) dealing with Incoterms. Specifically, which Incoterm is the best to use when importing from China. As a bonus, we'll also tell you the worst Incoterm to use when importing from China.




Also included is an overview of Incoterms with videos and links to blogs that define all the Incoterms you can use for your international shipping.

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In this blog we’ll answer a frequently asked question (FAQ) dealing with Incoterms. Specifically, which Incoterm is the best to use when importing from China. As a bonus, we’ll also tell you the worst Incoterm to use when importing from China.

But first, a quick review of what Incoterms are.

Incoterms Overview

IncotermsIncoterms are international commercial terms meant to bring clarity to business deals that involve the purchasing and shipping of goods overseas.

Incoterms are of particular interest to shippers, such as retailers and manufacturers who import and export goods. This is because Incoterms define who, whether buyers or sellers, are responsible for the shipping and/or insurance of goods through the various legs of transportation in the international shipping process.

We did a whole blog and video series explaining what’s the deal with Incoterms and defining all the Incoterms inside their various groups. Here are the blog links and videos so you can review or learn about each Incoterm.

Incoterms Definitions Part 1: EXW, FCA, FAS, FOB

Incoterms Definitions Part 2: CFR, CIF, CPT, CIP

Incoterms Definitions Part 3: DAT, DAP, DDP

YouTube Video

YouTube Video

YouTube Video

YouTube Video

Now to the question.

The Best Incoterm for Importing from China

Shipping Containers at Port Importing ExportingUniversal Cargo’s General Manager Raymond Rau, who has taught classes about incoterms, recently received an email asking this common question about which Incoterm is best for importing from China.

Ray was kind enough to respond with a thorough answer that not only contained our top two favorite Incoterms as a freight forwarder for importing goods from China, but also contained our least favorite.

Ray listed FOB as the best Incoterm for importing from China.

FOB Defined

FOB – Free on Board (named port of shipment)

Definition: Free Onboard Vessel is sort of a hybrid, where the seller is obligated to bring the goods all the way to the port, clear the goods for export, AND see that they are loaded onto the ship nominated by the buyer. Once the goods clear the railing of the vessel the buyer assumes the risk.[9] FOB is often followed by the named loading port thus: FOB Long Beach, meaning the seller delivers the goods, pays the port fees, and sees the goods loaded onto the ship docked (in this case) at the port of Long Beach.

Note: This Incoterm is used exclusively for maritime and inland waterway transport but not for container shipping.[10]

If FOB is not an option, Ray lists EXW as the next best option.

EXW Defined

EXW: Ex Works; i.e. goods available from the place of production.

Definition: EXW is usually followed by a place name[1], such as EXW Portland and means essentially that the seller will make the goods available to the buyer at a specified place, i.e. the seller’s premises/warehouse/works/factory, and at a specified time. This fulfills the seller’s obligations – leaving the buyer to load the goods onto whatever transportation has been arranged, clear the goods for export, and bear all the risk during transport.

Caveat: Alternate arrangements can be made, such as the seller agreeing to load the goods and assume the risks of such loading, etc. Any such deviation must be made explicit in the contract.

Note:  When getting an initial price quote for goods, you are usually quoted the price for an Ex Works arrangement, that is, the price of the goods not including shipping, loading, insurance or any of the other costs likely to apply.[2]  Therefore, Ex Works translates into the arrangement carrying the minimum obligation and risk for the seller and the maximum obligation and risk assumption for the buyer. Ex Works applies exclusively to air, rail, road, and containerized/multimodal transport.[3]

Why FOB & EXW Are Best for Importing from China

Here’s what Ray wrote, covering why FOB and EXW are our favorite Incoterms for importing goods before we get to our least favorite option.

  • FOB

    • FOB is our favorite because it allows each party to handle only what they know best.
      • The seller knows their country’s requirements and processes
        • Can frequently secure more competitive pricing at origin
      • The buyer (or their agent/forwarder) knows what is required in the US.
        • And has access to a vast network of vendors
    •   Overall there are fewer chances for error [with FOB].
  • EXW

    • Specifically when talking about US Imports, if FOB isn’t an option, EXW is the next best choice.

      • The issues that arise during US import shipments are generally caused by issues with customs.

      • This is because US Customs has very strict rules when it comes to what documents are required, when certain filings need to be done, and what processes need to be followed. If the seller/supplier or his agent is not aware of this or not experienced with US Imports, there is a good chance that they will either miss something or handle something improperly.

      • The importer (buyer) is the one held responsible for charges imposed by customs and border patrol [with EXW], not the seller/shipper or his agent.

      • While it is preferable that the seller arranges the origin pickup, delivery to the port, and export documentation, it is not required. Many freight forwarders have very strong relationships with other forwarders overseas that act as their agents to arrange local freight and handle origin processes.

      • As long as your US forwarder is well versed in customs processes (which they should be), they will be able to have their agents arrange everything perfectly.

Overall, as Ray is saying in his bulleted points, using EXW deals puts the customs process in the importer or their agent’s hands. That’s optimal because it protects importers from costly fees and delays that could arise from a manufacturer in China (or other country of origin) improperly handling or overlooking something in the U.S. customs clearance process.

Least Recommended Incoterm for Importing from China

Ray begins discussing our least favorite Incoterm for importing goods with a disclaimer about CIF:

I want to start this out by saying that there are companies that successfully ship under CIF terms on a regular basis. These companies have established relationships with their overseas partner and have been doing business this way for years (if not decades).

Obviously, that means CIF is our least recommended Incoterm for importing.

CIF Defined

CIF: Cost Insurance and Freight

Definition: This term is identical to the one preceding it – with exception for the insurance portion. With a CIF arrangement, the seller(not the buyer) assumes the risk (and therefore is responsible for purchasing insurance) for the goods during transit from origin to the port of destination.

Note: This term too applies solely to maritime and inland waterway trade. However, CIF may 
not be appropriate where the goods are handed over to the carrier before they are loaded on the vessel – the usual 
container scenario.[3]

Why CIF Is Least Recommended for Importing from China

Here’s what Ray wrote, covering why CIF is our least favorite Incoterm for importing goods.

  • CIF

    • For a first-time importer or novice shipper, CIF is probably not for you.
      • The issues we discussed earlier about US Customs processes not being followed and issues with filing documentation on time are of the utmost concern when shipping under CIF terms.
      • The specific issues we see very often are problems with ISF filing, documentation prepared improperly, and inaccurate pricing.
      • ISF must be on file and accurate 48 to 72 hrs before the ship departs the origin port. If this is not on file, or has been filed incorrectly, the US importer will be subject to a MINIMUM $5,000 fine for noncompliance. The fines can even reach upwards of $10,000, depending on the circumstances.
      • The packing list and invoice must be prepared properly and formatted correctly. When importers allow the supplier to take complete control and don’t have a US forwarder or customs broker to verify the accuracy of the documents ahead of time, they are taking a sizeable risk.
      • Usually forwarders aren’t contacted for CIF shipments until the container is about to arrive. Unfortunately, this very regularly results in delays and extra costs.

Conclusion

If you’re asking, “What Incoterm should I use for my importing from China,” the simple answer is go with FOB. If FOB is not possible, use EXW. Avoid CIF.

Click Here for Free Freight Rate Pricing

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2 Big Problems Ocean Freight Shipping Faces in 2019 https://www.universalcargo.com/2-big-problems-ocean-freight-shipping-faces-in-2019/ https://www.universalcargo.com/2-big-problems-ocean-freight-shipping-faces-in-2019/#comments Thu, 31 Jan 2019 23:06:53 +0000 https://www.universalcargo.com/?p=9432 We live in a global economy where about 90% of the world's goods are transported by sea, but it hasn't been smooth sailing for the ocean freight shipping industry in recent years. And the waters could get even choppier in 2019.




Though they finally appear to be getting a handle on it, ocean carriers have been plagued by overcapacity for a long time. While that has often meant low, even record low, freight rates for shippers, it also meant financial struggles and losses for carriers. We've watched as carrier competition in the industry shrunk through buyouts, mergers, alliances, and even bankruptcy.




It got so bad that Maersk, the top dog of ocean freight carriers, predicted competition in the industry will shrink to only three global companies.




Ultimately, shrinking carrier competition is a bad thing for shippers. In general, monopolies and oligopolies tend to mean higher prices for poorer service. Obviously, that's not what shippers want to see in the ocean freight industry. Financially healthy carriers benefit shippers and are needed for stability and reliability in the international shipping of goods.




Despite recent months of carriers managing better control of capacity and healthier freight rates, their future is uncertain. In fact, carriers may face their biggest challenge yet in 2019.




Here are the two big problems threatening the ocean freight industry in 2019.

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global businessWe live in a global economy where about 90% of the world’s goods are transported by sea, but it hasn’t been smooth sailing for the ocean freight shipping industry in recent years. And the waters could get even choppier in 2019.

Though they finally appear to be getting a handle on it, ocean carriers have been plagued by overcapacity for a long time. While that has often meant low, even record low, freight rates for shippers, it also meant financial struggles and losses for carriers. We’ve watched as carrier competition in the industry shrunk through buyouts, mergers, alliances, and even bankruptcy.

It got so bad that Maersk, the top dog of ocean freight carriers, predicted competition in the industry will shrink to only three global companies.

Ultimately, shrinking carrier competition is a bad thing for shippers. In general, monopolies and oligopolies tend to mean higher prices for poorer service. Obviously, that’s not what shippers want to see in the ocean freight industry. Financially healthy carriers benefit shippers and are needed for stability and reliability in the international shipping of goods.

Despite recent months of carriers managing better control of capacity and healthier freight rates, their future is uncertain. In fact, carriers may face their biggest challenge yet in 2019.

Here are the two big problems threatening the ocean freight industry in 2019.

1. IMO Cleaner Fuel Mandate

In 2019, carriers have to figure out how to become compliant with the International Maritime Organization’s (IMO) mandate to reduce the maximum amount of sulfur content in fuel. Currently, there is a 3.5% limit. On January 1st, 2020, the sulfur cap falls to 0.5%.

No matter how carriers reach the cleaner fuel levels — whether through “scrubbers” acting as onboard treatment plants to remove harmful gasses from ship engines and exhausts, much cleaner alternative fuels to the dirty fossil fuels currently used, electric ships, or actual sailing ships — the transition is expensive.

To say carriers are worried about the financial costs of meeting the 0.5% sulfur cap on fuel would be an understatement.

“We’re all going to go bust” is what MOL President and CEO Junichiro Ikeda told the Financial Times would happen to ocean carrier in the near future because of the costs of transitioning to this cleaner fuel level.

This will be a trying year on already struggling carriers as they get ready for the sulfur content rule change. For many carriers, how successful they are at passing increased fuel costs on to shippers could be the difference between competing in the industry and going bust or getting assimilated by a competitor.

In a Journal of Commerce (JOC) article, Peter Tirschwell wrote “the industry has never before faced a regulatory mandate with more potentially disruptive impact” than it does with the impending IMO fuel rule.

2. Trade War

US China Trade WarHow all the current trade war business plays out looms large over the ocean freight industry in 2019.

There is a ceasefire on the escalating tariffs of the trade war between the U.S. and China right now as the countries are in trade negotiations.

However, there is much uncertainty over whether a deal will be reached before the ceasefire’s March 1st deadline. If a deal is not reached by then, the U.S. is scheduled to increase tariffs from 10% to 25% on approximately $200 billion worth of Chinese goods.

The trade war actually helped carriers in the latter part of 2018 as U.S. shippers raced to import goods from China before tariff hike deadlines hit. That inflated and prolonged ocean freight’s peak season and helped profitability for carriers.

The downside to that is decreased freight volume is bound to follow. If the trade war between the U.S. and China begins escalating again, volume of goods moved between the countries could take a hit. Decreased demand is not something an industry struggling with overcapacity needs.

Obviously, the tariff battle between the U.S. and China is the first thing to come to mind when one says trade war; however, President Trump’s tariff moves have triggered trade tensions between the U.S. and many countries around the world. After President Trump’s aluminum and steel tariffs hit, the news was littered with headlines about retaliatory tariffs from and possible trade wars with even ally countries.

We posted articles in this blog about retaliatory tariffs from Canada and the U.S. and EU sitting on the verge of trade war.

Protectionist policies and trade war activities could hurt the ocean freight industry by negatively affecting cargo volumes simultaneous to the industry facing increased costs because of the fuel mandate.

Conclusion

Shipping Containers at Port Importing Exporting2019 will be a hard year for carriers in the ocean freight industry.

Carriers desperately need to maintain discipline when it comes to capacity because they face significant cost increases and the possibility of trade war decreasing demand. They can’t afford the downward pressure on freight rates overcapacity brings.

That also means carriers have added motivation to avoid undercutting each other’s freight rates and be disciplined on enforcing and maintaining general rate increases (GRI) and other fees imposed on shippers.

While carriers do everything they can to maintain the gains they’ve made recently in freight rates, achieving profitability will still be difficult when facing the challenges of 2019.

Shippers should expect 2019 to be a year of higher freight rates and fees.

However, it is possible one or more carriers may still choose to undercut rates and fees of others, making a market share grab and creating downward freight rate pressure in the industry again. The intent would be to outlast or acquire competitors who struggle going into 2020 when the difficult IMO fuel mandate hits and new megaships are scheduled to arrive.

Get ready for an interesting couple of years.

Click Here for Free Freight Rate Pricing

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Shippers Indicted for Evading U.S. Tariffs on Furniture Imported from China https://www.universalcargo.com/shippers-indicted-for-evading-u-s-tariffs-on-furniture-imported-from-china/ https://www.universalcargo.com/shippers-indicted-for-evading-u-s-tariffs-on-furniture-imported-from-china/#respond Thu, 24 Jan 2019 19:54:08 +0000 https://www.universalcargo.com/?p=9426 Two executives of a Florida-based furniture company face federal charges for allegedly evading antidumping duties on imports from China. They were indicted earlier this month.




Their indictment serves as a warning to shippers who might try to save money by evading duties, like the trade war's increased tariffs on imports from China.




"I'm not implying that there are false claims being made," Chris Reynolds of Universal Cargo's house customs broker said, "but we want the importing community to know that the consequences are severe and competitors are deeply incentivized to report illegally imported items."




Read the blog for details on the furniture importers facing federal charges story and to learn about the consequences for importing goods illegally.

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international shipping federal antitrust lawTwo executives of a Florida-based furniture company face federal charges for allegedly evading antidumping duties on imports from China. They were indicted earlier this month. John McDermott reported in the Post and Courier on January 9th:

The government filed the charges against Yingqing “Jeff” Zeng and Alexander Cheng in U.S. District Court.

Both men are owners and officers of Miramar, Fla-based Blue Furniture Solutions LLC. Zeng, 46, is president. Cheng, 64 and a North Carolina resident, is chief financial officer.

… The wooden products it imports have been subject to a 216 percent “anti-dumping” fee that was enacted in 2004 to combat and deter what the U.S. government called illegal trade practices in China.

According to the indictment, Zeng and Cheng submitted forms between January and November of 2015 to the Department of Homeland Security that mislabeled the furniture to avoid paying the tariffs.

At Universal Cargo, we first heard about this case in an email from Chris Reynolds of INLT, our house customs broker. They’ve been tracking this case since 2017.

Warning to Shippers Importing from China

This might seem like furniture shippers week in Universal Cargo’s blog with Tuesday’s guest post about organizing safe delivery of furniture and antiques; however, this is a good warning story for all U.S. shippers, especially those who import from China, not just furniture importers.

“I’m not implying that there are false claims being made,” Reynolds said, “but we want the importing community to know that the consequences are severe and competitors are deeply incentivized to report illegally imported items.”

With the U.S.-China trade war hitting shippers with increased costs on imports from China, some importers may be tempted to attempt illegal evasion of the trade war’s increased tariffs. Trying illegal tactics, like misdeclaring goods, rather than a legitimate strategy, like sourcing goods from another country from which tariffs would be lower (something Universal Cargo could help you with), could have severe consequences.

Consequences of Evading Tariffs

Just consider the consequences McDermott reports the Blue Furniture execs face if they’re found guilty of evading antidumping duties:

Zeng and Cheng face a maximum penalty of five years in prison and a $250,000 fine.

Yes, trying to cheat your goods’ way through customs not only means the risk of high fines but also jail time.

Both McDermott’s article and Reynolds’ email bring up that this is not the first time Blue Furniture and its execs have been hit with duty evading accusations; they were sued in a False Claims Act civil lawsuit over anti-dumping fees evasion back in 2015.

Reynold’s told us in his email the following about the 2015-filed lawsuit:

In that lawsuit, prosecutors argued that Blue Furniture Solutions evaded millions of dollars in duties and fees by classifying its wooden bedroom furniture as metal and office furniture to avoid a 216.01% antidumping duty rate, and stating false values of its imports on entry documentation.

The government joins University Loft, an Indiana furniture company, in the False Claims Act lawsuit. University Loft stands to gain a portion of any judgment against Blue Furniture in the case. In 2015, University Loft was awarded $2.25 million from a separate $15 million False Claims Act settlement involving another furniture importer that misclassified its bedroom furniture as office furniture.

Competitors’ Incentive to Report Duty Evasion on Imports

That’s where the deep incentive of competitors to report illegally imported goods comes into play. Because, as McDermott writes in his article, Blue Furniture “sells furniture primarily designed for use in college apartments,” it competes for the same target market as University Loft. Therefore, University Loft is able to not only hurt a competitor but also claim damages in having to compete against illegally cheaper goods in the market place.

To think competitors wouldn’t go after your business for falsifying customs documents to evade duties would be foolish.

Import Goods Right with Universal Cargo

At Universal Cargo, we’re always ready to help you with your importing and exporting needs, including customs clearance. And we always help you navigate the process lawfully, ethically, and strategically.

Click Here for Free Freight Rate Pricing

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Maersk Starting Random Container Inspections https://www.universalcargo.com/maersk-starting-random-container-inspections/ https://www.universalcargo.com/maersk-starting-random-container-inspections/#respond Thu, 17 Jan 2019 20:44:20 +0000 https://www.universalcargo.com/?p=9412 Shippers will start seeing random container inspections from Maersk on U.S. imports and exports.




Gavin van Marle reports in the Loadstar:




Maersk Line is set to begin physically inspecting container contents as part of its efforts to stem the increasing numbers of fires that break out inside boxes during transit, as well as boxes in which cargo moves or is damaged due to not being lashed correctly.




Initially, the project will focus on shipments into and out of the US, it said.




“We have recently implemented a Physical Container Inspection Pilot within North America. We are currently performing inspections for import and export cargo into the ports of Newark Berth 88, Houston Bayport, Miami Pomtoc and New Orleans Ceres terminals,” it explained.




While the inspection project is starting in the U.S., it can be expected that the program will eventually expand to other regions and that other carriers will likely undertake similar projects.




This blog covers why Maersk is doing these random shipping container inspections, how the inspections affect shippers, and how to avoid experiencing problems from the inspections.

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Shippers will start seeing random container inspections from Maersk on U.S. imports and exports.

Gavin van Marle reports in the Loadstar:

Maersk Line is set to begin physically inspecting container contents as part of its efforts to stem the increasing numbers of fires that break out inside boxes during transit, as well as boxes in which cargo moves or is damaged due to not being lashed correctly.

Initially, the project will focus on shipments into and out of the US, it said.

“We have recently implemented a Physical Container Inspection Pilot within North America. We are currently performing inspections for import and export cargo into the ports of Newark Berth 88, Houston Bayport, Miami Pomtoc and New Orleans Ceres terminals,” it explained.

While the inspection project is starting in the U.S., it can be expected that the program will eventually expand to other regions and that other carriers will likely undertake similar projects.

Why Maersk is Doing Random Container Inspections

Maersk Honam fire

Maersk Honam on fire in the Arabian Sea. Photo: Indian Coast Guard

Regular readers of Universal Cargo’s blog will probably remember the tragic fire on the Maersk Honam, which killed 5 of the 27 crew members on the maiden voyage of the 15,262 TEU megaship.

The suspected cause of the fire? Misdeclared cargo.

While the Maersk Honam fire was one of the 10 biggest international shipping news stories of 2018, containership fires are actually frighteningly common.

Chris Dupin wrote an article in American Shipper titled “Number of containerships ‘shocking’,” in which he wrote:

The fires onboard the Hapag-Lloyd ship Yantian Express off the coast of Nova Scotia and the car carrier Serenity Ace in the North Pacific are highlighting what have become frighteningly commonplace occurrences.

The first week of 2019 brought a spate of serious shipping accidents that has continued this week. On Tuesday a fire and series of explosions on a tanker off of Hong Kong resulted in the death and injury of several crew members. South China Morning Post reports one crew member died, two are still missing and seven were taken to a hospital when the Vietnam-registered tanker Aulac Fortune exploded as it was taking on fuel.

Insurer TT Club wrote last year, “Sources suggest that container fires may occur on a weekly basis and statistics indicate there is a major container cargo fire at sea roughly every 60 days.”

Weekly container fires and container cargo fires at sea every 60 days?! This is not only a reminder of the importance of cargo insurance, but it is also a major problem for the international shipping industry in general.

So Maersk is doing something about the problem with these random container inspections and boat inspections. Boat inspections, in particular, play a pivotal role in ensuring the safety and integrity of the cargo transport process. By carefully examining vessels for compliance with safety standards, proper stowage practices, and the presence of necessary firefighting equipment, Maersk aims to reduce the risk of fires and accidents at sea.

It is not only misdeclared contents of shipping containers that is a problem in container shipping but also improper packing of the contents.

Gavin van Marle’s Loadstar article highlights the problem of failure to properly lash, distribute weight, and follow proper packing procedures in container shipping:

“[Global shipping insurer] TT Club statistics indicate that as much as 66% of incidents related to cargo damage in the intermodal supply chain can be attributed in part to poor practice in the overall packing process, including not just load distribution and cargo securing, but also the workflow from classification and documentation through to declaration and effective data transfer,” the club’s risk management director Peregrine Storrs-Fox noted…

Maersk’s container inspection process will hopefully decrease misdeclaration and improper packing of ocean freight containers that cause such danger and damage in international shipping.

Effects of Maersk’s Container Inspections on Shippers

Maersk will pay for the program as it launches, but that doesn’t mean shippers won’t see any monetary effects.

It is unlikely Maersk will add a general fee to U.S. shippers in order to cover the costs of this program. Such a fee would be a bit of a competitive disadvantage versus other carriers. However, shippers whose containers are inspected and found to have cargo improperly packed or misdeclared will certainly see increased costs through fees and delays.

Maersk is quoted by van Marle as saying:

“We will endeavour to have the inspections completed as quickly as possible to reduce the delay in the intended transport of the container, however if a container is discovered to be inadequately stuffed, lashed, and secured, or found to contain mismatching cargo compared to the given declaration, it may be necessary to take corrective actions for onward transportation.

“Such corrective actions may involve reworking the container to ensure it is compliant with given regulations.

“The cost for such reworking actions to resume transport of the container will be charged to the Shipper/Consignee (depending on direction of the container).

There are even legal consequences a shipper could face for the misdeclaration of good.

Hopefully, Maersk’s execution of this program will be smooth, so inspected containers without misdeclaration or improper packing will not experience delays. We will have to wait until the program gets underway to see if any shipping containers without issue get delayed by a random inspection.

How To Avoid Problems from Maersk’s Container Inspections

Since Maersk’s cargo inspections are set to be random, there’s no way for U.S. shippers to try to avoid being one of those whose shipping containers get inspected. However, avoiding problems that could arise from being inspected is possible.

The obvious thing to do is make sure the contents of your containers are always properly declared and packed, which shippers should already be doing anyway.

Yes, that means diligence, and probably double-checking, with your customs clearance paperwork and container packing procedures. If you ship with Universal Cargo, we will walk you through everything you need for your imports and exports.

When it comes to packing, the International Maritime Organization (IMO) has a Code of Practice for Packing of Cargo Transport Units (CTU Code) that shippers should follow for the safe transport of their goods. Hiring professional shipping container packers is always a good idea too, and is required for insurance purposes of many types of goods.

Conclusion

Misdeclaration and improper packing of shipping containers not only puts the guilty shippers’ cargo at risk but also puts the cargo and lives of others at risk.

That Maersk is doing something about this problem is good news for shippers.

Always make sure your business follows proper packing and declaration of its import and export cargo. And know that Universal Cargo is always here to help.

Click Here for Free Freight Rate Pricing

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Travel to China is Good for Importing Business But U.S. Warns It Could Result in Detention https://www.universalcargo.com/travel-to-china-is-good-for-importing-business-but-u-s-warns-it-could-result-in-detention/ https://www.universalcargo.com/travel-to-china-is-good-for-importing-business-but-u-s-warns-it-could-result-in-detention/#respond Thu, 10 Jan 2019 21:57:31 +0000 https://www.universalcargo.com/?p=9300 At Universal Cargo, we've always advised that it is optimal for shippers who import goods from China to go to China, if possible, and meet in person with business partners, manufacturers, etc.




While we maintain this is good business practice, if you do plan a trip to China, right now you should be extra careful.




Due to China issuing exit bans and making arbitrary arrests of U.S. citizens, the U.S. Department of State issued a China travel advisory last week.




You can read the full advisory, which includes guidelines if you do take a trip to China, at the end of this post.




Before that, this article covers what's happening in China right now, including fascinating insight from someone who lived as an expatriate in China for a decade and knows people facing persecution from its government.

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China Sea ShippingAt Universal Cargo, we’ve always advised that it is optimal for shippers who import goods from China to go to China, if possible, and meet in person with business partners, manufacturers, etc.

While we maintain this is good business practice, if you do plan a trip to China, right now you should be extra careful.

Due to China issuing exit bans and making arbitrary arrests of U.S. citizens, the U.S. Department of State issued a China travel advisory last week. You can read the full advisory, which includes guidelines if you do take a trip to China, at the end of this post.

The trade war between the U.S. and China has obviously increased tensions between the countries. Canada, by request of the U.S., arresting Meng Wanzhou, the CFO of Chinese tech giant Huawei, on the same day the ceasefire was called on the trade war escalated tensions as well. It also created tension between Canada and China.

In fact, China made retaliatory arrests of Canadian citizens after Meng’s arrest. Canada says 13 of its citizens have been detained so far, according to a Reuters article. David Zweig wrote an excellent article in the South China Morning Post comparing the case the U.S. has on Meng to the case China has on two of the Canadians it arrested:

… China’s detention of Canadians Michael Spavor and Michael Kovrig in particular raises concerns for all foreign researchers who visit China regularly and meet colleagues to discuss China’s policies and links with the world. Are we now breaking Chinese law when, without formal approval, we meet our Chinese colleagues who study regional politics?

According to the Foreign Ministry, China is handling the cases according to law. Kovrig is allowed only one consular visit a month and has no lawyer. In keeping with standard detention practice in China, he is also being interrogated three times a day, and not allowed to turn the lights off at night. In comparison, Meng has hired a Canadian lawyer and is out on bail in her own home in Vancouver. Now, which of the two countries is following the rule of law? How has Canada violated Meng’s human rights, as China claims?

Political tensions between countries only add to already existing risks foreigners in China face of being arrested, getting hit with exit bans, or even being kicked out and banned from the country when it has long been their home.

If the communist regime in China suspects someone of criticizing the government or being of an unsanctioned religion like Christianity, that person is a likely target of persecutory practices.

I asked someone who lived in China for a decade about what’s happening there now with people she knows and her perspective on these exit bans that China is issuing. She will remain anonymous and be referred to as my source.

She spoke of churches in China being attacked, burned, and shut down with foreign and local Chinese Christians being taken into custody and interrogated. “Many local Chinese have been interrogated more than any expats.”

Expats or expatriates are people who live in a foreign country. All the expats my source spoke to me about are people, including families with children that have been raised in China, who have lived there for at least ten years with varying visas, including student visas, business visas, and research visas, but not tourist visas.

“I have stories mostly pertaining to expat friends being brought in for questioning their stay in China,” she said. “Some have passed and some have been told to leave China and not come back. Other expats visiting the States now have heard from friends in Mainland China that they are on a list of people that says they need to be interviewed and in turn are not returning to China for now. My friends who are in the States now are probably on the exit ban status, which is why they are not returning to their home in China for the foreseeable future.”

In the China Travel Advisory, the U.S. Department of State specifically brings up the Xinjiang Uighur and Tibet Autonomous Regions as places where Chinese authorities are enforcing extra security measures like sudden curfews and travel restrictions.

“On the Xinjiang Autonomous Region front,” my source says, “I have other friends who have worked for years with the Uygher and Muslim ethnic groups in China as well as Tibetans. Uyghers who have been associated with expats in Xinjiang have been taken off the streets by the Chinese government and disappear from their family and friends.”

In general, if you are planning a trip to China for your importing or exporting business, it is probably safest to avoid speech and electronic communication that is religious or critical of the Chinese government and to stay in the large cities. My source says smaller cities mean more government control.

Here is the full advisory the U.S. Department of State issued:

Exercise increased caution in China due to arbitrary enforcement of local laws as well as special restrictions on dual U.S.-Chinese nationals.

Chinese authorities have asserted broad authority to prohibit U.S. citizens from leaving China by using ‘exit bans,’ sometimes keeping U.S. citizens in China for years. China uses exit bans coercively:

  • to compel U.S. citizens to participate in Chinese government investigations,
  • to lure individuals back to China from abroad, and
  • to aid Chinese authorities in resolving civil disputes in favor of Chinese parties.

In most cases, U.S. citizens only become aware of the exit ban when they attempt to depart China, and there is no method to find out how long the ban may continue. U.S. citizens under exit bans have been harassed and threatened.

U.S. citizens may be detained without access to U.S. consular services or information about their alleged crime. U.S. citizens may be subjected to prolonged interrogations and extended detention for reasons related to “state security.” Security personnel may detain and/or deport U.S. citizens for sending private electronic messages critical of the Chinese government.

Extra security measures, such as security checks and increased levels of police presence, are common in the Xinjiang Uighur and Tibet Autonomous Regions. Authorities may impose curfews and travel restrictions on short notice.

China does not recognize dual nationality. U.S.-Chinese citizens and U.S. citizens of Chinese heritage may be subject to additional scrutiny and harassment, and China may prevent the U.S. Embassy from providing consular services.

Read the Safety and Security section on the country information page.

If you decide to travel to China:

Click Here for Free Freight Rate Pricing

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How the Government Shutdown is Affecting International Shipping https://www.universalcargo.com/how-the-government-shutdown-is-affecting-international-shipping/ https://www.universalcargo.com/how-the-government-shutdown-is-affecting-international-shipping/#comments Thu, 03 Jan 2019 21:40:30 +0000 https://www.universalcargo.com/?p=9295 Many shippers are concerned, and rightfully so, about how the partial government shutdown will affect their international shipping.




You probably already know the standoff between President Trump and Congress, with Democrats having taken back the House majority, has no clear end in sight. Funding a wall at the U.S.-Mexico border is the hot topic keeping the government from setting a budget and, you know, operating. Of course, Democrat and Republican politicians not being able to work together goes well beyond Trump's wall. Yay for a two party system. 




However, the business of this blog is not politics but international shipping. So let's focus not on the politics themselves, but exactly what this means right now for your imports and exports.




In this blog you'll see how imports and exports are being affected by the shutdown.

The post How the Government Shutdown is Affecting International Shipping appeared first on Universal Cargo.

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Government Shutdown's Effect on ShippingMany shippers are concerned, and rightfully so, about how the partial government shutdown will affect their international shipping.

You probably already know the standoff between President Trump and Congress, with Democrats having taken back the House majority, has no clear end in sight. Funding a wall at the U.S.-Mexico border is the hot topic keeping the government from setting a budget and, you know, operating. Of course, Democrat and Republican politicians not being able to work together goes well beyond Trump’s wall. Yay for a two party system.

However, the business of this blog is not politics but international shipping. So let’s focus not on the politics themselves, but exactly what this means right now for your imports and exports.

FMC Shutdown

While the the Federal Maritime Commission (FMC) “is an independent regulatory and enforcement agency responsible for ensuring a competitive and reliable international ocean transportation supply system that supports the U.S. economy and protects the public from unfair and deceptive practices,” the partial government shutdown effectively shuts it down.

The FMC is, of course, funded by the U.S. government, so it “closed effective Wednesday, December 26, 2018 as part of the partial federal government shutdown due to a lapse in appropriations” according to a news release on its website.

All FMC employees — with the exception of Acting Chairman Michael A. Khouri and Commissioner Rebecca Dye because they are Presidentially-appointed and Senate-confirmed officials — are on furlough until the shutdown is over. Therefore, the release states all functions of the FMC are suspended, including:

  • The Commission will not respond to email or phone inquiries.

  • The Commission’s website will be available during the shutdown, but it will not be updated with new information until operations resume.

  • The Commission will not accept online filings or applications through its website for the following:

    • Service contracts through SERVCON;
    • Ocean Transportation Intermediary (OTI) automated applications or license updates (FMC-18);
    • Foreign Unlicensed Non-Vessel Operating Common Carrier (NVOCC) registrations or renewals (FMC-65);
    • Tariff Registration Forms (FMC-1);
    • eAgreements Filing System (Ocean carrier or marine terminal operator agreements or amendments; or,
    • eMonitoring System (Agreement monitoring reports, minutes, transcripts).
  • The Commission will not accept filings during this period for:

    • Ocean carrier or marine terminal operator agreements or amendments;
    • Applications for certification of financial responsibility for cruise lines embarking from U.S. ports; or
    • Agreement monitoring reports, minutes, or transcripts.
  • The Commission’s online databases: SERVCON, the VOCC and NVOCC Tariff List, List of FMC Licensed and Bonded OTIs, and the Agreement Notices & Library will not be accessible.

  • The Commission will not accept or act on complaints, requests for dispute resolution services, or ombudsman services.

  • All filing deadlines in formal and informal adjudicatory and investigatory proceedings pending before the Commission or Administrative Law Judges are temporarily suspended as of 0001 HOURS December 22, 2018. No filings will be received during the shutdown. Upon reopening of the federal government and the Federal Maritime Commission, the public is welcome to contact the Office of the Secretary, 202-523-5725 or secretary@fmc.gov, with any questions about filing deadlines or computation of time in proceedings.

The good news for importers and exporters on this front is that shipping operations themselves should not really be impacted by FMC’s closure. While the agency is not available to provide its protections during the time of the closure (not that its regulations no longer exist), shippers’ complaints and any filings that would have been made during the time of the shutdown can be made after. However, expect delayed response at that point as the agency plays catch-up.

CBP Remains Staffed

Yes, there is a government shutdown, but operations essential to national security remain active. Such operations certainly include U.S. Customs and Border Protection (CBP).

That does not mean there are no cuts for the CBP during the shutdown, as its website will not be actively managed during the shutdown, but field operations will be staffed as normal. In an email from Chris Reynolds of INLT, Universal Cargo’s house customs broker, Reynolds wrote this means “there will be no interruptions to conveyance, clearance, and cargo release.”

Yes, imports should still move and not get held up by understaffed customs operations. However, there are Participating Government Agencies (PGA’s) that will not be operating, so Reynolds continues:

As some PGA’s will not be funded, CBP will use their discretion at the border to keep cargo flowing. Centers of Excellence and Expertise will be open as normal with drawback and liquidations continuing under normal circumstances.

The Office of Trade operations will also be open to ensure cargo flows as predictably as possible.

As the shutdown drags on, the speed of operations could certainly decrease.

ACE On Its Own

The Automated Commercial Environment (ACE) is an automated system — as should be obvious from its name — U.S. imports and exports are reported through and by which the government determines admissibility of shipments.

Yes, this system should work on its own, and let’s hope that it runs smoothly, because the workers who do maintain it will not be working during the shutdown.

Reynolds writes, “… client representatives will not be working and will only be recalled in the case of an ACE outage. These are the folks who keep the ACE system running, so their absence is of some concern.”

There is some relief in that these workers will be recalled if ACE goes down. But if it does, delays should be expected.

CPSC Investigators Furloughed

One area where there will likely be delays is in the movement of shipments that may be deemed health or safety risks.

Reynolds wrote in his email:

All U.S. Consumer Product Safety Commission’s (CPSC) port investigators have been furloughed and CPSC targeting has been suspended. Shipments that have been targeted, but not arrived for examination, would be released, unless CBP or another PGA has interest or an imminent health and safety issue has been identified. Decisions on whether to release shipments that have been detained because they failed field screening and may be violative will be made on a case by case basis.

Shippers importing goods classified as hazardous materials may experience delays and should probably expect them. Certainly, any shipments suspected to be part of illegal activities will see serious delays as CPSC port investigators are furloughed.

FDA, NHTSA, and FWS Import Operations

The other agencies that Reynolds specifically  mentioned in his email are the U.S. Food and Drug Administration (FDA), the National Highway Traffic Safety Administration (NHTSA), and U.S. Fish and Wildlife Service (FWS) — all of which have import operations.

Here are Reynolds’ summations:

U.S. Food and Drug Administration (FDA) import operations will remain operational, this includes FDA Prior Notice review, entry processing, sampling/examination of high-risk shipments, and all ordinary compliance activities.

The National Highway Traffic Safety Administration (NHTSA) personnel will also be furloughed. Therefore, shipments requiring action on their part will be affected by the shutdown. Expect delays.

U.S. Fish and Wildlife Service (FWS) will operate at the ports as normal during the shutdown since the wildlife inspection program is funded by user fees and not appropriated funds. However, issuance of Import/Export Licenses and Designated Port Exception Permits (DPEP) will be suspended during the shutdown.

Conclusion

So far the government shutdown is having minimal effects on U.S. shippers. Importers are obviously the ones at the most risk to be affected by the shutdown, as their goods must process through U.S. customs. However, as goods entering the country are a security concern, the government shutdown does not stop customs operations, so while the risk of delay increases during this time, movement of goods does not stop.

That being said, the longer the shutdown lasts, the greater the chance of delays. Delays at the ports with imports can eventually affect the movement of exports as well. Hopefully, the country’s leadership will figure out how to work with each other soon and bring a timely end to the shutdown.

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Top 10 International Shipping News Stories of 2018 https://www.universalcargo.com/top-10-international-shipping-news-stories-of-2018/ https://www.universalcargo.com/top-10-international-shipping-news-stories-of-2018/#respond Thu, 27 Dec 2018 22:08:30 +0000 https://www.universalcargo.com/?p=9289 This is it! Universal Cargo's final blog of 2018!




It's become a tradition over the last couple years to make the last blog of the year a look back on the year's top 10 international shipping news stories. Phew, there were a lot of years in that sentence.




Speaking of lots, 2018 had many big international shipping news stories that were impactful for shippers.




So head to the blog and focus, for just one last time, on 2018. There you'll find, counted down David Lettermen style, the top 10  international shipping news stories of 2018.

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Top 10 international shipping news stories 2016

pic: flickr iabusa

This is it! Universal Cargo’s final blog of 2018!

It’s become a tradition over the last couple years to make the last blog of the year a look back on the year’s top 10 international shipping news stories. Phew, there were a lot of years in that sentence.

Speaking of lots, 2018 had many big international shipping news stories, as did the years that preceded it.

If you want to take a longer look back, here are the blogs that covered the top shipping stories of the last few years:

Top 10 International Shipping News Stories of 2017

Top 10 International Shipping Stories of 2016

Top 11 International Shipping Blogs of 2015 (w/ Pics)

But let’s keep our focus, for just one last time, on 2018. Here they are, counted down David Lettermen style, the top 10  international shipping news stories of 2018.

Drum roll please…

#10 — PierPass 2.0 Goes Into Effect

The much anticipated changes to the PierPass program at the country’s biggest ports in terms of capacity  per TEU moved went into effect in 2018.

As this change at the Ports of Los Angeles and Long Beach impacts a big percentage of U.S. shippers, the story squeaks into the top 10 list. Not only did we blog on this story, but we made a Universal Shipping News video on it.

YouTube Video

Here are the blog links to the story.

PierPass Reducing Fees at Ports of Los Angeles & Long Beach

PierPass 2.0 To Go Into Effect November 19th at Ports of LA & LB

#9 — Maersk Megaship Fire

Shippers’ fears about megaships were realized with the tragic fire of a Maersk ship. Because of the massive amount of cargo megaships carry, there is a great deal of risk with a single ship sailing. This fire resurfaced megaship use concerns around those risks and even worse, cost the lives of crew members.

This story also appeared in both a video and blogs.

YouTube Video

Tragic Fire on Maersk Megaship Shows Need for Container Contents Verification in Shipping

Maersk Megaship Fire Update – Missing Crew Remains Found & Search Called Off

 

#8 — Hurricane Florence & Super Typhoon Mangkhat Strike

Severe weather seems to be on the increase. And such weather often affects international shipping. This year, a Hurricane and Typhoon struck almost simultaneously, one in the U.S. and the other in China, though neither exclusively in those places.

Here are the blogs:

Hurricane Florence Hits U.S. & Super Typhoon Mangkhat Heading for China

Hurricane Florence & Super Typhoon Mangkhat Updates

 

#7 — Blockchain Race

Blockchain is the next big thing in international shipping and a big international shipping buzz word of 2018. Companies are racing to have the dominant blockchain platform for the industry. At the beginning of the year, Maersk and IBM made headlines as they teamed up to release a big platform. But the other carriers in the industry have been slow to accept a platform from possibly their fiercest competitor.

Here’s a video on the collaboration, blogs around the blockchain competition in shipping, and even a guest post that covers blockchain’s potential to transform logistics.

YouTube Video

Holy Crap! Maersk & IBM Team Up to Change International Shipping!

Maersk & IBM’s BlockChain Collaboration Stalls

Let the BlockChain Wars Begin in International Shipping

6 Ways Blockchain Technology Can Transform Logistics

#6 — President Xi Jinping Removes Time Limit on His Rule of China

Ramifications of this news story go well beyond international shipping, but there is also an important impact when it comes to trade between the U.S. and China. Perhaps the biggest impact is stability. President Xi Jinping made a big power grab in China this year, getting rid of the two term limit on presidents there. This potentially means President Xi will rule the communist country for life.

This story left many shippers with mixed feelings:

Xi Jinping Power Grab in China Might Bring Stability for Shippers But Are Your Feelings Mixed?

#5 — ONE Starts Business

It had been coming since before the year began, but it was not until 2018 that Japan’s “Big 3” shipping companies—K Line, MOL, and NYK— officially began operating as the joint venture Ocean Network Express (ONE). This is a big one for international shipping, excuse the pun. Who am I kidding? I never apologize for a pun.

ONE Is in Business Starting Today

#4 — Ocean Carriers’ Future in Doubt

Ocean carriers struggling is not a new news item by any means. They’ve been struggling for years, creating the shrinking of competition in the industry through mergers, buyouts, bankruptcy, and alliances. Last year, Maersk made headlines by saying the industry would shrink to just three major carriers. This year, the headlines came when the president of MOL said about the world’s carriers, “We’re all going to go bust.”

Needless to say, which is why I’m typing it instead, the business practices of carriers have been under scrutiny in 2018. Stories around their troubles and business practices, which can be questionable to say the least, have been important stories for shippers. After all, carrier viability is very important when it comes to international shipping. Here are some blogs on it:

Are Ocean Carriers In Trouble?

Are Carriers, Imposing Emergency Bunker Surcharges, Really Cartels?

Sherlock Holmes Looks Into If Ocean Freight Carriers Really Are Bad at Business

#3 — ILA-USMX Contract Agreement

This was big news. 2018 saw the International Longshoremen’s Association (ILA) come to terms with the United States Maritime Alliance (USMX) on a new dockworkers contract for East and Gulf Coast ports before the previous contract expired. This is not how the dockworker unions traditionally operate, and shippers often pay the price with cargo delays and uncertainty at the ports.

There was something of foreshadowing in #9 on this list when ILA contract negotiations appeared in the video that also talked about the Maersk containership fire. But here’s the video that covered the new contract agreement being reached and blogs surrounding the story.

YouTube Video

ILA & USMX to Reopen Negotiations 

ILA & USMX Reach Contract Agreement for East & Gulf Coast Ports!

New ILA Master Contract Details & Approval Expectations

#2 — Trump’s Steel & Aluminum Tariffs Triggering Trade Tension

How about that title for alliteration? Coming in at number two are President Trump’s steel and aluminum tariffs. These tariffs, especially the ones on steel, created trade tension between the U.S. and countries around the globe, with not just one set of retaliatory tariffs getting implemented against the U.S.

Here are blogs on the drama surrounding the steel and aluminum tariffs:

Trump Delayed Steel & Aluminum Tariffs for Ally Countries But Not China

US & EU Tariffs On Verge of Trade War

Are Trump’s Steel Tariffs Unconstitutional?

Canada Enacts Retaliatory Tariffs Against the U.S.

Will Chassis Tariff Increase Costs for Shippers Or Benefit U.S. Manufacturers?

 

 

#1 — U.S.-China Trade War

Of course, the number one news story of 2018 has to be the trade war between the U.S. and China. It absolutely dominated international shipping news cycles and Universal Cargo blog space in 2018.

Starting with whether or not we were in a trade war with China, followed by the trade war being on and off again, then escalation, the trade war with China has had a massive impact on U.S. shippers and will continue to have an impact in 2019.

Tariffs increased, demand increased as shippers raced to beat tariff deadlines, and freight rates increased while the peak season was artificially inflated. Those struggling ocean carriers of #4 benefited in the short term, stock markets around the world often reacted negatively when a new piece of news hit regarding the trade war.

We’ve got videos and blogs aplenty for you on this subject:

YouTube Video

YouTube Video

YouTube Video

YouTube Video

YouTube Video

Is the US Entering a Full-Fledged Trade War with China?

Trade War Watch: China Ups Retaliation But Markets Relax 

Trade War Watch: Is Trump Misunderstanding China?

US China Trade War “On Hold” – Happy World Trade Week!

Trade War Back On: Trump Moving Forward with Tariffs on China

$450 Billion in Tariffs on Chinese Goods? Is This Getting Out of Hand?

Could the U.S. Be Winning the Trade War with China?

Section 301 Tariff Exclusion Process for Chinese Products 

 

 

China Imports Tariff List (Complete 2nd Tranche)

2 Solutions for Shippers Dealing with Tariffs on Chinese Goods

Section 301: You Might Be Eligible for a Tariff Exclusion

US-China Trade War Saves Carriers’ Year But Future Uncertain

US & China Call Trade War Ceasefire then Tensions Escalate

 

 

 

 

Happy New Year!

That’s it for our look back on 2018’s international shipping news stories. May 2019 hold much success for you and your business!

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Lumps of Port Congestion for Your Stocking https://www.universalcargo.com/lumps-of-port-congestion-for-your-stocking/ https://www.universalcargo.com/lumps-of-port-congestion-for-your-stocking/#respond Thu, 20 Dec 2018 21:21:37 +0000 https://www.universalcargo.com/?p=9285

'Tis the season for congestion. No, I'm not talking about whatever bug your kid brought home from school, although there is plenty of that. I'm talking port congestion. Merry Christmas!

The Ports of Los Angeles and Long Beach, the largest ports in the country per TEU moved, are experiencing congestion.

This isn't the kind of congestion West Coast ports, including these ones, saw during the 2014-15 contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and Pacific Maritime Association (PMA) that prevented inventory from reaching store shelves during the holiday season and caused agricultural exports to rot on the docks. However, containers are still sitting too long for a combination of reasons.

Read the article to see what's happening at the ports.

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‘Tis the season for congestion. No, I’m not talking about whatever bug your kid brought home from school, although there is plenty of that. I’m talking port congestion. Merry Christmas!

Port of Long Beach

The Ports of Los Angeles and Long Beach, the largest ports in the country per TEU moved, are experiencing congestion.

This isn’t the kind of congestion West Coast ports, including these ones, saw during the 2014-15 contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and Pacific Maritime Association (PMA) that prevented inventory from reaching store shelves during the holiday season and caused agricultural exports to rot on the docks. However, containers are still sitting too long for a combination of reasons.

In an article about the Ports of Los Angeles and Long Beach pledging to relieve congestion, Bill Mongelluzzo wrote in the Journal of Commerce:

The Pacific Merchant Shipping Association (PMSA) reported Wednesday [December 19th, 2018] that the average container dwell time in November in Los Angeles-Long Beach was 3.5 days, compared to about 2.5 days last spring. Some 13 percent of the containers had dwell times of five days or longer, compared to about 5 percent last spring. “Terminals rely on containers getting picked up in a timely manner in order to handle more containers efficiently,” said Jessica Alvarenga, PMSA’s manager of government affairs. She said it is “absolutely critical” that container dwell times be reduced to the normal level of less than three days.

One of the big causes of longer dwell times for containers is the relentless and extended peak season the international shipping industry has experienced this year because of the trade war with China.

In an attempt to beat tariff escalation dates, shippers have been moving up imports from China. As the new year approaches, shippers have continued to do so because the next escalation, the largest one yet, was scheduled to happen on January 1st.

After a meeting between President Trump and President Xi of China, a 90-day ceasefire was called on further tariff escalations for negotiations. That didn’t cancel the jump from 10% to 25% tariffs on $200 billion worth of Chinese goods imported to the U.S. that was supposed to happen at the beginning of the year — it postponed it.

That means there are three more months expected of shippers rushing to beat the tariff deadline, making the ports busier than the usual “relief” of a lull experienced after the peak season and the early months of a typical new year.

Carriers have worked hard during this unusual and extended peak season to control capacity, something carriers have struggled with for years now. While carriers scheduled blank sailings and adjusted ship route schedules to avoid overcapacity, carriers had to use extra-loader vessels to keep up with U.S. and Chinese shippers pushing imports and exports from China to the U.S. ahead of tariff dates.

Extra-loader vessels arrive with significantly reduced notice to the ports to which they deliver. Mongelluzzo wrote that there was “an unprecedented number” of such ships this year, as well as bringing up megaships (which ports are still adjusting to the sheer numbers of containers such ships deliver at once) and weather event delays to go with the uninterrupted front-loading of U.S. imports from China already discussed above.

Beyond those factors contributing to congestion, ports, including the Ports of Los Angeles and Long Beach are still dealing with chassis issues, slowing down truck retrieval and drop-off of containers. It was all the way back in 2012 that pretty much all carriers across the board were done with owning chassis by, and chassis have been an issue for the industry ever since. This was a big congestion-contributing issue back during the awful congestion in 2015, when we were blogging about plans the Ports of Los Angeles and Long Beach had to alleviate the chassis problem

In his JOC article, Mongelluzzo writes:

Chassis shortages due to the hoarding of equipment by some terminal operators, and BCOs’ increasing use of import containers and the chassis they are resting on as an extension of their warehouses, is one of the biggest contributors to port congestion. The pool of pools operated by the three major equipment lessors has 68,000 chassis in Southern California, yet truckers each day encounter shortages throughout the harbor.

Yes, the ports are working on the chassis problem, but it persists years after the transition of chassis ownership in the international shipping industry.

The ports are working hard to control the congestion issue before it grows out of hand, and promise to do so. Of course, we here at Universal Cargo will be keeping an eye on it to make sure your cargo continues to ship as efficiently as possibly.

Click Here for Free Freight Rate Pricing

 

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Carrier Surcharges for China’s 2019 Low Sulfur Regulation Changes https://www.universalcargo.com/carrier-surcharges-for-chinas-2019-low-sulfur-regulation-changes/ https://www.universalcargo.com/carrier-surcharges-for-chinas-2019-low-sulfur-regulation-changes/#comments Thu, 13 Dec 2018 20:53:56 +0000 https://www.universalcargo.com/?p=9278 China's Ministry of Transport announced a while back upcoming changes to the country's fuel regulations in regard to sulfur content and emissions. We're fast approaching the implementation of the first major changes. The changes will come with costs to carriers, so the carriers, of course, plan to pass costs on to shippers through surcharges.




Those surcharges are listed at the end of this article.




Starting in the new year, 2019, China's emission control areas (ECAs) will include the entire coast of China. Ships sailing within 12 nautical miles of the coastline will be subject to a 0.5% sulfur content limit on fuel. This limit includes when ships are berthing.

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China’s Ministry of Transport announced a while back upcoming changes to the country’s fuel regulations in regard to sulfur content and emissions. We’re fast approaching the implementation of the first major changes. The changes will come with costs to carriers, so the carriers, of course, plan to pass costs on to shippers through surcharges.

Those surcharges are listed at the end of this article.

Starting in the new year, 2019, China’s emission control areas (ECAs) will include the entire coast of China. Ships sailing within 12 nautical miles of the coastline will be subject to a 0.5% sulfur content limit on fuel. This limit includes when ships are berthing.

NASA Image of Pollution Haze Over China

NASA Image of Pollution Haze Over China

Pollution has long been a problem in China where air quality has often been visible to the naked eye. In fact, the pollution haze has even been visible from space.

That China is showing commitment toward improving air quality is laudable. China’s effort even gets ahead of the International Maritime Organization’s (IMO) sulfur cap regulation changes that are also fast approaching.

The IMO has a 0.5% sulfur cap scheduled to hit the global ocean freight industry in 2020. We recently blogged about literal sail ships being one of the possible solutions for carriers to meet the upcoming regulations.

A 0.5% sulfur cap is pretty good, but it looks like that’s not going to be good enough for China. Starting in 2020, the plan in China is to reduce the sulfur content limit on fuel to 0.1% in the country’s ECAs with talk of increasing the ECAs to something like 20 nautical miles from the coastline instead of 12.

Those 2020 further increased fuel regulations are not set in stone. The country is still determining the feasibility, and it is likely how well implementation of the 2019 regulation changes go will also have an impact on implementation of the IMO-exceeding 2020 regulation plans.

To be clear, the 2019 fuel sulfur regulation change in China is quite significant. The current fuel sulfur cap there is 3.5%. Yes, switching fuels to go from 3.5% sulfur content to 0.5% does cost more money for carriers. So it is no surprise that this regulation would bring with it Low Sulfur Surcharges from carriers.

Of course, the surcharges announced by different carriers vary in amounts and the dates they go into effect.

Steven Chiu of Seamaster Global shared in an email to Universal Cargo a chart including the various Low Sulfur Surcharge amounts he has received announcements on so far. The charts include the surcharge amounts for the various standard shipping container sizes.

Steven also notes that the increase of ECAs coming from China’s Maritime Safety Administration (MSA) expands in the Bohai Sea Area and Pearl River Delta, effective on January 1st, 2019. He adds that the Hong Kong and Taiwan governments also announced the same procedure, aligning with China. This information is reflected in the charts Steven sent, which are broken into two phases.

Phase 1: 

China Low Sulphur Surcharge applied for shipments loaded/transit at Shanghai, Ningbo, Nanjing, and Yangtze River area

Carrier

Effective Date

Loading

Discharge

Surcharge Amount

20’DC

40’DC

40’HC

45’HC

ZIM

1-Nov-18

Shanghai, Ningbo, Nanjing and Yangtze River area

All Routing

USD 20

USD 40

USD 40

USD 40

OOCL

11-Nov-18

Shanghai, Ningbo, Nanjing and Yangtze River area

West Coast

USD 6

USD 8

USD 9

USD 10

OOCL

11-Nov-18

Shanghai, Ningbo, Nanjing and Yangtze River area

Non-West Coast

USD 12

USD 15

USD 17

USD 19

PIL

1-Dec-18

Shanghai, Ningbo, Nanjing and Yangtze River area

All Routing

USD 20

USD 40

USD 40

USD 40

YML

1-Dec-18

Shanghai, Ningbo, Nanjing and Yangtze River area

All Routing

USD 16

USD 32

USD 32

USD 32

HMM

6-Dec-18

Shanghai, Ningbo, Nanjing and Yangtze River area

All Routing

USD 20

USD 40

USD 40

USD 40

Hamburg SUD

12-Dec-18

Shanghai, Ningbo, Nanjing and Yangtze River area

All Routing

USD 10

USD 20

USD 20

USD 20

ONE

1-Jan-19

Shanghai, Ningbo, Nanjing and Yangtze River area

All Routing

USD 15

USD 30

USD 30

USD 30

Phase 2:

Low Sulphur Surcharge applied for shipments export, import, or transit in China, Hong Kong, and Taiwan

Carrier

Effective Date

Loading

Discharge

Surcharge Amount

20’DC

40’DC

40’HC

45’HC

YML

1-Dec-18

Shanghai, Ningbo, Nanjing and Yangtze River area

All Routing

USD 16

USD 32

USD 32

USD 32

YML

1-Jan-19

North China

All Routing

USD 25

USD 50

USD 50

USD 50

YML

1-Jan-19

South China, Pearl River Delta, Hong Kong

All Routing

USD 20

USD 40

USD 40

USD 40

EMC

1-Jan-19

shipment loaded/transship at Taiwan, Hong Kong and China

All Routing

USD 20

USD 40

USD 40

USD 40

HMM

6-Dec-18

China

All Routing

USD 20

USD 40

USD 40

USD 40

ZIM

5-Jan-19

Cargo moving between China and USA/Canada/Panama/the Caribbean.

All Routing

USD 20

USD 40

USD 40

USD 40

APL

1-Jan-19

Cargo moving between China and USA/Canada/Panama/the Caribbean.

All Routing

USD 5

USD 10

USD 10

USD 10

Hamburg SUD

11-Jan-19

China, Taiwan, Hong Kong

All Routing

USD 12

USD 24

USD 24

USD 24

ONE

1-Jan-19

China, Taiwan, Hong Kong

All Routing

USD 15

USD 30

USD 30

USD 30

Maersk

1-Jan-19

Far East (excl. China)

WC North America

USD 26

USD 29

USD 29

USD 37

Maersk

1-Jan-19

Far East (excl. China)

East Coast North America

USD 23

USD 25

USD 25

USD 32

Maersk

1-Jan-19

China

West Coast North America

USD 38

USD 53

USD 53

USD 61

Maersk

1-Jan-19

China

East Coast North America

USD 35

USD 49

USD 49

USD 56

SM Line

1-Jan-19

China (including Hong Kong)   

All Routing

USD 20

USD 40

USD 40

USD 40

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US & China Call Trade War Ceasefire then Tensions Escalate https://www.universalcargo.com/us-china-call-trade-war-ceasefire-then-tensions-escalate/ https://www.universalcargo.com/us-china-call-trade-war-ceasefire-then-tensions-escalate/#respond Thu, 06 Dec 2018 21:16:30 +0000 https://www.universalcargo.com/?p=9264 In one country, President Donald Trump and President Xi Jinping ate dinner together and worked out a ceasefire on the trade war between the U.S. and China. In another country, an arrest was happening to escalate that war. Saturday was an interesting day.




Despite the second event listed above, this weekend brought great news for U.S. shippers who import goods from China. Tariffs on $200 billion worth of product will not jump from 10% to 25% on January 1st as previously scheduled.




This news does not mean the tariff increase will not happen at all—especially in light of the arrest that we'll come back to later—but the duty increase has at least been postponed as the U.S. and China called a ceasefire on the trade war to conduct negotiations.




Read the blog for details on the ceasefire and the arrest that could escalate the trade war to whole new levels.

The post US & China Call Trade War Ceasefire then Tensions Escalate appeared first on Universal Cargo.

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YouTube Video

US China Trade WarIn one country, President Donald Trump and President Xi Jinping ate dinner together and worked out a ceasefire on the trade war between the U.S. and China. In another country, an arrest was happening to escalate that war. Saturday was an interesting day.

Despite the second event listed above, this weekend brought great news for U.S. shippers who import goods from China. Tariffs on $200 billion worth of product will not jump from 10% to 25% on January 1st as previously scheduled.

This news does not mean the tariff increase will not happen at all—especially in light of the arrest that we’ll come back to later—but the duty increase has at least been postponed as the U.S. and China called a ceasefire on the trade war to conduct negotiations.

The dinner between President Trump and President Xi happened in Argentina. And after it was over, the White House said the following in a statement:

On Trade, President Trump has agreed that on January 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10% rate, and not raise it to 25% at this time. China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural product from our farmers immediately.

President Trump and President Xi have agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture. Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10% tariffs will be raised to 25%.

There was a big push from U.S. shippers to get their importing from China completed before the new year to beat the tariff increase. For those who didn’t make it, there are at least three more months before this tariff escalation could hit.

Following two previous tariff hikes in the trade war with China, the list 3 duties scheduled for January were not only a major concern for shippers but raised fear of a “list 4” tariff hike hitting all remaining import goods from China.

“Our Man in DC” Peter Friedmann says that the ceasefire “delays perhaps indefinitely implementation of the feared ‘List 4’, the ‘everything else list’ … which would include footwear, apparel, consumer electronics, etc. So, at least for now, List 4 is off the table.”

But that table is going to be a tense place to sit because of the arrest that I told you we’d get back to.

The arrest happened in Canada and may have a major impact on how fruitful the negotiations between the U.S. and China will be over this 90-day period. To say that impact is not likely to be positive would be a significant understatement.

CFO of Chinese tech giant Huawei, Meng Wanzhou, was arrested in Canada on Saturday with the U.S. seeking extradition. Coverage all over the world on this story is similar in its outlook. Headlines read like this one from the UK news source Express: Huawai arrest shatters truce in US-China trade war.

Jethro Mullen wrote the following in an article for CNN Business:

The arrest of a top executive at Chinese tech giant Huawei at the request of the US government has angered Beijing, alarmed investors and raised new doubts about the fragile truce that the leaders of the world’s top two economies reached just days ago.

“You have to see this as a significant escalation in the trade war,” said Christopher Balding, a China expert at the Fulbright University Vietnam in Ho Chi Minh City.

China is demanding Wanzhou’s release.

Only a quick glance at Twitter shows how intensely political this arrest is.

People’s Daily, China tweeted:

China’s embassy in Canada on Thursday demanded the immediate release of Chinese national Meng Wanzhou, who was arrested by Canadian police at the request of the US, even though she hasn’t violated any US or Canadian laws, calling the move a serious violation of human rights.

On the other extreme is a tweet from Senator Ted Cruz:

Huawei is a Communist Party spy agency thinly vieled as a telecom company. Its surveillance networks span the globe & its clients are rogue regimes such as Iran, Syria, North Korea & Cuba. The arrest of Huawei’s CFO Wanzhou Meng in Canada is both an opportunity & a challenge.

Does the truth lie somewhere within or between those statements? Are both false? How largely did trade factor into this arrest? Is there a thought process that this arrest could create leverage within the trade negotiations between China and the U.S.? Will China make a retaliatory move?

The situation is complex and raises many questions. But as trade markets around the world reacted with big drops at the news of the arrest, there’s no denying this move has an impact on trade.

From the CNN article, trade violations are likely—to no one’s surprise—the reason for Wanzhou’s arrest. Mullen writes:

The US and Canadian governments haven’t specified what charges Meng faces, but her arrest follows reports this year that the US Justice Department was investigating whether Huawei violated American sanctions on Iran.
“Under the Obama administration, the US indicted Chinese personnel on similar charges, but was reluctant to take more drastic action such as arresting the individuals in third countries, over fear that Beijing would retaliate against US interests in China or in other countries,” Eurasia Group political risk analysts wrote in a note.
And so, we wait and watch after an eventful weekend how the trade war will progress.
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U.S. Customs Mistakenly Voids Importer Numbers & How To Reactivate Record https://www.universalcargo.com/u-s-customs-mistakenly-voids-importer-numbers-how-to-reactivate-record/ https://www.universalcargo.com/u-s-customs-mistakenly-voids-importer-numbers-how-to-reactivate-record/#respond Tue, 04 Dec 2018 18:35:49 +0000 https://www.universalcargo.com/?p=9263 During a recent sweep of its importer database, U.S. Customs and Border Protection (CBP) mistakenly voided many importer numbers that should have remained active.




Obviously, maintaining an active importer record with the CBP is necessary for importing goods to the U.S. Universal Cargo's house customs broker, INLT, worked hard to make sure our customers are not impacted. However, if you were impacted by the CBP sweep, we've included the CBP instructions for reactivating an importer record the agency has voided.

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customs importer paperworkDuring a recent sweep of its importer database, U.S. Customs and Border Protection (CBP) mistakenly voided many importer numbers that should have remained active.

The CBP regularly voids importer records to keep its database up to date. Here are reasons the CBP lists for voiding importer numbers on its Voided Importer Record FAQs webpage:

  • Duplicate records are on file with CBP
  • The importer’s Social Security number or Employer Identification number cannot be verified with the appropriate government agency (Social Security Administration or Internal Revenue Service respectively)
  • The importer, their authorized agent (with a valid Power-of-Attorney), or local CBP Officer has requested that the record be voided
  • CBP has received returned (undeliverable) mail when attempting to contact the importer via the US Postal Service
  • Failure to respond to CBP requests sent to the name and address listed on the importer record

Importer inactivity should be added to that list. In the recent sweep, the CBP was voiding importer numbers that hadn’t been used in over a year.

Unfortunately, many shippers who very recently obtained continuous bonds for importing were also invalidated, so CBP error could also be added to the list of reasons an importer number might be voided.

At Universal Cargo, we have a great house customs broker in INLT, who worked hard to make sure our customers weren’t impacted by this sweep.

In an email informing Universal Cargo about the sweep, Chris Reynolds of INLT said:

You should also be aware that the reactivation process is fairly labor intensive. In a typical day, U.S. Customs handles about 20 of these requests, with most being processed within two business days. We’re told that there are currently over 300 in queue.

While we’re making sure our customers here at Universal Cargo are in good shape, we know there may be other readers of our blog out there who have been impacted by this sweep and need to take action.

How To Reactivate Importer Record

Here are the instructions the CBP give on how to reactivate an importer record the government agency voided:

Email a completed CBP 5106 along with a valid importer record proof and Power-of-Attorney that is no more than one year old (if 5106 is signed by an Attorney-in-Fact) to bondquestions@cbp.dhs.gov. The subject line should state “Void IR#”.

**NOTE: CBP Form 5106 must be signed by an officer of the company (President, VP, Secretary, Treasurer, CEO, COO, etc.) or a broker with power-of-attorney (POA).**

Relative to the type of importer record number, the following documents are acceptable proof:

Social Security Number – A copy of the importer’s Social Security card (front & back). Or submit a copy of the front page of the importer’s most recent tax return.

Employee Identification Number (EIN) – Pre-printed documentation received from the U.S. Department of Treasury, i.e. Internal Revenue Service (IRS), within the last 12 months that reflects the proper EIN and company name. Examples of IRS tax documentation include the following: 147C, 1040, 2363, 941/941V, SS-4, 1065, 8109/8109C, 7004, 355-ES, 1096, 1120/1120S, etc. You can call 1-800-829-0115 in order to obtain EIN verification (form 147C) if necessary. THE ABOVE DOCUMENTS MUST BE RECEIVED FROM THE IRS, U.S. DEPARTMENT OF TREASURY.

Note: W-9 applications, SS-4applications, State documents, and any documentation submitted to the IRS are unacceptable.

U.S. CBP Assigned Number – There is currently no documentation provided by CBP when issuing a CBP-assigned number. Only a completed CBP 5106 form and POA if signing on behalf of an importer, are required.

Click Here for Free Freight Rate Pricing

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Are Sailing Ships Solution to Pollution Problem in Ocean Shipping? https://www.universalcargo.com/are-sailing-ships-solution-to-pollution-problem-in-ocean-shipping/ https://www.universalcargo.com/are-sailing-ships-solution-to-pollution-problem-in-ocean-shipping/#respond Thu, 29 Nov 2018 20:49:12 +0000 https://www.universalcargo.com/?p=9260 The ocean freight sector of international shipping is getting closer and closer to the International Maritime Organization’s (IMO) 0.5 percent sulfur cap on fuel. That goes into effect in 2020.




Reducing CO2 emissions in ocean shipping is obviously great for the environment, but just how will carriers reduce fuel emissions to meet these new regulations? Cleaner fuel, electric power, scrubbers to clean traditional fuel in ships are all popular solution suggestions...




But how about a return to traditional sailing?




Yes, sailing, with actual canvas sails that use the wind to push a ship forward. Renault, a French car manufacturer, is turning to traditional sailing to reduce emissions in the transatlantic shipping of its cars just in time for the 2020 regulation change.




Find out about it and more in the blog.

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The ocean freight sector of international shipping is getting closer and closer to the International Maritime Organization’s (IMO) 0.5 percent sulfur cap on fuel. That goes into effect in 2020.

Reducing CO2 emissions in ocean shipping is obviously great for the environment, but just how will carriers reduce fuel emissions to meet these new regulations? Cleaner fuel, electric power, scrubbers to clean traditional fuel in ships are all popular solution suggestions…

sail shipBut how about a return to traditional sailing?

Yes, sailing, with actual canvas sails that use the wind to push a ship forward. Renault, a French car manufacturer, is turning to traditional sailing to reduce emissions in the transatlantic shipping of its cars just in time for the 2020 regulation change.

Gavin van Marle reported in the Loadstar:

Renault has signed a three-year deal with French developer Neoline to construct two wind-powered ro-ro vessels to operate on a transatlantic route from 2020.

Ro-ro stands for roll on/roll off, an option for the shipping of cars where they’re literally rolled on and off of cargo vessels rather than loaded in shipping containers to be transported over sea and ocean.

In his article, van Marle continues, describing these literal sail vessels:

The 136-metre long Neoliner has a beam of 24.2 metres and a standard sailing speed of 11 knots. It has some 4,200sq metres of sail and features “an innovative blend of technical solutions borrowed from the maritime transport industry, as well as from competitive sailing”.

The ship design features a loading ramp at the rear to 1,700 linear metres of cargo space – equating to 478 vehicles.

It doesn’t get any cleaner than using wind to propel a ship. While the wind obviously is not the only power these ships will have for propulsion, it will be the main source. The Loadstar article continues:

Neoline said its primary use of wind power would result in the equivalent of a reduction of CO2 emissions by some 90%.

These Renault commissioned Neoline will be sailing on a route between Nantes, the U.S. East Coast, and the island of St. Pierre off Canada’s coast according the article.

Most of the talk lately has been about scrubbers, cleaner fuel options, and electric ships to reduce emissions, but returning to wind power is not a new idea. The industry has been looking into it and developing ideas on its execution for quite some time.

In 2012, we posted a blog titled: Could Sailing Ships Come Back in the International Shipping Industry? Here’s a quick excerpt:

Nautical engineers have been tinkering with using sails to power commercial ships since at the 1980s. The Carib Alba for example, a 3,500 ton merchant vessel, uses an “auxiliary wind propulsion” system. According to their website, the Carib Alba design has proved cost effective and therefore “economically viable”.

Recently however, other wind-powered commercial ship designs are being tested through the construction of prototypes. At least one of these prototype vessels, the B9, combines sails with a bio-gas engine to power the ship. The result is an interesting hybrid of wind and bio fuel capable of powering a cargo ship on the high seas.

Now, we’re not going to see a return to the days of sailing ships racing each other across the ocean to deliver their goods before the competition does, like the elite cargo ships did during the Great Tea Race of 1866. However, don’t discount wind propulsion as part of the solution for meeting the upcoming IMO regulations.

For thousands of years, sailing ships were the best and fastest way to transport goods, and people for that matter, around the world. While we might think of sailing as something that’s quaint, antiquated, or maybe just a hobby for rich people, it is obvious there is still much this technology has to offer the world of shipping. The world’s air could get a bit fresher for it.

Click Here for Free Freight Rate Pricing

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A Turkey Day Poem for Universal Cargo’s Annual Turkey Blog https://www.universalcargo.com/a-turkey-day-poem-for-universal-cargos-annual-turkey-blog/ https://www.universalcargo.com/a-turkey-day-poem-for-universal-cargos-annual-turkey-blog/#comments Thu, 22 Nov 2018 14:00:46 +0000 https://www.universalcargo.com/?p=9228 Don't know what Universal Cargo's Annual Turkey Day Blog is all about? It can probably best be summed up in a poem. Here's how that poem starts:




Every year about this time




What I must do might be a crime




It is not nasty giblets untucking




Or even a bout of feather plucking




But one who looks quite likely gags




'Tis good this day readership lags




For who would give to this a view




If I could, I'd avoid it too




But there's an email from my boss




Whom I'd rather not make cross




And while he ends it with a smiley




His short sentence is quite wily




"Can’t wait for my Turkey blog =)"




Translation: Write, you lazy dog




Read the whole Turkey Day Poem in Universal Cargo's annual Turkey Day Blog.

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Every year about this time

What I must do might be a crime

It is not nasty giblets untucking

Or even a bout of feather plucking

But one who looks quite likely gags

‘Tis good this day readership lags

For who would give to this a view

If I could, I’d avoid it too

But there’s an email from my boss

Whom I’d rather not make cross

And while he ends it with a smiley

His short sentence is quite wily

“Can’t wait for my Turkey blog =)”

Translation: Write, you lazy dog

Yes, that’s the font of Raymond whipping

Me to combine Turkey with shipping

Turkey the country or Turkey the bird?

Both, though that may sound absurd

It’s no prank despite your misgiving

I do this every single Thanksgiving

Endure Thanksgiving torture, wonder how I can?

I have practice as a Detroit Lions fan

So these posts are now my annual norm

Though each year’s blog may change in form

The last two years ’twas a Turkey quiz

Click and see if you’re a Turkey whiz

Those clearly beat straight Turkey facts

Which dominated Turkey blogs years past

Okay, that wasn’t a perfect rhyme

I’ll get it right in the next line

Though now you may want to abort

Before you read the word “export”

Too late, you read it, here we go

Machinery is Turkey’s top cargo

Now you know, despite comma splices,

Containership import export business logistics

Turkey’s top export ain’t Turkey spices

Yes, I know it makes no sense

Riding on this Turkey fence

Of talking poultry then a nation

Risking reader alienation

How did this tradition even start?

It started cuz I wasn’t smart

In picking days for the blog posting

And when I type this I’m not boasting

Tuesdays and Thursdays without fail

Okay, I missed a few—don’t email

I write a post for UC’s blog

Readers wait, I’m sure, agog

It must have been in dazed malaise

When I picked those two days

For I forgot that every year

Thanksgiving’s on Thursday, dear oh dear

I’d take it off, but that first year, see

I wasn’t thinking very clearly

Just to make my L.A. rent

I set an awful precedent

And wrote a blog, sure no one would read

(For a Turkey shipping blog there is no need)

But it somehow caught my boss’s eye

And became his favorite—I don’t know why

So now it’s a tradition like no other

That my family won’t read, not even my mother

Years later, the first Turkey blog is lost

But each year, my holiday, it does accost

My family begs me, “Let the Turkey blog die

“Tell Ray you’re done in an email reply”

They beg cuz I made them take the Turkey blog quiz

Er, I mean, cuz they want to spend time with me, that is

But now it turns out I’m not so sore

As I have been on Thanksgiving the years before

At the completion of this chore

Why does my spirit now suddenly soar?

Because I’m completing the Turkey blog the night before

 

From all of us here at Universal Cargo, have a Happy Turkey Day!

Click Here for Free Freight Rate Pricing

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Guidelines & Tips to Be Published in Universal Cargo’s Blog https://www.universalcargo.com/guidelines-tips-to-be-published-in-universal-cargos-blog/ https://www.universalcargo.com/guidelines-tips-to-be-published-in-universal-cargos-blog/#comments Tue, 20 Nov 2018 22:18:21 +0000 https://www.universalcargo.com/?p=9219 Want to have an article you've written published in Universal Cargo's blog? This post will help you achieve that goal.




After spending years building our blog into a recognized, respected, high-Google-ranking source of information about the international shipping industry, we're happy to share the benefits of our hard work with you by publishing guest posts.

When we publish guest posts, the authors receive full credit for their work and we link the articles back to their authors' and their authors' companies' websites. The potential benefits of this include:




Exposure


Website Traffic


Increased Search Engine Optimization (SEO)




Included is an entertaining explainer video, covering the submission requirements for guest articles we publish. We also cover in this post the benefits of getting published in UC's blog, go into more detail about our requirements, and even include tips to really increase your chances of publication.

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Want to have an article you’ve written published in Universal Cargo’s blog? This post will help you achieve that goal.

Check out this video covering our submission requirements:

YouTube Video

Benefits to Being Published in Universal Cargo’s Blog

Every month Universal Cargo receives article submissions for publication in our blog. A week rarely passes without hopeful people contacting us with publication requests.

After spending years building our blog into a recognized, respected, high-Google-ranking source of information about the international shipping industry, we’re happy to share the benefits of our hard work with you by publishing guest posts.

When we publish guest posts, the authors receive full credit for their work and we link the articles back to their authors’ and their authors’ companies’ websites. The potential benefits of this include:

  • Exposure
  • Website Traffic
  • Increased Search Engine Optimization (SEO)

Requirements for Being Published in Universal Cargo’s Blog

Blog Submission Guidelines SEOWhile we are happy to publish guest posts, we do not post just any submission. Unfortunately, we end up rejecting more articles than we publish because their writers simply fail to follow our guidelines.

Here are the requirements for an article submission for publication in Universal Cargo’s blog. Articles must be:

  • International Shipping Related
  • Original Content
  • Previously Unpublished
  • 500+ Words
  • Include an Author Bio

Universal Cargo is a freight forwarder based in the United States, so our blog is designed to provide value for U.S. importers and exporters.

Articles that are not relevant to our target audience of U.S. importers and exporters will not be considered for publication in our blog.

Tips for Getting Published in Universal Cargo’s Blog

Just today, we received a submission article about helping caterers reduce food waste. This is like writing a horror screenplay full of graphic violence and nudity to Disney and expecting the company best known for Mickey Mouse and fairy tale cartoons to buy it and make it into a movie.

It doesn’t matter how good an article about caterers and food waste is, it will not get posted in Universal Cargo’s blog.

Let’s not focus on won’t be published here but what will help you get published in the blog.

It is not required, but we prefer submissions to include:

  • Related Pictures (from the public domain)
  • Author Headshot

If you do not provide a picture for your article, we’ll find one that goes with it if we want to publish it. However, including a picture is recommended. Do make sure that any picture you include is one that you either own the rights to or is in the public domain.

Obviously, we’re not going to dig up a picture of you to go with your author bio and will still publish your article without it, but the author bio section does look much nicer with your picture next to it.

Before you write an article, we suggest reading some of our blog posts.

It sounds obvious, but knowing the kinds of blogs we publish will help you write one.

You certainly don’t need to try to copy our style of writing. We prefer to see your own unique style. But we want to see that style applied to the type of international shipping topics we post on.

Here are a couple ideas for coming up with your article’s topic:

Do you have a hot take on an international shipping subject? Write it. Is there another angle to an international shipping story that you could write about? Do it! Is there an aspect of international shipping that you could write an in-depth article about? We love that!

What are some problems that need to be addressed in international shipping? What new technologies are affecting or will affect international shipping? Do you have well-educated predictions for the future of the industry? Analysis of big news items in the industry? Tips for people importing or exporting cargo? Dealing with customs clearance? Air freight? Ocean freight? How can businesses make more money importing or exporting goods?

There are countless directions you could go with your article. Just make it good. That means before you submit, reread, rewrite, and edit your article as needed.

We will do some editing before publishing in case you missed a typo or just need a little grammar help, but we will not publish low quality articles. Remember, what you write should provide value to our readers. That’s what makes this a win-win for you and us.

To submit your article, email Universal Cargo’s Marketing Coordinator: Jared@UniversalCargo.com

We look forward to reading your submissions.

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How High Are Freight Rates and How Long Will They Last? https://www.universalcargo.com/how-high-are-freight-rates-and-how-long-will-they-last/ https://www.universalcargo.com/how-high-are-freight-rates-and-how-long-will-they-last/#comments Tue, 13 Nov 2018 20:33:54 +0000 https://www.universalcargo.com/?p=9216 Transpacific freight rates are soaring high right now and not just because it's peak season.




Shippers have been rushing to beat tariff increase dates on imports from China, increasing demand and rates. The next big date is January 1st, when 10% tariffs on somewhere around 250 million dollars worth of products from China are planned to increase to 25%.




That date gives shippers until about the halfway point in December to get import goods from China loaded onto cargo ships if they want to get those imports to West Coast ports like the Ports of Los Angeles, Long Beach, and Oakland in order to beat New Year's tariffs. And mid December is really pushing it.




If shippers want to get those goods from China to the Ports of New York, New Jersey, Virginia, and other East or Gulf Coast ports, they need to get their ocean freight moving by early December.




Air freight obviously ships faster than ocean freight, giving shippers running right up against the deadline a little more time to get their imports moving before that January 1st deadline hits. However, air freight rates, already typically higher than ocean rates, are also up right now as a result of the U.S.-China trade war.




Read the article to find out how high and how long these high rates should last.

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Transpacific freight rates are soaring high right now and not just because it’s peak season.

Shippers have been rushing to beat tariff increase dates on imports from China, increasing demand and rates. The next big date is January 1st, when 10% tariffs on somewhere around 250 million dollars worth of products from China are planned to increase to 25%.

That date gives shippers until about the halfway point in December to get import goods from China loaded onto cargo ships if they want to get those imports to West Coast ports like the Ports of Los Angeles, Long Beach, and Oakland in order to beat New Year’s tariffs. And mid December is really pushing it.

If shippers want to get those goods from China to the Ports of New York, New Jersey, Virginia, and other East or Gulf Coast ports, they need to get their ocean freight moving by early December.

Air freight obviously ships faster than ocean freight, giving shippers running right up against the deadline a little more time to get their imports moving before that January 1st deadline hits. However, air freight rates, already typically higher than ocean rates, are also up right now as a result of the U.S.-China trade war.

Ocean carriers very much needed the boost brought by this added demand during what’s already the peak season for international shipping. About a month ago, we posted a blog headlining that the U.S.-China trade war is saving the year for carriers. Carriers’ financial struggles over the last several years have been well documented. Those struggles largely stem from overcapacity. However, carriers have done a good job controlling capacity lately (for a change) with things like blank sailings and pulling service lines while demand highly, even if artificially, grew.

According to an American Shipper article by Chris Dupin published last week, ocean freight rates from China to the U.S. West Coast increased 1 percent from the previous week but are 69 percent higher than the same time last year. For shipments from China to the U.S. East Coast, Dupin reported a 6 percent increase from the previous week and 65 percent increase from 2017. Freightos Baltic Index (FBX) is the source Dupin sited for the data.

On the air freight side, Dupin reports a 12% increase per kilogram rate from last month on China to U.S. shipments.

FBX is not the only index keeping track of freight rates. Another is the Shanghai Containerized Freight Index (SCFI). According to a Mike Wackett written article in the Loadstar, published two days after the American Shipper one, SCFI puts China to U.S. West Coast rates at 82 percent higher than this time last year and U.S. East Coast rates at 88 percent higher.

Not only are rates high, with demand up and carriers’ rare but current discipline with capacity expected keep rates high as we’re finishing up the year, but carriers are planning to implement more General Rate Increases (GRIs) to maximize their opportunity for higher rates.

Wackett reports that GRIs are scheduled for November 15th and December 1st. While Wackett writes that the latter will be unlikely to succeed with the expected sharp decline in demand that will hit next month, I’d say there is a decent chance carriers could maintain that GRI for a week or two while shippers are racing to get their final shipments in from China before the January first tariffs hit.

My expectations for when the current upward pressure on freight rates will ease is in the last couple weeks of December, almost exactly one month from now. However, according to a Journal of Commerce (JOC) article by Bill Mongelluzzo, “Some are predicting a continuation of peak season-like conditions not just through the end of the year but continuing until the Chinese New Year holiday beginning in early February (Week 6) as shippers seek to get goods moving prior to the typical two-week shutdown of Chinese factories.”

That would be good news for carriers, but I still think the rush to beat the New Year tariff will result in things slowing down before we hit the new year. We’ll see who’s right on that in about a month.

Click Here for Free Freight Rate Pricing

 

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Let the BlockChain Wars Begin in International Shipping https://www.universalcargo.com/let-the-blockchain-wars-begin-in-international-shipping/ https://www.universalcargo.com/let-the-blockchain-wars-begin-in-international-shipping/#comments Thu, 08 Nov 2018 20:02:12 +0000 https://www.universalcargo.com/?p=9208 There is so much potential for what blockchain technology can bring to the international shipping industry. So much potential, in fact, there's a fight for who can successfully bring blockchain to the industry.




Major international shipping companies just threw their names in the blockchain ring this week.




CMA CGM, Cosco/OOCL, Evergreen, Yang Ming, DP World, Hutchison Ports, PSA, and Shanghai International Port have formed a blockchain consortium utilizing technology from CargoSmart, a shipping tech company owned by Cosco.




The consortium is developing a blockchain platform called Global Shipping Business Network (GSBN). GSBN will be battling for position with Maersk and IBM's TradeLens and Accenture with APL and Kuehne + Nagel onboard.




Read the article to see how this blockchain war is taking shape.

The post Let the BlockChain Wars Begin in International Shipping appeared first on Universal Cargo.

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blockchain

BlockChain Picture by: Wikimedia user Davidstankiewicz

There is so much potential for what blockchain technology can bring to the international shipping industry. So much potential, in fact, there’s a fight for who can successfully bring blockchain to the industry.

Major international shipping companies just threw their names in the blockchain ring this week.

CMA CGM, Cosco/OOCL, Evergreen, Yang Ming, DP World, Hutchison Ports, PSA, and Shanghai International Port have formed a blockchain consortium utilizing technology from CargoSmart, a shipping tech company owned by Cosco.

The consortium is developing a blockchain platform called Global Shipping Business Network (GSBN).

Those first four companies of the consortium listed above are some of the largest carriers in the international shipping industry, spanning two carrier alliances. Three of the carriers—CMA CGM, Cosco/OOCL, and Evergreen—are members of the Ocean Alliance. Pulling in Yang Ming might be a major coup, as that carrier is part of THE Alliance.

Just a little more than a week ago, we blogged about Maersk and IBM’s blockchain collaboration, TradeLens, stalling because of its failure to pull in other major carriers to the platform.

The only carrier other than Maersk that TradeLens has gotten onboard is Pacific International Lines (PIL). PIL isn’t exactly the biggest international shipping carrier in the world, though it is not insignificant. However, just last year, the Journal of Commerce published an article about PIL being the most likely carrier to be taken over next after the buyout of OOCL by Cosco.

That article does point out the strategic alliance PIL has with Cosco due to a vessel sharing agreement between the two carriers for transpacific trade. Perhaps Maersk and IBM thought they were closer to landing Cosco on their platform by getting PIL onboard with TradeLens.

Seeing Cosco join with three other major carriers to form a separate blockchain consortium must be a major disappointment for Maersk and IBM. In fact, from the outside, this blockchain consortium almost looks like backlash from the Maersk/IBM one.

Major carriers don’t want to join a blockchain platform owned by Maersk. Who would want to give a potential competitive advantage to one of their competitors? Especially a competitor that has set out to conquer the competition and declared the industry will shrink to only three global companies.

Launching this consortium with four major carriers is score one for GSBN over TradeLens. The last four companies—DP World, Hutchison Ports, PSA, and Shanghai International Port—are major terminal operators, which are great additions to the blockchain consortium as well.

However, the Maersk/IBM platform is not without its own advantages in this fight. For one, it has a head start. Maersk and IBM have been developing TradeLens since 2016, and the technology/platform itself appears fully ready to go. Who knows how much work and time GSBN will need to be ready. Despite their lack of carrier partners, Maersk and IBM have reportedly signed up about 100 other partners, including port authorities, customs authorities, freight forwarders, and logistics companies, to TradeLens.

It’s also important not to forget that TradeLens and GSBN are not the only names in international shipping blockchain platforms. There’s also Accenture with big industry players APL and Kuehne + Nagel onboard.

So it looks like we’re primed for a three-way battle between TradeLens, GSBN, and Accenture for bringing blockchain-based platforms to the international shipping industry.

Now there is the possibility that multiple blockchain platforms will be introduced to the industry and instead of competing with each other, they’ll network with each other. Such a cooperative outcome would probably be optimal for shippers, bringing a level of transparency to the industry never before seen.

However, when it comes to ocean freight, carriers have long resisted transparency and there is much uncertainty as to how the introduction of blockchain to this industry will play out. So…

Let the blockchain war begin.

Click Here for Free Freight Rate Pricing

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Universal Cargo’s 2018 Halloween Costume Contest – Pictures & Winners https://www.universalcargo.com/universal-cargos-2018-halloween-costume-contest-pictures-winners/ https://www.universalcargo.com/universal-cargos-2018-halloween-costume-contest-pictures-winners/#respond Thu, 01 Nov 2018 22:44:03 +0000 https://www.universalcargo.com/?p=9158 Not only do we work hard at Universal Cargo (UC), but we also like to have a good time. And everyone knows Halloween provides an opportunity for a good time.




So while UC employees were helping your company import and export goods to compete in marketplaces domestic and abroad, they were competing themselves in a Halloween costume contest.




Check out this blog to see pictures from the contest and who won the $150, $75, $25 prizes.

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Not only do we work hard at Universal Cargo (UC), but we also like to have a good time. And everyone knows Halloween provides an opportunity for a good time.

So while UC employees were helping your company import and export goods to compete in marketplaces domestic and abroad, they were competing themselves in a Halloween costume contest.

It turns out members of UC’s team are almost as good at wearing costumes as they are at providing great international shipping services. And in today’s post-Halloween edition of the blog, we’ll share pictures of incredible UC team members in their great costumes.

But first, what’s a costume contest without prizes? And what better prizes are there than cold, hard cash? Well, cold, hard gift cards, rights? They spend like cash.

Here are the prizes for the costume contest:

  • 1st prize $150.00
  • 2nd Prize $75.00
  • 3rd Prize $ 25.00

To judge this contest are UC’s very own CEO and President, respectively, Devin and Shirley Burke. Better them than me. Judging this competition is a hard one.

Okay, you’ve waited long enough for the pictures… But I’ll make you wait another sentence just to be mean. Let’s see those costumes and find out who the winners of the Universal Cargo.

Let’s start with one of my favorites of the contest, Jasmine Palacios from finance.

   

Jasmine knows a mime is a terrible thing to waste, but she’ll see a lion’s share of competition from her own department with Executive Coordinator Gina Jackson dressed as a lion tamer or maybe circus ringmaster. Or maybe those two things are the same thing. I’m not sure. Daddy, why didn’t you take me to the circus? Oh wait, I remember my dad taking me to the circus once as a kid. Guess I can’t blame him for my ignorance.

   

It all has rocket man and Account Executive Robert Hamel worried about his ability to win this competition. But he does bring a lot of creativity to the fight.

   

Speaking of creativity, check out Alesha Barron from operations. She hilariously is going where no one has gone before in this competition:

However, I think Alesha might be getting outdone by Account Manager Laquadra Ponder, who isn’t holding anything back in this competition:

   

But wait, Account Executive Stephanie Hunt thinks she’s going to clean up this competition as the iconic Mr. Clean.

   

I would agree with Stephanie that she’s going to make a clean sweep, except… I found him! A possible winner in this competition, Project Coordinator Wesley Jew.

But just when I thought I found the winner in an 80’s character, out steps someone else who could be from the 80’s. Yet at the same time, Operations Manager at UC’s Atlanta office, Erick Constantino brings a timeless cool to the biker leather.

While Erick kept it black and blue, Account Manager Connie Santana brought the color in an awesome way, celebrating both Halloween and Christmas as Sally from the Nightmare Before Christmas.

   

But will Connie’s rendition of Sally be enough to win? Glad I’m not the one making that decision. A decision that everyone seems to be waiting for in the next picture.

Wait, shouldn’t Waldo be hiding somewhere in the background of this picture instead of everyone else being behind him? That may cost Wesley in this competition. Let’s find out.

Here’s what you’ve been waiting for. The winners announced!

In third place, collecting $25 gift card, is…

Wesley!

Wait, Waldo even brought his dog Woof to the competition? Is that allowed?

In second place, collecting $75 gift card, is…

Laquadra!

She really brought it.

But winning the competition, in first place, collecting the $150 gift card, is…

Gina!

She whipped this competition like a misbehaving lion!

Congratulations Wesley, Laquandra, and Gina, and thanks to everyone who participated. And even more than that…

universal cargo team members in costume

From all of us here at Universal Cargo, we hope you had a great—and, of course, happy—Halloween!

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Maersk & IBM’s BlockChain Collaboration Stalls https://www.universalcargo.com/maersk-ibms-blockchain-collaboration-stalls/ https://www.universalcargo.com/maersk-ibms-blockchain-collaboration-stalls/#respond Tue, 30 Oct 2018 19:21:48 +0000 https://www.universalcargo.com/?p=9154 Big news hit in January when it was announced Maersk and IBM were forming a joint venture. The giants in international shipping and information technology, respectively, were introducing a blockchain-based platform to revolutionize the international shipping industry.




Optimism around Maersk and IBM's blockchain platform was that it would be running strong by the midpoint of this year, creating transparency in the industry and reducing costly delays. However, the year is almost over without Maersk and IBM's platform having caught on.




It is not as though blockchain technology doesn't have huge potential to make improvements in the international shipping industry. In fact, just earlier this month we posted a guest blog by Kristin Savage about the 6 ways blockchain technology can transform logistics.




So what's the problem with IBM and Maersk's blockchain platform, which they've been working on since 2016?




In actuality, there's probably nothing wrong with the platform. The problem is who owns it. Not IBM but Maersk.




Other carriers don't want to sign up for a platform owned by probably their fiercest competitor. That leaves TradeLens, which is what Maersk and IBM's blockchain-based platform is called, in trouble.

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Big news hit in January when it was announced Maersk and IBM were forming a joint venture. The giants in international shipping and information technology, respectively, were introducing a blockchain-based platform to revolutionize the international shipping industry.

This was such a big story that we didn’t just blog about it, we made a video about the joint venture:

YouTube Video

Optimism around Maersk and IBM’s blockchain platform was that it would be running strong by the midpoint of this year, creating transparency in the industry and reducing costly delays. However, the year is almost over without Maersk and IBM’s platform having caught on.

It is not as though blockchain technology doesn’t have huge potential to make improvements in the international shipping industry. In fact, just earlier this month we posted a guest blog by Kristin Savage about the 6 ways blockchain technology can transform logistics.

So what’s the problem with IBM and Maersk’s blockchain platform, which they’ve been working on since 2016?

Global Digital Platform for shipping from Maersk & IBMIn actuality, there’s probably nothing wrong with the platform. The problem is who owns it. Not IBM but Maersk.

Ian Allison puts it well in the opening sentence of a CoinDesk article on the topic:

It’s hard enough to get enterprises that compete with each other to work together as a team, but it’s especially tricky when one of those rivals owns the team.

Other carriers don’t want to sign up for a platform owned by probably their fiercest competitor. That leaves TradeLens, which is what Maersk and IBM’s blockchain-based platform is called, in trouble.

A quote in Allison’s article illustrates just how dire the situation is for the joint venture:

“I won’t mince words here – we do need to get the other carriers on the platform. Without that network, we don’t have a product. That is the reality of the situation.” [Marvin Erdly, head of TradeLens at IBM Blockchain] told CoinDesk.

According to the article, outside of Maersk, only one carrier, Pacific International Lines (PIL), has signed onto the platform.

This response, or lack of response, from Maersk’s competitors isn’t all that surprising. Who wants to give their competition any extra advantage?

According to [Lars Jensen, CEO of SeaIntelligence Consulting, a Copenhagen-based shipping analyst firm], “The other carriers [in response to the blockchain proposition] basically said, ‘sure, maybe – tell us a bit about it. And by the way, if we do this then who owns the IP rights?’ Whereupon they were given the answer that the IP rights would be for Maersk and IBM.” He added:

In a word: no.

Maersk and IBM’s blockchain-based platform isn’t exactly dead in the water.

Allison writes:

…. IBM and Maersk have signed scores of participants from other parts of the shipping supply chain to join the TradeLens platform. These include an array of global port and customs authorities, beneficial cargo owners, freight forwarding and logistics companies (the Port of Montreal and Canada Border and Services Agency are the latest additions).

Allison also brings up that Maersk and IBM have competition when it comes to launching a blockchain-based platform in international shipping:

Accenture has onboarded Singapore-based shipping carrier APL (American President Lines, 12th largest by cargo volume) and freight forwarding giant Kuehne + Nagel to a blockchain pilot involving brewing giant AB InBev and a European customs organization.

Even if Maersk and IBM do manage to pull other carriers into TradeLens and beat the competition from Accenture, that is no guarantee of the success of the new platform. While there certainly is optimism about what a blockchain-based platform can do for the international shipping industry, there is also some skepticism too.

Back in August, Eric Johnson wrote in a Journal of Commerce (JOC) article:

Last week’s launch of Maersk’s and IBM’s blockchain platform, called TradeLens, was met by encouragement but also skepticism of its benefits to shippers, broader claims of productivity, and who’s verifying the latter.

The discussion is a microcosm for how shippers and the broader logistics industry is wrestling with a few key questions regarding blockchain: its cost, its imminent applicability, which parties will provide solutions, and whether there is value in being an early adopter.

That JOC article is certainly a good read for getting a better feel for the conversation about the potential of blockchain technology in the international shipping industry.

How things play out with TradeLens will certainly be worth keeping an eye on.

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Invasive Species on Your Shipping Containers – Action Needed? https://www.universalcargo.com/invasive-species-on-your-shipping-containers-action-needed/ https://www.universalcargo.com/invasive-species-on-your-shipping-containers-action-needed/#comments Thu, 25 Oct 2018 20:31:21 +0000 https://www.universalcargo.com/?p=9150 Something about international shipping has countries worried. And they're considering legislating it, which makes shipping industry professionals nervous.




What's the issue? Invasive species.




What do invasive species have to do with international shipping? Well, shipping is one of the biggest ways invasive species are spread around the world. All the way back in 2012, when "green" was a huge business buzzword (not that "going green" is not still important), we posted a blog about invasive species traveling in the ballast water of freighters, including container ships.




However, there's another way invasive species are traveling through international shipping that's being looked at now: riding on the outside of shipping containers.




Read more and let us know what you think about legislating the invasive species issue in international shipping.

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Import Shipping ContainersSomething about international shipping has countries worried. And they’re considering legislating it, which makes shipping industry professionals nervous.

What’s the issue? Invasive species.

What do invasive species have to do with international shipping? Well, shipping is one of the biggest ways invasive species are spread around the world. All the way back in 2012, when “green” was a huge business buzzword (not that “going green” is not still important), we posted a blog about invasive species traveling in the ballast water of freighters, including container ships.

However, there’s another way invasive species are traveling through international shipping that’s being looked at now: riding on the outside of shipping containers.

Alex Lennane wrote in an article in the Loadstar:

This week GSF met with the International Plant Protection Convention (IPPC) in Arizona. IPPC is investigating concerns that parasites and other invasive species are being spread globally on the outside of containers, contributing to the demise of local ecodiversity.

“It’s a big issue,” said James Hookham, secretary general of GSF. “There is heightened anxiety that contaminating species are travelling on containers via bird poo, snails and parasites.”

Just how serious of a problem is invasive species? Most of us have probably heard the term before, but the National Wildlife Federation (NWF) defines invasive species particularly well:

An invasive species can be any kind of living organism—an amphibian (like the cane toad), plant, insect, fish, fungus, bacteria, or even an organism’s seeds or eggs—that is not native to an ecosystem and causes harm. They can harm the environment, the economy, or even human health. Species that grow and reproduce quickly, and spread aggressively, with potential to cause harm, are given the label “invasive.”

A stat that might surprise many from the NWF is “approximately 42 percent of threatened or endangered species are at risk due to invasive species.”

But many would also be surprised to learn that invasive species also put human health and economies at risk. The most obvious economic area at risk when it comes to invasive species is the agricultural sector. That puts developing nations at particular risk, but developed nations are seriously impacted as well.

The U.S. Fish & Wildlife Service published a fact sheet back in 2012 about the economical impacts of invasive species:

The negative consequences of invasive species are far-reaching, costing the United States billions of dollars in damages every year. Compounding the problem is that these harmful invaders spread at astonishing rates. Such infestations of invasive plants and animals can negatively affect property values, agricultural productivity, public utility operations, native fisheries, tourism, outdoor recreation, and the overall health of an ecosystem.

The problem has not abated since 2012. In fact, it would make sense to think it has only gotten worse given the world trade growth over the last six years.

With these alarming impacts from invasive species traveling the world on the outside of shipping containers, it’s not surprising to read in Lennane’s Loadstar article that “North America, Australia and Japan have all expressed concern over the issue…”

But that sentence doesn’t end with the concern around the globe about the invasive species on shipping containers but by stating, “… the fear among the maritime industry is that the UN or governments will attempt to regulate.”

Regulating the washing of shipping containers to prevent the spread of invasive species would be an extremely challenging thing, perhaps even nightmarish.

Lennane’s article quotes a shipping industry professional who’s trying to express just how difficult regulation on this issue would be:

“We want to help the [International Plant Protection Convention] understand how complex it would be to legislate on the cleaning of the outside of containers, and instead promote awareness of the issue through self-regulation,” added [Secretary General of GSF,] Mr. [James] Hookham…

“A container can be in a yard for two weeks, then on a chassis, then at the terminal – contamination can happen anywhere.”

“It could become like the IMO or VGM rules. Everyone will have to do it, and there’ll be confusion and frustration.”

Remember how frustrated and confused people were about the new Verified Gross Mass rules back in 2016? Oh, people were freaking out. But in the end, it was much ado about nothing as implementation was relatively smooth.

Maybe good rules about the cleaning of shipping containers could go the same way. However, figuring out how to keep shipping containers clean and invasive species free seems like a much more complex problem than weighing loaded containers.

Still, just like safety is an important issue warranting legislation to get accurate weights of shipping containers to prevent injuries and deaths, the problem of invasive species on shipping containers warrants the finding of solutions.

If not through legislation, then how would change come? Self regulation on the issue does not seem likely to produce results. But legislation could cause serious logistical complications and expenses for port operators, carriers, and shippers.

What do you think? Are new laws and regulations needed when it comes to invasive species.

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PierPass 2.0 To Go Into Effect November 19th at Ports of LA & LB https://www.universalcargo.com/pierpass-2-0-to-go-into-effect-november-19th-at-ports-of-la-lb/ https://www.universalcargo.com/pierpass-2-0-to-go-into-effect-november-19th-at-ports-of-la-lb/#respond Thu, 18 Oct 2018 19:30:03 +0000 https://www.universalcargo.com/?p=9143 The changes in fees at the Ports of Los Angeles and Long Beach will go into effect on November 19th.




Back in April we shared in a blog post sharing the good news that PierPass is overhauling the OffPeak program, significantly reducing fees at the ports.




Here are the bullet points we shared in that blog, highlighting the changes being made to the program:




-New appointment-based system
-$31.52 per TEU fee (down from $72.09 per TEU)
-$63.04 on all other sizes (shipping containers of 40′, 45′, etc.)
-Fees apply to all times (not just peak hours)
-Effective August
-Subject to regulatory approval




At the time, we didn't know exactly when those changes would go into effect. Obviously, now we do. Find the rest of the details in the blog.

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YouTube Video

Port of Long BeachThe changes in fees at the Ports of Los Angeles and Long Beach will go into effect on November 19th.

Back in April we shared in a blog post sharing the good news that PierPass is overhauling the OffPeak program, significantly reducing fees at the ports.

Here are the bullet points we shared in that blog, highlighting the changes being made to the program:

  • New appointment-based system
  • $31.52 per TEU fee (down from $72.09 per TEU)
  • $63.04 on all other sizes (shipping containers of 40′, 45′, etc.)
  • Fees apply to all times (not just peak hours)
  • Effective August
  • Subject to regulatory approval

At the time, we didn’t know exactly when those changes would go into effect. Obviously, now we do.

PierPass published a press release this week, announcing the date when the OffPeak program is scheduled to go into effect:

The members of the West Coast MTO Agreement (WCMTOA) today said the revised OffPeak program for providing extended gate hours at the Ports of Los Angeles and Long Beach—informally known as PierPass 2.0—is expected to start on Nov. 19, subject to the conclusion of applicable Federal Maritime Commission procedures.

The press release goes on to share some details about the OffPeak program update while assuring that most shippers and shipping companies won’t have to change their procedures to comply with the changes happening at the ports’ terminals:

In April, PierPass announced it will overhaul the model used by its OffPeak program for truck traffic mitigation at the two adjacent ports, replacing the current congestion-pricing model with an appointment-based system that uses a single flat fee on both daytime and nighttime container moves.

For most port users, the new system won’t require new procedures, but rather an adjustment to current procedures. Most companies moving containers through the ports are already registered with PierPass to claim containers moved during Peak (weekday daytime) hours. Under the revised system, they will claim containers moved at any hour.

There are a few terminals that don’t fall under PierPass’s OffPeak program. However, those terminals are making adjustments to have appointment systems that line up well with the system to make things as smooth as possible at the Ports of Los Angeles and Long Beach. The press release also shares this information:

Because nine of the 12 terminals at the two adjacent ports already use appointment systems, most trucking firms serving the ports are already using these systems. The remaining three terminals, all operated by SSA Marine, are planning to launch their own appointment systems in advance of the implementation. As part of the program update, the terminals have also agreed on common appointment windows and common last appointment times for each shift. As the revised program moves forward, the terminals will consider further common rules and processes to enhance truck efficiency at the ports.

For those who move cargo through the Ports of Los Angeles but have not yet registered with PierPass, here’s the link the press release shared for you to do so:

https://www.pierpass-tmf.org/

All in all, PierPass 2.0 is expected to be good for shippers importing and exporting goods through the Ports of Los Angeles and Long Beach. Beyond the obvious benefit of fees cut more than in half, PierPass 2.0 should spread out truck arrivals for the movement of shipping containers even more than the initial OffPeak program did, continuing to fight and reduce congestion at and around the ports.

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US-China Trade War Saves Carriers’ Year But Future Uncertain https://www.universalcargo.com/us-china-trade-war-saves-carriers-year-but-future-uncertain/ https://www.universalcargo.com/us-china-trade-war-saves-carriers-year-but-future-uncertain/#respond Thu, 11 Oct 2018 20:21:17 +0000 https://www.universalcargo.com/?p=9135 You would think the trade war between the U.S. and China would be nothing but bad for transpacific shipping; however, it may have just saved the year for carriers.




Back in June, we posted a blog asking if ocean carriers are in trouble. The simple answer was yes.




Quoting an American Shipper article by Chris Dupin, we highlighted a really bad number for the start of 2018, continuing a trend of losses from previous years:




 BlueWater Reporting estimates that the 11 largest carriers (not including the privately held Mediterranean Shipping Co.) lost nearly $10.6 billion in 2016, about $1.4 billion in 2017 and already $1.3 billion in the first quarter of this year.




The carriers themselves didn't even have a positive outlook on their situation with MOL President and CEO Junichiro Ikeda saying, “We’re all going to go bust.”




That may still be true, but U.S. shippers really pushed to beat tariff deadlines on importing goods from China, giving carriers a financial boost....

The post US-China Trade War Saves Carriers’ Year But Future Uncertain appeared first on Universal Cargo.

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You would think the trade war between the U.S. and China would be nothing but bad for transpacific shipping; however, it may have just saved the year for carriers.

Back in June, we posted a blog asking if ocean carriers are in trouble. The simple answer was yes.

Quoting an American Shipper article by Chris Dupin, we highlighted a really bad number for the start of 2018, continuing a trend of losses from previous years:

 BlueWater Reporting estimates that the 11 largest carriers (not including the privately held Mediterranean Shipping Co.) lost nearly $10.6 billion in 2016, about $1.4 billion in 2017 and already $1.3 billion in the first quarter of this year.

The carriers themselves didn’t even have a positive outlook on their situation with MOL President and CEO Junichiro Ikeda saying, “We’re all going to go bust.”

That may still be true, but U.S. shippers really pushed to beat tariff deadlines on importing goods from China, giving carriers a financial boost.  Sam Whelan reported in the Loadstar:

The US-China trade war has seemed “positive” for transpacific shipping lines, so far, with importers rushing to beat tariff deadlines.

APL chief executive Nicolas Sartini believes the industry should still achieve around 5% trade growth this year.

“So far it’s paradoxical, because the trade war has been rather positive for shipping companies,” he told delegates today at the TPM Asia conference in Shenzhen.

“This is probably because capacity was really low in the market before peak season, as people were hesitant and afraid of the situation.

“But now the peak season is very strong and the US economy is doing extremely well – for the first time the trade growth is superior to the unemployment rate which is quite remarkable. But the most important factor is that many US importers are anticipating tariff increases and are bringing cargo into the US ahead of when they would have normally.

“We have yet another threat, on 1 January, of potential increases to 25% tariffs, so we are expecting – following feedback from customers today – another rush of cargo in the last quarter.”

These cargo pushes, increasing demand and helping spot freight rates increase (something carriers very much needed in a year when their contracts with big shippers are actually for lower rates than they managed to negotiate the year before) have been huge in boosting carriers’ bid not to end the year in the red.

Carriers have also helped their own cause by doing an uncharacteristically good job of managing capacity through the peak season to keep freight rates high in the spot market. Bill Mongelluzzo wrote in a great article in the Journal of Commerce (JOC):

Carriers, indiviually and through their vessel-sharing alliances (VSAs), have successfully balanced supply and demand in what has proven to be a volatile shipping environment marked by a US trade war with China, a spike in bunker fuel costs of $55 to $60 per TEU, and soaring truck and intermodal rail rates, all of which are contributing to higher transportation costs for retailers and manufacturers.

At least in terms of managing supply, carriers and their VSAs seem intent on avoiding the rate deterioration that normally occurs in the fourth quarter when most of the holiday merchandise has been shipped and before factories in Asia begin ramping up exports in weeks leading up to the Chinese New Year, which in 2019 falls on Feb. 5.

Carriers will need to maintain that discipline and even increase it with the uncertainty ahead. After all, what goes up, must come down. Whelan adds in his Loadstar article:

One cargo owner, who controls around 30,000 teu, told The Loadstar her company had shipped a “tremendous amount” of business early to try and avoid the tariffs – “and we’ll continue to ship even higher volumes in the run-up to the end of the year, as in our view the tariff hikes are unlikely to stop”.

But she added: “Unfortunate for us, of course, is that if we ship all this business in 2018, we will have a hole in our business in 2019, regardless of the optimism of the American consumer. It’s going to be turbulent and we’re having to look at alternatives, but it’s very, very difficult to move manufacturing in the short term.”

A run up on importing goods does mean that later when those goods would normally be imported, it will be a lean time for shipping. Not to mention that after new tariff deadlines hit, the amount of goods imported from China in general will likely decrease.

However, it is hard to tell exactly how big the impact will be on importing and exporting to and from China. Many importers are applying for tariff exemptions on their import goods. Others will move their sourcing to other countries. As long as it isn’t domestic manufacturing that they find, carriers will still have the business of shipping the goods across the ocean.

Expectations are that carriers will continue making strides in 2019 in managing capacity, as they’ve begun to do here at the end of 2018, moving away from the huge overcapacity problem that has plagued carriers for years, resulting in losses measured by the billions, bankruptcy, mergers, and buyouts.

That doesn’t mean carriers don’t still have challenges. That statement about all the carriers going bust by MOL’s president and CEO was in reference to the upcoming sulphur cap on fuel. Rules to reduce the greenhouse gas emissions from container ships will have a major financial impact on carriers.

But for right now, it looks like when the numbers are out on the final quarter of the year, those numbers will be quite good. And strangely, the U.S.-China trade war will have had a lot to do with it. Of course, I don’t think anyone would argue the trade war will be a good thing for transpacific trade overall.

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Section 301: You Might Be Eligible for a Tariff Exclusion https://www.universalcargo.com/section-301-you-might-be-eligible-for-a-tariff-exclusion/ https://www.universalcargo.com/section-301-you-might-be-eligible-for-a-tariff-exclusion/#comments Thu, 04 Oct 2018 15:32:15 +0000 https://www.universalcargo.com/?p=9129 At Universal Cargo, we help many businesses import goods from China. This means many of our customers are being affected by the tariff increases President Trump is imposing on Chinese imports. However, many of those clients may be eligible for exclusion from these tariffs.




We're ready to help our clients apply for these much needed exemptions.




Right now, the window is open for importers of Chinese goods to apply for exemption for items on tariff lists 1 and 2. For list 1 items, shippers have a little under a week left to apply. For items on list 2, there are about two and a half months left.




Exclusion procedures for the now finalized list 3 should be coming soon.




Partnering with our house customs broker INLT, Universal Cargo is offering a service to draft a statement written to defend our clients' right to continue importing their products as is with no additional duty.




We talked to a few customers who were getting quotes from attorneys from $5k to $25k for this service. INLT is helping us provide this service for a fraction of the cost: around $1k-$2k depending on the amount of work required around the products being imported.

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YouTube Video

section 301 chinese goods exemptionAt Universal Cargo, we help many businesses import goods from China. This means many of our customers are being affected by the tariff increases President Trump is imposing on Chinese imports. However, many of those clients may be eligible for exclusion from these tariffs.

We’re ready to help our clients apply for these much needed exemptions.

Right now, the window is open for importers of Chinese goods to apply for exemption on items in tariff lists 1 and 2. For list 1 items, shippers have a little under a week left to apply. For items on list 2, there are about two and a half months left.

Exclusion procedures for the now finalized list 3 should be coming soon.

Partnering with our house customs broker INLT, Universal Cargo is offering a service to draft a statement written to defend our clients’ right to continue importing their products as is, with no additional duty.

We talked to a few customers who were getting quotes from attorneys ranging from $5k to $25k for this service. INLT is helping us provide this service for a fraction of the cost: around $1k-$2k depending on the amount of work required around the products being imported.

Below is a bulletin we’ve put together about the requirements that need to be met for a product to be exempted. Please contact your Account Manager about this service or call us at 866.826.2276.

Section 301: You might be eligible for an exclusion

During the notice and comment process, a number of importers asserted that specific products only were available from China, that the imposition of additional duties on those products would cause severe economic harm to U.S. interests, and that the products were not strategically important or related to the ‘‘Made in China 2025’’ initiative. In light of such concerns, the Trade Representative established a process by which U.S. stakeholders may request those particular products classified within a covered HTSUS subheading be excluded from the additional duties.

What merits an exclusion and how to get one

The criteria is simple, but subjective: (1) only available from China, (2) severe economic harm to U.S. interests, and (3) not strategically important or related to the “Made in China 2025” initiative. So how do we prove this?

Identification

This is no ordinary description. Using a range of physical characteristics, we’ll define the product as narrowly as possible. Remember that the USTR already determined, after weeks of comments and testimony, that this product, at the 8-digit subheading, merits an additional duty under Section 301. What separates your product from every other product in this subheading?

HTSUS

The 10-digit HTSUS of the product.

Enforcement

This isn’t required and it’s not your job to tell U.S. Customs how to administer the exclusion, but it could help.

Statistics

Provide the annual quantity and value of the Chinese-origin product that the requestor purchased in each of the last three years.

There are deadlines

At this time, the USTR has not indicated whether parties may also request exclusions from the additional tariffs. However, we expect procedures for exclusions requests to be published soon, conducted similarly to the way it was done with Lists 1 and 2.

Importers wishing to request exclusion from the now final List 3, or Lists 1 and 2, should contact your Account Executive. The deadline for requesting an exclusion from List 1 is October 9, 2018 and the deadline or requesting an exclusion from List 2 is December 18, 2018.

FIND OUT MORE BY CALLING 866.826.2276

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Will Chassis Tariff Increase Costs for Shippers Or Benefit U.S. Manufacturers? https://www.universalcargo.com/will-chassis-tariff-increase-costs-for-shippers-or-benefit-u-s-manufacturers/ https://www.universalcargo.com/will-chassis-tariff-increase-costs-for-shippers-or-benefit-u-s-manufacturers/#comments Thu, 27 Sep 2018 21:15:46 +0000 https://www.universalcargo.com/?p=9127 For obvious reasons, U.S. shippers who import from China tend to be against the tariff increases President Trump is imposing on China. There have been hearings over items listed in the new tariff increases, and some of those items even got exempted. However, there is a particular item that remains on the list that can have a significant impact for shippers as a whole.




That item is chassis.




There's a debate brewing about whether these tariffs are a good or bad thing. Will they increase costs for shippers? Or will they benefit U.S. manufacturers of chassis and create jobs?

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chassis-hanjin-pool-of-pools-congestionFor obvious reasons, U.S. shippers who import from China tend to be against the tariff increases President Trump is imposing on China. There have been hearings over items listed in the new tariff increases, and some of those items even got exempted. However, there is a particular item that remains on the list that can have a significant impact for shippers as a whole.

That item is chassis.

Ari Ashe reported in the Journal of Commerce (JOC):

Marine terminals were spared a multimillion-dollar tariff that could have placed a crimp into projects to expand US ports, but chassis providers and users didn’t get a reprieve amid a dispute between US and Chinese equipment manufacturers. Shippers will ultimately suffer since chassis lessors will pass along these extra costs by raising prices on daily rentals or long-term leases.

The tariff that Ashe writes terminals were spared is on port cranes. Certainly, that is a sigh of relief for port operators and would impact the shipping industry. However, the tariffs remaining in place on chassis from China may have a more direct impact on shippers than the one on port cranes would have had.

Chassis are crucial in the moving of shipping containers. It’s impossible to imagine an increase in the cost of chassis wouldn’t increase shippers’ movement of goods.

How big will the increase in costs be? Well, in a separate JOC article about the hearings over the tariffed items, including chassis, Ashe writes:

Chassis lessors believe a 25 percent tariff could cost $100 million to $150 million to purchase 45,000 new units to replace the aging fleet, a cost that would ultimately be passed onto cargo owners and consumers. DirectChassis Link Inc. (DCLI), for example, spent $140 million in new Chinese-made chassis in the past four years, so a tariff would have cost an additional $35 million.

However, there is debate over this chassis tariff, just as there are debates about protectionist policies in general. The other side of the argument is that chassis can be bought from U.S. producers instead of Chinese manufacturers, mitigating the financial impact of this tariff while supporting, possibly even creating, U.S. jobs.

Cheetah Chassis, a U.S. producer of container chassis, argued for the tariff on chassis. In fact, Cheetah Chassis wrote letters petitioning to get chassis on the tariff list when at first chassis were omitted.

Julia Horowitz wrote a CNN article back in June about Cheetah Chassis and its president Garry Hartman seeking chassis to be added to the tariff list before chassis were included. The article highlights how Cheetah Chassis suffered due to China’s entrance into the U.S. chassis market:

At its peak in the 1990s, Cheetah had more than 500 workers and produced about 240 trailers a week. But over the past 10 years, Cheetah has steadily been pushed out of the US market by a Chinese state-backed company, which Hartman believes gets unfair support from Beijing. Now Cheetah only makes 60 chassis a week.

The CNN article does a good job of highlighting the U.S. manufacturer’s view of this issue.

Chinese government subsidized steel, intellectual property theft, and pushing out U.S. chassis manufacturers through unfairly low prices highlight the ways Cheetah Chassis claims Shenzhen-based equipment giant China International Marine Containers (CIMC) managed to dominate the US container chassis market after entering it in the mid 2000s to the point of Cheetah losing all of its large orders.

Hartman sees the tariff on chassis as a way of leveling the North American playing field between U.S. and Chinese producers of chassis and possibly a chance at saving his company. In the CNN article, Ashe includes quotes from a letter Cheetah’s lawyer sent to Trade Representative Robert Lighthizer:

“Cheetah Chassis has already been forced into a small portion of the market,” the letter said. “If CIMC’s unfair practices are left unchecked, it is likely that CIMC will quickly take over the entire US market for container chassis, effectively creating a virtual monopoly of the domestic chassis market controlled by Chinese [state-owned enterprises].” The letter added that “the very free flow of commerce within the United States is at risk.”

Now we’ll see what the results of the tariff on chassis is. Will chassis costs increase with those costs being passed on to shippers or will U.S. manufacturers of chassis benefit, growing as chassis buyers and lessors turn to them to avoid the tariff?

My money is on the results landing somewhere in the middle.

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2 Solutions for Shippers Dealing with Tariffs on Chinese Goods https://www.universalcargo.com/2-solutions-for-shippers-dealing-with-tariffs-on-chinese-goods/ https://www.universalcargo.com/2-solutions-for-shippers-dealing-with-tariffs-on-chinese-goods/#respond Thu, 20 Sep 2018 20:45:15 +0000 https://www.universalcargo.com/?p=9123 This blog provides two solutions shippers can utilize to mitigate or avoid financial losses from the new tariffs the U.S. is levying on Chinese goods. But first, a quick look at what's happening with tariffs between the two countries.




The trade war between the U.S. and China is officially full-blown. 10% tariffs on $200 billion worth of Chinese products will hit on Monday. While there is some good news for U.S. importers that these tariffs were reduced to 10% from 25%, the tariffs are obviously still very costly for businesses importing goods from China. And when the new year rolls around, the costs increase; the tariffs are set to jump to 25% on January 1st.

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YouTube Video

President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

This blog provides two solutions shippers can utilize to mitigate or avoid financial losses from the new tariffs the U.S. is levying on Chinese goods. But first, a quick look at what’s happening with tariffs between the two countries.

The trade war between the U.S. and China is officially full-blown. 10% tariffs on $200 billion worth of Chinese products will hit on Monday. While there is some good news for U.S. importers that these tariffs were reduced to 10% from 25%, the tariffs are obviously still very costly for businesses importing goods from China. And when the new year rolls around, the costs increase; the tariffs are set to jump to 25% on January 1st.

That tariff jump is not the end of the increasing of U.S. duties on Chinese goods. A few days ago, September 17th, President Donald Trump said the following in a statement:

Today, following seven weeks of public notice, hearings, and extensive opportunities for comment, I directed the United States Trade Representative (USTR) to proceed with placing additional tariffs on roughly $200 billion of imports from China.  The tariffs will take effect on September 24, 2018, and be set at a level of 10 percent until the end of the year.  On January 1, the tariffs will rise to 25 percent.  Further, if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.

It certainly seems like President Trump will be moving the U.S. into that third phase of tariff increases as Lingling Wei and Jacob M. Schlesinger reported yesterday in the Wall Street Journal that China is retaliating:

“The Chinese government said Tuesday it plans to impose new tariffs on $60 billion in U.S. exports…”

So as this trade war continues to escalate, what can shippers who import from China do?

Here are two solutions that Universal Cargo can help you with to keep your business profitable.

Solution 1:  Request Exclusion

We can help you through the tariff exclusion process that can keep you from paying these tariffs on your imports.

Universal Cargo’s own Cherry Chen blogged about a Section 301 Tariff Exclusion Process that shippers can utilize to keep these tariffs from raising their costs on products they sell, but can this process actually work for your imports?

Big companies like Apple are managing to get exclusions because they can afford hiring attorneys to fight on their behalf. Small to medium sized importers often can’t pay the $5k-30k, depending on the size of the job, attorneys would normally charge for these types of services.

Our customshouse broker, INLT, here at Universal Cargo can help our clients submit the letter or request for exclusion, fighting on our clients’ behalf to get their imports from China excluded from these costly tariffs. All this at a fraction of the cost of what attorneys are typically charging for this service.

You can find out more by calling your Account Manager or giving Universal Cargo a call at:

866.826.2276

Solution 2: Source Away from China

The other solution to these rising costs on imports from China is to import your goods from other countries. This is another area Universal Cargo can help you with.

The entire point of importing from China is getting goods or materials for goods you manufacture at a cost that allows your business to make a profit. If these tariffs are killing or cutting into your profits, it could be time to consider another option for sourcing your goods or materials.

Let our dedicated team help you with a better sourcing option for your business.

Click Here for Free Freight Rate Pricing

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Hurricane Florence & Super Typhoon Mangkhat Updates https://www.universalcargo.com/hurricane-florence-super-typhoon-mangkhat-updates/ https://www.universalcargo.com/hurricane-florence-super-typhoon-mangkhat-updates/#respond Tue, 18 Sep 2018 18:37:18 +0000 https://www.universalcargo.com/?p=9120 Hurricane Florence and Super Typhoon Mangkhat struck over the weekend, bringing tragedy with them.

This article gives an update on the aftermath of these two devastating storms that took lives, homes, businesses, and also are impacting international shipping.

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Super Typhoon Mangkhut

Super Typhoon Mangkhut

Hurricane Florence and Super Typhoon Mangkhat struck over the weekend, bringing tragedy with them.

The associated press has reported thirty-two people dead from Hurricane Florence. A majority of the victims, twenty-five people, in North Carolina.

Super Typhoon Mangkhat hit the Phillipines hard before striking China. An article by by Euan McKirdy, Joshua Berlinger and Ben Westcott of CNN that I found posted by Axis of Logic reports:

Worst hit by far was the Philippines, where at least 54 people were killed when the violent, then-super typhoon — known locally as Ompong — cut a swath through northern Luzon.

The storm caused flooding and landslides on Luzon, particularly in the town of Itogon, Benguet, where landslides have killed at least 35 and left dozens missing, many of whom are believed to be buried under thick mud.

When the super typhoon moved to China, it claimed additional victims, but the death toll was far less there than in the Philippines according to the article:

More than three million people have been moved to safety in southern China as Typhoon Mangkhut moved northward and continued to wreak havoc across the region.

Mangkhut made landfall in Guangdong, China’s most populous province, late afternoon Sunday, killing four people before heading west into neighboring Guangxi province around midnight.

As many as 391 people in Hong Kong sought medical attention Sunday during the storm, according to the local city government. Over 1,500 people sought refuge at temporary shelters.

NASA image of Hurricane Florence

NASA image of Hurricane Florence

Obviously these two storms stopped international shipping operations by closing ports and keeping ships from sailing.

Kim Link-Wills reported in American Shipper giving the details on what’s going on at U.S. ports affected by the hurricane:

The Ports of Wilmington and Morehead City will remained closed through Wednesday in the aftermath of Hurricane Florence.

“Hurricane Florence has had a major impact on North Carolina and the Ports of Wilmington and Morehead City,” North Carolina Ports tweeted.

The South Carolina Ports Authority said vessel operations at the Port of Charleston resumed at 4 a.m. Monday. Norfolk Southern and CSX intermodal operations also resumed early Monday morning.

Maersk said the Wando Terminal at the Port of Charleston was experiencing congestion, but that is expected to be resolved this week.

Inland Port Greer reported normal gate and terminal operations and Norfolk Southern service in South Carolina between Charleston and Greer had resumed Monday.

Inland Port Dillon remained closed Monday. The port was expected to reopen at 6 a.m. Tuesday. The first CSX train is scheduled to arrive in Dillon from Charleston on Wednesday.

SCPA also said that Georgetown reopened at 8 a.m. Monday.

In Georgia, normal gate operations are being observed at the Port of Savannah. “However, the vessels are only being permitted to sail on a case-by-case basis,” Maersk said.

Expect some congestion and delays around those ports as trucks are also held up by road closures caused by flooding.

Disruptions at the Port of Hong Kong and other major ports in the region hit by Super Typhoon Mangkhat are still being assessed. But congestion and delays can obviously be expected during the recovery process.

Hellenic Shipping News reported:

Bunker operations at the port of Hong Kong was suspended Monday due to Typhoon Mangkhut, which made landfall on Sunday.

While the Hong Kong Observatory has lowered the typhoon warning from strong winds signal T3 to standby signal T1 at 2:40 pm local time (0640 GMT), the wind was still strong, accompanied by high swells, market sources said.
“We can deliver in-port location but terminal loadings are still suspended, and pilotage has not resumed,” a supplier said Monday.

Terminal and barge congestion is expected when operations resume.

“Loadings at the terminal will be jammed from Tuesday, barges are currently empty,” another supplier said, adding that operations were expected to resume on Tuesday.

Please give thoughts and prayers to the victims of Hurricane Florence and Super Typhoon Mangkhut who are injured, have lost family members and friends, as well as those who have suffered damage and loss of homes, property, and businesses.

You can also give financial support.

One way to do so is by donating to Red Cross’s disaster relief, which is working to help victims in the aftermath of both of these deadly storms.

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Hurricane Florence Hits U.S. & Super Typhoon Mangkhat Heading for China https://www.universalcargo.com/hurricane-florence-hits-u-s-super-typhoon-mangkhat-heading-for-china/ https://www.universalcargo.com/hurricane-florence-hits-u-s-super-typhoon-mangkhat-heading-for-china/#respond Thu, 13 Sep 2018 18:59:59 +0000 https://www.universalcargo.com/?p=9111 When it comes to international shipping in regards to the U.S. and China, trade war has been dominating the news. But as this week draws to a close, two huge, potentially deadly storms are hitting the countries.




This time of year, typhoons and hurricanes present threats to property, businesses, and worst of all, people's lives. Of course, typhoons and hurricanes also tend to disrupt international shipping at ports, which are particularly likely to be affected by the storms because of their susceptible locations on coasts.

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NASA image of Hurricane Florence

NASA image of Hurricane Florence

When it comes to international shipping in regards to the U.S. and China, trade war has been dominating the news. But as this week draws to a close, two huge, potentially deadly storms are hitting the countries.

This time of year, typhoons and hurricanes present threats to property, businesses, and worst of all, people’s lives. Of course, typhoons and hurricanes also tend to disrupt international shipping at ports, which are particularly likely to be affected by the storms because of their susceptible locations on coasts.

Hurricane Florence is particularly scary for people in the Carolinas as it’s hitting there right now. Holly Yan and Nicole Chavez report in CNN:

Just as Hurricane Florence closes in on the Southeast, the area covered by hurricane-force winds has doubled — meaning far more people will get blasted with winds 74 mph or greater.

By late Thursday afternoon, the Carolina coasts can expect winds topping 80 mph. And that’s just the prelude to untold days of misery.
What also makes Florence extremely dangerous are the deadly storm surges, mammoth coastal flooding and historic rainfall expected far inland.

When it comes to international shipping, Hurricane Florence obviously caused the Coast Guard to shut down the Port of Charleston. However, there are more U.S. ports affected.

Here are some impacts of Hurricane Florence on ports from an American Shipper article by Chris Gillis that was posted yesterday:

The port authorities for North Carolina and South Carolina have issued orders that their marine terminals will be closed to both truck and vessel traffic Thursday and Friday…

Specifically, the North Carolina Ports Authority’s facilities at Wilmington and Morehead City will be closed, and the South Carolina Ports Authority will shut down its terminals at Charleston, Greer, Dillon and Georgetown. The ports’ operations could remain closed through the weekend for post-storm evaluations.

While not anticipating a direct hit from the hurricane, Virginia and Maryland also are preparing for possible heavy rains and up to 30 mph wind gusts from the storm.

… per the Coast Guard, the Port of Virginia’s main shipping channel remains closed at the Virginia Capes and no vessels are currently entering or leaving the port.

The Maryland Port Administration also cautioned its marine terminal tenants to make preparations for the storm, including “securing missile hazards and clearing nonessential equipment and gear from berths and piers.”

Still, that disruption to international shipping could be far less than the disruption Super Typhoon Mangkhut will cause on the other side of the world.

Gerry Mullany and Felipe Villamor reported in the New York Times:

Super Typhoon Mangkhut is on track to hit the northern Philippines with its strongest winds on Friday before striking Taiwan and then possibly veering south toward Hong Kong and mainland China.

As many as 43 million people could be exposed to cyclone-strength winds, according to the Global Disaster Alert and Coordination System. Its winds are expected to intensify Thursday and Friday — reaching speeds as high as 161 m.p.h. — before weakening Saturday, the Hong Kong Observatory said.

A South China Morning Post article about the costs of typhoons like Super Typhoon Mangkhut reported:

A.P. Moller-Maersk, the Danish line, said there is a “high risk” the typhoon could affect its operations in Hong Kong and the Pearl River Delta, which may require port operations to be suspended and its vessels to be moved.

The company is “evaluating potential port congestion following the typhoon, however, most our planned vessel calls are currently expected to maintain their schedule”, a Maersk spokesman said.

Orient Overseas Container Line, a Hong Kong-based unit of China’s Cosco Shipping Holdings, has been diverting its ships at sea from the path of the storm and the company will divert them “when and where it is safe to operate”, said Mark Wong, a company spokesman.

Super Typhoon Mangkhut is coming right on the heels of Typhoon Barijat, which just affected China’s shipping. A CNN Wire article reported:

Around 12,000 people have been evacuated from low-lying parts of China’s Guangdong province and shipping halted ahead of the arrival of Typhoon Barijat Thursday, according to state media.

But the real concern is Super Typhoon Mangkhut, which is still gathering strength as it nears the northern Philippines.

Super Typhoon Mangkhut is the equivalent of a category 5 hurricane, making it potentially devastating. Thoughts and prayers are with the people in its path as well as those in the path of Hurricane Florence.

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Women of UC Accounting Staff Buck Sexist Trend in International Shipping https://www.universalcargo.com/women-of-uc-accounting-staff-buck-sexist-trend-in-international-shipping/ https://www.universalcargo.com/women-of-uc-accounting-staff-buck-sexist-trend-in-international-shipping/#respond Tue, 11 Sep 2018 18:56:33 +0000 https://www.universalcargo.com/?p=9107 The international shipping industry has traditionally been a male-dominated one. In fact, it still seems to be largely behind when it comes to gender equality in the workplace. 




A year ago, Eva Grey wrote a great article published by Ship Technology called "Women in shipping: pushing for gender diversity" that highlights just how bad gender disparity is in international shipping:




While the sector has come a long way from the earliest voyages, when nautical folklore believed that having women on ships could bring bad luck, the profession is still utterly male dominated and the International Transport Workers Federation (ITF) estimates that today, only 2% of global seafarers are women.




While Grey's article is focused on seafarers, it does point out that there is a global gender gap with a scope well beyond international shipping:




This year’s report from the International Labour Organization (ILO) found that “gender gaps remain one of the most pressing challenges facing the world of work.” The global labour force participation rate for women is nearly 27 percentage points lower than the rate for men. 




However, the problem is so pressing in the maritime sector that a couple months ago, in July, 40 maritime companies signed a gender equality pledge with the "intent to improve fairness, equality and inclusion in the sector," as reported in a press release from Maritime UK.




While the lack of gender equality is a significant problem in the workplace overall, and particularly in the international shipping industry, that is not a problem within the culture of Universal Cargo (UC).




As is highlighted by this Universal Cargo Family Spotlight, UC has many incredible women professionals as key members of our team and leadership whom we'd like to introduce to you.

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The international shipping industry has traditionally been a male-dominated one. In fact, it still seems to be largely behind when it comes to gender equality in the workplace.

A year ago, Eva Grey wrote a great article published by Ship Technology called “Women in shipping: pushing for gender diversity” that highlights just how bad gender disparity is in international shipping:

While the sector has come a long way from the earliest voyages, when nautical folklore believed that having women on ships could bring bad luck, the profession is still utterly male dominated and the International Transport Workers Federation (ITF) estimates that today, only 2% of global seafarers are women.

While Grey’s article is focused on seafarers, it does point out that there is a global gender gap with a scope well beyond international shipping:

This year’s report from the International Labour Organization (ILO) found that “gender gaps remain one of the most pressing challenges facing the world of work.” The global labour force participation rate for women is nearly 27 percentage points lower than the rate for men.

However, the problem is so pressing in the maritime sector that a couple months ago, in July, 40 maritime companies signed a gender equality pledge with the “intent to improve fairness, equality and inclusion in the sector,” as reported in a press release from Maritime UK.

While the lack of gender equality is a significant problem in the workplace overall, and particularly in the international shipping industry, that is not a problem within the culture of Universal Cargo (UC).

As is highlighted by this Universal Cargo Family Spotlight, UC has many incredible women professionals as key members of our team and leadership whom we’d like to introduce to you.

Universal Cargo Family Spotlight is a new series in our blog that highlights members of UC’s team, so you can get to know us a little better. This edition focuses on the amazing women of UC’s accounting staff.

Universal Cargo Accounting Staff

UC Accounting Staff (from left to right): UC President Shirley Burke, Executive Coordinator of Finance Gina Jackson, Finance Staff Jasmine Palacios, Manager of Finance Mayra Munoz, & A/R Credit Coordinator Karol Tehrani

Unfortunately, UC’s Director of Finance J.T. Rapport, CPA wasn’t present when the above picture was taken, but she’s also a key member of the accounting team that is shown enjoying a meal with UC President Shirley Burke.

There really wasn’t a plan to go out and specifically hire women to fill these accounting roles. UC was just looking for the best people for the jobs, which led UC to getting an incredible staff of women on the accounting team that Burke calls “the financial engine of UC.” She says, “They keep [UC] running and humming along like a well oiled machine.” And she’s absolutely right.

Of course, we already know this is a fantastic group of professionals who are great at their jobs. The point of the Universal Cargo Family Spotlight series is to get to know members of the UC team a little bit better on a personal level. Fortunately, each member of the accounting team shared some of their personal goals and desires, which add meaning and purpose to work and life.

Shirley Burke is a fantastic example of this. As President of UC, her personal goals and desires helped shape the company right down to its mission statement. She lives and works by two mission statements, the one that UC shares and one for her life as a whole:

  • “To enrich the lives of those within our company and all those we do business with.”
  •  “To influence, teach, nurture all those around me to prosper, succeed & grow.”

Below are bullet points about each accounting team, including how they’re known by the rest of the team and items they shared of their personal lives, desires, and interests so you can get to know them a little bit better:

J.T. Rapport, CPA – Director of Finance

  • great leader
  • very nice person
  • warm hearted, very caring
  • loves cats
  • loves working and teaching others
  • enjoys the peace and quiet.

Jasmine Palacios – Finance Staff

  • working on passing CPA exam
  • loves caring for her 3 cats
  • enjoys hiking
  • enjoys exercising
  • loves to travel (enjoys sightseeing)

Karol Tehrani – A/R Credit Coordinator

  • very family oriented.
  • loves hosting Friday night dinners
  • enjoys hanging out with friends
  • happily married and hopes to grow her family soon.
  • loves lending a helping hand.

Gina Jackson – Executive Coordinator of Finance

  • enjoys spending time with her church family.
  • loves to make people laugh
  • loves helping others; very giving
  • loves the peace and quiet.
  • loves eating healthy
  • loves music / worship

Mayra Munoz – Manager of Finance

  • working on becoming a better leader
  • very family oriented
  • loves to go shopping
  • working on becoming a better cook
  • has a 2-year-old son who loves soccer
  • loves to play and teach her son new things.
  • love the peace and quiet.
  • enjoys traveling and cherishes every moment with her son.

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Is Sea/Air the New Answer for International Shipping? https://www.universalcargo.com/is-sea-air-the-new-answer-for-international-shipping/ https://www.universalcargo.com/is-sea-air-the-new-answer-for-international-shipping/#comments Thu, 06 Sep 2018 21:22:27 +0000 https://www.universalcargo.com/?p=9101 Traditionally, when it comes to international shipping, there are two major modes to choose between: ocean freight and air freight. But now, shippers are starting to eye a combination service called sea/air.

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Traditionally, when it comes to international shipping, there are two major modes to choose between: ocean freight and air freight. But now, shippers are starting to eye a combination service called sea/air.

Universal Cargo offers both ocean and air freight services, and in order to help shippers, especially new shippers, consider which mode is best for them, we’ve posted blogs in the past comparing ocean and air shipping:

4 Factors for Considering Air Freight Vs. Ocean Freight

Air Freight Vs. Ocean Shipping 8 Round Fight—Which Will Win Your Cargo?

We even created this video on the subject:

YouTube Video

Both modes have their advantages and disadvantages when comparing them to each other. Is it possible that sea/air could offer the advantages of both?

For example, air freight offers the advantage of speed over ocean freight, but it also tends to be more expensive. Perhaps sea/air could be less expensive than regular air freight while still being faster than ocean shipping. From a theoretical, cursory perspective, sea/air should split the difference between the two major modes of international shipping.

Of course, when it comes to real world execution of sea/air, it is not so simple as saying costs will be halfway between the prices of ocean and air shipping nor as saying the speed will be the average between the time ocean freight and air freight shipping take.

The complication of moving cargo from one mode to another will be something to consider as an added difficulty of sea/air; however, international shipping already involves moving cargo between modes, including truck and rail beyond ship or plane. Of course, those who import or export standard shipping containers of goods would likely find sea/air much more complicated in terms of steps than utilizing a system of trucks, rail, and containerships set up for the easy movement of 20 and 40 FEU containers.

What got me thinking about sea/air was an article by Alex Lennane in the Loadstar with the headline: Shippers seeking reliability are eyeing sea/air services to avoid congestion.

Congestion is certainly a major problem that pops up in international shipping. We’ve had many articles and news stories in this very blog highlighting congestion at the ports. Usually, those articles are focused on congestion at sea ports, like the congestion at U.S. West Coast ports during the 2014-15 contentious ILWU contract negotiations or the congestion at Shanghai’s Yangshen Port right after the carrier alliance reshuffle last year. However, the titular congestion in Lennane’s article seems to be airport congestion with freight. Lennane writes:

“Congestion last year meant air freight wasn’t that quick anyway,” said one forwarder. “People were struggling with the reliability of both air and sea.”

Reliability and speed are big factors in why shippers choose air freight over ocean freight. Air tends to win both of those categories, and often shippers are willing to pay more to ship by air for those advantages.

It’s not surprising that failures to deliver the speed and reliability shippers expect from air would cause importers and exporters to look at other options.

Sea/air is a pretty new way to go about international shipping. It has had viability issues, but is starting to become a legitimate choice as a tweener option, creating the possibility for speed and cost between ocean and air freight shipping. Here’s a quick look at advantages that have shippers looking at sea/air pointed out in Lennane’s article:

“If the air cost out of Shanghai is $3 per kg, sea/air can be done for about $2.”

“A lot of sea/air is to repair delays from the factory,” he explained. “When shippers are running a week late with production, sea/air is a viable option to recover the delay without taking the full air freight cost. And many importers don’t want freight arriving too early, so sea/air can be taken as a preference.”

Sea/air transit times into Europe from South-east Asia to Singapore are 10-12 days, while from the Far East via Dubai it can be 13-15 days.

As sea/air options continue to develop in availability, reliability, and viability, it could end up having a significant impact on how shippers ship.

Click Here for Free Freight Rate Pricing

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Freight Philanthropy: CPAF Gala to End Domestic & Sexual Violence https://www.universalcargo.com/freight-philanthropy-cpaf-gala-to-end-domestic-sexual-violence/ https://www.universalcargo.com/freight-philanthropy-cpaf-gala-to-end-domestic-sexual-violence/#respond Thu, 30 Aug 2018 17:55:21 +0000 https://www.universalcargo.com/?p=9092 The values of Universal Cargo’s President Shirley Burke and CEO Devin Burke translated into the values of their company, shaping Universal Cargo’s mission statement to enrich the lives of those within the company as well as those they do business with. However, the Burke’s are not interested in stopping with just enriching the lives of people within their business circles. […]

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The values of Universal Cargo’s President Shirley Burke and CEO Devin Burke translated into the values of their company, shaping Universal Cargo’s mission statement to enrich the lives of those within the company as well as those they do business with. However, the Burke’s are not interested in stopping with just enriching the lives of people within their business circles.

You don’t have to be around Universal Cargo for long to know that Devin and Shirley Burke are passionate about fighting violence and injustice against women and children.

That passion is easily seen through the philanthropic organizations Universal Cargo supports, such as Zoe InternationalCoalition to Abolish Slavery & Trafficking or CASTTruckers Against Trafficking or TAT, and iEmpathize.

One organization in particular that Devin and Shirley, and therefore Universal Cargo, support is Center for the Pacific Asian Family (CPAF).

CPAF was founded to help address domestic violence and sexual assault in the Asian and Pacific Islander communities. Its mission is to build healthy and safe communities by addressing the root causes and the consequences of family violence and violence against women.

The following playlist of stories gives you an idea of the people helped by CPAF’s work:

YouTube Video

Every year, CPAF holds a Gala for Change that raises funds and awareness to address the issues of domestic violence and sexual assault in the Asian and Pacific Islander (API) communities in the Greater Los Angeles area.

Here’s a quick video from CPAF to give you an idea of what that event looks like:

YouTube Video

Universal Cargo is sponsoring CPAF’s 40th Anniversary Gala for Change that happens next month (September).

While general admission tickets for this event are sold out, you can still help in the fight against domestic violence and sexual assault on women and children by donating to CPAF.

Go to the UC Cares page of this website to see more about other organizations Universal Cargo supports, like ZOE International and iEmpathize. Both of those organizations focus on human trafficking, a major injustice happening in the world today that Devin and Shirley Burke are passionate about fighting.

“In 2007 I became aware of the horrendous atrocity against humanity called human trafficking,” Shirley says. “I was shocked to learn that child sex trafficking even existed and was extremely unsettled. During a simple conversation with my sister in law about the horrors of child sex trafficking she told me that the USA Director of Zoe Children’s Home, Betsy Meenk was speaking that very next Sunday at her church right after their service. I went, met Betsy and learned about this amazing organization. I have traveled to the ZOE home in Chiang Mai, Thailand, three times and have been able to not only help but to observe and experience the awesome work they are doing there to rescue and restore these children to wholeness.”

Devin says, “”We support ZOE and iEmpathize because we believe human trafficking is one of the biggest travesties in society today.   It is not only the largest form of slavery in history, but it currently is the largest industry in the world passing up the porn industry.  There are several ministries and NGO’s making a difference to eradicate this huge problem.  But we have been involved with both enough to witness firsthand what great work they are doing.  While iEmpathize focuses on the educational side of this issue Zoe has a very successful orphanage and school in Thailand as well as a new safe house in LA. We have visited their Thailand operations in Chang Mai several times and were touched and blown away.”

If you want to support the fight against injustice, there are links on the UC Cares page to donate to CPAF, ZOE, and iEmpathize.

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Maersk Sending First Container Ship Through Arctic https://www.universalcargo.com/maersk-sending-first-container-ship-through-arctic/ https://www.universalcargo.com/maersk-sending-first-container-ship-through-arctic/#respond Thu, 23 Aug 2018 18:48:51 +0000 https://www.universalcargo.com/?p=9084 Maersk announced that it is sending the first container ship from East Asia to Europe through the Arctic Ocean. Daniel Shane reports in CNN Money:




The newly built Venta Maersk is set to leave the Russian port of Vladivostok later this month. It will sail through the Bering Strait and over the top of Russia en route to St. Petersburg, taking what is known as the Northern Sea Route.




Due to global warming and ice cap melting, actually useable shipping routes have been developing through the arctic. These have huge potential for cost savings in the international shipping industry as shipping through the arctic can shorten shipping routes by 30-40%.

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Maersk Cargo Ship

Maersk Cargo Ship pic: Maersk Line

Maersk announced that it is sending the first container ship from East Asia to Europe through the Arctic Ocean. Daniel Shane reports in CNN Money:

The newly built Venta Maersk is set to leave the Russian port of Vladivostok later this month. It will sail through the Bering Strait and over the top of Russia en route to St. Petersburg, taking what is known as the Northern Sea Route.

Due to global warming and ice cap melting, actually useable shipping routes have been developing through the arctic. These have huge potential for cost savings in the international shipping industry as shipping through the arctic can shorten shipping routes by 30-40%.

Currently, ships going through the Arctic are accompanied by special ships clearing a path through the ice known as ice-breakers. While an ice-breaker will still accompany the Maersk’s containership on this voyage, shipping companies like Maersk are now having ice-class merchant ships built specifically for shipping through the Arctic Ocean. Perhaps as time goes on, these ships will also serve as their own ice-breakers.

An article on the maritime website gCaptain gives some information on Maersk’s new ice-class containerships, including the Venta Maersk that is about to transport containers through the Northern Sea Route:

Delivered July 11th, Venta Maersk is the fourth vessel in a series of seven ice-class Baltic feeder containerships to serve the North Sea and Baltic Sea for Seago Line, the intra-Europe and short-sea carrier of Maersk.

The 3,96 TEU vessels are among the world’s largest ice-class containerships, designed specifically for operation in winter conditions (down to -25 degrees C). Apart from a stronger hull, the vessels are also fitted with 600 reefer plugs for refrigerator cargo.

All reports say that Maersk has no plans to launch commercial services on the Northern Sea Route through which it will be sending the Venta Maersk. Maersk itself said in a statement:

This is a trial designed to explore an unknown route for container shipping and to collect scientific data. Currently, we do not see the Northern Sea Route as an alternative to our usual routes.

Of course, there is no doubt that Maersk is testing and preparing to take advantage of the cost savings and speed shipping through the Arctic offers with its shorter routes.

There are only a few months a year that shipping through the Arctic is currently possible, so even when Maersk determines it is viable to offer services through the Arctic, they won’t be offered year-round.

Despite this being a test voyage, there are actual goods being shipped on it. Why would Maersk waste the opportunity?

Appropriately, the cargo onboard will be frozen fish. Mike Wackett reports in the Loadstar that the “Venta Maersk will sail from Vladivostok in eastern Russia this week with a cargo of frozen fish, en route for St Petersburg, accompanied by a Russian nuclear-powered icebreaker.”

Maersk is certainly not the only carrier interested in shipping through the Arctic. Wackett’s short article points how, before this move by Maersk, Cosco has been the front-runner in the race to commercially shipping through the Arctic:

With Chinese state-owned carrier Cosco known to be eyeing a new container service after successfully using the Northern Sea Route (NSR) for heavylift cargo in the past few years, Maersk has jumped ahead of the pack to become the first to use the NSR for a container shipment.

The race between shipping lines is not the only one involving Arctic Ocean shipping. There’s also a race between countries to control the Arctic routes or prepare potentially profitable ports for these new routes. Russia has made big grabs at controlling as much of these routes as possible, but China, Canada, and the U.S. (among other countries) all have things to say about these waters.

We’ve been keeping an eye on and occasionally blogging about shipping through the Arctic Ocean since 2012. Here are a few related articles we’ve posted in that time:

GERMANY & ICELAND ARCTIC SHIPPING COOPERATION GOOD NEWS FOR U.S.

CHINA IS SHIPPING THROUGH THE ARCTIC!

TOP 5 SCARIEST INTERNATIONAL SHIPPING WATERS

PACK UP SANTA, WE’RE SHIPPING THRU THE NORTH POLE!

FREIGHT NEWS: CHINA SHIPPING BREAKTHROUGH COULD LOWER FREIGHT RATES

Click Here for Free Freight Rate Pricing

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Sherlock Holmes Looks Into If Ocean Freight Carriers Really Are Bad at Business https://www.universalcargo.com/sherlock-holmes-looks-into-if-ocean-freight-carriers-really-are-bad-at-business/ https://www.universalcargo.com/sherlock-holmes-looks-into-if-ocean-freight-carriers-really-are-bad-at-business/#comments Tue, 21 Aug 2018 19:44:27 +0000 https://www.universalcargo.com/?p=9081 I've seen a lot of headlines this year about various ocean freight carriers losing money. However, it all came to a head for me with Mike Wackett's article in the Loadstar last week with the headline, "2018 may be a write-off as shocking H1 numbers all but sink the liner industry."




Here's a highlight from the article:




Just halfway through the Q2 reporting period, some $650m of red ink has been reported by ocean carriers to add to their $1.2bn deficit for the first three months of the year.




To date, niche operator Wan Hai is the only container line to post a net profit for Q2, some $9m, as other carriers face up to the negative revenue consequences of their market share grab and inability to compensate for fuel price hikes.




Wackett's headline calls the carriers' first half of the year numbers shocking, but are they really?




I started writing these blogs for Universal Cargo back in 2011. Perhaps the biggest topic I blogged about that year was overcapacity pushing freight rates down, causing carriers to struggle with profitability.




Carriers would go on to suffer losses measured in the billions of dollars in 2011. 




Overcapacity has continued to plague carriers in the international shipping industry to this day. Solving the mystery of the source of struggles for carriers over recent years doesn't take the genius intellect of Sherlock Holmes. What's surprising is not that carriers posted such large losses here in H1 2018 but that carriers still haven't learned to manage capacity, which is at the core of their struggles.




Brazenly increasing capacity as carriers not only makes large losses by carriers unsurprising but predictable.

The post Sherlock Holmes Looks Into If Ocean Freight Carriers Really Are Bad at Business appeared first on Universal Cargo.

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I’ve seen a lot of headlines this year about various ocean freight carriers losing money. However, it all came to a head for me with Mike Wackett’s article in the Loadstar last week with the headline, “2018 may be a write-off as shocking H1 numbers all but sink the liner industry.”

Here’s a highlight from the article:

Just halfway through the Q2 reporting period, some $650m of red ink has been reported by ocean carriers to add to their $1.2bn deficit for the first three months of the year.

To date, niche operator Wan Hai is the only container line to post a net profit for Q2, some $9m, as other carriers face up to the negative revenue consequences of their market share grab and inability to compensate for fuel price hikes.

Wackett’s headline calls the carriers’ first half of the year numbers shocking, but are they really?

I started writing these blogs for Universal Cargo back in 2011. Perhaps the biggest topic I blogged about that year was overcapacity pushing freight rates down, causing carriers to struggle with profitability.

Carriers would go on to suffer losses measured in the billions of dollars in 2011.

Sherlock Holmes Looks Into International Shipping Carriers

Picture: Holmes!!… by dynamosquito flickr

Overcapacity has continued to plague carriers in the international shipping industry to this day. Solving the mystery of the source of struggles for carriers over recent years doesn’t take the genius intellect of Sherlock Holmes. What’s surprising is not that carriers posted such large losses here in H1 2018 but that carriers still haven’t learned to manage capacity, which is at the core of their struggles.

Brazenly increasing capacity as carriers not only makes large losses by carriers unsurprising but predictable.

There is no more basic concept factoring into product or service prices than supply and demand. That’s Business 101 stuff. Actually, you learn about supply and demand way, way before getting to any college level course on business. Sherlock Holmes would be quite literal in saying about supply and demand, “Elementary, my dear Watson.”

Despite the concept being quintessential, it’s as if carriers can’t wrap their minds around it. Seven years later and carriers still can’t figure out how to solve their overcapacity problem that causes billions of dollars in losses. In fact, they keep exacerbating the problem.

For example, consider last week’s Journal of Commerce (JOC) article by Bruce Barnard with the headline, “Evergreen swings to loss, but will still boost fleet.”

Here’s the highlight:

Evergreen continued the recent run of negative container line results with the Taiwan-based carrier swinging to a second quarter net loss of 1.2 billion new Taiwan dollars ($39 million) from a modest 137 million new Taiwan dollars profit a year earlier.

The ocean carrier’s revenue inched higher to 38.3 trillion new Taiwan dollars from 37.7 trillion new Taiwan dollars in the second quarter of 2017, but it slumped to an operating loss of 1.75 billion new Taiwan dollars from a year earlier profit of 2.77 billion new Taiwan dollars. However, despite the slump into the red, Evergreen unveiled plans to boost its fleet, which will give it the largest order book in the container industry.

Evergreen is not alone. Carriers just keep on increasing their capacity in the face of struggles to be profitable in an industry fraught with overcapacity. In fact, the Loadstar article about 2018 H1’s “shocking” numbers all but sinking the liner industry highlights carriers increasing capacity as—surprise, surprise—the source of the problem:

But, according to Alphaliner, the root cause of the industry’s plight can be traced back to the second half of last year, with a rampant expansion of tonnage.

“The active fleet grew by 9% in the fourth quarter of 2017, and it swelled by another 10.7% in the first quarter of this year,” said the consultant, adding that this significantly above-demand growth continued into the second quarter, when supply jumped another 8.2%.

How can carriers keep increasing capacity beyond any demand justifications? Can carriers really be this bad at business? Of course, freight rates are not going to be at healthy and profitable levels for carriers with their current practices.

Meanwhile, there’s a chorus from the carriers blaming poor profitability and losses in 2018 not only on lower than ideal freight rates but also on rising oil bunker prices. Yes, oil bunker prices add volatility to the industry, but come on, did anyone not expect oil prices to rebound after the most recent oil price crash? Yet here carriers act as if increasing oil prices are completely out of the blue and as if increasing capacity isn’t destroying their ability to control freight rates.

Of course carriers understand the importance of capacity when it comes to freight rates. In fact, as we proceed through the peak season of international shipping, when demand is higher because shippers are stocking up stores for the holiday seasons, carriers are actually laying up ships and cancelling services to decrease capacity and keep freight rates strong before the industry hits a slack season.

A couple weeks ago we blogged about what’s happening with with freight rates right now. The gist is that carriers are gaining momentum here during the peak season and are expected to maintain healthy rates through it.

However, carriers cannot maintain healthy freight rates with their current practices. And perhaps that’s by design.

I spoke about those early blogs I wrote in 2011 about overcapacity driving down freight rates, which ultimately has caused billions of dollars in losses for carriers. The major carrier Hanjin even completely collapsed. Well, in 2011, one of those blogs was about Maersk outlasting the competition in the face of low freight rates. Perhaps these market share grabs with increases in capacity are designed by the biggest carriers to crash the freight rate market and make other carriers disappear from the landscape—er, waterscape?—like what happened to Hanjin.

Perhaps carriers’ actions shouldn’t make us contrast them with Sherlock Holmes on the basis of their intellect. Perhaps the top carriers are more like Professor James Moriarty, deep into a long-term plot.

I don’t really want to call carriers villains, but perhaps Maersk and others at the top of the shipping line industry are playing the long game. And using sacrifices to win. Eventually, with less competition, the few carriers left standing will level out capacity and freight rates will see serious increase.

Click Here for Free Freight Rate Pricing

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New ILA Master Contract Details & Approval Expectations https://www.universalcargo.com/new-ila-master-contract-details-approval-expectations/ https://www.universalcargo.com/new-ila-master-contract-details-approval-expectations/#respond Thu, 16 Aug 2018 18:54:37 +0000 https://www.universalcargo.com/?p=9075 Back in June, we blogged that the International Longshoremen's Association (ILA) and United States Maritime Alliance (USMX) reached a dockworkers agreement that should bring stability to the East and Gulf Coast ports for the next several years (with an expiration date in 2024).




However, that Master Agreement is only tentative until the ILA rank and file approve it, so it can be ratified. With the current contract expiring next month, many shippers are wondering what the status is on the new Master Contract getting approved.




Well, it won't get voted on until next month. Yes, the same month the current contract expires. In the meantime, the ILA is working to convince the rank and file to vote yes on the tentative contract agreement.

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ILA logoBack in June, we blogged that the International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) reached a dockworkers agreement that should bring stability to the East and Gulf Coast ports for the next several years (with an expiration date in 2024).

However, that Master Agreement is only tentative until the ILA rank and file approve it, so it can be ratified. With the current contract expiring next month, many shippers are wondering what the status is on the new Master Contract getting approved.

Well, it won’t get voted on until next month. Yes, the same month the current contract expires. In the meantime, the ILA is working to convince the rank and file to vote yes on the tentative contract agreement.

In fact, the ILA even created a video in which ILA Executive Vice President Dennis Daggett hails the tentative contract as “the best ILA Master Contract ever negotiated” in his bid to sway the rank and file to vote yes on its approval.

In the video, imbedded below, Daggett talks through major points of the contract with an emphasis on the success the ILA had in negotiating the issue of automation, telling the rank and file that his father, ILA President Harold Daggett, “convinced management to invest in you rather than automation.”

YouTube Video

Automation was a major sticking point in the contract negotiations between the ILA and USMX.

Perhaps one of the biggest selling points in the video is when Daggett says, “No fully automated terminals and no fully automated equipment will be implemented during the life of the contract.”

Daggett adds a little context by defining what is meant by fully automated. “Fully automated is defined as machinery or equipment that is devoid of human interaction,” he says.

Protections for union members are not limited only to fully automated terminals and equipment. Daggett adds, “Management and ILA agree that no semiautomated equipment and no technology automation will be implemented until both parties agree to workforce protections and staffing levels.”

He then gives bullet points on how the ILA workforce will be protected:

  • Determining manning for new equipment & number of positions affected by head count
  • Reassigning workers within their craft
  • Identifying the rate of pay which must be Master Contract wages & similar hours in remaining or new positions
  • Identifying the new work created by technology
  • Providing training to ensure that all workers have the tools to succeed

The contract includes clearly defined steps to resolution of issues that arise between the ILA and employers at the ports. All resolutions and agreements on such issues will be binding, but Daggett points out that “all negotiations, resolutions, and agreements are port-specific. In other words, the process is not one size fits all but is tailored to an individual port.”

Automation is obviously an important issue to the rank and file because it directly affects job security. However, just as high on the list for the rank and file are monetary numbers. Will they make more money? How much more?

Daggett talks about a significant increase in container royalties the ILA will receive, but then brings up what appears to be the biggest sticking point for the rank and file: hourly wage increases.

“ILA members will see an economic increase every year of the contract.” That sounds good, but comments from ILA members on the video show that there are members of the rank and file who are not happy with the fact there is only a $1 hourly increase in either wages or ILA members’ money purchase plan each year.

“When is the ila [sic] going to negotiate a real cost of living raise?” complains Caa 311 in the comments section to the video on Youtube. “We have not gotten a decent raise since 1984! Had we just got a 3 percent raise every year since 1984 we would be over $60 an hour. This one dollar every other year crap destroys our ability to buy goods and services. Y’all are effectively lowering our pay by not keeping up with the cost of living. I’ll vote no again just like every other crap contract the ila has brought to us. [sic]”

Yes, that’s an ILA member representing that he or she will vote against the contract. Another user, Glenwood Wilson, chimed in with some colorful language to show his displeasure with the $1 wage increases as well.

However, not all comments were negative. YouTube user wilfredo Pagan replied to Caa 311’s negative comment with:

Caa How can one condemn this contract? This is the best indenture I’ve been subject to in the last 20 years! If you put in the hours, you see results through your weekly paychecks. Anyone who is unhappy should consider changing professions. Raises aside, our medical coverage is great! What other profession out there covers individuals even after retirement?! I’ll reiterate my earlier post, I affirmatively vote yes to this contract! God Bless the I.L.A.

Shippers probably shouldn’t be too concerned that not all ILA members are in support of the contract. There are always some votes against new contracts and naysayers or the disgruntled often make their voices loud.

So far, I haven’t found anyone with serious expectations that the contract will fail to win the ILA rank and file vote.

The strong benefits ILA members receive, which wilfredo Pagan mentions in his pro Master Contract comment, will have no reductions according to Daggett in the video. Daggett also adds, “The Master Agreement between the ILA and the USMX for the first time ever addresses a national money purchase pension plan for ILA that fall under the Master Contract.”

Granted, the video is meant to persuade the rank and file to vote yes on the new contract, but there is not much in the way of compromises the ILA seemed to make in favor of USMX. However, Daggett does bring up a setback and cancellation policy to give carriers additional flexibility if ships do not arrive on time that carriers need because of the larger ships that they now use. Even with that, there is protection for ILA workers.

Daggetts final remarks show how positively the ILA views the new tentative Master Contract:

“As you can see, the tentative agreement deals with many of the most pressing issues facing the ILA membership while bringing stability to the East and Gulf Coast ports. The document lays out a comprehensive approach to solving the economic problems that the ILA workforce is facing now and will be encountering over the next six years. Without a doubt, the tentative agreement is unique because it is perhaps the only collective bargaining agreement to date that imposes definite limits on automation while incorporating a workforce protection program for the implementation of new technology. In the end, this tentative agreement represents a giant step forward in the collective bargaining history of the ILA. Thank you for watching this video. We hope you will vote yes on the new contract. God bless you, and God bless the ILA.”

My expectations are that a majority of the rank and file will agree enough to approve the contract. Of course, we will keep an eye on this during the lead-up to the vote on the new contract and expiration of the current one.

Click Here for Free Freight Rate Pricing

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Universal Cargo Family Spotlight: Tim Hu & Son https://www.universalcargo.com/universal-cargo-family-spotlight-tim-hu-son/ https://www.universalcargo.com/universal-cargo-family-spotlight-tim-hu-son/#comments Tue, 14 Aug 2018 17:42:36 +0000 https://www.universalcargo.com/?p=9072 In today's blog we're doing something new that we plan to continue doing intermittently from now on. Spotlighting members of our team, so you can get to know us a little better.




Today's spotlight will be on Los Angeles Operations Manager Tim Hu, who recently had a very significant and exciting event take place in his life.

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Universal Cargo Operations Manager Tim HuIn today’s blog we’re doing something new that we plan to continue doing intermittently from now on. Spotlighting members of our team, so you can get to know us a little better.

Today’s spotlight will be on Los Angeles Operations Manager Tim Hu, who recently had a very significant and exciting event take place in his life.

We have a mission statement here at Universal Cargo (UC):

We seek to enrich the lives of
those within our company
as well as
those we do business with.

Those are not mere words posted on our website, walls, or business cards. Those words are reflected in every action UC takes because they are the purpose behind every decision UC, as a company, makes.

UC’s dedication to enriching the lives of those within our company and those with whom we do business has helped us become the trusted freight forwarder we’ve been for over 3o years. It helped us cultivate our core CARE values. It also makes the UC team feel like more than a group of coworkers. The team feels more like family.

If you’ve been a UC customer for a while, you may have that same feeling with the members of the UC family who have worked with you on your cargo imports and exports.

Every once in a while from now on we’ll post a blog featuring a member of the Universal Cargo team like Tim.

It's a boy! Tim Hu's desk.Not only is Tim a valued member of the Universal Cargo family, but Tim also has a growing family of his own.

Tim is the new father of a baby boy. We celebrated with him upon his return from paternity leave, but it’s still worth saying congratulations again to Tim.

Congratulations, Tim!

He was kind enough to share a few pictures of his beautiful family for us to post here in the blog.

Check out the following pics:

Tim Hu's Baby Boy

Tim’s beautiful wife is staying home with their handsome new son as Tim continues to work hard here at UC, helping all your international shipping to continue with smooth sailing.

Tim was originally born in Taiwan but moved to the U.S. with his family in 1997. He graduated from Cal Poly Pomona and worked in several industries, including insurance, telecommunications, and logistics before joining the UC family.

Tim is a great problem solver, genuinely cares about our clients, and is a very valued member of our team.

Click Here for Free Freight Rate Pricing

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China Imports Tariff List (Complete 2nd Tranche) https://www.universalcargo.com/china-imports-tariff-list-complete-2nd-tranche/ https://www.universalcargo.com/china-imports-tariff-list-complete-2nd-tranche/#respond Thu, 09 Aug 2018 18:57:00 +0000 https://www.universalcargo.com/?p=9070 A week ago, we posted a blog from Universal Cargo's own Cherry Chen outlining the section 301 tariff exclusion process shippers can use to request a one year tariff exclusion on products they import from China.




The list of Chinese imports being tariffed has increased.




This blog will help you see the additional products being tariffed from China in case you want to apply for tariff exclusion on any of them or just want to know which products are becoming more expensive to import from China.

The post China Imports Tariff List (Complete 2nd Tranche) appeared first on Universal Cargo.

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A week ago, we posted a blog from Universal Cargo’s own Cherry Chen outlining the section 301 tariff exclusion process shippers can use to request a one year tariff exclusion on products they import from China.

The list of Chinese imports being tariffed has increased.

This blog will help you see the additional products being tariffed from China in case you want to apply for tariff exclusion on any of them or just want to know which products are becoming more expensive to import from China.

As you’re probably aware, on July 6th, tariffs on $34 billion worth of imports from China went into effect. A first tranche of the items was put out by the Office of the United States Trade Representative (USTR). But now a second tranche has been finalized for the additional $16 billion worth of items that U.S. Customs and Border Protection will begin collecting 25 percent additional duties on starting August 23rd, 2018.

Below, you can see the full second tranche, which is composed of 279 tariff lines.

In an email to Universal Cargo, Steven Chiu of Seamaster Global said:

On a related note, the Trump administration also announced last week that they are contemplating increasing the duty amount related to the 3rd list from 10% to 25%. Given this announcement, they have also extended the comment period to September 6, 2018. 

Learned from market some BCO is struggling push their goods export from China as many as possible with arriving on/before early September.

Several giant BCO is hunting space in spot rate market with all effort ship goods out in week 33 and 34 especially through USWC routing.

As result the space demand is going to remain strong in rest of August and expect it won’t be any chance deduct spot rate from now on.

The big takeaway from that is the expectation for freight rates to remain strong through the rest of this month. For more on what’s happening with freight rates right now, you can check out our last blog.

With no more ado, here’s the complete 2nd tranche:

Second Tranche
HTS Subheading 
Product Description
2710.19.30
Lubricating oils, w/or w/o additives, fr. petro oils and bitumin minerals (o/than crude) or preps. 70%+ by wt. fr. petro oils
2710.19.35
Lubricating greases from petro oil/bitum min/70%+ by wt. fr. petro. oils but n/o 10% by wt. of fatty acid salts animal/vegetable origin
2710.19.40
Lubricating greases from petro oil/bitum min/70%+ by wt. fr. petro. oils > 10% by wt. of fatty acid salts animal/vegetable origin
3403.19.10
Lubricating preparations containing 50% but less than 70% by weight of petroleum oils or of oils obtained from bituminous minerals
3403.19.50
Lubricating preparations containing less than 50% by weight of petroleum oils or of oils from bituminous minerals
3403.99.00
Lubricating preparations (incl. lubricant-based preparations), nesoi
3811.21.00
Additives for lubricating oils containing petroleum oils or oils obtained from bituminous minerals
3811.29.00
Additives for lubricating oils, nesoi
3901.10.10
Polyethylene having a specific gravity of less than 0.94 and having a relative viscosity of 1.44 or more, in primary forms
3901.10.50
Polyethylene having a specific gravity of less than 0.94, in primary forms, nesoi
3901.20.10
Polyethylene having a specific gravity of 0.94 or more and having a relative viscosity of 1.44 or more, in primary forms
3901.20.50
Polyethylene having a specific gravity of 0.94 or more, in primary forms, nesoi
3901.30.20
Ethylene copolymer: Vinyl acetate-vinyl chloride-ethylene terpoly w/ < 50% deriv of vinyl acetate, exc polymer aromatic/mod arom monomers
3901.30.60
Ethylene-vinyl acetate copolymers, nesoi
3901.90.10
Polymers of ethylene, nesoi, in primary forms, elastomeric
3901.90.55
Ethylene copolymers, in primary forms, other than elastomeric
3901.90.90
Polymers of ethylene, nesoi, in primary forms, other than elastomeric
3902.10.00
Polypropylene, in primary forms
3902.20.10
Polyisobutylene, elastomeric, in primary forms
3902.20.50
Polyisobutylene, other than elastomeric, in primary forms
3902.30.00
Propylene copolymers, in primary forms
3902.90.00
Polymers of propylene or of other olefins, nesoi, in primary forms
3903.11.00
Polystyrene, expandable, in primary forms
3903.19.00
Polystyrene, other than expandable, in primary forms
3903.20.00
Styrene-acrylonitrile (SAN) copolymers, in primary forms
3903.30.00
Acrylonitrile-butadiene-styrene (ABS) copolymers, in primary forms
3903.90.10
Methyl methacrylate-butadiene-styrene (MBS) copolymers, in primary forms
3903.90.50
Polymers of styrene, nesoi, in primary forms
3904.10.00
Polyvinyl chloride, not mixed with any other substances, in primary forms
3904.21.00 Polyvinyl chloride, mixed with other substances, nonplasticized, in primary forms
3904.22.00
Polyvinyl chloride, mixed with other substances, plasticized, in primary forms
3904.30.20
Vinyl chloride copolymer: Vinyl acetate-vinyl chloride-ethylene terpoly w/< 50% deriv vinyl acetate, exc polymer aromatic/mod arom monomers
3904.30.60
Vinyl chloride-vinyl acetate copolymers, nesoi
3904.40.00
Vinyl chloride copolymers nesoi, in primary forms
3904.50.00
Vinylidene chloride polymers, in primary forms
3904.61.00
Polytetrafluoroethylene (PTFE), in primary forms
3904.69.10
Fluoropolymers, elastomeric, other than polytetrafluoroethylene, in primary forms
3904.69.50
Fluoropolymers, other than elastomeric and other than polytetrafluoroethylene, in primary forms
3904.90.10 Polymers of vinyl chloride or of other halogenated olefins, nesoi, in primary forms, elastomeric, in primary forms
3904.90.50
Polymers of vinyl chloride or of other halogenated olefins, nesoi, in primary forms, other than elastomeric, in primary forms
3905.12.00
Polyvinyl acetate, in aqueous dispersion
3905.19.00
Polyvinyl acetate, other than in aqueous dispersion, in primary forms
3905.21.00 Vinyl acetate copolymers, in aqueous dispersion
3905.29.00
Vinyl acetate copolymers, other than in aqueous dispersion, in primary forms
3905.30.00
Polyvinyl alcohols, whether or not containing unhydrolyzed acetate groups, in primary forms
3905.91.10
Copolymers of vinyl esters or other vinyls, in primary forms, containing by weight 50% or more of derivatives of vinyl acetate
3905.91.50
Copolymers of vinyl esters or other vinyls, in primary forms, nesoi
3905.99.80
Polymers of vinyl esters or other vinyl polymers, in primary forms, nesoi
3906.10.00
Polymethyl methacrylate, in primary forms
3906.90.10
Acrylic polymers (except PMMA) in primary forms, elastomeric
3906.90.20
Acrylic plastics polymers (except PMMA), in primary forms, nonelastomeric
3906.90.50
Acrylic polymers (except plastics or elastomers), in primary forms, nesoi
3907.10.00
Polyacetals in primary forms
3907.20.00
Polyethers, other than polyacetals, in primary forms
3907.30.00
Epoxide resins in primary forms
3907.40.00
Polycarbonates in primary forms
3907.50.00
Alkyd resins in primary forms
3907.61.00
Polyethylene terephthalate, having a viscosity number of 78 ml/g or higher
3907.69.00
Polyethylene terephthalate, having a viscosity number less than 78 ml/g
3907.70.00
Poly(lactic acid)
3907.91.20
Unsaturated allyl resins, uncompounded
3907.91.40
Unsaturated allyl resins, nesoi
3907.91.50
Unsaturated polyesters, other than allyl resins in primary forms
3907.99.20
Thermoplastic liquid crystal aromatic polyester copolymers
3907.99.50
Other polyesters nesoi, saturated, in primary forms
3908.10.00
Polyamide-6, -11, -12, -6,6, -6,9, -6,10 or -6,12 in primary form
3908.90.20
Bis(4-amino-3-methylcyclohexyl)methaneisophthalic acid-laurolactam copolymer
3908.90.70
Other polyamides in primary forms
3909.10.00
Urea resins; thiourea resins
3909.20.00
Melamine resins
3909.40.00
Phenolic resins
3909.50.10
Polyurethanes, elastomeric, in primary forms
3909.50.20
Polyurethanes: cements, in primary forms
3909.50.50
Polyurethanes, other than elastomeric or cements, in primary forms
3910.00.00
Silicones in primary forms
3911.10.00
Petroleum resins, coumarone, indene, or coumarone-indene resins and polyterpenes, in primary forms
3911.90.10 Elastomeric polysulfides, polysulfones and other products specified in note 3 to chapter 39, nesoi, in primary forms
3911.90.15
Specified carbodiimide or homopolymer with polyethylene thermoplastic goods
3911.90.25
Thermoplastic polysulfides, polysulfones & oth products spec in note 3, chapt 39, cont aromatic monomer units or derived therefrom
3911.90.35
Benzenamine; and hydrocarbon novolac cyanate ester
3911.90.45
Thermosetting polysulfides, polysulfones & oth products spec in note 3, chapt 39, cont aromatic monomer units or derived therefrom
3911.90.70
Chlorinated synthetic rubber
3911.90.90
Polysulfides, polysulfones & other products specified in note 3 to chapter 39, nesoi
3912.12.00
Cellulose acetates, nesoi, in primary forms, plasticized
3912.20.00
Cellulose nitrates (including collodions), in primary forms
3912.39.00
Cellulose ethers, other than carboxymethylcellulose and its salts, in primary forms
3912.90.00
Cellulose and its chemical derivatives nesoi, in primary forms
3913.90.10
Chemical derivatives of natural rubber, nesoi, in primary forms
3913.90.50
Natural polymers and modified natural polymers, nesoi, in primary forms
3914.00.20
Cross-linked polyvinylbenzyltrimethylammonium chloride (Cholestyramine resin USP)
3914.00.60
Ion-exchangers based on polymers of headings 3901 to 3913, in primary forms, nesoi
3916.10.00
Monofilament with cross-section dimension over 1 mm, rods, sticks, profile shapes, at most surface-worked, of polymers of ethylene
3916.20.00
Monofilament with cross-section dimension over 1 mm, rods, sticks, profile shapes, at most surface-worked, of polymers of vinyl chloride
3916.90.10
Monofilament with cross-section dimension over 1 mm, rods, sticks, profile shapes, at most surface-worked, of acrylic polymers
3916.90.30
Monafilament nesoi, of plastics, excluding ethylene, vinyl chloride and acrylic polymers
3916.90.50
Rods, sticks and profile shapes, at most surface-worked, of plastics, nesoi
3917.21.00
Tubes, pipes and hoses, rigid, of polymers of ethylene
3917.22.00
Tubes, pipes and hoses, rigid, of polymers of propylene
3917.23.00
Tubes, pipes and hoses, rigid, of polymers of vinyl chloride
3917.29.00
Tubes, pipes and hoses, rigid, of other plastics nesoi
3917.31.00
Flexible plastic tubes, pipes and hoses, having a minimum burst pressure of 27.6 MPa
3917.32.00
Tubes, pipes and hoses, of plastics, other than rigid, not reinforced or otherwise combined with other materials, without fittings
3917.40.00
Fittings of plastics, for plastic tubes, pipes and hoses, nesoi
3919.10.10
Self-adhesive plates, sheets, other flat shapes, of plastics, in rolls n/o 20 cm wide, light-reflecting surface produced by glass grains
3919.10.20
Self-adhesive plates, sheets, other flat shapes, of plastics, in rolls n/o 20 cm wide, not having a light-reflecting glass grain surface
3919.90.10
Self-adhesive plates, sheets, other flat shapes, of plastics, light-reflecting surface produced by glass grains, nesoi
3919.90.50
Self-adhesive plates, sheets, other flat shapes, of plastics, not having a light-reflecting surface produced by glass grains, nesoi
3920.10.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not reinforced or combined with other materials, of polymers of ethylene
3920.20.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not reinforced or combined with other materials, of polymers of propylene
3920.30.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not reinforced or combined with other materials, of polymers of styrene
3920.43.10
Nonadhesive plates/sheets/film/foil/strip made imitation of patent leather, of vinyl chloride polymers, not less 6% plasticizers
3920.43.50
Nonadhesive plate/sheet/film/foil/strip, noncellular, not comb w/other materials, of vinyl chloride polymers, not less 6% plasticizer, nesoi
3920.49.00
Nonadhesive plates, sheets, film, foil, strip, noncellular, not combined w/other materials, of polymers of vinyl chloride, < 6% plasticizers
3920.51.10
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of polymethyl methacrylate, flexible
3920.51.50
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of polymethyl methacrylate, not flexible
3920.59.10
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of acrylic polymers, flexible, nesoi
3920.59.40
Transparent sheeting containing 30% or more by weight of lead
3920.59.80
Plates, sheets, film, etc, noncellular, not reinforced, laminated, combined, of other acrylic polymers, nesoi
3920.61.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of polycarbonates
3920.62.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of polyethylene terephthalate
3920.63.10
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of unsaturated polyesters, flexible
3920.63.20
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of unsaturated polyesters, not flexible
3920.69.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of polyesters, nesoi
3920.71.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of regenerated cellulose
3920.73.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of cellulose acetate
3920.79.05
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of vulcanized fiber
3920.79.10
Nonadhesive films, strips, sheets, noncellular, not combined with other materials, of other cellulose derivatives nesoi, n/o 0.076 mm thick
3920.79.50
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of cellulose derivatives, nesoi
3920.91.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of polyvinyl butyral
3920.92.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of polyamides
3920.93.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of amino-resins
3920.94.00
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of phenolic resins
3920.99.10
Nonadhesive film, noncellular, not combined with other materials, of plastics nesoi, flexible, over 0.152mm thick, not in rolls
3920.99.20
Nonadhesive film, strips and sheets, noncellular, not combined with other materials, of plastics nesoi, flexible
3920.99.50
Nonadhesive plates, sheets, film, foil and strip, noncellular, not combined with other materials, of plastics, nesoi
3921.11.00
Nonadhesive plates, sheets, film, foil and strip, cellular, of polymers of styrene
3921.12.11
Nonadhesive plates, sheets, film, foil, strip, cellular, of polymers of vinyl chloride, with man-made textile fibers, over 70% plastics
3921.12.15
Nonadhesive plates, sheets, film, foil, strip, cellular, of polymers of vinyl chloride, with man-made textile fibers, n/o 70% plastics
3921.12.19
Nonadhesive plates, sheets, film, foil and strip, cellular, of polymers of vinyl chloride, combined with textile materials, nesoi
3921.12.50
Nonadhesive plates, sheets, film, foil and strip, cellular, of polymers of vinyl chloride, not combined with textile materials
3921.13.11
Nonadhesive plates, sheets, film, foil and strip, cellular, of polyurethanes, with man- made textile fibers, over 70% plastics
3921.13.15
Nonadhesive plates, sheets, film, foil and strip, cellular, of polyurethanes, with man- made textile fibers, not over 70 percent plastics
3921.13.19
Nonadhesive plates, sheets, film, foil and strip, cellular, of polyurethanes, combined with textile materials nesoi
3921.13.50
Nonadhesive plates, sheets, film, foil and strip, cellular, of polyurethanes, not combined with textile materials, nesoi
3921.14.00
Nonadhesive plates, sheets, film, foil and strip, cellular, of regenerated cellulose
3921.19.00
Nonadhesive plates, sheets, film, foil and strip, cellular, of plastics nesoi
3921.90.11
Nonadhesive plates, sheets, film, foil, strip, of noncellular plastics combined with man-made fibers, n/o 1.492 kg/sq m, over 70% plastics
3921.90.15
Nonadhesive plates, sheets, film, foil, strip, of noncellular plastics combined with man-made fibers, n/o 1.492 kg/sq m, n/o 70% plastics
3921.90.19
Nonadhesive plates, sheets, film, foil and strip, of noncellular plastics combined with textile materials, nesoi, not over 1.492 kg/sq m
3921.90.21
Nonadhesive plates, sheets, film, foil and strip, of noncellular plastics combined with cotton, over 1.492 kg/sq m
3921.90.25
Nonadhesive plates, sheets, film, foil and strip, of noncellular plastics combined with man-made fibers, over 1.492 kg/sq m
3921.90.29
Nonadhesive plates, sheets, film, foil and strip, of noncellular plastics combined with textile materials, nesoi, over 1.492 kg/sq m
3921.90.40
Nonadhesive plates, sheets, film, foil and strip, flexible, nesoi, of noncellular plastics
3921.90.50
Nonadhesive plates, sheets, film, foil and strip, nonflexible, nesoi, of noncellular plastics
7002.20.10
Glass rods of fused quartz or other fused silica, unworked
7308.10.00
Iron or steel, bridges and bridge sections
7308.20.00
Iron or steel, towers and lattice masts
7308.90.30
Iron or steel, not in part alloy steel, columns, pillars, posts, beams and girders
7308.90.60
Iron or steel, columns, pillars, posts, beams and girders, nesoi
7308.90.70
Steel, grating for structures or parts of structures
7308.90.95
Iron or steel, structures (excluding prefab structures of 9406) and parts of structures, nesoi
7614.10.10
Aluminum, stranded wire, cables & the like w/steel core, not electrically insulated, not fitted with fittings & not made up into articles
7614.90.20
Aluminum, elect. conductors of stranded wire, cables & the like (o/than w/steel core), n/elect. insulated, n/fitted w/fittings or articles
8406.82.10
Steam turbines other than for marine propulsion, of an output not exceeding 40 MW
8407.34.05
Spark-ignition reciprocating piston engines used in agricultural tractors, cylinder capacity over 1000 cc to 2000 cc
8407.34.35
Spark-ignition reciprocating piston engines used in agricultural tractors, cylinder capacity over 2000 cc
8407.90.10
Spark-ignition rotary or reciprocating internal-combustion piston engines nesoi, installed in agricultural/horticultural machinery/equipment
8407.90.90
Spark-ignition rotary or reciprocating internal-combustion piston engines, for machinery or equipment nesoi
8408.20.10
Compression-ignition internal-combustion piston engines to be installed in tractors suitable for agricultural use
8419.60.10
Machinery for liquefying air or gas containing brazed aluminum plate-fin heat exchangers
8419.89.10
Machinery and equipment for the treatment of materials (by a process which changes temperatures), for making paper pulp, paper or paperboard
8419.89.95
Industrial machinery, plant or equipment for the treatment of materials, by process involving a change in temperature, nesoi
8420.10.20
Calendering or similar rolling machines for making paper pulp, paper or paperboard
8420.99.10
Parts of calendering or rolling machines for processing textiles
8424.82.00
Agricultural or horticultural projecting or dispersing equipment including irrigation equipment
8424.89.90
Other mechanical appliances for projecting, dispersing or spraying liquids or powders, nesoi
8432.29.00
Harrows (other than disc), scarifiers, cultivators, weeders and hoes for soil preparation or cultivation
8432.31.00
No-till direct seeders, planters and transplanters
8432.39.00
Seeders, planters and transplanters, nesoi
8432.42.00
Fertilizer distributors
8443.99.40
Parts of photocopying apparatus of subheading 8443.39.20 specified in additional U.S. note 4 to this chapter
8455.90.40
Parts for metal-rolling mills, other than rolls, in the form of castings or weldments, individually weighing less than 90 tons
8464.10.01
Sawing machines for working stone, ceramics, concrete, asbestos-cement or like mineral materials or for cold working glass
8465.95.00
Drilling or mortising machines for working wood, cork, bone, hard rubber, hard plastics or similar hard materials
8466.30.80
Special attachments for use solely or principally for machine tools of headings 8456 to 8465, nesoi
8473.50.60
Part/accessory (also face plate and lock latch) of printed circuit assemblies suitable for use w/machine of two or more heading 8469 to 8472
8473.50.90
Parts and accessories, nesoi, suitable for use with machines of two or more of the headings 8469 to 8472
8475.29.00
Machines for manufacturing or hot working glass or glassware, nesoi
8483.30.80
Bearing housings nesoi; plain shaft bearings
8486.10.00
Machines and apparatus for the manufacture of boules or wafers
8486.20.00
Machines and apparatus for the manufacture of semiconductor devices or electronic integrated circuits
8486.30.00
Machines and apparatus for the manufacture of flat panel displays
8486.40.00
Machines and apparatus for the manufacture of masks and reticles; for the assembly of electronic integrated circuits;
8486.90.00
Parts and accessories of the machines and apparatus for the manufacture of semiconductor devices, electronic integrated circuits and flat pa
8501.10.20
Electric motors of an output of under 18.65 W, synchronous, valued not over $4 each
8501.10.60
Electric motors of an output of 18.65 W or more but not exceeding 37.5 W
8501.20.40
Universal AC/DC motors of an output exceeding 74.6 W but not exceeding 735 W
8501.31.40
DC motors, nesoi, of an output exceeding 74.6 W but not exceeding 735 W
8501.31.80
DC generators of an output not exceeding 750 W
8501.32.20
DC motors nesoi, of an output exceeding 750 W but not exceeding 14.92 kW
8501.32.60
DC generators of an output exceeding 750 W but not exceeding 75 kW
8501.33.20
DC motors nesoi, of an output exceeding 75 kW but under 149.2 kW
8501.33.30
DC motors, nesoi, 149.2 kW or more but not exceeding 150 kW
8501.52.40
AC motors nesoi, multi-phase, of an output exceeding 750 W but not exceeding 14.92 kW
8501.53.60
AC motors, nesoi, multi-phase, 149.2 kW or more but not exceeding 150 kW
8503.00.95
Other parts, nesoi, suitable for use solely or principally with the machines in heading 8501 or 8502
8507.80.40
Other storage batteries nesoi, of a kind used as the primary source of electrical power for electrically powered vehicles of 8703.90
8507.80.81
Other storage batteries nesoi, other than of a kind used as the primary source of power for electric vehicles
8511.80.20
Voltage and voltage-current regulators with cut-out relays designed for use on 6, 12 or 24 V systems
8511.80.40
Voltage and voltage-current regulators with cut-out relays other than those designed for use on 6, 12 or 24 V systems
8511.90.20
Parts of voltage and voltage-current regulators with cut-out relays, designed for use on 6, 12 or 24 V systems
8511.90.40
Parts of voltage and voltage-current regulators with cut-out relays, other than those designed for use on 6, 12 or 24 V systems
8529.10.91
Other antennas and antenna reflectors of all kinds and parts, for use
8533.90.40
For the goods of subheading 8533.40, of ceramic or metallic materials, electrically or mechanically reactive to changes in temperature
8536.30.80
Electrical apparatus for protecting electrical circuits, for a voltage not exceeding 1,000 V, nesoi
8536.50.70
Certain specified electronic and electromechanical snap-action switches, for a voltage not exceeding 1,000 V
8536.70.00
Connectors for optical fibers, optical fiber bundles or cables
8537.10.30
Electric control panels, for a voltage not exceeding 1,000, assembled with outer housing or supports, for goods of 8421, 8422, 8450 or 8516
8541.10.00
Diodes, other than photosensitive or light-emitting diodes
8541.40.60
Diodes for semiconductor devices, other than light-emitting diodes, nesoi
8542.31.00
Electronic integrated circuits: processors and controllers
8542.32.00
Electronic integrated circuits: memories
8542.33.00
Electronic integrated circuits: amplifiers
8542.39.00
Electronic integrated circuits: other
8542.90.00 Parts of electronic integrated circuits and microassemblies
8543.70.45
Other electric synchros and transducers; defrosters and demisters with electric resistors for aircraft
8543.70.99
Other machinery in this subheading
8544.49.10
Insulated electric conductors of a kind used for telecommunications, for a voltage not exceeding 80 V, not fitted with connectors
8544.49.20
Insulated electric conductors nesoi, for a voltage not exceeding 80 V, not fitted with connectors
8544.60.60
Insulated electric conductors nesoi, not of copper, for a voltage exceeding 1,000 V, not fitted with connectors
8601.20.00
Rail locomotives powered by electric accumulators (batteries)
8602.10.00
Diesel-electric locomotives
8605.00.00
Railway or tramway passenger coaches and special purpose railway or tramway coaches, not self-propelled
8606.10.00
Railway or tramway tank cars and the like, not self-propelled
8606.30.00
Railway or tramway self-discharging freight cars (o/than tank cars or insulated/refrig. freight cars), not self-propelled
8606.91.00
Railway or tramway freight cars nesoi, closed and covered, not self-propelled
8606.92.00
Railway or tramway freight cars nesoi, open, with nonremovable sides of a height over 60 cm, not self-propelled
8606.99.01
Railway or tramway freight cars nesoi, not self-propelled
8607.11.00
Parts of railway/tramway locomotives/rolling stock, truck assemblies for self – propelled vehicles
8607.19.03
Parts of railway/tramway locomotives/rolling stock, axles
8607.19.30
Parts of railway/tramway locomotives/rolling stock, parts of truck assemblies for non- self-propelled passenger coaches or freight cars
8607.30.10
Parts of railway/tramway locomotives/rolling stock, hooks and other coupling devices, buffers, pts thereof, for stock of 8605 or 8606
8607.30.50
Parts of railway/tramway locomotives/rolling stock, hooks and other coupling devices, buffers, pts thereof, for stock of 8601 to 8605
8701.20.00
Road tractors for semi-trailers
8701.30.50
Track-laying tractors, not suitable for agricultural use
8701.91.10
Other tractors of engine power <18kW, for agricultural use
8701.91.50
Other tractors of engine power <18kW, not for agricultural use
8701.92.10
Other tractors of engine power => 18kW but < 37kW, for agricultural use
8701.92.50
Other tractors of engine power => 18kW but < 37kW, not for agricultural use
8701.93.10
Other tractors of engine power => 37kW but < 75kW, for agricultural use
8701.93.50
Other tractors of engine power => 37kW but < 75kW, not for agricultural use
8701.94.10
Other tractors of engine power => 75kW but < 130kW, for agricultural use
8701.94.50
Other tractors of engine power => 75kW but < 130kW, not for agricultural use
8701.95.10
Other tractors of engine power >130kW, for agricultural use
8701.95.50
Other tractors of engine power >130kW, not for agricultural use
8704.90.00
Mtr. vehicles for transport of goods, o/than w/compress. ign. or spark ign. recip. piston engine, nesoi
8705.10.00
Mtr. vehicles (o/than for transport of persons or of goods), mobile cranes
8705.20.00
Mtr. vehicles (o/than for transport of persons or of goods), mobile drilling derricks
8705.90.00
Mtr. vehicles (o/than for transport of persons or of goods), special purpose motor vehicles nesoi
8711.10.00
Motorcycles (incl. mopeds) and cycles, fitted w/recip. internal-combustion piston engine w/capacity n/o 50 cc
8711.60.00
Motorcycles (incl. mopeds) and cycles, w/electric motor for propulsion
8711.90.01
Motorcycles (incl. mopeds) and cycles, nesoi
8901.30.00
Vessels, designed for the transport of goods, refrigerated vessels (o/than tankers)
9001.10.00
Optical fibers, optical fiber bundles and cables, other than those of heading 8544
9001.20.00
Sheets and plates of polarizing material
9014.10.90
Direction finding compasses, other than optical instruments, gyroscopic compasses or electrical
9025.19.40
Pyrometers, not combined with other instruments
9025.19.80
Thermometers, for direct reading, not combined with other instruments, other than liquid-filled thermometers
9025.80.10
Electrical: hydrometers & sim. floating instr., hygrometers, psychometers, & any comb. with or w/o thermometers, pyrometers, & barometers
9027.10.20
Electrical gas or smoke analysis apparatus
9028.10.00
Gas supply or production meters, including calibrating meters thereof
9028.20.00
Liquid supply or production meters, including calibrating meters thereof
9028.30.00
Electricity supply or production meters, including calibrating meters thereof
9029.20.40
Speedometers and tachometers, other than bicycle speedometers
9029.90.80
Parts and accessories of revolution counters, production counters, odometers, pedometers and the like, of speedometers nesoi and tachometers
9030.31.00
Multimeters for measuring or checking electrical voltage, current, resistance or power, without a recording device
9030.32.00
Multimeters, with a recording device
9030.84.00
Instruments and apparatus for measuring, checking or detecting electrical quantities or ionizing radiations, nesoi: with a recording device
9030.89.01
Instruments and apparatus for measuring, checking or detecting electrical quantities or ionizing radiations, nesoi: w/o a recording device

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What’s Happening with Freight Rates Right Now https://www.universalcargo.com/whats-happening-with-freight-rates-right-now/ https://www.universalcargo.com/whats-happening-with-freight-rates-right-now/#respond Tue, 07 Aug 2018 20:16:08 +0000 https://www.universalcargo.com/?p=9069 Don't look now, but peak season is upon us. Yes, those big volume shipping months when importers are bringing in products to line store shelves for the back to school and holiday seasons are here.




Generally, that means increased freight rates.




However, in some of these recent years, even with increased shipping volumes and Peak Season Surcharges (PSS), carriers have struggled to maintain the higher freight rates typical of this time of year.




The reason for that has been an inability to control capacity and maintain discipline with freight rates. While overcapacity and undercutting of rates hurt carriers' bottom lines, shippers usually don't complain about lower shipping rates.




Well, shippers don't complain until something like the bankruptcy of Hanjin happens. Yes, that happened right during peak season a couple years ago. Shippers whose cargo was stuck on ships certainly haven't forgotten the mess. Of course, Hanjin customers weren't the only ones whose shipments got impacted and delayed by the event.




Unfortunately, that's the flip side to prolonged unhealthy (for carriers) freight rates. The inevitable effect of carriers struggling to be profitable is decrease in competition. Ultimately, enough decrease in competition will result in an increase in freight rates.




But again, those are long term outlooks. How are things in the short term, the present? What are freight rates doing now? How is the 2018 peak season shaping up?

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Don’t look now, but peak season is upon us. Yes, those big volume shipping months when importers are bringing in products to line store shelves for the back to school and holiday seasons are here.

Generally, that means increased freight rates.

However, in some of these recent years, even with increased shipping volumes and Peak Season Surcharges (PSS), carriers have struggled to maintain the higher freight rates typical of this time of year.

The reason for that has been an inability to control capacity and maintain discipline with freight rates. While overcapacity and undercutting of rates hurt carriers’ bottom lines, shippers usually don’t complain about lower shipping rates.

Well, shippers don’t complain until something like the bankruptcy of Hanjin happens. Yes, that happened right during peak season a couple years ago. Shippers whose cargo was stuck on ships certainly haven’t forgotten the mess. Of course, Hanjin customers weren’t the only ones whose shipments got impacted and delayed by the event.

Unfortunately, that’s the flip side to prolonged unhealthy (for carriers) freight rates. The inevitable effect of carriers struggling to be profitable is decrease in competition. Ultimately, enough decrease in competition will result in an increase in freight rates.

But again, those are long term outlooks. How are things in the short term, the present? What are freight rates doing now? How is the 2018 peak season shaping up?

Right now, carriers are gaining good momentum in freight rates.

Ben Meyer reports in American Shipper that the World Container Index (WCI), which is container freight rate assessments made by shipping industry research company Drewry, surged last week by 13.5%.

That makes for a couple weeks of solid gains now. Meyer also reported:

Shanghai Shipping Exchange’s composite Shanghai Containerized Freight Index, which aggregates spot rates on 13 different outbound trades from Shanghai, grew another 3.1 percent on a sequential basis last week after an 8.8 percent jump the previous week.

For many U.S. importers, freight rate numbers on containers moving from Asia to the U.S. are of special significance. And that’s actually the area where carriers are seeing their best freight rate increases.

Meyer writes “the transpacific, eastbound WCI rates from Shanghai to Los Angeles skyrocketed 30 percent” and then adds, “Rates to New York grew 18 percent…”

Those big freight rate increases are per FEU (forty-foot equivalent units). On transatlantic pricing, Meyer reports a 5% increase on the previous week.

As we’ve seen in recent years, a couple weeks of solid freight rate pricing gains from carriers does not necessarily mean they will be able to maintain momentum on rate increases.

However, current projections look good for freight rates to continue to climb as peak season goes on. Gavin van Marle reports in the Loadstar:

Next week is set to see large increases in spot container shipping freight rates on the transpacific trades, according to figures from today’s Shanghai Containerised Freight Index (SCFI)

The index, which collates freight rates quoted for the week ahead from a group of carriers and customers, indicates that, as the peak shipping season gets under way, the trade between Asia and the US west coast will see rates rise 10.5%, to $2,074 per feu.

Meanwhile, the on the Asia-US east coast trade, spot rates rose 8.9% to reach $3,099 per feu, and analysts predict that carriers are set to enjoy a better peak season than in 2017 – at this point last year, spot rates had begun to decline.

One of the main reasons carriers are enjoying rising freight rates right now is a successful reduction of capacity on major trade lanes. If carriers can maintain, even increase, discipline in reducing capacity while resisting the temptation to undercut each other’s freight rates, they should be able to maintain strong freight rates through the peak season.

Right now, however, there’s a wildcard that could greatly factor into how high freight rates are: trade war.

Shippers importing from China are paying close attention as the U.S. and China are hitting each other with spiraling tariff threats and actual enactment of new duties on each other’s goods.

The trade war could reduce the volume of goods shipped, even during peak season. If volume falls, that would be another factor putting downward pressure on freight rates.

And the U.S. is not only having tariff disputes with China. There is strife over tariffs between the U.S. and the EU, between the U.S. and Canada, and between the U.S. and others countries.

Click Here for Free Freight Rate Pricing

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Could the U.S. Be Winning the Trade War with China? https://www.universalcargo.com/could-the-u-s-be-winning-the-trade-war-with-china/ https://www.universalcargo.com/could-the-u-s-be-winning-the-trade-war-with-china/#respond Tue, 31 Jul 2018 18:44:45 +0000 https://www.universalcargo.com/?p=9066 Trade wars are often thought of as lose-lose situations. However, President Trump obviously thinks the U.S. can win the trade war he has ignited with China. And it looks like he isn't alone in his assessment.




David Brown wrote an article in the South China Morning Post that doesn't merely say the U.S. can win this trade war with China, but that the U.S. is winning this trade war with China.




You want proof? Brown writes right in the headline that the proof will be  China's economic growth falling to 5 percent.

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President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

Trade wars are often thought of as lose-lose situations. However, President Trump obviously thinks the U.S. can win the trade war he has ignited with China. And it looks like he isn’t alone in his assessment.

David Brown wrote an article in the South China Morning Post that doesn’t merely say the U.S. can win this trade war with China, but that the U.S. is winning this trade war with China.

You want proof? Brown writes right in the headline that the proof will be  China’s economic growth falling to 5 percent.

Brown writes:

China’s potential exposure to a trade war is much greater than the US’, and Trump knows he has the upper hand. China’s export reliance on the US market is much greater than American dependence on China, by a multiple of five times. It is the president’s trump card.

According to estimates by the International Monetary Fund, a full-blown trade war could knock as much as 1-1.5 per cent off China’s growth rate, while the impact on the US might be more limited, to the tune of 0.1-0.3 per cent shaved off growth, thanks to the US economy’s relatively greater domestic dominance. Given the rapid pace of US growth right now, it is a price Trump probably thinks worth paying to intensify pressure on China.

President Trump certainly has not been afraid to intensify pressure on China. Tariff threats between the U.S. and China have been escalating and escalating. The last blog we posted on it had Trump threatening $450 billion of tariffs on Chinese goods. But the threats didn’t stop there.

President Trump has since threatened to slap new tariffs on every single Chinese good imported into the U.S.

Just weeks ago, Bloomberg reported:

President Donald Trump threatened to impose tariffs on every single Chinese import into America as the world’s two largest economies exchanged the first blows in a trade war that isn’t set to end anytime soon.

… [President Trump] indicated to reporters Thursday on Air Force One that the final tariff total could exceed $500 billion, almost the same amount that the U.S. imported in 2017.

Yes, you read that right. President Trump’s tariff threats on China have reached over half a trillion dollars. I just used the word trillion without being ironic or hyperbolic. At this point it seems like I might as well be using made up numbers like a gazillionbadillion dollars. But these are real numbers Trump is using to apply pressure to China.

And it’s not all talk.

On July 6th, the U.S. levied its first set of strictly Chinese aimed tariffs in the value of $34 billion. Of course, China fired right back with retaliatory duties.

Once those shots were fired, it’s fair to say we have officially entered a trade war, though many are still calling this a trade dispute.

Just because the trade war is likely more damaging to China than the U.S. does not mean that China is going to give in to U.S. demands. There still is no sign that Beijing will stop fighting, even if the South China Morning Post is right and China is losing.

President Trump has famously said that a trade war is easy to win. Maybe it is easy for the U.S. to win if winning is defined by the trade war doing less damage to U.S. economic growth than Chinese economic growth.

However, a trade war is probably much more difficult to end.

Click Here for Free Freight Rate Pricing

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What These Shipping Containers Are Being Used For Will Make You Sick https://www.universalcargo.com/what-these-shipping-containers-are-being-used-for-will-make-you-sick/ https://www.universalcargo.com/what-these-shipping-containers-are-being-used-for-will-make-you-sick/#comments Thu, 26 Jul 2018 20:21:19 +0000 https://www.universalcargo.com/?p=9059 Right now, shipping containers are being used to violate the basic human rights of thousands of people.




We've posted before about uses of shipping containers for purposes other than transporting cargo imports and exports around the world. Often, these uses are innovative and fun to think about.




Shipping containers have been used to create some very impressive, modern homes as well as chic restaurants, coffee shops, and stores. Shipping containers have been used to create art, display art, and we even posted a blog counting down the top 9 movie scenes featuring shipping containers.




In 2012, the devastating and deadly Hurricane Sandy inspired designs to use shipping containers as emergency housing. Such a humanitarian use of shipping containers contrasts starkly with how shipping containers are being used in the country of Eritrea.

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Shipping Container PrisonRight now, shipping containers are being used to violate the basic human rights of thousands of people.

We’ve posted before about uses of shipping containers for purposes other than transporting cargo imports and exports around the world. Often, these uses are innovative and fun to think about.

Shipping containers have been used to create some very impressive, modern homes as well as chic restaurants, coffee shops, and stores. Shipping containers have been used to create art, display art, and we even posted a blog counting down the top 9 movie scenes featuring shipping containers.

In 2012, the devastating and deadly Hurricane Sandy inspired designs to use shipping containers as emergency housing. Such a humanitarian use of shipping containers contrasts starkly with how shipping containers are being used in the country of Eritrea.

There, shipping containers are being used as prisons to hold politically and religiously persecuted people. Prisoners locked in these un-furbished shipping container prisons receive no trial and are not even officially charged with crimes. However, they are being detained indefinitely in extremely harsh conditions, completely cut off from family and friends.

In 2013, I posted a blog here about shipping container jail cells in the southeastern Australian state of Victoria. But the Eritrean shipping container prisons are nothing like those of Victoria. In Victoria, the shipping container cells are fitted with showers, cupboards, basins, beds…

The shipping container prisons of Eritrea are atrocious.

None of the above mentioned amenities are added to the Eritrean shipping container cells that may be stuffed with 20, 30, or even more prisoners. The below video from Amnesty International highlights how appalling these prisons are.

YouTube Video

Though I hadn’t heard of these Eritrean shipping container prisons until yesterday, they have been around for a long time. The above video is actually 5 years old.

Despite the fact that the existence of these abhorrent prisons has been known for years, there seems to be virtually no outcry against them in the international community. The most likely place you’d hear about them right now is from Christian groups, blogs, and news sources because Christian sects in Eritrea have suffered mass incarcerations in these inhumane shipping container prisons but some were just set free.

It was an article headline from RNS — Religion News Service, a news source that focuses on religion-related stories — that inspired me to find out about Eritrean shipping container prisons and write this post. The headline read, “Eritrean Christians released from shipping container prisons.” While RNS isn’t narrowed in its reporting to only Christian related stories, this story was picked up by several Christian websites for obvious reasons.

While the headline is certainly good news, it hardly felt like it as the story’s lead is immediately followed by a “but”:

Eritrean Christians and human rights advocates are cheering the release of 35 Christian prisoners as a new peace pact between Eritrea and Ethiopia takes hold this month. But hundreds remain imprisoned in Eritrea under harsh conditions stemming from a war in which members of Christian sects were targeted for mass incarceration.

For the last two decades, Eritrean authorities have persecuted religious groups, frequently arresting church leaders and detaining them in small shipping container prisons where advocates say they’re routinely deprived of water, food, proper sanitation and medicines.

According to the RNS article, Eritrea “is believed to be holding between 1,200 and 3,000 people on religious grounds.” That’s actually a small number compared to the amount of political prisoners believed to be held by Eritrea. Back in 2013, Amnesty International published an article that says:

…at least 10,000 political prisoners have been imprisoned by the government of President Isaias Afewerki, who has ruled since the country’s independence in 1993. With no known exception, not a single political prisoner has ever been charged with a crime or tried, has had access to a lawyer or been brought before a judge or a judicial officer to assess the legality and necessity of their detention.

It almost seems miraculous that those 35 Christian prisoners were released. Salem Solomon wrote an article in Voice of America (VOA) that quotes an Eritrean man calling the prisons “Enda Hawya” — which is a village in a dark Eritrean fairy tale that people go in but never come out.

That man would know. His brother was Haile “Durue” Woldensae, who fought for Eritrea’s freedom from Ethiopia. According to Solomon’s article, Durue was imprisoned in 2001 and never seen again.

Reportedly, Durue died. But those reports, which seem more like social media rumors in February of this year, have not been substantiated  because of the secret nature of the Eritrean prisons.

One would think a man who fought for a country’s freedom would be treated as a hero by that country. Not in Eritrea. Solomon writes “some of the nation’s founders have been held without trial for more than 16 years.”

It’s time for these so-called secret prisons to be brought to light and for the international community to help get these unjustly held people out of their shipping container prisons and back to their families.

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Top 10 Most Useful & Popular Shipping Posts https://www.universalcargo.com/top-10-most-useful-popular-shipping-posts/ https://www.universalcargo.com/top-10-most-useful-popular-shipping-posts/#comments Tue, 24 Jul 2018 17:28:22 +0000 https://www.universalcargo.com/?p=9058 Whether you’re new to Universal Cargo’s blog or a regular reader, this post will help you navigate through to the most useful and popular articles we’ve posted here over the years. After years of regularly posting international shipping articles, Universal Cargo has established its blog as a recognized resource for shippers and businesspeople considering an […]

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Whether you’re new to Universal Cargo’s blog or a regular reader, this post will help you navigate through to the most useful and popular articles we’ve posted here over the years.

Top 10 international shipping news stories 2016

pic: flickr iabusa

After years of regularly posting international shipping articles, Universal Cargo has established its blog as a recognized resource for shippers and businesspeople considering an import and/or export business.

Often, blog posts here are news articles, covering the current happenings in the international shipping industry. However, the most viewed blog posts are articles giving shipping tips or explaining basic or important information around shipping.

Below we count down the top 10 such blog posts, ranked by the most visited posts. We measured this not by which posts have the most views, as that would favor older blogs, but by the blog posts that are currently receiving the most visits from shippers and potential shippers that come to our site.

You can throw a bookmark on this page to have easy reference to the following links. To read the blogs, just click on the titles that are also links to the pages.

Without further ado, let’s count them down from number 10 to number 1 just like David Letterman used to do!

NUMBER 10

13 THINGS YOU NEED TO KNOW ABOUT FREIGHT FORWARDING

This is the only guest post that made the list. In this post by John Stuart of the International Logistics Centre shares 13 facts you need to know about freight forwarding that will help you through the shipping process.

NUMBER 9

SIZE MATTERS! SOME SHIPPERS TOO BIG FOR SMALL FREIGHT RATES

This article was posted at the height of record low freight rates in 2016. While freight rates aren’t quite as low now as they were then, carriers still struggle with overcapacity and increasing freight rates to the healthy and profitable levels they would like.

Traditionally, the really large shippers, with the

ir direct annual contracts with carriers, are at an advantage when it comes to freight rates. However, this highlights an interesting anomaly of smaller shippers having an advantage over the Walmarts of the world.

NUMBER 8

7 TIPS TO AVOID INTERNATIONAL SHIPPING SCAMS

At number 8 comes 7 extremely useful tips to help shippers avoid common and costly scams that happen in the international shipping industry.

If you haven’t checked out this blog, please do. It could end up saving you major hassle and serious money.

NUMBER 7

AUTO SHIPPING: RORO VS. CONTAINER — WHICH IS BETTER?

Universal Cargo has moved away from shipping vehicles, but we posted this blog back when we still handled that specialized cargo. While you’ll need to go elsewhere for this particular service, our blog post looking at the two options for auto shipping is still very useful and popular among new auto shippers.

NUMBER 6

4 FACTORS FOR CONSIDERING AIR FREIGHT VS. OCEAN FREIGHT

Ah, the age old debate: which is better, air freight or ocean freight. This is our first blog covering the topic and still the most popular.

While this blog is still useful, we have a more recent version that takes into consideration almost twice as many factors when comparing air freight to ocean shipping and helping you decide which is better for your cargo shipping needs.

Here’s that newer article: Air Freight Vs. Ocean Freight — Which Will Win Your Cargo

NUMBER 5

INCOTERMS DEFINITIONS PART 1: EXW, FCA, FAS, FOB

IncotermsFrom the time we published this series defining Incoterms, it has been one of the most popular pages on our site. Coming in at number 5 is part one of the series defining the Incoterms in Groups E and F.

Anyone making deals with overseas partners that involve shipping should familiarize themselves with these types of deals that define who is responsible for the shipping and insurance of cargo.

NUMBER 4

INCOTERMS DEFINITIONS PART 2: CFR, CIF, CPT, CIP

Here the Incoterms definitions series continues, covering the deal types in Group C.

NUMBER 3

INCOTERMS DEFINITIONS PART 3: DAT, DAP, DDP

Our most popular blog in the Incoterms definitions series is the third part. This blog defines the deals in Group D.

It should be noted that these Incoterm blog posts also include videos that have the Incoterm definitions in them.

NUMBER 2

WHAT DOES A FREIGHT FORWARDER DO & DO YOU NEED ONE?

What this blog is about is pretty self explanatory from the title. But if you’re wondering what exactly a freight forwarder does and whether you need one, as many people do, this is the blog for you.

Finally, we come to the number one visited post in our blog. And yes, it is a useful one. Drum roll, please…

NUMBER 1

WHAT IS CUSTOMS CLEARANCE?

Not only does this blog provide a thorough definition of exactly what customs clearance is, it also gives shippers (both new and experienced) information that will help shippers navigate this unavoidable part of international shipping.

Click Here for Free Freight Rate Pricing

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Canada Enacts Retaliatory Tariffs Against the U.S. https://www.universalcargo.com/canada-enacts-retaliatory-tariffs-against-the-u-s/ https://www.universalcargo.com/canada-enacts-retaliatory-tariffs-against-the-u-s/#respond Tue, 03 Jul 2018 17:20:20 +0000 https://www.universalcargo.com/?p=9035 It is a clichéd joke that Canadians are so polite they'll apologize to you if you insult them. It seems the U.S. tested that cliché's punchline on a national level.




The U.S. insulted Canada with President Trump's steel and aluminum tariffs, and Canada isn't returning insult with apology. Canada is fighting back with retaliatory tariffs. Well, there might be a little of that apologetic sounding politeness to go with the retaliation.




In an American Shipper article, Ben Meyer quoted Canadian Minister of Foreign Affairs Chrystia Freeland as saying:




“It is with regret that we take these countermeasures [speaking of Canada's newly enacted retaliatory tariffs], but the U.S. tariffs leave Canada no choice but to defend our industries, our workers and our communities, and we will remain firm in doing so. The real solution to this unfortunate and unprecedented dispute is for the United States to rescind its tariffs on our steel and aluminum.”




Meyer reported in the article that Canada, on Sunday, put into force tariffs on a list of U.S. products worth $16.6 billion Canadian (U.S. $12.6 billion).




For those of you keeping count at home, we've now posted blogs about the U.S. being on the cusp of trade war with China, trade war with the EU, and now trade war with Canada.

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American & Canadian flagsIt is a clichéd joke that Canadians are so polite they’ll apologize to you if you insult them. It seems the U.S. tested that cliché’s punchline on a national level.

The U.S. insulted Canada with President Trump’s steel and aluminum tariffs, and Canada isn’t returning insult with apology. Canada is fighting back with retaliatory tariffs. Well, there might be a little of that apologetic sounding politeness to go with the retaliation.

In an American Shipper article, Ben Meyer quoted Canadian Minister of Foreign Affairs Chrystia Freeland as saying:

“It is with regret that we take these countermeasures [speaking of Canada’s newly enacted retaliatory tariffs], but the U.S. tariffs leave Canada no choice but to defend our industries, our workers and our communities, and we will remain firm in doing so. The real solution to this unfortunate and unprecedented dispute is for the United States to rescind its tariffs on our steel and aluminum.”

Meyer reported in the article that Canada, on Sunday, put into force tariffs on a list of U.S. products worth $16.6 billion Canadian (U.S. $12.6 billion).

For those of you keeping count at home, we’ve now posted blogs about the U.S. being on the cusp of trade war with China, trade war with the EU, and now trade war with Canada.

Canada!

Is it just me or does it seem like it takes serious work to be in conflict with Canada.

As a Detroit Lions fan, I can’t help but be reminded of the slogan “Detroit versus everybody!” In this case, Detroit would be replaced by the U.S.

In both versions of the slogan, it seems the subject of the sentence is in conflict with someone it shouldn’t be. For the Detroit Lions, they not only have to be play against another football team every week but also the NFL refs. For the U.S., it sure feels wrong to be in conflict with our allies.

As Meyer says in his American Shipper article, “Initially, it looked as if both [Canada and the EU] would be exempted [from the new U.S. steel and aluminum tariffs], but Trump dropped the exemptions following unsuccessful negotiations on deals that would likely have replaced those tariffs with quotas.”

Now, I’m no economist, so I’m not going to sit here in my cozy, little computer chair and say President Trump is making the wrong moves. He has his strategy. Even if the whole world says it’s wrong, we’ll all have to wait and see how it all plays out. After all, it seems just about everyone was wrong about Trump’s strategy in running for president being sure to fail.

What we do know is, in the meantime, many U.S. importers and exporters are being affected by tariffs implemented by the U.S. and its trading partners around the world.

President Trump obviously believes tariffs can help level trade playing fields that he thinks are stacked against the U.S. And he’s certainly not wrong that the U.S. could have better trade deals with other nations around the world. With Trump’s belief in mind, levying tariffs makes sense. But tariffs against Canada?

Canada’s government points out that the U.S. has a rare thing (for the U.S.) when it comes to the U.S.’s major metal trade with its neighbor to the north: a surplus.

“The U.S. has a $2 billion annual trade surplus on iron and steel products with Canada,” it added. “Canada buys more American steel than any other country in the world, accounting for 50 percent of U.S. exports. Canadian steel is used in American tanks, and Canadian aluminum in American planes. Indeed, Canada is recognized in U.S. law as part of the U.S. National Technology and Industrial Base related to National Defense.”

As a matter of fact, the U.S. has traditionally held an overall trade surplus with Canada. A peripheral look at the import and export numbers between Canada and the U.S. suggest this is still the case. However, a deeper look shows that this U.S. surplus is due to a surplus in services, and there is actually U.S. deficit in goods trade with Canada.

The Office of U.S. Trade Representative reports:

U.S. goods and services trade with Canada totaled an estimated $673.9 billion in 2017. Exports were $341.2 billion; imports were $332.8 billion. The U.S. goods and services trade surplus with Canada was $8.4 billion in 2017.

Canada is currently our 2nd largest goods trading partner with $582.4 billion in total (two way) goods trade during 2017. Goods exports totaled $282.5 billion; goods imports totaled $300.0 billion. The U.S. goods trade deficit with Canada was $17.5 billion in 2017.

Trade in services with Canada (exports and imports) totaled an estimated $91.5 billion in 2017. Services exports were $58.7 billion; services imports were $32.8 billion. The U.S. services trade surplus with Canada was $25.9 billion in 2017.

That deficit on the trade of actual goods with Canada is what President Trump is likely looking to change with a new trade deal with the country. And, of course, he’s trying to use tariffs as leverage to induce Canada into a deal that’s more beneficial for the U.S.

Click Here for Free Freight Rate Pricing

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Are Trump’s Steel Tariffs Unconstitutional? https://www.universalcargo.com/are-trumps-steel-tariffs-unconstitutional/ https://www.universalcargo.com/are-trumps-steel-tariffs-unconstitutional/#respond Thu, 28 Jun 2018 22:27:17 +0000 https://www.universalcargo.com/?p=9033 The Trade Expansion Act of 1962 gives President Trump the legal right to impose tariffs at his discretion if he determines there's a national security threat to justify it. Therefore, when the president exercised that right by imposing 25% tariffs on steel imports (which he did along with 10% tariffs on aluminum) under the justification of national security, he was within his legal rights.




But is that legal right unconstitutional?




The American Institute for International Steel (AIIS) and two of its member companies, Sim-Tex LP and Kurt Orban Partners LLC, say yes.




AIIS, Sim-Tex LP, and Kurt Orban Partners LLC filed a lawsuit challenging the constitutionality of  Section 232, the statute within the Trade Expansion Act of 1962 that gives the president the legal right in question.

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international shipping federal antitrust lawThe Trade Expansion Act of 1962 gives President Trump the legal right to impose tariffs at his discretion if he determines there’s a national security threat to justify it. Therefore, when the president exercised that right by imposing 25% tariffs on steel imports (which he did along with 10% tariffs on aluminum) under the justification of national security, he was within his legal rights.

But is that legal right unconstitutional?

The American Institute for International Steel (AIIS) and two of its member companies, Sim-Tex LP and Kurt Orban Partners LLC, say yes.

AIIS, Sim-Tex LP, and Kurt Orban Partners LLC filed a lawsuit challenging the constitutionality of  Section 232, the statute within the Trade Expansion Act of 1962 that gives the president the legal right in question.

According to an article by Chris Dupin in American Shipper, the lawsuit not only seeks to declare Section 232 unconstitutional but also seeks a court order to stop further enforcement of Trump’s tariffs on steel. They filed the suit Wednesday (June 27th) in the United States Court of International Trade in New York City.

Obviously, President Trump’s tariffs have met much opposition. We just blogged on Tuesday about the European Union’s retaliatory tariffs followed by President Trump’s threat to throw new tariffs on U.S. imports of EU cars and the EU’s promise to match that with more retaliation putting the U.S. and EU on the verge of a trade war.

However, one of the interesting things about the lawsuit challenging the constitutionality of the president’s tariffs is that it does not criticize Trump. The lawsuit points at Congress as the ones who acted unconstitutionally.

Dupin reports:

Alan Morrison, lead counsel for the plaintiffs, said, “Unlike most cases brought against actions of the Trump administration, it is Congress — through its delegation of unfettered discretion to the president in this statute — and not the president that is the violator of the Constitution. The president simply took advantage of the opportunity to impose his views on international trade on the American people, with nothing in the law to stop him.”

The plaintiffs’ argument, as Dupin’s article presents it, is that Congress, with Section 232, delegates its legislative powers to the president without any “intelligible principle” to limit the president’s discretion, which violates both the doctrine of separation of powers and the system of checks and balances protected by the Constitution.

When President John F. Kennedy signed this act into law, he said, “This is the most important international piece of legislation, I think, affecting economics since the passage of the Marshall plan.”

The Marshall Plan was a program where the U.S. aided Western European countries in rebuilding their economies after World War II from 1948 to 1952.

Ready for some irony?

When JFK — who worked hard to get this bill passed, even calling it his number one priority — signed the Trade Expansion Act of 1962, he spoke of how this legislation was to lower tariffs while highlighting the benefits of doing so:

This act recognizes, fully and completely, that we cannot protect our economy by stagnating behind tariff walls, but that the best protection possible is a mutual lowering of tariff barriers among friendly nations so that all may benefit from a free flow of goods.

A little more than half a century later, JFK’s top priority bill is raising controversy as its being used to do the opposite of what he wanted to use it for.

There’s an article from the Washington, DC: Congressional Quarterly, 1963 that ends with the following portend about the Trade Expansion Act of 1962:

According to most observers, the moments of truth are yet to come. For the Trade Expansion Act of 1962 is an instrument, a set of authorities, within which to shape U.S. trade policies. The true shape will be determined at the negotiating table and in the White House, which must decide how much to protect domestic industries.

It’s almost eerie to see prophecy fulfilled from over fifty years ago as those moments of truth come to pass.

A big moment of truth is coming with this lawsuit as its plaintiffs eye the Supreme Court. Perhaps it will be decided that the truth is it’s unconstitutional for the White House to decide how much to protect domestic industries.

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US & EU Tariffs On Verge of Trade War https://www.universalcargo.com/us-eu-tariffs-on-verge-of-trade-war/ https://www.universalcargo.com/us-eu-tariffs-on-verge-of-trade-war/#respond Tue, 26 Jun 2018 19:58:55 +0000 https://www.universalcargo.com/?p=9029 We’ve talked a lot about the escalating tariffs and tariff threats between the U.S. and China in this blog, but Asia is not the only battle front for President Trump’s trade wars. There has also been backlash from countries in both North America and Europe over President Trump’s tariff moves. Today’s post looks at the […]

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Picture: Flickr — US and EU Flags by openDemocracy

Picture: Flickr — US and EU Flags by openDemocracy

We’ve talked a lot about the escalating tariffs and tariff threats between the U.S. and China in this blog, but Asia is not the only battle front for President Trump’s trade wars.

There has also been backlash from countries in both North America and Europe over President Trump’s tariff moves. Today’s post looks at the escalating tariff tension between the United States and the European Union.

The EU has put new tariffs into effect against the U.S. in retaliation for President Trump’s steel and aluminum tariffs, from which he did not spare U.S. allies like the EU, Canada, and Mexico. Ben Meyer reported in American Shipper about the EU’s new tariffs:

The European Union on Friday officially adopted a long list of duties on goods produced in the United States in response to the Trump administration’s import tariffs on steel and aluminum.

These “rebalancing” measures will immediately target a list of products worth 2.8 billion euros (U.S. $3.27 billion) that includes steel and aluminum products, as well as a wide range of agricultural goods like corn, whiskey and cigarettes.

President Trump used national security as his legal grounds to levy taxes on steel at 25% and taxes on aluminum at 10%. It is clear the president intends to use the new U.S. tariffs as bargaining chips to create leverage and get better trade deals for the U.S. with countries around the world.

While Trump, since his election campaign, has had a clear emphasis on leveling the playing field when it comes to trade between the U.S. and China, it has also been obvious that he does not see the U.S.’s trade situation as satisfactory with many, if any, of its long-standing trade partners.

So far, President Trump’s tariffs have been met with scorn from other countries, and he has not yet reached the trade deals he hopes for. Instead, the U.S. is receiving retaliatory tariffs like the ones mentioned above from the EU that went into effect on Friday.

It is likely President Trump saw this response coming as without the bat of an eye, he is ready with further tariff threats to shoot back at countries’ tariff retaliations.

For China, threats have spiraled to intervals of $200 billion worth of tariffs. For the EU, President Trump targets the auto industry with tariffs if the member countries do not bend. Alanna Petroff wrote in a CNN article:

Trump threatened to make cars his next major target in a transatlantic trade tussle on Friday, saying they were in line for a 20% tariff if the European Union did not remove its own tariffs and trade barriers.

Should Trump follow through, analysts said that the European Union will be ready to strike back.

“Cars is a big deal. This is a much bigger deal than steel,” said David Henig, a former trade negotiator from the United Kingdom who worked on trade talks with the United States.

Cars worth €38 billion ($44 billion) are shipped each year from the European Union to the United States. It’s the biggest export market for an industry that forms the backbone of manufacturing in Europe.

President Trump’s threat of tariffs on cars from the EU is not strictly in response to retaliatory tariffs from the EU. The president demands the EU remove tariffs on U.S. cars in order to prevent the U.S. from imposing the tariffs on EU cars, so this tariff threat may have come either way.

Nonetheless, we’re now in the back and forth game. President Trump hits the EU with steel and aluminum tariffs, the EU hits back with retaliatory tariffs, Trump ups the stakes with car tariff threats, the EU looks for bigger retaliation to match…

The obvious short-term results are coiling tensions and spiraling tariffs. That is not good news for shippers, nor probably the U.S. economy as a whole, in the here and now, but it is hard to know what the end result will be.

Michelle Fox reported in a CNBC article that Nobel Prize-winning economist Robert Shiller does not think President Trump’s tariffs will last:

That’s because they are “too crazy,” said Shiller, a professor of economics at Yale University.

“They are generating so much anger around the world. It’s not a sustainable policy,” he said…

However, that same article does highlight the bit of leeway President Trump has right now to levy tariffs in pursuit of better trade deals with countries around the world.

Todd Buchholz, former White House economic advisor under President George H.W. Bush, believes timing is key for the Trump administration.

He told “Closing Bell” on Monday that the White House is probably thinking “if you can’t take on China now — when the economy is growing at 4 percent, when unemployment is nearly at record lows — when will you have the wherewithal to do that?”

The growing economy and low unemployment rate have boosted President Trump’s economic approval rating. In fact, the CNBC article says that the majority of Americans now approve the president’s handling of the economy for the first time since he was elected. CNBC cites a survey it conducted, showing 51% approval versus only 36% disapproval.

Basically, if President Trump is going to make the unpopular moves of levying tariffs at the risk of full on trade wars with other countries, he couldn’t ask for a better opportunity to do so. And that’s what Buchholz, as quoted in the CNBC article, was getting at:

“Does it take a toll on the economy? Yes. Does it take a toll on the market? Yes,” he added.

However, Trump is someone who made his name in real estate and reality TV programming, said Buchholz, now CEO of educational start-up Sproglit.

“He knows a lot about game theory and this is a game he’s playing. We’re all participants in it, whether we want to or not,” he noted.

U.S. shippers likely don’t want to be participants in President Trump’s game; however, they’re at the top of the list of the most affected participants by the president’s moves. There’s good reason to worry about increased costs, possible loss of foreign business partners, and global competitiveness of U.S. companies.

The big question is, as Trump moves toward his endgame, will there be positive results for U.S. shippers after the initial negative impacts of escalating tariffs.

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$450 Billion in Tariffs on Chinese Goods? Is This Getting Out of Hand? https://www.universalcargo.com/450-billion-in-tariffs-on-chinese-goods-is-this-getting-out-of-hand/ https://www.universalcargo.com/450-billion-in-tariffs-on-chinese-goods-is-this-getting-out-of-hand/#respond Thu, 21 Jun 2018 08:49:45 +0000 https://www.universalcargo.com/?p=9027 In a statement on Monday, President Donald Trump announced plans to pursue a whopping additional $400 billion worth of tariffs to the $50 billion dollars worth already planned on imports from China if Beijing does not change course on its planned retaliatory tariffs on U.S. exports:




"Therefore, today, I directed the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent.  After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.  If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200 billion of goods.  The trade relationship between the United States and China must be much more equitable."

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YouTube Video

In a statement on Monday, President Donald Trump announced plans to pursue a whopping additional $400 billion worth of tariffs to the $50 billion dollars worth already planned on imports from China if Beijing does not change course on its planned retaliatory tariffs on U.S. exports:

Therefore, today, I directed the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent.  After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.  If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200 billion of goods.  The trade relationship between the United States and China must be much more equitable.

The only thing that has changed with the planned $50 billion of tariff increases on Chinese goods since we blogged at the end of May that President Trump was moving forward with the tariffs and the trade war with China was back on is we’ve gotten closer to the tariffs’ implementation.

Everything is in place for the U.S. to impose the first phase of the tariff increases. On July 6th, $34 billion worth of tariffs on imports from China are scheduled to go into effect. The $16 billion remaining portion of the $50 billion still has to go through a public notice and comment period.

Obviously, China is not happy about seeing these tariffs imposed and is ready to retaliate. Brian Bradley reported in an American Shipper article:

“Though a trade war is not something we want, we are definitely not afraid of one,” a Chinese Foreign Ministry spokesperson said during a Tuesday press conference. “We will continue to take effective measures to firmly safeguard the interests of our nation and our people and resolutely uphold the economic globalization and the multilateral trading system.”

President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

The Trump administration has made similar statements about the U.S. not fearing a trade war. With such stances on both sides, it’s easy to see how tariff threats keep escalating.

These new numbers in President Trump’s statement, adding up to $450 billion, eclipse the already enormous amounts of $150 billion worth of tariffs to which previous threats escalated from each country.

There’s a point at which throwing around ridiculously large numbers like this devalues how much money we’re actually talking about. To be perfectly honest, my brain doesn’t even really comprehend what $1 billion actually is (although I’d like to try with such a number added to my bank account).

To get an actual sense of how large these numbers really are, I turned to my old friend the interweb. More.com has a post on the subject that credits authors at Expand Your Mind with describing the numbers well:

To count to one thousand, counting one number every second continuously, it would take seventeen minutes. Counting to one million at the same rate, it would take twelve days (counting nonstop, day and night). But counting to one billion would take thirty-two years!

Therefore, extrapolating from the Expand Your Mind information, in order to count to the $450 billion number President Trump is talking about in tariffs on Chinese goods, it would take 14,400 years of counting without ever taking a moment’s break. That’s 180 lifetimes using 80 years as the average lifespan.

Perhaps more helpful to understanding how significant this amount of money actually is would be comparing it to how much money trade between the U.S. and China adds up to in a year.

According to the U.S. Census Bureau, last year’s U.S. exports to China added up to $129.8936 billion. To make it simpler, I’m going to round that number to $130 billion (even though that is rounding up by more than $100 million). U.S imports from China added up to $505.47 billion in 2017. I’m going to do another gross bit of rounding and turn that number into an even $505 billion (yes, chopping close to half a billion dollars from the total). Let’s jut call 2017 an average year and add those numbers together to say that there is $635 billion worth of trade between China and the U.S. in a year.

I know there’s an economist out there somewhere pulling out his or her hair at the simplicity of how I’m throwing around these numbers, but when we’re talking about $450 billion, that number a little over 70% of the amount of trade done between U.S. and China in a year.

That means $450 billion worth of tariffs on Chinese goods is way more than a significant amount. This kind of money in tariffs would be a game changer when it comes to trade between the U.S. and China. I’m not even talking about a game changer in that it would switch which country has a trade deficit with the other. I’m talking about a game changer in terms of many (maybe even a majority of) U.S. shippers finding a different country as their preferred trade partner.

Maybe these very large tariff threats are no more than threats as the U.S. and China fight for leverage in trade negotiations. July 6th isn’t quite here yet, so maybe even the scheduled tariffs will go back on hold again instead of going into effect. But maybe we are at the beginning of a trade war that will drastically change the trade relationship between the U.S. and China.

I’m not an economist and don’t claim to know all the implications that come along with the tariff threats being made back and forth between the U.S. and China. But as the numbers being thrown around climb higher and higher, I have to ask if this is getting out of hand or if President Trump is really on his way to getting the U.S. a better trade deal with China.

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Top 10 Shipping Quotes https://www.universalcargo.com/top-10-shipping-quotes/ https://www.universalcargo.com/top-10-shipping-quotes/#respond Tue, 19 Jun 2018 17:44:51 +0000 https://www.universalcargo.com/?p=9025 At Universal Cargo, we're always happy to provide shipping quotes; however, today's quotes are of a completely different kind than we normally dispense.




Instead of freight rate pricing, compiled here is a top 10 list of quotations about shipping. Some of the quotes are recent while others are pulled from history as far back as antiquity.




I'd quote Monty Python to say, "And now for something completely different," but this isn't completely similar to a blog we posted in 2014 that compiled a top 10 logistics quotes list, which I was inspired to create when I stumbled upon the following words of Alexander the Great:




“My logisticians are a humorless lot … they know if my campaign fails, they are the first ones I will slay.”




Even though that blog is nearly five years old, it remains one of Universal Cargo's most popular posts to this day.




Top 10 international shipping news stories 2016




Therefore, I thought I'd compile a new top 10 list of quotes narrowing from logistics to the slightly more specific topic of shipping for our readers to enjoy.

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At Universal Cargo, we’re always happy to provide shipping quotes; however, today’s quotes are of a completely different kind.

Instead of freight rate pricing, compiled here is a top 10 list of quotations about shipping. Some of the quotes are recent while others are pulled from history as far back as antiquity.

I’d quote Monty Python to say, “And now for something completely different,” but this is completely similar to a blog we posted in 2014 that compiled a top 10 logistics quotes list, which I was inspired to create when I stumbled upon the following words of Alexander the Great:

“My logisticians are a humorless lot … they know if my campaign fails, they are the first ones I will slay.”

Even though that blog is nearly five years old, it remains one of Universal Cargo’s most popular posts to this day.

Top 10 international shipping news stories 2016

pic: flickr iabusa

Therefore, I thought I’d compile a new top 10 list of quotes narrowing from logistics to the slightly more specific topic of shipping for our readers to enjoy.

Before we get to that top 10 list, here are a few quotes that just missed the cut.

Runners Up:

“A ship in harbor is safe, but that is not what ships are for.”

— John A. Shedd

This is a great quote that has been retread by several people. But somehow I get the feeling that it isn’t really about shipping. Plus it’s something of a retread of a much older quote itself. Foreshadowing perhaps?

“The man who has experienced shipwreck shudders even a a calm sea.”

— Ovid

While shipwrecks happen in shipping and it’s hard to cut one of history’s greatest poets from the list, this quote still didn’t really seem to be about shipping itself. That’s something of a theme in this section of runners up as we’ll see with the next one…

“To reach a port, we must set sail — Sail, not tie at anchor — Sail, not drift.”

— Franklin D. Roosevelt

FDR is a great source for quotes and another person that is hard to cut from a list of top quotes. However, preference is given to quotes that illuminate shipping rather than quotes that use shipping or sailing to illustrate another point.

“It is not the ship so much as the skillful sailing that assures the prosperous voyage.”

— George William Curtis

Man, this quote was close to making the list. Perhaps on any other day, in any other mood, I may have placed this in the top 10. But not today.

Freight mobility and movement, while not a sexy policy issue, is a highly important one. Capacity constraints and congestion on our nation’s freight rail system create many problems.

— Bill Lipinski

Now we’re talking. This quote is definitely about the kind of shipping we’re looking for. And it was the last quote to get cut from the list. Perhaps it just felt too obvious or not quite catchy enough to crack the top 10.

Enough with runners up. Let’s get to the real list. Here they are, the top 10 shipping quotes:

Number 10:

“I find Maersk fascinating. It is the Coca-Cola of freight with none of the fame. Its parent company, A. P. Moller-Maersk, is Denmark’s largest company, its sales equal to 20 percent of Denmark’s GDP; its ships use more oil than the entire nation.”

— Rose George

Rose George is a British writer who became so fascinated with shipping she decided to travel on a cargo ship to learn more about it. She gave a great Ted Talk about it and is the only person who made this list twice. Oops! Spoiler alert.

Number 9:

“As we look at a future where we’re going to have to double our freight capacity, how do you create a freight system that’s integrated across the country when you have 50 different freight systems that are built one state at a time?”

— Anthony Foxx

Politician Anthony Foxx’s quote highlights the complexity of shipping. And he was only talking about moving freight through our country before adding the complications of international shipping.

Number 8:

“For a lot of arcane shipping reasons, new comics, even digital ones, have a long history of only being released on Wednesdays”

— Brian K. Vaughan

Vaughan is a writer of not only comic books but TV too. His best known work is probably the show Lost. The characters in that show could have used a ship. This quote highlights the surprise effects shipping has that no one would realize.

Number 7:

“I grew up watching my dad scout games live. They played on Saturday. Sometimes they wouldn’t get the films until Monday. Sunday air shipping from wherever the college team was located – Starkville, Mississippi, or wherever the film was coming from. It took two days.”

— Bill Belichick

Anyone at all into football knows who Bill Belichick is. This quote goes along with the previous one in showing shipping’s effects on a vast many details that we wouldn’t even think about in our lives.

Number 6:

“There are few industries as defiantly opaque as shipping. Even offshore bankers have not developed a system as intricately elusive as the flag of convenience, under which ships can fly the flag of a state that has nothing to do with its owner, cargo, crew, or route.”

— Rose George

As spoiled earlier, Rose George appears again. Here she highlights a major issue when it comes to ocean carriers in the international shipping industry: lack of transparency.

Number 5:

“Since Europe is dependent on imports of energy and most of its raw materials, it can be subdued, if not quite conquered, without all those nuclear weapons the Soviets have aimed at it simply through the shipping routes and raw materials they control.”

— Barbara Amiel

Barbara Amiel is a British journalist. Thanks, Barbara, for this sobering thought. Or strategy to utilize, depending on your personal ambitions.

Number 4:

“It takes four months to ship food aid and 40 percent of the cost is in the shipping. People cannot eat shipping costs. We have had people die when there are surpluses in the markets.”

— Andrew Natsios

If American public servant Andrew Natsios’s words don’t speak to the importance of shipping, I don’t know what does.

Number 3:

“Admire a small ship, but put your freight in a large one; for the larger the load, the greater will be the profit upon profit.”

— Hesiod

Hesiod was a Greek poet that is thought to have been a contemporary of Homer. Considering megaships’ current rule of the oceans, it seems the more times change, the more shipping remains the same.

Number 2:

“If the highest aim of a captain were to preserve his ship, he would keep it in port forever.”

— Thomas Aquinas

This is the quote I alluded to after that John A. Shedd one in the runners up section. It definitely seems that quote could have been directly inspired by this one from Saint Aquinas.

I may be showing inconsistency in ranking this so highly. It could have easily been lumped in with those other runner up quotes that use ships and shipping metaphorically, but this is so well stated and even if taken literally (which I don’t think is the intention) is full of profundity.

Number 1:

“I never predict freight rates; nobody can do that.”

— Søren Skou

This one is short, sweet, and perfectly describes the volatile nature of freight rates in the international shipping industry. And it doesn’t hurt that it comes from the Coca-Cola of ocean freight carriers, A.P. Moller Maersk’s CEO.

What do you think about the list? Would you change the order or remove quotes from the list to put in other ones that you think I should have included? Let us know in the comments section below.

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Are Ocean Carriers In Trouble? https://www.universalcargo.com/are-ocean-carriers-in-trouble/ https://www.universalcargo.com/are-ocean-carriers-in-trouble/#comments Thu, 14 Jun 2018 23:35:40 +0000 https://www.universalcargo.com/?p=9024 "We're all going to go bust," MOL President and CEO Junichiro Ikeda said to the Financial Times about the near future of ocean carriers in the international shipping industry.




For years, we've been watching ocean carriers struggle with profitability in the international shipping industry. It's why we've seen carrier competition shrink so much with mergers, buyouts, bankruptcy, and carrier alliances.




Even as competition has shrunk, turning profits remains difficult for the carriers left standing.




In a long American Shipper article about uncertainty for carriers to get on a profitable course, Chris Dupin shared:




 BlueWater Reporting estimates that the 11 largest carriers (not including the privately held Mediterranean Shipping Co.) lost nearly $10.6 billion in 2016, about $1.4 billion in 2017 and already $1.3 billion in the first quarter of this year.

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K Line, MOL, and NYK Line merging

Picture: Container ship MOL Presence passing the Golden Gate Bridge by Chris Isherwood

“We’re all going to go bust,” MOL President and CEO Junichiro Ikeda said to the Financial Times about the near future of ocean carriers in the international shipping industry.

For years, we’ve been watching ocean carriers struggle with profitability in the international shipping industry. It’s why we’ve seen carrier competition shrink so much with mergers, buyouts, bankruptcy, and carrier alliances.

Even as competition has shrunk, turning profits remains difficult for the carriers left standing.

In a long American Shipper article about uncertainty for carriers to get on a profitable course, Chris Dupin shared:

 BlueWater Reporting estimates that the 11 largest carriers (not including the privately held Mediterranean Shipping Co.) lost nearly $10.6 billion in 2016, about $1.4 billion in 2017 and already $1.3 billion in the first quarter of this year.

Playing a large role in that unprofitable first quarter of this year is rising fuel costs. Carriers have since come under fire for imposing emergency bunker surcharges to try to alleviate their higher fuel costs in an industry that they’re already struggling for profitability in.

There’s good reason for shippers to be upset about those emergency bunker surcharges. The nearly unison announcement of the surcharges screams collusion while the inability to handle the rising fuel costs is the carriers’ own doing.

There is a system in place that should have accounted for the rising fuel prices, but to grab more market share, carriers made contracts with large shippers that completely side-stepped the mechanism that takes fuel price fluctuations into account.

Of course, fuel is not the only cost that carriers have not managed well, but it is a very big one that is only going to get worse. And it is fuel costs that led Ikeda to say that all the carriers are going to go bust.

Just over a week ago, Mike Wackett reported in the Loadstar:

Less than 18 months before the IMO’s 0.5% sulphur cap regulations come into force for merchant shipping, container lines are worried that the estimated $50bn extra cost of the greener fuel could tip them into bankruptcy.

At that point, Wackett brought up Ikeda’s quote from Financial Times that all the carriers are going to go bust. Then Wackett continued:

[Ikeda] expressed his concern that ocean carriers would be unable to recover sufficient amounts from shippers to mitigate the impact of the $300 a tonne extra cost of low-sulphur fuel oil (LSFO).

Mr Ikeda may have good reasons to be worried: carriers have generally not been very successful in their attempts to pass on extra fuel costs to shippers…

Yes, the losses of the first quarter of this year, which have already been brought up above, exemplify carriers’ lack of success in passing on fuel costs. But Wackett also brings up an older example:

In the previous decade, the establishment of SECA (Sulphur Emission Control Areas) in the North and Baltic Seas and North American and Canadian coastlines, which required switching tanks to LSFO when entering, was also not compensated.

Ocean carriers initially announced surcharges to cover the cost of more expensive fuel consumed on some tradelanes, but these were ultimately absorbed into their freight rates.

Carriers need to find a way to compensate for the costs of the upcoming sulphur cap on fuel or risk facing even bigger losses than the billions already suffered in these previous years.

If carriers continue to lose money the way they have in recent history, the shrinking of carrier competition in the international shipping industry will not merely continue, it will greatly increase.

A bit less than a year ago, Maersk (long considered the top dog of ocean carriers) announced expectations that carrier competition would shrink to just three international companies.

It’s not hard to see such an outcome happening to carriers in a couple years, especially with MOL saying they’re all going to go bust when the sulphur cap hits in a little less than a year and a half from now.

In recent years, we’ve watched strategies spread across the international shipping industry’s carriers like a fever as they raced to build megaships and forge ship sharing alliances.

Those strategies certainly have not saved carriers, but they may have helped the carriers stay afloat for a little while like a leaking swim tube ring.

Now we’ll watch new and recycled strategies spread as carriers madly try to stay afloat.

Will “scrubbers” keep carriers from losing too much money to the new sulphur regulations by removing harmful gasses from ship engines and exhausts? According to Wackett’s article, such systems (which act as onboard treatment plants) have been bemoaned by carriers but will now be put on MSC’s ships.

MSC, along with Maersk, is also looking at slowing down its ships on major trade lanes while moving ships over from unprofitable lanes to increase both reliability and profits, according to another Chris Dupin written American Shipper article.

Of course, slow-steaming is no new strategy for reducing fuel costs of cargo ships. Seeing renewed emphasis on it would not be at all surprising at this point. But will it save carriers? Not on its own, it won’t.

Carriers have long shot themselves in the bows as they compete with each other for market share. Price wars have driven freight rates down below profitability margins, negated surcharges, and halted mechanisms built to account for cost fluctuations like bunker fuel spikes. During the last several years, we’ve been watching them take on water.

So, yes, carriers are in trouble. They’re in deep water literally and figuratively. We’ll all be watching and hoping more than Maersk’s prediction of three carriers manage to stay afloat because shippers don’t really want to see a world in which there is no carrier competition.

And let’s just not even think about MOL’s prediction that all ocean carriers are going to sink.

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ILA & USMX Reach Contract Agreement for East & Gulf Coast Ports! https://www.universalcargo.com/ila-usmx-reach-contract-agreement-for-east-gulf-coast-ports/ https://www.universalcargo.com/ila-usmx-reach-contract-agreement-for-east-gulf-coast-ports/#respond Thu, 07 Jun 2018 19:55:43 +0000 https://www.universalcargo.com/?p=9016 Do you feel that breeze? It's either the winds of change or a collective sigh of relief from shippers as the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) reached a dockworkers agreement that should bring stability to the East and Gulf Coast ports for the next several years.




The ILA and USMX announced the agreement yesterday (Wednesday, June 7th). A press release on ILA's website states:




"The International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) announced they reached tentative agreement on a six-year Master Contract, subject to ratification by ILA members at ports from Maine to Texas and by the USMX membership.  The current USMX-ILA Contract expires on September 30, 2018."

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hiring agents for selling overseasDo you feel that breeze? It’s either the winds of change or a collective sigh of relief from shippers as the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) reached a dockworkers agreement that should bring stability to the East and Gulf Coast ports for the next several years.

The ILA and USMX announced the agreement yesterday (Wednesday, June 7th). A press release on ILA’s website states:

The International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) announced they reached tentative agreement on a six-year Master Contract, subject to ratification by ILA members at ports from Maine to Texas and by the USMX membership.  The current USMX-ILA Contract expires on September 30, 2018.

As that September date drew closer and closer, shippers became more and more worried that the ILA and USMX would not be able to resolve their issues over automation and come together on a deal before the current contract expires.

The fear was if that were to happen, slowdowns, strikes, and/or lockouts might disrupt the flow of goods through the ports.

In 2014-2015, contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and Pacific Maritime Association (PMA) led to slowdowns, mini-lockouts, and crippling congestion at the West Coast ports.

Just before that, in 2012-2013, the contentious contract negotiations were on the East and Gulf Coasts between the ILA and USMX when negotiations stretched well past contract expiration and the ILA announced plans to strike.

Traditionally, neither the ILA nor the ILWU would extend or agree to a new contract before the previous one expires. This policy preserved the dockworker unions’ most powerful weapons for leverage: strikes, threat of strikes, and slowdowns.

Unfortunately, all the drama at the ports whenever a dockworkers union contract was about to expire would end up being very costly for shippers and the U.S. economy.

Now we may have reached a new era at U.S. ports as both the ILWU and ILA have reached long-term contract agreements before expiration of the previous one.

In August of last year, the rank and file of the ILWU approved an agreement with PMA to extend the West Coast dockworkers contract from an expiration date in 2019 to 2022. This agreement put a bit of pressure on the ILA and USMX to get a deal done on the other side of the country.

The new Master Contract agreement on the East and Gulf Coast ports will still have to be approved by votes from the rank and file, so it’s still tentative; however, at this time there is no reason to believe that the agreement will be rejected.

From the press release on ILA’s website, the agreement has the full support of the ILA representation that helped negotiate it:

Some 200 ILA Wage Scale delegates unanimously approved the terms of the new agreement, following two-days of Master Contract negotiations in Delray Beach, Florida.  The agreement culminates months of tough negotiations between the ILA and USMX. Both sides hailed the agreement that was reached months ahead of the expiration of the current pact.

The two sides encouraged local ILA and management groups to finalize local agreements by July 10, 2018, prior to full membership ratification votes by the ILA rank-and-file members and USMX.

Details about the contract itself have not yet been made available, but shippers should just be happy (if not ecstatic) that this deal got done prior to the previous contract’s expiration.

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Are Carriers, Imposing Emergency Bunker Surcharges, Really Cartels? https://www.universalcargo.com/are-carriers-imposing-emergency-bunker-surcharges-really-cartels/ https://www.universalcargo.com/are-carriers-imposing-emergency-bunker-surcharges-really-cartels/#respond Tue, 05 Jun 2018 20:28:23 +0000 https://www.universalcargo.com/?p=9010 Fuel costs have significantly increased this year, causing many carriers to post first-quarter losses for 2018.




At least, carriers are saying higher fuel bunker prices are the cause of the financial losses, although shippers know carriers already struggle with profitability in the international shipping industry.




Fuel prices have certainly risen this year, causing more carrier struggles; however, when top carriers in ocean shipping announced emergency bunker surcharges almost simultaneously, shippers shouted collusion and unfair business practices.




Actually, shippers are using stronger words than those. Global Shippers Forum (GSF), which represents shippers' interests and that of organizations around the world, calls the emergency bunker surcharges "an unwelcome legacy of the cartel era" that have "no place in a modern liner shipping market".

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Fuel costs have significantly increased this year, causing many carriers to post first-quarter losses for 2018.

At least, carriers are saying higher fuel bunker prices are the cause of the financial losses, although shippers know carriers already struggle with profitability in the international shipping industry.

Fuel prices have certainly risen this year, causing more carrier struggles; however, when top carriers in ocean shipping announced emergency bunker surcharges almost simultaneously, shippers shouted collusion and unfair business practices.

Actually, shippers are using stronger words than those. Global Shippers Forum (GSF), which represents shippers’ interests and that of organizations around the world, calls the emergency bunker surcharges “an unwelcome legacy of the cartel era” that have “no place in a modern liner shipping market”.

In the media statement that includes those above strong words, GSF posted:

Chris Welsh, Secretary General of the Global Shippers’ Forum (GSF) believes this move is an indictment on the liner shipping industry that, a decade since the abolition of the liner conference system in October 2008, the container industry is still using conference-style pricing methods to impose surcharges on its customers.

GSF doesn’t mince words in accusing carriers of collusion. The word cartel, which GSF uses right in the media statement’s headline, even brings images of gangsters, violence, and drugs to many minds. Of course, a cartel in no way needs to involve guns or drugs. The Oxford Dictionary defines a cartel as “an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.”

And that definition is exactly what shippers worry is happening with ocean carriers.

Shippers have had plenty of reason to worry about carriers acting as cartels in recent years. There are carrier alliances dominating the industry, carrier mergers and buyouts, actual collusion investigations into the major carriers, and many carriers being found guilty of breaking antitrust laws in the RoRo sector of international shipping. Handy Shipping Guide just posted another story last week on antitrust fines levied against carriers — including K Line, MOL, and NYK.

It’s enough to see why GSF would call this time in international shipping the cartel era.

But GSF goes beyond saying there’s collusion. GSF points out that most of these emergency bunker surcharges are in addition to bunker surcharges that already exist from the carriers and Chris Welsh is quoted in the statement as saying:

“Container ship operators need to ‘fess-up’ by taking responsibility and greater control of their costs,” he says, “rather than announcing vaguely explained short-notice unrecoverable surcharge costs on customers.”

GSF is not alone in saying it is not because of higher fuel costs carriers, including CMA CGM and Maersk, suffered financial loss and are imposing emergency bunker surcharges. Maritime research, consulting, and financial advisory company Drewry seems to agree.

Ship & Bunker reported:

Carriers’ own failure to control costs, not rising oil and bunker prices, are the cause of the controversial emergency bunker surcharges recently announced by the world’s top three box carriers, Drewry has suggested.

“After half a century of doing business, lines should by now have a workable system to deal with increases in external costs like fuel and not have to impose new surcharges,” the consultancy said.

Indeed, Drewry says BAF mechanisms in-place today were established when fuels costs were much higher, so in theory should still wok with today’s relatively lower prices.

“Carriers’ own failure to control costs has left them exposed to the rapidly rising fuel prices. Emergency BAFs are a desperate move that will only partially compensate them and at the same time alienate small and medium shippers,” the consultancy said.

And alienate shippers it certainly has.

The GSF media statement demands transparency from carriers with explanation and evidence that bunker surcharges are necessary before going on with the following paragraphs that rail against the use of emergency bunker surcharges.

“The imposition of emergency surcharges has no place in a modern liner shipping market where costs and prices should be mutually agreed between customers and suppliers, preferably in mutually agreed service contracts,” he continues. “Such arrangements enable the parties to build long term business partnerships, as well as providing clarity on the terms and conditions for the services provided and for appropriate remuneration.

“The use of emergency surcharges is a none too subtle attempt to impose non-negotiable charges on customers.  The liner industry needs to employ more appropriate pricing arrangements, in conjunction with its customers, if it is serious about developing partnership approaches and improving individual customer-supplier relationships.”

For an idea of price hikes being imposed through these emergency bunker surcharges, Maersk is charging $60 per TEU or $120 per FEU and CMA CGM is charging $55 per TEU or $110 per FEU. These charges are not supposed to hit U.S. shippers, where the industry is regulated by the Federal Maritime Commission until July 1st.

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Trade War Back On: Trump Moving Forward with Tariffs on China https://www.universalcargo.com/trade-war-back-on-trump-moving-forward-with-tariffs-on-china/ https://www.universalcargo.com/trade-war-back-on-trump-moving-forward-with-tariffs-on-china/#respond Tue, 29 May 2018 20:46:56 +0000 https://www.universalcargo.com/?p=9000 Barely more than a week after Treasury Secretary Steven Mnuchin went on Fox News Sunday and said the trade war with China is on hold, the White House announced in a statement today (May 29th) that the United States will impose a 25 percent tariff on $50 billion of goods imported from China.




The statement lines up with President Trump's announcement back on March 22nd of planned levies on $50 billion worth of imports from China that quickly escalated into both China and the U.S. threatening $150 billion worth of tariffs on the other country's goods.




If you're already feeling dizzy from tariffs between the U.S. and China being announced, escalated, on hold, back on... well, you may find yourself throwing up soon.

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President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

Barely more than a week after Treasury Secretary Steven Mnuchin went on Fox News Sunday and said the trade war with China is on hold, the White House announced in a statement today (May 29th) that the United States will impose a 25 percent tariff on $50 billion of goods imported from China.

The statement lines up with President Trump’s announcement back on March 22nd of planned levies on $50 billion worth of imports from China that quickly escalated into both China and the U.S. threatening $150 billion worth of tariffs on the other country’s goods.

If you’re already feeling dizzy from tariffs between the U.S. and China being announced, escalated, on hold, back on… well, you may find yourself throwing up soon.

It is likely the purpose of this White House statement, including the announcement these tariffs will be imposed, is to create leverage for the trade negotiations Commerce Secretary Wilbur Ross is heading to Beijing at the end of this week to continue with China.

Today’s White House statement was brief, but it gives the following information about imposing tariffs on China.

Under Section 301 of the Trade Act of 1974, the United States will impose a 25 percent tariff on $50 billion of goods imported from China containing industrially significant technology, including those related to the “Made in China 2025” program.  The final list of covered imports will be announced by June 15, 2018, and tariffs will be imposed on those imports shortly thereafter.

That tariffs announcement was actually the third action update in the statement. Here are the other two:

  1. To protect our national security, the United States will implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology.  The proposed investment restrictions and enhanced export controls will be announced by June 30, 2018, and they will be implemented shortly thereafter.
  2. The United States will continue to pursue litigation at the World Trade Organization for violations of the Agreement on Trade-Related Aspects of Intellectual Property Rights based on China’s discriminatory practices for licensing intellectual property.  The United States filed the case regarding these violations on March 23, 2018.

After listing those three actions, the statement summed up with the following:

… the United States will continue efforts to protect domestic technology and intellectual property, stop noneconomic transfers of industrially significant technology and intellectual property to China, and enhance access to the Chinese market.  Likewise, the United States will request that China remove all of its many trade barriers, including non-monetary trade barriers, which make it both difficult and unfair to do business there.  The United States will request that tariffs and taxes between the two countries be reciprocal in nature and value.  Discussions with China will continue on these topics, and the United States looks forward to resolving long-standing structural issues and expanding our exports by eliminating China’s severe import restrictions.

While this statement was pretty short, the White House also published today a press release, labeled as a fact sheet, titled “President Donald J. Trump is Confronting China’s Unfair Trade Policies”.

While highlighting China’s unfair trade practices with the U.S.—including dumping, discriminatory non-tariff barriers, forced technology transfer, over capacity, and industrial subsidies—and the actions of the Trump administration to fight these practices, the press release underscores the U.S. deficit with China.

Trump has loudly bemoaned this deficit, which the press release says was $375 billion in 2017 alone, since he was on the campaign trail to become president.

While it’s a matter of debate if a trade deficit between countries actually is a bad thing, President Trump certainly believes the one between the U.S. and China is very bad. Therefore, the U.S. trade deficit is at the center of President’s Trump’s trade action and trade negotiation with China.

Until action and agreement between the U.S. and China is set to significantly decrease the trade deficit, expect drama over tariffs to appear in the news cycle. But it would not be surprising at all to hear from the Trump administration that the tariffs, and the trade war to go along with them, are on hold again after Ross completes his upcoming meetings with Chinese officials.

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US China Trade War “On Hold” – Happy World Trade Week! https://www.universalcargo.com/us-china-trade-war-on-hold-happy-world-trade-week/ https://www.universalcargo.com/us-china-trade-war-on-hold-happy-world-trade-week/#respond Tue, 22 May 2018 19:58:50 +0000 https://www.universalcargo.com/?p=8995 Worried about a trade war with China? Here's some good news.




“We’re putting the trade war on hold,” Treasury Secretary Steven Mnuchin said in an interview on Fox News Sunday.




Ever since President Trump announced Section 301 trade action including tariffs on imported goods from China, the world has feared the two countries spiraling into a full-fledged trade war. In fact, threats between the countries quickly climbed to $150 billion worth of tariffs to be imposed by each country on goods from the other.




Mnuchin said in the Fox interview that the $150 billion worth of tariffs the Trump administration threatened China with have been put on hold while they try to "execute the framework" the two countries have agreed to during trade talks.

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President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

Worried about a trade war with China? Here’s some good news.

“We’re putting the trade war on hold,” Treasury Secretary Steven Mnuchin said in an interview on Fox News Sunday.

Ever since President Trump announced Section 301 trade action including tariffs on imported goods from China, the world has feared the two countries spiraling into a full-fledged trade war. In fact, threats between the countries quickly climbed to $150 billion worth of tariffs to be imposed by each country on goods from the other.

Mnuchin said in the Fox interview that the $150 billion worth of tariffs the Trump administration threatened China with have been put on hold while they try to “execute the framework” the two countries have agreed to during trade talks.

In the interview, Mnuchin described the negotiations and framework with China as follows:

…we’ve made very meaningful progress and we agreed on a framework, which is important to understand. And the framework includes their agreement to substantially reduce the trade deficit by increasing their purchases of goods. We also discussed very important structural issues that they’re going to make in their economy to make sure that we have a fair ability to compete there. And also protections about technology, which have been very important to the president.

While Mnuchin did say that all of the $150 billion worth of tariffs on Chinese goods are on hold, he made it clear that President Trump can always put the tariffs back on if China doesn’t follow through with its commitments.

So the news isn’t exactly trading war canceled yet.

Key areas of trade mentioned by Mnuchin are agricultural and energy exports from the U.S. to China. U.S. exports in these sectors are to be greatly increased and factor largely into the reduction of the U.S. trade deficit with China.

When pushed about whether the Trump administration was getting China to agree to the specific trade deficit reduction target of $200 billion Trump had previously talked about or any specific target numbers at all, for that matter, Mnuchin refused to give any specific targets. He did, however, say there are specific targets that he won’t disclose publicly, but they go industry by industry.

Coincidentally, or probably not so coincidentally, President Trump proclaimed this week as World Trade Week.

In the White House press release proclaiming May 20th through May 26th of 2018 as World Trade Week, President Trump says:

The United States will no longer tolerate any foreign nations gaining unfair advantages on American industries by stealing or forcing the transfer of our companies’ technology or intellectual property, subsidizing their exporters, illegally dumping products into our markets, and building excessive and unnecessary capacity. These unfair and distortionary trade practices flood global markets, depress prices, and harm our companies and workers. We will not allow these practices to compromise our leadership in intellectual property, digital products, innovative technology, manufacturing, agriculture, and numerous industrial sectors.

The trade practices highlighted in those words from the president are the same practices the Trump administration has accused China of and says the agreed upon trade framework addresses.

“I encourage Americans to observe this week with events, trade shows, and educational programs that celebrate the benefits of trade to our country,” President Trump says in the proclamation.

Clearly, the week has been timed to sync up with the announcement of progress in trade talks with China. But, hey, as a freight forwarder, it seems improper for us to miss the chance to say, “Happy World Trade Week.” So, yeah, happy World Trade Week.

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Shipping Can Wait: Interview with Micah Burke https://www.universalcargo.com/shipping-can-wait-interview-with-micah-burke/ https://www.universalcargo.com/shipping-can-wait-interview-with-micah-burke/#comments Tue, 15 May 2018 20:37:48 +0000 https://www.universalcargo.com/?p=8979 For those of you who don't know, Universal Cargo's CEO Devin Burke and President Shirley Burke have a son who is a pro golfer. Micah Burke, who put off joining the family shipping business to pursue golfing, has his own business called Perfect ProAms that runs pro am tournaments, which pair professional and amateur golfers for competition play.




Micah Burke Happy FaceWhile today's blog is a bit of a break from our usual international shipping material, it does provide insight into the family of the freight forwarders you've trusted your cargo with for over 30 years.




The following is an interview I conducted with Micah Burke about the tournaments he runs, but it also contains the down-low on Devin Burke's photography skills, whether or not our CEO can swing a golf club, what it's like to be a professional golfer, and more.

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Micah BurkeFor those of you who don’t know, Universal Cargo’s CEO Devin Burke and President Shirley Burke have a son who is a pro golfer. Micah Burke, who put off joining the family shipping business to pursue golfing, has his own business called Perfect ProAms that runs pro am tournaments, which pair professional and amateur golfers for competition play.

Micah Burke Happy FaceWhile today’s blog is a bit of a break from our usual international shipping material, it does provide insight into the family of the freight forwarders you’ve trusted your cargo with for over 30 years.

The following is an interview I conducted with Micah Burke about the tournaments he runs, but it also contains the down-low on Devin Burke’s photography skills, whether or not our CEO can swing a golf club, what it’s like to be a professional golfer, and more.

ME: Tell me about the ProAm event. This is the 2nd annual one you just had, right?

MICAH: Not really the exact event I ran last year. Last year was my first event that I ever ran. Definitely a lot of kinks I needed to work out. Last year was good. It just wasn’t good enough where I could get a repeat event. So I made some changes just to get people excited about the event again. I changed the format of it. I changed the structure of it too. But still kept the integrity of it where I wanted to have one professional, one amateur pair up as a team and play together.

Perfect ProAmThere are not a lot of events like that out there. I wanted to brand my event as that event where you get that one-on-one experience. So what it does for me, it makes my event uniquely competitive in a sense where most programs are for three amateurs, one pro, and it just kind of takes that competitive edge out of it because everybody in the group is on the same team. But when you have teams of two playing against each other…

So my event, this one, I try to make really competitive by making it match play, where, say, me and you are a team… We play against a bunch of other teams that are one pro and one am. And every nine holes you switch to a different team that you play. So over the span of three days, you play five nine-hole matches and you’re playing against five different teams. So as opposed to playing a tournament with the same people every time every round, you’re playing different people, and you’re trying to beat them. So it’s different in that sense, and also I try to bring in a lot of young, talented professionals to play in my events on the girl and guy’s side just to try to give it that more youthful energy. And make it fun and competitive at the same time. That’s the balance I try to have in my events. That combination tries to get people to come back.

ME: What’s the overall goal of your events?

MICAH: It’s kind of two part. The main part, I started this company to create events that help pros that were in my same situation. I played professional for seven years. I found it very difficult to play in events that helped me raise money. I thought it’d be really cool if I create an event where you could invite someone that maybe has always been supportive or maybe that was interested in supporting my career.

pro am teamInstead of me asking them for money, it’s asking them to play in a tournament with me. So that’s what this event is. That one-on-one experience also doubles as an opportunity for you as a professional to invite someone that could potentially help you out with a career.

And then what I do in the actual event to double down on that cause is to take all the money from the amateurs—the pros play for free—so I take all of the money from the amateurs and I create an event that has money and prizes and stuff that’s all free for the professional. So for a change, you get to play an event that is not expensive—it’s no cost to them—and they can win stuff to help them with their career because playing out there on the road, it’s up to a thousand bucks per tournament. And you put in your lodging, you put in your car rental, you put in your food. You know, it’s fifteen hundred dollars a tournament. It’s really hard to afford that week in, week out. So I’m trying to set up tournaments that, you know, are cheaper.

pro am teamI’ve had a couple instances where a couple pros have played with someone and through that experience, that relationship growing through my event, they were able to get a bigger check down the road. One guy last year, he got like a $20,000 check to play the summer. And I try to put this event right before the summer because I know that’s where there’s all the bulk of tournaments for pros. So one kid got a big chunk of money to be able to play the rest of the summer. Another one happened here this year.

I also incorporate the First Tee of Pheonix, which is a junior golf program. It’s the local chapter here in Phoenix. I try to raise money for them in a variety of different ways throughout the tournament. So I was able to raise a couple grand for them.

ME: How was Universal Cargo Involved?

MICAH: The way UC was a part of it, they sponsored my awards party. So they provided the dinner buffet, a couple drinks here and there, the setup of it, and then I donated five hundred of their contribution to the First Tee.

Range BallsI titled them as the awards party sponsor. Just, like, I put signage up. But their contribution helps out not only getting money to the First Tee, providing the dinner, but also providing money into the purse that all the pros play for. It’s just they feel the overall cause of the event too.

Every sponsorship I get, I take half of that, a portion of that, and put it toward the First Tee too. This is such a new thing for me that I haven’t really tapped into the sponsorship world yet. Still working with my parents’ company and then one other company right now but hoping to grow and keep going and raise more money for local charity and do more positive things for pros in the area.

ME: Sounds like it’s a win-win kind of event. It’s good for the pros and good for anyone who wants to get in and play with the pros.

MICAH: Exactly. It’s definitely a mix kind of thing. I’m looking for amateurs who want that competitiveness. A lot of amateurs that don’t know how to play golf are a little insecure about their game or are maybe a little intimidated by playing with the pro and competing. But there’s a ton of golfers out there that have invested all this time—I’m talking about amateurs—that are going into retired life, and there’s a lot of them that want a taste of that.

Follow throughThe way it works is, you know, there’s a lot of pros in Arizona. A ton of pros. It’s kind of one of the hubs. That and Florida is one of the golf hubs in the US because of the winter its so incredible there. I know that there’s a lot of amateurs out there who know pros. My tournament only really works if there’s that relationship already there where the amateur knows a pro and they know they’re chasing their dream as a professional. You get a lot of support verbally, just not a lot of action behind that. So that’s what this tournament is. That’s what I’m trying to create. It’s going to take a little bit of time for me to work out the kinks of making it actually  really clean, clean event. But the essence of it is just that. That relationship and growing that relationship through my tournament. The pro showing them how good they are, how they compete. And the am getting to see that first hand. And, you know, hopefully they can learn something from them.

I think it’s a pretty rare thing that you get to see someone in their element competing. And that’s how we all work, especially in golf, is you just learn by being kind of in it, in the mix of it. It’s really hard to be on the driving range and learn how to play golf. But if you actually see someone doing it, I think it’s actually a pretty unique learning experience too.

Q: How did you get into golf to begin with?

MICAH: I went with my dad a couple times on the driving range. It was right before high school. Like right when my dad started going. This was right around when Tiger Woods was going off and doing his thing. Perfect Pro AmSo everybody was kind of going on the driving range. So my dad and my brother went together—My brother was actually pretty good. Picked it up pretty easily. But naturally, me being the younger brother, I just wanted to beat him. So I started playing too and tagging along.

And then I went to high school. So I had a little bit of history hitting balls, and then they started a golf team right as I went to high school. And then they said you get out of school at 1:30 if you play on the golf team, so I signed up for that. And then the rest is kind of history. I just picked it up really quick in high school.

ME: So I think I picked up in there you saying that Devin, your dad, is not very good at golf.

MICAH: <Laughing.> Oh, he’s awful. He’s awful! He doesn’t get better. He just stays really bad. I try to help him but I think his grandpa taught him back when he was a kid. He engraved some, like, I don’t know, some bad stuff going on there. It just doesn’t seem like he can make the changes. He’s just a high 2o, 30 handicapper.

ME: So he should stick to international shipping is what you’re saying.

MICAH: Yes. He should stay away from golf. I don’t think his body can hold up either. His knees are bad. It’s pretty funny watching him. He has a good time, but… He actually played in my tournament last year. He didn’t play in this one. He actually took another role. He was a photographer for the event.

ME: Yeah, I saw that. He took some pictures. Looks like he did a pretty good job with that.

Perfect Pro AmMICAH: Oh my God, he did great. It was tough last year because I hired a professional, but it was just awful. Like the guy was just kind of a dork and he just didn’t really understand golf. But my dad’s had some experience photographing me in tournaments, and he really likes that. You know, the action shots—which are really hard to take—and he took a lot of really good ones. That was cool.

ME: So I guess the call of international shipping never made it to you, huh?

MICAH: You know, I never… I’m not going to rule it out, you know. There seems to be still… Both my mom and dad are working pretty good as a team doing that. My brother’s in there. It’s just I had to try this.

Perfect Pro AmI knew if I were to transition my life to international shipping that that’s something I’d have to commit to long-term. So before I did that… Golf, it was just such a powerful force in my life from high school and going into college and going into it professionally. I feel like it just gave me so much.

So I had this idea to pursue it. I still want to see it through to see if it works. I really feel like there’s a need for it. Golf doesn’t have to be that much of an elitist sport. If you create events like this, and you create a tradition like this, and you create a culture with these tournaments, you give golfers a chance that may have never had a chance. And who knows?

Who knows what kind of golfers can come out of that if I’m able just to start it and get some people around me that believe in the same thing as me. You know, it’s fun. It’s been a lot of work, but it’s been fun starting this. You know, and someday I may circle back and be a part of my parents’ business, but I love golf too much to leave it cold turkey.

ME: So who won the tournament this year?

MICAH: It was these two guys. One guy plays professionals on the mini tours in Arizona and I think in the Midwest during the summer. Really good player. I’ve actually known him for a while. That was the pro.

The amateur is an ex-pro who recently went to amateur after he started his own business. He has this golf product. He invented this really cool golf invention. So that’s his business. He doesn’t play anymore. But it’s actually kind of cool how they won.

So the way the whole tournament worked out is I ran a three day tournament and at the end, six teams came out as advancing to the shoot-out. And the shoot-out is a sudden death playoff. So I made this tournament so I could have this climax of a moment where all these six teams are all playing together and at the end of these three holes only one team remains.

Perfect Pro Am Golf Tournament WinnersAnd when these six teams played, everybody else that didn’t make it stayed and watched. Now I have a crowd of 30 people, 40 people watching these six teams as they battle it out for three holes and one remains. So it was really cool and I’m still going through the videos that my dad took of the shoot-out, but that’s going to be really cool. And it was really fun. Everybody was just watching and it was really intense but really fun. That was really cool. So that was the team that won. They won in the end. Kind of a little nail-biter. I gave them these big wrestling belts as trophies. So they were cool. I started to put all that stuff on my website.

ME: What was the purse?

MICAH: The winner got three grand. Winning team got three grand. On top of that, the pro in that group gets paid Q School. This is something I put in all my events because key school is the biggest event of the year for a professional. It happens usually in the fall of every year. It’s about forty-five hundred bucks. So it’s really expensive, God knows why, I have no idea. It’s forty-five hundred bucks and a lot of times pros don’t have the money to pay that because they didn’t do as well as they thought in the summer and they ran out of money.

Mel at Perfect Pro AmThat’s the prize I always want to give out because it goes with the purpose of my event. And that’s to empower these young up-and-coming tour professionals. So the guy won it, so now he can play in the summer knowing no matter how he plays, he’s got that Q School lined up for the end of the year. And he’s just preparing for that.

Q School is the way to get to the next level the fastest. It’s kind of like the NBA Draft, but you’re not getting drafted, you have to play your way through. So it’s like your big moment to get to the next level. Yeah, nobody picking, you gotta earn it.

ME: So the way it basically works for a pro golfer is you pay your way into tournaments, trying to make it into the paying ranks at the end of it, right?

MICAH: Each single tournament, yeah, there’s, like, I’ll give you an example. I played in the Canadian Tour. 156 players, and of those 156 players, 55 make the cut. So 100 people are not making any money. Of that 55, first place would get about twenty grand; the last place would get about three hundred bucks. So you gotta make it in there, and then for you to make your money back on the week, you gotta take probably, like, 15th.

Perfect Pro AmSo that’s kind of how the money breakdown is for a tournament. And that’s how it goes. According to my friend, who likes to use the Bitcasino.io no deposit bonus – it’s like gambling. You put your money in, you hopefully, your game stacks up and you’re able to make a profit.

And then the Q School’s different. The Q School is Qualifying School. So let’s say 10,ooo people are entering this Q School, only 50 guys at the very end through a series of tournaments, Qualifying Tournaments, only about 60 people actually get to the next level. So you gotta really play well all the way through. It’s different stages that you play. There’s 1st stage, 2nd stage, 3rd stage, final stage, and you gotta play all the way through to the very end.

ME: Before we end, we should do a little bit about growing up with Devin as your dad. How many puns do you know?

MICAH: <Through laughter> He knows them all for me. He’s got so many, it’s great. I don’t know how he fits them all in there. I told him for Halloween, he should be the Pun-isher, and all he does is speak in puns.

Thank you to Micah for sharing your time.

To learn more about Micah’s Perfect ProAm events, check out his website:

https://www.perfectproams.com/

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60 Tips from 20 Experts on Importing from China https://www.universalcargo.com/60-tips-from-20-experts-on-importing-from-china/ https://www.universalcargo.com/60-tips-from-20-experts-on-importing-from-china/#respond Thu, 10 May 2018 19:24:06 +0000 https://www.universalcargo.com/?p=8976 I was recently asked to contribute my top 3 tips about importing from China for a big list of advice to help new shippers to, well, import from China.




Since at Universal Cargo we really care about helping shippers succeed, I couldn't say no.




The list of advice contains 60 tips from 20 experts about importing from China compiled by Bansar, a China-based freight forwarder.

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Shipping Containers at Port Importing ExportingI was recently asked to contribute my top 3 tips about importing from China for a big list of advice to help new shippers to, well, import from China.

Since at Universal Cargo we really care about helping shippers succeed, I couldn’t say no.

The list of advice contains 60 tips from 20 experts about importing from China compiled by Bansar, a China-based freight forwarder.

The list strikes a nice balance between professionals who work in the international shipping industry and successful entrepreneurs who import goods from China to sell through online platforms like Amazon and eBay and coach others in doing likewise.

A couple of experts on the list of 20, like assurance and quality control expert Renaud Anjoran, actually live in China.

Anjoran gave excellent tips relating to risk and production of goods in China. But his tips are just the tip of the iceberg when it comes to good pieces of wisdom for new shippers.

The list’s tips include advice on picking suppliers, making deals, being culturally aware, and protecting your brand as well as things like understanding laws, taxes, and customs that affect your shipping.

I also noticed that more than one person brought up the importance of using and understanding Incoterms in their tips. While I didn’t bring them up in my tips, Incoterms are important for international shippers. As such, we have a whole blog and video series overviewing and defining Incoterms:

What’s the Deal With Incoterms?!

Incoterms Definitions Part 1: EXW, FCA, FAS, FOB

Incoterms Definitions Part 2: CFR, CIF, CPT, CIP

Incoterms Definitions Part 3: DAT, DAP, DDP

All Incoterms Made Fast & Simple in New Video Series

The three tips I contributed to the list are:

Tip 1:

Make sure your Chinese manufacturers/suppliers are reputable. Research who you’re buying products from. In fact, ordering sample products first is a good way to make sure you’re getting something of quality from them before you order a big shipment of something you won’t be able to sell, won’t feel good about selling, or that will hurt your reputation.

Tip 2:

Form relationships with Chinese manufacturers/suppliers. Most ideally would be making a trip to China to meet business partners/potential business partners in person. However, forming a relationship beyond just ordering goods from Chinese business partners (even through emails and phone calls) will help you get better deals, be prioritized over other customers, and even have access and opportunity for more products and cooperation than you might otherwise receive.

Tip 3:

Choose an experienced freight forwarder that makes customer service a priority. Your freight forwarder makes the entire shipping process go smoothly—if they know what they’re doing. If they don’t have the proper experience, not only will they be unprepared for the many issues that can pop up during the international shipping process, but they can also create costly problems for you. And if their communication and customer service is lacking, you could end up in the dark through the entire shipping process.

That gives you three of the 60 tips on the list. You can click here to read the other 57.

Click Here for Free Freight Rate Pricing

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Trade Deficit Falls & US, China Trade Talks Continue https://www.universalcargo.com/trade-deficit-falls-us-china-trade-talks-continue/ https://www.universalcargo.com/trade-deficit-falls-us-china-trade-talks-continue/#respond Tue, 08 May 2018 21:58:28 +0000 https://www.universalcargo.com/?p=8973 The numbers are in from the U.S. Department of Commerce’s Bureau of Economic Analysis for March, revealing a drop in the U.S. trade deficit after six consecutive months of increase.




When Donald Trump was on the campaign trail to become president of the United States, he promised to turn around the U.S. trade deficit. He clearly wanted to increase U.S. production and exporting to the point of it exceeding U.S. importing.




Then presidential candidate Trump talked about outsourcing as something that is hurting, even destroying, American manufacturing.




Trump spoke of imposing tariffs to protect American jobs before becoming president, and over the last months, we've been watching the now president announce tariffs that have sparked fears of trade war around the world.

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money trade deficit U.S. China

Picture: Money! by Tracy O via flickr

The numbers are in from the U.S. Department of Commerce’s Bureau of Economic Analysis for March, revealing a drop in the U.S. trade deficit after six consecutive months of increase.

When Donald Trump was on the campaign trail to become president of the United States, he promised to turn around the U.S. trade deficit. He clearly wanted to increase U.S. production and exporting to the point of it exceeding U.S. importing.

Then presidential candidate Trump talked about outsourcing as something that is hurting, even destroying, American manufacturing.

Trump spoke of imposing tariffs to protect American jobs before becoming president, and over the last months, we’ve been watching the now president announce tariffs that have sparked fears of trade war around the world.

Of course, his goal is the same one he talked about before becoming president of doing away with the huge U.S. trade deficit.

While there is certainly a great deal of debate about whether or not a trade deficit is actually a bad thing for a country, there is no debating that President Trump thinks the deficit is a bad thing and is willing to impose whatever tariffs he thinks are necessary to turn it around. Or at least threaten whatever tariffs he thinks necessary to make other countries negotiate better trade deals with the U.S.

Therefore, there’s little doubt that the Trump administration is happy to hear the news that a dent was made in the deficit in March.

Hailey Desormeaux reported the numbers in American Shipper:

The U.S. trade deficit tumbled from $57.7 billion in February to $49 billion in March, fueled by an increase in exports amid a drop in imports, data from the U.S. Department of Commerce’s Bureau of Economic Analysis revealed.

U.S. exports reached $208.5 billion in March, ticking up 2 percent from February, while the nation’s imports totaled $257.5 billion, down 1.8 percent.

Of course, $49 billion is still a great deal of money, and it would take an awful lot to get rid of that deficit altogether.

However, as my workout program says in one of its taglines, “Progress is progress, no matter how small.”

And President Trump is sure to point to March’s numbers as progress in his fight against the deficit, and more specifically, the trade deficit with China.

A significant amount of the trade deficit decline in March was from a decrease in the trade deficit with China.

“The trade deficit with China during the month fell 11.6 percent from February to $25.9 billion,” Desormeaux wrote.

China is where much of President Trump’s focus has been when it comes to balancing trade. Tariff threats and moves between the two countries over the last few months have gotten intense, but also led to urgent negotiations happening between the countries right now.

Last week, a U.S. delegation was in China for trade negotiations.

There were no announcements of a breakthrough in the talks. Such a breakthrough is not to be easily come by as President Trump is seeking a $200 billion decrease in the U.S. deficit with China by 2020.

That $200 billion number makes the March drop of $8.7 billion (to the overall U.S. deficit, not just the one with China) look pretty small.

The talks between the U.S. and China will continue next week when Beijing’s top economic advisor, Liu He travels to Washington for round two of negotiations, as reported by Financial Times.

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Trump Delayed Steel & Aluminum Tariffs for Ally Countries But Not China https://www.universalcargo.com/trump-delayed-steel-aluminum-tariffs-for-ally-countries-but-not-china/ https://www.universalcargo.com/trump-delayed-steel-aluminum-tariffs-for-ally-countries-but-not-china/#respond Thu, 03 May 2018 19:36:31 +0000 https://www.universalcargo.com/?p=8962 Uncertainty continues in steel and aluminum related markets as President Trump delayed tariffs on imports of these important materials from select U.S. ally countries.




In a presidential proclamation on March 8, 2018, Trump announced a 25% tariff on steel imports and a 10% tariff on aluminum.

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Steel Plant U.S. steel tariffsUncertainty continues in steel and aluminum related markets as President Trump delayed tariffs on imports of these important materials from select U.S. ally countries.

China, not receiving an exemption on the tariffs, responds by increasing tariffs on U.S. goods, reigniting trade war fears, even making the trade war feel official.

In a presidential proclamation on March 8, 2018, Trump announced a 25% tariff on steel imports and a 10% tariff on aluminum.

The tariffs are, of course, controversial. There have been worries about increased steel and aluminum costs hurting U.S. manufacturing. There have been conjectures about U.S. manufacturing competitiveness suffering and a loss of jobs.

Other concerns are increased costs for consumers on steel and aluminum products. Yes, that would include the price of cars.

It also wouldn’t be a President Trump tariff announcement without the immediate trade war talk from people. Fears that these tariffs could spark trade wars with other countries responding with retaliatory tariffs are not unfounded, especially after all the tariff threats that recently went back and forth between the U.S. and China and China now following through with tariff hikes.

On the other hand, there are those who argue in the positive, saying the tariffs on imported steel and aluminum will boost U.S. steel and aluminum manufacturing jobs. This argument is not without evidence either. For example, WKYC 3, a local NBC channel in Lorain County, OH, reported Republic Steel’s plan to restart a steel plant following the tariff announcement that would bring back 1,000 jobs to the area.

Whether good or bad, many believe these tariffs on steel and aluminum are really just Trump creating U.S. trade negotiation leverage on other countries.

These tariffs certainly do play into trade negotiations with other countries as Trump’s proclamation days ago, on April 30th, 2018, that delays the tariffs for select countries centers around agreements and negotiations with the states.

Trump uses national security as justification for the tariffs and reiterated in the most recent proclamation that the tariffs could be reduced or eliminated for ally countries that make an alternative deal with the U.S.:

… any country with which we have a security relationship is welcome to discuss with the United States alternative ways to address the threatened impairment of the national security caused by imports from that country, and noted that, should the United States and any such country arrive at a satisfactory alternative means to address the threat to the national security such that I determine that imports from that country no longer threaten to impair the national security, I may remove or modify the restriction on aluminum articles imports from that country and, if necessary, adjust the tariff as it applies to other countries, as the national security interests of the United States require.

The U.S. has reportedly completed such a deal with South Korea and agreed in principle with Argentina, Australia, and Brazil.

That makes it look like these countries are to be exempt from the steel and aluminum tariffs, but if the deals do not go through to the Trump administration’s satisfaction, the tariffs could be reimposed on the countries according to Trump’s proclamation:

I have determined that the necessary and appropriate means to address the threat to national security posed by imports of aluminum articles from Argentina, Australia, and Brazil is to extend the temporary exemption of these countries from the tariff proclaimed in Proclamation 9704, in order to finalize the details of these satisfactory alternative means to address the threatened impairment to our national security posed by aluminum articles imported from these countries. In my judgment, and for the reasons I stated in paragraph 10 of Proclamation 9710, these discussions will be most productive if aluminum articles from Argentina, Australia, and Brazil remain exempt from the tariff proclaimed in Proclamation 9704, until the details can be finalized and implemented by proclamation. Because the United States has agreed in principle with these countries, in my judgment, it is unnecessary to set an expiration date for the exemptions. Nevertheless, if the satisfactory alternative means are not finalized shortly, I will consider re-imposing the tariff.

When it comes to Canada, Mexico, and the EU, negotiations have not yet reached agreement points. These ally countries have had a temporary exemption from the tariffs from the start.

Those exemptions are now extended to the end of this month, which seems to be the deadline President Trump is trying to put on a trade deal regarding steel and aluminum with Canada, Mexico, and the EU.

Here’s what the president said in the proclamation:

The United States is continuing discussions with Canada, Mexico, and the EU. I have determined that the necessary and appropriate means to address the threat to the national security posed by imports of aluminum articles from these countries is to continue these discussions and to extend the temporary exemption of these countries from the tariff proclaimed in Proclamation 9704, at least at this time. In my judgment, and for the reasons I stated in paragraph 10 of Proclamation 9710, these discussions will be most productive if aluminum articles from these countries remain exempt from the tariff proclaimed in Proclamation 9704.

For the reasons I stated in paragraph 11 of Proclamation 9710, however, the tariff imposed by Proclamation 9704 remains an important first step in ensuring the economic stability of our domestic aluminum industry and removing the threatened impairment of the national security. As a result, unless I determine by further proclamation that the United States has reached a satisfactory alternative means to remove the threatened impairment to the national security by imports of aluminum articles from Canada, Mexico, and the member countries of the EU, the tariff set forth in clause 2 of Proclamation 9704 shall be effective June 1, 2018, for these countries.

For other countries, including China, the tariffs remain in place:

I have determined that, in light of the ongoing discussions that may result in long-term exclusions from the tariff proclaimed in Proclamation 9704, it is necessary and appropriate, at this time, to maintain the current tariff level as it applies to other countries.

The tariffs are having consequences when it comes to U.S., China trade as already mentioned. China is increasing tariffs on U.S. goods, effective Monday. According to a Reuters article by Ben Blanchard, Tony Munroe:

China has increased tariffs by up to 25 percent on 128 U.S. products, from frozen pork and wine to certain fruits and nuts, escalating a dispute between the world’s biggest economies in response to U.S. duties on imports of aluminum and steel.

The Ministry of Commerce said it was suspending its obligations to the World Trade Organization (WTO) to reduce tariffs on 120 U.S. goods, including fruit and ethanol. The tariffs on those products will be raised by an extra 15 percent.

The U.S. and China are currently in trade talks, with the first day of negotiations between a U.S. delegation and Chinese officials concluding today (May 3rd) without a statement from either side according to the Houston Chronicle.

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Pictures Highlighting High Point Market’s Smash Hit Party https://www.universalcargo.com/pictures-highlighting-high-point-markets-smash-hit-party/ https://www.universalcargo.com/pictures-highlighting-high-point-markets-smash-hit-party/#respond Tue, 24 Apr 2018 10:17:37 +0000 https://www.universalcargo.com/?p=8854 Get ready for High Point pictures worth high-fiving about. Or fist-bumping if you're not really the high five sort. We invited you to Seductive Reflections, the party Universal Cargo sponsored to launch another great High Point Market, and if you missed it, well, pretend the people in these pictures aren't having nearly as much fun as they appear to be having.




Oh, who are we kidding, the pictures don't even begin to show how much fun the party was.




Thank you to everyone who attended. We at Universal Cargo love the chance to party with our customers, friends, and all the rest of you crazy furniture industry people!

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Get ready for High Point pictures worth high-fiving about. Or fist-bumping if you’re not really the high five sort, but that just doesn’t have the same alliterative quality.

We invited you to Seductive Reflections, the party Universal Cargo sponsored to launch another great High Point Market, and if you missed it, well, pretend the people in these pictures aren’t having nearly as much fun as they appear to be having.

Oh, who are we kidding, the pictures don’t even begin to show how much fun the party was.

Thank you to everyone who attended. We at Universal Cargo love the chance to party with our customers, friends, and all the rest of you crazy furniture industry people at High Point!

Hats off to you all!

Yes, that’s Universal Cargo’s own CEO Devin Burke lifting his cap to you. And that’s the most serious picture of him you’ll see in this post.

After all, no one likes to have a good time more than Mr. Burke.

But this blog isn’t about Mr. Burke. It’s a look back at the great High Point party that we helped Classy Art throw through a compilation of some of our favorite pictures from the event.

This party had it all.

 

Not only was the party packed with the furniture industry’s finest—all having a great time—but there were hors d’oeuvres for the eating, cocktails for the drining, live music for the dancing, and I swear that table was alive!

Yes, once again there were fantastic costumes.

No, this wasn’t a masquerade or costume ball, but there was someone dressed as if he was a disco ball.

I’m not kidding. You could see your reflection a hundred times over on this guy.

Check it out!

For those who are perhaps a little on the vain side, seeing themselves all over this guy might have been what they thought Classy Art was talking about when naming the party Seductive Reflections.

Not that I would be suggesting in any way that the person kissing her reflection on this man’s mirrored cheek is at all on the vain side.

Come on, that’s just a good picture.

But there were so many great pictures from the party that we couldn’t put them all in this blog.

However, we did manage to cram a whole lot of them into it.

It’s impossible to really show you all you missed if you didn’t attend the party or capture all the fun that was had by those of you who were there, but there is enough captured to give just a tiny taste of the things that these parties hold.

Speaking of taste, there is always great food to be had at the High Point parties we sponsor.

Yum.

Tell me your mouth isn’t watering just from looking at the picture of those hors d’oeuvres.

Shoot, they practically look like an entrée.

Okay, that’s enough French food words for me.

The live band killed it with the music, making not only people but statues dance!

     

     

For some, it takes a little more than a band to get dancing.

Yes, I’m referring to a little liquid courage.

Grabbing a drink before hitting the dance floor is a perfectly acceptable thing to do at a party. And the drink department was well covered.

Of course, there’s never any pressure to have a drink if you don’t want one.

As we all know, Devin Burke certainly doesn’t need a drink to have a good time.

I wonder how many new pun jokes he learned just to tell at this party.

And does he get them out of books or does he make up all those puns on his own?

Some mysteries are best not thought about.

One thing I do know is that Mr. Burke was not the only jokester in attendance at the High Point Market party.

It doesn’t take too much looking through pictures to know that.

     

     

Of course, in the middle of all the fun, games, and just being out while looking good, there was plenty of networking to be had.

We are all serious professionals, after all.

We’re just serious professionals who know there is a time to put on the party hats.

But as Mr. Burke demonstrated at the beginning of this blog, the hat can come off at any time to sit and have a nice conversation. Or to stand and have a nice conversation. Or to just pull a business card out of the hat to give to your next business partner.

We, here at Universal Cargo, were happy to sponsor another High Point market kick-off party in appreciation of the customers and friends for whom we import furniture.

But again, if you weren’t able to make it, come next time. And in the meantime, check out more great pictures below. Beyond that, there are even more on Classy Art’s Facebook page.

 

High Point Market Party Pics                                             

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Drones & Rockets to Mars: 3 Shipping Stories that Sound Sci-Fi https://www.universalcargo.com/drones-rockets-to-mars-3-shipping-stories-that-sound-sci-fi/ https://www.universalcargo.com/drones-rockets-to-mars-3-shipping-stories-that-sound-sci-fi/#respond Thu, 19 Apr 2018 20:16:02 +0000 https://www.universalcargo.com/?p=8850 It doesn't take much perusing of international shipping news stories to see that the machines are rising. Robot ships, driverless trucks, delivery drones, and port automation interrupting dockworker negotiations have all headlined blog posts here within the last year or so.




You might not be hearing the name Cyberdine Systems—Alexa is too smart for that—but this is exactly what James Cameron and Arnold Schwarzenegger taught us to fear in the 80's and 90's.




Or maybe it's just exciting progress and innovation, right Alexa?




After all, it was rather disappointing when 2015, the year Marty McFly traveled to in Back to the Future II, came and went with no flying cars for us all to zoom around in.




Even if we're not quite rising off the ground in our cars yet, we're certainly seeing liftoff of the machines in international shipping. So without further adieu, here are three more stories making headlines in the international shipping industry right now that sound like science fiction from years past.

The post Drones & Rockets to Mars: 3 Shipping Stories that Sound Sci-Fi appeared first on Universal Cargo.

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Sci-fi International ShippingIt doesn’t take much perusing of international shipping news stories to see that the machines are rising. Robot ships, driverless trucks, delivery drones, and port automation interrupting dockworker negotiations have all headlined blog posts here within the last year or so.

You might not be hearing the name Cyberdine Systems—Alexa is too smart for that—but this is exactly what James Cameron and Arnold Schwarzenegger taught us to fear in the 80’s and 90’s.

Or maybe it’s just exciting progress and innovation, right Alexa?

After all, it was rather disappointing when 2015, the year Marty McFly traveled to in Back to the Future II, came and went with no flying cars for us all to zoom around in.

Even if we’re not quite rising off the ground in our cars yet, we’re certainly seeing liftoff of the machines in international shipping. So without further adieu, here are three more stories making headlines in the international shipping industry right now that sound like science fiction from years past.

Port of Los Angeles or Spaceport of Los Angeles

Chris Dupin wrote an article in American Shipper about the Port of Los Angeles becoming a site for building spaceships to fly to Mars:

SpaceX plans to build the Big Falcon Rocket that it eventually wants to use to send spacecraft to Mars at a former shipyard in the Port of Los Angeles.

On Monday, Los Angeles Mayor Eric Garcetti said during his annual state of the city speech, “SpaceX will start production development of the Big Falcon Rocket in the Port of Los Angeles.”

Spaceport of Los Angeles comes right from the title of Dupin’s article. It’s worth reading, even if it is more impactful for sending and leaving Matt Damon on another planet than it actually is for the business of importing and exporting goods.

The next stories are far more impactful for shippers.

Inventory Drones to Invade Warehouses

Another American Shipper article from Chris Dupin reports about drones that have been developed to handle inventory in warehouses. And these drones should be hitting warehouses this year:

The supply chain company Geodis and Delta Drone said their small drones will be operational in warehouses by the end of the year.

Geodis and Delta Drone have been working on the project to use drones to automate inventory tracking inside warehouses for several years.

As the drones move around the warehouse, they are accompanied by and tethered to a robot on the ground that provides them with power. The drones fly around warehouses at night or when workers are not present and read the bar codes on merchandise stored on shelves.

The companies say they have developed a “plug-and-play” solution that easily can be moved from one warehouse to another without requiring any prior changes be made to the warehouse and that is adaptable to all types of warehouse management systems.

This technological advancement could have a big impact on the supply chain. There might even be a chain reaction in how goods are labeled, organized, and more in the warehousing process.

Speaking of drones…

Amazon Patented Drones that Communicate with Humans

This may be the scariest, most Cyberdine-Systems-like technology making headlines at the moment.

The US Patent Office published a patent on March 20th (2018) that would raise the hair on the back of John Connor’s neck. The Patent was filed by Amazon back on July 18th, 2016 for “Human interaction with unmanned aerial vehicles.”

Here’s a little description from the patent’s abstract:

The unmanned aerial vehicle may include a propulsion device, a sensor device, and a management system. In some examples, the management system may be configured to receive human gestures via the sensor device and, in response, instruct the propulsion device to affect an adjustment to the behavior of the unmanned aerial vehicle. Human gestures may include visible gestures, audible gestures, and other gestures capable of recognition by the unmanned vehicle.

The patent is interesting to read (if you can get past the technical nature of a patent filing), allowing the mind to run wild with all the applications beyond delivering packages such drones could have.

But what is really striking is this image that is inside the filed patent:

Amazon Drone

Look at that foolish human, waving his arms stupidly at the imposing drone. That seems exactly how the machines will see us expendable-if-not-compliant humans when the AI takes over and all the many necessary sensors for human gesture recognition on drones like these are complimented with assault weapons.

Until that happens though, these drones combined with the drones of the previous section could certainly speed up the goods fulfillment process in the supply chain.

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PierPass Reducing Fees at Ports of Los Angeles & Long Beach https://www.universalcargo.com/pierpass-reducing-fees-at-ports-of-los-angeles-long-beach/ https://www.universalcargo.com/pierpass-reducing-fees-at-ports-of-los-angeles-long-beach/#comments Tue, 17 Apr 2018 19:58:33 +0000 https://www.universalcargo.com/?p=8848 There's good news for shippers importing and exporting goods through the Ports of Los Angeles and Long Beach. PierPass is overhauling its OffPeak program, significantly reducing fees at the ports.




After an 18-month-long consultation process, the terminal operators at the sister ports decided to make major changes in the OffPeak program of PierPass highlighted by the following bullet points:




-New appointment-based system


-$31.52 per TEU fee (down from $72.09 per TEU)


-$63.04 on all other sizes (shipping containers of 40', 45', etc.)


-Fees apply to all times (not just peak hours)


-Effective August


-Subject to regulatory approval

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Port of Los Angeles Sunrise

Picture: Port of Los Angeles Sunrise by pete (wirralwater) – Flickr

There’s good news for shippers importing and exporting goods through the Ports of Los Angeles and Long Beach. PierPass is overhauling its OffPeak program, significantly reducing fees at the ports.

After an 18-month-long consultation process, the terminal operators at the sister ports decided to make major changes in the OffPeak program of PierPass highlighted by the following bullet points:

  • New appointment-based system
  • $31.52 per TEU fee (down from $72.09 per TEU)
  • $63.04 on all other sizes (shipping containers of 40′, 45′, etc.)
  • Fees apply to all times (not just peak hours)
  • Effective August
  • Subject to regulatory approval

Shippers and international shipping industry professionals have been wanting to see a change in the PierPass system for quite some time.

In the current system, fees are placed on cargo containers moved at the ports during normal daytime business hours on Mondays through Fridays in order to create an incentive to move containers during night and weekend hours.

Those fees actually paid for extended gate hours at the port terminals while spreading out cargo movement in order to fight port congestion.

The new system will spread out shipping container movement across regular and extended gate hours through appointments while having everyone, regardless of appointment time, pay the smaller fee.

In theory, shippers are looking at lower fees (as the fees truckers are charged at the ports are passed on to shippers in the trucking prices) while the terminals still receive the capital needed for extended gate hours plus the potential of increased efficiency through appointments.

PierPass sent us, here at Universal Cargo, an email containing an article about the changes in the OffPeak program. We’re sharing it with you below so you have more information on exactly what’s happening at the ports. For even more information, PierPass provides a link at the end of the article to a Q&A about the revised program.

LONG BEACH, Calif., April 16, 2018—PierPass will overhaul the model used by its OffPeak program for truck traffic mitigation at the Ports of Los Angeles and Long Beach, replacing the current congestion pricing model with an appointment-based system that uses a single flat fee on both daytime and nighttime container moves.

The members of the West Coast MTO Agreement (WCMTOA)—the 12 marine terminal operators at the two adjacent ports—reached the decision after an 18-month process of consultation with industry stakeholders, and an analysis and survey by industry consultants.

Port users have expressed a desire for changes to increase flexibility and reduce the bunching up of trucks that often occurs before the start of the nighttime OffPeak shifts. Subject to regulatory approval, the revised OffPeak program is expected to begin in August.

“The industry has been demanding ‘PierPass 2.0,’ and we are responding,” said PierPass President John Cushing. “The original OffPeak program was an innovative and highly effective solution to the challenges we faced in 2005. But it was fairly inflexible, whereas an appointment-based model is scalable and can evolve to meet changing industry needs, technology and practices.”

Under the current program, OffPeak charges a Traffic Mitigation Fee (TMF) on weekday daytime cargo moves to incentivize cargo owners to use OffPeak shifts on nights and Saturdays. The revised OffPeak program will replace this two-tier fee structure with a single flat TMF during both shifts, and use appointments to spread traffic across the two shifts.

Applying the TMF to both day and night cargo will allow a reduction of more than 55 percent in the TMF while still providing funding to operate extended gates. The current TMF of $72.09 per TEU (twenty-foot equivalent unit) will be replaced by a new flat fee of $31.52 per TEU; the rate for all other container sizes will be a flat fee of $63.04.

“The Port of Long Beach is pleased with the progress PierPass has made in working with industry stakeholders to improve night gate operations in our terminals,” said Port of Long Beach Executive Director Mario Cordero. “As ships are getting bigger and volumes increase, efficient gate management is critical to our ability to move cargo in a reliable, predictable and expedient manner.”

“I’m pleased and encouraged that PierPass members are taking a significant step forward to improve efficiencies at the San Pedro Bay port complex,” said Port of Los Angeles Executive Director Gene Seroka. “We, as well as the trucking community and all of our stakeholders, look forward to increased cargo velocity and customer responsiveness at Port facilities.”

The process of reviewing OffPeak alternatives has included a series of meetings beginning with an October 2016 workshop where WCMTOA met with more than 70 leaders representing importers, exporters, trucking companies, logistics providers, elected officials, government representatives, port authorities and other supply chain stakeholders. After a series of subsequent stakeholder meetings to delve into potential alternative models, PierPass retained industry consultants to conduct a detailed analysis. The consultants’ findings were presented and discussed at a follow-up industry workshop on March 8, 2018. WCMTOA members then worked through the remaining issues to arrive at the final plan for the revised OffPeak program.

“The California Trucking Association appreciates the proposal put forth by PierPass regarding its re-structuring of the TMF,” said Alex Cherin, Executive Director of the CTA Intermodal Conference. “This is the culmination of many collaborative discussions between the marine terminal operators and trucking communities over the last few years, and we look forward to supporting these efforts.”

“The HTA has worked hard with our marine terminal colleagues to create a more efficient and environmentally sustainable port complex,” said Weston LaBar, CEO of the Harbor Trucking Association. “This new direction for PierPass is another example of cross-industry collaboration and is a giant step in the right direction. It shows that the San Pedro Bay Port Complex will continue to be the preferred gateway for moving America’s cargo.”

A Q&A about the revised OffPeak program is available at www.pierpass.org/wp-content/uploads/2018/04/QA-on-New-OffPeak-Program_4-16-18.pdf. The West Coast MTO Agreement is a discussion agreement filed with the FMC. For more information and to track continuing developments, please go to www.pierpass.org.

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Trade War Watch: Is Trump Misunderstanding China? https://www.universalcargo.com/trade-war-watch-is-trump-misunderstanding-china/ https://www.universalcargo.com/trade-war-watch-is-trump-misunderstanding-china/#respond Thu, 12 Apr 2018 19:28:28 +0000 https://www.universalcargo.com/?p=8842 Judging by President Trump's remarks, and of course that includes tweets, there's been a turn for the better in the potential trade war between the US and China.

After tariff threats between the countries escalated all the way to $150 billion worth of penalties from each side on imports from the other country, good news on the trade war threat is very welcome.




Here's what President Trump tweeted on Tuesday:




“Very thankful for President Xi of China’s kind words on tariffs and automobile barriers... also, his enlightenment on intellectual property and technology transfers. We will make great progress together!”

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YouTube Video

Judging by President Trump’s remarks, and of course that includes tweets, there’s been a turn for the better in the potential trade war between the US and China.

After tariff threats between the countries escalated all the way to $150 billion worth of penalties from each side on imports from the other country, good news on the trade war threat is very welcome.

Here’s what President Trump tweeted on Tuesday:

“Very thankful for President Xi of China’s kind words on tariffs and automobile barriers… also, his enlightenment on intellectual property and technology transfers. We will make great progress together!”

Trump Tweets about President XiA Bloomberg article by Justin Sink reported on a meeting President Trump had this week with Republican governors and lawmakers from farm states, during which the president referred to the same speech by Chinese President Xi Jinping that Trump was referring to in the above tweet:

“He’s going to get rid of a lot of taxes and tariffs,” Trump said of Xi.

Xi pledged a “new phase of opening up” Tuesday in a keynote address to the Boao Forum for Asia. While the speech offered little new policy and made no mention of Trump, Xi affirmed or expanded on proposals to increase imports, lower foreign-ownership limits on manufacturing and expand protection to intellectual property — all issues central to the U.S. president’s trade complaints.

Trump clearly regarded the remarks as conciliatory, and said again Thursday that it was a “good speech.”

According to the article, President Trump went so far as to say, “Now we’re really negotiating and I think they’re going to treat us really fairly. I think they want to.”

While President Xi Jinping did address issues “central to the U.S. president’s trade complaints,” as Sink’s article says, not everyone sees this as a sign that China is making concessions relating to US demands.

A Himanshu Goenka written article on International Business Times says President Trump is completely misunderstanding the situation after President Xi’s speech:

… Trump appears to have misread the situation completely, a fact highlighted Thursday by Gao Feng, a spokesman for China’s Ministry of Commerce, who reiterated the Asian country was prepared and unhesitating to retaliate if the U.S. decided to escalate the trade war with China. Gao also stressed that nothing in Xi’s Tuesday speech was meant to be a concession to the U.S., and that China already had a retaliation plan in place, which would be put into action if needed.

Xi’s announcement of the strategy to open up the Chinese economy was completely independent of the current trade situation with the U.S., and would be carried out irrespective of the relations between the two countries, Gao clarified. He also added that U.S. actions so far were unilateral and typical trade protectionism, and that any allegations of forced transfer of intellectual property were without any basis.

Whether President Trump is misreading President Xi’s words or not may not ultimately matter.

If the US sees China as addressing the concerns President Trump has raised, it may be enough for the US to relent on imposing tariffs and to continue with conciliatory signals instead.

Despite words from the Trump administration saying the US is not afraid of a trade war, there are reports that the Fed is afraid of one. Matthew Boesler reports in a Bloomberg article entitled “The Fed is really worried about a trade war”:

Minutes of the U.S. central bank’s March 20-21 policy meeting, published Wednesday, showed “a strong majority of participants viewed the prospect of retaliatory trade actions by other countries, as well as other issues and uncertainties associated with trade policies, as downside risks for the U.S. economy.”

For Fed officials, those concerns seem to far outweigh the one-time increase in prices that tariffs would bring.

Opposing points of view and responses from the US and China on and to the Chinese president’s speech might be a good thing.

China addressing Trump’s concerns could be enough to keep the administration from levying tariffs without it looking like giving in to fear of the consequences of such tariffs while claiming success to the tariff threat strategy.

China saying its actions toward increasing imports, lowering foreign-ownership limits on manufacturing, and expanding protection to intellectual property are just part of China’s already ongoing plans, independent of US demands, postures strength of not conceding to the US and allows the Asian country to claim success of tariff retaliation threats in keeping the US from levying its threat of $150 billion worth of tariffs.

There would probably be some truth to both sets of claims.

Ultimately, the trade war may be able to be averted with both the US and China saving face. But we’ll see if that’s actually what comes to pass.

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Trade War Watch: China Ups Retaliation But Markets Relax https://www.universalcargo.com/trade-war-watch-china-ups-retaliation-but-markets-relax/ https://www.universalcargo.com/trade-war-watch-china-ups-retaliation-but-markets-relax/#respond Thu, 05 Apr 2018 19:41:41 +0000 https://www.universalcargo.com/?p=8817 China increased its tariff threat against the US this week, seemingly moving China and the US closer to a full-out trade war.




Last week, as we blogged about whether or not the US and China are entering a full-fledged trade war, one of the major points in our post was that China announced $3 billion worth of retaliation tariffs on imports from the US. That was only a small fraction of China's ability to retaliate to President Trump's announced plan to hit China with $50 billion worth of tariffs on Chinese goods imported to the US.




China decided to make its threat of retaliatory tariffs equal to the level of tariffs the US threatened to implement.

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YouTube Video

Xi Jinping China head of state

Picture: Xi Jinping by Narendra Modi

China increased its tariff threat against the US this week, seemingly moving China and the US closer to a full-out trade war.

Last week, as we blogged about whether or not the US and China are entering a full-fledged trade war, one of the major points in our post was that China announced $3 billion worth of retaliation tariffs on imports from the US. That was only a small fraction of China’s ability to retaliate to President Trump’s announced plan to hit China with $50 billion worth of tariffs on Chinese goods imported to the US.

China decided to make its threat of retaliatory tariffs equal to the level of tariffs the US threatened to implement.

Brian Bradley reported in American Shipper:

China’s Ministry of Commerce on Wednesday [April 4th, 2018] announced its intent to impose 25 percent tariffs on 106 items imported from the United States worth about $50 billion…

This is a real tit for tat situation. Especially when you consider the fact that the US tariff threat is also from a retaliation perspective.

The U.S. Trade Representative (USTR) found China’s trade practices and policies with the US, especially when it comes to intellectual property, to be unreasonable, creating a market in which US companies do not receive fair and equitable treatment.

President Trump obviously bemoans China’s trade practices and policies and has promised to decrease the trade deficit, which depending on who calculates it and which methodology they use is in the $500 billion range or $800 billion range, that the US has with China.

China, obviously, does not see the Section 301 trade action the US is taking against it as justified. Bradley wrote in the American Shipper article that “China said the U.S.-proposed tariffs violate World Trade Organization rules, and threaten China’s economy and security.”

Tensions certainly seem to be mounting between these two world economic powers, but it appears the world is not buying that the US and China are really about to enter the full-fledged trade war that is threatened.

President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

Initially, the US announcement of Section 301 actions, including tariffs on Chinese imported goods, followed by China’s announcement of $3 billion in retaliatory tariffs scared investors and sent stock markets around the world diving.

However, those initial fears seem to have been alleviated, even with China’s announcement to increase retaliatory tariffs to $50 billion, as markets rebounded.

Stocks powered higher again on Thursday [April 5th, 2018], sending the Dow up more than 300 points and extending a stunning comeback. On Wednesday, the Dow reversed a 510-point loss shortly after the open to finish higher by 230 points.

Will Martin reported in Business Insider how that rebound was not limited to the US stock market:

… the Dow Jones industrial average ending Wednesday up almost 1% after diving more than 500 points in early trade.

That calm then moved to Asia and Europe, with European stocks jumping at Thursday’s open, and continuing to gain as the day progressed. US stocks then saw gains at the open, with the Dow Jones Industrial average up 200 points at 24,461, a gain of 0.8%, as of 3:35 p.m. BST (10:35 a.m. ET).

Martin’s article attributes this market turnaround to comments made by President Trump’s chief economic adviser, Larry Kudlow, quoting him as saying, “Don’t overreact — we’ll see how this works out.”

The threatened tariffs from the US and China have not actually hit yet, and investors and strategists are now seeing the threats as posturing and “gamesmanship” according La Monica’s article. La Monica wrote:

“The US and China are the two toughest kids in the playground, but they really don’t want to fight,” said JJ Kinahan, chief market strategist with TD Ameritrade.

Investors were also reassured by Larry Kudlow, the new director of the White House National Economic Council, who also characterized the tariffs as just proposals.

He reiterated that point on Thursday, telling reporters there is “nothing around the corner” regarding any concrete tariff plans.

As Donald Trump was running for president, he characterized previous leaders and their negotiations with China as stupid. His promise to negotiate a new deal with China that is better for the US likely helped in his election bid for president. Now we get to watch and see if his negotiation plan involving threatening China with tariffs is any smarter.

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Furniture Industry Pros Are Invited to Party at High Point Market https://www.universalcargo.com/furniture-industry-pros-are-party-at-high-point-market/ https://www.universalcargo.com/furniture-industry-pros-are-party-at-high-point-market/#respond Tue, 03 Apr 2018 15:54:35 +0000 https://www.universalcargo.com/?p=8814 Here we go again, kicking off the High Point Market with a Universal Cargo sponsored Classy Art party!




Here are the details:




— DATE: Friday, April 13th, 2018
— TIME: 6:00 PM
— PLACE: Center Point Hamilton #114




Anyone who's anyone in the furniture industry knows the High Point Market is the place to be.




And all those anyones who are anyone will be at the High Point Market kickoff party, alluringly called Seductive Reflections.

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Party at High Point for Furniture ProsHere we go again, kicking off the High Point Market with a Universal Cargo sponsored Classy Art party!

Here are the details:

  • DATE: Friday, April 13th, 2018
  • TIME: 6:00 PM
  • PLACE: Center Point Hamilton #114

Anyone who’s anyone in the furniture industry knows the High Point Market is the place to be.

And all those anyones who are anyone will be at the High Point Market kickoff party, alluringly called Seductive Reflections.

At Universal Cargo, we love the High Point Market and especially enjoy helping Classy Art bring these great parties to the furniture industry professionals there.

As furniture importing specialists, Universal Cargo’s team sees the High Point Market as a chance to meet up and hang out with many of our favorite customers. That’s why we’ve been attending the market every year since 1989.

We’re proud to get to contribute to the market with these incredible parties twice a year.

Universal Cargo’s CEO Devin Burke, whom you can see along with other members of our team at the High Point Market and Seductive Reflections party, probably loves High Point more than anybody.

“I think I speak for a lot of people who come to market year in a year out,” Burke said. “I really look forward to coming every six months, not just because of the prospect of business, but because of so many lasting friendships that have developed through the years. It is truly a joy to come and see old friends here.”

It’s in appreciation of those great friends and customers, who never have to ask where do I go for my furniture importing needs, Universal Cargo is sponsoring this big party at High Point.

On the evening of Friday, April 13th, please join us for a night of cocktails, hors d’oeuvres, and surprises. It’s going to be a great party! 6 PM is when Seductive Reflections begins.

You don’t want to miss a minute of it!

If you were at High Point Market back in October and attended Classy Art’s Secret Garden party that Universal Cargo also sponsored, then you know how much fun these parties are.

But even with all the spectacle that Secret Garden brought, you ain’t seen nothing yet! This spring High Point party should be even better! It’ll be the talk of the market. Make sure you’re a part of it.

Here are the details one more time:

  • DATE: Friday, April 13th, 2018
  • TIME: 6:00 PM
  • PLACE: Center Point Hamilton #114

For those furniture sellers out there who don’t know us, Universal Cargo is your one-stop-shop for furniture importing.

Offering short-term and long-term rate agreements, Universal Cargo will be able to handle every facet of the move, including delivery to the door of major big box retail establishments.  We are experienced in dealing with major retailers, such as Costco and Menards, that have very stringent delivery requirements.

Universal Cargo has been a trusted freight forwarder for over 30 years, but we began working with furniture manufacturers in 1989. Quickly, the furniture industry became the top industry we serve. With all that industry-specific experience, Universal Cargo knows and caters to the specific needs of furniture sellers like yourself.

At competitive rates, Universal Cargo’s friendly staff will provide you with reliable, transparent, and personalized service, covering every detail of shipping your furniture around the world.

On top of all of that, our CEO will be happy to tell you a pun-filled joke or challenge you to a push-up contest.

Click Here for Free Freight Rate Pricing

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Is the US Entering a Full-Fledged Trade War with China? https://www.universalcargo.com/is-the-us-entering-a-full-fledged-trade-war-with-china/ https://www.universalcargo.com/is-the-us-entering-a-full-fledged-trade-war-with-china/#respond Thu, 29 Mar 2018 20:00:20 +0000 https://www.universalcargo.com/?p=8809 From the election of President Trump, there have been worries about protectionist policies and a potential trade war with China because of Donald Trump's promises to decrease the U.S. trade deficit with China and his outspokenness on unfair trade practices from China and bad deals the U.S. has with its biggest trade partner.




Fears over the possible negative impact of protectionism and a trade war with China could have on both the US and global economies have fueled headlines ever since President Trump's election.




That fear of a full-blown trade war ramped up last week when President Trump announced placing tariffs on imports from China and filing a World Trade Organization (WTO) case against China's Intellectual Properties (IP) practices pertaining to US exports to the country.

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YouTube Video

President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

From the election of President Trump, there have been worries about protectionist policies and a potential trade war with China because of Donald Trump’s promises to decrease the U.S. trade deficit with China and his outspokenness on unfair trade practices from China and bad deals the U.S. has with its biggest trade partner.

Fears over the possible negative impact of protectionism and a trade war with China could have on both the US and global economies have fueled headlines ever since President Trump’s election.

That fear of a full-blown trade war ramped up last week when President Trump announced placing tariffs on imports from China and filing a World Trade Organization (WTO) case against China’s Intellectual Properties (IP) practices pertaining to US exports to the country.

President Trump said, “… with China, we’re going to be doing a Section 301 trade action. It could be about $60 billion but that’s really just a fraction of what we’re talking about. I’ve been speaking with the highest Chinese representatives, including the President, and I’ve asked them to reduce the trade deficit immediately by $100 billion.”

After President Trump announced that he would be signing the Section 301 trade action “right here, right now,” he introduced Trade Representative Robert Lighthizer to explain the action:

First of all, for those of you who don’t know, Section 301 is a statute that gives substantial power, authority to the President to correct actions in certain circumstances where there’s unfair acts, policies, or practices by our trading partners.

In this case, the area is technology….

[From a thorough study] we concluded that, in fact, China does have a policy of forced technology transfer; of requiring licensing at less than economic value; of state capitalism, wherein they go in and buy technology in the United States in non-economic ways; and then, finally, of cyber theft.

The result of this has been that the President has analyzed it — we have a 200-page study which we will put out — and he has concluded that we should put in place tariffs on appropriate products — we can explain later how we concluded what products they are; that we would put investment restrictions on China with respect to high technology; and that we’ll file a WTO case. Because one of the actions here does involve a WTO violation.

The president is not wrong in that there are unfair practices when it comes to both tariffs and IP practices from China. Perhaps he is also right in this response to that inequity.

But not unexpectedly, China has responded to President Trump’s tariffs and WTO case moves with increased tariffs of its own against US products.

Bloomberg News reported with the assistance of Peter Martin, Dandan Li, and Keith Zhai reported:

China’s plans for reciprocal tariffs of $3 billion on products from pork to wine represent a tiny fraction of its U.S. imports. Crucially, the Commerce Ministry said those were in response to Trump’s steel and aluminum tariffs, and said it has a plan to act further on the planned levies on $50 billion worth of Chinese imports that his administration announced Thursday.

Could this escalate into a full-blown trade war with the US and China going back and forth with tariffs and other moves to damage each other’s economy?

It is certainly possible, but there’s reason to believe our countries will come to terms. Yu Zheng writes in the Washington Post that “a conventional comparison would suggest that stakes are higher for Beijing” and points out that China’s actions show an unwillingness to set out on a full-blown trade war:

So far, China has shown restraint. Beijing imposed tariffs of between 10 and 20 percent on U.S. agricultural exports, with a total amount of $3 billion. None of the products on the list appear crucial for either country. This measured retaliation signals that China is not yet willing to push the tensions into a full-fledged trade war.

On the other side, the White House has declared it’s not afraid of a trade war.

Despite threats of retaliation from China over U.S. plans to impose tariffs on up to $60 billion in Chinese goods, Treasury Secretary Steve Mnuchin on Sunday said President Donald Trump had no intention of backing down and was not worried about a trade war.

“We are going to proceed with our tariffs. We’re working on that,” Mnuchin told Fox News Sunday. “So, as President Trump said, we’re not afraid of a trade war, but that’s not our objective.”

President Trump is certainly doing his best to make good on his promises when running for president to get a better trade deal with China and reduce the US trade deficit with the country. And he might succeed here.

One would tend to think with the appearances of China fearing a trade war and the US showing a willingness to enter one that China would be willing to compromise with US demands.

However, President Xi Jinping will certainly want to show strength freshly off his power grab for lifetime control of the communist state. Just giving in to US demands seems like something President Jinping is unlikely to do. But President Trump may not want to settle for anything less.

The pride and stubbornness of both leaders make it likely that there will be at least some escalation and time before resolution is reached, but in reality, an all-out trade war is almost always a lose-lose situation that will not likely be good for the US or China. The question is whether the egos and beliefs of the two countries’ leaders would allow them to lead us into that full-fledged trade war.

We’d love to hear your thoughts in the comments section below.

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Ports of NY-NJ & Philadelphia Closed by Snow Storm https://www.universalcargo.com/ports-of-ny-nj-philadelphia-closed-by-snow-storm/ https://www.universalcargo.com/ports-of-ny-nj-philadelphia-closed-by-snow-storm/#respond Thu, 22 Mar 2018 18:40:45 +0000 https://www.universalcargo.com/?p=8801 The first day of spring was on Tuesday, and with it came winter storms. Yeah, that makes sense.




Snowstorms were big enough on the East Coast to affect port operations. In fact, the snow was enough to halt port operations.




Hugh R. Morley reported in the Journal of Commerce (JOC): 




Container terminals at the ports of Philadelphia and New York-New Jersey closed Wednesday due to the snow storm hammering the Northeast, and New York-New Jersey announced that it will be closed Thursday.

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Picture: Mark Haviland US Army Corps of Engineers

Picture: Mark Haviland US Army Corps of Engineers

The first day of spring was on Tuesday, and with it came winter storms. Yeah, that makes sense.

Snowstorms were big enough on the East Coast to affect port operations. In fact, the snow was enough to halt port operations.

Hugh R. Morley reported in the Journal of Commerce (JOC):

Container terminals at the ports of Philadelphia and New York-New Jersey closed Wednesday due to the snow storm hammering the Northeast, and New York-New Jersey announced that it will be closed Thursday.

The four main terminals at the Port of New York and New Jersey closed at lunchtime Wednesday and the port announced that it will be closed Thursday, due to the snow storm hammering the Northeast.

According to Jonathan Wolfe in the New York Times, the snowstorm dropped 8.2 inches of snow by the time it broke this morning. That’s a pretty decent amount of snow, but the good news in that sentence is that the storm broke this morning.

See? I’m a glass half full type of guy. Somebody tell my wife that.

Anyway, with the breaking of the storm, many terminals were able to open this morning despite reports that they would be closed.

The Port of NY & NJ tweeted this morning, “Terminals working to open ASAP today. PNCT, Maher & GCT Bayonne at 8AM +/-. No queuing before 7:45 AM. No appts at GCT. TSC @ 10. Clear snow from rooftops.”

That tweet was followed up by the port tweeting that APMT is opening at 8:30 AM today; Columbia, RHCT, and GCT NY opening at 8 AM; and Interport at 10 AM.

Port of NY-NJ Tweets about Snow Storm Closures

Obviously, the port authorities and dockworkers have been working hard to minimize the impact of the snow on the movement of goods through the ports.

We have seen some congestion result from winter storms and port closures in previous years. However, while the terminal closures at the ports today and yesterday will cause some small delays, no major congestion is expected at the Ports of New York-New Jersey nor are they expected at the Port of Philadelphia.

This is good news for shippers with goods scheduled to be imported or exported through the ports.

Now we wait for the weather to catch up with the calendar, hoping this will be the only winter storm of the spring. But with all the severe weather over the last year, there will probably be more weather events affecting the ports that we’ll have to keep our eye on.

Ooh, that sounds like I just switched to being a glass is half empty type of guy. Don’t tell my wife.

As always, Universal Cargo keeps an eye on all the news impacting the international shipping industry to keep your cargo imports and exports moving smoothly. Twice a week, we post blogs about the biggest topics concerning international shipping as well as sharing information and resources to help you be a successful importer or exporter.

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Crazy Cargo Ship Crash Video https://www.universalcargo.com/crazy-cargo-ship-crash-video/ https://www.universalcargo.com/crazy-cargo-ship-crash-video/#respond Tue, 20 Mar 2018 18:33:58 +0000 https://www.universalcargo.com/?p=8797 Whoah!




Collisions and incidents with cargo ships are not uncommon; however, it's not every day one is caught on video. But that's exactly what happened at South Asia Pakistan Terminal is Karachi.




Grant Rowles posted the video on Splash247.com and Youtube. The video was taken by a port worker, according to Rowles, and captures the 8,000 TEU Hapag-Lloyd Tolten scraping against the terminal dock and another ship. Shipping containers fall in pretty dramatic fashion.

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Whoah!

Collisions and incidents with cargo ships are not uncommon; however, it’s not every day one is caught on video. But that’s exactly what happened at South Asia Pakistan Terminal in Karachi.

Grant Rowles posted the video on Splash247.com and Youtube. The video was taken by a port worker, according to Rowles, and captures the 8,000 TEU Hapag-Lloyd Tolten scraping against the terminal dock and another ship. Shipping containers fall in pretty dramatic fashion.

There’s also a second video, in which the aftermath of the collision can be seen. Shipping containers are scattered in the water and sink.

The videos are below. For the first, you may need to watch on Youtube or Splash247, but the second one plays fine right here.

YouTube Video

YouTube Video

Watching these videos is yet another reminder of the importance of getting cargo insurance when importing or exporting goods. In his posting of these videos, Rowles shared from local reports that 50 to 60 containers ended up in the water from the collision.

Cargo Insurance for lost shipping containers on burning shipJust imagine if one of those was your container of goods and you didn’t have the proper insurance on the shipment.

It would be a total loss!

I mentioned at the top of this post that collisions and incidents with cargo ships are not uncommon. In fact, the last two weeks we were posting blogs about a Maersk megaship fire, apparently caused by the contents of one of the stacked shipping containers it was transporting.

Here are those blogs:

TRAGIC FIRE ON MAERSK MEGASHIP SHOWS NEED FOR CONTAINER CONTENTS VERIFICATION IN SHIPPING

MAERSK MEGASHIP FIRE UPDATE – MISSING CREW REMAINS FOUND & SEARCH CALLED OFF

Mike Wackett wrote an article in the Loadstar about insurers bracing for hundreds of millions of dollars worth of claims from that Maersk megaship fire.

Right in the first paragraph of Wackett’s article, he writes that some shippers who lost cargo in the fire will not have been insured. That’s because many shippers forego insurance, hoping that everything will just work out. In fact, it may even be most shippers who take this kind of risk.

In August of last year, I stumbled upon a brief from Supply Chain Dive, which said 9 out of 10 shipping containers that arrive in the U.S. travel uninsured.

That was so crazy to me, I posted a blog here warning shippers about the danger of failing to insure their cargo. It included references to several news stories about ships that were lost or involved in collisions. You know, the kinds of things that are all too common and result in the loss of cargo.

Here’s an excerpt:

Making headlines since Monday (August 21st), is a collision between navy destroyer USS John S. McCain and an oil tanker. This is a tragic incident as 10 sailors were missing after the collision, of whom the remains of one has since been reported found.

Making this news scary is how quickly it follows on the heels of another navy ship collision in international shipping waters. It hasn’t even been a full month since we shared about the tragic collision between the USS Fitzgerald and a Nippon Yusen Kabushiki Kaisha (NYK) container ship in a blog.

The navy obviously has some serious investigating to do, being involved in two fatal collisions in the span of just weeks. However, it’s not only with the U.S. Navy that ship collisions are happening on international waters. Every time I turn around it seems like there’s another story of a ship collision.

Maritime Bulletin published a post at the beginning of this month detailing a Maersk container ship colliding with a tug-pulled vessel. Again, this is a tragic news story as 9 people were missing after the collision.

Last week, the South China Morning Post published an article about a container ship and tanker being identified as vessels that collided, leading to an oil spill.

Container ships don’t even need other ships to have a collision or worse. About a month after the Panama Canal expansion opened, we posted a blog about how ships kept colliding with canal walls. There was also the cargo ship El Faro that was lost along with its crew during Hurricane Joaquin.

You get the idea from that excerpt, but it’s still only the tip of the iceberg. We don’t look for stories about containerships getting damaged, lost, or colliding with something else, yet we’ve posted many blogs on such topics because of how often it happens and how significant the losses are. We’ve shared many more such stories than the ones talked about in the above excerpt.

Moral of the story. Yeah, you know it. Get cargo insurance.

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ILA & USMX to Reopen Negotiations https://www.universalcargo.com/ila-usmx-to-reopen-negotiations/ https://www.universalcargo.com/ila-usmx-to-reopen-negotiations/#comments Thu, 15 Mar 2018 19:31:10 +0000 https://www.universalcargo.com/?p=8795 There's good news for shippers and the supply chain. The International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) are resuming labor contract negotiations for the East and Gulf Coast ports.




Chris Dupin reports in an American Shipper article:




The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) revealed Friday they are resuming master contract negotiations, with the goal of finalizing terms on a contract that will keep cargo moving at Atlantic and Gulf Coast ports.




Their current contract expires Sept. 30, 2018.

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YouTube Video

dockworkers at terminal

Photo By: Cpl. Wesley Timm

There’s good news for shippers and the supply chain. The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) are resuming labor contract negotiations for the East and Gulf Coast ports.

Chris Dupin reports in an American Shipper article:

The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) revealed Friday they are resuming master contract negotiations, with the goal of finalizing terms on a contract that will keep cargo moving at Atlantic and Gulf Coast ports.

Their current contract expires Sept. 30, 2018.

September 30th may seem a long ways off to some, but it’s close enough for importers and exporters who ship through East and Gulf ports to be nervous. Especially worrying is the fact that automation is expected to make these negotiations contentious.

In fact, when negotiations were last happening a few months ago, in December, talks broke down over automation. Hailey Desormeaux reported in American Shipper at the time:

Negotiations on a new contract between the International Longshoremen’s Association (ILA), which represents dockworkers at East and Gulf Coast ports, and the United States Maritime Alliance (USMX) abruptly broke off Wednesday over a disagreement regarding automation, according to a report from the Journal of Commerce (JOC).

On Wednesday, [ILA President Harold] Daggett reportedly accused employers of seeking to use automation to eliminate dockworker jobs. Daggett noted the ILA and USMX did not agree on the distinction between fully automated terminals and semi-automated terminals that have automated features but are operated by dockworkers.

“When they’re talking about fully automated, they mean two or three people on the whole terminal,” he told JOC. “We’re not going to accept that. If they install a computer on any equipment, they need to provide a seat for a longshoreman next to it.”

There are still months for ILA and USMX to come to terms on a contract extension or new one before the current contract expires. However, shippers and supply chain professionals don’t have to think back very far to remember the union’s chokehold on the supply chain during the ILA strike watch of 2012-2013 when contentious negotiations stretched well past the expiration of the previous contract and the union announced plans to strike.

Then in 2014-2015, came contentious contract negotiations at West Coast ports between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). It took over a year for the ILWU and PMA to get a new contract worked out, with hugely costly labor slowdowns, mini-lockouts, and crippling port congestion happening as part of the process.

And those things really have been part of the process.

Traditionally, dockworker unions do not extend or agree to new contracts before the previous one expires. Making such an early agreement would take away the unions’ most powerful weapons of leverage—strikes, threat of strikes, and slowdowns. Of course, shippers and the U.S. economy end up suffering loss over the way contracts are traditionally negotiated at the ports.

Shippers were given a glimmer of hope from the USMX and ILA that the damaging cycle of contract negotiations might change in 2015. After East and Gulf Coast ports received a market share boost from the instability at West Coast ports, the USMX and ILA announced they planned to open early talks for a long-term labor contract extension to bring stability to the East and Gulf Coast ports.

The cynical part of me at the time wrote that the ILA and USMX’s talk of early negotiations might just be PR words to capitalize on shippers’ anger and distrust of the ILWU and PMA immediately following losses suffered because of the 2014-2015 contract negotiations. Three years later, that cynical part of me seems to be right.

Ironically, the welcome talk of an early extension negotiation from the USMX and ILA may have turned shippers in favor of West Coast ports instead of East and Gulf Coast ports. While the USMX failed to come together on an early contract extension, the ILWU agreed in August of last year to extend their contract years ahead of its expiration.

That puts pressure on the ILA and USMX to do likewise. Unfortunately, Daggett said the ILA is prepared to avoid bargaining until the contract expires (as per usual) according to Desormeaux’s article about the negotiations breaking down in December. Let’s just hope the ILA follows ILWU’s example and gets these negotiations done before that.

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Maersk Megaship Fire Update – Missing Crew Remains Found & Search Called Off https://www.universalcargo.com/maersk-megaship-fire-update-missing-crew-remains-found-search-called-off/ https://www.universalcargo.com/maersk-megaship-fire-update-missing-crew-remains-found-search-called-off/#respond Tue, 13 Mar 2018 18:11:38 +0000 https://www.universalcargo.com/?p=8791 Hope dwindled last week for rescuing the four crew members of the Maersk megaship Honam who remained missing. Now that hope is completely gone.




Maersk announced in a press release:




It is with deep sadness that we announce that the human remains of three of the four missing crew members after the fire aboard Maersk Honam have been found on board the vessel. At this point in time our three colleagues are unidentified. 

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Maersk Honam fire

Maersk Honam on fire in the Arabian Sea. Picture: Indian Coast Guard

Hope dwindled last week for rescuing the four crew members of the Maersk megaship Honam who remained missing. Now that hope is completely gone.

Maersk announced in a press release:

It is with deep sadness that we announce that the human remains of three of the four missing crew members after the fire aboard Maersk Honam have been found on board the vessel. At this point in time our three colleagues are unidentified.

With three of the four missing crew confirmed dead, the fourth is presumed dead. As such, Maersk announced a halt to the search for that final missing crew member:

Given the time passed and the severe fire damages of the vessel we must conclude by now that we have lost all four colleagues who have been missing since the fire onboard Maersk Honam which began on 6 March. All four families of our deceased colleagues have been informed.

A thorough search on board the Maersk Honam continues. However, the active search and rescue mission at sea will be brought to a halt.

This is a tragic outcome to the Maersk cargo ship fire, which is suspected to have started because of a container of misdeclared cargo. With the four missing crew lost, the death toll from the Honam fire is up to five.

“Our most heartfelt condolences go out to families of our deceased colleagues. We share their sorrow and do our outmost [sic] to support them in this devastating time,” says Chief Operating Officer, Søren Toft.

The fire has blazed for a full week today, having started last Tuesday (March 6th). Firefighting efforts continue. Maersk also gave an update about the progress of that fight in its press release:

The fire-fighting efforts on board Maersk Honam are progressing. Specialized firefighting vessels remain engaged, with salvage operations led by Smit Salvage and Ardent – two best-in-class companies within maritime salvage operations. Maersk Line is cooperating with the salvors and has two Marine Engineers onsite, working closely with Smit and Ardent.

An article in the Loadstar by Gavin van Marle reports that Maersk, along with its 2M partner MSC, declared general average (GA) late last week.

GA splits loss between all parties in a maritime accident. This means that all shippers with cargo on the Maersk Honam will share in the cargo damage and loss of the Honam fire, not only the shippers whose goods are actually damaged or lost in the blaze.

The legal principle of general average in maritime law actually comes out of merchant shipping practices that date all the way back to ancient times.

In his Loadstar article, van Marle gives some details about the GA declaration in the case of the Maersk Honam:

Law firm Richards Hogg Lindley has been appointed to collect the necessary GA security from shippers before cargo can be released.

This includes a copy of the cargo invoice, an average bond signed by the cargo owner and either an average guarantee for insured cargo signed by its insurers, or a cash deposit for uninsured cargo.

This is yet another example of why cargo insurance or maritime insurance, including general average coverage, is important when importing and exporting goods.

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Tragic Fire on Maersk Megaship Shows Need for Container Contents Verification in Shipping https://www.universalcargo.com/tragic-fire-on-maersk-megaship-shows-need-for-container-contents-verification-in-shipping/ https://www.universalcargo.com/tragic-fire-on-maersk-megaship-shows-need-for-container-contents-verification-in-shipping/#comments Thu, 08 Mar 2018 21:32:03 +0000 https://www.universalcargo.com/?p=8789 On Tuesday, a tragic fire broke out on one of Maersk's new megaships. If Maersk is right about the fire's cause, this will be a quintessential example of why the international shipping industry needs to take action to create an effective container contents verification system.

Mike Wackett reported yesterday (Wednesday, March 7th) in the Loadstar:

More than 23 crew members have been evacuated, but four seafarers are unaccounted for, after a fire in the hold of the 15,262 teu Maersk Honam could not be contained.

Maersk Line said this morning the ship was “still on fire” and the situation was “critical”.

Not only are we talking about a critical situation, but there were crew members in critical condition after suffering injuries from the fire as well.

One of those crew members in critical condition died according to an article by Hailey Desormeaux in American Shipper:

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YouTube Video

YouTube Video

Shipping Containers Need Contents VerifiedOn Tuesday, a tragic fire broke out on one of Maersk’s new megaships (images in above Youtube video posted by Bhartiya Samachar). If Maersk is right about the fire’s cause, this will be a quintessential example of why the international shipping industry needs to take action to create an effective container contents verification system.

Mike Wackett reported yesterday (Wednesday, March 7th) in the Loadstar:

More than 23 crew members have been evacuated, but four seafarers are unaccounted for, after a fire in the hold of the 15,262 teu Maersk Honam could not be contained.

Maersk Line said this morning the ship was “still on fire” and the situation was “critical”.

Not only are we talking about a critical situation, but there were crew members in critical condition after suffering injuries from the fire as well.

One of those crew members in critical condition died according to an article by Hailey Desormeaux in American Shipper:

One Maersk Honam crew member has passed away due to injuries sustained in connection with the fire that broke out on board the vessel, while four crew members still remain missing, Maersk reported today.

Two crew members in urgent need of medical care due to worsening conditions have been evacuated by an Indian navy vessel and handed over to the Indian coast guard of Trivandrum. They are now receiving medical treatment, Maersk said.

Sadly, hope is fading for finding the crew members that remain missing from the cargo ship fire according to a press release from Maersk:

“While search operation continues the hope of finding our missing colleagues is fading. We are in contact with their families and they know that tragically, the time passed decreases the likelihood of finding their loved ones alive. Our thoughts and prayers go to them,” says Søren Toft, Chief Operating Officer of A.P. Moller – Maersk.

This was the maiden voyage of the 15,262 teu Maersk Honam according to Mike Wackett’s Loadstar article. It was also in that article that I first read Maersk’s suspicion of how the fire started:

Maersk said the cause of the fire was currently unknown, but it is likely to have emanated from a container of misdeclared cargo.

And as containerships have almost trebled in size in the past 20 years, insurers have become increasingly concerned at the risk from rogue containers.

Indeed, such is the limited transparency of the container industry that nobody, including shipping lines and the masters of vessels, knows for sure what has actually been loaded into the millions of boxes being transported around the world every year.

You didn’t read that incorrectly, nobody knows what’s inside the containers being shipped around the world from country to country. But they’re supposed to.

There is no effective system in place for verifying what’s declared as the contents of containers loaded onto cargo ships. And that’s dangerous. Megaships have only increased that danger.

Obviously, the biggest concern in a tragic event like this fire on Maersk’s megaship is people’s lives. But this also validates concerns critics of the international shipping industry’s move to megaships have been raising for years.

One of the biggest concerns from shippers and cargo insurers from the onset of international shipping’s shift to megaships is increased risk.

So many more containers packed on a single ship means greater risk of catastrophic events in terms of cargo loss. A megaship going down, catching fire, or being delayed has a heightened impact. The Maersk Honam was carrying 7,860 containers when this tragic fire began, according to Wacket’s article. That’s fewer than half the number of containers the ship is capable of carrying, but still a very significant amount.

With containers in huge stacks, a fire starting in one containing misdeclared hazardous materials is harder to get to in order to extinguish the fire.

Yes, this is a reminder of the importance of cargo insurance, however, primarily, this is a call for action on the misdeclared cargo problem in the industry.

The international shipping industry recently underwent a crackdown on container weight with the Verified Gross Mass (VGM) rule change. Maybe it’s time we see something similar when it comes to verifying the contents of containers.

As it is, the lack of transparency when it comes to what’s inside containers puts cargo and, more importantly, lives at danger.

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FMC Investigating Detention, Demurrage & Per Diem Charges https://www.universalcargo.com/fmc-investigating-detention-demurrage-per-diem-charges/ https://www.universalcargo.com/fmc-investigating-detention-demurrage-per-diem-charges/#comments Tue, 06 Mar 2018 18:47:34 +0000 https://www.universalcargo.com/?p=8788 The Federal Maritime Commission (FMC) has launched an investigation into detention, demurrage, and per diem charges. And the shippers rejoice. Eric Johnson reported in American Shipper: The Federal Maritime Commission (FMC) on Monday voted to launch an investigation into the liner carrier industry’s practice of assessing detention, demurrage, and per diem charges. The investigation, headed […]

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detention, demurrage, per diem chargesThe Federal Maritime Commission (FMC) has launched an investigation into detention, demurrage, and per diem charges. And the shippers rejoice.

Eric Johnson reported in American Shipper:

The Federal Maritime Commission (FMC) on Monday voted to launch an investigation into the liner carrier industry’s practice of assessing detention, demurrage, and per diem charges.

The investigation, headed by Commissioner Rebecca Dye, relates to a petition filed in December 2016 by a coalition of shippers, associations and trucking organizations. The petition asked the FMC to adopt a policy to restrict ocean carriers’ ability to assess what the coalition deemed unreasonable detention, demurrage, and per diem penalties, particularly when the cause of the infractions was beyond the control of cargo owners’ or their representatives.

Shippers have been making complaints to the FMC for years about demurrage, detention, and per diem charges.

In 2015, we blogged about the Los Angeles Customs Brokers and Freight Forwarders Association (LACBFFA), along with 94 other organizations, sending a letter to the FMC to stop unfair practices of detention, demurrage, and per diem charges further penalizing shippers who were already suffering losses from port congestion beyond their control.

At that time, port congestion had been a problem for some time, even before slowdowns and mini-lockouts started happening the previous year on the West Coast due to contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). Congestion became so much worse during the negotiations that products didn’t make it to store shelves for the holidays and U.S. agricultural products rotted on the docks instead of being exported.

It was no surprise that shippers were angry when on top of losing money from goods not moving on the ports, including many U.S. exporters losing contracts and business partners abroad, they were charged fees for their cargo not moving.

Of course, more than just shippers were hurt by these fees. That’s why that 2015 letter to the FMC represented not only importers and exporters, but also manufacturers, retailers, distributors, wholesalers, farmers, truckers, and other supply chain stakeholders.

Eric Johnson’s American Shipper article brings up both that period of congestion during the 2014-2015 labor contract strife and the congestion and cargo delays in the aftermath of Hanjin’s collapse as times this issue of demurrage, detention, and per diem charges has come to a head.

The December 2016 petition finally got the ball rolling on potential action from the FMC on these charges shippers have long hailed as unfair. The FMC held hearings earlier this year where shippers and shipper associations were able to bring their complaints before the commissioners.

However, the hearings did not only give a chance for shippers and members of the supply chain who have complaints about the detention, demurrage, and per diem charges to speak.

Johnson writes:

The FMC held two days of hearings in mid-January to hear from a range of stakeholders on the petition, including importers, shipper associations, drayage providers, carriers, and terminal operators.

The latter two groups contend that the petition seeks to push all of the inherent risk in supply chains onto them by not letting them penalize shippers and shippers’ representatives when containers are stored in marine terminals or kept by shippers for too long. Additionally, carriers have emphasized that the intensely competitive nature of liner shipping means they cannot excessively penalize shippers for detention and demurrage and maintain good commercial relationships with those customers.

Advocates for the liner carrier and terminal operator industry also urged the FMC to carefully weigh the consequences of acting on the petition, as it could be perceived legally as too much of an overreach into what they consider purely commercial activity.

While Johnson reports there is no presumed outcome to the petition by the ordered investigation, I would argue that the investigation in and of itself is a win for shippers.

Obviously, that there is an investigation to find out the facts behind demurrage, detention, and per diem charges does not mean that such charges will be stopped, decreased, or regulated. However, in the past, shippers’ complaints about these charges always seemed to fall on deaf ears.

From the quotes in Johnson’s American Shipper article, there seem to be sympathetic ears hearing shippers’ complaints now. And more importantly, those sympathetic ears belong to people with the power to do something about the situation.

“The coalition raised substantive issues in both their petition and their testimony at our January hearing investigating carrier and terminal detention and demurrage practices,” Acting FMC Chairman Michael A. Khouri said in a statement. “Various alleged practices were described that—without countervailing or explanatory testimony and evidence—would be troubling from my perspective…”

There is no doubt shippers have a vested interest in the results of the FMC’s investigation of these charges. Certainly, there are times when detention, demurrage, and per diem charges are justified; however, when the charges are being assessed only to boost profitability or because of port congestion caused by labor strife, carrier unreliability, or other factors completely out of shippers’ control, those fees should not be placed on importers, exporters, or their agents.

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Maersk is Worried About Amazon – That Could Be Good for Shippers https://www.universalcargo.com/maersk-is-worried-about-amazon-that-could-be-good-for-shippers/ https://www.universalcargo.com/maersk-is-worried-about-amazon-that-could-be-good-for-shippers/#respond Thu, 01 Mar 2018 19:00:39 +0000 https://www.universalcargo.com/?p=8783 Amazon has Maersk scared. And for shippers, that’s a good thing. Christian Wienberg and Alaric Nightingale reported in an article for Bloomberg that the international-shipping-industry-leading shipping line is worried about not only Amazon but Alibaba as well. The article’s authors are not just extrapolating that Maersk is worried about these companies; it’s right in quotes […]

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Maersk Worried about AmazonAmazon has Maersk scared. And for shippers, that’s a good thing.

Christian Wienberg and Alaric Nightingale reported in an article for Bloomberg that the international-shipping-industry-leading shipping line is worried about not only Amazon but Alibaba as well.

The article’s authors are not just extrapolating that Maersk is worried about these companies; it’s right in quotes from the shipping line’s leadership:

“Amazon is a threat if we don’t do a good job for them,” Soren Skou, the Chief Executive Officer of A.P. Moller Maersk A/S, said in a phone interview. “If we don’t do our job well, then there’s no doubt that big, strong companies like Amazon will look into whether they can do better themselves.”

Amazon has shown more than just a willingness to get into the international shipping game instead of just hiring companies like Maersk to handle the shipping.

In 2016, there were a couple of big stories about Amazon entering the freight game. In January of that year, we blogged about Amazon registering with the FMC to become a non vessel operating common carrier (NVOCC) or freight forwarder. Then in March, we blogged about Amazon leasing 20 Boeing 767 freighters to launch air freight services.

So there’s reason for Maersk to fear Amazon will bypass shipping lines and handle all that international shipping itself. The reasons don’t actually stop with moves Amazon has made.

A long history of international shipping lines being notoriously unreliable, lacking focus on customer service, and showing no transparency gives reason for big companies like Amazon and Alibaba to look into handling their own freight movement.

Maersk recognizing the risk of losing major money to Amazon and Alibaba moving into international shipping themselves is good news for shippers because it will cause Maersk to put more emphasis on customer service, transparency, and reliability. Of course, Maersk leads the industry, so as Maersk does, so does the rest of the world’s shipping lines.

Wienberg and Nightingale’s Bloomberg article actually highlights improvements Maersk has already made:

The Copenhagen-based company has already come a long way. In 2014, it took more than 2 hours to complete a container booking at Maersk. In 2016, the average was 22 minutes, and management wants to bring that down to as little as 2 minutes this year.

In January, we blogged about Maersk teaming up with IBM to create a joint venture company that will use blockchain technology to create a world-wide trade platform for the international shipping industry that Weinberg and Nightingale bring up in their article along with the rest of Maersk’s digitization plans and strategy of combining its shipping line, port operator, and freight forwarding activities as moves that might provide companies like Amazon with service that will induce them to stay with the shipping line.

Service from the big shipping lines like Maersk have always been more focused on their large customers than the medium to small shippers who need freight forwarders to act as go-betweens to help them book their imports and exports with the shipping lines. However, as Maersk and other shipping lines work to improve their services for the big shippers like Amazon, service across the board should improve.

Shippers and freight forwarders should expect overdue increases in reliability, transparency, and customer service coming from shipping lines or disruptors like Amazon and Alibaba to enter the industry.

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Xi Jinping Power Grab in China Might Bring Stability for Shippers But Are Your Feelings Mixed? https://www.universalcargo.com/xi-jinping-power-grab-in-china-might-bring-stability-for-shippers-but-are-your-feelings-mixed/ https://www.universalcargo.com/xi-jinping-power-grab-in-china-might-bring-stability-for-shippers-but-are-your-feelings-mixed/#respond Tue, 27 Feb 2018 19:24:29 +0000 https://www.universalcargo.com/?p=8782 Many don't know this, but like the U.S. presidency, China's presidency has a two-term limit. However, it appears that is about to change.

According to a CNN article by Kerry Brown, an expected change to China's constitution, removing the two-term limit, "would allow President Xi Jinping to rule the country unchallenged for decades to come."

China's presidential terms are longer than U.S. presidential terms. A term there is for five years. Of course, China is a communist state, so the government functions much differently than the democratic system in the U.S. With the current two five-year term limit in China, a president's rule there is limited to one decade.

Xi Jinping obviously does not plan for his rule to be limited to that time span.

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Xi Jinping China head of state

Picture: Xi Jinping by Narendra Modi

Many don’t know this, but like the U.S. presidency, China’s presidency has a two-term limit. However, it appears that is about to change.

According to a CNN article by Kerry Brown, an expected change to China’s constitution, removing the two-term limit, “would allow President Xi Jinping to rule the country unchallenged for decades to come.”

China’s presidential terms are longer than U.S. presidential terms. A term there is for five years. Of course, China is a communist state, so the government functions much differently than the democratic system in the U.S. With the current two five-year term limit in China, a president’s rule there is limited to one decade.

Xi Jinping obviously does not plan for his rule to be limited to that time span.

CNN Correspondent Matt Rivers said in a CNN video about the proposed change to China’s constitution:

“This is further proof that this is Xi Jinping’s China. There’s absolutely no doubt about that at this point moving forward. But really, what this move is, yes it’s unprecedented, but it’s also sort of expected in a lot of ways because of the sort of power grabs that we’ve seen Xi Jinping take.

So what happens now is that this was proposed, and so Xi Jinping and his vice president could now stay on for more than two terms if in March what’s called the People’s Congress, which convenes delegates from all over China, votes to do that. That’s essentially a rubber stamp parliament. If Xi Jinping wants this to happen, if the Standing Committee—which is the most powerful committee in China inside the Communist Party—wants this to happen, it’s going to happen. People are voting on it in a nominal sense, but if they want this to happen, it will. And it almost assuredly will go into effect in March.

And that opens the door for Xi Jinping to stay on as the head of the state, which is a big deal. He could stay on indefinitely. But we have to remember there’s two different things going on in China here. You have head of state but also Xi Jinping is head of the party. And that is the more important term. He is the Party Chairman of the Communist Party of China. And remember what happened last November, where Xi Jinping thought was actually inscribed into the party constitution not the state constitution. That is more important than anything else.

What Kerry Brown’s article points out is how silent the rest of the world’s leaders, particularly leaders in the West, are on Xi Jinping’s power grab.

Why does the U.S. seem okay with Xi Jinping basically making himself the indefinite emperor of China? To sum up the answer given by Kerry Brown’s article in one word, stability.

Brown writes:

For all the Western complaints about the parlous state of human rights, in [Western Leaders’] hearts they know they need a country which is stable and predictable — even if it is a stable and predictable autocracy.

For all the West’s unease about a one-party state having such dominance at the moment, because of the stability it gives over such a crucial region, the Communist Party’s total control of China is something Western leaders buy into and support.

Brown gives many examples of why the world needs stability from China. Among uncertainty with the Trump presidency in the U.S., the UK trying to leave the EU, the Middle East’s perpetual unrest, Congo slipping into civil war, and nuclear threats from North Korea, is the flow of goods throughout the world.

Obviously, China is a huge manufacturer of goods. As a freight forwarder, Universal Cargo helps businesses import goods from China on a daily basis. Therefore, this story holds special significance for many of our clients and readers.

Xi Jinping’s time of power extending indefinitely could very well give a sense of stability for those who import goods from China as well as those who export to China.

To that end, many U.S. shippers may feel relieved by the thought of stability in Chinese leadership for the stability it could bring to importing and exporting in the future. However, there are probably many with mixed feelings about seeing such a huge power grab from Xi Jinping.

We’d love to know what you think about this situation, shippers. Share your thoughts in the comments section below.

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ONE Is in Business Starting Today https://www.universalcargo.com/one-is-in-business-starting-today/ https://www.universalcargo.com/one-is-in-business-starting-today/#respond Thu, 01 Feb 2018 20:00:16 +0000 https://www.universalcargo.com/?p=8709 Japan’s “Big 3” shipping companies—K Line, MOL, and NYK— joined forces to form the joint venture Ocean Network Express (ONE). And starting today (February 1st, 2018) you can book your cargo through the merged ocean carrier. Or, better yet, you can let Universal Cargo do that for you. ONE put out a press release with […]

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Big 3 Carrier Merger K Line MOL NYK

Japan’s “Big 3” shipping companies—K Line, MOL, and NYK— joined forces to form the joint venture Ocean Network Express (ONE). And starting today (February 1st, 2018) you can book your cargo through the merged ocean carrier. Or, better yet, you can let Universal Cargo do that for you.

ONE put out a press release with the announcement:

Ocean Network Express Pte. Ltd. (hereinafter referred to as “ONE”) announces that acceptance of bookings for its container shipping service begins in stages from February 1, 2018*.

ONE is a joint venture of Kawasaki Kisen Kaisha, Ltd. (hereinafter referred to as ““K” Line”), Mitsui O.S.K. Lines, Ltd (hereinafter referred to as “MOL”), and Nippon Yusen Kabushiki Kaisha (hereinafter referred to as “NYK”) set to start its business operations on April 1, 2018.

The transition to ONE is happening in stages. As of right now, shippers can book through the newly formed entity as well as the individual shipping companies that formed the joint venture. The press release continues:

With the commencement of ONE’s business operations, there will be up to four companies, namely ONE, “K” Line, MOL, and NYK operating on the same service concurrently during the transitional period until three pre-existing lines completely stop operating vessels.

In an attempt to help customers book through the right company during this transitional period, ONE gave a Booking Ownership Guide and a Vessel Voyage Direction List.

It looks like the companies are anticipating some confusion from customers in the booking process as the following was added in the press release:

If a customer makes a booking with an operator different from those in the “Booking Ownership Guide” or “Vessel Voyage Direction List”, we will attempt to coordinate between ONE and “K” Line / MOL / NYK to ensure handover to the appropriate operator upon confirmation of the customer’s intention.

It was back in 2016 that we first published a blog post about Japan’s “Big 3” carriers merging. About a year and a quarter later, it’s a reality. A reality that serves as one more example of shrinking carrier competition.

ONE is the culmination of years of the shrinking and consolidation of Japanese based shipping companies. Long-time maritime professional and valued reader and commenter on Universal Cargo blogs Gary Ferrulli commented, “In my maritime career, which started in March 1972, I’ve seen first 7, then 6 then 5, then 4, then three then ONE Japanese carrier.”

Of course, shrinking carrier competition in the international shipping industry is in no way limited to Japan. Maersk even thinks carrier competition will shrink to only 3 global companies dominating international shipping.

As long time readers of this blog know, posting about shrinking ocean carrier competition in Universal Cargo’s blog goes back a long time. Reading them gives something of an abridged history of shrinking carrier competition. Here are some of the highlight headlines you can click on for a stroll through history:

MAERSK EXPECTS CARRIER COMPETITION TO SHRINK TO 3 GLOBAL COMPANIES

SHRINKING CARRIER COMPETITION: COSCO BUYING OOCL

SHRINKING CARRIER COMPETITION: JAPAN’S 3 BIG CARRIERS MERGING

SURPRISE MOVE – KOREA LINE BUYING HANJIN’S ASIA-US ASSETS

THERE’S HIGH RISK OF MORE CARRIER COLLAPSES SAYS DREWRY

HANJIN COLLAPSES – HOW BADLY WILL IT HURT U.S. SHIPPERS?

CMA CGM BUYING MERCOSUL AS MAERSK IS FORCED TO SELL

MAERSK ACQUIRING HAMBURG SÜD!

DIVIDE & CONQUER: MAERSK SPLITS TO GO AFTER COMPETITION

AND THEN THERE WERE 3… CARRIER ALLIANCES

HERE COMES CHINA COSCO SHIPPING CORPORATION, SHIPPING LEVIATHAN

CARVING CARRIER COMPETITION: COSCO & CHINA SHIPPING FORM ALLIANCE

MOVIES OVER BUT HUNGER GAMES OF THE SEA CONTINUE W/ MERGER & BUYOUT

HAPAG-LLOYD CSAV SIGN MERGER: NOW 4TH LARGEST SHIPPING CARRIER

EVER SHRINKING CARRIER COMPETITION – HAPAG-LLOYD AND CSAV MERGING

SHIPPING NEWS ALERT: P3 HALTED BY CHINA

WORLD’S LARGEST CONTAINER SHIPPING CARRIERS FORM TRIUMVIRATE

CATCHING FIRE ON THE SEA: INTERNATIONAL SHIPPING MOVES & COUNTER MOVES

HUNGER GAMES OF THE SEA: G6, P3, & CKYH ALLIANCES FIGHT FOR SHIPPING DOMINANCE

HOLY CARGO COLLUSION, BATMAN–SHIPPING COMPANIES UNDER INVESTIGATION!

MAERSK TO OUTLAST COMPETITORS IN FACE OF LOWER FREIGHT RATES?

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Ocean Freight Emissions Have Caused Global Cooling? https://www.universalcargo.com/ocean-freight-emissions-have-caused-global-cooling/ https://www.universalcargo.com/ocean-freight-emissions-have-caused-global-cooling/#respond Thu, 25 Jan 2018 19:08:15 +0000 https://www.universalcargo.com/?p=8614 Decarbonization is one of the top priorities of the ocean freight industry in order to reduce greenhouse gas emissions and fight global warming. But apparently, emissions from all those ships out on the ocean have actually caused global cooling over the last century. What?! MIT Technology Review posted an article written by James Temple that […]

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Decarbonization is one of the top priorities of the ocean freight industry in order to reduce greenhouse gas emissions and fight global warming. But apparently, emissions from all those ships out on the ocean have actually caused global cooling over the last century.

What?!

MIT Technology Review posted an article written by James Temple that opens with:

Studies have found that ships have a net cooling effect on the planet, despite belching out nearly a billion tons of carbon dioxide each year. That’s almost entirely because they also emit sulfur, which can scatter sunlight in the atmosphere and form or thicken clouds that reflect it away.

The article headlines with, “We’re about to kill a massive, accidental experiment in reducing global warming,” which is explained as Temple continues to write:

In effect, the shipping industry has been carrying out an unintentional experiment in climate engineering for more than a century. Global mean temperatures could be as much as 0.25 ˚C lower than they would otherwise have been, based on the mean “forcing effect” calculated by a 2009 study… For a world struggling to keep temperatures from rising more than 2 ˚C, that’s a big helping hand.

That ocean freight shipping has actually caused global cooling rather than simply being a significant source of CO2 gas that contributes to global warming is one of the craziest things I’ve heard in a long time.

Everyone seems concerned about global warming. Well, almost everyone:

President Trump Global Warming Tweet

We’ve certainly posted many articles concerning global warming and the international shipping industry in Universal Cargo’s blog over the years. Here are several:

“Make Shipping Sexy” Part of Decarbonization Plan for International Shipping

A Windshield on a Container Ship?

Aviation & Ocean Shipping Steal U.N. Global Climate Deal Headlines

Could More Ocean Shipping Be the Solution to Climate Change?

Is the International Shipping Industry Dirty?

Pack Up Santa, We’re Shipping Thru the North Pole!

Watch Out International Shipping, Antarctica is Falling Apart!

The most recent headlines are about things the international shipping industry is doing to reduce or even eliminate emissions that contribute to global warming. It’s ironic that these efforts to fight global warming should end an agent of global cooling.

However, sulfur pollution creates short-term global cooling while CO2 pollution creates long-term effects but with the services from carbonclick.com, online business offsets are also available nowadays which can be used to measure CO2 emissions. While cooling effects have outweighed warming effects in shipping, the long term effects of CO2 emissions could be much worse.  Consider this from the abstract of the study Temple’s article refers to.

Recent studies indicate that the cooling due to altered clouds far outweighs the warming effects from greenhouse gases such as carbon dioxide (CO2) or ozone from shipping, overall causing a negative present-day radiative forcing (RF). Current efforts to reduce sulphur and other pollutants from shipping may modify this. However, given the short residence time of sulphate compared to CO2, the climate response from sulphate is of the order decades while that of CO2 is centuries. The climatic trade-off between positive and negative radiative forcing is still a topic of scientific research, but from what is currently known, a simple cancellation of global mean forcing components is potentially inappropriate and a more comprehensive assessment metric is required. The CO2 equivalent emissions using the global temperature change potential (GTP) metric indicate that after 50 years the net global mean effect of current emissions is close to zero through cancellation of warming by CO2 and cooling by sulphate and nitrogen oxides.

Of course, even if international shipping’s sulfur emissions cancel out the warming effects of its CO2 emissions over the next 50 years, no one wants harmful sulfur emissions ton continue. Acid rain and respiratory problems such as asthma are among the negative effects of sulfur emissions. Trying to cancel out one harmful pollutant with another doesn’t make sense.

Temple’s article points out the unintentional increasing of clouds by sulfur emissions from ships causing global cooling gives support to fighting global warming through geoengineering.

Scientists are working on ways to increase cloud cover (without harmful pollutants like sulfur) in order cause global cooling like shipping has done. While controlling the weather has been a popular subject of science fiction and film, there may be ethical questions and perhaps dangerous consequences to intentionally affecting the weather. But that’s a topic for a whole other blog.

If you’re interested in another blog about shipping affecting the weather, check out this one:

Universal Bizargo: Shipping Changes the Weather

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Maersk Still Number One Carrier by Capacity https://www.universalcargo.com/maersk-still-number-one-carrier-by-capacity/ https://www.universalcargo.com/maersk-still-number-one-carrier-by-capacity/#comments Thu, 18 Jan 2018 19:44:40 +0000 https://www.universalcargo.com/?p=8588 Back in November, we blogged about Maersk no longer being the number one carrier. Today’s blog headlines with Maersk still being number one. So what gives? The previous blog was about who moved the most cargo measured in twenty-foot equivalent units (TEU). In the third quarter of 2017, Cosco moved in front of Maersk to […]

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Maersk Cargo Ship

Maersk Cargo Ship pic: Maersk Line

Back in November, we blogged about Maersk no longer being the number one carrier. Today’s blog headlines with Maersk still being number one. So what gives?

The previous blog was about who moved the most cargo measured in twenty-foot equivalent units (TEU). In the third quarter of 2017, Cosco moved in front of Maersk to the top spot in terms of TEU of cargo being shipped.

Today’s blog is talking capacity. Maersk still holds it’s number one spot as the world’s largest carrier by capacity. So while it’s possible for another carrier to move more cargo than Maersk, Maersk still has the ability to move more cargo than any other carrier in the world.

While Cosco may have managed to move more cargo than Maersk for a certain period, Cosco is not even in second place when it comes to actual capacity.

Mike Wackett reports in the Loadstar:

Maersk Line has consolidated its position as the world’s largest container carrier, increasing its lead over MSC after its capacity was swollen by an 26.8% to 4.15m teu.

Maersk announced the final regulatory approval and closing of its acquisition of Hamburg Süd back on November 30th. But apparently, the carrier didn’t even need the 105 Hamburg Süd vessels the acquisition integrated into Maersk’s fleet to keep its capacity lead on MSC from shrinking.

Wackett continued in the Loadstar article:

Notwithstanding the Danish carrier’s acquisition of Hamburg Süd, [Maersk’s] organic growth matched that of MSC, which has a tradition of developing its business solely by customer base expansion, and recorded a year-on-year gain of 10.8% last year.

While Cosco was not one of the top two carriers by capacity, the carrier is in the top tier of carriers according to Alphaliner research, which Wackett’s Loadstar article is based upon.

Alphaliner’s top tier is referred to as the premier league of Maersk, MSC, CMA CGM, Cosco, Hapag-Lloyd, Evergreen and the new Ocean Network Express (ONE) in the Loadstar article.

The order the carriers are listed there is actually the order in which they rank by capacity. That means Cosco actually comes in at fourth.

Wacket writes:

Cosco’s operating capacity increase was a more modest 11.1% last year, to 1.8m teu. However, Alphaliner notes that this figure will be boosted this year by 700,000 teu of capacity from the purchase of OOCL, putting the Chinese state-owned carrier on a par with CMA CGM, before the addition of 319,000 teu of newbuild deliveries.

In reality, having less capacity but moving more cargo seems better. Yet, carriers seem to battle over capacity leads as much as or more than actual cargo movement.

In Maersk’s press release mentioned above, the press team boasts about the capacity the merger gives the company:

Together, Maersk Line and Hamburg Süd will have a total container capacity of 4.15 million TEU and a 19.3% global fleet capacity share (Alphaliner, 27 November 2017).

It is obvious that how much capacity a shipping line has in comparison to others is important to carriers.

However, in an industry plagued by overcapacity, carriers battling for larger percentages of market capacity is deleterious.

While carriers continue to fight for more capacity than competitors, overcapacity will continue to plague the industry. For leaders at the top like Maersk, this is not much of a problem. The world’s largest shipping company by capacity can survive downward pressure on freight rates.

Many of its competitors may not be able to stay above water with so much more capacity than demand. That would mean us coming closer to Maersk’s prediction of only three global companies left when it comes to carrier competition in the international shipping industry.

Such shrinking in competition would ultimately be bad for shippers.

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Holy Crap! Maersk & IBM Team Up to Change International Shipping! https://www.universalcargo.com/holy-crap-maersk-ibm-team-up-to-change-international-shipping/ https://www.universalcargo.com/holy-crap-maersk-ibm-team-up-to-change-international-shipping/#respond Wed, 17 Jan 2018 00:14:12 +0000 https://www.universalcargo.com/?p=8571 Always seeming to be a step ahead of the competition, Maersk is at it again. The industry-leading ocean carrier is forming a joint venture company with IBM that could revolutionize the international shipping industry. Jacob Gronholt-Pedersen reports in Reuters: The world’s largest container shipping firm A.P. Moller-Maersk is teaming up with IBM to create an industry-wide […]

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YouTube Video

Global Digital Platform for shipping from Maersk & IBMAlways seeming to be a step ahead of the competition, Maersk is at it again. The industry-leading ocean carrier is forming a joint venture company with IBM that could revolutionize the international shipping industry.

The world’s largest container shipping firm A.P. Moller-Maersk is teaming up with IBM to create an industry-wide trading platform it says can speed up trade and save billions of dollars.

Technically, Maersk has already been working with IBM since 2016 on this blockchain-based platform technology.

Gavin van Marle wrote in an article on the Loadstar:

Maersk and IBM are taking their blockchain collaboration a step further, announcing today that they intend to form a joint-venture company based in New York to “commercialise” the technology.

“Blockchain technology powers the digital currency bitcoin and enables data sharing across a network of individual computers,” Gronholt-Pedersen clarifies. He goes on to write in his Reuters article:

Success of the platform, which will be made available to the ocean shipping industry around mid-2018, depends on whether Maersk and IBM can convince shippers, freight forwarders, ocean carriers, ports and customs authorities to sign up.

It’s hard to imagine shippers, freight forwarders, ocean carriers, ports, and customs authorities won’t sign up and make the platform successful.

For one thing, many such companies are already onboard.

The Loadstar article makes it clear that Maersk and IBM have a head start on convincing businesses to sign up, saying they’ve already got Agility Logistics as well as shippers General Motors and Procter & Gamble signed up to use the blockchain-based international shipping platform.

Not just that, but since Maersk and IBM started working on their joint block chain project in 2016, van Marle writes that DuPont, Dow Chemical, Tetra Pak, Port Houston, Rotterdam Port Community System Portbase, Customs Administration of the Netherlands, and US Customs and Border Protection have linked up to trial the platform. “In addition, Guangdong Inspection and Quarantine Bureau will connect to its Global Quality Traceability System for import and export goods,” van Marle reports.

More companies will likely jump onboard because this platform is a possible solution for a number of problems in the international shipping industry.

Shippers commonly complain about lack of transparency from carriers when it comes to their cargo shipments while carriers are also notoriously unreliable.

This platform offers better service from carriers to shippers through digital transparency while potentially significantly reducing delays that can be costly for both shippers and carriers.

Lucas Mearian gives a little bit of analysis of Maersk and IBM’s blockchain-based electronic shipping platform in an article on Computer World:

The new platform could save the global shipping industry billions of dollars a year by replacing the current EDI- and paper-based system, which can leave containers in receiving yards for weeks, according to the companies.

Blockchain will enable a single view via a virtual dashboard of all goods and shipping information for all parties involved, from manufacturers and shippers to port authorities and government agencies.

As an immutable, distributed ledger, blockchain technology will also improve security, according to Michael White, former president of Maersk Line in North America and CEO of the new company.

Blockchain’s native immutability as a distributed ledger will also create an automatic audit trail for regulators, something with which the industry has struggled.

Along with paper legal documents, much of the international shipping industry’s information has been transmitted via electronic data interchange (EDI) – a 60-year-old technology. But once shipping manifests move to API-based technology on the new platform, shippers and everybody else in the supply chain will have more timely information and improved visibility, White said.

The blockchain technology will employ smart contracts or self-executing workflows determined by the goods being shipped and the authorization they require while in transport.

“The key point is how do you eliminate or minimize delays and how can you shorten the time people are waiting for information or documentation for cargo to move efficiently,” White said.

While international shipping is a $4 trillion a year industry, and 80% of of the goods are carried on ocean vessels, much of the logistics involved in creating cargo manifests, tracking shipments and even getting sign-offs from customs and other port authorities remains a paper process.

As the cost and size of the world’s trading ecosystems continue to grow more  complex, the cost of the required trade documentation to process and administer goods shipped globally is expected to reach one-fifth of the actual physical transportation costs.

According to The World Economic Forum, by reducing barriers within the international supply chain through transparent, electronic communications, global trade could increase by nearly 15%, boosting economies and creating jobs.

Yes, smart contracts or self-executing workflows mentioned by Mearian above would be forms of AI technology. And yes, AI technology and digitization through a digital platform are more examples of the 4th Industrial Revolution (4IR) hitting the international shipping industry.

Previous examples we’ve talked about in posts on this blog are automated cargo ships and electric semi-trucks.

Many have predicted the 4IR to disrupt shipping as this industry—typically behind the times in terms of technology—adapts to all the technological advances and changes on the horizon. However, this Maersk/IBM platform looks like it could quickly improve international shipping.

Of course, the pessimist could always point out the possibility of things going wrong. What could potential bugs in the system do? What happens if a cyber attack shut the platform down? Even as a separate company, would the platform give Maersk an unfair advantage in the industry?

Maersk and IBM still have to gain regulatory approval before their still-unnamed joint venture company can come into existence. However, we may not be waiting long for answers to questions about the joint venture as Gronholt-Pedersen writes in the Reuters article that the platform could be available to the shipping industry by the middle of this year.

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Oil, Fire & Death: Cargo Ship & Tanker Collide in East China Sea https://www.universalcargo.com/oil-fire-death-cargo-ship-tanker-collide-in-east-china-sea/ https://www.universalcargo.com/oil-fire-death-cargo-ship-tanker-collide-in-east-china-sea/#respond Thu, 11 Jan 2018 23:02:52 +0000 https://www.universalcargo.com/?p=8560 A fire still burns even though the collision that created it between the oil tanker Sanchi and the cargo ship CF Crystal happened Saturday. BBC News reported that the oil tanker was an Iranian ship with about one million barrels of condensate containing 136,000 tonnes of the ultra-light version of crude oil and 32 crew members, 30 of which were Iranians […]

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East China SeaA fire still burns even though the collision that created it between the oil tanker Sanchi and the cargo ship CF Crystal happened Saturday.

BBC News reported that the oil tanker was an Iranian ship with about one million barrels of condensate containing 136,000 tonnes of the ultra-light version of crude oil and 32 crew members, 30 of which were Iranians and two were Bangladeshis.

While all 21 Chinese national crew members onboard the cargo ship, which was carrying 64,000 tonnes of grain from the US, were rescued, all 32 crew members of the tanker were missing at the time of the initial reporting from BBC News.

On top of the missing crew members, BBC News reported an oil slick from the collision. This was being reported as a big spill with worry that all 136,000 tonnes of the condensate oil would end up in the sea.

A report three days later from BBC News said, “No large oil spill has been detected” from the tanker. That’s the good news. The bad news is that 31 of the 32 crew members from the ship are still missing with one body having been found at the time of the writing of this article

The tanker Sanchi still burns, toxic gas is being released from the ship, and bad weather creates hard to deal with wind and waves. All of this combines to make rescue operations extremely difficult.

The Washington Post published an article yesterday (Wednesday, January 10th) by Amanda Erickson, who wrote an explosion took place on the still burning oil tanker:

On Wednesday, an explosion on the tanker forced a retreat. According to the Chinese Transport Ministry, the blast occurred while rescue crews doused the ship with foam to try to put out the flames. It’s unclear what kind of damage the explosion caused.

Such explosions are very worrisome because a major oil spill could be released. Erickson also wrote:

Since the crash, the Sanchi has been billowing thick plumes of black smoke. Unless the fire can be brought under control, officials worry that an explosion might sink the ship, releasing its 1 million barrels of oil (which amounts to 42 million U.S. gallons) into the water.

The resulting spill would be about three times as big as the Exxon Valdez spill of 1989, one of the worst environmental disasters in history. The oil spilled would be double what the Prestige tanker released when it sank off the coast of Spain in 2002. That accident damaged beaches in France, Spain and Portugal, and led to the closure of one of Spain’s richest fishing areas.

The East China Sea just happens to be major fishing waters for the important Chinese fishing industry. A major condensate spill in these waters would have a major impact, likely closing this important fishing area.

Remember, the oil we’re talking about onboard the Sanchi is more toxic than regular crude oil. The second BBC News article quoted above illuminates the difference between condensate and crude:

Condensate is very different from the black crude that is often seen in oil spills.

It exists in gas form within high-pressure oil reservoirs and liquefies once extracted.

It is toxic, low in density and considerably more explosive than regular crude oil.

Erickson even went on in her article to add that condensate “also is nearly colorless and odorless, which makes it difficult to detect.” She then quoted yet another BBC article:

“This stuff actually kills the microbes that break the oil down,” Simon Boxall of the National Oceanography Center at the University of Southampton told the BBC. “If she sinks with a lot of cargo intact, then you have a time bomb on the sea bed which will slowly release the condensate.”

In Iran, criticism is growing for China with concern that the Chinese are more interested in protecting its fishing industry and the water from oil than rescuing the mainly Iranian crew of the Sanchi, according to a Middle East Online article.

While hope is being held on to that the Sanchi crew is alive somewhere in the tanker, the fire, explosions, and toxic gas make it seem very unlikely there are still survivors onboard.

This is a time when prayers should go out for the families and friends of those crew members as well as the firefighters and rescue crews fighting the blaze.

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U.S. East Coast Ports Recovering from Severe Weather Closures https://www.universalcargo.com/u-s-east-coast-ports-recovering-from-severe-weather-closures/ https://www.universalcargo.com/u-s-east-coast-ports-recovering-from-severe-weather-closures/#respond Tue, 09 Jan 2018 23:52:19 +0000 https://www.universalcargo.com/?p=8559 U.S. East Coast ports are recovering this week from delays and shutdowns caused by severe winter weather last week. The East Coast was hit with what the Weather Channel called “one of the most intense western Atlantic winter storms in decades” last week. White out snow, 50 mph gusts of wind, and coastal flooding were […]

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Pic: Snow Covered Pines - Creative Commons - by Lucy Meade

Pic: Snow Covered Pines – Creative Commons – by Lucy Meade

U.S. East Coast ports are recovering this week from delays and shutdowns caused by severe winter weather last week.

The East Coast was hit with what the Weather Channel called “one of the most intense western Atlantic winter storms in decades” last week. White out snow, 50 mph gusts of wind, and coastal flooding were among the effects of the “bomb” cyclone Winter Storm Grayson, which ironically shares a name with the most famous superhero sidekick of all time.

Of course, unlike the eminently helpful but fictional Dick Grayson, the unfortunately all too real Winter Storm Grayson kicked many shippers’ supply chains in the U.S. East Coast side. American Shipper reported:

Railways and trucking operators have delayed operations as several East coast seaports were closed Wednesday and Thursday….

Class I railroad CSX announced the closure of their Charleston and Savannah ramps on Wednesday, with re-openings scheduled for Thursday….

Norfolk Southern closed their ramp in Charleston on Wednesday, with the Ayer, Charleston and Norfolk Intermodal facilities resuming operations on Friday….

Charleston port terminals ceased operations Wednesday and remained closed on Thursday. According to advisories, South Carolina DOT issued truck restrictions on I-526 and I-26….

Savannah’s Garden City terminal closed at 4 a.m. Wednesday with terminal operations resuming at 1 p.m. Thursday. The North Carolina Port Authority ceased operations at 3 p.m. Wednesday, Jan. 3, with operations resuming on Friday after a two-hour delay….

In Norfolk, terminal gate operations ceased at 6 p.m. Wednesday with all truck gates closed until 1 p.m. Friday….

The Port of Virginia also advised that Norfolk International Terminals (NIT) and Virginia International Gateway (VIG) are tentatively scheduled to reopen on Saturday, Jan. 6. Norfolk Southern said it will continue to accept shipments billed to the Port of Virginia and advance them as conditions allow. However, the railway will not be able to unload and return units once they have been loaded.

Luckily, the timing of Winter Storm Grayson is about as optimal as the timing of a delay causing event can be when it comes to international shipping. Shipping volumes tend to be much lower this time of year. Peak season, leading up to the holidays, is well over, and many business are in a seasonal slow period following the holidays.

As such, major congestion is not expected at East Coast ports despite last week’s closures and slowdowns.

Still, recent years have seen severe weather hamper operations at East Coast ports enough to make shippers leery. Most notably, winter hit hard early in the 2013/2014 winter season, with snow and ice storms diminishing the 2013 shipping season, causing port delays and closures, and losing shippers money.

Eyes will definitely be on the weather as the winter continues. After the hurricane season hit Gulf Coast shipping hard and the strength of Winter Storm Grayson being so high, it has almost become an expectation for weather to be more extreme than usual through 2018.

As always, Universal Cargo will be watching how weather and other factors affect the ports and working hard to make sure our shippers’ cargo imports and exports move as smoothly as possible.

Click Here for Free Freight Rate Pricing

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Learn About Incoterms From Universal Cargo in Lorman Live Webinar https://www.universalcargo.com/learn-about-incoterms-from-universal-cargo-in-lorman-live-webinar/ https://www.universalcargo.com/learn-about-incoterms-from-universal-cargo-in-lorman-live-webinar/#respond Thu, 04 Jan 2018 14:58:39 +0000 https://www.universalcargo.com/?p=8528 Back by popular demand is the ICC Incoterms Update live webinar hosted by Lorman Education Services. The webinar will take place February 28th, 2018 from 4 to 5:30 pm (PST). Your teacher on all things Incoterms during this webinar is Universal Cargo’s own General Manager Raymond Rau. Incoterms are hugely important in international business deals […]

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Back by popular demand is the ICC Incoterms Update live webinar hosted by Lorman Education Services.

The webinar will take place February 28th, 2018 from 4 to 5:30 pm (PST).

Your teacher on all things Incoterms during this webinar is Universal Cargo’s own General Manager Raymond Rau.

Incoterms are hugely important in international business deals involving importing and exporting.

In fact, Incoterms are so important that our blogs defining Incoterms have more visits than any other page on Universal Cargo’s website, including our Home Page.

This will be the second time Lorman Education Services has invited Universal Cargo to teach the ICC Incoterms Updates live webinar. Raymond Rau did a great job the first time around and should only be better for this encore.

Here’s the agenda for the webinar:

Incoterms

— What Are Incoterms?

  • Why Are They Necessary?
  • How Are They Used?

— What Services Are Required to Arrange a Shipment?

  • Origin Services
  • Freight
  • Insurance
  • Destination Services

— What Do These Different Terms Mean?

  • Names
  • Definitions

— Most Frequently Used

  • Benefits
  • Problems

— As a Forwarder, Which Are Our Favorite and Least Favorite?

  • Why?
  • Personal Experiences

— Special Notes

  • Terms With Special Definitions, Related to Incoterms

Here are the benefits you’ll gain from this Incoterms webinar:

  • You will be able to define each of the 11 incoterms.
  • You will be able to discuss why having the right incoterm in place will help to reduce or eliminate confusion and missed steps in the shipping process.
  • You will be able to explain which incoterm will be of most value to you.
  • You will be able to review the benefits and problems with the most frequently used incoterms in order to make a decision that is in your best interest.

Beyond the useful knowledge you can gain, you can use this webinar for continuing education credit for CLE, CPE, and ISM 1.50.

If you cannot attend the live webinar, Lorman also offers it on demand. The biggest disadvantage of the on demand version is not being able to take part in the live Q&A; however, you will still be able to learn from the questions others ask.

Don’t let Incoterms mystify you as they do so many others, including experienced business people who often find them intimidating and confusing. Join us for this webinar and get all the Incoterm intel.

For Universal Cargo’s blog readers, Lorman is offering a 50% discount on the webinar.

Here’s the info to take advantage of the discount:

Register online: http://www.lorman.com/401554?discount_code=V7179766&p=15999
Call: 866-352-9539
Discount code: V7179766
Priority code: 15999

Incoterms Webinar Button

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Top 10 International Shipping News Stories of 2017 https://www.universalcargo.com/top-10-international-shipping-news-stories-of-2017/ https://www.universalcargo.com/top-10-international-shipping-news-stories-of-2017/#respond Thu, 28 Dec 2017 14:00:24 +0000 https://www.universalcargo.com/?p=8495 This is it! Universal Cargo’s final blog of 2017. This year certainly seems to have gone by fast. Last year, we began a new tradition of ending the year in the blog with a look back at the top international shipping news stories of the year (click here for 2016’s Top 10) This is your […]

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YouTube Video

Top 10 international shipping news stories 2016

pic: flickr iabusa

This is it! Universal Cargo’s final blog of 2017. This year certainly seems to have gone by fast.

Last year, we began a new tradition of ending the year in the blog with a look back at the top international shipping news stories of the year (click here for 2016’s Top 10)

This is your chance to get a quick recap of what the year looked like in terms of international shipping news.

Below you’ll find the top 10 stories listed with short summaries, links to the blogs that covered the story, and often Universal Shipping News videos on the story.

We love to count it down David Letterman style, so we’re going from 10 to 1. Let’s get it started.

Drum roll please…

#10 — Freight Rates Increase for a While Then Slip

Of course, freight rates are always part of the news cycle when it comes to international shipping. 2016 saw record low freight rates, but carriers had some success in 2017 increasing these unsustainable shipping prices. However, by the end of the year, freight rates began slipping again, and 2018 could end up seeing even lower rates than 2016.

There are a couple videos and four blog links below to get you caught up on all the freight rate drama surrounding 2017.

YouTube Video

YouTube Video

What’s Happening with Ocean Freight Rates?

Freight Rate Wars: Carriers Strike Back

What’s Happening With International Shipping Freight Rates?

Freight Rates to Hit Record Lows Again in 2018?

#9 — Automated Cargo Ships On the Way

Completely automated cargo and container ships are being built and planned to be put on international waters. This would probably be higher on the list if the ships actually started sailing this year. These automated ships aren’t scheduled to be on the water until 2019.

But still, this is a game changer in international shipping.

Could This Container Ship Be the Biggest Thing to Hit Transpacific Shipping?

World’s First Automated Cargo Ship Is On the Way

#8 — Maersk Out-Shipped by Cosco

Maersk has been the #1 carrier for so long that it seemed like the carrier was untouchable. However, in the 3rd quarter of 2017, China Cosco Shipping Corporation (Cosco) moved more TEU of cargo than Maersk—5.49 million TEU to 5.26 million TEU—and it looks like Cosco will be able to continue loading more cargo than Maersk in the foreseeable future.

Maersk Is No Longer #1 Carrier

YouTube Video

#7 — South China Sea Tensions Intensify

YouTube Video

Around $5 trillion of cargo is shipped through major shipping lanes in the South China Sea every year. The importance of those waters to international shipping has caused the US to get involved in disputes between China and its neighbors over conflicting claims on the South China Sea. Tensions were getting quite high between China and the US over the waters under the Obama administration. When Trump took over the presidency, those tensions intensified.

A later news story on this list shows improving relations between China and the US under the Trump administration. However, that does not mean the issues in the South China Sea are resolved.

South China Sea Tensions Intensify Under Trump

#6 — China Pollution Crackdown Shuts Down Thousands of Factories

YouTube Video

During peak shipping season, China cracked down on enforcement of anti-pollution laws. Local officials overreacted and shut down all possible pollution sources, which meant tens of thousands of factories, disrupting the supply chain at the source for many US importers. Despite the setback for shippers, this could be chalked up as a win for the environment.

China Pollution Crackdown Shuts Down Thousands of Factories Disrupting Supply Chain

#5 — Hurricanes Hitting US Cities & Ports

YouTube Video

Hurricane season hit hard in the US this year. Hurricane Harvey and Hurricane Irma both caused extensive damage, claimed lives, and interrupted supply chains. Hurricane Harvey was especially devastating in Houston. Recovery is still an ongoing process.

While the impact these hurricanes had on international shipping is newsworthy, the more important stories here are the people who lost lives, friends, family members, and homes.

HURRICANE HARVEY HURTS PEOPLE & SUPPLY CHAIN

HURRICANE HARVEY UPDATE – GULF COAST SHIPPING RESUMED

U.S. PORTS BRACING FOR ANOTHER DEADLY HURRICANE

FALLOUT OF HURRICANE IRMA ON SHIPPING

#4 — China Cuts Tariffs

This one is huge for US exporters. China is taking steps in opening its market to foreign goods from countries like the US. China cut tariffs on close to 200 goods with average drops from 17.3% to 7.7%.

This is also a much better story for US-China relations than #7 on this list was.

China Cuts Import Tariffs Creating Big Opportunity for Exporters

#3 — 3 Mega Carrier Alliances Take Over

In April of 2017, the reshuffling of carriers into just 3 alliances that dominate international shipping officially launched. Ocean freight shipping is now controlled by the Ocean Alliance, THE Alliance, and 2M.

In March, many were worried about possible disruptions that might occur in the adjustment period to the new alliance arrangement. While there were a few minor disruptions and hiccups here and there, the transition went pretty smoothly. However, that doesn’t allay the ominous feeling so many shippers have over so few alliances controlling shipping.

YouTube Video

Carrier Alliances Bring Real March Madness for Shippers

#2 — ILWU Agrees to Early Contract Extension

This is unprecedented news. The International Longshore & Warehouse Union (ILWU) actually agreed to a contract extension in 2017 well before the current contract expires. This means shippers don’t have to worry about West Coast port disruptions caused by slowdowns, strikes, or lockouts during contentious contract negotiations as is the norm whenever the dockworker contracts expire at the ports.

The ILWU agreeing to a contract extension creates hope that the International Longshoremen’s Association (ILA) will do likewise at the East and Gulf Coast ports.

YouTube Video

YouTube Video

ILWU To Vote on Early Contract Extension, and It Could Pass!

ILWU Agrees to Contract Extension

Early Contract Extension May Happen with Dockworkers at East & Gulf Coast Ports

#1 — Shrinking Carrier Competition

2016’s #1 story was Hanjin’s Bankruptcy. In 2017, it’s the continued shrinking of carrier competition in international shipping. We’re seeing carrier competition continue to shrink through buyouts and mergers of carriers. What’s scary is Maersk predicts carrier competition will shrink all the way down just 3 global carriers.

YouTube Video

YouTube Video

Shrinking Carrier Competition: Cosco Buying OOCL

CMA CGM Buying Mercosul as Maersk is Forced to Sell

Japan’s Big 3 Becoming ONE in Practice & Name

Maersk Expects Carrier Competition to Shrink to 3 Global Companies

What Do You Think?

What do you think about this list? Are there any big international shipping stories we didn’t include that you think should have made the top 10? Would you change the order?

Let us know in the comments section below.

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Who Was this Unexpected Man to Powerfully Impact His Community? https://www.universalcargo.com/who-was-this-unexpected-man-to-powerfully-impact-his-community/ https://www.universalcargo.com/who-was-this-unexpected-man-to-powerfully-impact-his-community/#comments Thu, 21 Dec 2017 22:27:52 +0000 https://www.universalcargo.com/?p=8480 In our last blog before Christmas, we take a break from international shipping to focus on the people around us. In particular, a man who made such an impact on the community of Lawndale, a small city in the greater Los Angeles area, that community members came together to raise money to erect a plaque […]

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In our last blog before Christmas, we take a break from international shipping to focus on the people around us. In particular, a man who made such an impact on the community of Lawndale, a small city in the greater Los Angeles area, that community members came together to raise money to erect a plaque in the man’s honor.

A Daily Breeze article by Sandy Mazza about the man said that people actually wondered if he “was an angel — or like the Buddha when he gave up his life as a royal prince, or Jesus when he traveled ministering to the public.”

What incredible public figure could be so loved to inspire comparisons to angels, the Buddha, and Jesus Christ? The answer would probably surprise most people.

The person that inspired such love from the people of Lawndale was a man called Mike, who quietly lived on Hawthorne Boulevard between 165th and 166th streets for about 30 years. He was a homeless man.

At age 56, Gerardo Michael Juarez—Mike’s full name—died near the curb where he lived.

Candles, Flowers, & Notes from Gerardo Michael Juarez vigil

Candles, Flowers, & Notes from Gerardo Michael Juarez vigil

Afterward, according to the Daily Breeze article, more than 2,000 people signed a change.org petition to erect a plaque in Mike’s honor and, according to another Daily Breeze article by Mazza, more than one hundred people gathered for a vigil, leaving flowers and notes at his camp in front of the USA Gasoline Station.

Mazza wrote that it was when Mike didn’t come into the gas station for his morning coffee that worried workers at the station found him dead, “lying over the large decorative rocks separating the station from the sidewalk. Deputies said his sister was notified of his death…”

That sister is Universal Cargo’s Executive Coordinator, Finance Gina Jackson.

“I tried to get him to come home with me,” Gina said of her brother, “but he would not even budge. He would just say, ‘I am okay.'”

The way Gina describes her older brother and hero as a kid, there’s no way anyone could have predicted he would end up living on the street.

Gerardo Michael Juarez as a child

Gerardo Michael Juarez as a child

“Growing up I can still remember Michael’s smile…. you could see it in his eyes. He always smiled with his eyes…. I still remember Michael being the coolest brother ever! He was a risk taker, a great athlete, quick on his feet, and he exemplified leadership qualities that were far above his peers.

“… he would ride his bike… get some momentum and before you knew it, Michael was standing on his seat with his arms to the sky with a HUGE grin on his face just having a blast! Michael was always taking a risk… he was very smart, and no one messed with Michael growing up. He played football… and his skills were undeniable… he was truly amazing at it because he was so quick and had no fear….

Gerardo Michael Juarez

Gerardo Michael Juarez

“Michael was a leader and a world changer who had the biggest heart and wanted the best for everyone. He didn’t put up with bullies nor was he a man that would take advantage of you; he was a man of loyalty and love, but one wrong decision in his life and being at the wrong place at the wrong time altered the course of his life forever….”

For the Lawndale community, why Mike was camped on Hawthorne in front of the gas station was a mystery. According to Mazza’s articles there were stories people created to explain Mike’s presence there, including him secretly being a millionaire with a home on the Palos Verdes Peninsula, having lost his family in a tragic car accident, and being a Vietnam War vet who came home scarred with Post Traumatic Stress Disorder (PTSD).

Mike’s best friend growing up, Dennis Rigdon, helps dispel these myths that become something of a legend surrounding Mike:

“Sometime during Freshman/Sophomore year at Hawthorne High, he moved to Hawaii to live with his mom.

“The next time I saw him, a few years later, he was not the same Mike. His brain had clearly been scrambled. When asked about what happened in Hawaii, his only response would be “bad drugs” as he shook his head. He never served in the military as you’ve been told. And was definitely way too young to have fought in Vietnam. It’s possible that he had some type of PTSD, but it wasn’t from the war.

“He never married or had a family to lose.”

While Dennis wanted to clear away all the false stories about Mike, he would probably also want to make it clear that Mike wouldn’t have just thrown his life away on drugs either. Mazza quotes Dennis as saying about Mike, “I heard from a guy who stayed in touch with him that someone slipped him bad acid in Hawaii. Mike was not a drug guy.”

Unfortunately, even that story is hearsay, and nobody seems to know exactly what happened to Mike in Hawaii. However, Dennis is right about Mike not being a drug guy.

Gina said Mike didn’t want to take the medication his parents tried to give him for the chronic and worsening mental illness Mike was suffering from after his return from Hawaii because the medication made him feel weird.

“… as I got older,” Gina said, “he got worse, and he simply forgot who I was… I would politely remind him, but he just gave me a grunt and smiled with his eyes and just let me do the talking because now Michael was a man of few words.”

It wasn’t only his family members Mike couldn’t remember but his friends also.

“He was one of the last people I saw before shipping off to Basic Training myself in 1980,” Dennis said. “At that time, Mike was having a real hard time finding a place in productive society. I lost track of him after that for the next 10-15 years.

“When I found him again, he was living at his spot on Hawthorne Blvd and 166th. I would stop to talk to him whenever I was in the area, always hoping that seeing me, his best childhood friend, would make him snap out of it. Sadly, most times he acted like he couldn’t remember me.

“One time, my sister Dawn and I stopped to visit him. He lit up when we started talking about the old football playing days. But, sadly, he quickly went back into his shell.”

Gerardo Michael Juarez camped daily in front of USA Gasoline in Lawndale courtesy of the Daily Breeze.

Gerardo Michael Juarez camped daily in front of USA Gasoline in Lawndale courtesy of the Daily Breeze.

Amazingly, even in his shell, Mike managed to brighten the lives of the people of the Lawndale community and bring out the best in them. By all accounts, Mike rarely spoke and didn’t beg. However, people from the community would still give him food, clothing, and blankets.

“He initiated something in us to give,” Linda Birmingham was quoted as saying in Mazza’s article about Mike’s vigil. “He awakened something in each of us, a humanitarian kind of emotion. He never stood outside with a sign asking for help. I was taken by his helplessness and innocence.”

Perhaps it was those eyes that Gina described Mike smiling with that moved people so. A couple people Mazza quoted in that article mentioned his eyes:

Maritza Hernandez was quoted as saying, “I’d tell him my problems, like my boyfriend was mad at me. He’d listen but never say anything. I’d tell him, ‘You have the most beautiful blue eyes,’ and he’d smile a little bit. I love him.”

Annette Hudson was quoted as saying, “I would bring him Christmas treats and rotisserie chicken. He would never say a word. He would just look at me with his eyes, as if to say: ‘Thank you.’ ”

Many people never look at a homeless person twice or avoid looking at them altogether. However, looking at Mike made community members gather together and musicians—including Gina Jackson in a worship band—play for a luncheon and fundraiser to finance erecting a plaque in one homeless man’s honor.

Nearly $2,000 of the $3,000 it will take to erect the plaque has been raised on gofundme.com.

The story shines a spotlight on the homelessness problem in Los Angeles county. According to the BBC, there are 57,794 homeless people in L.A. County, a 23% increase from 2016.

But in any city, there are homeless people. If we all took a moment to look at one, being generous with a little food, clothing, a blanket, or just our time, we may find ourselves feeling like so many in the Lawndale community who met  Mike—like we’ve just met an angel.

There’s an old biblical verse, Hebrews 13:2, which reads, “Do not forget to show hospitality to strangers, for by so doing some people have shown hospitality to angels without knowing it.”

Mike was repeatedly called or compared to an angel in Mazza’s articles.

“We had no idea that [Mike] touched so many lives,” Gina said. “Words cannot express how grateful my mom and I are after all the wonderful things that were said about Michael… [He] became an Angel to a city and still continued to bring out the best in everyone. It’s funny, even though he didn’t do it in a conventional way, he still became a world changer!”

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Freight Rates to Hit Record Lows Again in 2018? https://www.universalcargo.com/freight-rates-to-hit-record-lows-again-in-2018/ https://www.universalcargo.com/freight-rates-to-hit-record-lows-again-in-2018/#comments Thu, 14 Dec 2017 21:34:35 +0000 https://www.universalcargo.com/?p=8466 It’s bad news for ocean freight carriers but good news for U.S. shippers. At least, it’s good news for U.S. shippers in the short run. 2018 could see transpacific freight rates drop to record lows. Again? If you regularly read this blog, you know all about how overcapacity has plagued the international shipping industry for […]

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Freight RatesIt’s bad news for ocean freight carriers but good news for U.S. shippers. At least, it’s good news for U.S. shippers in the short run. 2018 could see transpacific freight rates drop to record lows. Again?

If you regularly read this blog, you know all about how overcapacity has plagued the international shipping industry for years. Overcapacity puts downward pressure on freight rates and has caused serious struggles for ocean carriers, which transport 90% of the world’s goods around the globe.

For a while in 2017, it looked like carriers were making headway in increasing freight rates to healthier levels for the industry. However, carriers still appear unable to control capacity in a disciplined way. And that’s what has 2018’s freight rate outlook so low.

A little stroll down memory lane with the below blog posts gives a good overview of recent trends in freight rates and how they affect shippers.

Record Low Freight Rates for Shippers

2016 seemed to be the peak (or maybe the valley) of plummeting freight rates. Shippers loved this because low freight rates meant higher profits for businesses that import and export goods.

But there was a problem…

Are Low Freight Rates Bad for Shippers in Long Run?

This blog post may have been borderline prophetic. Low freight rates are great in the moment for shippers, who should absolutely should take advantage of the increased profit opportunity low rates present. But when those rates are unhealthy, even unsustainable, for carriers over a long stretch of time, something has to give.

This blog highlighted the freight rate wars between carriers that pushed freight rate pricing even lower than overcapacity already had as well as the struggles of Hanjin and Hyundai Merchant Marine (HMM).

It wasn’t long after this blog pointed out how shipping companies like Hanjin and HMM might not be able to survive the low freight rates that Hanjin “suddenly” collapsed causing disruption for shippers.

It seemed carriers learned from the disaster…

Freight Rates Primed to Increase on U.S. Imports But May Not Be Bad for Shippers

In April of 2017, when the above titled blog was posted, carriers were making a serious push to increase freight rates. And it seemed to have actually been successful.

In the long run, healthy freight rates are a good thing for shippers and, of course, the stability of the industry.

What’s Happening with International Shipping Freight Rates

By May of 2017, carriers’ success in pushing freight rates up had made record low freight rates a thing of the past. Carriers maintained their success as the peak season ramped up…

Freight Rate Wars: Carriers Strike Back

In August, Universal Cargo’s blog posted about how successfully carriers had managed to “strike back” against record low freight rates with healthier prices on import and export shipments. They were actually making general rate increases (GRI) and peak season surcharges (PSS) stick.

I may have gotten a little carried away with the Star Wars theme in that blog, even posting a Star Wars scroll video about the industry’s battle with freight rates.

However, as per usual, carriers were unable to sustain their success with increased freight rates.

What’s Happening with Ocean Freight Rates

When we posted this blog in October, carriers had been watching rates slip during the peak season, unable to overcome overcapacity despite increased shipping for the holiday season on the way.

That brings us to now with Alphaliner projecting that freight “rate levels are likely to fall to unprecedented lows” if carriers can’t get disciplined when it comes to capacity. Gavin van Marle reports in an article for The Loadstar:

Since the beginning of the year, freight rates from Asia to both the US west and east coasts have more than halved.

“Transpacific routes are currently under the most severe pressure…,” said Drewry.

It added: “Rates could weaken further and fall below the key levels of $1,000 per feu to the west coast and $1,600 per feu to the east coast, with significant uncertainty over the coming months.”

In the article, van Marle points out that this decline in freight rates coincides with the weakening of the Transpacific Stabilization Agreement (TSA), which imposed some capacity discipline and is now seeing industry leader Maersk leave the agreement.

A few days ago, Dhwani Pandya and Anirban Nag reported in Bloomberg that Maersk is issuing caution on the outlook of freight rates:

The world’s largest container shipping line says international freight rates are reversing after climbing for most of this year, raising questions about the sustainability of the global trade recovery.

Decade-old oversupply issues swamped demand for containerized sea trade in the third quarter, a senior official at Maersk Line Ltd. said in an interview last week….

“We have started to see some pockets of downward pressure,” said Steve Felder, Mumbai-based managing director of Maersk’s South Asian unit. The global trade order book at around 13.5 percent of capacity isn’t high, “however, given that freight rates are largely determined on the basis of supply-demand balance, they remain fragile,” he said.

If freight rates do reach “unprecedented lows” in 2018, more competition shrinking events like the collapse of Hanjin and carrier buyouts and mergers are likely to quickly follow. That will put us closer to Maersk’s prediction of carrier competition shrinking to only three global companies.

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VoyageLA Interviews Universal Cargo President Shirley Burke https://www.universalcargo.com/voyagela-interviews-universal-cargo-president-shirley-burke/ https://www.universalcargo.com/voyagela-interviews-universal-cargo-president-shirley-burke/#comments Tue, 12 Dec 2017 19:01:31 +0000 https://www.universalcargo.com/?p=8448 VoyageLA posted an interview with Universal Cargo President Shirley Burke this month. In the interview, Mrs. Burke shares how Universal Cargo CEO Devin Burke went from VP of Sales for Universal Cargo in 1991 to owning the company with Mrs. Burke in 2000. The husband and wife team went on to grow Universal Cargo from […]

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VoyageLA posted an interview with Universal Cargo President Shirley Burke this month.

In the interview, Mrs. Burke shares how Universal Cargo CEO Devin Burke went from VP of Sales for Universal Cargo in 1991 to owning the company with Mrs. Burke in 2000.

The husband and wife team went on to grow Universal Cargo from an 8 employee operation into what it is today.

Shirley BurkeThings Mrs. Burke attributed their success to in the interview are:

  • Prayer, trust, and reliance on God.
  • Attracting and retaining the best and brightest talent. Hiring and surrounding ourselves with people smarter than us and who share our core values and principles.
  • Reading, learning, and never ceasing to grow and develop ourselves as leaders.
  • Passing on what we’ve learned to others and helping develop them to their full potential in business and life.

Of course, just because the Burkes have had great success as owners of a freight forwarding company in the international shipping industry, it does not mean things have always been smooth sailing.

In the interview, Mrs. Burke gives a fascinating look at some of the challenges she and Mr. Burke faced along the road to success as business owners. Those challenges included working with a spouse and a huge financial challenge early in their ownership of the company.

There are great takeaways to be gathered from Mrs. Burke’s sharing of these challenges.

 

Devin and Shirley BurkeNot only does Mrs. Burke share what it takes to work with a spouse, she also shares exactly how she and her husband got through a financial challenge that could have ended their company.

Afterward, Mrs. Burke takes a moment to share exactly what a freight forwarder is and what sets Universal Cargo apart from other freight forwarders, its core values: C.A.R.E. C – Customers, A – Available, R – Resourceful, E – Evolving.

 

To read the whole interview, which is certainly worth doing, follow this link to VoyageLA.com.

VoyageLA is a publication focused on the Los Angeles area. It is the flagship publication of Voyage Media, which has expanded with publications covering other cities as well.

Here’s how the company describes its mission and editorial ethos:

Our small team of 40 has been working hard to create a new type of media for our community. As you browse through our stories you’ll notice that many of our interviews aren’t as polished as you’ll find elsewhere in the media. That’s intentional – we believe that far too many in the media filter, edit, and polish away the personality of interviewees and as a result so much of what we see in the media feels like it’s coming from the same person, the same voice, etc.  We think it’s important for media to more authentically represent the communities they serve and so we try to ensure that voices of those we feature jump off the page.

We also think artists rock.  We love small businesses, mom-n-pops, and hole-in-the-walls. We’re not snobs, but we aren’t fond of most chains.  We think independent entrepreneurs, freelancers and other risk takers make our cities exciting to live in.  We cherish the rebel spirit, we don’t think just a handful of large corporations should control all of our commerce and we think smores with vegan marshmallows are better than normal marshmallows. We respect people and organizations that take the path less traveled.  We root for the underdogs and we almost never say no to pizza.

Accordingly our mission is build a platform that fosters collaboration and support for small businesses, independent artists and entrepreneurs, local institutions and those that make our city interesting.  We want to change the way people spend their money – rather than spending it with the big, cookie-cutter corporations we want them to spend their money with the independent, creative, local entrepreneurs, small businesses and artists.

And finally, we want the stories we share to help give our big city a little bit of that small town community charm, where people know each other and their stories at a deeper, more personal level.

Mrs. Burke’s interview certainly gives that personal look inside of Universal Cargo. Mrs. Burke and the rest of us here at Universal Cargo want to thank the team at VoyageLA for featuring her and our company in their publication.

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China Cuts Import Tariffs Creating Big Opportunity for Exporters https://www.universalcargo.com/china-cuts-import-tariffs-creating-big-opportunity-for-exporters/ https://www.universalcargo.com/china-cuts-import-tariffs-creating-big-opportunity-for-exporters/#respond Thu, 07 Dec 2017 19:41:05 +0000 https://www.universalcargo.com/?p=8444 Good news is here for U.S. producers and exporters of consumer goods. Last year, the U.S. trade deficit with China was over 300 billion dollars. Here are the numbers from the U.S. Trade Representative’s office: U.S. goods and services trade with China totaled an estimated $648.2 billion in 2016. Exports were $169.3 billion; imports were $478.9 […]

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Good news is here for U.S. producers and exporters of consumer goods.

Last year, the U.S. trade deficit with China was over 300 billion dollars. Here are the numbers from the U.S. Trade Representative’s office:

U.S. goods and services trade with China totaled an estimated $648.2 billion in 2016. Exports were $169.3 billion; imports were $478.9 billion. The U.S. goods and services trade deficit with China was $309.6 billion in 2016.

Obviously, that’s not the good news. Those numbers show economies much friendlier for U.S. shippers to import from China than for U.S. shippers to export to China.

President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

The U.S. trade deficit with China was a huge part of Donald Trump’s presidential campaign. Huge. While there’s plenty of controversy in the now president’s words, policies, and views, there’s no debating that China is highly protectionist, putting a disadvantage on its trade partners to export to the country anywhere close to as much as they import from China.

Now, steps are being taken toward leveling the playing field.

Starting this month (on December 1st, actually), China cut tariffs on close to 200 consumer goods. The news that this was coming actually broke last month. BBC News reported:

China is cutting import tariffs on 187 consumer goods from whisky to cashmere clothing to help spur spending and economic growth.

The Finance Ministry said tariffs will drop from an average 17.3% to 7.7% on products, including pharmaceuticals, food, health supplements and clothing.

Perhaps not coincidentally, this tariff cut announcement came shortly after President Trump made a trip to China. While the trip was much criticized, $250 billion in deals between U.S. companies and China were announced.

Investor’s Business Daily posted an editorial on the news that opened with:

During President Trump’s trip to China, the U.S. scored some $250 billion in deals for such major companies as Boeing, General Electric and Qualcomm. It’s a nice haul, but Trump’s time in China would better be spent reducing barriers to trade overall.

I don’t want to sound critical of that editorial as it is a good article, but the tariff cuts (announced after the publication of the editorial) are exactly that: a reduction of trade barriers.

There were other promises to reduce trade barriers from China last month as well. The Los Angeles Times posted an article from the Associate Press about the tariff cuts that also reported:

Beijing promised Nov. 10 to gradually reduce tariffs on auto imports, though it gave no details. It was unclear how that might affect imports because most of the vehicles sold in China by global automakers are made in China.

Also on Nov. 10, the government announced it would lift its limit on foreign ownership of securities, fund management and futures companies from a minority stake of 49% to a majority stake of 51% and end restrictions after three years. It said a similar change would be made for life insurance companies and those restrictions would end in five years.

There’s still a long way to go in making a level trading ground between the U.S. and China; however, Beijing is showing willingness if not desire to open its market.

Now is an opportune time for U.S. companies to export to China. And the U.S. trade deficit with China just may start falling.

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Maersk is No Longer #1 Carrier https://www.universalcargo.com/maersk-is-no-longer-1-carrier/ https://www.universalcargo.com/maersk-is-no-longer-1-carrier/#respond Thu, 30 Nov 2017 19:42:33 +0000 https://www.universalcargo.com/?p=8425 The leviathan just ate the top dog. Perhaps that’s a bit overdramatic, but China Cosco Shipping Corporation (Cosco), China’s international shipping leviathan, is now the world’s largest carrier by cargo TEU shipments, knocking Maersk, international shipping’s top dog, off its top spot. Mike Wackett reported in the Loadstar: A 23% increase in containers lifted allowed Cosco to […]

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YouTube Video

Leviathan (Cosco) Eats Top Dog (Maersk)The leviathan just ate the top dog.

Perhaps that’s a bit overdramatic, but China Cosco Shipping Corporation (Cosco), China’s international shipping leviathan, is now the world’s largest carrier by cargo TEU shipments, knocking Maersk, international shipping’s top dog, off its top spot.

Mike Wackett reported in the Loadstar:

A 23% increase in containers lifted allowed Cosco to steal the top spot from Maersk Line in the third quarter.

The Chinese carrier loaded 5.49 million teu, compared with the Danish carrier’s 5.26m.

Maersk has been number one for so long, it was generally assumed that the company would always sit at the top. The news of Maersk being displaced has many saying, “What happened?”

A major cyber attack did hit Maersk this year. It appears that did negatively impact Maersk’s numbers, but according to Wackett’s article, Cosco would still have beaten out Maersk even without the cyber attack:

According to Alphaliner’s liftings league table, the Chinese line loaded 23% more containers in Q3 than in the same period of 2016, whereas Maersk carried 2.4% fewer, its booking systems temporarily stymied by a cyber attack in the summer that caused a 12-day IT shutdown.

Nevertheless, even allowing for a loss of say 200,000 teu, Maersk would probably still have been toppled from its long-held position as the biggest carrier by volume.

It will be interesting to see if Maersk makes moves to regain its number one position.

Maersk is acquiring Hamburg Süd, but Cosco’s acquisition of OOCL should outpace Maersk’s TEU growth through the buyout according to the Loadstar article:

… adding soon-to-be-acquired OOCL, which carried 1.6m teu in Q3, suggests 2018 could see the Chinese liner as a permanent fixture at the top of the liftings league.

Even Maersk’s upcoming takeover of Hamburg Sud will only add about 4m teu a year to the total, and that figure could even be lower depending on the impact of the regulatory restrictions in certain trading regions.

That certainly makes it appear that Cosco topping Maersk is not merely an anomalous quarter, but the new pecking order of ocean freight carriers.

In actuality, it is a possibility that Maersk is not even number two but number three.

Wacket points out in his Loadstar article that MSC does not disclose how many TEUs of cargo it moves and could be in the number one position:

… all the carriers could be relegated by one place if MSC, second only to Maersk Line in terms of deployed capacity, was to disclose its liftings.

The privately owned MSC, has always declined to reveal any operational or financial numbers. However sources suggest that it could have carried close to 6m teu in Q3 as it benefited from its 2M alliance relationship with Maersk.

It’s not a surprise that these carriers—MSC, Cosco, and Maersk—are the final three companies I chose to survive if Maersk is correct in its prediction that carrier competition will shrink to just 3 global companies.

Obviously, I would not change that list to take Maersk out of it, but this does change how many would view the industry’s top carriers. Maersk was thought of as the untouchable leader of ocean freight shipping. Now we know the company is not so untouchable.

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FMC Commissioner Stepping Down https://www.universalcargo.com/fmc-commissioner-stepping-down/ https://www.universalcargo.com/fmc-commissioner-stepping-down/#respond Tue, 28 Nov 2017 19:44:39 +0000 https://www.universalcargo.com/?p=8423 The Federal Maritime Commission (FMC) is losing another commissioner. Commissioner William P. Doyle announced in a press release yesterday (November 27th) that he is stepping down from the FMC: Last week, I notified The President of the United States Donald J. Trump of my intention to leave the Federal Maritime Commission effective January 3, 2018. It […]

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FMC Commissioner William P Doyle

FMC Commissioner William P. Doyle

The Federal Maritime Commission (FMC) is losing another commissioner. Commissioner William P. Doyle announced in a press release yesterday (November 27th) that he is stepping down from the FMC:

Last week, I notified The President of the United States Donald J. Trump of my intention to leave the Federal Maritime Commission effective January 3, 2018. It has been an honor and a privilege to continue serving in the Trump Administration. I especially thank President Barack Obama for twice nominating and appointing me as a Commissioner. I have learned so much in this position, and I thank both Presidents for the opportunity to serve the United States of America.

With Mario Cordero recently leaving the FMC to become director at the Port of Long Beach, Doyle’s resignation will leave the FMC with only three instead of five commissioners.

Doyle has been part of the FMC for nearly five years since President Obama’s nomination of him was confirmed by the Senate on January 1, 2013.

The international shipping industry has gone through a great deal during those five years. Overcapacity and downward pressure on freight rates helped lead to the consolidating of ocean carriers into just a few major alliances while mergers, acquisitions, and even bankruptcy shrunk competition. Contentious labor contract negotiations hit the ports as did severe congestion, both of which requiring FMC attention. The Verified Gross Mass (VGM) rule went into effect, scaring shippers across the country and world, but ultimately went happened pretty smoothly with the FMC playing a role in that too.

Here’s how Doyle described those years in his press release:

Over the past five years there has been an enormous amount of change in the international maritime industry including consolidations, mergers, bankruptcies, and the advent of mega ocean carrier alliances. As a Commissioner, I have been intimately involved and successful in negotiating terms and conditions into carrier alliance agreements. This has provided additional safeguards from the alliances using their collective market power to drive down the rates of U.S-based suppliers, service providers, and small businesses – such as tugs, barges, bunker providers, equipment lessors, drayage/truckers, and marine terminals.

Over the past several years the Commission has been very busy. I’ve had the opportunity to find reasonable compromises with some of the world’s largest ocean carrier companies and build solid working relationships with governments that oversee international oceanborne trade.

Looking back, I am pleased with the outcome of the 2014-2015 West Coast labor – management negotiations. I worked directly with White House cabinet secretaries, management and labor helping to conclude the negotiations – chassis was a big issue, as a lot of folks did not understand the labor/management sensitivities around the equipment.

Of course, the FMC is also involved in talks and negotiations with other countries over shipping matters. Commissioner Doyle was directly involved in such meetings and consultations with other countries.

I also had the opportunity to work with officials from Panama, European Union, China, Greece, and the Netherlands. I am particularly pleased with the outcome serving as Co-chair of the U.S.-China Bilateral Maritime Consultations.

During my tenure as Co-chair, the Peoples Republic of China began to move its oceanborne international tax system from a business tax to a value added tax (VAT) regime. I explained to China at the time, that businesses in the U.S. are seeking clarity and guidance on the new VAT rule as well as confirmation from China that the VAT is being applied fairly to all businesses. I also highlighted that companies are concerned that they may be paying too much on the VAT and would like to know the reimbursement process. Further, if businesses were paying too little, they were concerned that they would be billed or penalized later.

I worked directly with China’s Ministry of Transport, Ministry of Finance and the State Administration of Taxation. China was very attentive to the concerns of U.S. businesses. Ultimately, China issued a series of circulars, starting with Circular 106, exempting portions of shipping transportation from the VAT.

China’s VAT was a big deal for shippers and received several posts on this blog. The FMC did an excellent job of bringing U.S. shippers’ concerns about the VAT to China. Ultimately, there were several exemptions made for the shipping industry.

Doyle also talked in the press release about preparation for the VGM rule, fallout from Hanjin’s bankruptcy, the FMC hosted Global Regulatory Summit, and the Panama Canal expansion.

 

What Doyle did not bring up was why he is resigning from the FMC.

In an article about Doyle’s resignation in the Loadstar, Alexander Whiteman brought up speculation by some that it has to do with President Trump wanting to purge President Obama’s appointees and by others that Doyle is looking to move into a role with one of the world’s major shipping lines.

 

While both seem like little more than speculation, the latter seems more likely to me.

In his bio on FMC.gov, Doyle’s experience in the industry is highlighted:

Commissioner Doyle served over a decade as officer in the U.S. Merchant Marine as a marine engineer aboard numerous classes of vessels. Combined, Commissioner Doyle has over 20 years of experience in the transportation industry, including both the maritime and energy sectors. Throughout his career, he has held several senior executive positions in the industry.

On top of that, Doyle ended the press release with, “I am looking forward to what comes next in my career.”

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Turkey Trivia—Universal Cargo’s Annual Thanksgiving Turkey Blog https://www.universalcargo.com/turkey-trivia-universal-cargos-annual-thanksgiving-turkey-blog/ https://www.universalcargo.com/turkey-trivia-universal-cargos-annual-thanksgiving-turkey-blog/#comments Thu, 23 Nov 2017 13:00:37 +0000 https://www.universalcargo.com/?p=8421 It’s back! The blog I know we’re all most thankful for… Universal Cargo’s Thanksgiving Turkey Blog! Yes, it’s become a Universal Cargo tradition that every year when Thanksgiving rolls around, I post a blog that brings together turkey and international shipping. Why? Because we post blogs on Thursdays and Thanksgiving always falls on a Thursday. […]

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Thanksgiving Turkey Trivia QuizIt’s back! The blog I know we’re all most thankful for… Universal Cargo’s Thanksgiving Turkey Blog!

Yes, it’s become a Universal Cargo tradition that every year when Thanksgiving rolls around, I post a blog that brings together turkey and international shipping. Why? Because we post blogs on Thursdays and Thanksgiving always falls on a Thursday.

Oh, why did the days on which we post blogs have to be Tuesdays and Thursdays?!

I actually thought I got rid of this blog a few years ago. I think I actually skipped the Universal Cargo Thanksgiving Turkey Blog altogether in 2014. However, in 2015, one of my bosses, whom I will not name (ahem, Raymond Rau), emailed me with, “We getting some Turkey Blog this year? My favorite seasonal blog topic! haha.”

Since my anxiety is far too high for me to take the email purely as sarcasm—which it had to be, right? Right?!—the Turkey Blog was reborn out of the ashes. Wait, that’s a phoenix. Turkey… Out of the oven? You know what, scratch that last part.

Last year, there was a new twist to the blog. A quiz! My family actually sat around trying to answer the questions about the bird traditionally eaten on this day and shipping factoids about the country that shares its name (when they are normally never interested in the international shipping blogs I write). Since that was actually entertaining, this year I’m bringing back the quiz with a combination of new and previously used questions.

So with no more adieu (as if anyone actually read all of this adieu anyway), here it is—dedicated to you, Ray (possibly the only person reading this?)—Universal Cargo’s Turkey Blog Turkey Quiz:

1. Even though the turkey population was hunted to around 30,000 birds in the 1900s, the current turkey population is what?

a) 100,000 birds

b) 3 million birds

c) 7 million birds

d) over 10 millions birds

The answer is c) according to Smithsonian.

2. Which founding father preferred the turkey to the bald eagle?

a) Benjamin Franklin

b) George Washington

c) John Quincy Adams

d) Alexander Hamilton

The answer is a). Benjamin Franklin wrote to his daughter about how the turkey is more courageous and respectable than the bald eagle, which we covered thoroughly in a previous Turkey Day blog. The other founding fathers didn’t leave such strong evidence concerning their feelings about the two birds other than the fact that the bald eagle was chosen as the national bird and the turkey was not.

3. The U.S. ranks where in Turkey’s trading partners in terms of export sales?

a) 1st

b) 2nd

c) 4th

d) 5th

The answer is d) according to World’s Top Exports.

4. How many subspecies of turkeys are there?

a) 2

b) 4

c) 6

d) 16

There are 6 according to Smithsonian, making the answer c), with Pilgrims hunting and eating the eastern wild turkey, M. gallopavo silvestris.

5. Which of the following CANNOT be used to conclude a turkey’s sex?

a) beard

b) tail feathers

c) droppings

d) talons

The answer is a). Many turkeys have special feathers, which look like a tuft of coarse hair, that are referred to as a beard. More often than not, guessing a bearded turkey to be male would be correct. However, the beard is not enough to conclude the sex of the bird. While it is more common for male turkeys to have beards, many female turkeys also have these special feathers.  According to reference.com:

“If one sees a beard on a turkey, it indicates that the turkey is probably a male — about 10 to 20 percent of female turkeys also grow beards. Regardless of whether the turkey is male or female, the beard can be up to 18 inches long with an average length of nine inches.”

It should be noted that beards on lady turkeys do not seem to be a turn off for male turkeys.

b) is incorrect because as is common with many birds, male turkeys have more brightly colored feathers than their female counterparts. On top of this, only male turkeys fan their tails according to reference.com.

“A turkey’s gender can be determined from its droppings–males produce spiral-shaped poop and females’ poop is shaped like the letter J,” says Smithsonian, making c) incorrect. That’s an appetizing thought before Thanksgiving dinner.

d) is incorrect because, like the men in any Western you can watch John Wayne or Clint Eastwood in, male turkeys have spurs. According to animals.mom.me, “As male turkeys become sexually mature at about 6 months of age, they begin developing long talons, one on the back of each leg. Known as spurs, these talons grow throughout the turkeys’ lives. Only male turkeys grow the spurs…”

6. How many U.S. dollars worth of product did Turkey ship around the globe in 2016?

a) $952.4 million

b) $6.3 billion

c) $142.6 billion

d) $752.6 billion

The answer is c) according to World’s Top Exports.

7. What is the Galloping Gobbler?

a) A mythic turkey that eats poorly behaved children on Thanksgiving Day.

b) A Thanksgiving Day football MVP award.

c) An annual Thanksgiving Day horse race.

d) Something I just made up for this quiz

The answer is b). FOX started giving out this annual award in 2002 to a Thanksgiving player of the game after traditional Thanksgiving Day games the company broadcasts.

8. The size of a male turkey’s ___________ factors in to whether a female turkey chooses him as a mate.

a) spurs

b) beard

c) giblets

d) snood

Don’t let that female turkey fool you. Size matters. The answer is d).

The Journal of Avian Biology published the results of studies that found the size of a male’s snood has a significant effect on his love life and competition with other gobblers:

… a male’s relative snood length, a character previously shown to be used by females in mate choice, is also predictive of the outcome of male-male competition. Complementary trials using artificial males confirmed that live males assess the snood length of potential competitors independent of other male characteristics.

What is a snood? Wikipedia describes it well:

In anatomical terms, the snood is an erectile, fleshy protuberance on the forehead of turkeys. Most of the time when the turkey is in a relaxed state, the snood is pale and 2-3 cm long. However, when the male begins strutting (the courtship display), the snood engorges with blood, becomes redder and elongates several centimeters, hanging well below the beak.

9. What is Turkey’s #1 Export (as of 2016)?

a) vehicles

b) gems & precious metals

c) clothing

d) machinery (including computers)

According to World’s Top Exports, the answer is a) vehicles. Gems & precious metals (Is that really just one export?) is #3. Clothing comes in at 7, and machinery (including computers) is #2.

10. How fast can a turkey run?

a) 5 miles per hour

b) 10 miles per hour

c) 15 miles per hour

d) 25 miles per hour

e) turkeys can’t run

Perhaps I cheated by putting an extra choice on this one, but since I’m creating the Turkey Blog Quiz, I can’t cheat. So deal with it. This wasn’t a trick question. Turkeys can run. The answer is d) according to Smithsonian.

Humans are still faster (though definitely not all). Google says humans’ top speed is 28 miles per hour, which I believe is the speed Usain Bolt was clocked at.

Okay, that’s enough. I hope you enjoyed this year’s Turkey Blog. Don’t get so distracted by turkey that you forget to be thankful for all the important things in your life like family, home… football.

Happy Thanksgiving!

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Tesla Unveils Electric Semi Truck https://www.universalcargo.com/tesla-unveils-electric-semi-truck/ https://www.universalcargo.com/tesla-unveils-electric-semi-truck/#respond Tue, 21 Nov 2017 21:27:59 +0000 https://www.universalcargo.com/?p=8417 Tesla unveiled two electric semi trucks Thursday (November 16th) as CEO Elon Musk stepped out of one of the prototypes and onto stage in front of what seemed to be an overly enthusiastic crowd. Even if the cheers did seem like a bit much for the unveiling of semi trucks, it is exciting to see […]

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https://www.youtube.com/watch?v=31xvmvAq8ms

Tesla unveiled two electric semi trucks Thursday (November 16th) as CEO Elon Musk stepped out of one of the prototypes and onto stage in front of what seemed to be an overly enthusiastic crowd.

Even if the cheers did seem like a bit much for the unveiling of semi trucks, it is exciting to see the leaps being made in truck technology, especially in terms of the electric truck.

According to Statista (using data from the EPA), freight trucks (that’s including medium and heavy duty trucks but not light trucks) accounted for 23% of transportation-related greenhouse gas in 2015. That’s 8% more than all U.S. aircraft, rail, ship, boat, and bus emissions combined.

The only transportation form creating more greenhouse gas emissions in the U.S., according to Statista, is cars. Coming in right behind freight trucks are light trucks, including those typically used for personal travel, at 18% of transportation-related greenhouse gas emissions.

In this era of evolving truck technology, it’s not just about electrification and sustainability; the comfort for truck seats and truck seat protectors is also vital. Drivers spend long hours on the road , and ergonomic seats with features like adjustable lumbar support and advanced cushioning are essential for their well-being and safety.

So, as we embrace electric trucks, let’s remember that comfortable truck seats are a crucial part of making the future of transportation both sustainable and driver-friendly.

Tesla’s new semi trucks won’t replace all those diesel freight trucks out there producing greenhouse gas emissions, but the emission-free vehicles are a step in that direction. In the context of Tesla’s semi trucks making strides toward reducing greenhouse gas emissions, it’s worth noting that Tesla also offers tesla accesories and technologies to make the transition to electric freight transportation more practical and efficient. For instance, Tesla provides robust charging infrastructure solutions tailored to support fleets of electric semi trucks, allowing for seamless integration into existing logistics operations. Additionally, Tesla’s innovative accessories, such as advanced driver-assistance systems and telematics tools, can help trucking companies optimize their operations and reduce costs while contributing to a more sustainable future for long-haul transportation.

Here are some highlights about the truck from Musk’s presentation:

  • 80,000 lbs max gross vehicle weight
  • 0-60 in 30 seconds (at max gross vehicle weight)
  • Goes 65 mph up hill (5% grade) compared to 45 mph from diesel trucks
  • 500 mile range between charging (at highway speed)
  • 4 electric motors
  • 0.36 drag coefficient (better than a “super car”)
  • Charges to 400 mile range in 30 minutes
  • Armor glass windows

Musk raved about the safety advances of Tesla’s new electric semi:

“Even if you’re in the truck and you have a medical emergency, the truck will stay in lane and gradually come to a halt and put on the emergencies. If it doesn’t hear a response from you it will actually call emergency services and get an ambulance. It is going to take care of you. It is going to take care of other cars. It is going to take care of pedestrians. This is a massive increase in safety.”

Those safety features include:

  • Automatic emergency braking
  • Automatic lane keeping
  • Forward collision warning

Shippers might worry that the buying of these trucks will be costly and hurt the bottom line through increased trucking costs. While I haven’t seen what the final price tag on the vehicle is, Musk emphasized the semi truck’s money saving value with these points:

  • 20% less expensive than a diesel truck per mile
  • When in convoy, 50% less expensive than diesel and cheaper than rail

“It’s economic suicide to use rail. This beats rail,” Tusk said.

On top of that, maintenance costs should be lower. Tusk was convinced that truckers would not ever need to change brake pads on these trucks. That’s a pretty incredible claim, but even bigger was when Tusk said:

“We are guaranteeing that this truck will not break down for a million miles.”

In the long run, such vehicles could mean cost savings on the trucking portion of shipping.

It’s not hard to see why Musk describes Tesla’s new electric semis as BAMF. For those of you who don’t know what that means, look up Dane Cook.

Of course, there are those who aren’t totally convinced.

inside Tesla's semi truck

Inside Tesla’s electric semi truck. Picture courtesy of Tesla

Ex-trucker Jonathon Ramsey wrote an article posted by MSN questioning the design of Tesla’s new semi, criticizing the centered driver’s seat, screens in the cab, lack of mirrors, and more while questioning Tesla’s claim that the truck couldn’t jackknife.

John Peterson wrote an article in Seeking Alpha saying Tesla’s electric semis “will almost certainly be shelved.”

Production is not slated for the semi until 2019, and Tesla has been known to fall behind on such production dates in the past. However, there are companies with enough confidence in Tesla and the new trucks to have already put in orders.

According to an Elizabeth Landrum written article in American Shipper:

… trucking companies J.B. Hunt Transport Services and Ryder System Inc., as well as retail giant Wal-Mart Stores Inc. have already placed orders for “multiple” Tesla Semis, while Canadian grocery giant Loblaw announced that it is purchasing 25 semis with a $5,000 deposit for each upfront, according to the Canadian Press.

Click Here for Free Freight Rate Pricing

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‘Make Shipping Sexy’ Part of Decarbonization Plan for International Shipping https://www.universalcargo.com/make-shipping-sexy-part-of-decarbonization-plan-for-international-shipping/ https://www.universalcargo.com/make-shipping-sexy-part-of-decarbonization-plan-for-international-shipping/#comments Thu, 16 Nov 2017 20:13:20 +0000 https://www.universalcargo.com/?p=8414 Sexy is not a word typically used to describe international shipping. Boring. Yeah, that’s a more typical description. Of course, boring isn’t exactly the type of description to attract the brightest and best minds to the industry, which is exactly what the international shipping industry needs to do to help it decarbonize. That’s why “make […]

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Container Ship EmissionsSexy is not a word typically used to describe international shipping. Boring. Yeah, that’s a more typical description.

Of course, boring isn’t exactly the type of description to attract the brightest and best minds to the industry, which is exactly what the international shipping industry needs to do to help it decarbonize.

That’s why “make shipping sexy” is one of the approaches a group of over 150 international shipping leaders have included in their requirements for an action plan to decarbonize the industry and “meet the high ambition climate change target of limiting global temperatures to 1.5°C, as indicated in the Paris Agreement.”

Ocean freight container shipping is actually the most carbon efficient way of transporting goods. However, about 90% of the world’s goods are transported through ocean shipping, which relies on fossil fuels, and this extremely high volume of ocean freight shipping means the industry accounts for about 3% of global emissions. To give perspective, international shipping’s carbon emissions are comparable to those of a large country.

Solving this problem is no easy feat. The industry is facing a complex and challenging problem with significant global impact. Working on the solution or solutions, as there is not one fix-all solution for removing carbon emissions from the industry, is far from boring and could even be considered noble.

There is no reason this line of work shouldn’t attract bright and ambitious people. Therefore, making international shipping’s boring perception sexier is a good idea.

Of course, if that was the only requirement for the action plan to decarbonize the industry, it would be a very disappointing plan indeed.

It was ahead of the 23rd session of the Conference of the Parties (COP 23) to the UN Convention on Climate Change (UNFCCC) that the international shipping leaders, strategists, and entrepreneurs organized the Ambition 1.5°C: Global Shipping’s Action Plan Summit to layout the groundwork for a comprehensive decarbonization plan to be developed.

In a press release yesterday (November 15th, 2017), the group shared the requirements the summit came up with that the comprehensive plan will have to cover:

The high ambition approaches and conclusions made by participants at the summit for the baseline requirements of a decarbonization Action Plan were:

  • We will build demonstrator vessels for the trialling of new technologies.
  • We will push for the urgent adoption of a science-based target for carbon emissions.
  • We will push for a much tighter, more robust Energy Efficiency Design Index (EEDI).
  • We will build a ‘coalition of the willing’ of those ready to collaborate across the industry in tackling the 1.5°C decarbonization challenge.
  • We will define ‘transparency’ in the industry and drive the adoption of that transparency in relation to emissions and operational data.
  • We will ensure that the decarbonization debate is broadened to involve all stakeholders, enhancing synergies and emission savings across the entire value chain.
  • We will develop more global forums based on focused working groups, including an Asia advocacy group.
  • We will ‘Make Shipping Sexy’ through communication strategies in order to:

    A. foster a multiplier ‘Ambition’ effect to encourage other actors to engage in decarbonization projects and;

    B. attract new talent to a modernizing industry.

Several commitments made at the summit will sit at the core of the decarbonization Action Plan:

  • To make a container ship available as a test/demonstrator vessel for low carbon and zero emissions technologies.
  • To urgently work towards the establishment of a CO2 levy to stimulate the uptake of clean technology and low carbon operations.
  • To convene a similar summit of the same structure and impact for retailers and local ship owners on a regional basis.
  • To continue the ‘technology toolbox’ discussion and build a robust performance verification process.
  • To find shipping companies who will go beyond legislation – and actively support them.
  • To create an innovation/engineering challenge prize to stimulate the bringing of technology and designs to market.
  • To develop a system that brings forward benefits of emissions saving operational changes and adoption of low carbon technology, prior to mandated emissions levies.
  • To change company operations to collaborate more intensively with equipment suppliers and to further embed more ambitious R&D into company structures.
  • To make a concerted effort to raise the profile of the shipping emissions issue with consumers.
  • To create a powerful platform for cross-stakeholder engagement.
  • To enhance collaboration between Think-Tanks and NGOs that are active in the sector and to pool resources.
  • To call for the greater collaboration of research & technology sharing with developing countries.

There’s also an official video about the Ambition 1.5°C: Shipping’s Global Action Plan:

YouTube Video

Click Here for Free Freight Rate Pricing

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Shippers’ Supply Chains Could Take Hit from Electronic Logging Device Mandate https://www.universalcargo.com/shippers-supply-chains-could-take-hit-from-electronic-logging-device-mandate/ https://www.universalcargo.com/shippers-supply-chains-could-take-hit-from-electronic-logging-device-mandate/#respond Tue, 14 Nov 2017 20:03:18 +0000 https://www.universalcargo.com/?p=8411 By December 18th, the trucking industry must use electronic logging devices. This electronic logging device (ELD) mandate will likely not only affect truckers but also significantly impact shippers. The ELD rule in and of itself is a good thing, promoting safety for truckers and other drivers on the road, as well as making “it easier and […]

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End of Truckers?By December 18th, the trucking industry must use electronic logging devices. This electronic logging device (ELD) mandate will likely not only affect truckers but also significantly impact shippers.

The ELD rule in and of itself is a good thing, promoting safety for truckers and other drivers on the road, as well as making “it easier and faster to accurately track, manage, and share records of duty status (RODS) data,” according to the Federal Motor Carrier Safety Administration (FMCSA) website’s overview on ELD.

For those unfamiliar with what an ELD is, FMCSA has you covered. “An ELD synchronizes with a vehicle engine to automatically record driving time, for easier, more accurate hours of service (HOS) recording.”

What could be bad about this?

Here’s the problem. There are a great many truckers who falsify their logs in order to drive more. Falsifying logs will be much harder to do with the ELD rule in place, potentially having a large initial impact on the industry as many truckers and trucking companies will have to change their practices.

This could create a couple negative impacts on shippers’ supply chains:

  1. Decreased trucking capacity
  2. Increased trucking costs

William B. Cassidy wrote a great article in the Journal of Commerce (JOC) titled Shippers warned ELD mandate will crimp supply chains, in which he quotes John Seidl, a transportation consultant and former FMCSA trucking investigator as saying:

“I think false logs have been an epidemic, from the 1930s until right now, and they’re going to go away.”

But before going away, false logs appear to have increased as the article goes on to say that the FMCSA reported false log violations rose by 11.5% in fiscal year 2017 after a 9.6% increase in 2016 and that the amount of truckers taken off the roads in fiscal 2017 increased by 3,900 drivers to 30,274.

The industry has already experienced a trucker shortage, and more truckers could exit the industry with the ELD rule. Many truckers struggle to make a living, which is a big reason why there is such a strong temptation to falsify logs and do more driving than the law allows.

Fewer drivers would certainly decrease capacity, but capacity will likely take its biggest hit from the decreased hours truckers will be able to spend on the road.

Cassidy quoting Seidl, who says falsifying logs is more widespread than many think, explains it nicely in the JOC article:

“Would you stay at a truck stop for 10 hours if the only difference was a piece of paper and a pencil?” he asked. “Let’s say no. I’m going to stay there 8 hours. That gives me two additional hours of driving. Two hours a day, five days a week, that’s 10 hours a week.”

Multiply that by 10 drivers, and that company is picking up an additional 100 hours a week. “Last time I checked, that’s [the equivalent of] a driver and a half,” Seidl. That 100 hours is also the equivalent of a 14 percent productivity boost that 10-truck carrier will lose with ELDs.

Because it is unknown how many truckers and trucking companies are actually falsifying logs, it’s impossible to know how big of a capacity impact the ELD mandate will have on trucking.

By the laws of supply and demand, decreased capacity should result in increased cost for shippers in trucking their goods. However, there are other factors that would also increase those costs.

AmWINS Group posted an article showing 8 areas in which the ELD mandate will impact trucking. Among them are compliance costs and operational costs. Any cost increases trucking companies experience will, of course, get passed on to their customers, the shippers.

Hiring is another area AmWINS highlighted. “…there will be many drivers who are not comfortable with ELDs because of concerns regarding privacy and other issues, and some will leave the industry as a result.” Hiring, and truck buying, may also increase as companies try to regain lost capacity. With the trucker shortage already mentioned earlier, hiring could be a long process that also comes with costs trucking companies will look to make up for in the prices they charge shippers.

Shippers should be prepared for the likelihood that the ELD mandate will affect their supply chain and costs. But shippers should also know that there’s a way they can help this situation.

Often, truckers are held up by shippers in the process of loading. Shippers being prepared for the arrival, loading, and unloading of trucks helps keep the supply chain moving faster. This means having teams ready for live loading or unloading of trucks as well properly packing containers ahead of time that will be placed on trucks’ chassis and being prepared to receive shipping containers trucks are dropping.

Here are a couple blogs on container loading that can help in that area:

Container Loading Guidelines

Proper Container Loading Practices and Container Packing Guidelines

Click Here for Free Freight Rate Pricing

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Early Contract Extension May Happen with Dockworkers at East & Gulf Coast Ports https://www.universalcargo.com/early-contract-extension-may-happen-with-dockworkers-at-east-gulf-coast-ports/ https://www.universalcargo.com/early-contract-extension-may-happen-with-dockworkers-at-east-gulf-coast-ports/#comments Thu, 09 Nov 2017 19:37:50 +0000 https://www.universalcargo.com/?p=8410 Something has changed at U.S. ports. And it’s a good thing for shippers. The International Longshore & Warehouse Union (ILWU) agreed to an early contract extension in August that brings port stability to the West Coast ports through July of 2022, and now the International Longshoremen’s Association (ILA) may do the same thing at the […]

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YouTube Video

Port of Virginia

Port of Virginia

Something has changed at U.S. ports. And it’s a good thing for shippers.

The International Longshore & Warehouse Union (ILWU) agreed to an early contract extension in August that brings port stability to the West Coast ports through July of 2022, and now the International Longshoremen’s Association (ILA) may do the same thing at the East and Gulf Coast ports.

What’s amazing, is this would never happen traditionally.

There’s an unofficial (but possibly official) policy of the dockworkers unions not to extend contracts or agree to new ones before the previous contract has expired.

This practice preserves the unions’ most powerful negotiating weapons against employers at the ports: strikes, threat of strikes, and labor slowdowns.

Of course, the problem with strikes and slowdowns at the ports is that they cause importers, exporters, and the economy as a whole to suffer.

Luckily, we haven’t actually seen a full scale strike at the East and Gulf Coast ports in decades. However, we were in a full scale strike watch back at the end of 2012 leading into 2013 when one was scheduled and the contract negotiations between the ILA and United States Maritime Alliance (USMX) needed mediation to get completed.

Things have been worse recently on the West Coast. During the contentious 2014-15 contract negotiations, labor slowdowns and mini lockouts left export produce rotting on the docks and kept import goods from hitting shelves during the holiday shopping season. This caused many shippers to divert goods from the West Coast to East and Gulf Coast ports.

Some of that market share reverted back to the West Coast; however, East and Gulf Coast ports have retained some market gains. But with the ILWU agreeing to an early contract extension and the current ILA contract expiration coming up next year, the East and Gulf Coast ports are in danger of losing their gains.

That’s probably why we’re seeing a story from the Journal of Commerce (JOC) posted yesterday (November 8th) headlining ILA, USMX to discuss multiyear contract extension. Senior Editor Joseph Bonney writes:

The International Longshoremen’s Association (ILA) and its East and Gulf coast employers plan to meet in early December to discuss a contract extension that could stretch beyond the five-year deal that West Coast dockworkers recently approved.

ILA president Harold Daggett has summoned the union’s wage scale committee, which comprises more than 150 local delegates, to meet with USMX representatives Dec. 5 and 6 in Hollywood, Florida, to discuss contract issues.

Union and management officials have been tight-lipped but reportedly are discussing a contract extension that would run as long as six years, to September 2024.

In 2015, while financial losses shippers suffered during the contentious ILWU contract negotiations were still fresh, the ILA and USMX actually announced plans to open early discussions on a long-term contract.

I wanted to believe such early contract negotiations would happen, but I was skeptical that it might just be a move to gain more market share from shippers feeling betrayed by the congestion on West Coast ports after the ILWU and Pacific Maritime Association (PMA) pledged to keep cargo moving during contract negotiations.

It seemed I was right to be skeptical. A couple years passed without any forward movement on negotiations.

Then a surprise ILA labor slowdown hit the Port of Charleston in response to an automated gate system and it looked like we would see a contentious and costly fight over automation during contract negotiations next year when the current contract expires instead of a smooth or early transition to a new or extended contract.

That makes this news of movement toward an extension before the current contract expires even more exciting.

Perhaps instead of an isolated event of an early extension between the ILWU and PMA, such forward thinking could become the new norm. That would be much better than the traditional trend of costly and contentious negotiations every time a dockworkers union contract expires at the ports.

Of course, nothing happens until it happens, don’t count your chickens until they’ve hatched, and other such cliché but wise sayings apply here. Automation and other dockworker contract concerns still exist and many will not want to give up the leverage the unions gain by allowing contracts to expire.

Shippers should be encouraged by this step toward an early contract extension but temper hopes until an extended or new contract actually does happen at the East and Gulf Ports.

Click Here for Free Freight Rate Pricing

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Which Carriers Will Be the Final 3 to Survive? https://www.universalcargo.com/which-carriers-will-be-the-final-3-to-survive/ https://www.universalcargo.com/which-carriers-will-be-the-final-3-to-survive/#comments Tue, 07 Nov 2017 23:50:20 +0000 https://www.universalcargo.com/?p=8404 Last month, Maersk said it expects carrier competition to shrink to only three global companies. It’s possible that Maersk is wrong, but it’s hard not to take the words and predictions of the clear leader in international shipping seriously. Naturally, that begs the question: Which carriers will be the final three? For the last few […]

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Last month, Maersk said it expects carrier competition to shrink to only three global companies.

It’s possible that Maersk is wrong, but it’s hard not to take the words and predictions of the clear leader in international shipping seriously. Naturally, that begs the question:

Which carriers will be the final three?

For the last few years, we’ve been watching competition shrink between carriers as shipping lines have been swallowed up by buyouts, mergers, and even bankruptcy with the remaining carriers banding together in alliances.

All it takes is one look at Universal Cargo’s Carrier Craziness Bracket to see just how intensely insane carrier competition has become.

Carrier Craziness Bracket

It’s hard to imagine that when the bracket was first created, it was a clean chart of the carriers dividing into alliances.

If Maersk is right, there are a lot of international shipping company names on the above bracket that will disappear.

So let’s take a stab at which carriers are the most likely to be the final three. This really does feel like March Madness, which is what inspired the Carrier Craziness Bracket in the first place.

Maersk is the obvious top choice to survive.

All the way back in 2011, we posted a blog with a headline that read, “Maersk to Outlast Competitors in Face of Lower Freight Rates?

The gist of that article was overcapacity is creating lower freight rates and Maersk said it was prepared to outlast its competitors, who weren’t as well prepared to survive the plummeting profits. We called Maersk the big dog of international shipping that likely would survive the dog eat dog world of international shipping that was developing.

As the years past since 2011, overcapacity remained and, as mentioned, quite a few carriers have been eaten with Maersk remaining the clear leader in the industry.

There’s no reason to think Maersk’s status will change, barring some catastrophe. According to a Mike Wackett penned article in the Loadstar, Maersk has even managed to stay in profit despite the huge cyber attack that hit the world’s largest carrier by capacity in June.

So we have Maersk in the final three. That only leaves two spots.

Just like in March Madness, it’s easier to pick carriers most likely to get eliminated than the ones likely to make it all the way. For example, if this was March Madness, Yang Ming, with all its recent financial struggles, would certainly be a 16 seed.

There are plenty who worry about Yang Ming being the next Hanjin, forcing the carrier to reassure customers about its financial recovery. If carrier competition shrinks all the way down to three global companies, it’s hard to imagine Yang Ming being one of them.

However, there are a number of companies at the top that it’s hard to imagine won’t be in the picture of ocean shipping’s carrier competition pool.

That being said, also like in March Madness, I see four one seeds among the carriers at the top. After Maersk, the number one overall seed, are the Mediterranean Shipping Company (MSC), Ocean Network Express (ONE), and China Cosco Shipping Corporation Limited (COSCO) as the other one seeds.

Predicting only three global companies in the international shipping industry means one of these one seeds must go out of business, merge into one of the others, get acquired, or downsize to a domestic shipping line.

I’m picking COSCO as one of the final three.

It’s hard to imagine China allowing its shipping company, which it strengthened by merging the country’s two large shipping companies China Cosco Group and China Shipping Group, to fall out of the picture.

On top of that, Mark Edward Nero just reported in the Loadstar that after its acquisition of Orient Overseas International Ltd. (OOCL), COSCO is set to become the world’s third largest carrier by capacity:

Chinese government-owned ocean carrier COSCO Shipping could hit a total fleet capacity of 3 million TEUs by the end of 2018, which would vault it into the third spot in the global liner rankings, surpassing France’s CMA CGM, according to a new report by container analyst Alphaliner.

I didn’t even list CMA CGM, currently the world’s third largest carrier by capacity, as one of the four one seeds. CMA CGM is a strong two seed. Despite its size, I think it will end up with the short end of the stick if only three remain just like it did when the P3 Network was blocked by China.

The P3 Network was set to be a huge alliance between the three largest carriers in the world, Maersk, MSC, and CMA CGM. CMA CGM ended up with that short end of the stick as Maersk and MSC formed the 2M Alliance when China refused to approve the P3, forcing CMA CGM to scramble to find new alliances.

MSC’s alliance with Maersk, along with its size gives it an edge over CMA CGM. But does MSC also have an edge over ONE?

ONE is the entity that Japan’s big three international shipping companies, Kawasaki Kisen Kaisha, Ltd. (K Line), Mitsui O.S.K. Lines, Ltd. (MOL), and Nippon Yusen Kabushiki Kaisha (NYK), are merging into.

Originally, I was going to make ONE one of the final three because of the financial surge and stock increases K Line, MOL, and NYK have seen since the announced merger and Japan being protective of it like China is of COSCO, with MSC perhaps eventually becoming one with Maersk through a buyout or merger.

However, I think COSCO has the stronger chance of being the final global carrier coming out of Asia, while ONE could become more of a domestic carrier, handling Japan’s shipping needs.

That makes my projection of the final three:

  • Maersk
  • MSC
  • COSCO

My hope is the industry does not see carrier competition shrink to that level. And I certainly wouldn’t think more of my opinion than the experts at Maersk, but I would think it more likely for the competition pool to shrink to four or five rather than three global companies.

What are your thoughts? Do you agree? Disagree?

Which carriers would you pick as the final three standing?

Let us know in the comments section below.

Click Here for Free Freight Rate Pricing

 

 

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Woman Traveled World Inside Shipping Container – Universal Bizargo https://www.universalcargo.com/woman-traveled-world-inside-shipping-container-universal-bizargo/ https://www.universalcargo.com/woman-traveled-world-inside-shipping-container-universal-bizargo/#respond Thu, 02 Nov 2017 18:14:46 +0000 https://www.universalcargo.com/?p=8401 When you see a story about a woman who spent years traveling the world inside a shipping container, you know it can only mean one thing: Universal Bizargo! That’s right, Universal Cargo’s blog series that highlights the weird stories in international shipping. The woman inside the shipping container was not some vagabond or stowaway. She […]

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Universal Bizargo shipping container

Universal Bizargo shipping container

When you see a story about a woman who spent years traveling the world inside a shipping container, you know it can only mean one thing: Universal Bizargo!

That’s right, Universal Cargo’s blog series that highlights the weird stories in international shipping.

The woman inside the shipping container was not some vagabond or stowaway. She didn’t stay in that shipping container because she had nowhere else to go. It was all for science! Science and mold-free cocoa beans.

Quartz Media published an interview by Cassie Werber and Lila MacLellan with Barbara Pratt, the scientist inside a shipping container. Here’s the quick background given at the beginning of the Quartz post:

Shortly after graduating from Cornell University, Barbara Pratt was hired in 1977 by shipping company Sea-Land (now Maersk) to build a laboratory inside a standard shipping container. For years she traveled around the world inside of it, figuring out how best to ensure that perishable goods remained fresh on long journeys. Today, Pratt directs refrigerated technical services for Maersk North America.

Seeing Maersk (or Sea-Land at the time) putting serious resources into advances in shipping makes it no surprise the shipping company is the leader in international shipping that it is today.

However, it is Maersk’s director of refrigerated technical services who is really the focus here.

Barbara Pratt in Shipping Container Lab courtesy of Maersk

Barbara Pratt in Shipping Container Lab courtesy of Maersk

Spending years traveling the world inside a shipping container, as Pratt did, is serious dedication to the international shipping of perishable goods. Most would probably think living inside a shipping container while it’s being shipped around the world is a strange way to live which usually is not a fun way to live. And especially, when the weather is suitable for travel and all outdoor events, it is better to go ziplining to enjoy the trip to the fullest.

But the shipping container was a laboratory, office, and bedroom all in one for Pratt. She describes its setup in the interview:

“The laboratory we built was three different compartments: It had what we called an engine room where we had a diesel fuel tank, a diesel generator for power, a water tank, a hot water heater… We had a laboratory section which was in the middle which had your typical equipment but it also had things like a gas chromatograph, a computer, a fume hood, and a microscope—those types of things. And then we had an office section which had bunk beds in it, and a couple of desks and cabinets, a microwave, and a refrigerator.”

In the 70’s, computers were not what they are today. Technology has evolved to the point of being able to monitor containers and their interior temperatures remotely. However, decades ago, it required great sacrifice from someone like Pratt to make the gains in international shipping that the rest of us enjoy the fruits today. Literally.

Over the years, Pratt worked on extending the shelf life and transit time of perishable products like pineapples, watermelons, tomatoes, peppers, and bananas.

The very first project Pratt undertook in her shipping container laboratory home was finding a way to keep cocoa beans from becoming moldy when shipped from the Dominican Republic to the United States.

“We ran a number of tests, and the end result was we came up with a new container design which ultimately was patented, which provided some paths of ventilation, and helped improve the out-turn of the beans.”

The next time you eat a piece of fruit or vegetable that is out of season where you live, take a moment to think about the weird story of Barbara Pratt living inside a shipping container to make that possible.

Her work brought us to the place we are now with reefer containers controlling the temperature of goods transported inside.

You can read more from her interview at Quartz.

And you can contact us here at Universal Cargo if you need to import or export refrigerated or perishable goods.

Click Here for Free Freight Rate Pricing

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Universal Cargo Wins Best Freight Forwarder 2017 Award from TFG https://www.universalcargo.com/universal-cargo-wins-best-freight-forwarder-2017-award-from-tfg/ https://www.universalcargo.com/universal-cargo-wins-best-freight-forwarder-2017-award-from-tfg/#respond Wed, 01 Nov 2017 16:28:43 +0000 https://www.universalcargo.com/?p=8335 Trade Finance Global (TFG) just announced its 2017 International Trade Awards, recognizing innovative practice in international trade. The 2017 TFG International Trade Award for Best Freight Forwarder went to Universal Cargo. In describing why Universal Cargo was selected as Best Freight Forwarder, TFG said, “Universal Cargo is helping grow the industry through awareness, creating excellent content for […]

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International-Trade-Awards-Winner-Best Freight ForwarderTrade Finance Global (TFG) just announced its 2017 International Trade Awards, recognizing innovative practice in international trade.

The 2017 TFG International Trade Award for Best Freight Forwarder went to Universal Cargo.

In describing why Universal Cargo was selected as Best Freight Forwarder, TFG said, “Universal Cargo is helping grow the industry through awareness, creating excellent content for those looking for freight forwarding services, and a huge growth in guides and videos on their site.”

In a press release, TFG gave background on the awards and how the selections are made:

 

With the recently announced $1.5tn trade finance gap, primarily due to lack of SME finance and trade financing in Asian countries, the international trade awards looked at those stepping in to bridge and address this shortfall, along with ancillary products and services helping businesses trade internationally.

Each category of the TFG International Trade Awards was judged by a panel of professional judges and 2017 was the biggest awards to date, choosing from over 100 companies across 5 markets.

 

 

“We are extremely thankful to receive this honor,” Universal Cargo CEO Devin Burke said upon receiving the award. “We are thrilled and feel very grateful to be recognized as the Best Freight Forwarder of 2017 by TFG. Our heartfelt thanks also go out to our amazing staff of super smart and talented people that we get to work with!”

More about the International Trade Awards:

The International Trade Awards are totally independent, judged by a panel of leading experts.

The TFG Awards are presented each year, recognising businesses in the structured trade and commodity finance space, as well invoice and trade finance, and those ancillary services facilitating trade.

Tradefinanceglobal.com editor James Sinclair, said: “2017 has been a tough year. With Brexit causing nervousness in markets and amongst businesses, and SMEs looking to drive efficiencies and grow the bottom line; trading overseas has been far from easy.”

“We were proud to nominate fintechs and disruptors who are using technology to accelerate the use of paperless trade, automation and eKYC. It’s been a pleasure for the judging panel reading independent reviews, talking to experts in the sector, and reviewing websites.”

TFG is the leading authority and information hub for businesses seeking trade finance, export finance, and supply chain finance.

Here is the full list of the 2017 TFG International Trade Awards and winners:

Best Trade Finance Company – Ultimate Finance (Winner), Woodsford TradeBridge (Runner Up)
Best Supply Chain Financier – Greensill Capital (Winner)
Best Alternative Financier – Ebury (Winner)
Best Business Finance Provider, Europe – Funding Circle (Winner), Working Capital Partners (Runner Up)
Best Business Finance Provider, Asia – Asian Development Bank (Winner)
Best Business Finance Provider, Australia – Scottish Pacific (Winner)
Best Business Finance Provider, North America – BlueVine (Winner)
Best Business Finance Provider, South America – BBVA (Winner)
Best Freight Forwarder – Universal Cargo (Winner)
Best Trade Finance Recruiter – Johnson Associates (Winner)
Best Foreign Exchange Provider – Smart Currency Business (Winner)
Innovator in Global Trade – TradeIX (Winner)
Disruptor in Mobile Banking – ipagoo (Winner), Atom (Runner Up)

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High Point Party Was a Crazy Good Time & Smash Hit! https://www.universalcargo.com/high-point-party-was-a-crazy-good-time-smash-hit/ https://www.universalcargo.com/high-point-party-was-a-crazy-good-time-smash-hit/#respond Tue, 31 Oct 2017 19:30:04 +0000 https://www.universalcargo.com/?p=8333 “People were saying it was the best High Point party they’ve ever been to,” Universal Cargo CEO Devin Burke said after Classy Art’s Secret Garden party. Burke should know; no one gets out there and talks to people more than Universal Cargo’s CEO. We, here at Universal Cargo, were happy to sponsor this High Point […]

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Devin Burke at High Point Market

Devin Burke gives quick speech High Point party

“People were saying it was the best High Point party they’ve ever been to,” Universal Cargo CEO Devin Burke said after Classy Art’s Secret Garden party.

Burke should know; no one gets out there and talks to people more than Universal Cargo’s CEO.

We, here at Universal Cargo, were happy to sponsor this High Point market kick-off party in appreciation of the customers and friends for whom we import furniture.

And, oh, was this party packed with the furniture industry’s finest, all having a great time, eating hors d’oeuvres, drinking cocktails, dancing to the live music, winning prizes, handling snakes–Wait. What?

Don’t worry. No one had to hold a snake who didn’t want to.

The night was full of surprises. A costumed woman mingling in the crowd with giant snakes was not nearly the biggest.

Classy Art definitely had a vision for the party and as Burke said, “Classy Art’s vision was realized.”

Secret Garden Hight Point Market RaffleThe party had spectacle, opportunity to mingle, but also places where people could sit and have conversations with colleagues and friends.

Of course, it was hard to resist getting back out there where all the action was happening.

One very popular portion of the party was the raffle.

“Raffle idea was good idea and the highlight of the party,” Burke said. “A lot of customers showed up with 2 of our customers winning prizes (1 from each raffle).”

You can talk to people who were at the party like Universal Cargo Account Executive and Operations Manager Kelly Liu and Tim Hu who will tell you that it was “really good” and “pretty cool”; however, to get an idea of how much fun people were having, it would be better to check out the pictures below.

 

High Point Secret Garden Party

Thank you to everyone who was at the party to make it such a huge success!

Click Here for Free Freight Rate Pricing

 

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3 Changes Coming to International Shipping in the Near Future https://www.universalcargo.com/3-changes-coming-to-international-shipping-in-the-near-future/ https://www.universalcargo.com/3-changes-coming-to-international-shipping-in-the-near-future/#comments Thu, 26 Oct 2017 20:33:44 +0000 https://www.universalcargo.com/?p=8331 In light of digital technologies, big data, and the Internet of Things–yes, the 4th Industrial Revolution–the global management consulting firm McKinsey & Company imagined what the international shipping industry will be like 50 years in the future. McKinsey compared the effects the “Digital Age” will have on container shipping to the effect container shipping had on […]

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Digital Age or 4IR international shippingIn light of digital technologies, big data, and the Internet of Things–yes, the 4th Industrial Revolution–the global management consulting firm McKinsey & Company imagined what the international shipping industry will be like 50 years in the future.

McKinsey compared the effects the “Digital Age” will have on container shipping to the effect container shipping had on the industry as a whole. “When McKinsey investigated containerization in 1967, we found that industry players would have to rethink everything. Is it time to rethink everything again?”

Inspired by McKinsey’s post on the subject by Steve Saxon and Matt Stone, this blog will not only share highlights of their vision for what the industry will look like in 50 years, but my own thoughts on those changes as well.

While we’re at it, why not do this in list fashion. So, without further ado, here are 3 changes coming to the international shipping industry in the near future:

1. Automation

Automation is perhaps the most obvious thing happening in shipping with the Fourth Industrial Revolution (4IR) or Digital Age.

What McKinsey says about automation in international shipping in fifty years is:

Autonomous 50,000-TEU ships will plow the seas—perhaps alongside modular, dronelike floating containers—and the volume of container trade will be two to five times what it is today.

Automated ships are on their way to ocean freight shipping for sure. Drone-like floating containers seem very likely in that they’ll be easier to design and manufacture than whole automated ships. However, they could also present more complications because of the sheer number of such “ocean drones” it would take to transport the amount of cargo moved by one container ship and perhaps more susceptible to loss.

I don’t just see automation happening on the ocean routes in the digital age; automation will take place in all legs of cargo shipping. Complete automation, despite unions’ fight against it, will take over ports. Automated trucks and rail will distribute containers inland, and drone deliveries will eventually become common place. Welcome to the sci-fi world we saw in 80’s and 90’s movies.

McKinsey actually brings this up too with:

A fully autonomous transport chain will extend from loading, stowage, and sailing to unloading directly onto autonomous trains and trucks, with last-mile deliveries by drones.

2. Shipping Monopolies

Maersk’s COO Soren Toft said Maersk expects competition in ocean freight international shipping to be whittled down to three global companies.

McKinsey certainly appears to believe Maersk:

After multiple value-destroying overcapacity and consolidation cycles, three or four major container-shipping companies might emerge: digitally enabled independents with a strong customer orientation and innovative commercial practices, or small subsidiaries of tech giants blending the digital and the physical.

The way ocean carrier competition has been shrinking over the last few years, there’s no reason not to believe Maersk and McKinsey to be correct about carrier competition.

I’ve been bringing up shrinking carrier competition for years in this blog.

The biggest problem with so few companies handling international shipping is that they will have virtual monopolies that shippers who import and export goods will have to deal with.

I don’t believe that competition shrinking will be limited to ocean carriers. Competition will also shrink between ports that goods are imported and exported through.

Because carriers are working together in alliances, ports will be allowed to work together in alliances to level the negotiation table. In fact, we’ve already seen the beginning of the rise of port alliances.

It won’t be much of a stretch to go from port alliances to single companies controlling multiple ports. In fact, the mother corporations that own the carriers may also end up controlling the ports, as terminals at ports are already owned and operated by such companies.

When it comes to truck and rail, the companies first able to release large scale automation will likely corner the market like a winning race car driver corners the turns and edges out his or her competitors.

3. Freight Forwarders Will Morph

I actually diverge a bit with McKinsey on this one. McKinsey thinks freight forwarders will go the way of the dodo bird:

Freight forwarding as a stand-alone business will be virtually extinct, since digital interactions will reduce the need for intermediaries. All winners, closely connected through data ecosystems, will have fully digitized customer interactions and operating systems.

I don’t think freight forwarders will be completely removed from the shipping process. I do, however, think the role of the freight forwarder will be very different in the future.

I expect many, many freight forwarders will go out of business, failing to adapt to the digital age or 4IR. However, those that are smarter than the dodo will excel in a more advisory and compliance role in the industry.

International shipping is complicated by fluctuating laws from all the different countries and governing authorities through whose territories goods move. Someone will be needed to make sure shippers are in compliance with the complexity of these laws, and I think that will become the biggest focus of freight forwarders.

McKinsey seems to think that despite the shrinking competition of ocean carriers, the remaining shipping companies will have improved customer service.

Perhaps that is true, but usually customer service suffers as competition shrinks. Freight forwarders will likely still be needed to create the customer service, which carriers have never been good at, between the carriers and shippers.

Along with making sure shippers meet the requirements of international and national laws, freight forwarders will also assist shippers in meeting the physical and legal requirements of carriers’ digital platforms.

What Do You See in International Shipping’s Future?

We’d love to hear what you think the future has in store for the international shipping industry.

Perhaps you disagree with how the Digital Age or 4IR will affect shipping.

Share your thoughts in the comments section below.

Click Here for Free Freight Rate Pricing

 

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What’s Happening with Ocean Freight Rates? https://www.universalcargo.com/whats-happening-with-ocean-freight-rates/ https://www.universalcargo.com/whats-happening-with-ocean-freight-rates/#comments Tue, 24 Oct 2017 19:57:59 +0000 https://www.universalcargo.com/?p=8328 What kind of freight rates are shippers getting right now on their ocean shipping? The last time we posted on freight rates was in August with a blog titled Freight Rate Wars: Carriers Strike Back. I might have gotten a little carried away with the Star Wars theme, even creating a Star Wars scroll for […]

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ocean freight ratesWhat kind of freight rates are shippers getting right now on their ocean shipping?

The last time we posted on freight rates was in August with a blog titled Freight Rate Wars: Carriers Strike Back.

I might have gotten a little carried away with the Star Wars theme, even creating a Star Wars scroll for that blog, but the gist was that carriers were finally managing a turnaround from the low, even record low, freight rates seen during the previous few years.

Carriers finally appeared to be managing to make general rate increases (GRI) and peak season surcharges (PSS) stick. That’s something they’ve failed to do in recent times as overcapacity and carrier rate wars have undermined freight rate pricing.

Have the carriers maintained that success through the peak season? Or are we already seeing the return of the falling freight rates?

Unfortunately for carriers, even with the increased shipping activities of the peak season and improved capacity management from carrier alliances, they have not managed to keep capacity from outstripping demand. Thus, freight rates have been slipping some.

Despite rates decreasing some since August, last week’s drop was small enough to make it appear like rates are stabilizing.

Hailey Desormeaux reported in American Shipper on Friday:

 Spot container rates on major trades from Shanghai to Europe, the Mediterranean, and the U.S. West Coast and East Coast have all declined since last week, according to the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index (SCFI).

Since last week, rates from Shanghai to Europe slipped 0.7 percent… while rates from Shanghai to the Mediterranean fell 0.9 percent…

Meanwhile, rates from Shanghai to the U.S. West Coast slipped 0.1 percent since last week… while rates from Shanghai to the U.S. East Coast fell 2.6 percent…

For most of our readers, those Shanghai to U.S. numbers are the most important ones written about by Desormeaux. The 2.6% freight rate decline to the U.S. East Coast is the most significant change of all the freight rate numbers, as the rest dropped less than 1% and Shanghai to U.S. West Coast barely changed at all.

Even as rate declines are slowing, we’re on the verge of another push from carriers to bring freight rates back up again.

Gavin van Marle reports in the Loadstar that carriers are launching new freight all kinds (FAK) rates and GRI in November.

Most of the rate increases van Marle writes about in his article are on Asia to Europe trade; however, included in the rate hikes is a GRI of $560 per TEU and $700 per FEU from Hapag-Lloyd on transpacific shipping. That GRI is scheduled to begin on November 15th.

I would expect to see similar GRI from other carriers hitting Asia to U.S. trade next month. When one carrier announces a GRI, others tend to quickly follow suit. Announced GRI is one way carriers have gotten around anti-collusion laws.

Hapag-Lloyd and other carriers who increase rates in November will have to keep an eye out for another carrier undercutting their GRI.

As per usual, it will be the carriers’ challenge to maintain such freight rate increases. And it is unlikely the full GRI will be maintained. Carriers have not by any means solved their overcapacity problem, so a downward pressure still remains on freight rates.

Freight rates in international shipping are always volatile, but at Universal Cargo, we’re always happy to give you some insight into what’s happening with freight rates.

Click Here for Free Freight Rate Pricing

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Maersk Expects Carrier Competition to Shrink to 3 Global Companies https://www.universalcargo.com/maersk-expects-carrier-competition-to-shrink-to-3-global-companies/ https://www.universalcargo.com/maersk-expects-carrier-competition-to-shrink-to-3-global-companies/#comments Thu, 19 Oct 2017 18:03:01 +0000 https://www.universalcargo.com/?p=8326 Maersk is the largest carrier by capacity in international shipping and clearly the leader of the industry. We’ve talked about this before in Universal Cargo’s blog: The moves Maersk makes are copied by the other ocean freight carriers. When Maersk buys megaships, the industry buys megaships. When Maersk forges an alliance, the whole industry jumps […]

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YouTube Video

Maersk Cargo Ship

Maersk Cargo Ship pic: Maersk Line

Maersk is the largest carrier by capacity in international shipping and clearly the leader of the industry.

We’ve talked about this before in Universal Cargo’s blog: The moves Maersk makes are copied by the other ocean freight carriers.

When Maersk buys megaships, the industry buys megaships. When Maersk forges an alliance, the whole industry jumps into alliances. When Maersk shifts focus to acquiring smaller competitors… Well, carriers able to do so follow suit.

The ones that are unable to acquire competitors may be the carriers that are acquired.

This is all to say when Maersk says something, the industry listens. And Maersk just said something most carriers probably don’t want to hear. It could mean those carriers won’t be around much longer.

Mark Edward Nero reported in American Shipper:

During a recent media briefing, Maersk Chief Operating Officer Soren Toft said that as growth in the shipping industry slows, merger and acquisition activity may begin to pick up again, according to a report from Singapore news outlet the Straits Times.

“We expect that within – I cannot give a timeframe on it – that you will see maybe a handful of shipping companies, a little bit similar to what you see in the courier express and parcel industry, where there’re really, you know, three global companies,” Toft was quoted as saying.

Just three global companies!

And even though Toft “cannot” put a timeframe on carrier competition shrinking to this level, it sure sounded like he wanted to. Like Maersk expects this to happen relatively quickly.

We’ve seen carriers struggle financially over the last several years, resulting in acquisitions, mergers, Hanjin’s collapse, and carrier alliances.

The desperation of carriers to join alliances in order to reduce costs and simply survive has made the industry dominated by just three alliances. Of course, Maersk isn’t saying three alliances will dominate shipping, but just three companies.

For years, I’ve been writing in this blog that overcapacity, low freight rates, and carrier financial struggles will eventually lead to such a reduced level of competition in ocean shipping that it would be bad for shippers in terms of freight rate pricing.

Because of this, the words of Maersk’s COO don’t come as that big of a surprise. All you have to do is read some of the Universal Cargo blogs over several years to see plenty of evidence that the industry is well on its way to the level of carrier competition Maersk predicts.

In fact, just reading the blog headlines below (and there are even more than these) is enough to see carriers are struggling and competition is majorly shrinking in ocean shipping. Of course, you can also click on the titles to read the corresponding blogs.

While only three global ocean carriers dominating international shipping is a very small number, it is more likely a question of when that will be the case than if that will become the case.

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Is International Shipping About to Be Disrupted by the 4th Industrial Revolution? https://www.universalcargo.com/is-international-shipping-about-to-be-disrupted-by-the-4th-industrial-revolution/ https://www.universalcargo.com/is-international-shipping-about-to-be-disrupted-by-the-4th-industrial-revolution/#respond Tue, 17 Oct 2017 22:01:28 +0000 https://www.universalcargo.com/?p=8320 Big, bold letters reading, “Fourth Industrial Revolution will disrupt shipping” headline an article Wolfgang Lehmacher wrote for the Journal of Commerce (JOC). Is this just a sensational headline or are we really hitting a new revolution that will disrupt the international shipping industry? For the past few years, we’ve been hearing about how digitization is about […]

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YouTube Video

Big, bold letters reading, “Fourth Industrial Revolution will disrupt shipping” headline an article Wolfgang Lehmacher wrote for the Journal of Commerce (JOC). Is this just a sensational headline or are we really hitting a new revolution that will disrupt the international shipping industry?

automated container shippingFor the past few years, we’ve been hearing about how digitization is about to revolutionize container shipping with Silicon Valley sinking millions of dollars into startups that were supposed to drive traditional freight forwarders out of business with online international shipping platforms.

For the most part, these freight e-commerce companies and platforms have flopped. The Loadstar even posted an article by Gavin van Marle telling readers not to believe the hype, quoting Alphaliner in the headline as saying, “There is a long way to go before digitisation revolutionises container shipping.”

However, this Fourth Industrial Revolution thing seems different than outsiders from the Silicon Valley trying to infiltrate international shipping with their tech-driven business models, even though both the Fourth Industrial Revolution and freight digitization are heralded as game changers for international shipping through new technology.

What even is the Fourth Industrial Revolution?

The term seems to be originated by Professor Klaus Schwab. At the very least, he wrote the book entitled The Fourth Industrial Revolution.

I like how Bernard Marr frames it in an article he wrote for Forbes. “First came steam and water power; then electricity and assembly lines; then computerization… So what comes next?”

The answer he’s leading to is, of course, the Fourth Industrial Revolution (4IR). Marr also points out that some call it industry 4.0.

What it is called is not so important. What really matters is that this industrial revolution is different than the three that came before it, utilizing new technologies that combine the physical, digital, and biological worlds in a way that will profoundly affect all industries of the world. Perhaps, it will even impact our view of what it means to be human.

At least, that’s what Schwab and these articles about his 4IR are saying about it.

New technologies of 4IR include artificial intelligence, automated vehicles, and nanotechnology. Yes, the more I read about 4IR, the more it sounds like the science fiction I grew up with as a kid (and still enjoy today).

But much of the science fiction of my childhood isn’t fiction now. Reading off our phones and tablets looks a lot like the reading they did in Star Trek. Where those fictional characters would say, “Computer,” we say, “Siri” or “Okay Google” now.

We don’t have the automated car systems of Minority Report or I, Robot, but automated cars and trucks are in production. We even posted two blogs recently about automated cargo ships that are supposed to hit the water next year:

WORLD’S FIRST AUTOMATED CARGO SHIP IS ON THE WAY

COULD THIS CONTAINER SHIP BE THE BIGGEST THING TO HIT TRANSPACIFIC SHIPPING?

Automated container ships is just the tip of the iceberg. 3D printing, internet connectivity of all aspects of business--including shipping, AI, electric vehicles, quantum computing, biotechnology… All these things and more are part of this 4IR.

It is very plausible that we are right on the edge of a huge industrial revolution that could make the world look like science fiction movies of the 80’s or 90’s.

The JOC article quotes a keynote address Wolfgang Lehmacher gave at the World Economic Forum:

“The world will significantly change,” he said. “The shipping industry has been impacted by the previous industrial revolutions: It moved from sail-powered shipping to steam-powered shipping in the First Industrial Revolution, to oil-powered shipping in the Second, to satellite guided navigation and digital transport in the Third. The [4IR] is expected to bring to the sector networks of autonomous vehicles.”

The article went on to quote Lehmacher quoting Schwab. Yes, and me quoting it here makes it a quote within a quote within a quote (if we were talking dreams, this would be Inception):

“The changes unleashed by the 4IR are so profound that, from the perspective of human history, there has never been a time of greater promise or potential peril.”

The imagination could easily run away with what this could look like. My mind immediately jumps to what kind of science fiction movies this could inspire, as if it hasn’t already (Ex Machina, anyone?). But what is the disruption headlining the JOC article that this new technology would necessarily bring to shipping?

Well, here’s where Lehmacher gets into disruption in the JOC article:

Although disruption would be unavoidable, Lehmacher said in the past, it came largely from within the industry where new players with new technologies took market share from less advanced players.

“In the 4IR, not only the changes within shipping, but also the changes in other industries will have significant impact. Let’s take the automotive industry. The move towards electric vehicles will disrupt the world in a big way. Electric vehicles have less moving parts and run more mileage than combustion engine powered vehicles. This means less maintenance, less spare part, less cars sold, less parts and cars to be transported; of course also less oil needed, sold, and transported,” he said.

So in other words, this 4IR will hit the international shipping industry from all angles because it will be hitting all the industries of the world. And, as we all know, international shipping plays a role in almost all of them, transporting 90% of the world’s goods.

Just from the example given, shipping takes a hit, losing items that are shipped. Of course, as certain items decrease in demand, it seems like other items will increase in demand. I am not sure that argument exactly adds up to a necessary disruption to international shipping.

The other premise of disruption to shipping appears to be that a change in and of itself automatically results in disruption.

I am not entirely sure that is true either. A shift to automated ships could very well be extremely disruptive as laws have to change and flaws will have to be fixed. However, I could imagine a smooth transition too.

It seems hard to imagine a major global industrial shift that 4IR describes would happen without hiccup. And, of course, the wealthy are the ones most likely to benefit early on and be in the best place to handle major economic upheaval that could happen if the transition is not a smooth one.

Ultimately, we’ll have to see if this Fourth Industrial Revolution really does disrupt the international shipping industry. We do know, the industry is certainly entering a time of change.

Click Here for Free Freight Rate Pricing

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Universal Bizargo: Shipping Changes the Weather https://www.universalcargo.com/universal-bizargo-shipping-changes-the-weather/ https://www.universalcargo.com/universal-bizargo-shipping-changes-the-weather/#respond Thu, 12 Oct 2017 19:48:02 +0000 https://www.universalcargo.com/?p=8315 Is international shipping manipulating weather? Controlling the weather has often captured our imagination in popular fiction. Examples include the upcoming movie Geostorm about weather controlling satellites that, of course, get highjacked; one of the X-Men’s most powerful superheroes, Storm, who controls the weather; and the movie Avengers (not Marvel’s) where Sean Connery played a weather […]

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Ocean LightningIs international shipping manipulating weather?

Controlling the weather has often captured our imagination in popular fiction.

Examples include the upcoming movie Geostorm about weather controlling satellites that, of course, get highjacked; one of the X-Men’s most powerful superheroes, Storm, who controls the weather; and the movie Avengers (not Marvel’s) where Sean Connery played a weather manipulating mad scientist who says, “Weather is not in God’s hands, but in mine.”

Actually, scratch that last one. Avengers was so bad that combined with the almost equally as bad League of Extraordinary Gentlemen caused Sean Connery to quit acting. And that I can never forgive.

Sure, it’s fun to imagine the weather being manipulated in a book or movie, but in real life?

Researchers are saying that ocean shipping is changing the weather.

No, it’s not really controlling the weather. This isn’t like the Son of God telling a storm to end and the waves to cease. In fact, it’s more of the opposite effect.

Universal Bizargo shipping container

Universal Bizargo shipping container

According to a study, pollution from ocean vessels are increasing lightning. And that’s enough to inspire another edition of Universal Bizargo, sharing the weird stories of international shipping.

Mark Edward Nero reported in American Shipper:

A new study recently published in the scientific journal Geophysical Research Letters claims that an increase in lightning strikes occurring over major oceanic shipping lanes is being caused by maritime vessel traffic.

In a research letter first published Sept. 14, the four authors, using 12 years of high-resolution global lightning stroke data from the World Wide Lightning Location Network (WWLLN), say they have managed to show that lightning density “is enhanced by up to a factor of two” directly over shipping lanes in the northeastern Indian Ocean and the South China Sea compared to adjacent areas with similar climatological characteristics but significantly less vessel traffic.

Twice as much lightning over major shipping lanes sounds like a pretty significant amount.

Researchers Joel A. Thornton, Katrina S. Virts, Robert H. Holzworth, and Todd P. Mitchell lay out why they hypothesize that “emissions of aerosol particles and precursors by maritime vessel traffic lead to a microphysical enhancement of convection and storm electrification in the region of the shipping lanes” in the plain language summary of their study:

The lightning enhancement maximizes along the same angular paths ships take along these routes and cannot be explained by meteorological factors, such as winds or the temperature structure of the atmosphere. We conclude that the lightning enhancement stems from aerosol particles emitted in the engine exhaust of ships traveling along these routes. These particles act as the nuclei on which cloud drops form and can change the vertical development of storms, allowing more cloud water to be transported to high altitudes, where electrification of the storm occurs to produce lightning.

Yeah, that sounded pretty plain language to me.

Increased lightning right along the same paths as ships without any normal meteorological factors to explain it would seem way too much for a coincidence.

Sean Connery Avengers weather villainOf course, this does seem like a long way away from a mad scientist controlling the weather with lightning strikes. At least it did until I read the next sentence from the study’s summary:

These shipping lanes are thus an ongoing experiment on how human activities that lead to airborne particulate matter pollution can perturb storm intensity and lightning.

The next step in that experiment is figuring out how to use that particulate matter to manipulate lightning.
Perhaps we’re not too far away from a real life version of Sean Connery’s Sir August De Wynter from Avengers.

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Is THE Alliance in Trouble? https://www.universalcargo.com/is-the-alliance-in-trouble/ https://www.universalcargo.com/is-the-alliance-in-trouble/#respond Thu, 05 Oct 2017 18:47:49 +0000 https://www.universalcargo.com/?p=8306 THE Alliance members are “falling further behind in the megamax vessel stakes,” Alphaliner was quoted as saying in an article by Mike Wackett in the Loadstar. The headlining point of the article was that the carrier alliance’s falling behind in the megamax vessel stakes could cost THE Alliance $500 more per TEU than the carrier […]

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Freight RatesTHE Alliance members are “falling further behind in the megamax vessel stakes,” Alphaliner was quoted as saying in an article by Mike Wackett in the Loadstar.

The headlining point of the article was that the carrier alliance’s falling behind in the megamax vessel stakes could cost THE Alliance $500 more per TEU than the carrier alliances its competing with. Wackett writes:

THE Alliance could find itself on the wrong side of a $500 per teu cost differential on the key Asia-North Europe trade due to its members’ failure to order more ultra-large container vessels (ULCVs), according to new analysis from Alphaliner.

Alphaliner notes that, including its orderbook, THE Alliance will only have 12 ships of 18,000-20,000 teu – six operated by Hapag-Lloyd and six by MOL. This compares with 62 ULCVs for the 2M and 51 for the Ocean Alliance.

As regular readers of this blog know, ocean shipping in the international shipping industry is now dominated by the three alliances, 2M, Ocean Alliance, and THE Alliance, brought up by Wackett above.

To survive the slim profit margins and overcapacity of ocean shipping, carrier alliances and megaships have become something of a necessity for carriers. Carriers need the assets of alliances and larger ships to compete in the international market. These assets bring down carrier costs on importing and exporting shipping containers of goods for shippers.

Competition between carriers is fierce. Overcapacity was a huge factor in creating record low freight rates in ocean shipping over the last couple years. However, freight rate wars between carriers also played a major role.

Of late, carriers have been able to raise freight rates and sustain those higher rates; however, carriers are far from safely profitable, moving into the future.

A $500 per TEU cost differential between carrier alliances is not only significant, it’s vast.

Wacket’s article brings up THE alliance members Yang Ming and Hapag-Lloyd’s financial issues, making them too strapped for cash, and NYK, MOL, and K-Line’s merging, making them too preoccupied, as reasons THE Alliance will not be able to bring their megaship fleet up to the level of the other two major carrier alliances.

If THE can’t find another way to reduce costs, the alliance could be in serious trouble, especially if another rate war breaks out. If THE Alliance ends up struggling to compete with 2M and Ocean Alliance, another carrier alliance shakeup could come.

Members of another alliance may find it beneficial to extend membership to a THE member, making THE even more precarious. THE members certainly cannot afford to find themselves without an alliance.

The trend for ocean carriers has shifted from acquiring megaships to acquiring competing shipping companies. If THE Alliance were to dissolve without its members realigning in other alliances, it’s hard to imagine that a member or two wouldn’t get picked off.

Perhaps, instead of the industry being dominated by three alliances, shippers will see it dominated by only two in the not so distant future.

Let’s hope the ever shrinking carrier competition in the international shipping industry doesn’t fall that low anytime soon.

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Port of Oakland Investing $11 Million for Meat Exporting https://www.universalcargo.com/port-of-oakland-investing-11-million-for-meat-exporting/ https://www.universalcargo.com/port-of-oakland-investing-11-million-for-meat-exporting/#respond Tue, 03 Oct 2017 18:07:04 +0000 https://www.universalcargo.com/?p=8301 China has beef with the U.S. again, and it’s worth billions of dollars. The Port of Oakland wants in on that money, and is spending $11 million to be a part of it. It was almost exactly a year ago that we blogged about China’s plan to remove a ban on U.S. beef that had […]

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U.S Beef Exports to ChinaChina has beef with the U.S. again, and it’s worth billions of dollars. The Port of Oakland wants in on that money, and is spending $11 million to be a part of it.

It was almost exactly a year ago that we blogged about China’s plan to remove a ban on U.S. beef that had been in effect since a 2003 incident of “mad cow” infected beef being shipped from Washington state.

Expectations at the time of that blog were that U.S. beef exports to the monumentally large China market would resume after a 14-year hiatus in 2017; however, no one knew exactly when it would happen.

Reuters reported in June that the first U.S. exports of beef to China since the ban had been lifted were shipped:

China let through the first shipments of beef from the United States in 14 years on Friday [June 23rd, 2017], after the two nations agreed to resume the trade in May, state media reported.

China officially allowed U.S. beef imports from Tuesday this week after the two sides settled the conditions for exports last week.

Under the new rule, boneless and bone-in beef from cattle under 30 months of age will be eligible for imports. Beef destined for China must also be from cattle that can be traced to its birth farm, according to the rule.

So that’s the lucrative beef China finally has again with the U.S. It’s lucrative for the U.S. agriculture industry. And the amount of beef expected to be exported means it’s also lucrative for professionals in the supply chain and international shipping industries.

The Port of Oakland obviously recognizes this as Mark Edward Nero reports in American Shipper that the port’s commission has approved millions of dollars in funding of a rail connection to a temperature controlled distribution facility that would allow Oakland to be a major hub for meat exports to China:

The Port of Oakland Commission has approved an $11 million rail spur to a planned temperature controlled transload and distribution facility known as Cool Port Oakland.

It’s the final piece of a plan for a refrigerated gateway to Asia for U.S. meat exports, according to port officials.

When complete, the spur would connect Union Pacific Railroad tracks with Cool Port, a 280,000-square-foot distribution center now under construction on 25 acres of port property….

When the project is completed, an estimated 27,000 TEUs of meat could be exported annually from Oakland to export markets in Asia, according to the port.

refrigerated "reefer" shipping containersThe prospect of an additional 27,000 TEUs shipped through the Port of Oakland is obviously enough inducement for the port to make this significant investment that is similar to the one to generate passive income. However, the port expects more than just a 27,000 TEU jump after the rail spur and Cool Port Oakland are complete according to Nero’s article:

The $90 million Cool Port Oakland project… is expected to open in the third quarter of 2018. The facility’s projected to process 9,000 rail cars per year, and an additional 9,000 containers are projected to move via truck.  Total twenty-foot equivalent (TEU) volume based on this container throughput is projected at 54,000 units, the port has said.

On top of all those thousands of TEU of inducement projected to move through this “refrigerated gateway,” Nero also says the $11 million investment will be offset by a $5 million grant.

I asked a cow what she thought of all this money spent on beef. “Moo,” she responded. Moo, indeed.

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Party for Furniture Sellers at High Point Market https://www.universalcargo.com/party-for-furniture-sellers-at-high-point-market/ https://www.universalcargo.com/party-for-furniture-sellers-at-high-point-market/#respond Tue, 26 Sep 2017 17:08:23 +0000 https://www.universalcargo.com/?p=8295 Where do furniture importers and sellers go in the fall? To the event of the season for the furniture industry: High Point Market! Universal Cargo always goes too. As furniture importing specialists, we here at Universal Cargo love High Point Market. It’s a chance to meet up and hang out with many of our favorite […]

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SecretGarden High Point PartyWhere do furniture importers and sellers go in the fall?

To the event of the season for the furniture industry: High Point Market!

Universal Cargo always goes too.

As furniture importing specialists, we here at Universal Cargo love High Point Market. It’s a chance to meet up and hang out with many of our favorite customers. That’s why we’ve been attending it every year since 1989.

Universal Cargo’s CEO Devin Burke will certainly be there along with other members of our team. Nobody loves the High Point Market more than Mr. Burke.

“I think I speak for a lot of people who come to market year in a year out,” Burke said. “I really look forward to coming every six months, not just because of the prospect of business, but because of so many lasting friendships that have developed through the years. It is truly a joy to come and see old friends here.”

In appreciation of those great friends and customers, who never have to ask where do I go for my furniture importing needs, Universal Cargo is sponsoring a big party at High Point.

On the evening of Thursday, October 12th, join us for a night of cocktails, hors d’oeuvres, and surprises. Yes, it’s a party! 6 PM is when Classy Art’s Secret Garden begins. But obviously, we’re not keeping this party a secret.

SecretGarden High Point Party

You don’t want to miss this party.

If you were at High Point Market back in April and attended the Classy Art’s Inspire the Fire party that Universal Cargo also sponsored, then you got a glimpse at how much fun these parties can be.

This October High Point party should be even better! It’ll be the talk of the market. Make sure you’re a part of it.

Here are the details:

  • DATE: Thursday, October 12th, 2017
  • TIME: 6:00 PM
  • WHERE: Center Point Hamilton #105

For those furniture sellers out there who don’t know us, Universal Cargo is your one-stop-shop for furniture importing.

Offering short-term and long-term rate agreements, Universal Cargo will be able to handle every facet of the move, including delivery to the door of major big box retail establishments.  We are experienced in dealing with major retailers that have very stringent delivery requirements, such as Costco and Menards.

Universal Cargo has been a trusted freight forwarder for over 30 years, but we began working with furniture manufacturers in 1989. Quickly, the furniture industry became the top industry we serve. With all that industry-specific experience, Universal Cargo knows and caters to the specific needs of furniture sellers like yourself.

At competitive rates, Universal Cargo’s friendly staff will provide you with reliable, transparent, and personalized service, covering every detail of shipping your furniture around the world.

On top of all of that, our CEO will be happy to tell you a pun-filled joke or challenge you to a push-up contest.

Click Here for Free Freight Rate Pricing

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Join Us Tomorrow at the CPAF Gala for Change https://www.universalcargo.com/join-us-tomorrow-at-the-cpaf-gala-for-change/ https://www.universalcargo.com/join-us-tomorrow-at-the-cpaf-gala-for-change/#respond Thu, 21 Sep 2017 16:59:54 +0000 https://www.universalcargo.com/?p=8292 We here at Universal Cargo would like to invite you to join us tomorrow at an event in Los Angeles. The Center for the Pacific Asian Family (CPAF) is holding their big annual event, Gala for Change. Here’s how CPAF describes the Gala for Change on its page about the event: CPAF’s signature benefit event, […]

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We here at Universal Cargo would like to invite you to join us tomorrow at an event in Los Angeles. The Center for the Pacific Asian Family (CPAF) is holding their big annual event, Gala for Change.

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Here’s how CPAF describes the Gala for Change on its page about the event:

CPAF’s signature benefit event, Gala for Change, is attended by 400 guests, including individuals, community partners and other leaders from the corporate and nonprofit sectors. The evening features a food tasting reception hosted by premier local culinary partners, a silent auction, and a program and award ceremony, followed by live music entertainment from “The Inspiration”.

Let’s Nurture Change Together

Proceeds benefit Center for the Pacific Asian Family (CPAF), a nonprofit whose mission is to build healthy and safe communities by addressing the root causes and the consequences of family violence and violence against women.

Universal Cargo CAREs

Universal Cargo CAREs

Universal Cargo is sponsoring this event because we are passionate about fighting violence and injustice against women and children in the world.

That passion starts with Universal Cargo President Shirley Burke.

Mrs. Burke’s philanthropic work has included supporting many organizations that, like CPAF, fight violence against women and children, including Zoe InternationalCoalition to Abolish Slavery & Trafficking or CASTTruckers Against Trafficking or TAT, and iEmpathize, and has helped shaped Universal Cargo’s core values.

If you come to the Gala for Change, you’ll have a chance to meet Mrs. Burke as well as other members of the Universal Cargo team. But most importantly, you’ll be supporting CPAF’s work of fighting violence against women and children.

To get an idea of the people who are helped CPAF’s work, check out the video playlist below of stories from survivors of domestic violence and sexual assault.

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Here’s everything you need to know about tomorrow’s gala:

Event Details

Center for the Pacific Asian Family 39th Anniversary Gala for Change: “Together We Rise”

Date:              Friday, Sep. 22, 2017, 6:00-10:00 PM

Location:       LA River Center & Gardens, 570 W. Ave. 26, #100, Los Angeles 90065

Arrival:          Please arrive by 6:00 PM to enjoy the food & drink reception.

Dress Code:  Semi-Formal, Dressy Casual

The event takes place outdoors in a garden setting. Weather is forecasted to be in the mid-sixties in the evening.

This is a reception-style event. Please note that a sit-down dinner will not be served.

Our Culinary/Beverage/Dessert Partners provide a food tasting experience prepared by chefs from more than 10 restaurants and hosted drinks. The food tasting ends at 8 PM when the program begins.

6-8PM Food Tasting & Silent Auction
8-9PM Program & Awards Presentation
9-10PM Live Band Entertainment – The Inspiration
At the gala, CPAF will present its “Champion for Change” awards to:

  • Susan Hirasuna, a volunteer who has worked tirelessly on behalf of CPAF
  • Kirkland & Ellis LLP and Nixon & Peabody LLP for their pro-bono legal services

CLICK HERE TO GET TICKETS FOR THE GALA AND SUPPORT CPAF.

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China Pollution Crackdown Shuts Down Thousands of Factories Disrupting Supply Chain https://www.universalcargo.com/china-pollution-crackdown-shuts-down-thousands-of-factories-disrupting-supply-chain/ https://www.universalcargo.com/china-pollution-crackdown-shuts-down-thousands-of-factories-disrupting-supply-chain/#respond Tue, 19 Sep 2017 19:42:25 +0000 https://www.universalcargo.com/?p=8284 It’s no secret that pollution in China is bad. If you ever visit the country, you’ll probably notice some people walking around wearing surgical masks because of the haze from China’s industrialization that you can actually see in the air. Not only can you see that pollution haze from the ground, you can see it […]

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NASA Image of Pollution Haze Over China

NASA Image of Pollution Haze Over China

It’s no secret that pollution in China is bad. If you ever visit the country, you’ll probably notice some people walking around wearing surgical masks because of the haze from China’s industrialization that you can actually see in the air.

Not only can you see that pollution haze from the ground, you can see it from outer space. NASA took the picture to the right in which the pollution haze can be clearly seen over eastern China.

China has decided to do something about the pollution. And that action is affecting shippers who import from China.

Helen Zhu wrote in an article on EJ Insight:

In Beijing… the PM2.5 concentration monitored by the US embassy shows that the monthly index grew more than threefold between August and December in 2016, and similarly in 2015.

The central government recently launched a campaign to help the Beijing-Tianjin-Hebei region and neighboring provinces control pollution this autumn and winter, which may bring some positive changes to the situation this year.

PM2.5 is a particulate matter size that is small enough for people to breathe into their lungs, which can cause serious health problems. The EPA defines the term as follows:

PM2.5 consists of “fine particles” with aerodynamic diameters less than or equal to 2.5 microns (μm).

The concentration of this dangerous particulate matter tripling over just a handful of months is obviously very concerning. Therefore, China is not merely launching a campaign against it but is taking unprecedented action to fight the pollution.

You can get an idea of how big this China’s crackdown from what Jane Cai reported in the South China Morning Post:

An army of 5,600 inspectors, from not only China’s environment ministry but also the Communist Party’s anti-graft watchdog and personnel unit, were dispatched to the provinces to check whether local cadres were doing their jobs to protect the environment. This unprecedented action caused many local officials to overreact by shutting down all possible pollutant sources.

It’s the shutting down of “all possible pollutant sources” that is having such an impact on shippers.

We’ve all become accustomed to reading “Made in China” on products we find on store shelves. In fact, many of you who read Universal Cargo blog posts like this one are shippers who import goods from China. I don’t want to minimize the importance of China fighting its major pollution problem, but it’s also in our readers’ and customers’ interest to point out the supply chain disruption to imports from China being created by factories shutting down because of China’s pollution crackdown.

Michael Standaert reported in Bloomberg BNA:

Factory operations suspended under sweeping environmental inspections are affecting supply chains in China ranging from chemicals to electronics to textiles, creating a crunch at its ports and uncertain timelines for deliveries, sources told Bloomberg BNA.

The situation could linger for months as authorities near major urban areas around Beijing, Shanghai and South China’s Pearl River Delta push to meet cleaner air quality goals laid out in a national air pollution action plan launched in late 2013, which expires at the end of the year.

“Tens of thousands” of factories have been affected in and near the major urban centers, with impacts ranging from “complete factory shutdowns [to] temporary closures” with unknown timeframes for resolution, Gary Huang, who sources products in China for Amazon.com sellers and is head of the supply chain committee at American Chamber of Commerce in Shanghai, told Bloomberg BNA.

What’s more, these factory shutdowns are happening as the holidays approach. September is traditionally part of the peak season for international shipping, when U.S. shippers are doing a great deal of importing from China in preparation for holiday shopping.

Many importers are having to change plans on suppliers of inventory.

Are you being affected by factory shutdowns in China? Share your experience in the comments section below.

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Fallout of Hurricane Irma on Shipping https://www.universalcargo.com/fallout-of-hurricane-irma-on-shipping/ https://www.universalcargo.com/fallout-of-hurricane-irma-on-shipping/#respond Tue, 12 Sep 2017 20:19:39 +0000 https://www.universalcargo.com/?p=8280 The worst is over with Hurricane Irma; however, Florida and Georgia took pretty big hits. Millions are without power. Homes and businesses were damaged. Worse, ABC reported the death toll in the U.S. from the hurricane is up to 12. Among business offices to close was Universal Cargo’s Atlanta office. But many of our Atlanta […]

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Hurricane Irma

NASA image of Hurricane Irma

The worst is over with Hurricane Irma; however, Florida and Georgia took pretty big hits. Millions are without power. Homes and businesses were damaged. Worse, ABC reported the death toll in the U.S. from the hurricane is up to 12.

Among business offices to close was Universal Cargo’s Atlanta office. But many of our Atlanta team members were still assisting customers from home.

In an email yesterday, one of Universal Cargo’s business associates, Danny L. Roberts, from G & P Trucking Company shared the following port status updates, along with effects on G & P’s trucking services:

1)     Savannah – Port closed until Wednesday this could change but at the moment the port is closed.  Our operations is closed today but we will have limited staff tomorrow to serve you. We don’t know when our trucks will be back but we suspect tomorrow / Wednesday

2)     Charleston – The port has closed empty pick up and we suspect will close gate operation soon as the weather is getting steadily worse with winds 25-50 miles an hour and heavy rain expected to continue today.  We will update you more as we learn the ports operation schedule.  We have very limited operations today… We expect our trucks to be back tomorrow…

3)     Norfolk – all OK but we could have high winds tomorrow which could affect empty containers allowed to cross the Chesapeake Bay Bridge but today there are no real weather issues.

Most trucking companies were similarly affected in the area.

Port closures and diversions from Hurricane Harvey followed by port closures and diversions from Hurricane Irma will certainly continue to have their ripple effect across the supply chain.

However, some ports in Florida are already open again while others are still undergoing assessments in preparation to reopen. Hailey Desormeaux reports in American Shipper:

U.S. Southeast ports are beginning to resume operations after Hurricane Irma made landfall in South Florida on Sunday and continued to make its way northward, wreaking further havoc across the region.

In southern Florida, PortMiami and the port tunnel are open. The U.S. Coast Guard (USCG) cleared truck and gate operations for the Seaboard Marine container terminal, but truck and gate operations will be closed Tuesday for POMTOC and SFCT container terminals, according to the latest update on PortMiami’s website. The port will remain closed for marine traffic at least until 4:00 p.m. Tuesday.

U.S. Customs and Border Protection (CBP) recognizes the situation and is reminding carriers to amend manifests to reflect port diversions while reassuring that ports should not be penalizing carriers for Trade Act violations.

In fact, the U.S. Department of Homeland Security (DHS) even waived the Jones Act for a little while to help shipping and gasoline recovery. Chris Gillis reported in American Shipper:

 The U.S. Department of Homeland Security (DHS) on Friday approved a seven-day waiver of the Jones Act to expand the options for delivering fuel to states and territories impacted by the recent hurricanes to strike the Texas Gulf coast and Florida.

The Jones Act requires the cargoes moving between ports in the domestic waterborne trades to be moved on U.S.-flag vessels. However, the Defense and Energy departments requested the temporary Jones Act waiver to assist with the hurricane aftermath.

The supply chain will recover. Here at Universal Cargo, we’re working hard to help shippers whose importing and exporting has been affected by the hurricanes, but there are many people affected by Hurricane Harvey and Hurricane Irma who need more than business support. They need support from any of us who are able.

Kellee Mallord, Account Executive at Universal Cargo, shared an update on customers whose situations she shared with us in the first blog we posted on Hurricane Harvey:

Follow up to our Harvey conversation about the family I told you about in Houston: One house is fine, two were flooded 9 ft deep.  My customer with the WWI raft, flooded 9 ft deep too. Ugh.

Like many of us here at Universal Cargo and you out there, Kellee has many family members and friends in Florida, including the Keys. To give money to support those impacted by Hurricanes Harvey and Irma, click here.

That link will take you to a Red Cross donation page.

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U.S. Ports Bracing for Another Deadly Hurricane https://www.universalcargo.com/u-s-ports-bracing-for-another-deadly-hurricane/ https://www.universalcargo.com/u-s-ports-bracing-for-another-deadly-hurricane/#respond Thu, 07 Sep 2017 18:50:05 +0000 https://www.universalcargo.com/?p=8276 We haven’t even gotten over Hurricane Harvey, and already another deadly hurricane is headed for U.S. landfall. Hurricane Irma is a category 5 storm that is likely to make landfall in Florida over the weekend. While Harvey was the most powerful hurricane to hit the U.S. in over a decade, Hurricane Irma is the most powerful […]

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Hurricane IrmaWe haven’t even gotten over Hurricane Harvey, and already another deadly hurricane is headed for U.S. landfall.

Hurricane Irma is a category 5 storm that is likely to make landfall in Florida over the weekend.

While Harvey was the most powerful hurricane to hit the U.S. in over a decade, Hurricane Irma is the most powerful Atlantic storm in a decade, according to ABC News, and maybe ever, according to updated reports around the web. In fact, ABC’s Chief Meteorologist Ginger Zee said, “Hurricane Irma can now be said to be the strongest for the longest period of time on the globe.”

To get an idea of how massive Irma is, CNN reports that the square mileage of Irma’s force winds is 65,000, which is roughly the same area as the entire state of Florida. Irma’s diameter is 300 miles, about twice the width of Florida. The maximum sustained strength of Irma’s winds is 185 mph, 10 mph more than Hurricane Andrew--the most destructive hurricane to ever hit Florida.

The hurricane has already devastated the Caribbean on what looks to be a direct path to Florida. Mark Osborne and Morgan Winsor wrote in an ABC article:

Hurricane Irma skirted north of the Dominican Republic early Thursday as the powerful Category 5 storm set its sights on south Florida after leaving a trail of death and destruction in the Caribbean. At least 13 people have been killed.

The U.S. Coast Guard set port condition X-Ray for South Florida ports, meaning gale force winds are expected to hit within 48 hours. Here’s a list of hurricane port conditions:

  • PORT CONDITION WHISKEY: Gale force winds predicted to arrive within 72 hours. Ports Status: Open to all commercial and recreational traffic.
  • PORT CONDITION X-RAY: Gale force winds predicted to arrive within 48 hours. Port Status: Open to all commercial and recreational traffic.
  • PORT CONDITION YANKEE: Gale force winds predicted to arrive within 24 hours. Ports status: Closed to inbound traffic and vessel traffic control measures in effect on vessel movements within the port.
  • PORT CONDITION ZULU: Gale force winds predicted to arrive within 12 hours. Ports Status: Closed to all inbound and outbound traffic.
  • PORT CONDITION RECOVERY: Storm is no longer threat to area, however some damage may have occurred and response and recovery operations are in progress. Ports status: Reopened to outbound traffic at completion of port survey. Vessel traffic control measures remain in effect on vessel movements within the port.

Expect the port conditions for Florida ports to update to Yankee and Zulu this weekend, as Irma looks likely to hit Florida on Sunday morning.

When ports reach condition Zulu, vessels are not allowed to enter or transit the waters around the ports. Carriers should be wise enough to keep their vessels away from the hurricane anyway, especially with the El Faro and its crew having been lost to Hurricane Joaquin just two years ago.

People are evacuating in Florida and major ports prepare to close down.

The disruptions and delays to international shipping will add on to the ones already rippling through the U.S. portion of the supply chain. Closures at Florida ports will ripple through other U.S. ports just like port closures from Hurricane Harvey did.

Also like with Hurricane Harvey, U.S. oil/gasoline is expected to be significantly impacted.

Looking through the expected path of Irma from various news and weather sources, Irma is expected to be downgraded to a category 4 storm when it hits. However, there is always a level of unpredictability with hurricanes. It is even possible that Irma’s trajectory could change and it will stay off the coast of Florida. Unfortunately, that seems less and less likely.

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Hurricane Harvey Update – Gulf Coast Shipping Resumed https://www.universalcargo.com/hurricane-harvey-update-gulf-coast-shipping-resumed/ https://www.universalcargo.com/hurricane-harvey-update-gulf-coast-shipping-resumed/#respond Tue, 05 Sep 2017 17:48:19 +0000 https://www.universalcargo.com/?p=8274 The biggest news to hit U.S. Shippers and international shipping last week was also the biggest hurricane to hit the U.S. in a decade. We shared how Hurricane Harvey hurt the supply chain last week. Among the hurricane’s many impacts were port closures. I our blog a week ago, Universal Cargo Account Manager Jessica Langdon shared […]

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Hurricane Harvey Gulf of MexicoThe biggest news to hit U.S. Shippers and international shipping last week was also the biggest hurricane to hit the U.S. in a decade. We shared how Hurricane Harvey hurt the supply chain last week. Among the hurricane’s many impacts were port closures.

I our blog a week ago, Universal Cargo Account Manager Jessica Langdon shared that the Houston ports had been closed since Friday (August 25th) at 11am. We also shared, sourcing an  Elizabeth Landrum written article from American Shipper, that the Port of Corpus Christi was closed. Port closures also included the Port of Galveston.

A week after ports shut down (on Friday, September 1st), Elizabeth Landrum reported an update with another American Shipper article that ports reopened:

The ports of Houston, Galveston and Corpus Christi are once again open for business, but with a few channel restrictions, including one-way vessel movements, daylight-only transits and draft restrictions of 43 feet.

After almost a week of suspended operations as Hurricane Harvey lashed the U.S. Gulf Coast with heavy rains and flooding, more than 20 vessels are awaiting berth assignments. The Port of Corpus Christi said it will allow seven local refineries to startup operations in an effort to serve the already-short transportation fuels markets in the region and nation.

Those fuel refineries closing operations was also very impactful for the supply chain, limiting available gasoline needed for trucking.

Of course, trucking and rail through the Houston area was halted by flooding, but as water continues to recede, movement is happening.

Some good news for shippers in the Landrum article was the appearance that cargo at the Port of Houston remained unharmed:

Port of Houston said there was no evidence of flooding on terminals and no visible damage to containers, cranes or other equipment. Power to refrigerated containers was still operational, port officials said.

Still, even with the pieces of the supply chain resuming operations, it is taking time to catch up with spreading delays and some shortages of truckers to move containers finally able to arrive at ports. We’re now seeing what Universal Cargo Atlanta Operations Manager Erick Constantino explained in the last blog about the disruptions Hurricane Harvey created:

When operations are shut down in one area, it has a ripple effect across the nation. For imports, we will see delays on ETAs as vessels are parked at sea until operations resume. That’ll lead to delays at the other ports the vessel is calling. For exports, that will mean the containers will have delayed departures and a shortage of available equipment. For truckers, they’ll have to assess the damage to their equipment, and we can expect port congestions when operations resume as every container will be hot for delivery.

While the shipping industry works hard to recover from the hurricane, so do the people and businesses of Houston.

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Could This Container Ship Be the Biggest Thing to Hit Transpacific Shipping? https://www.universalcargo.com/could-this-container-ship-be-the-biggest-thing-to-hit-transpacific-shipping/ https://www.universalcargo.com/could-this-container-ship-be-the-biggest-thing-to-hit-transpacific-shipping/#respond Thu, 31 Aug 2017 18:49:17 +0000 https://www.universalcargo.com/?p=8269 A container ship crossing the Pacific Ocean sounds like nothing new. Importers and exporters know that carriers have ships sailing goods between Asia and America every day. However, a ship Nippon Yusen Kabushiki Kaisha (NYK Line) is preparing to send “could disrupt the global shipping industry” according to a Bloomberg Technology article. The headline of that […]

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NYK Container Ship

Photo: kees torn SMIT SCHELDE , AL MURAYKH , NYK DELPHINUS & SMIT SEINE

A container ship crossing the Pacific Ocean sounds like nothing new. Importers and exporters know that carriers have ships sailing goods between Asia and America every day. However, a ship Nippon Yusen Kabushiki Kaisha (NYK Line) is preparing to send “could disrupt the global shipping industry” according to a Bloomberg Technology article.

The headline of that article calls it a “robot ship,” but what we’re talking about here is a large autonomous ship hitting the busy transpacific shipping lanes. Chris Cooper and Kiyotaka Matsuda wrote in the Bloomberg Technology article:

Japan’s largest container line plans to test a remote-controlled vessel across the Pacific Ocean in 2019 as it pursues fully autonomous technology that could disrupt the global shipping industry.

Nippon Yusen K.K. is considering using a large container ship for the test from Japan to North America and a crew will be on standby for safe operations, Hideyuki Ando, a senior general manager at Monohakobi Technology Institute, said…

Even though this autonomous ship will have a crew onboard, just in case, this is a huge step toward seeing container ships arriving at ports without any people onboard. Once these ships have enough successful tests, crews will be gone and the ships will ghost their way around the world.

If you’re a regular reader of Universal Cargo’s blog, you’ll know that NYK Line is not the only company working on autonomous ships for the international shipping industry. Earlier this month, we posted a blog about the world’s first autonomous, electric, emissions free cargo ship on its way from Yara International and Kongsberg Gruppen.

The Bloomberg Technology article also points out Yara, along with other companies, that are developing autonomous ship technology:

The Tokyo-based cargo carrier is joining a list of companies worldwide working to develop vessels without sailors…

Rolls-Royce Holdings Plc, BHP Billiton Ltd., the world’s biggest mining company, and fertilizer producer Yara International ASA are all studying the introduction of autonomous ships. Yara is aiming to test remote operation in coastal waters in 2019, it said in May.

That makes two companies that have announced plans to put autonomous ships in the water in 2019. You can bet the other companies developing autonomous cargo ships are working hard not to get beat out. There may be a full out race underway for releasing cargo ships that sail themselves.

Safety is of greatest concern in putting ships in the water that do not have people in them. That’s why these ships will initially be sailed with crews ready on standby in case there are any malfunctions or problems with the navigation and crash avoidance technologies.

However, concern for safety is also a draw to autonomous ships. In the post about Yara’s automated ship, I brought up some of the international shipping tragedies we’ve shared in this blog over the years, including 33 people being killed when the cargo ship El Faro was lost in Hurricane Joaquin and 7 U.S. sailors being killed in a collision between a containership and Navy destroyer. Since then, more have died in another Navy destroyer collision. And there have been so many more losses of sailors lives over the years.

Even though ocean freight shipping is a daily thing, sailing those international waters is a dangerous thing. Every person taken off those ships is one less person at risk of being lost at sea.

Cooper and Matsuda also bring up fatalities on the seas as a factor in favor of autonomous ships but from another angle. “The technology may help eliminate human errors that are responsible for a vast majority of all marine casualties,” they wrote.

Of course, the biggest driving force behind autonomous ships is probably money. While the initial investment is high, think of how much less money it will cost carriers to sale ships without hiring and feeding crews.

The international shipping industry is changing. The next time you drive by a port or see images of cargo ships sailing or docking, just imagine them with no people onboard.

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Hurricane Harvey Hurts People & Supply Chain https://www.universalcargo.com/hurricane-harvey-hurts-people-supply-chain/ https://www.universalcargo.com/hurricane-harvey-hurts-people-supply-chain/#respond Tue, 29 Aug 2017 19:16:49 +0000 https://www.universalcargo.com/?p=8265 The U.S. hasn’t seen a hurricane as powerful as Hurricane Harvey hit in a decade. It came right through the Gulf of Mexico, making landfall as a category 4 hurricane, destroying homes, claiming lives, and slamming shipping and supply chains in and near the Gulf Coast. Of course, the most important thing is people. And […]

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Hurricane Harvey Gulf of MexicoThe U.S. hasn’t seen a hurricane as powerful as Hurricane Harvey hit in a decade. It came right through the Gulf of Mexico, making landfall as a category 4 hurricane, destroying homes, claiming lives, and slamming shipping and supply chains in and near the Gulf Coast.

Of course, the most important thing is people. And the people of Texas have been hit hard. Adrienne LaFrance reports in the Atlantic:

The magnitude of the flooding in Texas is almost incomprehensible, even for a disaster that the National Weather Service warned was “unprecedented,” “unknown,” and “beyond anything experienced.” At least seven people have died. Texas faces a recovery that will span years.

crazy Hurricane Harvey flooding in Texas

Crazy Hurricane Harvey flooding in Texas

It doesn’t seem like any city has been hit as hard as Houston. The flooding there is immense, the rain hasn’t stopped, and right there is the Port of Houston.

Jessica Langdon

Universal Cargo Account Manager Jessica Langdon told me, “The Houston ports have been closed since Friday at 11am and remain closed through today.

Jessica even gave me a picture (on the right) from one of the truckers she works with that helps make the “incomprehensible” flooding a little more comprehensible for those who aren’t in Texas to see it.

One look at that picture, in which all you see is water where you should see road, makes it easy to surmise that truckers aren’t likely to be operating in the area.

Kellee Mallord

Kellee Mallord

Kellee Mallord, Account Executive at Universal Cargo, made the picture of the situation Houston truckers have found themselves in even clearer when she told me, “I spoke with one of our truckers in Houston yesterday, and she told me that all of their buildings are under water.”

What’s happening in Houston is not just of professional concern for us at Universal Cargo, and no one exemplifies that more than Kellee. Kellee has great personal care for her customers and was checking in on the welfare of those in the path of this devastating weather:

“One of my Houston customers, as of yesterday, was still ok at his house, and his power is still on. He’s got his army surplus WW1 boat ready to go if need be. He’s in west Houston.”

She has family connections in the area too:

“My brother in law’s mom lives in Friendswood and said she’s ok with power still and his dad, who lives just east of Houston, said water is about 3 ft. from his front door.”

There’s a long list of ways the supply chain has been affected by Hurricane Harvey. Elizabeth Landrum wrote an article for American Shipper that includes much of the havoc it wreaked on the international shipping industry. It included details on:

  • Maersk vessels delayed
  • Damage to the Port of Corpus Christi, keeping it closed until further notice
  • Railroad BNSF disruption
  • Closures at both Houston airports
  • Gulf of Mexico oil refineries shut down causing fuel stations to run out of gasoline

When something like this hits the supply chain, there’s a ripple effect. Universal Cargo Atlanta Operations Manager Erick Constantino explains how disruptions and delays spread beyond the region of the initial problem:

Erick Constantino

Erick Constantino

Our service is based off of estimated times of arrivals. When we don’t have that, it’s pretty difficult to coordinate deliveries and provide proper answers to our customers’ questions. When operations are shut down in one area, it has a ripple effect across the nation. For imports, we will see delays on ETAs as vessels are parked at sea until operations resume. That’ll lead to delays at the other ports the vessel is calling. For exports, that will mean the containers will have delayed departures and a shortage of available equipment. For truckers, they’ll have to assess the damage to their equipment, and we can expect port congestions when operations resume as every container will be hot for delivery.

But here’s the thing. Despite all the international shipping and supply chain disruptions, shipping will recover. And it will probably recover fairly quickly. It’s really the personal losses in Houston that are devastating. The loss of homes; property; and, worse, loved ones, leaves many in need of support. Many need water and medical attention.

To make donations to the Hurricane Harvey Emergency Disaster Response relief fund, click here.

That link will take you to Americares Foundation. Here’s what your donations will be used for straight from their donation page:

Donate to provide emergency medicine and supplies today. Right now, Americares is in Texas, distributing water, aid and mobilizing medical outreach with our local partners. Thousands of people are in desperate need of aid, medicine and basic supplies but we can’t keep up with demand. You can help them! Send your gift today!

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Warning: Increased Ship Collisions Highlight Need for Cargo Insurance https://www.universalcargo.com/warning-increased-ship-collisions-highlight-need-for-cargo-insurance/ https://www.universalcargo.com/warning-increased-ship-collisions-highlight-need-for-cargo-insurance/#respond Thu, 24 Aug 2017 18:06:59 +0000 https://www.universalcargo.com/?p=8264 I read something very disturbing this week. According to a brief from Supply Chain Dive, most cargo imported to the U.S. travels uninsured. In fact, according the brief, 9 out of 10 shipping containers that arrive in the U.S. travel uninsured. 9 out of 10? Really? Failing to insure cargo is a huge risk for […]

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I read something very disturbing this week. According to a brief from Supply Chain Dive, most cargo imported to the U.S. travels uninsured. In fact, according the brief, 9 out of 10 shipping containers that arrive in the U.S. travel uninsured.

9 out of 10? Really? Failing to insure cargo is a huge risk for shippers. Some might think because ocean shipping has been happening for so long that it’s getting safer and less likely to result in damaged or lost cargo. But recent news shows that’s not the case at all.

Making headlines since Monday (August 21st), is a collision between navy destroyer USS John S. McCain and an oil tanker. This is a tragic incident as 10 sailors were missing after the collision, of whom the remains of one has since been reported found.

Making this news scary is how quickly it follows on the heels of another navy ship collision in international shipping waters. It hasn’t even been a full month since we shared about the tragic collision between the USS Fitzgerald and a Nippon Yusen Kabushiki Kaisha (NYK) container ship in a blog.

The navy obviously has some serious investigating to do, being involved in two fatal collisions in the span of just weeks. However, it’s not only with the U.S. Navy that ship collisions are happening on international waters. Every time I turn around it seems like there’s another story of a ship collision.

Maritime Bulletin published a post at the beginning of this month detailing a Maersk container ship colliding with a tug-pulled vessel. Again, this is a tragic news story as 9 people were missing after the collision.

Last week, the South China Morning Post published an article about a container ship and tanker being identified as vessels that collided, leading to an oil spill.

Container ships don’t even need other ships to have a collision or worse. About a month after the Panama Canal expansion opened, we posted a blog about how ships kept colliding with canal walls. There was also the cargo ship El Faro that was lost along with its crew during Hurricane Joaquin.

I could go on and on listing examples of collisions and tragedies that involved cargo ships. The worst part of it is the loss of lives. However, the loss or damaging of goods shouldn’t be overlooked either. These collisions and tragedies are not even the only things that have caused loss or damage to cargo. I would be remiss to not even mention cargo theft, which has been a growing problem in the international shipping industry.

All this is to say that there is always a risk of loss when importing and exporting goods. If it’s really true that 9 out of 10 containers are not insured, shippers have suffered very significant financial losses.

According to that Supply Chain Brief brief, many shippers simply don’t insure cargo until disaster strikes them.

Cargo insurance tends to cost roughly half a percent of the overall worth of the goods being shipped, yet shippers routinely prefer to take risks and go without any coverage at all. This is due in part to the misunderstanding that Cost, Insurance and Freight (CIF) or Free on Board (FOB) coverage is in place, when in reality, neither are active.

Another reason shippers skip insurance can be attributed to a reliance on luck, laziness, or attempted thriftiness.

For a better understanding of things like CIF and FOB, we have a blog series that defines incoterms, deal types that identify who is responsible for insurance across the different legs of shipping. Shippers should always make sure that cargo is insured for all portions of the shipping process, even parts that their business partners are supposed to be responsible for.

If thriftiness is the reason for skipping insurance, that thriftiness turns out not to be very thrifty at all if something does happen to a shipper’s cargo.

This stat of 9 out of 10 cargo containers shipped to the U.S. come from a linked in blog by Steve Fodor, Director at Association For Trade Compliance. Actually, according to his blog it’s even more than that as Fodor writes:

One thing that has shocked me in my 33 years working in international trade is the fact that a large portion (90%+) of import cargo moves to the U.S. without any insurance coverage. While cargo insurance costs about 1/2 of a percent of the shipment’s value, many (most) importers don’t purchase this coverage.

I don’t know where Fodor got his stats, but it’s unbelievable that so many shippers would be unwilling to purchase insurance at 0.5% of the shipment’s value to protect themselves from damage and loss.

That percentage can vary some, depending on factors like the type of cargo you’re transporting; however, cargo insurance is always well worth its price. The reasons Fodor sites for people not purchasing cargo insurance are:

  1. A belief (usually a misbelief) that the shipper’s business insurance covers his or her shipments.
  2. A belief (also usually a misbelief) that the shipper’s supplier covers the cargo insurance
  3. A misbelief that because nothing ever happened to the shipper’s goods during importing or exporting before, it never will.

Don’t make the mistake of believing one of these things and allowing your cargo to get shipped without insurance.

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Maersk Sells Oil Division, Focusing on Shipping https://www.universalcargo.com/maersk-sells-oil-division-focusing-on-shipping/ https://www.universalcargo.com/maersk-sells-oil-division-focusing-on-shipping/#respond Tue, 22 Aug 2017 16:59:21 +0000 https://www.universalcargo.com/?p=8262 Maersk is the biggest name in international shipping. It is the largest ocean carrier by capacity and sets industry trends with the moves it makes. Another advantage Maersk has over its competition is diversification, which put the company in a better position to handle years of overcapacity and low freight rates that resulted in billions […]

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Maersk Cargo Ship

Maersk Cargo Ship pic: Maersk Line

Maersk is the biggest name in international shipping. It is the largest ocean carrier by capacity and sets industry trends with the moves it makes. Another advantage Maersk has over its competition is diversification, which put the company in a better position to handle years of overcapacity and low freight rates that resulted in billions of dollars in losses by carriers.

But Maersk is letting some of that diversification go.

Hailey Desormeaux reported in American Shipper:

Danish shipping conglomerate A.P. Moller-Maersk signed an agreement today to sell Maersk Oil to French energy giant Total for $7.45 billion in a combined share and debt transaction, the companies said.

About a year ago, Maersk split into two divisions, one to focus on shipping and the other to focus on oil. That split marked a change in strategy for Maersk Line, moving away from ordering megaships to instead grow its capacity and shrink the competition by acquiring smaller carriers.

Now it looks like Maersk is ready to let that oil division go completely, really allowing international shipping to be the focus of Maersk. Completely might actually be a little bit of a strong word. Maersk won’t lose all of the diversification it has in oil.

Desormeaux’s article went on to share:

A.P. Moller Maersk will receive a consideration of $4.95 billion in Total shares – amounting to 97.5 million Total shares, or about 3.8 percent of the company – and Total will assume $2.5 billion of Maersk Oil’s debt.

This is not a bad deal for Maersk at all: first, the company gets 7.45 billion dollars; second, it has 2.5 billion dollars of debt cleared; and third, it receives profit shares from Total in the future.

Perhaps some of this inflow of cash will be used on Maersk’s carrier acquisition strategy.

However the cash is used, this is probably a good time to move on from oil as the world is pushing to switch to cleaner energy sources.

Of course, there will still be money to be made in oil for some time to come. However, clean energy will likely supplant oil eventually. Shipping, on the other hand, will continue. It seems Maersk is looking at the long term picture.

The American Shipper article ends with a peek into Maersk’s strategy and a hint that similar deals could happen with other Maersk companies that aren’t Maersk Line in the very near future:

“The separation of the energy businesses was decided as part of last year’s strategic decision to focus A.P. Moller-Maersk’s future activities on transport and logistics, as well as a result of recent years’ oil and gas industry and market developments,” the conglomerate said. “Maersk Oil is the first of the four energy companies of A.P. Moller-Maersk for which a future structural solution has now been identified. The solutions for Maersk Drilling, Maersk Supply Service and Maersk Tankers remain to be defined before the end of 2018.”

Given Maersk’s already prestigious place in international shipping, just imagine how dominate the company may become completely focused on the transport and logistics industry.

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2 News Stories Affecting Freight Trucking – eHighways & Uber Freight https://www.universalcargo.com/2-news-stories-affecting-freight-trucking-ehighways-uber-freight/ https://www.universalcargo.com/2-news-stories-affecting-freight-trucking-ehighways-uber-freight/#respond Thu, 17 Aug 2017 17:20:53 +0000 https://www.universalcargo.com/?p=8259 Trucking, obviously, is crucial to the supply chain and international shipping as a whole. Therefore, when there’s news that affects the trucking industry, it also affects the international shipping industry, and we share it with shippers here. Whether that’s the trucker shortage problem, which came to the international community’s attention in 2014; the truckers strikes […]

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End of Truckers?Trucking, obviously, is crucial to the supply chain and international shipping as a whole. Therefore, when there’s news that affects the trucking industry, it also affects the international shipping industry, and we share it with shippers here.

Whether that’s the trucker shortage problem, which came to the international community’s attention in 2014; the truckers strikes at the Ports of Los Angeles and Long Beach, caused by truckers dissatisfaction over employers’ “misclassification” of truckers as independent contractors; or automated trucks threatening to push truckers out of the industry all together, we’re here to keep you up on what’s happening.

Right now, there are two more big headlines that majorly affect trucking and, therefore, international shipping.

Electric Highways for Trucks

Check out this video:

YouTube Video

Some may be wondering exactly what it is they’re looking at in that video. It’s an electric highway for trucks, also known as an eHighway.

You want greener shipping and less greenhouse gas emissions from trucks? eHighways provide that.

Hybrid trucks can extend power couplers, as shown in the video, and drive on electric power thanks to this technology developed by Siemens.

Published by Digital Trends, Trevor Mogg wrote an excellent article on these eHighways that shares where these eHighways are and soon will be:

Following a successful trial in Sweden, the system is now up and running on a 1.2-mile (2 km) stretch of road near Stockholm, while there are also plans to try it on several roads around Los Angeles.

Now Germany is getting interested, with Siemens announcing a plan to install the system on a 6-mile (10 km) stretch of the nation’s autobahn near Frankfurt.

It will be worth watching how well this technology catches on and spreads across trucking routes throughout the world. Perhaps this technology could help the Ports of Los Angeles and Long Beach reach their zero emissions goals in cargo handling machinery and trucks.

Uber Freight Successfully Expanding

At the beginning of 2016, we blogged about UberRUSH, a commercial service from Uber that had the potential to be developed into a freight trucking service in the international shipping industry.

Well, that development has happened. Uber launched Uber Freight a few months ago.

Trucks.com posted an article by Michelle Rafter in May outlining Uber Freight’s launch:

After months of operating in stealth mode, the San Francisco company best known for its ride-hailing service took the wraps off Uber Freight, a cloud-based, on-demand, full truck-load freight brokerage on Thursday.

Here’s the video Uber put out announcing Uber Freight’s launch:

YouTube Video

Looks a lot like Uber’s app based taxi service, right?

Since its launch, Uber Freight has been gaining ground. Mariana Cid De Leon Ovalle writes in BOSS Magazine:

Despite only launching three months ago, the company is already expanding to new markets.

This month, the company started actively marketing to shippers and drivers in the main metropolitan areas of California, Arizona, the Chicago–Midwest region, Georgia, South Carolina, and North Carolina.

“In the last few months, we’ve heard from drivers that they want more loads in more places,” saidBill Driegert, Director of Uber Freight. “These new areas represent where drivers like to run.”

Many other startups have attempted this app-based approach to freight trucking, but none of them have the name recognition of Uber. Very quickly, we could see Uber change the freight trucking industry just like it changed the taxi cab industry.

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Freight Rate Wars: Carriers Strike Back https://www.universalcargo.com/freight-rate-wars-carriers-strike-back/ https://www.universalcargo.com/freight-rate-wars-carriers-strike-back/#respond Thu, 10 Aug 2017 14:59:58 +0000 https://www.universalcargo.com/?p=8249 It has been a dark time for ocean carriers. Investing heavily in megaships–ships so large they can destroy entire planets–carriers created capacity greatly surpassing disappointing global trade growth. It doesn’t take an economist to know what happens when supply far outweighs demand. When this happens in international shipping, we call it overcapacity. This overcapacity drove […]

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Rate Wars Carriers Strike BackIt has been a dark time for ocean carriers. Investing heavily in megaships--ships so large they can destroy entire planets--carriers created capacity greatly surpassing disappointing global trade growth.

It doesn’t take an economist to know what happens when supply far outweighs demand. When this happens in international shipping, we call it overcapacity.

This overcapacity drove freight rates down to record lows over the last few years. Shippers became so spoiled with low freight rates that they could have shipped goods from the ice planet of Hoth cheaper than actually manufacturing products themselves.

While these low freight rates were great for shippers, they caused obvious struggles for carriers. Carriers lost money in the billions of dollars. We even eventually saw the destruction of a major carrier, blown up like Alderaan, with the bankruptcy of Hanjin Shipping.

But carriers are finally starting to turn things around.

In May, we posted a blog that took a look at what’s happening with freight rates, with possibly the biggest takeaway being that record freight rates were gone. At that time, transpacific spot freight rates were 49% higher to the U.S. East Coast and 74% higher to the U.S. West Coast per FEU than a year prior.

The normal annual trends were occurring, causing freight rates to be dropping at that moment and overcapacity certainly wasn’t a thing of the past; however, signs were pointing toward carrier recovery and healthier freight rates for the shipping companies. Yes, that means higher freight rates for shippers.

I want to be clear that overcapacity is not completely over; however, with all the carrier mergers, alliances, and even ship scrapping increases, carriers are managing capacity better than they have been, bringing somewhat better balance to the force. The force on freight rates.

A strategy carriers have always used to increase freight rates and their profitability are general rate increases (GRIs) and during peak seasons, when shipping increases in anticipation of holiday season shopping, peak season surcharges (PSS).

For the last several years, as overcapacity made things worse and worse for carriers, these giant ocean shipping companies had trouble making a GRI, or even a PSS, stick. It seemed like there was always a carrier that would undermine the attempted freight rate increase. In fact, carriers even engaged in freight rate wars, undercutting each other and further pushing freight rates to record lows and unprofitable levels (for themselves, not for shippers, of course).

Now, carriers are finally managing to make their GRIs and PSS stick. Largely this has to do with carriers artificially reducing supply through the reallocation of vessels due to the recent carrier alliance changes, which is brought up in a Supply Chain Management Review article about pricing gains in international shipping during the approach of the peak season.

The article lists current GRIs and PSS, citing research from Flexport:

Asia -U.S. West Coast, with tight capacity, a July 1 GRI (general rate increase) partially implemented at $350-$400 per 40 foot container and carriers announcing Peak Season Surcharges for July 15 at $540, $600, $675, and $765 for 20’, 40’, 40’ HC (High Cube), and 45’, which Flexport expects to be partially mitigated; Asia-U.S. East Coast, with space currently open, depending on the carrier, and a July 1 GRI being partially implemented at $300-$450 per 40’, and Peak Season Surcharges (PSS) of at $540, $600, $675, and $765 for 20’, 40’, 40’ HC (High Cube), and 45’, which Flexport expects to be partially mitigated; Asia-Europe, a Peak Season Surcharge slated for July 15 at $300/20’ and $600/40’, which Flexport said it expects to be partially mitigated while capacity is expected to be “extremely tight as we enter peak season. Capacity will not increase during peak so space will continue to be constrained as volume increases”;
India-U.S. East Coast rates are holding steady and space is somewhat tight; and India-U.S. West Coast rates are increasing and space is tight.

Tight capacity is not a phrase shippers are accustomed reading or hearing of late. But there it is in that quoted research. And here we are, heading for the midpoint of August, with carriers managing to keep freight rates growing. That’s not only because of July’s GRIs and PSS, but fresh sets of these freight rate increases in August.

As July ended, international shipping news outlets were reporting increases in shipping freight rates before August GRIs even hit. For example, Mike Wackett reported in the Loadstar:

Container spot rates from Asia to the US, and Asia to Europe were given a lift this week ahead of August GRI and FAK [Freight All Kinds] increases.

The increase was most notable on the transpacific where the Shanghai Containerized Freight Index (SCFI) components for the US west coast and the US east coast leapt 37.6% and 20.2% respectively…

It’s easy for shippers to begrudge carriers’ success in increasing freight rates. After all, lower freight rates mean higher profits for importers and exporters, right? However, shippers shouldn’t think of carriers as Darth Vader, the evil emperor, or Khan.

Wait, I might be mixing metaphors or mixing sci-fi’s there. You can’t have both Star Wars and Star Trek. Or can you? Right J.J. Abrams?

Anyway, shippers shouldn’t think of carriers as their enemies and begrudge their success in raising freight rates. Carriers provide a service, without which shippers couldn’t be shippers. When freight rates remain unsustainably and unprofitably low for  carriers, things like Hanjin’s collapse happen. That creates disruptions to the supply chain and is more costly to shippers than healthy freight rates.

So I guess what I’m saying is it’s okay that the carriers strike back; balance must be maintained in the force.

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World’s First Automated Cargo Ship Is On the Way https://www.universalcargo.com/worlds-first-automated-cargo-ship-is-on-the-way/ https://www.universalcargo.com/worlds-first-automated-cargo-ship-is-on-the-way/#comments Tue, 08 Aug 2017 14:07:40 +0000 https://www.universalcargo.com/?p=8242 It was only a matter of time. Well, there still is some time, really. But not much. The first automated containership is scheduled to set sail in 2018. Check out this video from Kongsberg Gruppen, laying out the details of a ship that will be not only autonomous but also fully electronic with zero emissions: […]

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It was only a matter of time. Well, there still is some time, really. But not much. The first automated containership is scheduled to set sail in 2018.

Check out this video from Kongsberg Gruppen, laying out the details of a ship that will be not only autonomous but also fully electronic with zero emissions:

YouTube Video

Every time you turn around it seems like the international shipping industry is one step closer to taking people out of the logistics process.

There’s Amazon with its delivery drones to replace delivery people, self-driving trucks to squeeze truckers out of the future of shipping, port automation creating contention in labor contract negotiations because of its potential to take dockworker jobs away, a push for automated freight forwarders, and now ships that don’t need a crew on board at all.

Don’t get me wrong, we’re not going to wake up tomorrow and see a world in which there are no jobs for people in the international shipping industry, but a substantial shift is happening in the industry.

And that shift is actually exciting.

Seeing more autonomous pieces in the supply chain does not mean people are removed from the process. But the shift will change the type of jobs that dominate the industry.

1st automated, electric, emission free container ship by Yara International & Kongsberg Gruppen

1st automated, electric, emission free container ship by Yara International & Kongsberg Gruppen

Costas Paris reports in The Wall Street Journal that before this automated ship takes voyages completely on its own, “a single container will be used as a manned bridge on board. Then the bridge will be moved to shore and become a remote-operation center. The ship will eventually run fully on its own, under supervision from shore, in 2020.”

People still have a place in this automated future of shipping. But that role is changing. Managing the navigation of ships, trucks, and port equipment from a distance is where jobs in the field are heading.

As people move to rooms to program navigation and manage automated shipping machinery, it means less physical risk to persons.

Dockworker, truck driver, and ship crew vocations are dangerous jobs. Perhaps putting self operating machines in those places takes a little adventure out of the process, but it should eventually mean fewer injuries and deaths in the supply chain.

Over the past few years, we’ve shared a number of international shipping tragedies that have claimed the lives of people. Eight people died at the Port of Genoa in Italy a few years ago when a container ship crashed into the dock and toppled a control tower. About two years ago, 33 people were killed when the cargo ship El Faro lost power in the path of Hurricane Joaquin. Just a couple months ago, 7 U.S. sailors were killed in a collision between a containership and Navy destroyer.

These aren’t by any means the only international shipping tragedies that, with a heavy heart, we’ve had to share with our readers. They’re just the first three that came to mind.

Imagine how many future tragedies could be avoided if when a ship goes down there is no one onboard.

Of course, there is much work to be done to make sure the use of automated ships is done safely. Just like automated trucks and cars are not just roaming the streets all over on their own, crew-less ships won’t just take over the oceans the moment an automated ship gets built. There are laws to consider, technology to be developed, logistics to be worked out… But these things are coming.

 

Robert Wall and Costas Paris report in the Wall Street Journal that “Ship designers, their operators and regulators are gearing up for a future in which cargo vessels sail the oceans with minimal or even no crew.”

They even quote Palle Laursen, head of Maersk Line Ship Management as saying, “The benefit of automation is as an enabler of further efficiency across the 630 vessels we operate.”

Now, the Yara Birkeland, the autonomous ship being touted in the video at the top of this post, is nowhere near as big as the typical container ship you see carriers like Maersk employing on the seas. Its capacity will only be 150 TEUs. Compare that to the literally thousands of shipping containers a typical cargo ship hauls nowadays and it might not seem like much. However, it is a huge, huge first step toward the emergence of automated ships.

Maersk’s interest in automated ship technology is of special significance. You know once Maersk, as the leader in ocean shipping, rolls out with an automated cargo ship, the rest of the world’s carriers will quickly follow.

Just as exciting as the automation of the Yara Birkeland is its ecological impact. Or lack thereof. Completely electric with zero emissions, the Yara Birkeland is also a big step forward in greener shipping for an industry that has come under attack for its emissions of greenhouse gases, despite the focus ocean shipping has had on reducing its ecological impact over the last several years.

I can just hear the classic Temptations song blasting from the deck of this automated, electric, zero emissions cargo ship: “Get ready ’cause here I come.”

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ILWU Agrees to Contract Extension! https://www.universalcargo.com/ilwu-agrees-to-contract-extension/ https://www.universalcargo.com/ilwu-agrees-to-contract-extension/#respond Thu, 03 Aug 2017 05:31:40 +0000 https://www.universalcargo.com/?p=8238 It’s actually happening. The International Longshore & Warehouse Union (ILWU) is extending its contract before the current one expires. This might be one of the most exciting news items we’ve ever shared on the Universal Cargo blog. It isn’t actually official yet, but Alexander Whiteman reported in The Loadstar that the rank and file vote […]

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It’s actually happening. The International Longshore & Warehouse Union (ILWU) is extending its contract before the current one expires. This might be one of the most exciting news items we’ve ever shared on the Universal Cargo blog.

It isn’t actually official yet, but Alexander Whiteman reported in The Loadstar that the rank and file vote to extend the contract between the union of dockworkers and their employers at West Coast ports is projected to pass:

US west coast ports received a welcome boost on Friday with early projections indicating that port workers had approved an extension to their collective bargaining agreement (CBA).

The International Longshore and Warehouse Union (ILWU) said reporting from local unions suggested the CBA extension with the Pacific Maritime Association (PMA) would pass by 67%.

Now, we don’t exactly like to call votes early (remember that whole election thing between Hilary Clinton and Donald Trump?), but it’s time to get excited.

Actually, we were already starting to get excited back at the beginning of May when our longshoremen friend David Griffen indicated his belief that the vote would approve the contract extension before ballots even went out.

David Griffen believes ILWU contract extension will pass

That was shortly after the news broke that the extension was going out to the rank and file to be voted on. Before his response, I had a little trouble believing the ILWU would actually break from tradition and extend its contract early.

Mr. Griffen always seems to be up on the latest news at the docks, dropping Universal Cargo a quick tweet on Friday, the very day the projection of the vote passing was made, to remind us that his prediction was correct.

David Griffen Correct ILWU extending contract

“Not bad for a country longshoreman,” Griffen says. No, not bad. Not bad at all. Thanks for having your finger on the pulse, David.

This isn’t just not bad, it’s great news for West Coast ports, shippers, and everyone, really, involved in the supply chain of international shipping.

In the past when contract negotiations between the ILWU and PMA rolled around, costly disruptions often happened to the supply chain. Strikes, slowdowns, and lockouts at the ports would threaten shippers’ ability to import and export goods in a timely manner.

During the last set of negotiations, congestion got so bad at West Coast ports that agricultural exports rotted on the docks, goods never made it to store shelves for the holiday shopping season, and U.S. businesses lost foreign trade partners.

Because the unions’ top weapons for gaining leverage in negotiations are strikes, threat of strikes, and slowdowns, the dockworker unions, including the ILWU and International Longshoremen’s Association (ILA) on the East and Gulf coasts, traditionally have a policy of neither extending contracts nor completing negotiations on new contracts before the expiration of current contracts.

It was actually the ILA that gave shippers a glimmer of hope that this tradition, which is so harmful to the U.S. economy, might change. Back in 2015, when the huge financial losses from the terrible West Coast port congestion during the contentious contract negotiations between the ILWU and PMA were fresh on shippers’ minds, the ILA and United States Maritime Alliance (USMX) announced plans to open early discussions on a new, long-term contract. That was three years before the expiration of the current one.

Unfortunately, that may have just been talk to get shippers to continue to divert cargo from West Coast ports to East Coast ports as substantial talks on a new contract have not taken place, and we’re now just about a year away from the current contract expiring at the East and Gulf Coast ports.

I was skeptical about the ILA and USMX actually negotiating a new contract early back then, finishing the blog post about it with:

I’d like to think this is a genuine act on the parts of the USMX and ILA to change the negotiating process that is so damaging to shippers and reach a long-term contract before the current one expires. Of course, I also wanted to believe the ILWU and PMA’s pledge to keep cargo moving during their contract negotiations.

Actions will speak louder than words.

Perhaps the actions of the ILWU to extend its contract early will set an example for its sister union on the other side of the country to follow suit. Contract actions (or lack thereof) on both sides of the country are certainly speaking loudly to shippers.

The extension will take the ILWU contract through July, 2022. Official results of the vote will be released Friday, August 4th.

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LA Dodgers Shipping Service Sets Example to Increase Your Business Profits https://www.universalcargo.com/la-dodgers-shipping-service-sets-example-to-increase-your-business-profits/ https://www.universalcargo.com/la-dodgers-shipping-service-sets-example-to-increase-your-business-profits/#respond Tue, 01 Aug 2017 11:31:24 +0000 https://www.universalcargo.com/?p=8229 Read to the end for a tip that could make your business stand out from the competition and increase your profits. For those of you who don’t know, Universal Cargo’s headquarters is located in Culver City, which is part of the Los Angeles metropolitan area. That means we’re not too far away from the best […]

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Read to the end for a tip that could make your business stand out from the competition and increase your profits.

For those of you who don’t know, Universal Cargo’s headquarters is located in Culver City, which is part of the Los Angeles metropolitan area. That means we’re not too far away from the best baseball team in MLB, the L.A. Dodgers.

For those of you who would like to debate the Dodgers’ baseball supremacy, just check out the team’s league leading 74-31 record (as of 7/31/17).

Magic Johnson even went so far as to guarantee the Dodgers win the World Series this year according to a story from the L.A. Times.

Granted, Magic Johnson might have some bias when it comes to the Dodgers as co-owner of the team. However, he does know a little something about championships, having won five with the L.A. Lakers, and he’s ready to see another trophy shipped to the city.

All of that taken into consideration, what better way to do a little team building and bonding than for the Universal Cargo team to take a trip to Dodger Stadium for a little Dodgers baseball?

Universal Cargo at Dodger StadiumLast Wednesday (7/26), Universal Cargo did just that as evidenced by the picture to the right. Uh, Ray and Wesley, I think you’re supposed to have your fists in the air.

If you ever go to Dodger Stadium, take a moment to check out the little merchandise shops. No, I’m not trying to get you to buy Dodgers gear, but if you decide to do so, you can ship your merchandise home directly from the park.

Yes, this blog post does have something to do with shipping after all.

According to an expert friend who loves to play any game that actually pays you, The L.A. Dodgers partnered with UPS to offer fans the service of shipping the gear they buy on game day home instead of having to carry it around the stadium. Imagine that, shipping as a customer service.

There’s actually a video on MLB.com about the Dodger Stadium “Ship it Home” service. In the video, Los Angeles Dodgers Executive V.P. and Chief Marketing Officer Lon Rosen says the Dodgers “lead the league in attendance.”

That’s just one more area the Dodgers lead the league, I guess.

Los Angeles ranks as the second biggest market in the U.S., behind only New York. Certainly, that helps the Dodgers have such high attendance. Maybe the fantastic weather of Los Angeles also helps the Dodgers beat out other teams for that number one attendance spot, but a focus on customer service also must be a huge factor in allowing the Dodgers to edge out even the New York Yankees, over in the number one market, for the top attendance around the league.

Dodger Stadium’s “Ship it Home” service is an example of that focus on customer service.

For Universal Cargo, shipping and customer service have always been linked. As a freight forwarder, our business is completely about customer service and shipping. For an MLB team, however, a shipping service is going above and beyond the standard operations of teams around the league. This shipping service is the Dodgers recognizing a need, or at least desire, from its fans or customers and then meeting it.

Providing a service that allows customers at Dodger Stadium to buy merchandise without having to lug it around the stadium or worry about spilling something on it, damaging it, or forgetting it creates the opportunity for the Dodgers organization to not only take better care of their customers, but also sell more merchandise. Win-win doesn’t just describe a typical pair of games for the Dodgers right now, it describes the results of this shipping service the organization has created.

The Dodgers’ shipping service sets a good example that all businesses could follow. Is there a need or desire your customers have that your business could create a service to take care of? There probably is. Think outside the box. Taking an extra step in customer service usually is not only beneficial for a business’ customer base but is also profitable for the business.

That’s the challenge Dodger Stadium shipping presents for all businesses: finding that extra area, need, or desire of customers that creates opportunity to provide new, improved, or increased customer service.

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You Won’t Believe What Was Shipped In This Potato Chip Can https://www.universalcargo.com/you-wont-believe-what-was-shipped-in-this-potato-chip-can/ https://www.universalcargo.com/you-wont-believe-what-was-shipped-in-this-potato-chip-can/#respond Thu, 27 Jul 2017 12:46:53 +0000 https://www.universalcargo.com/?p=8222 They say eating too many potato chips could eventually kill you; however, just opening these potato chip cans could cost you your life. A man was arrested after allegedly importing king cobras–yes the deadly snakes–from Hong Kong to the U.S. Apparently, the man and his accomplice thought the perfect shipping container for the international shipping […]

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imported cobra in can

Picture from U.S. Fish and Wildlife Service

They say eating too many potato chips could eventually kill you; however, just opening these potato chip cans could cost you your life.

A man was arrested after allegedly importing king cobras–yes the deadly snakes–from Hong Kong to the U.S.

Apparently, the man and his accomplice thought the perfect shipping container for the international shipping of a snake with venom strong enough to kill an elephant is a potato chip can.

I can just hear Samuel L. Jackson’s reaction to this story: “I’m tired of these mother-f*@#%ing snakes in these mother-f*@#%ing potato chip cans!”

A story this weird, this strange could only mean on thing…

Universal Bizargo shipping container

Universal Bizargo shipping container

That’s right, in an unprecedented move, Universal Cargo presents two Universal Bizargo stories in a row!

On Tuesday, we shared the story of four men found in a shipping container from Georgia. But today’s story completely dwarfs that one with its bizarreness.

Alene Tchekmedyian reported in the LA Times that the alleged recipient of the cans of king cobra snakes, Rodrigo Franco, “was arrested on a federal smuggling charge after a monthslong investigation that also involved the seizure of a young crocodile, three alligator snapping turtles and five diamond back terrapins, all of which are protected species…”

According to the article, it was actually back in March that customs officers discovered the cobras in potato chip cans that were being shipped to an apartment in Monterey Park, CA. Tchekmedyian goes on to write that Franco is being “charged with one count of illegally importing merchandise into the United States, which carries a maximum of 20 years in federal prison.”

cobra shipped in potato chip can

Picture from U.S. Fish and Wildlife Service

Franco is lucky a customs officer didn’t get bit by one of the snakes when inspecting his incoming potato chip cans. If that had happened, Franco might have found himself also facing a charge like criminal negligent homicide.

Each of the king cobras that were coiled up inside a potato chip can was reported to be about two feet long. That means the snakes were probably pretty young as, according to National Geographic, king cobras can reach 18 feet in length.

If you’re wondering what happened to the snakes, Tchekmedyian ended the article with “… two of the cobras seized in March are receiving care at the San Diego Zoo, while the third died for unknown reasons.”

This is just a hunch, but I suspect the unknown reason for the death of the third cobra was being shipped from Hong Kong to the U.S. in a potato chip can. Of course, like I said, that is just a wild guess.

For the record, if you want to follow in Franco’s footsteps and import cobras in potato chip cans, black mambas in cheese puff containers, or some other deadly animal in any kind food packaging, go ahead and do your international shipping through a company other than Universal Cargo.

But if you want to read weird stories about international shipping, check out the rest of the installments of our Universal Bizargo series listed below.

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Universal Bizargo: 4 Men Found in Shipping Container https://www.universalcargo.com/universal-bizargo-4-men-found-in-shipping-container/ https://www.universalcargo.com/universal-bizargo-4-men-found-in-shipping-container/#respond Tue, 25 Jul 2017 09:36:00 +0000 https://www.universalcargo.com/?p=8224 Imagine you’re a port security guard, walking up and down rows of stacked shipping containers when you hear cries for help. You investigate. Getting closer to the sounds, unsure exactly what you’ll find, you start to get nervous. The source of the cries is hard to establish, and soon you realize the cries for help […]

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Imagine you’re a port security guard, walking up and down rows of stacked shipping containers when you hear cries for help. You investigate. Getting closer to the sounds, unsure exactly what you’ll find, you start to get nervous.

The source of the cries is hard to establish, and soon you realize the cries for help are probably coming from inside one of the many shipping containers at the port.

One security guard at the Port of Montreal didn’t have to imagine this situation; it happened to him on Thursday (July 20th), according to a story from CBC News.

The security guard was able to locate the correct shipping container not only by the cries for help but also by a makeshift flag its occupants were waiving through a hole they’d drilled through the top of the container. That’s right, occupants of the container.

Universal Bizargo shipping container

Universal Bizargo shipping container

Four men were found inside the shipping container, which brings us to a new installment of Universal Bizargo, Universal Cargo’s blog series that shares the bizarre stories that come out of international shipping.

In a previous article on the story, CBC shared the account of a trucker who witnessed the stowaways being rescued from the container:

Andrei Medvedev, a truck driver who was going to pick a different container at the port, saw the slew of emergency vehicles, including paramedics and border police.

“I was kind of curious, kept looking and saw they were parked next to one of the 40-foot containers,” he said. “I saw paramedics coming out of this container with a stretcher with [someone on it].”​

According to the first CBC article mentioned above, the security guard who initially found the men was only able to do so because of a customs technicality. The shipping container the men were found in was set aside for inspection because it contained a vehicle.

When the security guard opened the door of the shipping container that had arrived over 24 hours earlier on an OOCL ship, the four men inside “were in poor condition and had to be taken to hospital,” according to CBC New. “They were suffering from dehydration and heat stroke.”

The men are refugees from Georgia, but apparently a publication ban from the refugee board hearing that ensued after the men’s discovery has made it impossible for CBC to report the identity of the men or why exactly they risked their lives in a shipping container to travel from Georgia to Canada.

This is not the first time we’ve shared the story of someone being found in a shipping container with our readers. In fact, the very first Universal Bizargo blog, posted way back in 2013, was about a hungover man who woke up to find himself in a sealed shipping container.

cute stowaway kitten from China to U.S.Even before that, we shared the story of a cute little kitten stowaway that was found in a shipping container that traveled all the way from China to the United States. Unfortunately, the original blog seems to have been lost, but a quick summary is given in a 2015 post that counted down our then 10 most entertaining shipping blogs.

Despite a few occurrences, it is still pretty bizarre when a shipping container is opened at a port and someone is discovered inside.

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Ports of LA & LB Release Clean Air Action Plan for Public Comment https://www.universalcargo.com/ports-of-la-lb-release-clean-air-action-plan-for-public-comment/ https://www.universalcargo.com/ports-of-la-lb-release-clean-air-action-plan-for-public-comment/#respond Thu, 20 Jul 2017 06:20:50 +0000 https://www.universalcargo.com/?p=8216 A draft of the 2017 Clean Air Action Plan (CAAP) update has been released by the Ports of Los Angeles and Long Beach. You have between now and September 18th to submit written comments on it. An updated CAAP was promised back in June when Los Angeles Mayor Eric Garcetti and Long Beach Mayor Robert Garcia […]

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Port of Los Angeles Smog

Smog over the Port of Los Angeles PICTURE: Nick C. Prior

A draft of the 2017 Clean Air Action Plan (CAAP) update has been released by the Ports of Los Angeles and Long Beach. You have between now and September 18th to submit written comments on it.

An updated CAAP was promised back in June when Los Angeles Mayor Eric Garcetti and Long Beach Mayor Robert Garcia signed a pact to update the plan with targets of zero emissions in the cargo handling machinery and trucks of the Ports of Los Angeles and Long Beach.

You would think the Port of Los Angeles Executive Director’s name was Gene Roddenberry rather than Gene Seroka based on his words upon the release of the 2017 CAAP update draft:

“These ports are going where no port has gone before.”

Obviously, there is excitement from the port directors upon releasing a plan that, if executed, would make the Ports of Los Angeles and Long Beach the greenest, cleanest, technologically-advanced-machine-est in the world.

[Seroka continued,] “Based on what we’ve already accomplished to promote healthy, robust trade through our gateway, we’re ready to make history again, looking at a new array of technologies and strategies to further lower port-related emissions in the decades ahead.”

“Working closely with all our partners has been crucial to our success. That same collaboration went into the development of the 2017 CAAP and will be indispensable going forward,” said Port of Long Beach Executive Director Mario Cordero. “Since 2006, the Clean Air Action Plan has been a model for programs to reduce health risks and air quality impacts from port operations worldwide. We remain committed to being leaders in seaport sustainability.”

Those are certainly nice words from the directors of the ports, but what exactly are the strategies the updated plan proposes to utilize to reach its lofty zero emissions goals?

The ports’ joint press release lists the strategies, grouped under four categories:

Clean Vehicles, Equipment Technology and Fuels

  • Starting in 2018, phase in clean engine standards for new trucks entering the port drayage registries followed by a truck rate structure that encourages the use of near-zero and zero emissions trucks, with the goal of transitioning to a zero emissions drayage fleet by 2035.
  • Reduce idling and support the state’s efforts to transition terminal equipment to zero emissions by 2030.
  • Update the Vessel Speed Reduction Program, expand the use of state-approved alternative technologies to reduce at-berth emissions, and encourage clean technology upgrades on ships to attract the cleanest vessels to the San Pedro Bay ports.

Freight Infrastructure Investment and Planning

  • Expand use of on-dock rail, with the long-term goal of moving 50 percent of all inbound cargo leaving the ports by rail.
  • Develop charging standards for electric cargo handling equipment.

Freight Efficiency

  • Develop a universal truck appointment system for the entire complex with the goal of minimizing truck turn times.
  • Create a voluntary Green Terminal Program to recognize terminal operators achieving high levels of freight movement efficiency.
  • Continue to explore short-haul rail, staging yards, intelligent transportation systems and other supply chain efficiency improvements.

Energy Resource Planning

  • Develop infrastructure plans to support terminal equipment electrification, alternative fuels and other energy resource goals.
  • Continue to develop and implement viable energy conservation, resiliency and management strategies.

The plan was just released on Wednesday (July 19th), but already there is plenty of criticism.

The Los Angeles Times published an article by Tony Barboza that headlines with the plan could cost $14 billion.

Barboza’s excellent article highlights a number of the criticisms of the plan, many of them coming down to the money it would cost to be realized:

One of the biggest questions raised Wednesday by industry and environmentalists was how the thousands of new trucks and pieces of equipment would be paid for — not to mention how quickly the change-over realistically could happen.

While environmentalists welcomed many elements of the plan, they criticized its lack of new targets for reducing smog-forming emissions as well as measures to ensure speedy progress and ease pollution-triggered health problems.

“The plan relies too heavily on yet-to-be-developed state regulations, millions in yet-to-be-located subsidies and voluntary programs,” said Melissa Lin Perrella, an attorney with the Natural Resources Defense Council. “At the end of the day, we have to ask if the words on paper will make the air safe to breathe. The plan is not there yet.”

And industry groups and truckers expressed big concerns about the price tag.

Weston LaBar, executive director of the Harbor Trucking Assn., said it was important “that we don’t saddle an industry that has invested billions of dollars in clean technology with a mandate that is not viable commercially or operationally.”

Business groups said the plan will place too heavy a burden on Southern California’s economy and put its freight-moving industries at a disadvantage at a time of increasing competition with other seaports.

Barboza’s article does much more than cover the criticisms of the plan and is certainly worth a read.

However, if you are really interested in the plan and concerned with its feasibility and potential impact, you can read the 2017 CAAP update itself by clicking here.

After you’ve read the plan for yourself, you can let your voice be heard in two ways.

The first way is by submitting written comments to CAAP@cleanairactionplan.org by 5 pm on September 18th.

The second is to attend a CAAP public workshop at 5 pm on August 30th at Banning’s Landing Community Center, located at 100 Water St. in Wilmington.

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How is the Panama Canal Expansion Working Out? https://www.universalcargo.com/how-is-the-panama-canal-expansion-working-out/ https://www.universalcargo.com/how-is-the-panama-canal-expansion-working-out/#respond Tue, 18 Jul 2017 12:26:14 +0000 https://www.universalcargo.com/?p=8204 It’s hard to believe it, but a year has already passed since the unveiling of the expanded Panama Canal. Plagued with delays and increases in costs, it once seemed the expansion project would never be complete. Now that some time has passed with the operation of the expanded canal, international shipping experts are starting to analyze whether […]

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Panama Canal

Picture: Panama Canal – Looking Back by Roger W.

It’s hard to believe it, but a year has already passed since the unveiling of the expanded Panama Canal. Plagued with delays and increases in costs, it once seemed the expansion project would never be complete. Now that some time has passed with the operation of the expanded canal, international shipping experts are starting to analyze whether the expansion was successful and who is benefitting most from the widened gateway between the Pacific and Atlantic oceans.

Xeneta CEO Patrik Berglund recently wrote an article on just that topic titled, “The Panama Canal – Was the Expansion Worthwhile?”

The ultimate answer Berglund gives to the question he raises in the title is resoundingly in the affirmative as he finishes the article with, “yes, it would be fair to say the Panama Canal expansion has been a success to both importers, exporters, and consumers on both sides of the Pacific Rim.”

Berglund also highlights the benefits of the Panama Canal expansion for carriers with:

The expansion was a god-send for the cash-strapped competitive industry. At no cost to the carriers, they now have legitimate options on shipping to the US, and are able to utilize either or both depending on the volumes of cargo they are carrying. If times are good, Supra-Panamax’s and Mega’s can use the Suez Canal, while in leaner times, carriers can rely on their 13,000 TEU vessels and transit through Panama. Or they can operate both; with the ports of both Baltimore and Savannah working hard to improve their intermodal reach into America’s industrial Midwest and south.

While the expansion appears good for the international shipping industry all around, the results do not actually appear to be as positive for Panama and the Panama Canal Authority according to Berglund’s article.

While the debt incurred by the Panama Canal Authority (ACP) is separate from Panama’s sovereign debt, many say the 12% ROI promised is specious and repayment will not be as smooth as promised. Transit tolls cannot be raised above those charged by the Suez Canal Authority, and with China-USEC transit times via either canal within 36 hours of each other, Panama offers no serious advantages; in truth China-Canada WC -rail offers the best service into the US Midwest and Canada as far east as Montreal. That’s sobering competition.

That does not mean the Panama Canal expansion is unsuccessful for Panama and the ACP, but it will take some time for the costs of the expansion to be made up.

In fact, Berglund does say in the article that the expansion was “absolutely not” a waste of time and money for Panama, adding, “Panama had to either enlarge the canal or fade into shipping obscurity.”

For the last several years, we’ve watched U.S. East Coast ports work on expansions and infrastructure improvements themselves to receive bigger ships traveling through the Panama Canal, hoping to increase their share of the import market over West Coast ports, especially from China and other major Asian exporting countries. Those efforts continue.

Berglund’s article addresses the cargo growth East and Gulf Coast ports are experiencing, but also points out how U.S. exporters are benefitting from the canal expansion, not just importers:

Surprisingly, equal beneficiaries of the expansion seem to be increased exports of LNG, LPG, coal, and grain from the US Gulf to Asian ports that are now able to transit through the expanded Panama Canal, along with shipments of grain coal, and soybeans that are now flowing to China and Asia from Colombia, Argentina, and Brazil…

Xeneta’s PR Manager Fernando Nikolic reached out to Universal Cargo, sharing this article with us. We thought it was a good, easy to read article and decided to share it with you, our readers.

If you have an article on international shipping you think we’d enjoy or that would benefit our readers, comprised largely (but certainly not exclusively) of shippers who import and export out of the U.S., please feel free to share it with us.

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Port of Virginia’s Growth Makes it a Major U.S. Port to Watch https://www.universalcargo.com/port-of-virginias-growth-makes-it-a-major-u-s-port-to-watch/ https://www.universalcargo.com/port-of-virginias-growth-makes-it-a-major-u-s-port-to-watch/#respond Thu, 13 Jul 2017 18:25:52 +0000 https://www.universalcargo.com/?p=8200 The Port of Virginia just had a very good fiscal year. In a press release from Port of Virginia Spokesman Joseph D. Harris, the port reported: The Port of Virginia® handled 231,675 twenty-foot equivalent units (TEUs) in June, a new record for the month and a 7 percent increase when compared with the same month last year. […]

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Port of Virginia

Port of Virginia picture by Missy Schmidt from Hampton Roads, Virginia

The Port of Virginia just had a very good fiscal year. In a press release from Port of Virginia Spokesman Joseph D. Harris, the port reported:

The Port of Virginia® handled 231,675 twenty-foot equivalent units (TEUs) in June, a new record for the month and a 7 percent increase when compared with the same month last year. With this achievement, the port completed fiscal year 2017 having handled a record-setting 2.7 million TEUs (twenty-foot equivalent units).

The Port of Virginia has been growing and strengthening its position for quite some time now.

Back in 2015, we posted a blog on the Port of Virginia looking strong in the battle of East Coast versus West Coast ports. The growth the Port of Virginia experienced then was remarkably similar to the growth reported in this fiscal year.

Here are the details from back then:

The port authority reported 7.2% increase from September of 2014 to September of 2015 with cargo container volumes reaching 215,520 TEUs.

American Shipper reports:

September marked the seventh straight month of box volumes exceeding 210,000 TEUs as the mid-Atlantic port continued to receive a portion of cargoes shippers have diverted from West Coast gateways to avoid congestion issues.

Containerized exports at the port grew 8.4 percent, while imports were up 5.7 percent.

Year-to-date the Port of Virginia is 8.8 percent ahead of its 2014 volumes with 1.9 million TEUs handled so far in 2015.

The port is also 6 percent ahead of the previous year’s volumes for the first three months of the fiscal year, which began July 1, according to the Virginia Port Authority.

In comparison with last September, rail units were up 16 percent, Virginia Inland Port (VIP) volumes grew 43 percent, truck volumes were up 2 percent and vehicle units were up 133 percent.

With the increased volume, despite the challenges that increase brings, is resulting in growing financial strength for the port. The Port of Virginia reported:

The port’s consolidated financial performance in the first two months of the fiscal year (July/August) is positive as well: Total operating revenues are $80.5 million and the operating income is $3.5 million. The audited fiscal year 2015 results confirmed operating income of $13.6 million in, which is an improvement of $30.1 million when compared with the results from the previous fiscal year.

In 2015, The Port of Virginia, along with the rest of the East and Gulf Coast ports, was in a position to benefit from the contentious ILWU contract negotiations and severe congestion at West Coast ports that had shippers diverting cargo from there.

The expanded Panama Canal continues to give East and Gulf Coast ports opportunity for increased capacity. However, just because larger ships can get through the Panama Canal than before does not mean that East and Gulf Coast ports will automatically experience cargo growth.

The Port of Virginia’s strong and persistent growth is impressive. To get a better feeling for the kind of success this is for the port, here’s more from its press report:

“We finished fiscal year 2017 with a solid volume increase and thus marked our fourth consecutive fiscal year of volume growth,” Virginia Port Authority CEO and Executive Director John F. Reinhart said. “We grew in the right areas, we moved a record-amount of volume across all modes of transportation, train, barge and truck – and did so safely — and we continue to improve our service levels.”

The mid-Atlantic port’s fiscal 2017, which ran from July 1 through June 30, saw cargo throughput increase in several categories, including a 7.3 percent rise in containerized cargo to 2.76 million TEUs; a 7.2 percent jump in total containers to 1.56 million; 568,894 total rail containers, an increase of 11.3 percent; and 950,311 total truck containers, a year-over-year rise of 4.6 percent.

“The Port of Virginia team and its labor partners accomplished a lot in fiscal year 2017. We became the leading rail port on the U.S. East Coast; we announced several significant initiatives; we moved record amounts of cargo; we embarked on the biggest expansion – investment — this port has ever seen and we were the first port to host the COSCO Development, which was biggest ship to ever call the U.S. East Coast,” Reinhart said. “We will not let up, there is still much work to be done and we are up to the task.”

The work to be done that Reinhart referred to above includes the projects to expand capacity at the Port of Virginia, allowing it handle the megaships that deliver great quantities of shipping containers at once, as is taking over as the practice of the international shipping industry.

The Port of Virginia obviously plans to continue to grow as it improves its ability to handle more capacity.

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Shrinking Carrier Competition: Cosco Buying OOCL https://www.universalcargo.com/shrinking-carrier-competition-cosco-buying-oocl/ https://www.universalcargo.com/shrinking-carrier-competition-cosco-buying-oocl/#respond Tue, 11 Jul 2017 13:31:10 +0000 https://www.universalcargo.com/?p=8196 On Sunday (July 9th, 2017), Cosco Shipping Holdings Co., Ltd. (Cosco); Shanghai International Port Group Co., Ltd (SIPG); and Orient Overseas International Limited (OOIL) announced jointly that Cosco and SIPG have made an offer to acquire OOIL. If it wasn’t clear enough that OOIL is accepting the offer by the fact the company jointly made […]

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YouTube Video

Cosco Buying OOCLOn Sunday (July 9th, 2017), Cosco Shipping Holdings Co., Ltd. (Cosco); Shanghai International Port Group Co., Ltd (SIPG); and Orient Overseas International Limited (OOIL) announced jointly that Cosco and SIPG have made an offer to acquire OOIL.

If it wasn’t clear enough that OOIL is accepting the offer by the fact the company jointly made the announcement, the press release states, “The controlling shareholders who currently holds 68.7% of OOIL has irrevocably undertaken to accept the Offer [sic].”

In other words, this is happening. The deal is subject to regulatory approval, of course, and approvals of Cosco’s shareholders, according to the release. However, it’s hard to imagine anyone thinking those conditions will not be met. So, yeah, this is happening.

The approximately $6.3 billion deal is one more item in a long stream of events shrinking the pool of carrier competition in the international shipping industry.

OOIL is the parent company of the ocean carrier Orient Overseas Container Line (OOCL). Those of you who are avid readers of this blog know this carrier buyout has to go onto my already insane Carrier Craziness Bracket.

Carrier Craziness Bracket

It’s gotten to the point that it’s hard to read the Carrier Craziness Bracket because of all the shrinking of competition through buyouts, mergers, bankruptcy, and groupings into alliances. In fact, I called this bracket busted long ago. However, it does help to see just how much action has happened over the last few years in consolidating the ocean shipping industry.

This particular consolidation move is obviously big for Cosco.

On Monday, Cosco, SIPG, and OOIL followed up their initial press release with another release that illuminates just how big Cosco will be after buying out OOCL:

Post-closing, the combined COSCO SHIPPING Lines and OOCL will become one of the world’s leading container shipping companies with more than 400 vessels and capacity exceeding 2.9 million TEU (including orderbook). The outstanding management system and service capabilities, as well as established global shipping network, of COSCO SHIPPING Lines and OOCL can provide customers of both COSCO SHIPPING Lines and OOCL with more diversified product offerings and better service experience.

This puts Cosco firmly in the number three spot in the world ranking of carriers by size according to capacity, behind only Maersk and MSC.

Despite Cosco buying out OOCL, shippers will still see both carrier names when they look at the market, as the companies made it clear in both press releases that Cosco will maintain OOCL’s listed status.

To that effect, here’s what the carriers said in the initial press release:

Post closing, COSCO SHIPPING Lines and OOIL will continue to operate under their respective brands, providing container transport and logistic services. By leveraging the strengths of each company and achieving synergies, the businesses will enhance their operating efficiencies and competitive positions to achieve sustainable growth in the long term. Both companies are members of the Ocean Alliance, and will continue to work together under this framework.

“We respect OOIL’s management team and its expertise, not to mention its people, brand and culture,” said Mr. Wan Min, Chairman of COSCO SHIPPING Holdings. “Our company remains committed to enhancing Hong Kong as an international shipping center. Following completion, we will continue to invest and strengthen our industry leadership, providing a more extensive platform for the employees of OOIL to excel.”

Cosco and SIPG are paying cash for this deal. In the end, the split up of OOIL’s stock will have Cosco holding 90.1% and SIPG holding 9.9%.

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Maersk Hit By Cyber Attack! https://www.universalcargo.com/maersk-hit-by-cyber-attack/ https://www.universalcargo.com/maersk-hit-by-cyber-attack/#respond Thu, 29 Jun 2017 14:30:58 +0000 https://www.universalcargo.com/?p=8187 In this age when people and businesses are more and more dependent upon technology, it seems no company–no matter how big–is invulnerable to cyber attack. Or is it cyberattack? Or cyber-attack? Whichever of the three current (and generally accepted) spellings for cyber attack you use, Maersk, the world’s largest ocean carrier by capacity, just fell victim. […]

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Maersk Cyber AttackIn this age when people and businesses are more and more dependent upon technology, it seems no company--no matter how big--is invulnerable to cyber attack. Or is it cyberattack? Or cyber-attack?

Whichever of the three current (and generally accepted) spellings for cyber attack you use, Maersk, the world’s largest ocean carrier by capacity, just fell victim.

Yes, this attack has affected Maersk operations around the world, but what’s more than that is the attack has caused terminals in U.S. ports to shut down.

Bruce Barnard reported in the Journal of Commerce (JOC):

The Maersk group has been hit by a cyberattack that has affected its operations around the world, closing terminals in the ports of New York and New Jersey, Los Angeles, and Rotterdam

The Danish transport and energy group said its information technology (IT) systems are down across multiple sites and business units owing to the attack.

Maersk actually operates more terminals than just the ones mentioned Tuesday in the JOC article. All Maersk operated terminals are likely affected, though not all have shut down.

ABC News posted an Associated Press article, giving more details on the effect this cyber attack is having:

Ports operated by the Danish shipping giant A.P. Moller-Maersk are still crippled following this week’s cyberattack.

An official with the Alabama State Port Authority, James K. Lyons, says crews at the Maersk’s APM terminal in Mobile, Alabama, have been loading and unloading containers in manual mode, without the normal computerized coordination. Lyons says the APM operation at Mobile handles 1,000 to 1,500 cargo containers each day….

APM gate operations at Port Elizabeth in New Jersey are expected to remain shuttered through at least Thursday. Port Elizabeth is APM’s largest terminal on the East Coast of North America.

In Los Angeles, there’s minimal impact — but only because no ships had been scheduled to load or unload at the ATM Terminal there on Tuesday or Wednesday. There’s no estimate on when the terminal will reopen.

… APM has 189 port and inland facilities in 61 countries.

Obviously, this whole situation is causing cargo delays for Maersk customers while creating some port congestion around the world. In a Reuters article, Teis Jensen reports that this attack “has also led to congestion at some of the 76 ports run by its APM Terminals unit, including in the United States, India, Spain and the Netherlands.

This cyber attack that Maersk fell victim to has all the appearances of cyber extortion, ransomware, or hacker blackmail. It also hit many more businesses than just Maersk.

Logistics Management shared an article that stated:

A Bloomberg report said that the cyberattack started in Ukraine yesterday and infected computer networks and demanded $300 million in cryptocurrency to unlock their systems. And by midday Tuesday, an estimate from Kaspersky Labs said around 2,000 users has been attacked, with organizations in Russia and Ukraine being the most affected.

Despite all the signs of this massive attack being motivated by the acquisitiveness of a hacker or group of hackers, according to a New York Times article yesterday, the actual motive of the cyber attack may have been more sinister. The virus, causing companies like Maersk so much pain, initially targeted tax accountants in the Ukraine and may have been designed to paralyze the country’s vital computer systems on the eve of Constitution Day, Ukraine’s holiday that celebrates its independence.

No matter the motive behind the cyber attack, shippers are affected because Maersk is affected (and so is FedEx’s TNT Express). Yesterday, Maersk shared the following in an email with its customers:

We are sorry but maerskline.com is temporarily unavailable

28th June 10.45 CET

Dear Customer

We apologize that you are unable to access the website.

Following on from our communications yesterday (27th June 2017) regarding the impact of the global cyber attack, Petya, on A.P. Møller-Maersk group, we can confirm that some of our IT and communications infrastructure have been impacted and we have proactively shut down as a security measure.

For now this means the following:

All immediate vessel operations will continue as planned, making the majority of planned port calls.

Access to most ports is not impacted, however some APM Terminals are affected and gates are closed.

Cargo in transit will be offloaded as planned. Import Cargo will be released to credit customers.

At the present time we are unfortunately unable to serve new quotes or accept future bookings. However we do greatly appreciate your patience and look forward to carrying your cargo as soon as it is practically possible.

Unfortunately due to the impact on our IT and communications systems we are limited in our ability to communicate with you. We will continue to email you when appropriate and will be updating our Social Media channels regularly.

We apologize once again for any inconvenience this may cause your business and we are working hard to resume normal operations as soon as possible.

The Maersk Team

Of course, we here at Universal Cargo are following this story closely, and will share major developments on our blog that affect shippers.

On a language note: cyber attack and cyberattack are the dominate spellings, with cyberattack quickly growing in prevalence over cyber attack, which had been the preferred spelling in terms of frequency. While cyber-attack is still regarded as acceptable, it has fallen out of favor and is not used nearly as often as the other two spellings.

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Investigations in Deadly Collision Between NYK Containership & US Destroyer https://www.universalcargo.com/investigations-in-deadly-collision-between-nyk-containership-us-destroyer/ https://www.universalcargo.com/investigations-in-deadly-collision-between-nyk-containership-us-destroyer/#respond Tue, 27 Jun 2017 11:17:27 +0000 https://www.universalcargo.com/?p=8185 Tragic news came out of the international shipping industry about a week ago when a Nippon Yusen Kabushiki Kaisha (NYK) container ship collided with a US Navy destroyer, killing seven US sailors. New details are emerging as investigations into the collision continue. It was about 1:30 in the morning on Saturday, June 17th in the Pacific […]

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USS Fitzgerald struck by NYK containership

YOKOSUKA, Japan (June 17, 2017) The Arleigh Burke-class guided-missile destroyer USS Fitzgerald (DDG 62) returns to Fleet Activities (FLEACT) Yokosuka following a collision with a merchant vessel while operating southwest of Yokosuka, Japan. (U.S. Navy photo by Mass Communication Specialist 1st Class Peter Burghart/Released)

Tragic news came out of the international shipping industry about a week ago when a Nippon Yusen Kabushiki Kaisha (NYK) container ship collided with a US Navy destroyer, killing seven US sailors.

New details are emerging as investigations into the collision continue.

It was about 1:30 in the morning on Saturday, June 17th in the Pacific waters off the Izu Peninsula of Japan when the fatal collision occurred.

The smaller guided-missile destroyer USS Fitzgerald suffered severe damage to its starboard side.
“The collision affected Fitzgerald’s forward starboard side above and below the water line, causing significant damage and associated flooding to two berthing spaces, a machinery space, and the radio room,” according to a statement from US 7th Fleet.
The merchant vessel involved is the ACX Crystal, a container ship flagged in the Philippines, officials said….
No one aboard the Crystal was hurt, and no oil spilled from the vessel, NYK said.
At the time of the reporting, a few crew were injured, including the Crystal’s commanding officer, and seven were missing.

Unfortunately, hopes of rescuing the missing crew members were dashed by the news reported by Brad Lendon, Barbara Starr, and Steve Almasy on CNN.com:

Seven missing sailors from the USS Fitzgerald were found dead in flooded berthing compartments following the warship’s collision with a merchant vessel, a US military official said.

The Navy’s 7th Fleet said searchers found the bodies Sunday morning, Japan time, after the guided-missile destroyer returned to its base in Japan.

The Navy on Sunday released sailors’ names. The deceased sailors are:
— Gunner’s Mate Seaman Dakota Kyle Rigsby, 19, from Palmyra, Virginia
— Yeoman 3rd Class Shingo Alexander Douglass, 25, from San Diego
— Sonar Technician 3rd Class Ngoc T Truong Huynh, 25, from Oakville, Connecticut
— Gunner’s Mate 2nd Class Noe Hernandez, 26, from Weslaco, Texas
— Fire Controlman 2nd Class Carlos Victor Ganzon Sibayan, 23, from Chula Vista, California
— Personnel Specialist 1st Class Xavier Alec Martin, 24, from Halethorpe, Maryland
— Fire Controlman 1st Class Gary Leo Rehm Jr., 37, from Elyria, Ohio

Sailors killed on USS Fitzgerald

Amazingly, the crew managed to keep the USS Fitzgerald from sinking despite the fact it was heavily taking on water.

Exactly how this collision between NYK container ship and US warship occurred is still under investigation, but Mark Edward Nero reported in American Shipper:

The NYK-chartered containership that collided with a U.S. Navy vessel off the coast of Japan on June 17 was on autopilot at the time of the early morning collision, a preliminary investigation has found.

According to tracking data from the Automatic Identification System, the ACX Crystal was being controlled by a computerized navigation system at the time of the collision, the U.S. Navy 7th Fleet has confirmed. The possibility of the system having malfunctioned is one of the issues currently being investigated.

Whether the container ship’s navigation system malfunctioned is not the first issue to be reported that is being investigated. ABC News published an Associated Press article by Mari Yamaguchi that reported there was about an hour delay before the crew of NYK’s Crystal reported the collision:

Japan’s coast guard is investigating why it took nearly an hour for a deadly collision between a U.S. Navy destroyer and a container ship to be reported.

A coast guard official said Monday they are trying to find out what the crew of the Philippine-flagged ACX Crystal was doing before reporting the collision off Japan’s coast to authorities 50 minutes later.

A track of the much-larger container ship’s route by MarineTraffic, a vessel-tracking service, shows it made a sudden turn as if trying to avoid something at about 1:30 a.m., before continuing eastward. It then made a U-turn and returned around 2:30 a.m. to the area near the collision.

The coast guard initially said the collision occurred at 2:20 a.m. because the Philippine ship had reported it at 2:25 a.m. and said it just happened. After interviewing Filipino crewmembers, the coast guard has changed the collision time to 1:30 a.m.

It will have to be seen if the delay in reporting the incident was because of the crew being busy in the emergency situation of the collision or if there was some sort of negligence involved.

The waters the collision took place in contain very busy shipping lanes. There are strict navigation rules there to prevent collisions, and investigations should reveal whether or not all such rules were being observed at the time of this fatal collision.

Our hearts here at Universal Cargo go out to the family, friends, and crew mates of the lost sailors in this incident.

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Truckers Strike at Ports of Los Angeles and Long Beach https://www.universalcargo.com/truckers-strike-at-ports-of-los-angeles-and-long-beach/ https://www.universalcargo.com/truckers-strike-at-ports-of-los-angeles-and-long-beach/#respond Tue, 20 Jun 2017 11:57:32 +0000 https://www.universalcargo.com/?p=8180 Yesterday (Monday, June 19th), truckers formed picket lines at the Ports of Los Angeles and Long Beach, going on strike over their classification as independent contractors. If this sounds familiar, it’s because truckers have been fighting this battle over their classification as independent contractors for the last few years. In April of 2015, Universal Cargo […]

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truckers strike Port of Los Angeles Long BeachYesterday (Monday, June 19th), truckers formed picket lines at the Ports of Los Angeles and Long Beach, going on strike over their classification as independent contractors.

If this sounds familiar, it’s because truckers have been fighting this battle over their classification as independent contractors for the last few years. In April of 2015, Universal Cargo published a blog that looked just like this one in title: Truckers Strike at the Ports of Los Angeles & Long Beach.

It seems that despite their efforts, very little has changed for truckers since then.

In 2015, the Ports of Los Angeles and Long Beach were trying to recover from massive congestion when truckers hit the terminals with their picket signs. There was worry then that the ILWU might join the truckers strike, showing solidarity and set port recovery way back.

Actually, the ILWU did join the truckers in their strike back in 2015, despite industry insiders projecting the union would not because the ILWU doesn’t get along with the International Brotherhood of Teamsters, which backs these truckers strikes. ILWU’s joining of the 2015 strike was very short lived, lasting only about an hour.

Expectations are that the ILWU will not get involved in the truckers strike that is continuing now.

According to the Long Beach Press-Telegram, the current truckers strike at the Ports of Los Angeles and Long Beach is actually the 15th such strike in the last 4 years.

In an article by Rachel Uranga, the Press-Telegram shares the following information about the current truckers strike:

Protests targeted Connecticut-based XPO Logisitics Inc. on Monday, but the strike will expand over the coming days to include more drivers at other trucking companies and will last until the end of the week.

The truckers strike we shared in this blog back in 2015 had pretty minimal effect on the ports, and although this current strike is growing and expected to last the week, it also is expected to have minimal impact on the ports.

By all reports so far, operations in the ports have not been affected by the truckers strike picketing at terminals. However, there have been some traffic delays at the ports, and that should be expected to continue.

The truckers’ grudge isn’t actually with the Ports of Los Angeles and Long Beach; it’s with trucking companies like XPO Logistics that do much transport business at the ports.

Truckers feel exploited and cheated out of fair wages and benefits while being forced to take on truck expenses by being classified as independent contractors, what they call a misclassification. Taking this issue to court, truckers have been awarded millions in lawsuits; however, the companies they work for appeal the rulings and the battle rages on.

While, as mentioned, truckers’ battle is not really with the ports, recent news out of the Ports of Los Angeles and Long Beach does have them concerned.

The pact signed by the mayors of Los Angeles and Long Beach last week, ordering the ports to update the Clean Air Action Plan (CAAP), includes a goal for zero-emission trucks at the Ports of Los Angeles and Long Beach by 2035. Truckers worry that the costs of this change may fall on them.

NBC Los Angeles, in an article on the truckers strike, shared the following quote, expressing truckers’ concern over the CAAP and how their classification makes it financially impactful for them:

“We support clean air, but there was no mention on how this Clean Air Action Plan would impact the drivers. We are concerned about who will end up paying for it,” said Eric Tate, secretary-treasurer of Teamsters Local 848.

“The last time they did this in 2008 with the Clean Truck Program, the corporations ended up passing on the cost to the workers by requiring them to lease a truck in order to get hired and illegally misclassifying them as `independent contractors,’ leaving very little for the workers to take home to their families. We don’t want that to happen again,” he said.

Here at Universal Cargo, we’ll keep an eye on this strike and any impacts it may have at the ports. As always, we’ll share news that impacts shippers here with you.

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CMA CGM Buying Mercosul as Maersk is Forced to Sell https://www.universalcargo.com/cma-cgm-buying-mercosul-as-maersk-is-forced-to-sell/ https://www.universalcargo.com/cma-cgm-buying-mercosul-as-maersk-is-forced-to-sell/#respond Thu, 15 Jun 2017 13:36:18 +0000 https://www.universalcargo.com/?p=8179 CMA CGM and Maersk announced in a joint press release Tuesday (June 13th) that the former is acquiring Mercosul Line from the latter: CMA CGM and Maersk Line have announced today that they have entered into a binding agreement whereby CMA CGM would acquire Mercosul Line, one of the leading players in Brazil’s domestic container shipping market. […]

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Mercosul Ship

Mercosul Ship

CMA CGM and Maersk announced in a joint press release Tuesday (June 13th) that the former is acquiring Mercosul Line from the latter:

CMA CGM and Maersk Line have announced today that they have entered into a binding agreement whereby CMA CGM would acquire Mercosul Line, one of the leading players in Brazil’s domestic container shipping market.

For Maersk Line to sell a profitable shipping line it owns seems counter to its current strategy of acquiring smaller carriers. However, it appears Maersk has no choice but to sell Mercosul if it wants to complete its acquisition of Hamburg Süd.

Maersk owning both South American shipping lines Hamburg Süd and Mercosul would not likely be approved by Brazilian competition authorities. The Maersk/CMA CGM press release alludes to this with:

The transaction will ensure that the cabotage sector in Brazil remains competitive and that customers continue to benefit from a comprehensive choice of carriers.

In April, Ben Meyer reported in American Shipper that Maersk would put Mercosul up for sale, clarifying the reasoning behind the sale with a direct quote from Maersk:

 “With the purpose of securing the Brazilian competition authorities’ (CADE) swift approval of the Hamburg Süd acquisition, it has been decided to divest Mercosul from A.P. Møller – Mærsk,” a Maersk spokesperson said in an email to American Shipper. “The divestment will ensure that the cabotage sector in Brazil remains competitive and that customers can benefit from a comprehensive choice of carriers.”

According to that article, “Hamburg Süd subsidiary Aliança Navegação e Logística currently controls 59 percent of the Brazilian cabotage market, while Mercosul controls around 21 percent…” That means if Maersk owned both shipping companies, the carrier would control a whopping 80% of the cabotage market in Brazil. There would only be one competitor left, Log-In Logística Intermodal, controlling the other 20%.

Since we usually only talk international shipping in Universal Cargo’s blog, cabotage is shipping between ports within the same country (generally by carriers or operators from another country).

Knowing since April that Maersk would sell Mercosul in order to complete its acquisition of Hamburg Süd, the real news that broke this week is who would be buying the shipping line from Maersk.

In his American Shipper article, Meyer listed not only CMA CGM as a contender to buy Mercosul but also Mediterranean Shipping Co. (MSC), COSCO Shipping, NYK, and Hapag-Lloyd.

Winning the bid, CMA CGM had this to say about acquiring Mercosul:

The acquisition of Mercosul Line would allow CMA CGM to strengthen its service offering to and from South America, most notably in Brazil, a market with a strong potential for development, especially on cabotage and “door-to-door” services.  This activity is part of CMA CGM’s core strategy, which  is to develop intra-regional sea transportation links and complementary services such as logistics.

The acquisition is not totally a done deal. It will, of course, have to receive approval from the proper regulatory authorities and is dependent upon Maersk’s completed acquisition of Hamburg Süd per Tuesday’s press release:

The Mercosul transaction is subject to Brazilian regulatory approval and the closing of Maersk’s Hamburg Süd acquisition. At the earliest, the integration of Mercosul within CMA CGM will start at the same time as the Hamburg Süd integration, which is expected in Q4 2017. Until then, Mercosul Line will continue business as usual.

At this time, there is no reason to believe we won’t see Maersk owning Hamburg Süd and CMA CGM owning Mercosul by the end of the year.

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Mayors Sign Pact for Zero Emissions at Ports of Los Angeles & Long Beach https://www.universalcargo.com/mayors-sign-pact-for-zero-emissions-at-ports-of-los-angeles-long-beach/ https://www.universalcargo.com/mayors-sign-pact-for-zero-emissions-at-ports-of-los-angeles-long-beach/#respond Tue, 13 Jun 2017 14:08:14 +0000 https://www.universalcargo.com/?p=8148 Zero emissions. That’s the goal the Ports of Los Angeles and Long Beach are working toward. Such a feat might have seemed impossible ten years ago. Or perhaps like the science fiction MacGuffin of a spy movie–some invention of a completely clean energy source that the rich and powerful petroleum dealers will kill to keep […]

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Port of Los Angeles Smog

Smog over the Port of Los Angeles PICTURE: Nick C. Prior

Zero emissions. That’s the goal the Ports of Los Angeles and Long Beach are working toward.

Such a feat might have seemed impossible ten years ago. Or perhaps like the science fiction MacGuffin of a spy movie--some invention of a completely clean energy source that the rich and powerful petroleum dealers will kill to keep from the world. Either way, zero emissions at the country’s busiest port complex would have been almost a laughable pipe dream a decade ago.

However, the progress that has been made at the Ports of Los Angeles and Long Beach over even the last decade have made the fantastic idea of emissions free ports a little more plausible. Living in Los Angeles ten years ago, I could see the smog when driving by the ports. Now, the skies seem much more blue.

That’s not to say emissions are no longer a problem at the ports, but there is significant improvement. Visible improvement.

Then yesterday (Monday, June 12th), the mayors of Los Angeles and Long Beach signed a pact to update the Clean Air Action Plan (CAAP) at the ports, targeting zero emissions in the cargo handling machinery and trucks of the Ports of Los Angeles and Long Beach.

“I know most of you, like I, can remember what the air actually looked like just ten years ago, twenty years ago,” Mayor of Long Beach Robert Garcia said. “And the work that has happened from the environmental side over this last decade, in particular through the ports, has produced the kind of air quality we have today and that we can see today in the sky in San Pedro.”

Port of Los Angeles Executive Director Gene Seroka stated, “While we have demonstrated great success for more than a decade in terms of reducing air emissions while simultaneously increasing cargo movement and jobs, all of us here today recognize there is much more work to do.”

Speaking on working together on the CAAP, Los Angeles Mayor Eric Garcetti said, “Together we will arrive at a document that lays out goals that are bold but absolutely worthy of our effort.”

The document the mayors signed gives a timeline for zero-emission technology at the ports. By 2030, the ports are to reach zero-emission cargo-handling equipment and zero-emission trucks by 2035. Emissions from ships calling upon the ports are also to continue being reduced.

The declaration the mayors signed yesterday is not a plan in and of itself. Rather, the joint declaration requires both the Ports of Los Angeles and Long Beach to update the CAAP by this November.

That makes it clear there will be much hammering out of goals, timelines, and plans over the upcoming months to continue making the ports greener. The ports must continue to balance their green initiatives with efficiency to protect the health of the surrounding communities and serve the shippers who import and export through the complex well.

When the updated CAAP is released, Universal Cargo will update you on the plan through this blog.

Here’s a video from the Port of Los Angeles, highlighting the press conference where the mayors signed the declaration as well as addressed the media with leaders from the ports:

YouTube Video

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2017 @Tour_Mindset Invitational Highlights https://www.universalcargo.com/2017-tour_mindset-invitational-highlights/ https://www.universalcargo.com/2017-tour_mindset-invitational-highlights/#respond Fri, 09 Jun 2017 19:31:53 +0000 https://www.universalcargo.com/?p=8147 Back in March, we told you about your chance to take a break from shipping and golf with the pros. Universal Cargo CEO Devin Burke‘s son, Micah Burke, is a pro golfer. He ran a pro-am golf tournament called the @Tour_Mindset Invitational that wasn’t just a golf tournament but a golf vacation where amateur golfers paired […]

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Back in March, we told you about your chance to take a break from shipping and golf with the pros. Universal Cargo CEO Devin Burke‘s son, Micah Burke, is a pro golfer. He ran a pro-am golf tournament called the @Tour_Mindset Invitational that wasn’t just a golf tournament but a golf vacation where amateur golfers paired up with pros.

Here are the highlights of this great event that took place May 17th-20th:

 

Our first pro-am event was a huge success!

A sincere thank you to everyone who competed in the 1st annual @Tour_Mindset Invitational presented by Perfect ProAms. We are immensely thankful for such a fantastic group of golfers to represent our first ever tournament field. We all shared some incredible memories together and we look forward to creating much more to come.

The @Tour_Mindset Invitational is a pro-am event that introduces a new breed of pro-am golf tournaments that create a fun and exciting experience for all amateur golfers, and, at the same time, empower tour professional golfers toward a breakthrough. Congratulations to Paul Imondi and Liv Cheng for both winning $10,000 plus paid Q-School and also earning the titles of the first ever @Tour_Mindset champions.

We now invite you to relive all of the memorable moments of our fantastic pro-am event. In case you missed out, here’s a little narrative of what went down at the 2017 @Tour_Mindset Invitational . Sign up for our future events and you’ll see youself in these photos next time around.

May 17th, 2017

Opening Party at TopGolf Scottsdale

The event kicked off with a private party at TopGolf-Scottsdale. This venue presented a really fun way for pro-am participants to check-in for the event as well as an opportunity for teams to mingle with each other before the competition began. We also invited some distinguished guests to join in on the fun and hang out with all the tour pros in the field.

  

May 18th: Round 1 begins…

1 pro + 1 am = ProAm team

Each Pro-Am team competed in a Chapman format and enjoyed a variety of fun games on the course. The Chapman format proved to be an exciting way to start off the competition as both the Pro and the Am had a vital role in the outcome of the score. Day 1 was all about team bonding and FUN!

 

Out on the course, we had a variety of fun games to compliment the day of competition including hole-in-one prizes for both the Pro and the Am and a “Beat the Pro” competition with Sean Shahi.

Sean Shahi at the “Beat the Pro” Station & Tyler Ostrovsky leading the way on “the Puttskee”

After golf, we all gathered beside the clubhouse to check out the scoring results and eat lunch at the taco bar. We all enjoyed kickin’ back and relaxing, playing the corn holes game laid out for everyone and also the extremely popular “Puttskee” game that proved to be the talk of the tournament.

Day 1 continues on…

Vision54 Seminar

At 2:30 pm, Vision54 joined in on the action and performed an exclusive seminar open only to our pro-am participants. The golfers that took advantage of this opportunity received invaluable mental game strategies that proved to be extremely beneficial in the competition, especially for the eventual winner, Liv Cheng.

Junior Clinic with the First Tee of Phoenix

To cap off a great first day of the 2017 @Tour_Mindset Invitational, a select group of tour professionals performed a clinic for the junior golfers of the First Tee of Phoenix. This was a truly special occasion as the tour pros gave back to their former selves by performing an instructional clinic, passing on years of knowledge to the future stars of the game. The clinic started with a fun game of “golf baseball” and finished with a long drive contest between Zach Cleland & Brian Hopkins, and the kids were the judges. You can see from these pictures how the kids decided the winner…

 

Round 2: Team-play resumes and the Pro competition begins…

The second day of the pro-am event symbolized a unique change in atmosphere as the format switched to Best Ball and allowed each professional, and amateur, to play their own ball out. Competing separately, 9 male and 8 female professionals tee’d it up Friday morning to begin the 36-hole competition for $10,000 plus paid Q-school. The 2-person team competition resumed on.

At the end of round 2, Paul Imondi and Liv Cheng both fired opening rounds of 67 and stood atop their respective divisions. With one round to go, Paul Imondi held a one-stroke lead over Kevin Stanek, and Liv Cheng jumped out in front with a 5 stroke lead over Katelyn Wright.

Liv Cheng also recorded her first ever hole-in-one on the 9th hole during this round. Congrats Liv!!

 

Horserace with all the Pros!

We were all having so much fun hanging out after the round that we decided to host a horse race competition. Each team had to have one guy and one girl, playing alternate shot against each other until only one remained. When all the dust settled, Katelyn Wright and Tyler Ostrovsky were crowned the winning team. Each of them won an Echo Dot from Amazon. Thanks to Talking Stick Golf Club for letting 18 people play one hole all at the same time, that was a sure highlight of the week.

Round 3: The Finale

The final round, culminating both the team and individual pro competitions, was set for tee times starting at 11 AM. The leaders were going off last and the teams were assigned a tee time based on the standing of the pro within his/her respective division. With each pro accompanied by their amateur partner, Liv Cheng & Katelyn Wright tee’d off last for the women and Paul Imondi & Kevin Stanek tee’d off last for the men.

The “First Tee” on the 1st tee

3 junior golfers from the First Tee of Phoenix program took turns hitting the ceremonial tee shots for each group on the tee. The kids that volunteered were so happy to meet all the pros and we had a number of donations to the program from all of our amateurs. We were able to raise $4,000 for the local junior golfers in the program.

Above: AJ Joiner and Lena Durette

Ceremonial tee shot in action

Competition gets tight: Only 9 Holes Left…

The leaders in both the men’s and women’s division shot over par on the front nine, opening up the race to everyone in pursuit. On the men’s side, Paul Imondi and Kevin Stanek shared the lead at (-4) with Sam Saunders one back at (-3) and Matt Hansen two back at (-2).

Pictured Left: Liv Cheng, Katelyn Wright, John Burnett.

On the women’s side, Liv Cheng stumbled early and lost her 5 stroke lead by the turn. Katelyn Wright stood atop at (-1) with Liv Cheng one back at even par. Melissa Mabanta shot an even par front nine to pull into 3rd place at (+5).

 

Only 4 holes left…

Sam Saunders had pulled within just one stroke of lead through 32 holes. Sam sat at 5 under par and was looking to catch Paul Imondi at 6 under par, who just birdied holes 12 and 13.

When Paul Imondi reached the leaderboard on hole #15, he saw that he only had a one-stroke lead over sam saunders and in that moment, he reacted like a true champion. Paul Imondi finished the tournament with 4 straight birdies (-10),  earning an impressive 5 stroke victory over Sam Saunders and the rest of the mens field.

The pro-am field gathered around the 18th green to watch the leaders finish. Paul Imondi closed his round with 6 birdies in his last 7 holes.

When the women’s final group reached hole number 15, Liv Cheng and Katelyn Wright were tied at even par. They matched each other shot for shot coming down to the end with the entire pro-am field intently watching.

Katelyn Wright battled the entire round and had a putt on the 18th hole to force a playoff with Liv Cheng. Katelyn’s putt just slid by the hole and with that miss, Liv Cheng was now your champion.

 

 

The winners of $10,000 plus paid Q-School

For more, check out https://www.perfectproams.com/.

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Would You Go to the Bank of Maersk? https://www.universalcargo.com/would-you-go-to-the-bank-of-maersk/ https://www.universalcargo.com/would-you-go-to-the-bank-of-maersk/#respond Thu, 08 Jun 2017 20:05:08 +0000 https://www.universalcargo.com/?p=8145 Maersk is the world’s largest ocean carrier by capacity. Not only is the company the industry leader (in more than just size), but Maersk also has more stability than other carriers in ocean shipping because of its diversification. When you think of Maersk’s diversification beyond international shipping, you think of oil. But now we can […]

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Maersk Cargo Ship

Maersk Cargo Ship pic: Maersk Line

Maersk is the world’s largest ocean carrier by capacity. Not only is the company the industry leader (in more than just size), but Maersk also has more stability than other carriers in ocean shipping because of its diversification.

When you think of Maersk’s diversification beyond international shipping, you think of oil. But now we can extend that diversification to financing.

Exporters who need financing for their international trade can now go to the Bank of Maersk instead of a traditional bank.

The shipping company actually calls their new service Maersk Trade Finance, and does not call the service nor refer to itself as the Bank of Maersk. I think I’m the only one doing that. But here’s a video from Maersk on how its giving bank-like financing to shippers so they don’t have to go to a traditional bank for it:

YouTube Video

Maersk Trade Finance isn’t available for everyone. Maersk offers trade financing for exporters in India, Spain, Netherland, Singapore, and three U.S. states, according to its FAQ page on the service. The three U.S. states it lists are South Carolina, Texas, and Georgia.

However, you can expect the financing service to expand.

According to an American Shipper article by Eric Johnson, Maersk Line has begun offering its trade finance in six U.S. States. New York, New Jersey, and Florida are the three additional states listed in the article.

It is hard to imagine that Maersk is not working on expanding that list of states (and countries too). We do know Maersk is working on expanding to include importers as well as exporters in the financing service. “Our current products are for exporters. We will soon launch financing solutions for importers as well,” Maersk says on its FAQ page.

“Maersk Trade Finance is a secure digital platform with pre-shipment and post shipment credit facilities for the exporter of the cargo, specifically designed to improve their cash flow and working capital,” Maersk says, describing its service.

 

To apply for financing through Maersk, a shipper would provide financials much like he or she would at a bank. However, Maersk also takes into account a shippers’ customer history with Maersk Line. The collateral for financing is the cargo exporters are shipping.

How much financing are we talking about shippers getting from Maersk?

“We generally fund 80% of the cargo value as declared on the commercial invoice excluding any freight, insurance, other logistic charges mentioned. This is however subject to specific agreement for each individual customer,” Maersk said.

The company gives the following bullet points as advantages for financing through Maersk instead of a bank:

  • Goods shipped through ML will be taken as collateral.
  • Easy credit assessment and on-boarding.
  • Faster funding at gate-in-stage on handover of container to Maersk.
  • Eliminates redundant documentation for financing.
  • Digital platform providing complete transparency.

Overall, the move of adding trade financing to their services appears to be a smart move on the part of Maersk.

Any regular reader of this blog knows that carriers have struggled to make a profit in the international shipping industry. Maersk Trade Finance should generate a nice revenue stream for the carrier through interest.

While the moves Maersk make are often followed by the other carriers of the international shipping industry, it is unlikely many would have the capital to do a similar financing service without partnering with an outside bank.

Maersk Trade Finance is transacted through Sunrise 14 A/S incorporated, which is already part of the Maersk Group.

All of this brings me back to the title of today’s blog. Many are fed up with banks and have lost faith in them since the financial crisis of 2007. Would you leave the traditional bank trade financing to get financing through the “Bank of Maersk”?

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Hapag-Lloyd Joins Carriers’ Container Cancellation Fee Trend https://www.universalcargo.com/hapag-lloyd-joins-carriers-container-cancellation-fee-trend/ https://www.universalcargo.com/hapag-lloyd-joins-carriers-container-cancellation-fee-trend/#comments Wed, 07 Jun 2017 19:57:48 +0000 https://www.universalcargo.com/?p=8142 It looks like carriers are jumping onboard for issuing fees on container cancellations and no-shows from shippers, as Hapag-Lloyd is now adding such a fee to their practices, according to a Gavin van Marle written article from The Loadstar: Hapag-Lloyd has become the latest container shipping line to introduce a cancellation/no-show fee, as carriers appear increasingly intent on penalising […]

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Hapag-Lloyd ShipIt looks like carriers are jumping onboard for issuing fees on container cancellations and no-shows from shippers, as Hapag-Lloyd is now adding such a fee to their practices, according to a Gavin van Marle written article from The Loadstar:

Hapag-Lloyd has become the latest container shipping line to introduce a cancellation/no-show fee, as carriers appear increasingly intent on penalising shippers and forwarders that book slots on services but don’t arrive with the cargo on time.

The German carrier has announced a $60 fee for all export shipments from Singapore to India from 9 June on “all bookings which are cancelled within three calendar days prior to vessel arrival”.

A couple weeks ago, I wrote that such cancellation fees could become a trend, rippling through the international shipping industry after van Marle reported CMA CGM was launching a $150 per TEU cancellation fee.

Two carriers launching cancellation fees isn’t exactly a trend, but Hapag-Lloyd and CMA CGM are not the only two. Like almost all carrier trends in the international shipping industry, this one appears to have been started by Maersk.

In the Loadstar article quoted above, van Marle brought up that Maersk introduced a booking cancellation fee back in April.

It should be noted that such fees are not just for entire shipments that are cancelled or become no-shows. When talking about Maersk’s cancellation fee, van Marle wrote, “… reducing the number of containers in a booking would ‘be treated as booking cancellation and charged the same way’.”

Three carriers issuing cancellation fees does look like a trend, but will it really catch on?

Right now, it appears that Maersk, CMA CGM, and Hapag-Lloyd are trying out the fees. They have not launched such fees on all routes. So far, transpacific routes are not being hit. But could they be?

This is not the first time carriers have attempted cancellation fees. According to Gary Ferrulli of Unicon Logistics, Maersk and Hapag-Lloyd tried such fees before without success. His opinion is that these fees will fail again even though they would actually be good for the industry.

Ferrulli said in a comment to our blog on CMA CGM’s launching of the cancellation fee:

It’s been tried before by Hapag and Maersk and because the market wouldn’t follow, failed. Will it work now? My personal feeling is no…

Carrier’s just can’t seem to tolerate having shippers upset, the ones who
try are told “we’ll pull the plug, no one else will do it” and so it goes.

It would actually do much good as it would stop or curtail the multiple bookings done to “make sure we are covered”, and in a tight market that has cargo being booked three or four weeks out that could move in a week but doesn’t because the ships are overbooked with ghost cargo
by big shippers/nvo’s. But with no consequence, why would they care?

Ferrulli makes a good point in that with no consequences for no-shows or cancellations, why would shippers stop. If shippers can find a better or cheaper deal for importing or exporting their goods, they will happily cancel or just switch to the less expensive carrier without a word.

Obviously, this is a problem for carriers. A cancellation fee reduces or neutralizes the savings shippers might gain from moving their cargo. It would make sense for other carriers to follow the lead of Maersk, CMA CGM, and Hapag-Lloyd with cancellation fees of their own.

Usually, as Maersk goes, so goes the industry. But in this case, many carriers may hold back from doing what Maersk is doing for fear of backlash from shippers. If several carriers decide not to adopt cancellation fees, those that do may find themselves at a little bit of a competitive disadvantage.

The cancellation fees so far are hitting European trade routes where cancellation and cargo rollover issues seem to be more severe.

Perhaps I am wrong, but I feel like the backlash from U.S. shippers might be greater than that of their European counterparts. In the previous Universal Cargo blog on this topic, I wrote:

Such fees on U.S. cancellations and transfers would likely garner complaints from shippers and freight forwarders to the Federal Maritime Commission (FMC).

Perhaps the best ground such complaints would have of convincing the FMC not to allow the fee is that shippers and freight forwarders would not have a similar recourse against carriers for blank sailings or container rollovers that can be so costly for shippers, delaying the receipt of cargo.

Ultimately, if the carriers adopted cancellation fees across the board (that is, all the carriers launched this fee on all routes), cancellation fees would likely be successful in becoming a new standard practice in international shipping.

Like Mr. Ferrulli, I believe the accountability would be a good thing for the international shipping industry. Of course, shippers would likely demand accountability from carriers on rollovers and blank sailings.

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Japan’s Big 3 Becoming ONE in Practice & Name https://www.universalcargo.com/japans-big-3-becoming-one-in-practice-name/ https://www.universalcargo.com/japans-big-3-becoming-one-in-practice-name/#comments Thu, 01 Jun 2017 19:22:58 +0000 https://www.universalcargo.com/?p=8139 Kawasaki Kisen Kaisha, Ltd. (K Line), Mitsui O.S.K. Lines, Ltd. (MOL), and Nippon Yusen Kabushiki Kaisha (NYK) have given a name to their upcoming joint venture. In a joint press release yesterday, May 31st, Japan’s three largest shipping companies announced the company they merge into will be called “Ocean Network Express.” Ocean Network Express. Now […]

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Big 3 Carrier Merger K Line MOL NYK

Kawasaki Kisen Kaisha, Ltd. (K Line), Mitsui O.S.K. Lines, Ltd. (MOL), and Nippon Yusen Kabushiki Kaisha (NYK) have given a name to their upcoming joint venture. In a joint press release yesterday, May 31st, Japan’s three largest shipping companies announced the company they merge into will be called “Ocean Network Express.”

Ocean Network Express. Now make that an acronym. ONE.

ONE is a very apt name, describing what these three ocean carriers will be turning into.

The new name’s acronym certainly didn’t happen by accident. Already, K Line, MOL, and NYK have launched a website for the upcoming merged company that plays up the significance of the name. As well as using a bit of word play with the title phrase “ONE Vision” at one point, here’s what the merging carriers have to say about ONE:

Our name conveys our integrity as a company—three leading marine transport companies working together to spark a revolution for the global container shipping industry. We will champion human potential and combine all our strengths to deliver better service, more routes, and improved ICT solutions that will exceed our customers’ needs around the world—now and well into the future.

This integrated global shipping partnership will contribute to our customers’ success and improve life, society, and the planet as a whole.

The site also highlights how this merger moves Japan’s Big 3 carriers up in the worldwide carrier rankings by capacity. With a capacity of 1.4 Million TEU, ONE will be 5th in the international shipping market with approximately 7% of the global share.

In an American Shipper article, Hailey Desormeaux shares the current rankings of K Line, MOL, and NYK:

According to ocean carrier schedule and capacity database BlueWater Reporting’s Carrier Ranking Report, based on operating fleet capacity, NYK is the eighth largest carrier in the world with 594,699 TEUs, while MOL comes in at 11th with 540,942 TEUs and “K” Line takes 14th place with 353,220 TEUs.

The merging of “Japan’s Big 3” is yet another example of shrinking competition among carriers.

As carriers have struggled with profitability in the face of overcapacity and low freight rates, buyouts, mergers, bankruptcy, and carrier alliances have made the competition pool of shipping lines in international shipping smaller and smaller.

In opposition to shipper’s worries about shrinking carrier competition, K Line, MOL, and NYK reiterate in their press release their stance of the new company providing a benefit for shippers:

The move will allow Ocean Network Express to better meet customers’ needs by providing high-quality, competitive services through the consolidation and enhancement of the three companies’ global network and service structures.

The other piece of information that is most notable in the press release is the planned launch date of the joint venture (JV):

… The establishment of new JV will officially be announced once all anti-trust reviews are completed. The service commencement date for Ocean Network Express is April 1, 2018.

That date can also be found on ONE’s website.

The biggest obstacle for that launch date is making it through all the anti-trust reviews by maritime regulators around the world. At the beginning of this month, we blogged about the FMC rejecting the Big 3’s Tripartite Agreement.

That was certainly a setback for K Line, MOL, and NYK in their merger plans but will not stop the companies from merging, only keeping them from acting as a merged entity before the shipping companies actually merge.

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A Windshield on a Container Ship? https://www.universalcargo.com/a-windshield-on-a-container-ship/ https://www.universalcargo.com/a-windshield-on-a-container-ship/#respond Tue, 30 May 2017 19:55:32 +0000 https://www.universalcargo.com/?p=8138 How can carriers reduce CO2 emissions, consume less fuel, and add extra protection on their container ships? How about a windshield? That’s right, a windshield on a container ship. According to an article by Mike Wackett on The Loadstar, the ocean carrier MOL tested a windshield on a container ship and found that it provided all […]

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How can carriers reduce CO2 emissions, consume less fuel, and add extra protection on their container ships? How about a windshield?

That’s right, a windshield on a container ship.

Windshield on Container Ship

According to an article by Mike Wackett on The Loadstar, the ocean carrier MOL tested a windshield on a container ship and found that it provided all the above mentioned benefits.

The biggest surprise to most is the thought that a windshield on a container ship could reduce CO2 emissions.

The international shipping industry, and the ocean shipping side in particular, is often criticized for its CO2 emissions. Even so, the ocean shipping industry has worked hard to clean up its act.

The World Shipping Council hails maritime shipping as the world’s most carbon-efficient form of transporting goods. Likewise, the International Chamber of Shipping released a fact sheet around a year and a half ago called Delivering CO2 Emission Reductions: Shipping is Part of the Solution while using the graph below to show just how container ships stack up against other forms of transportation.

ICS CO2 Shipping Chart

While these responses from the ocean shipping industry in response to the criticism of its environmental impact are perfectly legitimate, the sheer volume of ocean shipping makes its CO2 emissions very significant indeed.

CO2 emissions worldwide and fears over Global Warming are serious issues, giving good reason for container shipping on cargo ships, along with the rest of the shipping industry, to continue to work on CO2 emission reduction.

The industry certainly has been working on the problem, becoming greener and reducing its pollution. Resources have been put into new technologies and practices to reduce to CO2 emissions in ocean shipping. While most think of new technologies in ship engines and greener fuels as the answer, container ship windshields reducing CO2 shows that there are places to look for emission reductions that have been sitting right in front of us years.

The idea seems so simple. You can just imagine someone driving down the street, looking through the windshield of their car, and saying, “Why don’t we put one of these on our container ships?”

Perhaps it took an engineer to think a windshield would help reduce CO2 emission on a container ship. However, it makes sense that reduction of air resistance could reduce fuel consumption and CO2 emission when slow steaming also produces such results.

But just how effective is the windshield at CO2 reduction?

Wacket’s article gives illumination on the study and its results:

Data was accumulated by comparing the operational performance of two sister ships on the same route, one with a windshield and one without….

MOL said the test results confirmed “about 2% average CO2 reduction, sailing at 17 knots… compared with an identical vessel at the same speed without the device installed”.

2% CO2 reduction is significant.

Obviously, windshields are not the whole solution for green house gases being emitted by the shipping industry, but it does appear to be a piece in the puzzle.

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What’s Happening With International Shipping Freight Rates? https://www.universalcargo.com/whats-happening-with-international-shipping-freight-rates/ https://www.universalcargo.com/whats-happening-with-international-shipping-freight-rates/#comments Thu, 25 May 2017 21:16:00 +0000 https://www.universalcargo.com/?p=8134 For years now, we’ve talked about overcapacity plaguing carriers in the international shipping industry and putting downward pressure on freight rates. Over the last couple years, freight rates hit record lows. Shippers have been in a position to take advantage of low freight rates while carriers suffered huge losses. But what about now? What are […]

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Freight RatesFor years now, we’ve talked about overcapacity plaguing carriers in the international shipping industry and putting downward pressure on freight rates. Over the last couple years, freight rates hit record lows. Shippers have been in a position to take advantage of low freight rates while carriers suffered huge losses. But what about now?

What are freight rates doing in 2017?

Overcapacity is certainly not gone. It will likely be a few years before capacity and demand reach a balance. The earliest projections I’ve seen for demand meeting capacity is 2020. However, I’ve also heard projections of overcapacity not being under control until 2025.

That being said, ship scrapping is up while ship ordering is down. Carriers also could, in theory, dock ships like they did in 2010 in order control capacity and relieve the downward pressure on freight rates caused by overcapacity.

Global trade is showing signs of health and could always grow more than economists project. Or less. After all, much slower global trade growth than economists projected played a big role in carriers facing the overcapacity they’ve struggled with for the last several years.

All this is to say, no one can really point to a specific year and say that is when overcapacity will definitely end in the international shipping industry, but most think overcapacity will still exist for at least a few more years.

However, while overcapacity is still here, record low freight rates are not.

Carriers would certainly like to see it happen faster, but freight rates are rebounding. Right now, U.S. importers are paying significantly more to import goods from China, and the rest of Asia, than they were a year ago.

According to a Journal of Commerce (JOC) article by Bill Mongelluzzo, this week’s transpacific spot rates are 49% higher to the East Coast and 74% higher to the West Coast per FEU than they were a year ago.

Despite the fact that freight rates are significantly higher than a year ago, Mongelluzzo does report that freight rates are currently dropping. “…spot rates this week dropped 6 percent to the East Coast and 9 percent to the West Coast,” Mongelluzzo wrote. “This week marks the third consecutive week of declining rates.”

This is actually the typical behavior for transpacific freight rates this time of year. Mongalluzzo says as much, reporting that U.S. import freight rates from Asia “returned to market fundamentals”.

The international shipping industry, and the freight rates within it, are always volatile. There are plenty of variables that factor into it, including but not limited to capacity, demand, oil bunkers, market perceptions, seasonal behaviors, labor issues at ports, congestion, disruptions, and strength of economies. Even one time situations, like the worry about disruptions from the April 1st launch of the current carrier alliance situation, can affect shipping decisions and the freight rate market.

Despite all the factors that make freight rates and the international shipping industry in general volatile, there are normal ebbs and flows. For example, shipping volumes along with freight rates increase for U.S. shippers when big shopping seasons like back to school and the holidays approach. Volume and rates tend to lower between these types of seasons, at times such as now.

2017 looks to be following the “normal patterns” of ebb and flow and projects to continue to do so, with peak season coming up in a couple of months. But it’s following those patterns at a higher freight rate level than last year.

This is good news for carriers trying to recover.

Bruce Barnard reported in the JOC that the world’s third largest carrier by capacity, CMA CGM managed to return to making a profit in the first quarter of 2017. The “return to the black” is attributed to higher freight rates and the acquisition of APL.

This was the first time since 2011 that now CMA CGM’s APL unit posted a profit, according to Barnard.

Not all carriers managed to make a profit in the first quarter of 2017, despite increased freight rates from last year. In fact, we already posted about the top dog of the carriers, Maersk, posting a loss of $66 million in the first quarter.

It would certainly be premature to say carriers have recovered from years of low, low freight rates. However, freight rates are getting healthier for carriers. Of course, that means more expensive for shippers.

However, freight rates are still much lower than carriers would probably like. After record low freight rates, it would be hard to imagine not seeing a rise in year over year rates. But it will have to be seen if carriers can manage to keep rates increasing and stay on track for eliminating their overcapacity problem.

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CMA CGM Announces Possibly Trend-Setting Fee & New Service https://www.universalcargo.com/cma-cgm-announces-possibly-trend-setting-fee-new-service/ https://www.universalcargo.com/cma-cgm-announces-possibly-trend-setting-fee-new-service/#comments Tue, 23 May 2017 20:01:10 +0000 https://www.universalcargo.com/?p=8132 CMA CGM Launches New Fee CMA CGM just made a move that we could see ripple through the international shipping industry. The carrier will charge a fee to shippers who are “no-shows” with their cargo or who cancel or transfer their cargo within a week of shipping. Gavin van Marle reported in The Loadstar: The line says […]

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CMA CGM Launches New Fee
CMA CGM container ship

CMA CGM Hydra

CMA CGM just made a move that we could see ripple through the international shipping industry. The carrier will charge a fee to shippers who are “no-shows” with their cargo or who cancel or transfer their cargo within a week of shipping.

Gavin van Marle reported in The Loadstar:

The line says it will apply a $150 per teu cancellation fee on all equipment types, except reefer containers, from 1 June on applications to cancel or transfer a booking made less than seven days before the sailing date.

The fee will also apply to no-shows and will be applied to the party that made the booking – principally freight forwarders.

This fee is actually on European shippers and forwarders failing to deliver on booked container shipments to the Indian subcontinent, Middle East Gulf, and Red Sea ports according to the article. However, it doesn’t take much imagination to envision similar fees being levied on other routes, such as transpacific ones between the U.S. and Asia, and by other carriers.

Generally, when one carrier makes a move like enacting a general rate increase (GRI), the other carriers do likewise. It would be no surprise for CMA CGM’s cancellation fee to set a trend among carriers.

From what I’ve seen, no-shows from shippers along with rollovers from carriers are larger problems for shipments in Europe than in the U.S.; however, there is an industry wide reliability issue between shippers and ocean carriers.

Because the issue seems more prevalent in European trade routes, we could just see such fees spread across the other carriers when it comes to these European routes. Such fees on U.S. cancellations and transfers would likely garner complaints from shippers and freight forwarders to the Federal Maritime Commission (FMC).

Perhaps the best ground such complaints would have of convincing the FMC not to allow the fee is that shippers and freight forwarders would not have a similar recourse against carriers for blank sailings or container rollovers that can be so costly for shippers, delaying the receipt of cargo.

Of course, it makes sense that CMA CGM would issue this fee, combating a costly issue for the company. According to van Marle’s article:

“CMA CGM has been facing a large number of shortfalls due to late cancellations preventing us from accepting bookings on behalf of other valued customers,” the company said in a statement.

It will be interesting to watch if CMA CGM’s new fee really does become a trend throughout the international shipping industry.

CMA CGM Launches New Service

Speaking of CMA CGM, the carrier is working with Hamburg Süd to launch a new container service between the U.S. and Central and South America. Working with Hamburg Süd probably really means working with the biggest trend setter of all the carriers in the international shipping industry, Maersk Line.

An American Shipper article by Elizabeth Landrum reports:

French ocean liner CMA CGM will launch a new container service called “Azteca” connecting the U.S. West Coast with Central and South America later this month, the company said Tuesday.

The weekly loop will be operated in conjunction with north-south specialist Hamburg Sud of Germany, which was sold to industry leader Maersk Line…

The Azteca service will have a port rotation of Oakland, Los Angeles, Lazaro Cardenas, Puerto Quetzal, Acajutla, Corinto, Buenaventura, Puerto Caldera, Puerto Quetzal, Lazaro Cardenas, Los Angeles and Oakland.

The connection to Maersk is a nice bonus for CMA CGM in launching this new service.

CMA CGM is the third largest carrier in the world by capacity. In front of it are Maersk and the other member of the 2M carrier alliance, Mediterranean Shipping Company (MSC).

CMA CGM tried to enter an alliance called the P3 Network with Maersk and MSC until China halted those plans. Maersk and MSC quickly replaced the P3 alliance with the 2M. CMA CGM is now in the Ocean Alliance with China Cosco Shipping Corporation, Evergreen Line, and OOCL.

Click Here for Free Freight Rate Pricing

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Is It Time to Change or Replace Ocean Shipping Reform Act? https://www.universalcargo.com/is-it-time-to-change-or-replace-ocean-shipping-reform-act/ https://www.universalcargo.com/is-it-time-to-change-or-replace-ocean-shipping-reform-act/#comments Thu, 18 May 2017 20:32:16 +0000 https://www.universalcargo.com/?p=8129 Now that international shipping is dominated by three carrier alliances, the 2M, OCEAN Alliance, and THE Alliance, many shippers are worried about freight rate collusion between the shipping lines in these alliances. Shippers are not alone. Members of Congress and the Department of Justice (DOJ) are also suspicious of aligned carriers taking part in antitrust activities. In […]

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international shipping federal antitrust lawNow that international shipping is dominated by three carrier alliances, the 2M, OCEAN Alliance, and THE Alliance, many shippers are worried about freight rate collusion between the shipping lines in these alliances.

Shippers are not alone. Members of Congress and the Department of Justice (DOJ) are also suspicious of aligned carriers taking part in antitrust activities.

In fact, the DOJ made a bold move back in March, when it subpoenaed CEOs of major container lines.

The Journal of Commerce (JOC) reported at the time:

US antitrust investigators last week raided the biannual Box Club meeting in San Francisco, handing subpoenas to the CEOs of major container lines and capitalizing on a rare window to exercise their power over non-US-based companies.

While there have been many price fixing investigations into carriers in recent years, the exact reason for these subpoenas is still not clear two months later. What is clear is the DOJ’s suspicion of antitrust activities between shipping lines.

Last year, the DOJ’s then Acting Assistant Attorney General Renata B. Hesse wrote a letter to the Federal Maritime Commission (FMC) about concerns over the concentration of the international shipping industry into only three major shipping alliances likely facilitating “coordination in an industry that is already prone to collusion”. Hesse even gave instances of that collusion, writing:

For example, four companies (three of which are slated to join THE Alliance) have pled guilty, and eight corporate executives have been indicted or pled guilty in connection with a worldwide conspiracy involving price fixing, bid-rigging, and market allocation among providers of roll-on, roll-off shipping.

Unfortunately for the DOJ, its power to go after carriers regarding antitrust activity is somewhat limited. The U.S. Ocean Shipping Reform Act of 1998 actually gives carriers some ability to cooperate on pricing, giving the shipping lines with FMC approved agreements limited antitrust immunity to discuss and agree on rate guidelines. Those rate guidelines would be voluntary, and the DOJ could go after shipping lines that went beyond this antitrust immunity.

However, many find it alarming that carriers could have any immunity to federal antitrust laws at all.

The idea in giving some immunity to the shipping lines was to allow the FMC, with more expertise on the international shipping industry, to regulate carriers and protect shippers, as well as the general public, when it comes to this industry. But has the Ocean Shipping Reform Act created an antitrust loophole that carriers are taking advantage of?

There are members of Congress who certainly think carrier alliances are cooperating on more than just ship operations, as is supposed to be the case with these carrier alliance vessel operating agreements.

In an American Shipper article by Chris Dupin, Rep. Peter DeFazio, D-Ore., the ranking member of the House Transportation & Infrastructure Committee was quoted as saying:

“The Box Club, who were all just subpoenaed, what were they doing?” he asked. “There is no one in the industry who thinks these people aren’t getting together in the room and colluding over pricing and who is going to control what harbors and what marine facilities, what they are going to do.

“It’s Pollyannaish to think these alliances are just going to just help make the industry more efficient. Twenty years ago, that might have been true. It’s not true today, and they are foreign controlled.”

“We need to revisit the Act, we need to revisit the assumptions that we are creating efficiencies and market forces here in these modern times, where we know state-owned enterprises and governments that are acting in a mercantilist way are not really interested in competition and they are interested in driving down their costs and dominating our markets and put- ting our people at disadvantage.”

DeFazio is not alone. Dupin’s article goes on to quote Rep. Duncan Hunter, R-Calif., as suggesting:

“An idea would be to maybe strip out the limited antitrust exemption that FMC can grant these consortiums totally, so they are not allowed to join together to put pressure on the ports, collude on price.”

The DOJ certainly thinks it’s time to do away with the portion of the Ocean Shipping Reform Act that makes carriers exempt from federal antitrust laws.

In another letter from Hesse to the FMC, she wrote, “The Department has long taken the position that the general antitrust exemption for international ocean shipping carrier agreements is no longer justified.”

The letter goes on to say:

The passage of the Ocean Shipping Reform Act in 1998 was a step towards deregulation, but the industry still lacks the full benefits of competition. The ocean shipping industry exhibits no extraordinary characteristics that warrant departure from competition policy. Price fixing and other anticompetitive practices by the industry over the years have imposed substantial costs on our economy through higher prices on a wide variety of goods shipped by ocean transportation.

So what do you think? Is it time to amend or replace the Ocean Shipping Reform Act to remove the exemption shipping lines with FMC approved agreements enjoy? Or would that just bring an extra layer of regulation to an already complex industry?

Let us know your thoughts in the comments section below.

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Universal Cargo Makes Feedspot’s Top 100 Goods Transport Blogs https://www.universalcargo.com/universal-cargo-makes-feedspots-top-100-goods-transport-blogs/ https://www.universalcargo.com/universal-cargo-makes-feedspots-top-100-goods-transport-blogs/#comments Tue, 16 May 2017 21:44:53 +0000 https://www.universalcargo.com/?p=8127 Right now, NFL Network is in the middle of releasing its top 100 list of football players as voted by fellow players in the National Football League. While Universal Cargo has no chance of making that very popular list, we did just make it onto a much lesser known top 100 list. It was actually […]

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Right now, NFL Network is in the middle of releasing its top 100 list of football players as voted by fellow players in the National Football League. While Universal Cargo has no chance of making that very popular list, we did just make it onto a much lesser known top 100 list.

It was actually our blog that made the list.

Here at Universal Cargo, we work hard to take care of all your international shipping needs. Our blog plays into that picture by keeping shippers up to date on the latest news in the international shipping industry as well as educating shippers about aspects of importing and exporting. Occasionally, we even throw in some shipping related entertainment content.

Top 100 Transport Blogs

Every once in a while, someone notices what we’re doing on the Universal Cargo blog and gives us a little recognition.

Just recently, Feedspot named Universal Cargo’s blog to its Top 100 Goods Transport Blogs and Websites for Logistics & Transport Industry Professionals. Wow, that’s a mouthful.

Feedspot even gave us a virtual medal (pictured right). Although a real medal would be nicer, Feedspot. Hint. Hint.

Here’s what Feedspot said about the list and how blogs are selected for it:

The Best Goods Transport blogs from thousands of top Goods Transport blogs in our index using search and social metrics. Data will be refreshed once a week.

These blogs are ranked based on following criteria

  • Google reputation and Google search ranking

  • Influence and popularity on Facebook, twitter and other social media sites

  • Quality and consistency of posts.

  • Feedspot’s editorial team and expert review

Universal Cargo’s blog made it in the top quarter of the list, ranking as #22 out of the top 100.

Seeing as how the list includes international shipping news and research heavy hitters like the Journal of Commerce and Xeneta, ranked 5th and 35th respectively, Universal Cargo is in some pretty good company on this list.

We’d like to take a moment to thank Feedspot for making Universal Cargo’s blog a part of their list and thank you, our readers, for, well, reading.

Universal Cargo posts two blogs a week on international shipping. We love getting feedback on what we’re doing as we’re always looking to make this blog better for shippers.

Click Here for Free Freight Rate Pricing

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Maersk Still Top Dog Despite Q1 $66M Loss https://www.universalcargo.com/maersk-still-top-dog-despite-q1-66m-loss/ https://www.universalcargo.com/maersk-still-top-dog-despite-q1-66m-loss/#respond Thu, 11 May 2017 20:40:22 +0000 https://www.universalcargo.com/?p=8125 $66 million seems like a lot of money. Imagine losing that much in 3 months. For most of us, that’s hard to imagine because we’ve never even seen $1 million let alone $66 million. Despite the fact that Maersk Line, the world’s largest ocean carrier by capacity, lost that much money in the first quarter […]

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Maersk Cargo Ship

Maersk Cargo Ship pic: Maersk Line

$66 million seems like a lot of money. Imagine losing that much in 3 months. For most of us, that’s hard to imagine because we’ve never even seen $1 million let alone $66 million. Despite the fact that Maersk Line, the world’s largest ocean carrier by capacity, lost that much money in the first quarter of 2017, the shipping conglomerate A.P. Moller-Maersk, which Maersk line is a part of, had a very healthy first quarter to the year.

Hailey Desormeaux reported in American Shipper that A.P. Moller-Maersk “recorded a $253 million profit for the first quarter of 2017, up 12.9 percent from the first quarter of 2016.”

Maersk has an advantage over other carriers in the international shipping industry in its diversification. A.P. Moller Maersk, on top of owning Maersk Line, owns Maersk Oil, APM Terminals, and Damco. This diversification is what allowed Maersk to have a very healthy 9 figure profit in the first quarter despite Maersk Line’s 8 figure loss.

The $66 million loss Maersk Line suffered in the first quarter displays just how difficult the international shipping industry is for carriers. From the smallest to the largest carrier, none are immune to suffering large losses.

However, Maersk Line is certainly not in the red every single quarter every single year. Desormeaux, when reporting the loss Maersk Line suffered at the beginning of this quarter, compared it to a profit of $37 million in the first quarter of last year.

What’s more, Maersk’s acquisition of Hamburg Süd, which is supposed to be completed by the end of the year, should increase Maersk Line’s profitability. Desormeaux reported:

 Overall, the Hamburg Süd acquisition will deliver substantial growth in revenues, volumes and market share, as well as operational synergies of $350 million to $400 million per year from 2019, A.P. Moller-Maersk said.

 

Big DogI ran cross country in high school. I wasn’t particularly good my freshman or sophomore year, but the team was very good, conference champions even. We had shirts that read, “The big dog is off the porch.” As conference champs, our team was the big dog. In international shipping, Maersk is the big dog.

Back in 2011, Universal Cargo posted a blog about Maersk, the big dog, being prepared to outlast its competitors in the international shipping industry. In the face of low freight rates, which have remained a major problem for carriers over the last six years, it was actually Maersk saying it was prepared to outlast its competitors, showing its big dog status:

I can almost see a sneer full of K-9s as the IFW article quotes Maersk CEO Nils Smedegaard Andersen saying, “It would be natural if the smaller players in this business, or their banks, start questioning whether it’s a good idea to keep competing.”

Since that time, we’ve all watched competition shrink among the struggling carriers. Buyouts, bankruptcy, mergers, and the carrier alliances that now dominate the industry showcase how difficult survival is for carriers.

But the big dog will survive. Maersk is at the head of the industry. The moves Maersk makes are copied by the other carriers. When Maersk buys megaships, the industry buys megaships. When Maersk forges an alliance, the whole industry jumps in alliances. When Maersk shifts focus to acquiring smaller competitors… Well, carriers that can will try to do likewise.

Maersk is not merely the big dog, Maersk is top dog in international shipping. The company leads the industry. But there’s an area where Maersk used to lead that it no longer is: service reliability.

Maersk Buying Hamburg Süd

Maersk Buying Hamburg Süd

Mike Wacket wrote an article for The Loadstar about Maersk’s acquisition of Hamburg Süd that included:

… Maersk Line’s schedule integrity has been plunging – it now sits a lowly eighth in SeaIntel’s top 10 of carrier schedule reliability – while Hamburg Süd currently tops the rankings.

Do you think the top dog of international shipping, which let its schedule integrity slip, is going to be influenced into better schedule reliability by the smaller company it’s acquiring, which happens to be number one in that area? Or is it more likely Maersk lowers the reliability of the services its acquiring?

Reliability is an area where ocean carriers notoriously struggle. Blank sailings, changed schedules… these happen all the time.

Shippers are increasingly concerned with service as competition shrinks in the international shipping industry. It seems like fewer and fewer options are available to shippers, who have become leery of the carrier alliances dominating the shipping lanes. Many are calling for a new model from the carriers.

Most carriers are in a position where they have to latch on to the alliance trend just to survive these many years of low freight rates, which are largely driven by carrier-created overcapacity. However, Maersk is in a different situation. With A.P. Moller Maersk’s ability to not just survive but thrive even when large losses from Maersk Line occur, Maersk is uniquely situated to create an international shipping business model that improves customer service to shippers while being profitable for carriers.

Chris Welsh, secretary general of the Global Shippers Forum, was quoted in a Loadstar article by Alex Lennane as saying:

“I think there are opportunities for different business models to emerge. What is in place now does not offer the best to customers. That’s not about price. It’s overall management of the supply chain. Others are taking the value out. A new business model is viable and I wouldn’t be surprised if a disruptor came into the market – it’s ripe.”

Others quoted in the article question who could actually be a disruptor to the way things are going in the international shipping industry. Who has deep enough pockets?

The answer is, of course, Maersk.

The idea of a disruptor is generally thought of as a new business entering the industry and changing it, but the most likely disruptor in the international shipping industry would come from the inside, not the outside. Maersk could be the disruptor that changes the game. If Maersk does bring a different business model to international shipping, the other carriers would follow.

Of course, reliability couldn’t be an area Maersk could allow to slip. A business model both beneficial for carriers and shippers is sought. Maersk is likely in no hurry to rush for a change. In the meantime it can sit back and watch its competition shrink.

Click Here for Free Freight Rate Pricing

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Logistics Glossary Vs. Urban Dictionary – Useful to Funny Definitions https://www.universalcargo.com/logistics-glossary-vs-urban-dictionary-useful-to-funny-definitions/ https://www.universalcargo.com/logistics-glossary-vs-urban-dictionary-useful-to-funny-definitions/#respond Tue, 09 May 2017 21:15:15 +0000 https://www.universalcargo.com/?p=8120 It’s back! The most entertaining way to look at definitions of international shipping terms: comparing Logistics Glossary definitions to their Urban Dictionary counterparts. Let’s face it, international shipping can be a little boring from time to time. And there certainly are many terms unique to the industry. However, the words and acronyms themselves are not all that unique. Many exist […]

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It’s back! The most entertaining way to look at definitions of international shipping terms: comparing Logistics Glossary definitions to their Urban Dictionary counterparts.

Let’s face it, international shipping can be a little boring from time to time. And there certainly are many terms unique to the industry. However, the words and acronyms themselves are not all that unique. Many exist with different meanings outside of the shipping industry.

If you’re ever using international shipping jargon with a colleague and a passerby gives you a funny look, perhaps the following comparisons will help you know why.

So back by popular demand, and without any further ado, here is the fourth installment of International Shipping Definitions vs. Urban Dictionary Definitions:

Logistics Glossary Vs. Urban Dictionary

BOL

Commonly written BoL or BL, BOL is the Freight Bill-of-Lading, also known as a freight bill. Here’s the Logistics Glossary’s definition:
A document providing a binding contract between a shipper and a carrier for the transportation of freight, specifying the obligations of both parties. Serves as a receipt of freight by the carrier for the shipper. Usually designates the consignee, and the FOB point.
Here’s how the Urban Dictionary defines BOL, along with an example of its use:
Tired of the overuse of LOL? Feeling like it means nothing anymore when you really DID just Bust Out Laughing because people end every freaking sentence with LOL? Use BOL. Busted Out Laughing. It’s LOL, ROFL, LMAO, and OMG rolled into one.
When my friend said this to me, “I had this bizarre dream about you and me and Alan Rickman and Tom Brokaw. In the middle of the dream me and the boys went to see you perform at the Stone Pony and you did some extremely odd things, and then you sang your own lyrics to ‘They Don’t Know About Us,’ by Tracey Ullman but then Elizabeth Edwards cam out on stage and made you stop because it needed to be censored,” I BOL’d.
LOL has gotten really old. I might just use BOL moving forward.

FOB

Since the Logistics Glossary definition of the last acronym included this acronym in it, I figured we might as well look at FOB next. Here’s what the Logistics Glossary has to say about FOB:

FOB (Free-on-Board) Point

Point at which ownership of freight changes hands from shipper to consignee. FOB origin indicates that consignee owns the goods in transit; FOB-destination indicates that shipper owns goods in transit. Owner of goods in transit is liable for loss and damage to freight, and thus should provide insurance.

The definition to be found in the Urban Dictionary is, of course, very different; however, it does have something to do with a ship:

F.O.B
Is an acronym for “Fresh Off the Boat”, and refers to new immigrants to a country (mostly Western). A phrase first coined in New Zealand in the early 90’s by Polynesians to differentiate new arrivals (immigrants) from the old country (Tonga, Samoa, etc) from those with a Western upbringing. Now commonly used to describe any person new to a country, who is not well versed with its language or culture (mainly Western). Can be taken as an insult, or a term of endearment (eg; pride of culture).
“That Sione is such a F.O.B. He doesn’t speak good English, & last week he walked through the drive-thru at Macca’s (Mac Donalds) …”
Fresh Off the Boat
As a side note, this particular definition of FOB has become wider spread in the last few years with the popular ABC sitcom Fresh Off the Boat. Odds are if you’re using the term FOB, the average person will think you mean fresh off the boat rather than free-on-board.

Hub-and-Spoke

Let’s get away from the acronyms and look at the international shipping term Hub-and-Spoke. The Logistics Glossary defines Hub-and-Spoke as follows:
A transportation system design in which large hub terminals are used for freight consolidation. Medium-volume services serve the spoke-to-hub collection and hub-to-spoke distribution tasks. Large-volume services are operated in the hub-top-hub markets. In most systems, all outbound/inbound freight for a spoke uses the same hub, and thus larger shipment sizes are realized. Many transportation systems are oriented in this way.
Examples: Delta airlines, FedEx, LTL, and now ocean shipping. Not TL, however.
Okay, thank’s Logistics Glossary. But the Urban Dictionary has a much simpler definition, even removing the hyphens from the term:
Hub and Spoke
To restore to a good or sound condition, mend, restore or renew, making good, remedy, etc…
Boss: Did you get to that Smith job yet?
Worker: Yep, all fixed. It’s hub and spoke.

Dead-head

In international shipping, the Logistics Glossary says dead-head is:

A portion of a transportation trip in which no freight is conveyed; an empty move. Transportation equipment is often dead-headed because of imbalances in supply and demand. For example, many more containers are shipped from Asia to North America than in reverse; empty containers are therefore dead-headed back to Asia.

Like with the previous term, the Urban Dictionary sees no reason to hyphenate. In contrast to the previous Urban Dictionary term, and all of Urban Dictionary’s definitions so far in this installment, I actually knew this term’s “urban” definition.

Deadhead
A hardcore fan of the Grateful Dead. The complete opposite of a Parrothead.
Julio: Dude, that bro is trippy.
Beckworth: Hahaha, bro, that is just a Deadhead.
The Urban Dictionary has several submissions, all amounting to a Deadhead being a fan of the Grateful Dead. Some made reference to tie-dye shirts, LSD, marijuana, and Bill Clinton; however, I liked this one the best because it juxtaposes Deadheads with Parrotheads.
What’s a Parrothead, you ask?
It turns out, a Parrothead is a Jimmy Buffet fan. But after reading the final sentence of the Parrothead definition in the Urban Dictionary, there seems to be a very striking similarity between a Deadhead and Parrothead, even though they were previously defined as opposites.
A Parrothead is a fan of Jimmy Buffett (there is no other meaning). The typical parrothead is pictured to wear a Hawaiian shirt, flip-flops, and other tropical attire, and to enjoy drinking margaritas on the beach. Parrotheads often decorate their homes in tropical motifs. In general the life of a parrothead is one of relaxation and being on a permanent mental vacation even while at work.

Intermodal

Intermodal is an incredibly common term in the international shipping industry. Here’s how the Logistics Glossary defines it:
Transportation that uses a specialized container that can be transferred from the vehicle of one mode to the vehicle of another; a single freight bill is used for the shipment.
Example: Ocean shipping containers which can be hauled by trucks on chassis, railcars, ocean vessels, and barges. Also: UPS line-haul vans (these vans can be stacked onto railcars for long distance moves).
What’s interesting about the Urban Dictionary definition of this term is that it actually gets its origin from the international shipping term. Of course, Urban dictionary gives it a twist:
Intermodal
A term in underground traveling subcultures of Freight train hopping, Hitchhiking, Squatting, Gypsies, Hobos, Migrants, and Punks. Used to describe one’s ability to travel using any & all available modes of travel for free or dirt cheap. Trains (freight, passenger & public transit), Hitchhiking, Rideshare, Planes, Mopeds, Motorcycles, Bicycles, Horses, Goats & Boats & maybe even walking for a spell if it is the only available option. Derived from an actual term in the freight shipping industry meaning to move freight using Rail, Ships & Trucks.
The Bulls chased us out of the Stockton yard so we had to go intermodal for awhile. We got picked up on the 5 by some hippees who drove us as far as LA where we hung out at a squat & lined up a rideshare to Tucson.
Disclaimer: I try not to edit the Urban Dictionary definitions at all, but I cleaned up this one just a little bit, separating the first two sentences that were previously combined and hard to understand on a first reading.

Chassis

chassis-hanjin-pool-of-pools-congestionYou don’t have to be in the international shipping industry to be familiar with what a chassis is. This term was already referenced in a previous Logistics Glossary definition, but here is how it appears elsewhere in the glossary:
Intermodal ocean containers are moved on the road by attaching them to a separate piece of equipment, a chassis, which is essentially a set of wheels on a lightweight frame.
Now, it turns out the top definitions of chassis in the Urban Dictionary could make a guy using the term sound like a deusche. I feel like I could only type that word in one of these Urban Dictionary blog editions.
1. Noun: The female backside. Rumpshaker. Booty. Moneymaker. Ass. Heinie. Rear-end.

2. Noun: A superior hindquarters, usually on a well-proportioned female.

“Check out the chassis on that brunette hottie by the jacuzzi.”
I have to say, that definition of chassis (which was repeated in different ways by different contributors to the site) was a predictably typical entry from the Urban Dictionary. However, there is another definition provided for the word that is much more entertaining:
Chassis, usable in any situation. There is no badtime to say “chassis”
“whats up”
“chassis”
“cool”
From now on, I might just answer the phone by saying, “Chassis.” I expect the response to always be, “Cool, cool.”

Container

Let’s end with the most random Urban Dictionary definition to a common international shipping term I’ve ever seen.

It seems like the whole international shipping industry revolves around containers. I almost don’t want to waste time by putting the Logistics Glossary definition here. Almost.

A single, rigid, sealed, reusable metal box in which merchandise is shipped by vessel, truck, or rail. Container types include standard, high cube, hardtop, open top, flat, platform, ventilated, insulated, refrigerated, or bulk. Usually 8 ft x 8 ft in width and height, 20 to 55 ft long. Specialized containers also exist for air transportation modes, but are much smaller and cannot be directly transferred to truck or rail.

Any guesses for what the Urban Dictionary thinks a container is? Ew. Get your mind out of the gutter. Here it is:
container
1. people who where jeans with flip flops
bob: haha.. look at what that hippie’s wearing, rainbow flip flops and jeans
billy: ugh, what a container.
BOL. I told you it was random.
Okay, that’s enough Urban Dictionary for one blog entry. But if you want more, you can check out the three previous installments:

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FMC Stops Japan’s Big 3 Carriers From Jumping the Gun on Merger https://www.universalcargo.com/fmc-stops-japans-big-3-carriers-from-jumping-the-gun-on-merger/ https://www.universalcargo.com/fmc-stops-japans-big-3-carriers-from-jumping-the-gun-on-merger/#respond Thu, 04 May 2017 19:17:58 +0000 https://www.universalcargo.com/?p=8118 The “Tripartite Agreement” is what it was called–an agreement between Kawasaki Kisen Kaisha, Ltd (K Line), Mitsui O.S.K. Lines (MOL), and Nippon Yusen Kaisha (NYK) that included working together before the three largest carriers of Japan actually merge. The Federal Maritime Commission (FMC) rejected it. In a press release on Tuesday, the FMC announced: The Federal Maritime […]

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Big 3 Carrier Merger K Line MOL NYKThe “Tripartite Agreement” is what it was called–an agreement between Kawasaki Kisen Kaisha, Ltd (K Line), Mitsui O.S.K. Lines (MOL), and Nippon Yusen Kaisha (NYK) that included working together before the three largest carriers of Japan actually merge. The Federal Maritime Commission (FMC) rejected it.

In a press release on Tuesday, the FMC announced:

The Federal Maritime Commission (FMC) today rejected on jurisdictional grounds the “Tripartite Agreement” (FMC Agreement No. 012475), an agreement between three carriers to form a joint container shipping service.

The Shipping Act does not provide the Federal Maritime Commission with authority to review and approve mergers. After careful consideration, the Commission determined that parties to the Tripartite Agreement were ultimately establishing a merged, new business entity and that action is among the type of agreements excluded from FMC review.

The Tripartite Agreement was filed at the Commission on March 24, 2017 by Kawasaki Kisen Kaisha, Ltd (K Line), Mitsui O.S.K. Lines (MOL), and Nippon Yusen Kaisha (NYK). These parties were seeking authority to share information with each other in advance of a new business entity being formed under the agreement next year. Absent today’s vote, or a Request for Additional Information, the agreement would have gone into effect on May 8.

We first told you about the planned merger between Japan’s “Big 3” carriers in the first blog of November, 2016. That carrier competition shrinking merger is still happening.

The FMC can’t actually stop K Line, MOL, and NYK from merging, but the U.S. maritime regulator can stop Japan’s Big 3 from jumping the gun and acting as a merged company before the merger ever takes place.

William P. Doyle, a commissioner with the FMC, expressed his thoughts on why the Tripartite Agreement was rejected in a statement:

Much of what the Tripartite parties were asking for revolved around pre-merger or pre-consolidation coordination. For instance, the parties were seeking authority to share information and conduct joint negotiations with third party businesses in the United States for as much as year in advance of any potential merger. These provisions would violate “gun jumping” laws that forbid the sharing of competitively sensitive information or the premature combining of the parties.

“In order to receive the benefits of a merger, one needs to first merge,” Doyle said.

While there is always a disclaimer to statements like the one from Doyle that was released on the FMC’s website to say his views don’t necessarily reflect the rest of the commission, the decision to reject the Tripartite Agreement was unanimous. Therefore, Doyle’s statement is probably a pretty good reflection of the other commissioners’ opinions on the agreement as a whole.

Doyle makes it clear that the FMC is not stopping the merger by saying, “This decision by the FMC in no way precludes the Japanese carriers from merging their container trade business units into a single stand-alone company.” To do so would be beyond the bounds of the FMC.

However, allowing the Big 3 to begin working together as if they already were merged would set a really bad precedent. No other carriers have been so bold as to attempt to openly jump the gun on cooperation like this. Doyle said:

CMA CGM has acquired APL and China’s COSCO and CSCL have merged. Maersk Line is taking over Hamburg Süd and Hapag Lloyd is in the process of acquiring United Arab Shipping Company (UASC). None of these liner companies sought FMC authority under joint service agreement regulations to share information and conduct joint negotiations prior to actually merging.

If the FMC had allowed the agreement, it is doubtless other carriers would try to follow suit in trying to work together as if they were merged before mergers actually happen. Perhaps such circumstances would arise where such hypothetical mergers then fell apart or the companies decided mergers were no longer necessary.  A potential loophole around antitrust laws could be created by the precedent the Tripartite Agreement.

There is another unattractive aspect to the Tripartite Agreement that Doyle points out:

The proposed joint service agreement presented by the Japanese carriers seeks authority far beyond the bounds of any joint venture currently on file with the Federal Maritime Commission. Here, the Tripartite parties are seeking a geographic scope between the United States and all ports and points worldwide.

There are at least five joint service agreements currently on file with the FMC. These agreements are all geographically restricted to specific trade routes and ports. This means the that the joint service parties in those agreements still compete with each other in the container trade outside the joint service’s trade. Further, the joint ventures do not treat the joint service as a merger of the parties’ specific lines and retain their own separate corporate identities. Here, the Japanese Tripartite parties envision a complete merger of the liner trades into a single company and the entities do not intend to keep their separate corporate identities in the container trade attached once up and running.

Again, it would be a bad precedent if the FMC allowed a joint service agreement with broader geographical scope than specified trade routes and ports. Some would even argue joint service agreements themselves already set a bad precedent.

With all the joint service agreements and vessel sharing agreements happening between carriers in the international shipping industry right now, a close eye has to be kept on how much cooperation is allowed between carriers.

There is a history of illegal price fixing and collusion from carriers in the international shipping industry. It’s imperative maritime regulatory authorities, like the FMC, retain strength in restricting carrier cooperation. I applaud the FMC for its decision to reject the Tripartite Agreement.

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ILWU to Vote on Early Contract Extension, AND IT COULD PASS! https://www.universalcargo.com/ilwu-to-vote-on-early-contract-extension-and-it-could-pass/ https://www.universalcargo.com/ilwu-to-vote-on-early-contract-extension-and-it-could-pass/#comments Tue, 02 May 2017 19:14:50 +0000 https://www.universalcargo.com/?p=8115 This is unprecedented news. The International Longshore & Warehouse Union (ILWU) is actually going to vote on an early contract extension. Chris Dupin reports in American Shipper: The International Longshore and Warehouse Union (ILWU) said Friday that rank and file members of its longshore division will have an opportunity to vote on a proposal to […]

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YouTube Video

Dockworker and cargo containers

Dockworker and cargo containers

This is unprecedented news. The International Longshore & Warehouse Union (ILWU) is actually going to vote on an early contract extension.

Chris Dupin reports in American Shipper:

The International Longshore and Warehouse Union (ILWU) said Friday that rank and file members of its longshore division will have an opportunity to vote on a proposal to extend their current contract with employers for an additional three years beyond the current July 1, 2019 expiration date.

I didn’t want to get shippers, and everyone else in the supply chain, too excited about this news. After all, the ILWU approving an early contract extension would be a major narrative change. Historically, it has been a policy of the dockworker unions, both the ILWU and International Longshoremen’s Association (ILA), to never extend or agree to a new contract before the expiration of the previous one. And just because an extension is being voted on does not mean it will be passed.

However, my sources say there’s a good chance that the ILWU rank and file will actually approve the extension.

In fact, when I asked David Griffen, a longshoreman who granted Universal Cargo an interview during the contentious ILWU contract negotiations of 2014/2015, about the contract extension vote, he said, “I think she passes.”

Here is his response to my inquiry on Twitter:

David Griffen believes ILWU contract extension will pass

Despite Mr. Griffen saying I probably know when the vote is happening, I do not have that information to share. The ILWU has not released the date of the vote to the public. However, Griffen’s comment that ballots are going out soon means there shouldn’t be a long wait before finding out if he’s right about the extension passing.

Almost from the moment the current contract was ratified, groups across the supply chain began urging the ILWU and Pacific Maritime Association (PMA) to begin early contract negotiations for the next contract. There was probably no voice louder than that of the National Retail Federation, but the urging for early contract negotiations came from manufacturers, farmers and agribusinesses, wholesalers, retailers, importers, exporters, distributors, transportation and logistics providers, other supply chain stakeholders, and even politicians.

Despite so many wanting to see an early contract extension, few probably thought it would happen, even when the PMA and ILWU met about a contract extension. That an early extension is actually being voted on and expected to be passed by members of the rank and file is a very pleasant surprise.

The extension does come with pay bumps for ILWU members. Chris Dupin shared the following details about the extension from an unnamed source:

    • A wage increase of 3.1 percent per year over the base wage rate of $42.18 per hour, which amounts to an hourly increase of $1.31 the first year, $1.35 the second year and $1.39 the third year;
• An increase in pensions, with the maximum pension jumping from $88,000 to $95,460 by 2022, however, one source said that figure was misleading since most members do not receive the maximum (Surviving spouses receive a 75 percent benefit);
• A three-year early retirement “window” for members with at least 13 years of service to encourage early retirement;
• And maintenance of benefits for the union healthcare program, with no premiums, limited deductibles and a $1 co-pay for prescription drugs.

Universal Cargo has kept a close eye on this situation because of the impact contract negotiations have and can have on shippers. We’ll continue to keep you updated. You can catch up on the lead-up to this contract extension vote in the blogs listed below.

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PMA & ILWU MET ABOUT CONTRACT EXTENSION

PMA & ILWU TO ENTER TALKS ON “CONCEPT” OF CONTRACT EXTENSION

ILWU SLOWLY CONSIDERS EARLY CONTRACT NEGOTIATIONS

WILL THE ILWU ACTUALLY EXTEND THEIR CONTRACT EARLY?

ILWU & PMA URGED TO BEGIN CONTRACT NEGOTIATIONS

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Will Carrier Alliance Chaos Reach U.S. Shippers? https://www.universalcargo.com/will-carrier-alliance-chaos-reach-u-s-shippers/ https://www.universalcargo.com/will-carrier-alliance-chaos-reach-u-s-shippers/#respond Thu, 27 Apr 2017 20:02:03 +0000 https://www.universalcargo.com/?p=8113 Despite the reshuffling of ocean carriers into just three alliances–the 2M, Ocean Alliance, and THE Alliance–being described as a disaster, U.S. shippers have seen little impact on their imports and exports. But could that change? As the April 1st reshuffle date approached, shippers were worried their supply chains could suffer significant disruptions. Those fears were not […]

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Despite the reshuffling of ocean carriers into just three alliances–the 2M, Ocean Alliance, and THE Alliance–being described as a disaster, U.S. shippers have seen little impact on their imports and exports. But could that change?

Carrier Craziness Bracket 2017As the April 1st reshuffle date approached, shippers were worried their supply chains could suffer significant disruptions. Those fears were not unfounded, as congestion and stranded containers have resulted.

In fact, we told you in a blog last week about Shanghai’s Yangshen Port suffering major congestion largely due to the carrier alliance reshuffle.

However, the trans-Atlantic shipping routes remain, true to their normal character, stable.

While U.S. shippers have only suffered a few delays here and there, the Alliance reshuffle “disaster” has brought chaos to Asia-Europe tradelanes according to an article by Mike Wackett in The Loadstar:

“Organised chaos” – that’s how one carrier describes the Asia-Europe schedules of the Ocean and THE alliances, believing there’s very little hope of vessels hitting itineraries before June.

The source, an alliance member, told The Loadstar the transition of ships and containers from previous schedules to their new alliance hubs had proved more complex than expected – the result being containers stranded at terminals between Asia, the Middle East and Europe.

He admitted that phasing-in and -out had been “a disaster”, resulting in big gaps appearing in network coverage.

In the middle of the chaos of the carrier reshuffle, shippers got a scare that a repeat of Hanjin Shipping’s disastrous collapse might be happening with another carrier. Last week, Yang Ming’s shares were suspended from the Taiwan Stock Exchange. Some shippers took that as an alarm ringing.

The last thing shippers want to see right now is another major shipping line bankruptcy from a carrier in one of the three major alliances, the THE Alliance in Yang Ming’s case. According to another article by Wackett in The Loadstar, the carrier “issued an update on its financial status to mitigate shipper and service provider concerns after the suspension of its shares…”

It’s easy to see why shippers worry about the THE member when the carrier has made headlines recently like “Yang Ming losses double in 2016” in the Journal of Commerce.

In truth, carriers have struggled financially across the board in the international shipping industry for years now, and shippers’ concerns that another major shipping company could collapse are fair. The carrier alliances have created strategies to protect themselves against a member going bankrupt, but it is hard to imagine such an event wouldn’t be negatively impactful for shippers.

Even without a carrier collapse, U.S. shippers have to wonder if negative effects seen so far from the recent revamp of the carrier alliances will reach them.

Hugh R. Morley writes in the Journal of Commerce that “the impact [of the alliance reshuffle] is only slowly emerging on routes across the globe, and it’s unclear how it will shake out and which ports and routes will see more volume and which less.”

Morley even adds that this is also true of the normally stable trans-Atlantic lanes.

Capacity changes that the alliances ultimately put into effect will also impact their ability to increase freight rates. Downward pressure and even record low freight rates caused by overcapacity in recent years have played large roles in carriers’ financial struggles.

Whether or not these alliances will be able to get overcapacity under control is another question hanging in the air from these recent changes.

Here at Universal Cargo, we’ll, of course, be keeping an eye on how the changes in the carrier alliances affect international shipping around the world. As always, we’ll share important updates with you through this blog.

 

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Universal Cargo Teaching About Incoterms in Lorman Live Webinar https://www.universalcargo.com/universal-cargo-teaching-about-incoterms-in-lorman-live-webinar/ https://www.universalcargo.com/universal-cargo-teaching-about-incoterms-in-lorman-live-webinar/#respond Tue, 25 Apr 2017 18:07:26 +0000 https://www.universalcargo.com/?p=8108 Here’s your chance to learn all about Incoterms from Universal Cargo’s General Manager Raymond Rau. When it comes to international business deals involving importing and exporting, the importance of Incoterms cannot be understated. In fact, Incoterms is such a big topic that each of our blogs defining Incoterms have more visits than any other page on our website, including […]

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Here’s your chance to learn all about Incoterms from Universal Cargo’s General Manager Raymond Rau.

When it comes to international business deals involving importing and exporting, the importance of Incoterms cannot be understated.

In fact, Incoterms is such a big topic that each of our blogs defining Incoterms have more visits than any other page on our website, including our Home Page.

Lorman Education Services has invited Universal Cargo to teach a live webinar titled ICC Incoterms Updates. Raymond Rau will be teaching the Webinar on June 28th at 10 am PST (1 pm EST).

  • IncotermsYou will be able to define each of the 11 Incoterms.
  • You will be able to discuss why having the right Incoterm in place will help to reduce or eliminate confusion and missed steps in the shipping process.
  • You will be able to explain which Incoterm will be of most value to you.
  • You will be able to review the benefits and problems with the most frequently used Incoterms in order to make a decision that is in your best interest.
  • You will be able to have your Incoterms questions answered in a Q&A session with Raymond Rau.

If you cannot attend the live webinar, Lorman also offers it on demand. The biggest disadvantage of the on demand version is not being able to take part in the live Q&A; however, you will still be able to learn from the questions others ask.

For Universal Cargo’s blog readers, Lorman is offering a 50% discount on the webinar. All you have to do is follow one of our links to the webinar to take advantage of the half off deal.

Incoterms mystify many. Even experienced business people can find Incoterms confusing and intimidating. However, the importance of Incoterms to international shipping deals makes this topic vital to your success in international shipping.

Lorman Education Services, a national provider of continuing legal education, sponsors national live webinars for professionals across the United States. After asking if you need a refresher on international trade law, they describe the webinar as follows:

Make sure you are up-to-date on the most recent updates on the International Commercial Terms rules and regulations.

Many sellers and buyers are unfamiliar with what is required to handle a shipment from A to Z. They may be relying on the other’s expertise when, in fact, there are gaps in information.

For U.S. imports, many sellers do not fully understand U.S. customs processes and destination handling and the buyer (U.S. importer) does not fully understand the processes involved at the origin.

For U.S. exports, the same applies. U.S. based sellers (exporter) may have difficulty handling the destination customs processes and buyers do not fully understand what’s required in the U.S..

This topic helps the buyers (importers) and sellers (exporters) understand the process of an international shipment and then to understand the risks and costs involved for each party under each incoterm. This will allow the shippers to protect themselves financially by formally establishing expectations for each party in regards to the shipment process.

This information is critical for U.S. buyers (importers) and sellers (exporters) so they can make informed decisions about the terms of sale before signing a contract with any company.

Again the time and date of this live Incoterms webinar are:

  • June 28th
  • 10-11:30 am PST (1 pm EST)

Incoterms Webinar Button

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Shanghai’s Yangshen Port Suffers Congestion in Wake of Carrier Alliances https://www.universalcargo.com/shanghais-yangshen-port-suffers-congestion-in-wake-of-carrier-alliances/ https://www.universalcargo.com/shanghais-yangshen-port-suffers-congestion-in-wake-of-carrier-alliances/#respond Wed, 19 Apr 2017 20:02:57 +0000 https://www.universalcargo.com/?p=8104 Shippers were worried about potential delays or disruptions that April first’s carrier alliance reshuffle might bring. It turns out, those fears were well founded. Major congestion is happening at Yangshan Port in Shanghai, largely due to the launch of the new carrier alliances. Yangshan Port makes up part of the Port of Shanghai, which has […]

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Picture of Port Yangshan by Bruno Corpet

Picture of Port Yangshan by Bruno Corpet

Shippers were worried about potential delays or disruptions that April first’s carrier alliance reshuffle might bring. It turns out, those fears were well founded.

Major congestion is happening at Yangshan Port in Shanghai, largely due to the launch of the new carrier alliances.

Yangshan Port makes up part of the Port of Shanghai, which has held the distinction of the world’s busiest port by TEU volume for many years.

It is not the carrier alliances alone that have caused the major congestion at the port. The weather is certainly playing its role too. Bruce Gain reports in American Shipper:

Bad weather and shrinking capacity following a recent realignment of shipping alliances have created a perfect storm of port congestion that has caused a virtual gridlock in traffic at the port of Yangshan in China.

Gridlock is the last thing shippers want to hear when talking about ports. Unfortunately, the congestion at the Port of Yangshan is real, and shippers need to hear about it.

Many would call the bad weather, with thick fog hindering visibility, the main culprit of the congestion. Certainly, carriers are putting blame there rather than on themselves. In the American Shipper article quoted above, Maersk confirms that it has had vessels impacted by the congestion that the company’s spokesman said is “due to seasonal bad weather.”

It’s no surprise carriers would not name themselves as a cause of the congestion. However, other industry professionals put the blame squarely on the carriers. Bruce Gain’s article shares:

In addition to the more immediate impacts of the fog, rampant overbooking by carriers in the wake of newly restructured vessel sharing alliances is at the root of the massive delays at the port, Nicolas Vittori, the overseas network manager for France-based Setcargo, told American Shipper.

“Carriers are overbooking vessels and continue to accept reservations,” Vittori said. “Meanwhile, containers Chinese exporters deliver are left stranded at the port without being loaded onto ships.”

Jason Jiang, reporting in Splash 24/7, gives some details of the congestion happening in Shanghai:

… the congestion has caused delays in both ships calling at Yangshan Port’s Shengdong container terminal and Guandong container terminal.

Major lines have all sent notices to their clients to reschedule the services and Maersk line has even switched four ship callings between Apr 19 to April 27 from Yangshan Port to Waigaoqiao Port. K Line and NYK also delayed the sailing date of some of their containerships at Yangshan Port.

Shippers in both Asia-Europe and Asia-U.S. trade are being impacted by this congestion.

Steven Chiu from Seamaster Global emailed Universal Cargo Monday in regard to Shanghai Yangshan congestion and heavy backlog, saying that “carriers accepted 25% booking over their capacity” and “it will impact all vessel calling Shanghai Yangshan terminal (75% TP trade capacity impacted).”

Obviously the terminal and Port of Yangshan operators are working on this congestion problem, but they are not able to give any sort of timetable for clearing the congestion, as can be noted from both the American Shipper and Splash 24/7 articles.

U.S. shippers are familiar with the fact that severe congestion at ports can take a long time to clear up after experiencing the effects of such congestion at West Coast ports during and after the contentious 2014-15 contract negotiations between the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU).

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Freight Rates Primed to Increase on U.S. Imports But May Not Be Bad for Shippers https://www.universalcargo.com/freight-rates-primed-to-increase-on-u-s-imports-but-may-not-be-bad-for-shippers/ https://www.universalcargo.com/freight-rates-primed-to-increase-on-u-s-imports-but-may-not-be-bad-for-shippers/#respond Thu, 13 Apr 2017 20:38:09 +0000 https://www.universalcargo.com/?p=8098 Despite all the worries of slowed U.S. imports because of a potential protectionist policies from the Trump administration, strong growth is projected for U.S. imports over the next six months. Bill Mongelluzzo reported in the Journal of Commerce (JOC): US retailers project that increased consumer spending will drive stronger US import growth for at least the […]

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Import Shipping ContainersDespite all the worries of slowed U.S. imports because of a potential protectionist policies from the Trump administration, strong growth is projected for U.S. imports over the next six months.

Bill Mongelluzzo reported in the Journal of Commerce (JOC):

US retailers project that increased consumer spending will drive stronger US import growth for at least the next six months, potentially providing carriers the ability to reverse the slow decline of trans-Pacific spot rates. Eastbound Pacific spot rates have eroded steadily since the pre-Chinese New Year spike in January.

This is good news for carriers. Shipping lines have been trying to increase freight rates, but continue to struggle in overcoming the overcapacity that has so longed plagued shipping lines.

In fact, Linton Nightingale authored an article published by Lloyd’s Loading List that headlines, “Spot market rejects latest ocean price push.” The article really focuses on the carriers’ attempts to increase spot freight rates from Asia to North Europe falling flat. Yet it’s a different story with Asia to U.S. shipping rates.

While Asia to U.S. East Coast spot freight rates continue to decline, Asia to U.S. West Coast rates showed a significant increase, having “climbed 14.8% over the previous week,” according to the Lloyd’s List article (which was published last Monday, April 3rd).

What all this is adding up to is an increasing freight rate for U.S. importers, at least in terms of transpacific shipments.

Carriers are still a long way from being out of the woods when it comes to making freight rates healthy for themselves, especially on a global level. However, when it comes to transpacific shipments from Asia to U.S. West Coast, carriers are gaining ground, meaning U.S. importers can expect to pay higher freight rates in the months to come.

While this may seem like bad news for U.S. importers because of the obvious increase to costs with higher freight rates, it really isn’t. How can I say that? The healthy cause of increasing freight from the increase in demand makes it possible.

What is sparking this opportunity of increased freight rates for carriers is a strengthening economy where U.S. consumers are increasing their purchases.

The National Retail Federation (NRF) put out a press release highlighting how U.S. imports are growing as the economy expands. Here are the import numbers and projections from the NRF, which take us all the way to the end of the summer:

Ports covered by Global Port Tracker handled 1.43 million Twenty-Foot Equivalent Units in February, the latest month for which after-the-fact numbers are available. That was a decrease of 14.3 percent from January as many Asian factories shut down for Lunar New Year, and down 7 percent from the same month a year ago. Coming after the winter holidays and before retailers stock up for summer, February is historically the slowest month of the year for imports. One TEU is one 20-foot-long cargo container or its equivalent.

March was estimated at 1.61 million TEU, up 21.5 percent from unusually low numbers last year, when Lunar New Year came a week later than this year. April is forecast at 1.59 million TEU, up 10.3 percent from last year; May at 1.68 million TEU, up 3.5 percent; June at 1.66 million TEU, up 5.3 percent; July at 1.71 million TEU, up 5.1 percent, and August at 1.74 million TEU, up 1.6 percent.

The first half of 2017 is expected to total 9.6 million TEU, up 7.3 percent from the first half of 2016. Cargo volume for 2016 totaled 18.8 million TEU, up 3.1 percent from 2015, which had grown 5.4 percent from 2014.

When all is said and done, the NRF forecasts “that 2017 retail sales – excluding automobiles, gasoline and restaurants – will increase between 3.7 and 4.2 percent over 2016, driven by job and income growth coupled with low debt.”

“Consumers are spending more, and these import numbers show that retailers expect that to continue for a significant period,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “This is a clear sign that the economy has long-term momentum regardless of month-to-month fluctuations. Whether it’s merchandise for store shelves or parts for U.S. factories, imports play a vital role in American prosperity.”

Could protectionist policies from the Trump administration hurt this U.S. import growth? Potentially, yes. That has been a worry put forth by major importers since the election of President Trump. However, in the early part of the Trump presidency those fears have not been realized. The NRF seems confident that there will not be such significant policy changes during the time period projected to hurt this import growth, as evidenced by statements in the press release:

“Our view that imports will continue to be stable despite the uncertainties of the new administration’s trade policies remains unchanged,” Hackett Associates Founder Ben Hackett said. “Despite pre-election promises, there has been little real change in trade policy so far and little change is expected for the greater part of the year.”

 

It also is worth noting that healthier freight rates mean healthier carriers. Healthier carriers mean stronger reliability for international shipping. But that’s a topic for another blog…

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Universal Cargo Sponsors Fire to Inspire Party at High Point Market https://www.universalcargo.com/universal-cargo-sponsors-fire-to-inspire-party-at-high-point-market/ https://www.universalcargo.com/universal-cargo-sponsors-fire-to-inspire-party-at-high-point-market/#respond Tue, 11 Apr 2017 22:23:25 +0000 https://www.universalcargo.com/?p=8093 It’s here! The event of the season for furniture importers and sellers… actually, the furniture industry as a whole. The High Point Market! Here at Universal Cargo, we love the High Point Market. That’s largely due to the fact that we love the furniture industry. It’s the top industry we serve as a trusted freight […]

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High Point PartyIt’s here! The event of the season for furniture importers and sellers… actually, the furniture industry as a whole. The High Point Market!

Here at Universal Cargo, we love the High Point Market. That’s largely due to the fact that we love the furniture industry. It’s the top industry we serve as a trusted freight forwarder in the international shipping industry.

This year, Universal Cargo is not just attending the High Point Market but sponsoring a big party during it!

Every year since 1989, Universal Cargo CEO Devin Burke, along with other members of the team, attends the High Point Market.

For Burke, this isn’t just a chance to see clients and potential clients but a chance to meet and catch up with friends.

“I think I speak for a lot of people who come to market year in a year out,” Burke said. “I really look forward to coming every six months, not just because of the prospect of business, but because of so many lasting friendships that have developed through the years. It is truly a joy to come and see old friends here.”

You can find Burke wandering the High Point Market (where he may challenge you to a push up contest, tell you a wildly punny joke, and ask to record you on his phone for our Youtube channel), but you’ll be missing out if you don’t join him at the Fire to Inspire party on the first night of the High Point Market.

YouTube Video

Yes, that’s Devin Burke in the above video. Doesn’t he just look like someone who’d be fun to party with (as the saying goes, he also works hard)?

Everyone will be talking about the Fire to Inspire party for the rest of the High Point Market Week, so you won’t want to miss this event anyway, even if you don’t care about partying with Burke.

Universal Cargo is sponsoring this party that’s presented by Classy Art. The party kicks off at 6pm on Thursday, April 20th, 2017 and will be full of hors d’oeuvre and surprises. You won’t want to miss it.

The High Point Market--happening from April 20th to April 26th in High Point, NC--is the largest home furnishing show in the world. If you’re in the furniture business, you--like Universal Cargo--should never miss it.

Universal Cargo never misses High Point because we take care of all your furniture importing and exporting needs.

Offering short-term and long-term rate agreements, Universal Cargo will be able to handle every facet of the move, including delivery to the door of major big box retail establishments.  We are experienced in dealing with major retailers that have very stringent delivery requirements, such as Costco and Menards.

Universal Cargo has been a trusted freight forwarder for over 30 years, but we began working with furniture manufacturers in 1989. Quickly, the furniture industry became the top industry we serve. With all that industry-specific experience, Universal Cargo knows and caters to the specific needs of furniture sellers like yourself.

At competitive rates, Universal Cargo’s friendly staff will provide you with reliable, transparent, and personalized service, covering every detail of shipping your furniture around the world.

We can’t wait to see you at High Point and the Fire to Inspire party.

 

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President Trump’s New Executive Orders on U.S. Trade https://www.universalcargo.com/president-trumps-new-executive-orders-on-u-s-trade/ https://www.universalcargo.com/president-trumps-new-executive-orders-on-u-s-trade/#respond Thu, 06 Apr 2017 21:35:58 +0000 https://www.universalcargo.com/?p=8092 President Trump signed two executive orders last week to attack trade abuses and the United States’ trade deficit. The executive order going after trade abuses is focused on enforcement of antidumping laws and countervailing duties. Dumping is the practice where one country, let’s just say China, exports goods at a price that undercuts the market price […]

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President Trump

President Trump

President Trump signed two executive orders last week to attack trade abuses and the United States’ trade deficit.

The executive order going after trade abuses is focused on enforcement of antidumping laws and countervailing duties.

Dumping is the practice where one country, let’s just say China, exports goods at a price that undercuts the market price of that good in the country where it is being imported, let’s just say the United States.

I pick the example of China and the United States because China, as an article from CNN puts it, “has repeatedly run afoul of the US’ anti-dumping laws”. The article points out how these executive orders come shortly before President Trump’s first meeting with Chinese President Xi Jinping. The article also doesn’t fail to point out that the United States’ largest trade deficit is with China.

Regardless of the timing, these executive orders make good sense for the U.S., and should not be as controversial as previous executive orders from President Trump.

In this first discussed executive order, the president points to 2.3 billion uncollected dollars in antidumping and countervailing duties owed to the U.S. government as of 2015. This is not just missing revenue from the debt burdened government, but a show of serious evasion of U.S. trade law.

The size of that dollar number also makes it clear that the U.S. Customs and Border Protection (CBP) is a major revenue source for the U.S. In fact, Military Technologies posted an article on this executive order that enumerates just how big of a revenue source the CBP currently is:

In Fiscal Year 2016, CBP seized more than 31,500 of counterfeit shipments and collected more $40 billion in duties, taxes, and fees, making CBP the U.S. government’s second largest source of revenue.

Speaking of counterfeit shipments, the executive order also includes a mandate for the enforcement, and possible creation, of laws protecting intellectual property rights.

We’ll see in a few months what kind of impact the executive order dealing with violations of trade and customs laws will have on importers. After reading the executive order, there are two things that stand out to me:

  1. A “covered importer” will be required to pay security liability on imports.

The executive order says that “covered importers” will need to “pay to provide security for antidumping and countervailing duty liability through bonds and other legal measures”.

This will be a new fee, or perhaps better described as a security deposit, that importers assessed as a risk will have to pay in order to import goods. Three separate criteria are listed to make an importer a “covered importer” and therefore subject to paying security on their imports. That’s what brings me to the next thing that stands out.

  1. “Covered importer” includes new importers.

One criterion that makes an importer a “covered importer” is being a first time importer.

The other two criteria are about an importer’s past raising the risk level of him or her failing to pay antidumping or countervailing duties. If in the past the shipper has failed to pay such duties or fines or just failed to pay them in a timely manner, the importer will be subject to paying the security.

While it may seem unfair that newbies are lumped in with offenders when it comes to risk assessment and assignment of security bonds (or other legal measures), it could be thought of like a credit score. Someone with no credit history is a higher risk to a lender than someone with a long history of paying their debts.

It will be interesting to see if a new shipper importing through a long established freight forwarder or NVOCC will still be assessed a risk, paying security on imports as a “covered importer”.

The other executive order mentioned at the top of this blog is for the creation of an Omnibus Report on significant trade deficits the U.S. has.

The report is to be made by the Secretary of Commerce and the United States Trade Representative (USTR), in consultation with the Secretaries of State, the Treasury, Defense, Agriculture, and Homeland Security, and the heads of any other executive departments or agencies with relevant expertise, as determined by the Secretary of Commerce and the USTR.

President Trump made it clear during his campaign that he wanted to turn around the U.S. trade deficit. In order to create any strategy to pull off such a lofty goal, a thorough assessment of the trade deficits the U.S. has with other country’s must be made and analyzed.

Both executive orders are published at WhiteHouse.gov but also appear in full below for your convenience.

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ESTABLISHING ENHANCED COLLECTION AND ENFORCEMENT OF
ANTIDUMPING AND COUNTERVAILING DUTIES AND VIOLATIONS
OF TRADE AND CUSTOMS LAWS

By the authority vested in me as President by the Constitution and the laws of the United States of America, and in order to promote the efficient and effective administration of United States trade laws, it is hereby ordered as follows:

Section 1.  Policy.  Importers that unlawfully evade antidumping and countervailing duties expose United States employers to unfair competition and deprive the Federal Government of lawful revenue.  As of May 2015, $2.3 billion in antidumping and countervailing duties owed to the Government remained uncollected, often from importers that lack assets located in the United States.  It is therefore the policy of the United States to impose appropriate bonding requirements, based on risk assessments, on entries of articles subject to antidumping and countervailing duties, when necessary to protect the revenue of the United States.

Sec. 2.  Definitions.  For the purposes of this order:

(a)  the term “importer” has the meaning given in section 4321 of title 19, United States Code; and

(b)  the term “covered importer” means any importer of articles subject to antidumping or countervailing duties for which one of the following is true:  U.S. Customs and Border Protection (CBP) has no record of previous imports by the importer; CBP has a record of the importer’s failure to fully pay antidumping or countervailing duties; or CBP has a record of the importer’s failure to pay antidumping or countervailing duties in a timely manner.

Sec. 3.  Implementation Plan Development.  Within 90 days of the date of this order, the Secretary of Homeland Security shall, in consultation with the Secretary of the Treasury, the Secretary of Commerce, and the United States Trade Representative, develop a plan that would require covered importers that, based on a risk assessment conducted by CBP, pose a risk to the revenue of the United States, to provide security for antidumping and countervailing duty liability through bonds and other legal measures, and also would identify other appropriate enforcement measures.  This plan shall be consistent with the requirements of section 4321 and section 1623 of title 19, United States Code, and corresponding regulations.

Sec. 4.  Trade and Suspected Customs Law Violations Enforcement.  (a)  Within 90 days of the date of this order, the Secretary of Homeland Security, through the Commissioner of CBP, shall develop and implement a strategy and plan for combating violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise entering through any mode of transportation, to the extent authorized by law.

(b)  To ensure the timely and efficient enforcement of laws protecting Intellectual Property Rights (IPR) holders from the importation of counterfeit goods, the Secretary of the Treasury and the Secretary of Homeland Security shall take all appropriate steps, including rulemaking if necessary, to ensure that CBP can, consistent with law, share with rights holders:

(i)   any information necessary to determine whether there has been an IPR infringement or violation; and

(ii)  any information regarding merchandise voluntarily abandoned, as defined in section 127.12 of title 19, Code of Federal Regulations, before seizure, if the Commissioner of CBP reasonably believes that the successful importation of the merchandise would have violated United States trade laws.

Sec. 5.  Priority Enforcement.  The Attorney General, in consultation with the Secretary of Homeland Security, shall develop recommended prosecution practices and allocate appropriate resources to ensure that Federal prosecutors accord a high priority to prosecuting significant offenses related to violations of trade laws.

Sec. 6.  General Provisions.  (a)  Nothing in this order shall be construed to impair or otherwise affect:

 (i)   the authority granted by law to an executive department or agency, or the head thereof; or

 (ii)  the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b)  This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c)  This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

DONALD J. TRUMP

THE WHITE HOUSE,
March 31, 2017.

 

OMNIBUS REPORT ON SIGNIFICANT TRADE DEFICITS

By the authority vested in me as President by the Constitution and the laws of the United States of America, and in order to ensure the informed exercise of the authority over international trade granted to me by law, it is hereby ordered as follows:

Section 1.  Policy.  Free and fair trade is critical to the Nation’s prosperity, national security, and foreign policy.  It is in America’s economic and national security interests to promote commerce by strengthening our relationships with our trading partners, vigorously enforcing our Nation’s trade laws, improving the overall conditions for competition and trade, and ensuring the strength of our manufacturing and defense industrial bases.

For many years, the United States has not obtained the full scope of benefits anticipated under a number of international trade agreements or from participating in the World Trade Organization.  The United States annual trade deficit in goods exceeds $700 billion, and the overall trade deficit exceeded $500 billion in 2016.

The United States must address the challenges to economic growth and employment that may arise from large and chronic trade deficits and the unfair and discriminatory trade practices of some of our trading partners.  Unfair and discriminatory practices by our trading partners can deny Americans the benefits that would otherwise accrue from free and fair trade, unduly restrict the commerce of the United States, and put the commerce of the United States at a disadvantage compared to that of foreign countries.  To address these challenges, it is essential that policy makers and the persons representing the United States in trade negotiations have access to current and comprehensive information regarding unfair trade practices and the causes of United States trade deficits.

Sec. 2.  Report.  Within 90 days of the date of this order, the Secretary of Commerce and the United States Trade Representative (USTR), in consultation with the Secretaries of State, the Treasury, Defense, Agriculture, and Homeland Security, and the heads of any other executive departments or agencies with relevant expertise, as determined by the Secretary of Commerce and the USTR, shall prepare and submit to the President an Omnibus Report on Significant Trade Deficits (Report).  To aid in preparing the Report, the Secretary of Commerce and the USTR may hold public meetings and seek comments from relevant State, local, and non-governmental stakeholders, including manufacturers, workers, consumers, service providers, farmers, and ranchers.  The Report shall identify those foreign trading partners with which the United States had a significant trade deficit in goods in 2016.  For each identified trading partner, the Report shall

(a)  assess the major causes of the trade deficit, including, as applicable, differential tariffs, non-tariff barriers, injurious dumping, injurious government subsidization, intellectual property theft, forced technology transfer, denial of worker rights and labor standards, and any other form of discrimination against the commerce of the United States or other factors contributing to the deficit;

(b)  assess whether the trading partner is, directly or indirectly, imposing unequal burdens on, or unfairly discriminating in fact against, the commerce of the United States by law, regulation, or practice and thereby placing the commerce of the United States at an unfair disadvantage;

(c)  assess the effects of the trade relationship on the production capacity and strength of the manufacturing and defense industrial bases of the United States;

(d)  assess the effects of the trade relationship on employment and wage growth in the United States; and

(e)  identify imports and trade practices that may be impairing the national security of the United States.

Sec. 3.  General Provisions.  (a)  Nothing in this order shall be construed to impair or otherwise affect:

(i)   the authority granted by law to an executive department or agency, or the head thereof; or

(ii)  the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b)  This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c)  This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

DONALD J. TRUMP

THE WHITE HOUSE,
March 31, 2017.

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Amazon’s U.S. Delivery Drone Marks Shipping’s Move Toward Automation https://www.universalcargo.com/amazons-u-s-delivery-drone-marks-shippings-move-toward-automation/ https://www.universalcargo.com/amazons-u-s-delivery-drone-marks-shippings-move-toward-automation/#respond Tue, 04 Apr 2017 22:02:38 +0000 https://www.universalcargo.com/?p=8090 It’s official. People are obsolete. Okay, not really. But by watching the video above that was posted on Youtube by James Vincent, you can see how technology is taking over shipping. According to Business Insider, this video represents the first time a U.S. delivery from an Amazon drone has been publicly recorded by an observer. Apparently, […]

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YouTube Video

automated container shippingIt’s official. People are obsolete. Okay, not really. But by watching the video above that was posted on Youtube by James Vincent, you can see how technology is taking over shipping.

According to Business Insider, this video represents the first time a U.S. delivery from an Amazon drone has been publicly recorded by an observer. Apparently, the drone delivered sunscreen, which makes sense because this delivery happened in Palm Springs, CA.

With talk about automated ports, driverless trucks, and now drones delivering packages, automation is a hot topic in international shipping right now.

Of course, when you’re hiring a freight forwarder, you’re not shipping something small enough to be delivered by a little drone. However, a giant drone could, theoretically, deliver a 20′ shipping container. But that’s not the point. The advancements in technology that can make shipping more efficient is what makes a video like this so fascinating.

This video won’t be looked back on as some fantastic piece of cinematography or storytelling. In fact, it will probably be quickly forgotten. However, what it represents--the fact that a package can be delivered right to your door without a delivery person--will be remembered.

There is, of course, a downside to automated shipping. Delivering packages is a job someone has. Drones and driverless trucks threaten to take jobs from drivers and delivery people. And some people are up in arms about that.

No one is more up in arms about technology’s threat to jobs than the dockworkers and their unions at the ports.

Port automation is projected to be a major point of contention in the upcoming contract negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX).

The unions at U.S. ports have long fought against port automation for the obvious danger it poses to jobs held by union longshoremen. Unfortunately, this has helped put U.S. ports behind in terms of technological advancements and efficiency.

Ironically, one of the biggest weapons the ILA and its sister union the International Longshore & Warehouse Union (ILWU) utilize to fight against port automation (and other issues they have with port employers) is decreasing port efficiency through labor slowdowns and strikes.

Unfortunately for the ILA and ILWU, fighting against technological advancements is a losing battle. The advancements can be slowed, but as James Vincent’s video shows, technology is changing how shipping is done and people are excited about that change.

It should be noted that technological advancements in shipping automation does not just end jobs. These advancements also create tech jobs.

The hard negotiated contracts between the unions and employers at the ports will certainly include union members being trained in the use, upkeep, and oversight of new technology at the ports.

For shippers, automation is exciting. The potential is there to lower the costs of shipping while increasing its dependability and efficiency. However, there are plenty who worry about the inevitable hiccups that will happen along the way.

We’re now at a time of looking at the future of a changing industry. The question no longer is could the shipping process be automated from picking up cargo, delivering it to the ports, loading it on ships, transporting it across the sea, unloading it from the ships, to finally delivering the cargo to its destination. The question now is when will all this be automated.

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3 Things to Allay Shippers’ Fears About HMM’s Agreement with 2M Partners https://www.universalcargo.com/3-things-to-allay-shippers-fears-about-hmms-agreement-with-2m-partners/ https://www.universalcargo.com/3-things-to-allay-shippers-fears-about-hmms-agreement-with-2m-partners/#respond Thu, 30 Mar 2017 20:34:55 +0000 https://www.universalcargo.com/?p=8088 As of today (March 30, 2017), the Federal Maritime Commission’s (FMC) approval of the cooperation agreement between Hyundai Merchant Marine (HMM) and the 2M alliance members, Maersk and MSC is effective. Remember when less than a year ago it looked like HMM was headed for receivership? Yeah, I didn’t think you’d forgotten. That memory, combined with […]

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Hyundai Merchant Marine Dream container ship

Picture: Shipping21 Hyundai Merchant Marine Dream container ship

As of today (March 30, 2017), the Federal Maritime Commission’s (FMC) approval of the cooperation agreement between Hyundai Merchant Marine (HMM) and the 2M alliance members, Maersk and MSC is effective.

Remember when less than a year ago it looked like HMM was headed for receivership? Yeah, I didn’t think you’d forgotten. That memory, combined with Hanjin Shipping’s collapse, has shippers a little worried.

When Hanjin collapsed, many shippers found that their cargo was stuck on the bankrupt carrier’s ships even though they hadn’t contracted with Hanjin. Hanjin’s carrier alliance partners placed cargo on Hanjin ships without shippers’ knowledge. Of course, carrier alliances are vessel sharing agreements, so cargo from carrier alliance partners on Hanjin’s ships really should have been no big surprise.

Still, that fallout was both surprising and costly for many shippers.

Shippers now worry something similar may happen again. Could it happen with this Maersk, MSC, HMM agreement? Remembering HMM’s financial troubles has made shippers wary of Maersk and MSC’s agreement to enter a strategic cooperation agreement with the South Korean carrier.

There are a few things that may help make shippers feel better about this deal.

Here are three things to help allay shippers’ fears about HMM’s agreement with the 2M members:

1. HMM Is Not Joining 2M

It might seem like a matter of semantics, but this agreement is not between HMM and the 2M Alliance; it’s between HMM and the 2M alliance’s members.

In a short World Maritime News article about FMC Commissioner William P. Doyle giving his vote for approval of the agreement, the commissioner was quoted as saying:

“Despite announcements that were issued in mid-December by Maersk, MSC and HMM, the 2M alliance itself is not party to this strategic cooperation agreement. For clarification, the term 2M generally applies to the FMC filed agreement known as the Maersk/MSC Vessel Sharing Agreement.”

The distinction between this being an agreement between HMM and 2M partners, Maersk and MSC and not being an agreement with the 2M Alliance itself is significant. This agreement is more specific with the carriers purchasing slots on each other’s ships on selected routes rather than sharing ship operations through various shipping lanes in general.

What this higher selectivity of cooperation in cargo shipping creates is less exposure of risk to Maersk and MSC and, by extension, their shippers.

2. No Cargo On HMM Ships Without Shippers’ Knowledge

Like shippers, the FMC has not forgotten HMM’s financial struggles and the fallout of Hanjin’s collapse. An article on the Loadstar by Mike Wackett about the FMC greenlighting the agreement pointed out that the commission did so “with a proviso on shipper safeguards.”

The article emphasized Maersk’s commitment not to load cargo onto HMM without shippers’ consent:

Commissioner William Doyle said: “Maersk confirmed this week it would honour its commitment to shippers as to having a say on the vessels their cargo will be loaded onto….”

… Maersk said 2M cargo would only be loaded onto HMM vessels “with customers’ express agreement”.

That Maersk said 2M cargo rather than Maersk cargo makes it sound as though the carrier is speaking for MSC as well. However, shippers shouldn’t make that inference. MSC’s commitment, as related by the Loadstar article, does not seem to include customer consent, only transparency:

“MSC’s statement provided no shipper option to exclude carriage on the HMM services,” [said Commissioner Doyle.]

However, MSC subsequently told The Loadstar: “We have responded to the FMC regarding their concerns, and we are pleased that the agreement has now been approved.

“MSC is committed to providing shippers clear and transparent communications, including when slot purchases, exchanges or VSA’s are involved.

“It will normally be apparent to customers when the booked vessel is not a MSC vessel, and we will always do our best to keep customers informed if vessel is changed.”

MSC providing transparency when it comes to shipping on HMM versus 2M vessels is good and will help allay shippers’ fears some. Maersk getting consent before shipping on HMM ships is even better.

3. HMM in Much Better Position Than a Year Ago

I don’t want to go so far as to say HMM is the picture of financial health or is even financially strong. However, the carrier is looking much stronger than a year ago.

Of course, that in itself isn’t saying much. A year ago, HMM had a lot of work to do to avoid receivership. However, avoiding receivership did take some doing and show some resilience from the carrier.

Not only did HMM manage to stay out of receivership by getting a debt-for-equity deal from its creditors and reduced charter fees, but the demise of Hanjin also strengthened HMM.

South Korea had two big, state-owned carriers in Hanjin and HMM, but now HMM is THE big, state-owned carrier of South Korea. The market share benefit of that should be obvious, but this should also make it more likely that the South Korean government would help HMM avoid a financial collapse, like that of Hanjin’s, in the future.

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Legislation Introduced to Stop Labor Slowdowns at the Ports https://www.universalcargo.com/legislation-introduced-to-stop-labor-slowdowns-at-the-ports/ https://www.universalcargo.com/legislation-introduced-to-stop-labor-slowdowns-at-the-ports/#respond Tue, 28 Mar 2017 20:46:31 +0000 https://www.universalcargo.com/?p=8074 On Thursday (March 23, 2017), legislation was introduced to stop labor slowdowns at U.S. ports. The legislation is aptly called the Prevent Labor Union Slowdowns Act (PLUS). It was introduced by U.S. Senators Jim Risch (R-ID), David Perdue (R-GA), and Mike Crapo (R-ID). While the International Longshore & Warehouse Union (ILWU) and International Longshoremen’s Association (ILA) are bound […]

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Dockworker and cargo containers

Dockworker and cargo containers

On Thursday (March 23, 2017), legislation was introduced to stop labor slowdowns at U.S. ports. The legislation is aptly called the Prevent Labor Union Slowdowns Act (PLUS). It was introduced by U.S. Senators Jim Risch (R-ID), David Perdue (R-GA), and Mike Crapo (R-ID).

While the International Longshore & Warehouse Union (ILWU) and International Longshoremen’s Association (ILA) are bound to hate this legislation, shippers and ports should be thrilled by action to put an end to costly slowdown tactics.

The dockworker unions commonly use slowdowns at the ports during contract negotiations and times of disagreement with employers. The slowdowns give the unions leverage in negotiations and shows their power, but the slowdowns can also create huge losses for shippers, the economy, and even America’s business reputation abroad.

When contract negotiations became contentious between the ILWU and Pacific Maritime Association (PMA) after the expiration of their previous contract, the ILWU used slowdown tactics that exacerbated congestion issues to the point of importers not getting their goods in time for holiday season sales and agricultural exporters watching their produce rot on the docks.

Senator Risch’s press release about PLUS highlights the damage these ILWU slowdowns have had on the state he represents:

“Idaho farmers, ranchers, producers and manufacturers suffered significant losses due to the west coast port slowdown in late 2014.  This practice was unfair and dangerous, having immediate effects on Idaho businesses and potentially impacting the competitiveness of Idaho commodities globally for years to come,” said Senator Crapo, Chairman of the Senate Banking, Housing and Urban Affairs Committee.  “This bill will enable Idaho’s business community to remain competitive when faced with labor disputes outside the state and out of our control.”

Idaho’s potato exports is just one example of damage done by dockworker slowdowns. Another example would be how ILWU slowdowns at the Port of Portland caused carriers to stop calling on the port with container ships altogether.

Slowdowns orchestrated by dockworker unions at the ports cause businesses to lose money, contracts to be lost, and jobs to end for people who have no control over what’s happening at the ports.

What PLUS does is categorize labor union slowdowns as what they are: unfair practices. The press release gives a picture of what that looks like legally along with some numbers showing how damaging slowdowns are:

The “slowdown” method is detrimental to port managers because remuneration for full benefits and salaries is required, and replacing or firing employees cannot occur. In addition, since a slowdown is currently restricted from classification as an unfair labor practice under federal labor law, port managers lack the power to call in an order from an arbiter during contract negotiations directing workers to work at a normal pace. These disputes have resulted in both shipping companies and port managers terminating their contracts to service individual ports. The U.S. Potato Board estimates that in 2015, west coast slowdowns caused massive financial damage to the food industry, including a $50 million loss to the Idaho potato industry. Other estimates include $70 million in wasted fruit in Washington, and $40 million per week loss in meat sales.

The PLUS Act would change the National Labor Relations Act, defining a labor slowdown by maritime workers as an unfair labor practice. This legislation allows injured parties to file civil actions in federal court to seek double augmented damages resulting from slowdowns, as well as recover their attorney and expert witness fees and costs.

It is likely the dockworker unions will try to fight this legislation as slowdowns are one of their most powerful weapons for gaining leverage in contract negotiations.

With contract negotiations between the ILA and the United States Maritime Alliance (USMX) approaching at East and Gulf Coast ports, this legislation can’t arrive soon enough for shippers.

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Carrier Alliances Bring Real March Madness for Shippers https://www.universalcargo.com/carrier-alliances-bring-real-march-madness-for-shippers/ https://www.universalcargo.com/carrier-alliances-bring-real-march-madness-for-shippers/#respond Thu, 23 Mar 2017 22:14:38 +0000 https://www.universalcargo.com/?p=8073 Shippers are worried about more than just their March Madness brackets right now. What has them so worried? The risk of next month’s big carrier alliance reshuffle causing freight disruption. That the world’s ocean carriers are aligning themselves into alliances is no new news. However, who could have foreseen a few years ago when my NCAA men’s […]

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YouTube Video

Shippers are worried about more than just their March Madness brackets right now. What has them so worried? The risk of next month’s big carrier alliance reshuffle causing freight disruption.

That the world’s ocean carriers are aligning themselves into alliances is no new news. However, who could have foreseen a few years ago when my NCAA men’s basketball bracket inspired me to create the Carrier Craziness Bracket for ocean carrier alliances that the alliance bracket would be busted worse than Universal Cargo CEO Devin Burke’s typical March Madness bracket?

For those of you not privy to Universal Cargo’s March Madness pool, Burke’s brackets are pretty bad (I hope I don’t get fired after this blog).

Below is a quick visual history, through the busted Carrier Craziness Bracket, of how the changes in carrier alliances have altered the landscape (or oceanscape?) of international shipping.

The original Carrier Craziness Bracket was from 2014. It has been subsequently adjusted time and again to reflect the moves carriers make that affect alliances and competition in the international shipping industry until the latest version of the bracket shows what carrier alliances will look like starting April 1st, 2017.

The initial Carrier Craziness Bracket was plenty to show a shrinking level of competition among carriers, but the 2017 version with all those carriers down to just three alliances is downright unnerving for many shippers.

Greg Knowler reported in the Journal of Commerce (JOC):

There is a mounting concern from shipper groups and forwarders that the new mega alliances launching in just over a week will create significant disruption to their supply chains.

Sunny Ho, executive director of the Hong Shippers’ Council agreed that disruption was on the cards, with fears that capacity management and manipulation could be a major threat to carrier customers.

… “There is also concern of product diversification, such as port calls, routing, network, and frequency.”

Splash 24/7 released an article by Sam Chambers that also voices shippers’ concerns about the carrier alliances about to go into effect:

According to Carlos Hernández, the co-founder of online freight forwarder iContainers, the effect of this new reshuffle is a reduction of shipping options.

“Given the sharing of vessels and routes, this basically translates into multiple carriers having the exact same schedule. Instead of having seven or eight carriers offering a sailing of their own, we will perhaps only be getting three,” Hernández said. Generally, this means having fewer alternatives when customers need to meet certain deadlines, which can be rather frustrating.”

While the carriers are making this big shift in services, there is a looming container shortage that many in the industry have been worried about for months.

Another JOC article, this one by Reynolds Hutchins, reports that U.S. exporters are having trouble getting the shipping containers they need, which should be a warning for importers of a possible upcoming global container shortage:

Although Asian importers in the United Staes haven’t reported any trouble finding boxes to date, there are signs they soon could. Already container lessors and container lines are predicting a short-lived--but global--container shortage this spring, spurred by the collapse of Hanjin Shipping, a bumper US harvest, increased production of resins along the Gulf Coast, strains on Chinese manufacturing output, and higher-than-usual sailing cancellations during the Lunar New Year.

Shipping container supply is something carriers can actually manipulate. To read that last JOC article, it seems there is some anecdotal evidence indicating that carriers might be doing just that to create an advantage in freight rate negotiations. However, the whole container shortage issue just adds to the anxiety about possible supply chain disruption with the arrival of the new alliances.

On the other hand, these alliances are not sudden and rapidly happening affairs.

It has been about a year since we’ve known about the upcoming carrier alliance arrangements. Carriers, of course, have known for longer. During that time, carriers should have had plenty of time to plan for a smooth transition to the new alliances.

I would like to alleviate shippers’ fears a little by suggesting that there won’t be major disruptions to the importing and exporting of goods during this transition.

I am, however, alarmed by the shrinking competition among carriers that’s illustrated by the Carrier Craziness Bracket in all its updated mayhem. I think the shrinking of carrier competition has only just begun. And that’s bad news for shippers--even worse news than finding out you have to use Mr. Burke’s bracket in your March Madness pool.

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Shipping Story Updates: U.S. Beef Exports & Truckers’ Future https://www.universalcargo.com/shipping-story-updates-u-s-beef-exports-truckers-future/ https://www.universalcargo.com/shipping-story-updates-u-s-beef-exports-truckers-future/#respond Tue, 21 Mar 2017 20:30:24 +0000 https://www.universalcargo.com/?p=8072 We talk about how volatile the international shipping industry is in terms of freight rates all the time. But international shipping news can be quite volatile too, with stories taking twists and turns. Today we follow up on two international shipping stories on the verge of taking big turns. One could be great news for U.S. […]

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We talk about how volatile the international shipping industry is in terms of freight rates all the time. But international shipping news can be quite volatile too, with stories taking twists and turns.

Today we follow up on two international shipping stories on the verge of taking big turns. One could be great news for U.S. beef exporters, but that good news might be stalled. The other is the stalling of bad news for truckers in the international shipping industry.

Here are the stories:

U.S. Beef Exports Primed for Big Bump

China lifting ban on U.S. beefBack in October of 2016 we blogged about China planning to remove its ban on U.S. beef.

China is a huge market that U.S. agricultural exporters have not been able to tap with beef sales since a 2003 “mad cow” disease scare. 2017 is supposed to be the year of U.S. beef’s return to China.

Not only are U.S. beef exports supposed to regain this huge market, a major beef supplying country took a major hit concerning its exports in the market as well as other markets around the world.

Brad Brooks and Dominique Paton report in Reuters:

China and the European Union curtailed meat imports from Brazil on Monday after police, in an anti-corruption probe criticized by the government as alarmist, accused inspectors in the world’s biggest exporter of beef and poultry of taking bribes to allow sales of rotten and salmonella-tainted meats.

China, which accounted for nearly one-third of the Brazilian meatpacking industry’s $13.9 billion in exports last year, suspended imports of all meat products from Brazil as a precautionary measure.

The European Union suspended imports from four Brazilian meat processing facilities, ABPA said, citing the nation’s agriculture ministry.

Brazil’s loss could be America’s gain. U.S. beef exporters could take this opportunity to increase market share in the EU and, of course, the Chinese market could be a gigantic gain for U.S. agricultural exports.

The problem, however, is that the ban on U.S. beef has not yet ended in China. In fact, China may use the ban as a bargaining chip after the Trump administration’s talk of using tariffs on Chinese goods in negotiations.

Bill Tomson reported on Agri-Pulse.com back in February that Terry Branstad, President Trump’s ambassador to China, vowed to make reopening U.S. beef trade in China a top priority. The article quotes the ambassador as follows:

“We soon hope to reopen the market for American beef,” Branstad said. “I want to serve it at the (U.S.) embassy and I certainly want to do what I can to convince the Chinese leadership to do that sooner than later.”

So right now, U.S. agricultural exports are on the verge of huge opportunity, but are stalled by an outdated and supposedly on its way out ban. Of course, there’s plenty of market share opportunity elsewhere for U.S. beef exporters to grab with Brazil’s scandal.

Uber & Google’s Fight Over Driverless Cars Could Help Keep Truckers’ Jobs Safe Longer

End of Truckers?Last week we blogged about the incredibly important job of truckers’ in the international shipping industry being endangered by driverless car technology. Well, while the future of international shipping may not include truckers, that future could still be a long ways off.

Google is suing Uber for allegedly stealing its driverless car technology.

Max Chafkin and Mark Bergen wrote a great piece in Bloomberg Businessweek detailing Google’s lawsuit against Uber.

We all know there are legal issues that will have to be settled before driverless vehicles can start taking over on the roads. The technology will have to be proven to be safe for legislation to pass that would allow driverless cars to take people to their destinations and driverless trucks to deliver goods between businesses and ports. But the lawsuit between Google and Uber shows there could be a long fight between the companies creating this technology before the legislative hurdles can begin to be cleared.

Companies are racing to get a piece, if not total control, of this driverless market on the horizon. While you would think that race could speed up the onset of driverless technology, it could turn ugly and slow things down.

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Are Truckers Not Part of the Future of International Shipping? https://www.universalcargo.com/are-truckers-not-part-of-the-future-of-international-shipping/ https://www.universalcargo.com/are-truckers-not-part-of-the-future-of-international-shipping/#respond Thu, 16 Mar 2017 22:14:56 +0000 https://www.universalcargo.com/?p=8069 Truckers are some of the most important, and possibly most under-appreciated, people in the international shipping industry. Economies all over the world depend on truckers to get imports and exports to and from ports. But they may not be part of the international shipping industry’s future. In the last couple years, we’ve talked about trucker shortages, strikes, […]

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End of Truckers?Truckers are some of the most important, and possibly most under-appreciated, people in the international shipping industry. Economies all over the world depend on truckers to get imports and exports to and from ports. But they may not be part of the international shipping industry’s future.

In the last couple years, we’ve talked about trucker shortages, strikes, and even lawsuits. While these shipping stories shed light on struggles of truckers, recent stories are the ones really casting doubt on their future.

While trucking is an integral part of the supply chain in international shipping, it is a hard business for truckers. However, hard doesn’t even begin to describe the situation of some truckers in Western Europe on whom BBC News reported.

The story shames Ikea by highlighting the stories of drivers hauling the retailer’s goods. The truckers are unable to afford to live in the countries where they work. This forces the truckers to live in their trucks, having no running water, no toilets, nowhere to sleep except in the trucks.

The Loadstar’s Gavin van Marle shared the BBC News story, saying, “It is to the freight industry’s shame that some of its key workers are on ridiculously low wages – if it cannot pay a driver more than €150 a month, then that job should probably not exist.”

Perhaps such sentiments about trucking jobs will expedite the industry in the direction of trucking jobs going extinct.

For a while now, it has seemed like the trucking part of the international shipping industry is changing with company after company starting up to be the Uber of trucking. However, these companies all seem to have failed.

Preet Sivia wrote a great article on Parade.ai about how trucking startups, funded by the tech industry, have failed. However, the article ends by pointing out that the newest “Uber for trucking” is actually Uber with its new Uber Freight.

Here’s how Sivia describes Uber’s operations, giving the company very good odds for success in trucking:

Uber is laying the foundation to create a transportation business model that improves itself. Externally, moving loads with a network of self-driving trucks means Uber can apply their routing technology towards discovering untapped business intelligence. Since no brokerage today can offer trucks that never tire, the data self-driving trucks yield will give Uber insight unavailable to anyone else. Internally, routine day-to-day operations will be automated. Uber has one of the most skilled technology teams in the world capable of rapidly building new tools for their brokerage that outclass anything that’s been available on the market for the past 30 years. Uber Freight’s proprietary tools will allow them to book more volume in less time with less employees, drastically reducing their training, staffing, and operational costs.

What really stands out to me is Uber’s self-driving trucks. We’re talking about trucking with no truckers.

After Uber’s massive success disrupting the taxi cab industry, it’s hard to imagine the company won’t have similar success in the trucking industry.

Of course, it won’t take long for other companies to follow Uber’s lead and try to compete with self-driving trucks of their own. In fact, such companies are already stepping up.

Earlier this month, the Wall Street Journal reported on this, headlining with “Self-Driving-Truck Startups Race to Take On Uber.”

There are legislative obstacles to climb before self-driving trucks can take over the trucking portion of the international shipping industry, but is the writing on the wall for truckers?

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Could This Contract Stop Cargo Rollovers & No-Shows? https://www.universalcargo.com/could-this-contract-stop-cargo-rollovers-no-shows/ https://www.universalcargo.com/could-this-contract-stop-cargo-rollovers-no-shows/#comments Tue, 14 Mar 2017 21:04:10 +0000 https://www.universalcargo.com/?p=8064 Gavin van Marle reported in the Loadstar about a new contract arrangement between shippers and carriers designed to prevent both cargo shipment delays from carriers and cargo no-shows from shippers. Experienced shippers know cargo rollovers are a problem in the international shipping industry. Carriers are notoriously unreliable. Blank sailings, overbooking, switching sailing schedules on shipments… There are shippers […]

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Contract

Photo By: WIlliam S. Farrow “The appearance of U.S. Department of Defense (DoD) visual information does not imply or constitute DoD endorsement.”

Gavin van Marle reported in the Loadstar about a new contract arrangement between shippers and carriers designed to prevent both cargo shipment delays from carriers and cargo no-shows from shippers.

Experienced shippers know cargo rollovers are a problem in the international shipping industry. Carriers are notoriously unreliable. Blank sailings, overbooking, switching sailing schedules on shipments… There are shippers out there who consider international shipping delays, measured in days and weeks, to be the norm in the industry.

The Loadstar article quoted Bjorn Vang Jensen, vice president of global logistics at Electrolux as saying, “I ship 170,000 teu year and I still get rolled over all the time; I have problems with getting the containers.”

As a freight forwarder, we here at Universal Cargo work hard to make shippers’ cargo delivery as smooth and dependable as possible, knowing we face the challenge of unreliable carrier schedules.

What we didn’t know was just how costly carrier unreliability is for shippers per year.

The article by van Marle says, “shippers globally have to invest $14.7bn in additional inventory costs – storage fees, working capital costs etc – due to uncertainties over shipment delivery times, while another $3.8bn per year is sunk into blank sailings.”

That’s $18.5 billion dollars a year shippers lose due to carrier unreliability!

But it turns out shippers can be unreliable too.

Cargo no-shows from shippers are quite common. Shippers make a booking, find something cheaper, and then just go with that booking without so much as a cancellation. This practice from shippers is costly for carriers and, to read the Loadstar article, might be happening as often as a quarter of the time:

Hapag-Lloyd chief executive Rolf-Habben Jansen told The Loadstar that some 25% of bookings never appear at its ports of loading and, according to NJIT research, some 5m teu a year is classified as downfall, which it calculates costs carriers around $4.4bn a year.

From the numbers, carrier unreliability is more costly to shippers than shipper unreliability is to carriers, but both are problems. So how can these problems be fixed?

Enter the New York Shipping Exchange (NYSHEX) and their new contract arrangement between shippers and carriers. NYSHEX exists to deal with the breakdown in reliability between shippers and carriers.

The Loadstar article quotes NYSHEX chief executive Gordon Downes on how his company’s new service that uses enforceable “forward contracts” works:

“It works in three steps: first, the contract is specific to the departure port, sailing date, destination port, freight rate and number of containers; secondly, it is secure – shippers must pay a bond or pay a deposit to Citibank to secure the contract, and payment is released on fulfilment or a penalty paid on default, while the shipment is tracked to make sure the contract is performed; and thirdly, the contract is exitable, so that shippers with downfalls can leave the contract without losing their deposit by finding a replacement shipper to take over their contract.”

Shippers’ flexibility is certainly limited a bit by this sort of contract. I’m not sure I wholly like the idea of a shipper having to find a replacement shipper if they want out of a contract. However, a contract made should be kept unless made void by both parties or reasonably exited by one party under circumstances previously agreed to by both parties.

Contracts that hold both shippers and carriers responsible for their end of the agreement and cut down on unreliability in the industry certainly sound good.

What do you shippers out there think? Do you like the idea of a contract like this? What if this becomes the new norm in the international shipping industry?

Let us know your thoughts in the comments section below.

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Take Shipping Vacation to Golf With a Pro https://www.universalcargo.com/take-shipping-vacation-to-golf-with-a-pro/ https://www.universalcargo.com/take-shipping-vacation-to-golf-with-a-pro/#respond Thu, 09 Mar 2017 20:23:15 +0000 https://www.universalcargo.com/?p=8062 Today we take a break from the usual international shipping topic to talk about golf. Yes, golf. After all, why else do you get into importing and exporting goods than to do more of the things you enjoy like golf? Universal Cargo’s CEO wants to invite our readers to golf with a pro. No, Devin Burke […]

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Today we take a break from the usual international shipping topic to talk about golf. Yes, golf. After all, why else do you get into importing and exporting goods than to do more of the things you enjoy like golf?

Universal Cargo’s CEO wants to invite our readers to golf with a pro. No, Devin Burke is not a pro golfer himself. He has the swagger but not the swing. It’s his son, Micah Burke who has the professional golfer credentials.

For those of you who love to golf, this is your chance to team up with a pro, compete like a pro, and improve your game all while enjoying a relaxing vacation.

Here’s your invitation in the words of Devin Burke himself:

My son, the pro golfer, is running a pro-am golf tournament that I wanted to invite you to play in.

Golf is a funny game…It really can’t be taught, only learned! So why not learn from golfers who do this for a living?

Check out this golf event that not only provides a lavish golf vacation but also the opportunity to step inside the ropes and compete alongside a professional golfer.

The event takes place in Scottsdale, AZ on the dates of May 17-20 and includes 2 pro-am parties, FREE food & drinks during the entire event, along with various contests and prizes for amateurs, as well as helping the pro you are saddled with for 3 days compete for a purse with the other pros. All this at a 4-night stay at the luxurious resort.

You’ll also form a pro-am team with the professional of your choosing, competing together in a tour-like atmosphere.  If you absolutely love golf, this may be a perfect fit for you.

If you’re interested, please let me know and I’ll have my son send you some information about the event. You can also check out the event website by going to: https://www.perfectproams.com/

You can click on the pictures of the golf vacation event’s brochure to read them better in their full PDF glory.

Play with a pro Golf Pro Am front           Play with a pro Golf Pro Am back

Click here to sign up for this awesome weekend of golfing with the pros.

Our next blog will be back to our normal topic of international shipping.

 

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ILA Stops Strike… For Now https://www.universalcargo.com/ila-stops-strike-for-now/ https://www.universalcargo.com/ila-stops-strike-for-now/#respond Tue, 07 Mar 2017 20:25:50 +0000 https://www.universalcargo.com/?p=8061 Word from the International Longshoremen’s Association (ILA) was that it  planned to shut down East and Gulf Coast ports last week and hold a protest march in Washington. Obviously, the news of a potential port shutdown was not welcome news to shippers or anyone else in the supply chain. Such a shutdown would likely have […]

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Word from the International Longshoremen’s Association (ILA) was that it  planned to shut down East and Gulf Coast ports last week and hold a protest march in Washington.

Obviously, the news of a potential port shutdown was not welcome news to shippers or anyone else in the supply chain. Such a shutdown would likely have cost the U.S. economy millions of dollars. However, the strike never happened.

Mallory Alexander‏ Tweet that Daggett Urges Against Strike

Mallory Alexander‏ Tweet that Daggett Urges Against Strike

Twitter helped break the news of the strike’s cancellation with tweets like the one shown right by Mallory Alexander.

Apparently, the strike was not sanctioned by ILA leadership but came from the rank and file organizing the shutdown and march themselves.

ILA President Harold Daggett urged union workers not to violate contract with this march and has gone to Washington himself. Obviously, the organization of the strike was big enough for leadership to know about it but, luckily, not to sanction it.

That doesn’t mean ILA leadership does not agree with the union members about the issues that inspired the planned strike or the strategy of seeking federal support over those issues.

On the ILA’s website, it was reported that Daggett will seek an emergency meeting with congress over the union’s grievances that almost brought cargo movement on the East and Gulf Coasts to a halt. The brief article shared the ILA’s president’s words with the union:

“We hear your anger, we hear your frustration and we intend to address it,” said ILA President Daggett. “With a delegation of ILA leaders, I will be heading to Washington to seek help for our industry from Congress.”

“I strongly urge all ILA members not to engage in any work stoppage or any other violations of our current Master Contract,” continued President Daggett. “Let the leadership of the ILA meet with Congress in Washington. I am confident Congress will understand the urgency of our issues and help us resolve any and all problems.”

But just how likely is it that Congress will actually help the ILA resolve their grievances. Supply Chain Dive, in an article on the called off shutdown, points out a couple reasons why there’s doubt Congress will step in on behalf of the union’s issues:

Yet, Congress’s role and legislative bandwidth to address the issue remains in question. While the union workers are protesting overregulation by the part of the states, Congress’ role in regulating state port authorities is limited. Similarly, Congress does not appear to have legislation on worker retraining in the pipeline, given an already stacked schedule to address the new administration’s policy goals and a budget.

If Congress does nothing when it comes to ILA’s issues, will the strike just come later?

The big issues behind the ILA union members’ plans to shut down the ports and march on Washington are the Waterfront Commission of New York Harbor and the use of state employees at terminals operated by the South Carolina Ports Authority.

Obviously, the longshoremen unions are against any jobs being performed by workers outside the union. Think about how the International Longshore & Warehouse Union (ILWU) essentially shut down container shipping at the Port of Portland over two jobs plugging and unplugging reefer containers that had traditionally been performed by another union. So state employees filling any job at a terminal instead of ILA members is going to be a big problem for the union.

As long as the Waterfront Commission exists, there will be strife between it and the ILA. How could there not be when the commission exists to root out organized crime at the docks, focused on the long history of mob connection in the ILA?

With these issues being strong enough for ILA members to strike over, shippers worry about disruption during the upcoming contract negotiations between the ILA and employers.

It is predicted these won’t even be the most contentious issues when contract negotiations begin. There is projected to be a big fight over automation at the ports.

Threats of strike and port shutdowns had shippers rerouting cargo the last time the ILA and the United States Maritime Alliance (USMX) negotiated a contract. This time, there could be more than threats.

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New WTO Deal Supposed to Boost International Trade by $1 Trillion https://www.universalcargo.com/new-wto-deal-supposed-to-boost-international-trade-by-1-trillion/ https://www.universalcargo.com/new-wto-deal-supposed-to-boost-international-trade-by-1-trillion/#comments Thu, 23 Feb 2017 20:45:45 +0000 https://www.universalcargo.com/?p=8040 Global trade has been growing slowly over the last several years, but it might have just gotten a big shot in the arm. As of yesterday (February 22nd, 2017), the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) has officially received the necessary ratification from countries around the world to enter into force. According to the WTO, […]

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WTO TFA press conference

WTO TFA press conference

Global trade has been growing slowly over the last several years, but it might have just gotten a big shot in the arm.

As of yesterday (February 22nd, 2017), the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) has officially received the necessary ratification from countries around the world to enter into force.

According to the WTO, the agreement “seeks to expedite the movement, release and clearance of goods across borders, launches a new phase for trade facilitation reforms all over the world and creates a significant boost for commerce and the multilateral trading system as a whole.”

What seems to be grabbing everyone’s attention about this deal is its potential to increase world trade by $1 trillion per year.

The FTA has been in the works for some time. It was actually was agreed to by WTO members at the Ministerial Conference in Bali back in December of 2013. In 2015, the WTO released a World Trade Report subtitled
Speeding up trade: benefits and challenges of implementing the WTO Trade Facilitation Agreement.

The report contained a detailed study of the TFA and estimates of its results, which include that trillion dollar world trade growth potential.

In a WTO press release after the launch of the report, Director-General Roberto Azevêdo said:

… all too often, outdated and uncoordinated customs processes slow down the movement of goods and raise costs to prohibitive levels. By standardizing, streamlining and speeding-up customs processes around the world, the WTO’s Trade Facilitation Agreement will help to solve this problem. It is global trade’s equivalent of the shift from dial-up internet access to broadband — and it will have a similar impact.

The report found the TFA would have the following key impacts:

  • Global merchandise exports estimated to increase by between $750 billion and $1 trillion per annum.

  • Developing countries’ exports estimated to increase by between $170 billion and $730 billion per annum.

  • Developed economies’ exports estimated to increase by between $310 billion and $580 billion per annum.

  • Fuller, faster implementation of the TFA will increase the likelihood of impacts reaching the higher ends of these ranges.

  • Overall boost to world export growth per annum estimated at up to 2.7 per cent.

  • Overall boost to global GDP growth per annum estimated at 0.5 per cent.

You can get the entire report from the WTO.

It required 110 nations, two-thirds of the WTO members, to ratify the TFA in order for it to go into force. It took just over three years from the agreement being made to that actually happening.

That delay has not lessened the WTO’s excitement about the agreement. Director-General Azevêdo called the agreement “a landmark for trade reform” and said of its ratification in the WTO’s press release yesterday:

“This is fantastic news for at least two reasons. First, it shows members’ commitment to the multilateral trading system and that they are following through on the promises made in Bali. Second, it means we can now start implementing the Agreement, helping to cut trade costs around the world. It also means we can kick start technical assistance work to help poorer countries with implementation.

“This would boost global trade by up to 1 trillion dollars each year, with the biggest gains being felt in the poorest countries. The impact will be bigger than the elimination of all existing tariffs around the world.

“But this is not the end of the road. The real work is just beginning. This is the biggest reform of global trade in a generation. It can make a big difference for growth and development around the world. Now, working together, we have the responsibility to implement the Agreement to make those benefits a reality.”

Now we’ll see if the implementation of the TFA really has the kind of impact on global trade that the WTO projects.

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ILA to Shut Down East & Gulf Coast Ports https://www.universalcargo.com/ila-to-shut-down-east-gulf-coast-ports/ https://www.universalcargo.com/ila-to-shut-down-east-gulf-coast-ports/#respond Tue, 21 Feb 2017 20:16:47 +0000 https://www.universalcargo.com/?p=8037 Expect disruption of imports and exports through East and Gulf Coast ports next week as the International Longshoremen’s Association plans to flex its muscle. Chris Dupin reported in American Shipper: The International Longshoremen’s Association (ILA) said it is calling for a shutdown of ports along the Atlantic and Gulf Coasts and a march on Washington next […]

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East Coast Port & Container ShipExpect disruption of imports and exports through East and Gulf Coast ports next week as the International Longshoremen’s Association plans to flex its muscle.

Chris Dupin reported in American Shipper:

The International Longshoremen’s Association (ILA) said it is calling for a shutdown of ports along the Atlantic and Gulf Coasts and a march on Washington next week.

A march on Washington immediately brings to mind a protest against the new Trump administration like the International Longshore & Warehouse Union’s (ILWU) protest that shut down the Port of Oakland during Donald Trump’s inauguration as president of the United States.

However, this strike appears to have nothing to do with the controversial new head of state.

The American Shipper article goes on to list the two issues the ILA is protesting with its planned ports shutdown and march:

• Its long-standing desire to eliminate the Waterfront Commission of New York Harbor;
• And the use of state employees at terminals operated by the South Carolina Ports Authority (SCPA).

What’s ironic about this is that Dupin quotes the ILA as saying things like it is protesting “job loss and the resulting negative impacts on America’s economy” and will “highlight hiring practices in some of the nation’s ports that purposely reduce the numbers of dockworkers, causing immeasurable damage to the nation’s economy.”

What makes those statements so ironic is how damaging it is to the ports, jobs, and the nation’s economy when union strikes shut down the ports.

In 2015, when labor strife was at its height between the ILWU and Pacific Maritime Association (PMA), estimates started coming out on just how much port shutdowns cost the U.S. economy per day.

Some estimates were in the one to two billion dollar per day range, but according to a study commissioned by the National Association of Manufacturers and the National Retail Federation put the number at $2.5 billion per day.

The study that came up with those figures was researching what work stoppages of 5, 10, and 20 days would cost the national economy, and the focus seemed to be on West Coast ports.

This work stoppage the ILA has planned for East and Gulf Coast ports should definitely not be for anything close to 5, 10, or 20 days. Therefore, the financial impact to the national economy should not be nearly this large. Of course, you can be assured that it will come at a cost.

Most concerning is that this could be a portend to what is to come during the negotiations for a new contract between the ILA and the United States Maritime Alliance, Ltd. (USMX).

Just last week, Joseph Bonney reported in the Journal of Commerce (JOC) that the ILA and USMX were taking the first steps toward contract bargaining with informal meetings on the subject.

These meetings are several steps away from actual negotiations between the ILA and USMX, but it is ominous that so quickly after the meetings the ILA chooses to organize a shutdown of the ports.

The current contract between the ILA and USMX will expire September 30th, 2018.

Shippers are now forced to look toward the upcoming negotiations with pessimism, which is a sad turn from the optimism created when the USMX and ILA talked of opening discussions on a new, long-term contract over three years before the current one expires.

As usual, when something seems too good to be true…

The ILA, along with the ILWU, has a long history and policy of not agreeing to a new contract before the previous one is expired. The unions’ greatest negotiation leverage comes from strikes and labor slowdowns. These weapons become much more readily available after a contract expires.

How could we honestly expect a new contract negotiated before the current one expires?

Of course, the union shutting down ports over a year before the contract expires is a bit unexpected too.

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Retailers Meet with Trump Over Import Taxes https://www.universalcargo.com/retailers-meet-with-trump-over-import-taxes/ https://www.universalcargo.com/retailers-meet-with-trump-over-import-taxes/#respond Thu, 16 Feb 2017 20:35:28 +0000 https://www.universalcargo.com/?p=8031 At the beginning of the month, we told you about retailers forming a coalition called Americans for Affordable Products to battle any import tax increases like a Border Adjustment Tax (BAT), part of a House Republican plan, would do. This week, CEOs of companies in that coalition met with President Trump, voicing their concerns. The Khadeeja Safdar […]

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President Trump Meets with Retailers

President Trump Meets with Retailers

At the beginning of the month, we told you about retailers forming a coalition called Americans for Affordable Products to battle any import tax increases like a Border Adjustment Tax (BAT), part of a House Republican plan, would do.

This week, CEOs of companies in that coalition met with President Trump, voicing their concerns.

The Khadeeja Safdar and Louise Radnofsky report in the Wall Street Journal (WSJ):

Chief executives from several major U.S. retailers, including TargetCorp., Best Buy Co. and Gap Inc., met with President Donald Trumpon Wednesday to lobby against a proposed tax plan that would hurt their profits.

… the retailers at the meeting, which also included J.C. Penney Co.and Walgreens Boots Alliance Inc., stand to lose more than do other industries if Mr. Trump imposes new tariffs on trade or taxes on imports. Most rely heavily on overseas factories for the goods they sell.

It was actually the Retail Industry Leaders Association (RILA) rather than Americans for Affordable Prices that organized the meeting with the president according to the article, but there is such overlap in the membership of the two organization that both released statements about the meeting with President Trump.

The RILA released a brief statement by Bill Rhodes, President, Chairman and CEO of AutoZone:

“Today, we had a positive and productive conversation with President Trump about the important role the retail industry plays in our national economy.

“We stressed the importance of taking a thoughtful approach to tax reform for both individuals and corporations.

“The retail industry is the nation’s largest private sector employer providing and supporting more than 42 million American jobs. The President understands we support pro-growth policies that we believe will lead to greater domestic investment.

“We look forward to working with the President and his Administration on the issues of importance for our industry, our employees and American working families, who by and large are our customers.”

The Americans for Affordable Prices statement was even shorter but added background focusing on retail’s position as Americas largest employment sector:

“Today’s meeting between executives and President Trump focused on pressing issues confronting American families: economic growth and domestic investment. Americans for Affordable Products represents the nation’s largest employment sector supporting more than 40 million jobs or nearly one in four employed Americans, and we stand ready to work with the new administration in advancing pro-growth policies that work for all Americans, particularly middle-income households,” said Americans for Affordable Products

BACKGROUND:

PricewaterhouseCoopers LLP: Retail Is The Nation’s Largest Employment Sector Supporting 42 Million Jobs & Representing Employment For Nearly One In Four Americans. “Retail is the largest private-sector employer in the United States, supporting one out of every four jobs. A healthy and vibrant retail industry delivers a powerful impact across our economy … Retailers directly provide 29 million American jobs … The retail industry supports a total of 42 million jobs in retail and a host of other industries – 23.4% of total U.S. employment … 13 million American jobs across almost every industry depend upon retail for their success – including 7 million jobs in the service sector; 2 million jobs in finance, insurance and real estate; and 1 million jobs in manufacturing.” (National Retail Federation, Accessed 1/28/17)

Both statements highlight the retailer’s willingness to work with the Trump administration and their sector’s importance to the American economy and jobs. Both statements also emphasized supporting or advancing pro-growth policies, and that may be the most important part of the statements.

When Trump officially announced that he would run for president, he said he would be the “greatest jobs president God ever created,” so pro-growth policies are certainly important to him.

In the meeting he told the retailers, “My administration remains very focused on the issues that will encourage economic growth — that’s what we’re all about.”

However, retailers’ idea of what a pro-growth policy is may be different than President Trump’s as the president immediately talked about manufacturing or production plants moving back into the country with:

“We have a lot of plants moving back into various states, including the state of Ohio, the state of Michigan, Pennsylvania.  You have a lot of companies moving back in, coming back into the country, bringing the jobs with them.”

The part of the meeting where import taxes were discussed, if such a discussion really did occur, was not open to the press.

While President Trump has not exactly shown great enthusiasm for the plan that includes the BAT, which retailers oppose, the president has spoken of taxes and tariffs on imports to benefit domestic production over foreign.

It is obvious that Trump respects business leaders and CEOs, as can be evidenced by the many meetings he’s had with groups of such individuals since becoming president. But how much influence retailers, the major importers of the country, will actually have on President Trump regarding these taxes is not easy to assess.

Of course, major U.S. manufacturers and exporters like policies that increase import taxes while reducing or eliminating export taxes in the debate over BAT. It seems likely the president’s policies will fall more in line with this side of the debate.

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Are Automated Freight Forwarders Better for Shippers? https://www.universalcargo.com/are-automated-freight-forwarders-better-for-shippers/ https://www.universalcargo.com/are-automated-freight-forwarders-better-for-shippers/#respond Tue, 14 Feb 2017 22:50:52 +0000 https://www.universalcargo.com/?p=8029   Freight forwarders and non-vessel operators (NVOs) have been under a great deal of scrutiny for their lack of automation lately. For anything consumers want, they can go online and with a few clicks see a price to make it theirs. Often, it only takes one more click to actually buy it. This works for anything it seems except […]

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YouTube Video

Automated Freight RatesFreight forwarders and non-vessel operators (NVOs) have been under a great deal of scrutiny for their lack of automation lately.

For anything consumers want, they can go online and with a few clicks see a price to make it theirs. Often, it only takes one more click to actually buy it. This works for anything it seems except the service of importing and exporting goods.

When it comes to shipping goods, especially ocean freight but with air freight as well, consumers have to contact a company, communicate with a real live person, and then wait for that person to get back to them with a quote for their shipment.

Why can’t there just be an instant quote for international shipping? An app on the phone that tells you how much it will cost to import or export your goods in a matter of seconds and then let you click “buy” and be done with it?

A recent article by Hugh R. Morley in the Journal of Commerce (JOC) says:

Many of the 20 largest freight forwarders have only a basic, undeveloped portal through which to provide door-to-door shipping prices and enable customers to make bookings online, if any portal at all, according to a report released Thursday by Freightos.

Of course, Freightos’ report is a self-serving one. After all, the company is a new freight forwarding service offering automated freight quotes.

Self-serving or not, the report does bring up what is quickly becoming a sore spot for freight forwarders and NVOCCs. Shippers who are now coming onto the scene grew up with computers and smart phones allowing them to buy anything they want with a click of the button. Why can’t freight forwarders make the complicated business of international shipping this simple?

The answer is that shipping goods from one country to another utilizing multiple modes of transportation and dealing with differing laws and lots of potential complications is not as simple as buying a dress online.

Negotiating with ocean carriers and agents around the world, rerouting because of labor strikes at ports or weather issues, knowing the changing rules and laws of customs clearance from country to country, handling complications that very commonly arise, avoiding unnecessary fees, knowing how to insure various types of cargo… I feel much more confident with a human being who has expertise in international shipping walking me through all this and more than a computer spitting out a price from an algorithm.

That doesn’t change the fact that international shipping headlines along with online platform companies like Amazon and Alibaba pushing into international shipping seem to be creating a threat, warning freight forwarders  to update to automated systems or become obsolete.

In an industry as volatile as international shipping, however, the freight forwarder is still needed and beneficial in the constantly fluctuating spot rate market of international shipping. That begs the question of whether an automated freight forwarders would even be better for consumers.

While negotiating rates on behalf of consumers cannot be done by a machine, there certainly is elevated convenience and speed for shippers if accurate freight rates can be obtained through “instant” automated shipping tools.

Perhaps that convenience is enough to outdate the traditional freight forwarder.

Freight forwarder employee Kate McCauley, in a recent article published on The Loadstar, argues that the new automated marketplace tools for international shipping are far from outdating the traditional freight forwarder with a personal anecdote:

I’ve now tried three of the very publicly heralded freight marketplaces, promising to revolutionise global shipping bookings.

I entered a FOB 40ft Container from Shanghai to Felixstowe, one of the biggest trade lanes in the world. I was hoping for a plethora of choice and super-competitive rates. Quaking in my boots (thinking about my redundancy pay-out) I waited for the results to load  – only to be greeted with ‘your route cannot be found, sorry no rates found, no results found.’ I couldn’t even enter a destination on one site. Was I doing something wrong?

And if I’m feeling like this, imagine what a first-time importer would think?

Maybe the freight marketplaces should change their slogans to “making global freight rates so transparent they can’t even be seen.”

Still, the tech industry is trying to dive into the international shipping industry because it seems like the last untapped market for purchasing automation. However, without the experience in this complex business, Silicon Valley is finding it more difficult than expected.

The tech industry is missing the experience and relationships to make automated international shipping marketplaces reliable, and freight forwarders are missing the resources to provide consumers with this convenience technology.

That doesn’t change the inevitability of automated marketplaces for international shipping; however, in my opinoin, what is needed is a marriage between the technological know-how and resources of the tech industry with the experience and friendly expertise of the freight forwarder.

While appeasing the demand for the industry to move in the speedy automated direction, it’s important the relationships shippers have with the experts negotiating international waters for them should not be left behind in the process.

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NY-NJ Port Terminal Spending Hundreds of Millions to Increase Capacity https://www.universalcargo.com/ny-nj-port-terminal-spending-hundreds-of-millions-to-increase-capacity/ https://www.universalcargo.com/ny-nj-port-terminal-spending-hundreds-of-millions-to-increase-capacity/#respond Thu, 09 Feb 2017 21:31:47 +0000 https://www.universalcargo.com/?p=8027 The Port Newark Container Terminal is spending big bucks to more than double its capacity. Hugh R. Morley reported in the Journal of Commerce: The installation of a new computer “brain” at Port Newark Container terminal three weeks ago that coordinates the operation of the entire terminal is part of a plan that is expected […]

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Port of New York and New Jersey

The island of Manhattan and areas of the New York / New Jersey Port seen from aboard a plane in July, 2005 by Maureen on flickr.

The Port Newark Container Terminal is spending big bucks to more than double its capacity.

Hugh R. Morley reported in the Journal of Commerce:

The installation of a new computer “brain” at Port Newark Container terminal three weeks ago that coordinates the operation of the entire terminal is part of a plan that is expected to eventually cost more than $500 million and includes land acquisition, a new gate, a dredging project, new cranes, and an additional berth. The upgrade will eventually increase the terminal’s capacity from about 1 million containers a year to 2.4 million containers per year by 2020.

$500 million is, of course, a lot of money. However, it will be well worth the investment if the Port of New York and New Jersey can increase its portion of market share, taking cargo movement from West Coast ports like the Ports of Los Angeles and Long Beach.

The Port Newark Container Terminal is one of the major terminals at the Port of New York and New Jersey. The terminal is in an excellent position for considerable growth.

The expansion of the Panama Canal, which was finally completed last year, really creates opportunity for East and Gulf Coast ports to increase their market share of handling Asia to U.S. imports. That opportunity got a shot in the arm when many shippers lost trust in West Coast ports during the terrible and hugely costly congestion during the labor strife of the 2014/2015 contract negotiations between the International Longshore & Warehouse Union (ILWU) and Pacific Maritime Association (PMA).

The challenge for East and Gulf Coast ports is accommodating the larger ships that carriers can now send through the Panama Canal.

When it comes to New Panamax ships, the Port Newark Container Terminal cannot even be reached by them yet because the ships’ access to the terminal is blocked by a bridge.

We wrote before in this blog about a project to raise the clearance of that bridge, the Bayonne Bridge, from just over 150 feet to over 200 feet. That project is almost complete, so the Port Newark Container Terminal needs to be ready to receive the bigger ships that can soon get through.

Really, there is no choice but for ports to spend big money on projects like dredging, getting bigger cranes, and infrastructure. The ocean carriers have seen to that.

With their eyes on saving money through the efficiency of moving more shipping containers–and cargo in general–at once, carriers have moved to larger ships with no looking back. On top of that, the carriers work together in alliances to fill those ships.

Therefore, ports have to be able to accommodate larger ships delivering much larger amounts of cargo at once.

More than doubling its capacity will give the Port Newark Container Terminal a great chance at grabbing cargo movement from shippers, who are more and more limited in diversifying when it comes to carriers but want to diversify from West Coast ports.

Ports around the country and the world are also spending big money on upgrades in order to compete and just survive.

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Air Freight Is Up on 5 Year High https://www.universalcargo.com/air-freight-is-up-on-5-year-high/ https://www.universalcargo.com/air-freight-is-up-on-5-year-high/#respond Tue, 07 Feb 2017 20:25:17 +0000 https://www.universalcargo.com/?p=8025 Despite slow, even what some would call stagnant, growth in international trade over the last several years, the air freight sector saw healthy growth in cargo demand during 2016. In fact, it was the best air freight had seen in five years. In a press release, the International Air Transport Association (IATA) shared that “demand, measured […]

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service-air-freightDespite slow, even what some would call stagnant, growth in international trade over the last several years, the air freight sector saw healthy growth in cargo demand during 2016. In fact, it was the best air freight had seen in five years.

In a press release, the International Air Transport Association (IATA) shared that “demand, measured in freight tonne kilometers (FTKs) grew by 3.8% in 2016 compared to 2015. This was nearly double the industry’s average growth rate of 2.0% over the last five years.”

That demand growth is very encouraging for the air sector of international shipping, especially after the weak start to global freight volumes the IATA says 2016 experienced.

While “Europe accounted for almost half of the total annual increase in demand” for air freight, the sector should be happy to see that there was growth across all regions except Latin America.

Of course, just like in ocean shipping, the air freight sector has to be careful about the balance of capacity versus demand. Capacity grew more in 2016 than demand. “Freight capacity, measured in available freight tonne kilometers (AFTKs), increased by 5.3% in 2016,” the press release said.

Still, the air freight sector is definitely not struggling with the kind of overcapacity that has been so problematic for the ocean freight sector in recent years.

The press release included a nice bit of insight into the air freight sector of international shipping from IATA’s leadership:

“In terms of demand, 2016 was a good year for air cargo. That was boosted by solid year-end performance. Looking ahead, strong export orders are good news. But there are headwinds. The most significant is stagnant world trade which also faces the risk of protectionist measures. Governments must not forget that trade is a powerful tool for growth and prosperity,” said Alexandre de Juniac, IATA’s Director General and CEO.

“The air cargo industry must also improve its competitiveness. We know that the way forward is defined by digital processes which will drive efficiency and improve customer satisfaction. We must use the momentum of renewed demand growth to drive the important innovations of the e-cargo vision,” said de Juniac.

The air freight sector would be wise to look at how it competes with the ocean freight sector.

Air freight and ocean freight have different strengths and weaknesses. For some importers and exporters, it may never make sense to switch from ocean freight to air freight (or vice versa). However, there is some cargo that could be transported in either sector. This might be a time when the air freight sector could increase its market share of the cargo that could ship by sea or air.

Air freight tends to be more expensive than ocean freight, especially in recent years with overcapacity putting downward pressure on freight rates. However, ocean freight rates now appear to be recovering. Pair those rising freight rates with shippers’ nervousness regarding the financial health of ocean carriers after Hanjin Shipping’s collapse was costly for many shippers, and many who traditionally import and export by sea might take their first serious look at air.

One of the biggest reasons shippers go with air freight over ocean shipping is speed. When it comes to getting goods delivered around the world quickly, air freight will always hold the advantage.

However, there are many factors to consider when choosing between air and ocean freight including but not limited to reliability, destinations, and environmental impact. You can see how these modes match up in our Air Freight Vs. Ocean Shipping 8 Round Fight blog.

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Retailers Form Coalition to Fight Import Taxes https://www.universalcargo.com/retailers-form-coalition-to-fight-import-taxes/ https://www.universalcargo.com/retailers-form-coalition-to-fight-import-taxes/#respond Thu, 02 Feb 2017 21:01:02 +0000 https://www.universalcargo.com/?p=8024 Americans for Affordable Products, that’s the name of a new organization formed to fight taxes on imports to the United States. Eric Johnson reported in American Shipper: A group of more than 100 U.S. retailers and retail trade associations on Wednesday created a new organization dedicated to highlighting the increase in prices consumers would face if […]

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Americans for Affordable Products against BATAmericans for Affordable Products, that’s the name of a new organization formed to fight taxes on imports to the United States.

Eric Johnson reported in American Shipper:

A group of more than 100 U.S. retailers and retail trade associations on Wednesday created a new organization dedicated to highlighting the increase in prices consumers would face if Congress and the Trump administration follow through on policies to add taxes or tariffs to U.S. imports.

Members of the coalition include some of the country’s biggest importers, like Walmart, Target, DICK’s Sporting Goods and Macy’s. It also includes manufacturers that operate retail outlets in the United States, like Abercrombie & Fitch, or both operate independent outlets and depend on retailers to sell their products manufactured abroad, like Nike and Levi Strauss & Co.

Major trade associations, like the National Retail Federation, the Retail Industry Leaders Association, the American Apparel & Footwear Association, as well as a number of state retail associations are also involved.

Retailers who sell imported goods have been worried about protectionist policies from President Trump increasing the costs of the products they sell.

Increased tariffs and taxes on imported goods from around the world will hurt the average American, according to the Americans for Affordable Products coalition, by increasing the cost on an assortment of goods Americans buy every day. The coalition says on its website:

The Americans for Affordable Products is a coalition of job creators, entrepreneurs, and business leaders united against higher prices on everyday necessities. We oppose any Border Adjustment Tax (BAT) because it will increase the cost of clothing, food, medicine, gas, and other essential items that Americans rely on. Consumers shouldn’t bear the burden of this new tax while some corporations get a tax break. We fight for consumers by protecting their pocketbooks and ensuring access to affordable everyday products. We support comprehensive tax reform and encourage Congress to implement policies that helps businesses of all sizes, ensures the protection and creation of jobs, and promotes prosperity for all Americans.

Right now, Congress is moving a BAT forward that is exactly the kind of thing that importers are worried about, creating the urgency for the Americans for Affordable Products coalition. Surprisingly, the coalition just may have an ally in the White House when it comes to this BAT.

Richard Rubin and Peter Nicholas reported in the Wall Street Journal that President Trump called the plan “too complicated” and went on to say, “Anytime I hear border adjustment, I don’t love it. Because usually it means we’re going to get adjusted into a bad deal.  That’s what happens.”

It’s not likely the coalition is feeling all buddy-buddy with President Trump. After all, the new commander in chief has talked much about imposing tariffs, and the BAT, as part of a larger corporate tax plan, could be seen as an alternative to a Trump tariff plan.

It should be noted there are some businesses in favor of the BAT, seeing it as something that will help smaller businesses with American-made products compete when retail is dominated by big importers like Wal-Mart.

Proponents of the BAT say it will not hit consumers with higher priced goods as Americans for Affordable Products claims because it will strengthen the U.S. dollar, decreasing the cost of buying goods and therefore neutralizing the tax increase.

James Pethokoukis, in an article on Ricochet.com, sums up how proponents see this tax not hurting American consumers like this:

What happens to the dollar is key here. Economists typically predict the dollar would rise in value by as much as 25% in response to the border adjustment. That would make imports cheaper and offset the tax change.

Of course, Americans for Affordable Products would disagree with that assessment.

While taxes would increase on imports under this proposed BAT, U.S. exporters would get a big tax break. Therefore, we’re not likely to see a coalition of exporters against the BAT. Then again, other countries may retaliate with taxes on U.S. exports and the increased value of the dollar may decrease the buying of U.S. products, so you never know.

What is your opinion on a BAT? Share in the comments section below.

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Automation May Make ILA USMX Negotiations Contentious https://www.universalcargo.com/automation-may-make-ila-usmx-negotiations-contentious/ https://www.universalcargo.com/automation-may-make-ila-usmx-negotiations-contentious/#respond Tue, 31 Jan 2017 23:01:39 +0000 https://www.universalcargo.com/?p=7983 The current East and Gulf Coast labor contract between the International Longshore Association (ILA) and the United States Maritime Alliance, Ltd. (USMX) expires next year. While shippers and the rest of the supply chain are hoping for smooth–even early–negotiations, a news story this week highlights an issue of contention between the parties. The ILA hit the Port of […]

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The current East and Gulf Coast labor contract between the International Longshore Association (ILA) and the United States Maritime Alliance, Ltd. (USMX) expires next year. While shippers and the rest of the supply chain are hoping for smooth–even early–negotiations, a news story this week highlights an issue of contention between the parties.

The ILA hit the Port of Charleston with a surprise labor slowdown on Friday that caused the port to extend gate hours this week to cope with the results reported Reynolds Hutchins in the Journal of Commerce (JOC):

The work slowdown at the Wando terminal was orchestrated by the International Longshoremen’s Association local mechanics union in response to a new automated gate system that was implemented at the terminal last summer and is in the very early stages of testing at the nearby North Charleston terminal.

Last Friday, a day before the port authority began testing the AGS technology at the North Charleston Terminal, union workers refused to use the new automated gate system technology at Wando Welch, forcing truck drivers to stop for manual chassis inspections. The port authority told JOC.com that by 2 p.pm. local time the port authority had managed to clear the backlog of truck traffic that had mounted at the terminal, but apparently “issues” may have remained.

Longshore unions in the U.S., both the ILA and International Longshore & Warehouse Union (ILWU), have long fought hard against automation for the fear of losing jobs. While technology moves forward and the unions have had to make concessions, their fight has had its effectiveness.

U.S. ports are behind other ports around the world when it comes to modernization and utilization of new technology for efficiency. For one such example, you can check out this Flexport blog comparing the Port of Rotterdam to the Port of Oakland.

To be fair, the Port of Rotterdam is one of the most automated ports in the world and is much larger that the Port of Oakland, which is certainly not the most technologically advanced and automated port in the U.S. However, the blog does say “if the Port of Oakland were to implement a modern level of automation, 40-50% of the [port’s union jobs] would be eliminated.”

While I think that estimation is too high, it does highlight the longshoremen unions’ vested interest in fighting automation.

It is no surprise then that the JOC article above quoted goes on to say, “Automation at terminal gates has emerged as a top ILA concern.”

Of course, U.S. ports have a vested interest in automation to increase efficiency and fight port congestion, which has become a bigger and bigger problem in recent years with the combination of carrier alliances and larger container ships significantly increasing the volume of shipping containers arriving at ports at a single time.

The reduction of seemingly more common labor slowdowns and shutdowns at the ports also has to be an attractive benefit of automation to the ports’ management.

Just this month, a terminal at the Port of Oakland was shutdown because hundreds of union workers refused to accept shifts in protest of President Donald Trump’s inauguration.

The ILA and ILWU are powerful enough to slow and stop U.S. ports over political issues or labor disputes as shippers well know.

Slowdowns and full out strikes to shutdown ports have long been tools utilized by the unions when it comes time to negotiate contracts. As a policy, the unions do not extend negotiate contracts early in order to preserve these weapons of leverage.

I don’t need to do much reminding of the 2014/2015 contentious contract negotiations between the ILWU and PMA that has everyone involved in the supply chain urging the parties to start the next negotiations long before the current contract expires.

When the labor slowdowns and retaliatory mini-lockouts of that labor strife caused agricultural exports to rot on the docks and imports to never reach store shelves for the holiday season, shippers looked to move their cargo through other ports.

At that time, the USMX and ILA talked of opening contract negotiations long before next year’s expiration, sparking excitement that there may be change to the costly way things are done at the ports.

However, movement toward that early negotiation has not happened over the last couple years. Their talk of early negotiations now feels more like a grab at cargo market share.

Negotiations between the ILA and USMX on the East and Gulf Coasts has not been much better than the ILWU/PMA negotiations on the West Coast. The last time the ILA contract expired, the ILA scheduled a strike that threatened to shut down ports around Christmas time in 2012.

History and last week’s labor slowdown give shippers more reason to expect contentious and costly contract negotiations between the ILA and USMX next year rather than a smooth transition to a new or extended contract at East and Gulf Coast ports. Under the contention will be a fight over automation.

That automation fight could prove very costly for shippers and the U.S. economy as a whole if the ILA and USMX don’t do better than we’ve seen in the past at coming to agreement.

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How Stable Will Freight Rates Be in 2017? https://www.universalcargo.com/how-stable-will-freight-rates-be-in-2017-2/ https://www.universalcargo.com/how-stable-will-freight-rates-be-in-2017-2/#respond Thu, 26 Jan 2017 21:14:35 +0000 https://www.universalcargo.com/how-stable-will-freight-rates-be-in-2017-2/ Carriers could finally get some freight rate stability going in 2017. Traditionally, freight rates are a very volatile thing in the international shipping industry. In the last few years, however, low freight rates have dominated the container shipping market much to the dismay of ocean carriers. The carriers actually hold much of the responsibility for those low freight rates. […]

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shipping containersCarriers could finally get some freight rate stability going in 2017.

Traditionally, freight rates are a very volatile thing in the international shipping industry.

In the last few years, however, low freight rates have dominated the container shipping market much to the dismay of ocean carriers.

The carriers actually hold much of the responsibility for those low freight rates. While carriers cannot control lower than expected global economic and international shipping growth, their seeming obsession with ordering megaships, pushing overcapacity way up, and rate wars are the biggest factors that led to freight rates hitting record lows.

There was still plenty of volatility to be seen in the middle of all the low freight rates experienced. Carriers kept releasing General Rate Increases (GRIs) to raise freight rates, but inevitably, amidst the overcapacity, a carrier would undercut the GRIs to gain market share. Thus, the GRIs couldn’t be maintained, and freight rates remained lower than is healthy for carriers.

Shippers probably didn’t mind those unhealthily low freight rates until Hanjin Shipping collapsed.

Recently, freight rates have climbed, but now we’re hitting the Chinese New Year. Freight rates tend to drop after the holiday. Will the carriers lose the freight rate momentum they’ve finally gained?

In our 2017 International Shipping Predictions blog, I predicted the industry would see moderately higher freight rates in 2017. While freight rates should be healthier for carriers, overcapacity still exists and will keep shipping prices from soaring.

Mike King wrote an article published on Lloyds Loading List saying that stability is “more likely” with freight rates for 2017 in light of the new market structure.

We’ve been watching the structure of the industry change right before our eyes during these difficult times for carriers. Competition is shrinking with mergers, buyouts, Hanjin’s bankruptcy… Cooperation is increasing with carriers arranging themselves into only three major alliances. And that’s exactly the “new structure” King is talking about:

The ongoing shake-up of the four main current alliances in operation – the 2M Alliance, the G6 Alliance, the CHYHE Alliance and Ocean 3 – after a tumultuous 2016 of mergers and acquisitions is expected to see the emergence of just three alliances by around April.

Speaking in an ocean freight rates webinar last week, Patrik Berglund, CEO & Co-founder of Xeneta, a containerised ocean freight benchmarking and market intelligence specialist, said this could theoretically reduce the chances of a price war.

“Traditionally we’ve seen price wars as soon as the market picks up a little bit,” he said. “So the market has had a GRI [Generate Rate Increase] and then someone has stuck out their neck and reduced prices in order to try and win market shares because there’s so much overcapacity.” While the new alliance system was no guarantee this destructive cycle would not be repeated, the concentration of capacity “might” help lines avoid past mistakes.

Just how stable freight rates are going to be in 2017 is largely up to carriers.

There are plenty of outside factors and questions for the international shipping industry. A worry of protectionist policies slowing trade around the world is high on the list. However, carriers must make a concentrated effort to reduce overcapacity and avoid undercutting each other with their container shipping pricing to maintain any kind of stability with healthier freight rates.

Shippers, of course, want low freight rates to help them create higher bottom lines. But in the long run, carrier bankruptcies and ever shrinking carrier competition is not in shippers’ best interest.

This almost forces shippers to root for carriers to succeed in maintaining higher freight rates. Especially since, with all the carrier cooperation through alliances, shippers often don’t even know which carrier’s ship their cargo is going to end up in when they hire a carrier. You know what I’m talking about if your cargo was on a Hanjin ship even though you didn’t charter with the company when the carrier collapsed.

2017 does hold the potential for carriers to maintain some semblance of stability with freight rates. Now we’ll see if they can realize that potential.

Click Here for Free Freight Rate Pricing


Source: UC Blog

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South China Sea Tensions Intensify Under Trump https://www.universalcargo.com/south-china-sea-tensions-intensify-under-trump-2/ https://www.universalcargo.com/south-china-sea-tensions-intensify-under-trump-2/#respond Tue, 24 Jan 2017 22:31:23 +0000 https://www.universalcargo.com/south-china-sea-tensions-intensify-under-trump-2/   Tensions have been high in the South China Sea for some time as China aggressively pushes its territorial claim on almost the whole body of water, conflicting with claims by Vietnam, the Philippines, Brunei, Malaysia, and Taiwan. The U.S. is right in the middle of these tensions too, doing things like sending USS Lassen, a guided missile destroyer, […]

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South China Sea claimsTensions have been high in the South China Sea for some time as China aggressively pushes its territorial claim on almost the whole body of water, conflicting with claims by Vietnam, the Philippines, Brunei, Malaysia, and Taiwan.

The U.S. is right in the middle of these tensions too, doing things like sending USS Lassen, a guided missile destroyer, right through waters next to man-made islands China has created with air strips and military capabilities to strengthen its claim on the South China Sea.

While the U.S. has taken the stance of protecting international waters in the South China Sea and not recognizing China’s self-created islands as affecting territorial claims, there has been very little action from the Obama administration in these waters where about $5 trillion of cargo is shipped through major shipping lanes every year.

The Trump administration plans to be much more aggressive in stopping China’s takeover of these international waters.

All the major news outlets have released stories on the Trump administration’s vow to protect international waters in the South China Sea. At his hearing, President Trump’s selection for Secretary of State seemed to say the U.S. would do two things in stopping China’s takeover of the South China Sea:

  1. Stop China from building islands in the South China Sea
  2. Deny China access to the islands it built

Richard Engel, Marc Smith, and Eric Baculinao wrote an article for NBC News quoting Tillerson as saying, “We’re going to have to send China a clear signal that, first, the island-building stops and, second, your access to those islands also is not going to be allowed.”

While those words of Tillerson’s from his Senate confirmation hearing do not necessarily mean President Trump plans to attempt those restrictions on China, his administration didn’t exactly back down from them. Ben Blanchard and David Brunnstrom reported in Reuters:

“The U.S. is going to make sure that we protect our interests there,” [White House spokesman Sean Spicer] said when asked if Trump agreed with comments by his secretary of state nominee, Rex Tillerson. On Jan. 11, Tillerson said China should not be allowed access to islands it has built in the contested South China Sea.

“It’s a question of if those islands are in fact in international waters and not part of China proper, then yeah, we’re going to make sure that we defend international territories from being taken over by one country,” Spicer said.

 

The NBC article was more about China’s response to the Trump administration’s words on the South China Sea. Lu Kang, senior official with the Chinese foreign ministry gave NBC an interview, which will air tonight on NBC Nightly News with Lester Holt. But China’s stance is clear even from the article:

“That’s not international territory, that’s Chinese territory,” Lu said, insisting that China has every right to build whatever it wants on the islands.

The quote the article gives from China’s media is more ominous as it drops the “W” word:

“China has enough determination and strength to make sure that [Trump’s] rabble rousing will not succeed. Unless Washington plans to wage a large-scale war in the South China Sea, any other approaches to prevent Chinese access to the islands will be foolish,” wrote the state-run Global Times.

Things were already tense between Beijing and Washington over Chinese and American actions in the South China Sea. Beijing called the U.S. sending a warship, mentioned at the top of this post, within 12 nautical miles of China’s man-made islands “illegal” and a “deliberate provocation.”

Of course, smaller countries with claims in the South China Sea applaud the U.S. for standing up to China as it builds military instillations in the region’s waters.

 

This already  tense situation is intensifying. And in the middle of it all, shippers are trying to get their trillions of dollars worth of cargo imported and exported.

For more background, check out these related posts:

ARE SHIPMENTS IN DANGER AS US, CHINA TENSIONS RISE IN SOUTH CHINA SEA?

SOUTH CHINA SEA TENSIONS WORRY SHIPPERS

3 CHINA NEWS STORIES SHIPPERS SHOULD KNOW ABOUT

HOW ANTI-CHINA RIOTS IN VIETNAM AFFECTS SHIPPERS

SHIPPING NEWS ALERT: ANTI-CHINA RIOTS IN VIETNAM TORCH VENDORS


Source: UC Blog

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SM Line to Replace Hanjin, But Will Yang Ming Follow Hanjin’s Footsteps? https://www.universalcargo.com/sm-line-to-replace-hanjin-but-will-yang-ming-follow-hanjins-footsteps/ https://www.universalcargo.com/sm-line-to-replace-hanjin-but-will-yang-ming-follow-hanjins-footsteps/#respond Thu, 19 Jan 2017 21:14:33 +0000 https://www.universalcargo.com/?p=7976 The Emergence of SM Line It sounds like the story of the phoenix: SM Line rising “from the ashes of Hanjin.” But perhaps the better mythological creature to describe this story is the changeling, a creature that replaces a child who is then lost. SM Line has emerged as a new container line to take […]

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Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

The Emergence of SM Line

It sounds like the story of the phoenix: SM Line rising “from the ashes of Hanjin.” But perhaps the better mythological creature to describe this story is the changeling, a creature that replaces a child who is then lost.

SM Line has emerged as a new container line to take the place of Hanjin Shipping with the Asia-US assets that have been bought out from the bankrupt carrier.

Mike Wackett reports in an article on The Loadstar:

South Korean conglomerate Samra Midas Group (SMG) has applied to the US Federal Maritime Commission (FMC) to start a new transpacific container service.

Addressing a meeting of the National Retail Federation (NRF) in New York on Monday, commissioner William Doyle said executives from SMG had visited the FMC to discuss its application.

Mr Doyle told delegates SM Line was proposing to operate a liner service between Shanghai and Ningbo in China, Busan in South Korea and Long Beach on the US west coast “from the ashes of Hanjin”.

“In addition,” said Mr Doyle, “SM Line intends to operate eight intra-Asia services between China, Japan, Thailand, Vietnam, India, Pakistan, Indonesia and other countries.”

It was a surprise move back in November when Korea Line swooped in to buy Hanjin’s Asia-US assets. However, Korea Line’s parent company, SM Group, did not approve the bulk shipping line to go into container shipping. Therefore, the separate corporate body SM Line was formed to utilize the assets acquired from Hanjin.

When most of the carrier news in international shipping highlights shrinking competition amongst shipping lines through alliances, mergers, buyouts, and bankruptcy, this story stands out with the emergence of a new player in trans-Pacific container trade.

Yang Ming in Financial Danger

Speaking of shrinking competition among carriers in the international shipping industry, Mike Wackett also reported in The Loadstar on Drewry’s findings that Yang Ming is in the most financial danger of all the container lines:

Drewry Financial Research Services (DFRS) says the line has the industry’s most leveraged balance sheet, with a net gearing of a massive 437% at the end of Q3.

The figure soars above the industry average of 124% and is nearly five times that of its closest regional peer, Evergreen.

The report says: “Yang Ming’s high debt is a great cause for concern for us, given the heightened financial risks. Even with recovery in the underlying freight market, the debt burden without a restructuring is a red flag and a clear sell signal for us.”

DFRS noted that Yang Ming had accumulated NTD38.4bn ($1.2bn) in losses since 2009, with its net loss for 2016 at around $400,000 by the end of the third quarter.

Since the collapse of Hanjin Shipping, the international shipping industry has been nervous that bankruptcy might hit another major carrier.

Back in October, Drewry released research on the financial health of the industry’s shipping companies warning that there’s high risk of more major carrier collapses.

Since then, a surge in freight rates has given optimism for the health of carriers. However, there is much work to do for carriers to recover from years of overcapacity, heavy downward pressure on freight rates, and billion dollar losses.

According to Drewry’s research and Mike Wackett’s article, Yang Ming has the most work to do to return to financial health and avoid a similar fate to Hanjin’s.

Hanjin’s TTI Sale Approved

While we’re on the topic of Hanjin, here’s a little update on the bankrupt carrier’s sale of its shares in Total Terminals International (TTI).

Jim Christie reported in a Reuters article:

Bankrupt South Korean shipping line Hanjin Shipping Co Ltd (117930.KS) won U.S. court approval at a hearing on Wednesday for the $78 million sale of its stake in U.S. terminal operator Total Terminals International LLC, overcoming objections of container companies.

An objection to Hanjin’s sale of their shares in TTI, which operates a terminal at the Port of Long Beach as well as one at the Port of Seattle, had also been filed by the Northwest Seaport Alliance.

It now appears the sale of Hanjin’s stakes to Mediterranean Shipping Co. (MSC), through MSC’s subsidiary Terminal Investment Ltd., is free to move forward.

This will give MSC full control of the shares of TTI, but Hyundai Merchant Marine is expected to acquire some shares from MSC once the deal is complete.

 

 

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SM Line to Replace Hanjin, But Will Yang Ming Follow Hanjin’s Footsteps? https://www.universalcargo.com/sm-line-to-replace-hanjin-but-will-yang-ming-follow-hanjins-footsteps-2/ https://www.universalcargo.com/sm-line-to-replace-hanjin-but-will-yang-ming-follow-hanjins-footsteps-2/#respond Thu, 19 Jan 2017 21:14:33 +0000 https://www.universalcargo.com/sm-line-to-replace-hanjin-but-will-yang-ming-follow-hanjins-footsteps-2/ Hanjin Container Ship Photo by: Flickr user Ingrid Taylar The Emergence of SM Line It sounds like the story of the phoenix: SM Line rising “from the ashes of Hanjin.” But perhaps the better mythological creature to describe this story is the changeling, a creature that replaces a child who is then lost. SM Line […]

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Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

The Emergence of SM Line

It sounds like the story of the phoenix: SM Line rising “from the ashes of Hanjin.” But perhaps the better mythological creature to describe this story is the changeling, a creature that replaces a child who is then lost.

SM Line has emerged as a new container line to take the place of Hanjin Shipping with the Asia-US assets that have been bought out from the bankrupt carrier.

Mike Wackett reports in an article on The Loadstar:

South Korean conglomerate Samra Midas Group (SMG) has applied to the US Federal Maritime Commission (FMC) to start a new transpacific container service.

Addressing a meeting of the National Retail Federation (NRF) in New York on Monday, commissioner William Doyle said executives from SMG had visited the FMC to discuss its application.

Mr Doyle told delegates SM Line was proposing to operate a liner service between Shanghai and Ningbo in China, Busan in South Korea and Long Beach on the US west coast “from the ashes of Hanjin”.

“In addition,” said Mr Doyle, “SM Line intends to operate eight intra-Asia services between China, Japan, Thailand, Vietnam, India, Pakistan, Indonesia and other countries.”

It was a surprise move back in November when Korea Line swooped in to buy Hanjin’s Asia-US assets. However, Korea Line’s parent company, SM Group, did not approve the bulk shipping line to go into container shipping. Therefore, the separate corporate body SM Line was formed to utilize the assets acquired from Hanjin.

When most of the carrier news in international shipping highlights shrinking competition amongst shipping lines through alliances, mergers, buyouts, and bankruptcy, this story stands out with the emergence of a new player in trans-Pacific container trade.

Yang Ming in Financial Danger

Speaking of shrinking competition among carriers in the international shipping industry, Mike Wackett also reported in The Loadstar on Drewry’s findings that Yang Ming is in the most financial danger of all the container lines:

Drewry Financial Research Services (DFRS) says the line has the industry’s most leveraged balance sheet, with a net gearing of a massive 437% at the end of Q3.

The figure soars above the industry average of 124% and is nearly five times that of its closest regional peer, Evergreen.

The report says: “Yang Ming’s high debt is a great cause for concern for us, given the heightened financial risks. Even with recovery in the underlying freight market, the debt burden without a restructuring is a red flag and a clear sell signal for us.”

DFRS noted that Yang Ming had accumulated NTD38.4bn ($1.2bn) in losses since 2009, with its net loss for 2016 at around $400,000 by the end of the third quarter.

Since the collapse of Hanjin Shipping, the international shipping industry has been nervous that bankruptcy might hit another major carrier.

Back in October, Drewry released research on the financial health of the industry’s shipping companies warning that there’s high risk of more major carrier collapses.

Since then, a surge in freight rates has given optimism for the health of carriers. However, there is much work to do for carriers to recover from years of overcapacity, heavy downward pressure on freight rates, and billion dollar losses.

According to Drewry’s research and Mike Wackett’s article, Yang Ming has the most work to do to return to financial health and avoid a similar fate to Hanjin’s.

Hanjin’s TTI Sale Approved

While we’re on the topic of Hanjin, here’s a little update on the bankrupt carrier’s sale of its shares in Total Terminals International (TTI).

Jim Christie reported in a Reuters article:

Bankrupt South Korean shipping line Hanjin Shipping Co Ltd (117930.KS) won U.S. court approval at a hearing on Wednesday for the $78 million sale of its stake in U.S. terminal operator Total Terminals International LLC, overcoming objections of container companies.

An objection to Hanjin’s sale of their shares in TTI, which operates a terminal at the Port of Long Beach as well as one at the Port of Seattle, had also been filed by the Northwest Seaport Alliance.

It now appears the sale of Hanjin’s stakes to Mediterranean Shipping Co. (MSC), through MSC’s subsidiary Terminal Investment Ltd., is free to move forward.

This will give MSC full control of the shares of TTI, but Hyundai Merchant Marine is expected to acquire some shares from MSC once the deal is complete.

 

 


Source: UC Blog

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TAT Trains UPS About Human Trafficking – Please Join the Fight https://www.universalcargo.com/tat-trains-ups-about-human-trafficking-please-join-the-fight-2/ https://www.universalcargo.com/tat-trains-ups-about-human-trafficking-please-join-the-fight-2/#respond Tue, 17 Jan 2017 22:09:45 +0000 https://www.universalcargo.com/tat-trains-ups-about-human-trafficking-please-join-the-fight-2/ More than 8,000 UPS drivers will be trained by Truckers Against Trafficking (TAT) “how to recognize and respond to signs of human trafficking activity” according to an article from Transport Topics. This is a great story to share right now as January is National Slavery and Human Trafficking Prevention Month. The Transport Topics article expands on the […]

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human traffickingMore than 8,000 UPS drivers will be trained by Truckers Against Trafficking (TAT) “how to recognize and respond to signs of human trafficking activity” according to an article from Transport Topics.

This is a great story to share right now as January is National Slavery and Human Trafficking Prevention Month.

The Transport Topics article expands on the program between UPS and TAT that is actually an expansion of a previous effort itself:

The new effort builds on the completion of a pilot project between TAT and UPS Freight across 10 states in December, which successfully trained 1,500 drivers, the group said.

“TAT’s goal is to saturate trucking and related industries with educational materials and to equip drivers on how to recognize sex trafficking, what to do, and importantly — what not to do,” Kendis Paris, executive director of TAT, said in a statement. “We are thrilled to have an industry leader like UPS on board, demonstrating the impact the business community can make to raise awareness and stop this horrific exploitation.”

Universal Cargo (UC) applauds these efforts of TAT and UPS and implores more to join the fight.

 

It was about six years ago that Time Magazine disturbingly said, “Despite more than a dozen international conventions banning slavery in the past 150 years, there are more slaves today than at any point in human history.”

Even as awareness has increased in the years since then, sex slavery continues to thrive. And not just in other countries, but right here in the United Sates.

“I think the awful irony,” UC President Shirley Burke said, “is that we are referred to as ‘The Land of the Free’ and there is slavery happening in our very own neighborhoods.”

Fighting and preventing human trafficking is something UC’s owners are passionate about.

For years, Universal Cargo has supported organizations like iEmpathize and Zoe International that fight human trafficking and the sex slavery it produces, where the victims are so often vulnerable children.

Human Rights First, an independent advocacy and action organization, reports:

Human trafficking earns profits of roughly $150 billion a year for traffickers, according to the [International Labor Organization]. The following is a breakdown of profits, by sector:

  • $99 billion from commercial sexual exploitation

  • $34 billion in construction, manufacturing, mining and utilities

  • $9 billion in agriculture, including forestry and fishing

  • $8 billion dollars is saved annually by private households that employ domestic workers under conditions of forced labor

The sheer magnitude of human trafficking, especially in the sector of sex slavery is mind blowing.

Polaris, another organization dedicated to the fight against human trafficking and sex slavery, further illuminates just how big the problem of sex trafficking is right here in the United States:

  • Since 2007, the National Human Trafficking Hotline, operated by Polaris, has received reports of 14,588 sex trafficking cases inside the United States.

  • In 2014, the National Center for Missing & Exploited Children estimated that 1 in 6 endangered runaways reported to them were likely sex trafficking victims.

  • Globally, the International Labor Organization estimates that there are 4.5 million people trapped in forced sexual exploitation.

  • In a 2014 report, the Urban Institute estimated that the underground sex economy ranged from $39.9 million in Denver, Colorado, to $290 million in Atlanta, Georgia.

Truckers, moving across the roads of the country, are in a uniquely strong situation to see and do something about sex trafficking. That’s where TAT comes in.

TAT gives training on what to look for, how to recognize human/sex trafficking, and what to do about it. Of course, you don’t have to be a trucker to see the signs of sex trafficking. If you do suspect sex trafficking, there’s a number to call: 1-888-3737-888.

What are some signs you should be aware of to make a call? Check out Truckers Against Trafficking’s training video below, which not only gives tips on what to look for but also shares the story of a girl who suffered through being abducted and forced into sex slavery:


Source: UC Blog

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Port Alliance Era Is For Real https://www.universalcargo.com/port-alliance-era-is-for-real/ https://www.universalcargo.com/port-alliance-era-is-for-real/#respond Thu, 12 Jan 2017 20:33:38 +0000 https://www.universalcargo.com/?p=7973 With all the alliances of carriers in the international shipping industry, it was inevitable that ports and terminals would begin forging alliances too. A little less than a month ago, we posted a blog titled The Rise of Port Alliances. Now, similarly titled articles are popping up with different stories on the same theme. East Bay […]

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international shipping cargo ship port

international shipping cargo ship port

With all the alliances of carriers in the international shipping industry, it was inevitable that ports and terminals would begin forging alliances too.

A little less than a month ago, we posted a blog titled The Rise of Port Alliances. Now, similarly titled articles are popping up with different stories on the same theme.

East Bay Times posted New era begins with port alliance, and The Loadstar published Era of container terminal alliances nears after FMC approves Miami operator agreement.

Paul T. Rosynsky, who wrote the East Bay Times article, reports on a deal between the Port of Oakland and the Port of Sacramento:

The Port of Oakland’s takeover of the Port of Sacramento became official this week after Sacramento’s Port Commission unanimously approved the deal.

The deal will help Oakland handle an expected doubling of trade from Asia in the next decade. It will also allow the Port of Sacramento to remain solvent in an era where small ports are losing ground to larger maritime terminals.

The Port of Oakland will form a new company, Maritime Management Services, to operate the Port of Sacramento. The deal also will lead to joint efforts to market the Sacramento port, lobby governments for grants and turn the Delta into a new transportation corridor.

…… the ultimate goal is to create an alliance that will help keep the Port of Sacramento viable in the Pacific shipping trade and give Oakland another tool to handle the increased cargo expected to arrive from Asia.

Gavin van Marle wrote The Loadstar article, which tells of port terminals being allowed to enter into cooperation:

The FMC commissioners agreed not to prevent the Miami Marine Terminal Conference Agreement taking effect on 31 December.

It allows two of the port’s three container terminals – Port of Miami Terminal Operating Company (Pomtoc) and South Florida Container Terminal (SFCT) – to seek “cooperation and commonality in both business and operating matters”.

An FMC statement added: “…the companies may establish a variety of common rates, rules, and practices as well as to meet to discuss these matters.”

The Universal Cargo blog I brought up at the beginning focused on a Global Ports Group Agreement that was reported on by Chris Dupin in American Shipper:

Five large terminal companies and one European port authority have joined together to file a discussion agreement with the Federal Maritime Commission (FMC) in attempts to establish a structured organization to advance their efforts to promote the efficiency and effectiveness of the container port industry.

Adding the Oakland and Sacramento ports agreement along with the Miami terminals cooperation agreement to the Global Ports Group Agreement gives credence to the statement I made in the Rise of Port Alliances blog:

“This is the next phase in the increasing cooperation and consolidation happening in the international shipping industry.”

“Rise of Port Alliances” sounds a little ominous like Rise of the Planet of the Apes. Some are leery of the idea of more alliances in the international shipping industry while others think this will be a good thing for shippers.

Like when carrier alliances began forming in the international shipping industry, the argument for port alliances benefitting shippers is improved efficiencies. Shippers certainly could use less congestion and smoother flowing cargo.

The worry of price fixing shouldn’t loom as large with ports as with carriers when it comes to importing and exporting goods; however, there are some who are concerned port alliances could increase freight rates by ports and terminals working together to force carriers into more expensive deals, the costs of which would be passed on to shippers. Some also fear the rollout of synchronized fees.

So far, carrier alliances have not benefitted shippers in terms of better reliability from carriers, but maybe the potential for increased reliability from ports through alliances is greater.

It’s too early to know exactly how port and terminal alliances will turn out for shippers, but what we do know is that this new era of port alliances is for real.

Let us know what you think of these new port alliances in the comments section below.

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2 Lawsuits Making International Shipping Headlines https://www.universalcargo.com/2-lawsuits-making-international-shipping-headlines/ https://www.universalcargo.com/2-lawsuits-making-international-shipping-headlines/#respond Tue, 10 Jan 2017 22:03:33 +0000 https://www.universalcargo.com/?p=7972 Attorneys from Nofeeinjurylawyers.com.au has stated that as there are a great deal of parties and laws involved in international shipping. Therefore, it is not surprising that the courts play a role in the industry. Right now, a couple cases in the international shipping industry are making headlines. Here’s a quick look at them: NWSA Files […]

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international shipping newsAttorneys from Nofeeinjurylawyers.com.au has stated that as there are a great deal of parties and laws involved in international shipping. Therefore, it is not surprising that the courts play a role in the industry.

Right now, a couple cases in the international shipping industry are making headlines. Here’s a quick look at them:

NWSA Files Objection to Hanjin’s Terminal Shares Sale

A lawsuit is saying not so fast to the sale of Hanjin Shipping’s stake in Total Terminals International (TTI).

Mediterranean Shipping Company (MSC) is on its way to complete control of TTI through its company Terminal Investment Ltd (TIL). However, the Northwest Seaport Alliance (NWSA) has interrupted the sale with legal action.

Chris Dupin reports in an American Shipper article:

The Northwest Seaport Alliance (NWSA), which encompasses marine terminals at the ports of Seattle and Tacoma, said Friday that it filed an objection in U.S. Bankruptcy Court in Newark, N.J. to the proposed sale of Hanjin Shipping’s interest in Total Terminals International (TTI).

TTI has leased Terminal 46 in the Port of Seattle since 1991.

A spokesman for NWSA said, “We take this action in order to ensure the interests of the NWSA, under its lease with TTI, are adequately protected in the form of surety of lease payments. Our action is consistent with one of the purposes of Chapter 15 of the Bankruptcy Code, which is to protect the interests of US parties in a foreign bankruptcy.”

NWSA has a right to be concerned about the continued payment from its lessee, TTI. NWSA also has the right to take legal action to protect itself in this matter.

It would seem that among the concerns NWSA has is that TIL is buying Hanjin’s shares, in part, on behalf of Hyundai Merchant Marine (HMM).

Dupin’s article highlights the point with, “Hanjin Shipping’s ‘motion suggests that TIL is acquiring some portion of the ownership of TTI as an agent for HMM,’ the NWSA said.”

Just this summer, before Hanjin Shipping’s collapse, it looked like HMM was headed for receivership. It doesn’t take any imagination to think HMM’s financial situation, as well as MSC and TIL’s, is of utmost concern to the NWSA.

It is expected that the NWSA will work out its issues with MSC/TIL and allow the sale of the TTI shares. However, as it stands, the NWSA’s court filed objection is stalling the sale.

So the drama of Hanjin’s bankruptcy continues.

TTI not only operates a terminal at the Port of Seattle but also at the Port of Long Beach.

ILWU Lawsuit Could Go Before Oregon Supreme Court

It seems that the ILWU has done everything in its power to crush the Port of Portland, remaining bitter even after the union won a fight over two jobs that ultimately cost many more at and around the port.

The ILWU wanted to take control of two jobs–two jobs monitoring, plugging, and unplugging reefer shipping containers–at the Port of Portland that the International Brotherhood of Electrical Workers had been doing for the previous 30 years.

The ILWU hard timed the port so much, slowing the movement of cargo to a crawl, that carriers stopped calling upon the Port of Portland with containerships altogether.

Subsidies were used to try to keep business from carriers at the port, but the ILWU attacked those with a lawsuit.

Chris Dupin, in another American Shipper article, explains how that lawsuit is now being proposed to the Oregon Supreme Court:

The Oregon Supreme Court is being asked to look at the legality of subsidies the Port of Portland gave to ocean carriers in 2012 and 2013.

The 9th Circuit U.S. Court of Appeals last week referred questions raised in a lawsuit filed by the International Longshore and Warehouse Union (ILWU) against the port that challenged the subsidies, saying it was not clear if the way the subsidies were accounted for was legal under current Oregon case law.

“We are hesitant to expand Oregon law in a manner that may be contrary to Oregon’s wishes and in an important subject matter in Oregon’s history,” the 9th Circuit said. “If the Oregon Supreme Court declines certification, we will resolve the question according to our best understanding of Oregon law.”

In my opinion, the ILWU has gone way too far at the Port of Portland. To assert their jurisdiction over jobs–and specifically over two jobs that had always traditionally been performed by another union–the ILWU did everything it could to destroy the port’s business.

The actions of the union hurt more than just the terminal owners. The local economy, shippers, and everyone involved in the supply chain around the Port of Portland suffered. And the ILWU hurt itself.

Perhaps in the bigger scope, the ILWU was willing to sacrifice labor hours and jobs at the Port of Portland to show the rest of the PMA that it is not to taken lightly. Ultimately, however, this sort of action hurts the trust everyone in the supply chain has in the union.

Here are a few stories you can read to get background on what happened at the Port of Portland with the ILWU:

ILWU TAKES ADVANTAGE OF NO CONTRACT, SLOWING DOWN PORT OF PORTLAND

JUDGE RULES ILWU PURPOSEFULLY SLOWED IMPORT/EXPORT @ PORT OF PORTLAND

ILWU LOCAL 8 SHOULD PAY DAMAGES TO PORTLAND SHIPPERS

WHY IS THIS INTERNATIONAL SHIPPING STORY SO SAD?

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No Container Shipping for Korea Line https://www.universalcargo.com/no-container-shipping-for-korea-line/ https://www.universalcargo.com/no-container-shipping-for-korea-line/#respond Thu, 05 Jan 2017 16:37:19 +0000 https://www.universalcargo.com/?p=7968 It was a surprise move back in November when Korea Line swooped in to buy Hanjin Shipping’s Asia-U.S. assets. South Korea’s second largest bulk shipping company saw it as an opportunity to expand into container shipping. It turns out that Korea Line’s parent company, SM Group is not as positive about the opportunity. Yonhap News […]

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Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

It was a surprise move back in November when Korea Line swooped in to buy Hanjin Shipping’s Asia-U.S. assets. South Korea’s second largest bulk shipping company saw it as an opportunity to expand into container shipping.

It turns out that Korea Line’s parent company, SM Group is not as positive about the opportunity.

Yonhap News reports:

SM Group, a mid-sized business conglomerate that owns South Korea’s No. 2 bulk carrier Korea Line Corp., said Tuesday that its board has refused to approve a plan to acquire one of Hanjin Shipping Co.’s major assets.

SM Group said its board of directors turned down the proposal to acquire the troubled shipper’s U.S.-Asia route at a stakeholders meeting.

Stakeholders were reportedly against the proposal, citing that Korea Line does not have experience in the container shipping businesses, and that a general industrywide slump may cause a cash shortage.

An interesting fact brought up in the Yonhap article is that Korea Line was actually bought by SM Group when Korea Line, similarly to Hanjin Shipping, filed for bankruptcy protection five years back.

It is probably a wise move on the part of SM Group to block their shipping company, which has had  its share of financial struggles, from entering the trans-Pacific container trade business with the assets of another struggling shipping company.

Still, this is not exactly the end of Korea Line entering trans-Pacific container trade business with Hanjin’s Asia-U.S. assets. Yonhap brings up a clause that would allow a separate corporate body to acquire the assets. A Journal of Commerce (JOC) article by Dustin Braden expands on how Korea Line plans to utilize that clause to move forward into container shipping similarly to its original plan:

While SM Group’s board rejected Korea Line’s effort to join the trans-Pacific trade, officials from SM Group told IHS Fairplay, a sister product of JOC.com within IHS Markit, that the company could still launch its container shipping business in April as planned, but under a separate entity that has to be incorporated independently of SM Group. That new entity, expected to be named SM Line Corporation, which has already begun acquiring vessels, will likely have to rely heavily on non-vessel-operating common carriers for its volume as beneficial cargo owners who were burned by the Hanjin bankruptcy may be reluctant to load their cargo on an untested liner.

An interesting thing that Braden brings up in his JOC article is that NVOCCs (Non Vessel Operating Common Carriers) may be attracted to this new carrier in the trans-Pacific trade lanes because SM Line Corporation “will likely low ball rates in order to gain market share.”

There also may be a little irony to be found in the separate entity to carry out the trans-Pacific trade is named after the parent company that blocked Korea Line from entering that container shipping trade.

It will be something to watch if SM Line can become a significant player in trans-Pacific trade outside of the major carrier alliances operating there.

One thing we know now is that Korea Line itself, after winning the bid for Hanjin’s assets, will not be.

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2017 International Shipping Predictions https://www.universalcargo.com/2017-international-shipping-predictions-2/ https://www.universalcargo.com/2017-international-shipping-predictions-2/#respond Tue, 03 Jan 2017 21:08:56 +0000 https://www.universalcargo.com/2017-international-shipping-predictions-2/ 2017 international shipping predictions Happy New Year! Welcome to 2017, shippers. Last week, in the last blog of 2016, we took a look back at the top stories of the year. This week, in the first blog of 2017, we look forward. What does 2017 have in store for international shipping? Here are four predictions for […]

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2017 international shipping predictions

2017 international shipping predictions

Happy New Year! Welcome to 2017, shippers.

Last week, in the last blog of 2016, we took a look back at the top stories of the year. This week, in the first blog of 2017, we look forward.

What does 2017 have in store for international shipping?

Here are four predictions for the international shipping industry in 2017:

Moderately Higher Freight Rates

In 2016, we saw some very low freight rates. The numbers even hit record lows. Don’t expect to see freight rates bottom out like that again this year.

There has been downward pressure on freight rates for several years with overcapacity in the international shipping industry. That overcapacity is not gone, but increased ship scrapping; consolidation through mergers, buyouts, and alliances; and decreased ship ordering should start mitigating overcapacity some.

Some was the keyword in that last sentence.

Freight rates shouldn’t soar out of control as carriers still will be battling overcapacity in 2017. However, these giant shipping companies should have learned a lesson from the freight rate pricing wars that helped create the unsustainably low freight rates of 2016.

The end of 2016 actually saw a surge in freight rates that should make carriers feel a bit more confident about where the numbers stand going into 2017.

The Loadstar reports, “All the [Shanghai Containerized Freight Index’s] main tradelanes registered impressive spot rate gains as the index published on 30 December leapt 15.5%.”

Freight rate increases listed in the article include an 11.3% rise from Shanghai to North European ports increased, 24.8% surge in Asia to the US west coast ports, a jump of 18.6% from Asia to the US east coast, a leap of 61% in rates to Santos, a 39% climb in rates to Durban, and an escalation of 23.9% in rates to West Africa.

I wouldn’t expect carriers to be able to maintain those kinds of freight rate increases, but I do expect a moderate increase in 2017. Of course, there is probably no subject in international shipping that shippers are keener to watch.

Continued Shrinking of Carrier Competition

Even though there should be moderate increase in freight rates across the year, carriers are still likely to struggle in 2017.

I don’t expect another major carrier collapse in 2017 like that of Hanjin Shipping’s in 2016. That despite Drewry’s research that suggests another major carrier bankruptcy is likely.

Instead, it is more likely a carrier getting close to bankruptcy will get bought out. Maersk has switched to a strategy of acquisition, looking for competing carriers it could acquire. As Maersk does, so do other carriers. Don’t doubt other carriers are also looking for opportunity to buy out a competitor.

Of course, there will be more to see than just buy outs. Expect a major merger or two to make international shipping headlines in 2017 as well.

Carrier alliances also are not going anywhere. The carriers have already pretty well split themselves into three major alliances. Those alliances should continue to solidify in 2017. However, we could see some adjusting of the alliances, especially if there are mergers or buyouts that crossover from one alliance to another.

Protectionist Fears Relieved

With the election of Donald Trump as president, there has been fear in the international shipping industry that protectionist policies will hurt importers and exporters.

The fear is that the new administration will institute high tariffs while the controversial new president will hurt international relationships.

What if Trump really puts huge tariffs on imports from China? What if people around the world dislike Trump so much they no longer want to be business partners with U.S. companies?

I don’t believe I’m about to quote Aaron Rodgers, but R-E-L-A-X.

International business will go on. Business relationships are not motivated by how much people around the world like the countries’ presidents of those with whom they do business. Exporters need not worry about losing international customers as demand and potential for profit remain.

As far as the tariffs on China go, threats of big tariff increases to create negotiation leverage are much more likely than actual big tariff increases.

Even with tariff increases, international shipping will continue in 2017.

There actually is a shift happening in China that could affect its status as the United States’ top trade partner that doesn’t share a border. But that’s a blog for another time.

No Contract Extension from ILWU

I certainly hope this prediction is wrong.

The International Longshore & Warehouse Union (ILWU) and Pacific Maritime Association (PMA) teased us in 2016 with talks to discuss “the concept” of an early contract extension.

The hope is that these parties will actually reach an agreement to extend the current contract well before it expires in 2019. However, that is not likely to happen in 2017.

The dockworkers unions, both on the West and East Coast, by design do not extend or complete new contract negotiations before the previous contract expires. They want the leverage of their most powerful weapons–slowdowns and threat of strikes.

The problem, of course, is that every time a contract comes to an end, ports experience slowdowns, congestion, shutdowns… Everyone in the supply chain suffers, ports lose reputation, and jobs the unions are supposed to protect actually are put in danger.

Despite that, and the urges from the rest of the industry, I don’t believe 2017 will be the year we see the ILWU break from tradition by signing an early contract extension.

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Source: UC Blog

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Top 10 International Shipping Stories of 2016 https://www.universalcargo.com/top-10-international-shipping-stories-of-2016/ https://www.universalcargo.com/top-10-international-shipping-stories-of-2016/#respond Thu, 29 Dec 2016 23:34:12 +0000 https://www.universalcargo.com/?p=7963 This is it! Universal Cargo’s last blog of 2016. What better way to close out the year than with a look back on the top international shipping stories of 2016. Below you’ll find a list of the top stories with a short recap and links to blogs on the topic. You know how we like […]

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YouTube Video

Top 10 international shipping news stories 2016

pic: flickr iabusa

This is it! Universal Cargo’s last blog of 2016. What better way to close out the year than with a look back on the top international shipping stories of 2016.

Below you’ll find a list of the top stories with a short recap and links to blogs on the topic.

You know how we like to count them down David Letterman style, so here are the biggest international shipping news stories from 10 to 1.

Drum roll please…

#10 – Record Low Freight Rates

2016 saw record low freight rates for shippers importing and exporting goods.

This might have made it higher on the list if carriers in the international shipping industry hadn’t already been struggling with low freight rates, caused largely by overcapacity, for the last several years. Still, the impact of these low freight rates is significant.

Of course, low freight rates seem like good news to shippers, but the competition pool where carriers are struggling to swim is shrinking. The international shipping market is changing before our very eyes. Playing a key role in that are these low freight rates.

RECORD LOW FREIGHT RATES FOR SHIPPERS

ARE LOW FREIGHT RATES BAD FOR SHIPPERS IN LONG RUN?

#9 – China Lifting Ban on U.S. Beef Imports

This news item flies under the radar of many, but it is big, big news when it comes to U.S. agricultural exports.

China has had a ban on importing U.S. beef for 13 years because of a Mad Cow Disease scare. In 2017, U.S. exporters should be shipping beef to China again. As Donald Trump would describe that market, it’s HUGE.

CHINA ABOUT TO HAVE BEEF WITH U.S. EXPORTS, & THAT’S A GOOD THING!

#8 – MOL, NYK, and K Line Plan Merger

I mentioned above that the competition pool is shrinking when it comes to carriers in the international shipping industry. Here’s a big example:

Japan’s three major carriers announced plans to merge.

This is only the first three examples of shrinking carrier competition to make this list. However, there are more examples than three that could be pointed to from 2016 international shipping news headlines.

SHRINKING CARRIER COMPETITION: JAPAN’S 3 BIG CARRIERS MERGING

#7 – El Faro’s Black Box Found

It was 2015 when tragedy struck. The container ship El Faro, along with its crew, was lost in Hurricane Joaquin. In 2016, the remains of the ship and its black box were found.

This was the biggest international shipping biggest involving a U.S. ship in decades. The loss of the 33 crew members is devastating.

The black box offers audio that helps understand exactly what happened leading up to the loss of the ship. A transcript of the audio was recently released. A link of the 52 page document can be found on the National Transportation Safety Board website. Sebastian Kitchen does an excellent job of highlighting key moments from the heart wrenching document in an article on Jacksonville.com.

Hopefully, lessons will be learned from the El Faro and changes will be made to keep a tragedy like this from ever happening again.

EL FARO’S BLACK BOX FOUND

#6 – New Verified Gross Mass Rule

A new, and long awaited, verified gross mass (VGM) rule went into effect in 2016 that required shippers to provide certified weights of loaded shipping containers before they could be loaded onto a cargo ship.

With the panic about procedure changes, enforcement, and interpretation of the rule, you would have thought the sky was falling. For a while, it seemed every story in international shipping was about VGM.

Things really got hairy when controversy hit over the Coast Guard’s position on the rule.

VGM would make it even higher on the list, except for the most part all the panic was much ado about nothing. Still, this VGM rule has had an effect on some procedures and produced some controversial fees.

COAST GUARD RAISES CONTROVERSY ON NEW CONTAINER WEIGHT RULE

HOW PORTS TAKE ADVANTAGE OF SOLAS VGM RULE CHANGE

COAST GUARD SAYS U.S. LAWS EQUIVALENT TO NEW VGM RULE

ARE YOU READY FOR VGM RULE GOING INTO EFFECT NEXT MONTH, SHIPPERS?

SHOULD IMPORTERS WORRY ABOUT VGM RULE TAKING EFFECT TOMORROW?

MUCH ADO ABOUT VGM

#5 – China Cosco Shipping Formed

Here’s another big example of that shrinking carrier competition pool.

China’s two big shipping companies, China Cosco Group and China Shipping Group, merged into one giant carrier called China Cosco Shipping Corporation Limited that shook up the carrier alliances.

You’ll get more about that shakeup later in the list…

HERE COMES CHINA COSCO SHIPPING CORPORATION, SHIPPING LEVIATHAN

BIG CARRIER ALLIANCE SHAKE-UP IS COMING!

#4 – Panama Canal Expansion Completed

It finally happened! The Panama Canal expansion was completed in 2016.

The newly enlarged version of the Panama Canal made the old Panamax ships obsolete, swung shipping traffic from the Suez Canal back to Panama, but also makes shippers and carriers nervous as ships keep hitting its hard to navigate walls.

This project fell years behind schedule, costing more than initially planned while seeing scary things like water leaking through its locks.

However, the Panama Canal has the potential to shift a significant amount of cargo traffic from West Coast ports to East and Gulf Coast ports in the U.S.

TOP 3 NEWS STORIES HIGHLIGHT BIGGER IS BETTER TREND IN INTERNATIONAL SHIPPING

5 REASONS THE EXPANDED PANAMA CANAL MAY BE TOO RISKY FOR SHIPPERS

PANAMA CANAL MAKES COMEBACK ON SUEZ CANAL

SHIPS KEEP HITTING WALLS OF NEWLY EXPANDED PANAMA CANAL

#3 – 3 Carrier Alliances to Rule Shipping

I promised that carrier alliance shakeup would be talked about more in this list. Alliances had to change with the formation of China Cosco Shipping because the companies that merged to form it belonged to two separate but major carrier alliances.

Boy, did that shakeup come.

All the major carriers have now consolidated to three major alliances: 2M, Ocean Alliance, and THE Alliance.

Many 2017 news stories will focus on these alliances, especially as shifting and changing among them can still be expected. Just recently, for example, 2M brought Hyundai Merchant Marine onboard and the only major carrier not in one of these alliances, Zim, just entered into a limited cooperation deal with THE Alliance.

What you need to know is that when all is said and done, these three alliances are dominating the waters of international shipping.

AND THEN THERE WERE 3… CARRIER ALLIANCES

THE ALLIANCE TEAMS UP WITH ZIM

#2 – Maersk Goes After Competition

Maersk’s moves are always worth a headline. But this one climbs all the way to the number two position of top stories of 2016.

Maersk split into two divisions, with its shipping division focused on acquiring other carriers in the international shipping industry. The first big acquisition announced is that of Hamburg Süd. I certainly do not expect that to be the last.

Maersk is the biggest carrier in the industry, and as it does, the rest of the carriers follow. When Maersk started ordering megaships, it quickly became a trend amongst carriers and drove overcapacity to out of control levels. Now that Maersk is acquiring competing carriers, expect more carriers to try to do the same.

It’s a dog eat dog world in international shipping. And Maersk is the biggest dog.

DIVIDE & CONQUER: MAERSK SPLITS TO GO AFTER COMPETITION

MAERSK ACQUIRING HAMBURG SÜD!

#1 – Hanjin Bankruptcy

Finally, the top story of 2016 could only be the collapse of Hanjin Shipping.

The world was shocked when a major carrier actually failed. It shouldn’t have been that much of a shock, but somehow the general belief was that these carriers were too big to fail despite years of billion dollar losses.

Hanjin’s bankruptcy has rippled through the international shipping industry. Hanjin was a counted on carrier alliance member whose collapse caused its partners to scramble. Congestion, delays, and fees hit shippers. Some shippers still have cargo stranded out there!

But ultimately, Hanjin’s collapse weakened shippers’ trust in carriers’ stability as a whole and underscores just how difficult this industry has been for major shipping companies in recent years.

HANJIN COLLAPSES – HOW BADLY WILL IT HURT U.S. SHIPPERS?

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K Line Sues Over Bankruptcy Rumors https://www.universalcargo.com/k-line-sues-over-bankruptcy-rumors/ https://www.universalcargo.com/k-line-sues-over-bankruptcy-rumors/#respond Tue, 27 Dec 2016 19:56:06 +0000 https://www.universalcargo.com/?p=7961 Since the collapse of Hanjin Shipping, shippers are painfully aware of the possibility that major ocean carriers can go bankrupt. Although years of carriers suffering through billion dollar losses, overcapacity, and low freight rates really made a major carrier collapse inevitable, it seemed like these shipping companies were too big to fail. There would always be banks […]

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K Line shipping containers

Picture of K Line shipping containers by: Dan DeLuca

Since the collapse of Hanjin Shipping, shippers are painfully aware of the possibility that major ocean carriers can go bankrupt.

Although years of carriers suffering through billion dollar losses, overcapacity, and low freight rates really made a major carrier collapse inevitable, it seemed like these shipping companies were too big to fail. There would always be banks and governments bailing them out and keeping them afloat until things got better in the industry.

Hanjin’s bankruptcy shattered this false confidence in ocean carriers and hurt their reputation as a whole.

Suddenly, shippers are wary of ocean carriers and are, rightfully so, keenly interested in these shipping companies’ financial situations. So when employees at APL Logistics started saying K Line was in danger of going bankrupt, shippers naturally moved their cargo shipping to other carriers.

There has been much speculation on whether another major carrier will collapse, which ones might collapse, discussion of their financials… However, K Line feels like APL went too far, costing K Line in terms of sales and reputation.

Alexander Whiteman reports in The Loadstar:

K Line has filed a lawsuit against Singapore-based APL Logistics, claiming its employees had wrongly suggested the Japanese shipping line was in danger of going bankrupt.

Filed yesterday in the Tokyo District Court, the lawsuit claims APL employees sent emails “strongly” recommending shippers terminate bookings with K Line and switch shipments to other carriers because of potential bankruptcy.

In a statement, K Line said the misinformation had damaged both its reputation and its financial performance, as clients had indeed cancelled or suspended bookings.

It is no surprise K Line is suing for libel. Shippers suffered delays, loss, and significant extra costs when Hanjin went bankrupt and are scared of seeing it happen again. Saying that K Line is in danger of bankruptcy could be quite costly for the carrier.

From the outside, K Line’s case against APL seems strong, as APL admitted its employees sent emails that said K Line was in danger of bankruptcy. However, APL also said those statements were retracted according to Whiteman’s article that also went on to quote APL as saying:

“APL Logistics Group states unreservedly that it is not our practice to comment on the financial position of other market participants; neither in a negative nor positive aspect.

“The APL Logistics Group therefore does not endorse the comments made by these employees.”

It likely will be up to the courts to decide how responsible APL is for its employees’ harmful warnings about K Line’s alleged bankruptcy risk. Of course, the court would also have to decide on the extent of the damage done.

While part of K Line’s goal in the lawsuit is to “restore its social confidence” according to the article, whether or not there is any actual legitimacy to the APL employees’ statements might become a point of interest in the court proceedings.

Back in October, Drewry Research issued a “Red Alert” that warned another collapse like Hanjin’s was not only possible but likely. Using what they call a Z-score, the major international shipping industry research company indexed the financial stress of most major carriers. Not surprisingly, none did well.

While K Line was not singled out from the rest, it did fall within the “distress zone” of the Z-score index. That is the same zone Hanjin Shipping was in when it collapsed.

However, it would be unfair to take that and say K Line was at higher risk of bankruptcy than other carriers, as only two carriers of the fourteen listed were above that “distress zone.” Those two companies, Maersk and OOCL’s parent company OOIL, were both in a gray “cautionary zone” that would advise potential business partners to be cautious before entering into a contract with the companies.

To be clear, I am not nor is Universal Cargo in any way saying or implying that K Line could be in danger of bankruptcy. We have no reason to believe K Line is any worse financial situation than any other major ocean carrier. And we certainly don’t want to get sued.

That being cleared up, it will be interesting to see what factors into this libel case and how it all plays out.

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Hanjin Sells Stake in Terminal at Port of Long Beach to MSC https://www.universalcargo.com/hanjin-sells-stake-in-terminal-at-port-of-long-beach-to-msc/ https://www.universalcargo.com/hanjin-sells-stake-in-terminal-at-port-of-long-beach-to-msc/#respond Thu, 22 Dec 2016 20:59:15 +0000 https://www.universalcargo.com/?p=7959 In another move of liquidation after bankruptcy, Hanjin is selling its stake in Total Terminals International (TTI) to Mediterranean Shipping Co (MSC). Chris Dupin reports in an American Shipper article: Hanjin Shipping has signed a deal to sell its stake in Total Terminals International (TTI) to Terminal Investment Ltd. (TIL), a company owned in substantial part by Mediterranean […]

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Hanjin sells container terminal shares to MSCIn another move of liquidation after bankruptcy, Hanjin is selling its stake in Total Terminals International (TTI) to Mediterranean Shipping Co (MSC).

Chris Dupin reports in an American Shipper article:

Hanjin Shipping has signed a deal to sell its stake in Total Terminals International (TTI) to Terminal Investment Ltd. (TIL), a company owned in substantial part by Mediterranean Shipping Co (MSC).

The deal was approved Tuesday by a Seoul District Court…

If this deal is also approved by U.S. authorities, it will give MSC complete control of the container terminal through TIL, as the company already owns the remainder of the shares in TTI.

Hyundai Merchant Marine (HMM) is also a player in the sale of the shares despite what superficial readings of headlines on the topic would lead one to believe.

At first glance, it might seem odd to read things like “… Hyundai Merchant Marine Co. had indicated that it would be willing to enter into a joint bid with MSC to acquire the terminals, but it dropped out of the process last week,” as reported in a Transport Topics article, and then see Dupin’s article highlight HMM as working with MSC on the deal:

Joe Cook, global marketing director for MSC, said Hanjin, TIL and Korean liner carrier Hyundai Merchant Marine “are progressing approvals for completion of a purchase and sale agreement related to the Hanjin interests in TTI. The parties expect that all approvals will be achieved by early January 2017. As previously reported, our bid can be considered to be joint with HMM and they will acquire an interest in the terminal too.”

Statements like MSC’s, saying this can be seen as a joint venture between the shipping companies, and the fact that it is a solo buying deal from MSC that is going through the approval process seem contradictory. But here’s what’s at play:

HMM’s financial troubles have been well documented. In fact, this summer it looked like HMM was the more likely South Korean shipping company to file for bankruptcy before Hanjin collapsed. It would be quite the understatement to say HMM doesn’t have the best credit. That caused the shipping company to drop out of the joint bid it was making with MSC to buy the shares of TTI.

That didn’t mean HMM no longer wanted to acquire shares nor that MSC was not interested in working with the South Korean shipping company in the acquisition of the shares from Hanjin.

HMM’s financial and credit situation simply changed the structure of how the companies are working together to acquire the container terminal shares.

In a Wall Street Journal article, In-Soo Nam shared HMM Chief Executive C.K. Yoo words to the news outlet on the subject:

“Considering our low credit ratings, we thought it would be better for MSC to make a solo bid. We agreed to buy a stake from MSC later.”

The shipping company also clarified the situation with the Journal of Commerce (JOC), as highlighted in an article written by Turloch Mooney:

“HMM and MSC have agreed to join forces to acquire Hanjin Shipping’s interests in TTI. Although MSC made a sole bid due to HMM’s low credit rating, the shares of TTI will be jointly acquired,” an HMM spokesperson told JOC.com.

It is clear that MSC is buying Hanjin’s stake in TTI with the intention of selling some of those shares to HMM. What is not clear is how many shares MSC plans to sell to HMM. No one, however, would expect it to be more than a minority share.

Still, MSC could decide to keep the 100% share ownership if it so chose.

Most see Hanjin’s selling of its stake in TTI as another step toward total liquidation rather than reorganization.

TTI not only has a terminal in the Port of Long Beach, but also in the Port of Seattle. Here is a little more about TTI from its profile on the company’s website:

Total Terminals, established in 1991 is a full service marine terminal and stevedore operator along the U.S. West Coast. TTI operates two facilities in Long Beach and Seattle comprising a total of 460 acres of terminal acreage. Corporate headquarters for TTI is located in Long Beach, CA with satellite offices in Seal Beach, CA Chandler, AZ and Seattle, WA.

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The Rise of Port Alliances https://www.universalcargo.com/the-rise-of-port-alliances/ https://www.universalcargo.com/the-rise-of-port-alliances/#respond Tue, 20 Dec 2016 20:18:58 +0000 https://www.universalcargo.com/?p=7958 “Five large terminal companies and one European port authority have joined together to file a discussion agreement with the Federal Maritime Commission (FMC) in attempts to establish a structured organization to advance their efforts to promote the efficiency and effectiveness of the container port industry,” Chris Dupin reported in an article for American Shipper yesterday. This is the […]

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international shipping cargo ship port

international shipping cargo ship port

“Five large terminal companies and one European port authority have joined together to file a discussion agreement with the Federal Maritime Commission (FMC) in attempts to establish a structured organization to advance their efforts to promote the efficiency and effectiveness of the container port industry,” Chris Dupin reported in an article for American Shipper yesterday.

This is the next phase in the increasing cooperation and consolidation happening in the international shipping industry.

The international shipping industry has always been a cooperative industry. Moving cargo around the world requires ports to work with carriers, truckers, rail lines… Freight forwarders connect shippers with carriers, working to get the best routing for cargo at the best freight rates….

However, each part of the supply chain is supposed to have multiple companies competing for shippers’ cargo. Trucking companies compete for moving the cargo across land to and from ports, ports compete with each other for handling imports and exports, carriers compete to sale shipping containers across the ocean, etc.

This competition, according to economic theory, should ensure that companies across the supply chain provide the best customer service and efficiency they can. In the last few years, competition in the international shipping industry has been shrinking right before our eyes.

It starts with the ocean carriers.

For several years, carriers have struggled with slower than expected global growth in international shipping, overcapacity, and low freight rates. To counter huge financial losses, carriers have turned to alliances–working together, sharing ships–to decrease costs and increase efficiency to help their bottom lines.

Alliances dominate the oceans as pretty much all major carriers work in cooperation with “competitors” while mergers, buyouts, and bankruptcy shrink the number of carriers that are competing to ship shippers’ cargo.

It only makes sense that if carriers are working together, ports would start doing the same.

Carrier alliances have put extra strain on ports. Multiple carriers combining their cargo loads on single ships, often megaships, means ports have to deal with much higher quantities of shipping containers at once. This has helped create congestion, but is only one of many challenges ports face.

After contentious labor negotiations between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) and a shortage of chassis and truckers combined with bigger ships loaded up by carrier alliances during international shipping’s peak season in 2014 to cause out of control levels of congestion, the Ports of Los Angeles and Long Beach increased cooperation to fight congestion, increase efficiency, and re-earn shippers’ trust.

The structured organization that the terminals and port filed a discussion agreement with the FMC to form is a much bigger thing than partnership between the twin ports of Los Angeles and Long Beach.

If approved, this organization could give rise to a global network of ports working together or the creation of several alliance-like organization between groups of ports. This could be the beginning of a shift in the international shipping industry where ports follow the trend started by carriers.

I do not want to suggest that port alliances are a bad thing or even that they would necessarily cause a decrease in competition. However, the way such organizations operate should be of particular interest to shippers.

American Shipper actually published a copy of the Global Ports Group Agreement that was filed with the FMC.

Here are a few key points to note:

Parties to Agreement

The agreement is between APM Terminals, DP World, Hutchison Port Holdings, PSA International, the Shanghai International Port (Group) Co., and the Port of Rotterdam Authority. The agreement does leave it open for more parties to join the proposed organization.

Geographical Scope

The geographical scope of the agreement includes “all United States ports and points and all foreign ports and points…” So, yeah, we could just say everywhere.

The agreement does say in its “Geographic Scope” section that its members will respect and comply with antitrust and competition laws of all applicable jurisdictions.

Agreement Authority

While the parties of the agreement are meant to meet, share information, discuss issues, and create concerted actions, members are not required exchange information or implement actions the organization comes up with.

If any discussion or exchange of information results in any proposals or agreements of concerted action, those proposals or agreements shall be subject to the right of each Member to independent action and to necessary approvals or requirements of Governments. Nothing herein shall be construed as obligating any Member to provide or exchange information with other Members or the Group. Information and documents exchanged between the parties under authority of this Agreement will be filed with the Commission and will be exempt from disclosure under 60) of the Shipping Act of 1984, as amended.

How large and influential this organization becomes will be interesting to watch. Will other ports and terminals want to join? Will other terminals and ports instead be more interested in forming their own cooperative organizations?

The hope for shippers is that the end result is more efficient and dependable ports. Of course, there will be some worry that this signals one more area in international shipping to see a decrease in competition.

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THE Alliance Teams Up with Zim https://www.universalcargo.com/the-alliance-teams-up-with-zim/ https://www.universalcargo.com/the-alliance-teams-up-with-zim/#respond Thu, 08 Dec 2016 19:29:10 +0000 https://www.universalcargo.com/?p=7947 During these trying times for ocean carriers in the international shipping industry, carrier alliances dominate the shipping lines, sharing ship operations to reduce costs. On the outside looking in is a bad place for carriers to be. That’s exactly where Zim Integrated Shipping Ltd has been. The general consensus is that shipping lines that do not […]

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Container Ship Zim Virginia

Container Ship Zim Virginia by Daniel Ramirez

During these trying times for ocean carriers in the international shipping industry, carrier alliances dominate the shipping lines, sharing ship operations to reduce costs. On the outside looking in is a bad place for carriers to be.

That’s exactly where Zim Integrated Shipping Ltd has been.

The general consensus is that shipping lines that do not join a major carrier alliance are likely not to survive the ever shrinking international shipping competition pool.

Finally, an announcement of Zim working with a major carrier alliance has been announced. Mike Wackett reported on the Loadstar:

THE Alliance and Israeli carrier Zim are to combine Mediterranean-US east coast services next April.

Subject to regulatory approval, the co-operation involves THE Alliance dropping calls at Barcelona, Tarragona, Valencia and the transhipment hub of Algeciras from its AL6 service, which will be served by Zim’s flagship ZCA service, branded AL7 by THE Alliance.

In turn, Zim will co-load on THE Alliance’s rejigged AL6 service, marketing it as its ZC1, which will include a call at Savannah.

This is not exactly Zim joining THE Alliance but instead a limited cooperation with the major carrier alliance that recently lost a one of its prospective members when Hanjin shipping collapsed.

Interestingly, the Loadstar pointed out that Zim did not even mention THE Alliance in its announcement of the service. Here’s Zim’s press release on the enhancement to its Atlantic service:

ZIM is pleased to announce a significant upgrading of its Atlantic network, offering improved connections between US, Canada and the Mediterranean, starting April 2017, subject to FMC approval.

  • ZIM Container Service Italy (ZCI) – A new premium string, offering improved service to the Italian and French markets, connecting with Canada and the US East Coast, with faster transit time, additional ports of call in Italy and a direct call in Fos, France. This service will operate  5 vessels on the following rotation: Salerno – Livorno – La Spezia – Genoa – Fos Sur Mer – Halifax- New York – Norfolk – Savannah – Salerno
  • ZIM’s flagship service, ZIM Container Service Atlantic (ZCA), operating 7 vessels, will focus on the East Med and Spain, with a new call in Algeciras, serving the South Spain market and adding new direct calls in two major Turkish ports- Izmir and Mersin. ZCA upgraded rotation: Ashdod – Haifa – Izmir – Piraeus – Barcelona – Tarragona – Valencia – Algeciras – Halifax – New York – Norfolk – Savannah – Valencia – Tarragona – Mersin – Ashdod

The two current well-established dedicated services, MGX and MPS, will continue to operate as follows:

  • Mediterranean Gulf Express (MGX) providing a fast, direct service between Mexico, US Gulf and the Mediterranean, with connections to the Caribbean and Central America: Cagliari – Livorno – Genoa – Barcelona – Valencia – Port Everglades – Kingston – Veracruz – Altamira – Houston – New Orleans – Tangier – Cagliari
  • Mediterranean Pacific Service (MPS) – a direct service between US West Coast and the Mediterranean:  Cagliari – Livorno – Genoa – Fos Sur Mer – Barcelona – Valencia – Tangier – Los Angeles –  Oakland – Caucedo – Lisbon – Valencia – Cagliari

The improved structure is part of ZIM’s strategy, offering stable and reliable services to customers, while maintaining a flexible partnership policy with major carriers.

Rani Ben Yehuda, VP Cross Suez and Atlantic Business Unit, said: “We are very pleased to launch our upgraded Atlantic services, an improved product with wider port coverage and better service levels to customers.”

It is likely that this move is not the last in THE Alliance’s replacement of the lost Hanjin Shipping. And there is hardly a secure feeling when the alliance moves from a bankrupt shipping company to financially distressed one.

“Zim posted a net loss of $37.6m in the third quarter of the year, following a loss of $74.2m in Q2. In September, it agreed with its creditors to defer $115m of loan repayments until 2018 – 2020,” Wackett wrote in the Loadstar article.

Of course, it seems all carriers are under financial stress as they’ve suffered through years of overcapacity and low freight rates. At least now carrier alliances should be preparing for the possible collapse of partners so there is not a repeat of the cargo disruption that happened with Hanjin’s collapse.

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Maersk Acquiring Hamburg Süd! https://www.universalcargo.com/maersk-acquiring-hamburg-sud/ https://www.universalcargo.com/maersk-acquiring-hamburg-sud/#respond Thu, 01 Dec 2016 19:35:14 +0000 https://www.universalcargo.com/?p=7939 It came out over Thanksgiving weekend that the major carrier Hamburg Süd could be up for sale. Immediately, speculation began about who would acquire the company with the names of other carriers in the international shipping industry like Hapag-Lloyd and CMA CGM being thrown around. Of course, the frontrunner in the rumor mill was A.P. Moller Maersk, the world’s […]

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YouTube Video

Maersk Buying Hamburg Süd

Maersk Buying Hamburg Süd

It came out over Thanksgiving weekend that the major carrier Hamburg Süd could be up for sale.

Immediately, speculation began about who would acquire the company with the names of other carriers in the international shipping industry like Hapag-Lloyd and CMA CGM being thrown around. Of course, the frontrunner in the rumor mill was A.P. Moller Maersk, the world’s largest carrier by capacity, which recently announced a new strategy of acquiring competing carriers.

It didn’t take long to confirm the frontrunner in all the speculation of a Hamburg Süd buyout really is buying the major, German-based carrier. The Loadstar reported today:

Maersk Line today announced it is to acquire Hamburg Süd in a cash deal one analyst claims could be worth up to $5bn.

“We estimate the takeover price in a range from $3bn-$5bn, which would increase Maersk’s leverage from 1.2x to around 1.6x full year 2017 EBITDA,” said Jeffries in a research note.

Maersk’s acquisition of the world’s seventh-biggest carrier would lift its capacity to 3.8m teu, from its current 3.1m teu, giving it an 18.6% global share.

This is the first big move from Maersk since it announced its change in strategy from ship ordering to competition acquisitions. In fact, the Wall Street Journal (WSJ) reported that Maersk hasn’t made a full-blown acquisition since 2005 when it bought P&O Nedlloyd.

This acquisition of Hamburg Süd is a huge move.

WSJ said that Hamburg Süd “had $6.7 billion in revenue in 2015,” although profit margins are not known as its private owner, the Oetker Group does not share profit/loss information. However, the carrier faces the same overcapacity and low freight rate struggles as the rest in the company. That likely played a large role in the Oetker Group’s decision to sell.

American Shipper gives a little more insight into Hamburg Süd’s size:

Hamburg Süd accounted for 49.5 percent of the Oetker Group’s 12.2 billion euro (U.S. $12.9 billion) in sales in 2015….

The family-owned company does not reveal information about profits and losses, but in a year-end commentary, Oetker said Hamburg Süd was able to increase its total revenues to 6.057 billion euros in 2015, 16.8 percent more than in 2014. The carrier also increased the number of containers it carried in 2015 to 4.1 million TEUs, 21.5 percent more than the prior year.

At the end of 2015, Hamburg Süd’s fleet consisted of 189 vessels, with 130 ships deployed in liner services, along with 59 bulk carriers and product tankers. Today, Alphaliner said the company has 117 containerships – 44 owned and 73 chartered – with an aggregate capacity of 602,908 TEUs. It also has eight containerships on order.

Hamburg Süd said it had 5,960 employees at the end of 2015, an 11.2 percent year-over-year increase, “primarily due to the expansion of the east-west trades, the acquisition of CCNI and organizational and IT projects.”

Hamburg Süd was on the outside looking in at the major carrier alliances taking over the international shipping industry, and that is bad place to be as a carrier right now. Therefore, the sudden selling of the carrier that WSJ says “traces its roots back more than 100 years” is not that shocking. It is just one more example of the shrinking competition pool for carriers in the international shipping industry.

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RELATED READING ON SHRINKING COMPETITION IN INTERNATIONAL SHIPPING INDUSTRY:

SHRINKING CARRIER COMPETITION: JAPAN’S 3 BIG CARRIERS MERGING

EVER SHRINKING CARRIER COMPETITION – HAPAG-LLOYD AND CSAV MERGING

HAPAG-LLOYD CSAV SIGN MERGER: NOW 4TH LARGEST SHIPPING CARRIER

3 BIGGEST TAKEAWAYS FOR SHIPPERS FROM 2017 PROJECTIONS

SURPRISE MOVE – KOREA LINE BUYING HANJIN’S ASIA-US ASSETS

HANJIN COLLAPSES – HOW BADLY WILL IT HURT U.S. SHIPPERS?

AND THEN THERE WERE 3… CARRIER ALLIANCES

MOVIES OVER BUT HUNGER GAMES OF THE SEA CONTINUE W/ MERGER & BUYOUT

ARE LOW FREIGHT RATES BAD FOR SHIPPERS IN LONG RUN?

CARVING CARRIER COMPETITION: COSCO & CHINA SHIPPING FORM ALLIANCE

HERE COMES CHINA COSCO SHIPPING CORPORATION, SHIPPING LEVIATHAN

HUNGER GAMES OF THE SEA: G6, P3, & CKYH ALLIANCES FIGHT FOR SHIPPING DOMINANCE

MAERSK TO OUTLAST COMPETITORS IN FACE OF LOWER FREIGHT RATES?

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What is Blank Sailing? https://www.universalcargo.com/what-is-blank-sailing/ https://www.universalcargo.com/what-is-blank-sailing/#respond Tue, 29 Nov 2016 21:04:56 +0000 https://www.universalcargo.com/?p=7937 If you’re a shipper and you’ve heard the words “blank sailing,” there’s a decent chance they were accompanied by frustration. That’s because blank sailing often means delay and can also mean increased cost for shippers. Blank sailing is a term that basically means no sailing or, perhaps more precisely, canceled sailing. In order to reduce capacity […]

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Blank Sailing

Blank Sailing

If you’re a shipper and you’ve heard the words “blank sailing,” there’s a decent chance they were accompanied by frustration. That’s because blank sailing often means delay and can also mean increased cost for shippers.

Blank sailing is a term that basically means no sailing or, perhaps more precisely, canceled sailing.

In order to reduce capacity and increase freight rates, organized groups of carriers or shipping lines in the international shipping industry create blank sailings by omitting sailings that were previously scheduled.

A blank sailing could refer to a sailing skipping one specific port (while still traversing the rest of the scheduled route) or the entire sailing being canceled.

There are reasons other than carriers reducing capacity in attempt to stabilize or increase freight rates for blank sailings. A port may be experiencing severe congestion or delays due to labor strife, weather, or other factors that could cause a carrier to skip that port in order to keep the rest of the sailing on schedule. A ship could need repairs, preventing it from fulfilling its originally scheduled sailing. A carrier could pull a ship from a route for a “more urgent” sailing.

(For definitions of more shipping terms, check out the Logistics Glossary on our Resources Page.)

Despite the array of possibilities that could cause blank sailings, carriers doing it to reduce capacity in order to affect freight rates is the most common.

Now, with all the carrier alliances dominating the industry, it is perhaps easier for carriers to work together to create blank sailings than ever before. This counters the selling point carriers make for their alliances that they will make sailing schedules more reliable.

With carriers struggling against overcapacity in the international shipping industry over the last several years, blank sailings are common and likely to become even more so.

When a shipper has the misfortune of having cargo scheduled on a blank sailing, he or she must wait for the next available sailing before that cargo gets loaded and moved. Often this delay is a week, but it has also happened that such delays have taken a month or more.

Currently, 2M and CKYE carriers are implementing blank sailings in the transpacific trade route. November just say blank sailing from CKYE’s NUE/Vespucci service from Asia to the United State’s East Coast and 2M’s Maple service from Asia to the United State’s West Coast. December will kick off with another blank sailing from 2M’s Maple service.

Here are the specifics on the blank sailings the carriers provided:

Week # Trade Lane Lanes Alliance Service Vessel Provider Slot Buyers Rotation Year Starting Port ETD Vessel Size
47 Asia – USEC TP CKYE NUE / Vespucci Evergreen / COSCO / K Line / Yang Ming UASC / CMA CGM Qingdao, Ningbo, Shanghai …(Pan)… Colon-Coco Solo (~Cristobal), Savannah, Charleston, Baltimore, New York, Colon-Coco Solo (~Cristobal) …(Pan)… Qingdao 2016 CNTAO 22-Nov-16 8,577
46 Asia – USWC TP 2M Maple MSC Maersk Yantian, Shanghai, Busan, Long Beach, Vancouver, Yantian 2016 CNYTN 18-Nov-16 6,966
48 Asia – USWC TP 2M Maple MSC Maersk Yantian, Shanghai, Busan, Long Beach, Vancouver, Yantian 2016 CNYTN 1-Dec-16 6,966

The specific dates of those week numbers are as follow:

  • Week 46 – November 14th-20th
  • Week 47 – November 21st-27th
  • Week 48 – November 28th-December 4th

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Do You Know Your Turkeys? Take the Turkey Quiz! https://www.universalcargo.com/do-you-know-your-turkeys-take-the-turkey-quiz/ https://www.universalcargo.com/do-you-know-your-turkeys-take-the-turkey-quiz/#respond Thu, 24 Nov 2016 09:28:54 +0000 https://www.universalcargo.com/?p=7934 It’s finally here! Universal Cargo General Manager Raymond Rau’s favorite blog of the year: Universal Cargo’s Happy Thanksgiving Turkey Blog! You might call today Thanksgiving, but many call it Turkey Day. To celebrate people all over the United States following tradition and stuffing their faces with turkey today, Universal Cargo keeps the Turkey Day Blog tradition, […]

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turkeyIt’s finally here! Universal Cargo General Manager Raymond Rau’s favorite blog of the year: Universal Cargo’s Happy Thanksgiving Turkey Blog!

You might call today Thanksgiving, but many call it Turkey Day. To celebrate people all over the United States following tradition and stuffing their faces with turkey today, Universal Cargo keeps the Turkey Day Blog tradition, which is much less celebrated (except by Ray), alive.

But how can I post another turkey blog and make it different than the ones posted in years past? I got it! How about a Turkey Quiz! How much do you really know about the bird you, or at least many people you know, will be eating today?

Okay, let’s face it. There’s a good chance you’re not reading this on Thanksgiving Day because who reads international shipping blogs on holidays? If you do, don’t worry. I don’t judge. Take the quiz below to test your turkey knowledge or challenge your friends, family, or coworkers.

Since this is an international shipping blog, I’ve also thrown in a couple questions about shipping to and from the country of Turkey. Don’t worry, it’s all multiple choice. Just like the SAT. What could be better?

Are you ready? Begin!

1. Which of the following cannot be used to conclude a turkey’s sex?

a) beard

b) tail feathers

c) droppings

d) talons

The answer is a). Many turkeys have special feathers, which look like a tuft of coarse hair, that are referred to as a beard. More often than not, guessing a bearded turkey to be male would be correct. However, the beard is not enough to conclude the sex of the bird. While it is more common for male turkeys to have beards, many female turkeys also have these special feathers.  According to reference.com:

“If one sees a beard on a turkey, it indicates that the turkey is probably a male — about 10 to 20 percent of female turkeys also grow beards. Regardless of whether the turkey is male or female, the beard can be up to 18 inches long with an average length of nine inches.”

It should be noted that beards on lady turkeys do not seem to be a turn off for male turkeys.

b) is incorrect because as is common with many birds, male turkeys have more brightly colored feathers than their female counterparts. On top of this, only male turkeys fan their tails according to reference.com.

“A turkey’s gender can be determined from its droppings–males produce spiral-shaped poop and females’ poop is shaped like the letter J,” says Smithsonian, making c) incorrect. That’s an appetizing thought before Thanksgiving dinner.

d) is incorrect because, like the men in any Western you can watch John Wayne or Clint Eastwood in, male turkeys have spurs. According to animals.mom.me, “As male turkeys become sexually mature at about 6 months of age, they begin developing long talons, one on the back of each leg. Known as spurs, these talons grow throughout the turkeys’ lives. Only male turkeys grow the spurs…”

2. Which founding father preferred the turkey to the bald eagle?

a) George Washington

b) John Quincy Adams

c) Benjamin Franklin

d) Alexander Hamilton

The answer is c). Benjamin Franklin wrote to his daughter about how the turkey is more courageous and respectable than the bald eagle, which we covered thoroughly in a previous Turkey Day blog. The other founding fathers didn’t leave such strong evidence concerning their feelings about the two birds other than the fact that the bald eagle was chosen as the national bird and the turkey was not.

3. At $6,395,842,000 in value of goods last year (2015), where does the USA rank in terms of countries Turkey exported to?

a) 1st

b) 2nd

c) 5th

d) 10th 

The answer is c). This data is according to the Turkish Statistical Institute.

4. Why is the turkey called a turkey?

a) Turkey is the transliteration of a Native American (Wampanoag language) name for the bird.

b) Benjamin Franklin gave the bird its name because at a “turning point” between the Pilgrims and Native Americans it played a “key” role.

c) It was named after the country Turkey.

d) European settlers thought the syllables “tuuurr” and “key” best described the sound the male turkey’s feathers made when dragged across the ground to attract a mate.

The answer is c). According to the Huffington Post:

The bird “turkey” actually is named after the country Turkey. Who’d have thunk it? Reportedly, Europeans mistakenly thought the turkeys they saw in America were Guineafowl, also known as turkey fowl in Europe because, get this, they had been imported from the country Turkey to Central Europe. Then again they also thought America was Asia.

5. How many calories are in a turkey’s tail?

a) Up to 50 calories.

b) Up to 200 calories.

c) Up to 1,500 calories.

d) There are no calories in a turkey’s tail.

The answer is b). Again we go to the Huffington Post:

Turkeys have a tail that is considered a delicacy in many countries. The turkey tail is very fatty and a single turkey tail can have up to 200 calories (almost all from fat) depending on size!

Now you can ask the awkward question to a Thanksgiving meal guest if he is a leg man, breast man, or tail man.

6. Last year (2015), what was the top U.S. export to Turkey?

a) oil

b) cotton

c) electronics

d) air craft/space craft

The answer is d). World’s Richest Countries shares the following data about goods exported from the United States to Turkey in 2015:

Top 10 Turkish Imports from the US
America’s exports to Turkey amounted to
$11.1 billion or 5.6% of its overall imports.
  1. Aircraft, spacecraft: $1.7 billion
  2. Machinery: $1.2 billion
  3. Iron and steel: $1 billion
  4. Medical, technical equipment: $729.5 million
  5. Oil: $689.1 million
  6. Pharmaceuticals: $556.9 million
  7. Cotton: $532.3 million
  8. Electronic equipment: $478.3 million
  9. Plastics: $432.8 million
10. Organic chemicals: $415.4 million

7. How many pounds of turkey does the average American eat every year?

a) 5-10

b) 10-12

c) 14-15

d) 16-18

You’d need a good memory to pull this answer from our 2013 Turkey Blog, but the average American eats between 16 and 18 pounds of turkey every year according to WHSV.

8. The size of a male turkey’s ___________ factors in to whether a female turkey chooses him as a mate.

a) spurs

b) beard

c) giblets

d) snood

Don’t let that female turkey fool you. Size matters. The answer is d).

 

The Journal of Avian Biology published the results of studies that found the size of a male’s snood has a significant effect on his love life and competition with other gobblers:

… a male’s relative snood length, a character previously shown to be used by females in mate choice, is also predictive of the outcome of male-male competition. Complementary trials using artificial males confirmed that live males assess the snood length of potential competitors independent of other male characteristics.

What is a snood? Wikipedia describes it well:

In anatomical terms, the snood is an erectile, fleshy protuberance on the forehead of turkeys. Most of the time when the turkey is in a relaxed state, the snood is pale and 2-3 cm long. However, when the male begins strutting (the courtship display), the snood engorges with blood, becomes redder and elongates several centimeters, hanging well below the beak.

With that as a final image, go eat some turkey, watch some football, and be with people you love! And if you want to ship to or from Turkey or anywhere else in the world, contact Universal Cargo for a free freight rate quote.

Happy Thanksgiving! May the Detroit Lions win today.

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3 Biggest Takeaways for Shippers from 2017 Projections https://www.universalcargo.com/3-biggest-takeaways-for-shippers-from-2017-projections/ https://www.universalcargo.com/3-biggest-takeaways-for-shippers-from-2017-projections/#respond Tue, 22 Nov 2016 20:46:23 +0000 https://www.universalcargo.com/?p=7932 The holiday season is here. That means we’re approaching the end of 2016 and projections are being made about what 2017 will look like for the international shipping industry. Drewry, the world’s leading independent maritime research company, released their over 100-page-long forecaster report, summing up the international shipping industry in 2016 while making projections for the […]

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The holiday season is here. That means we’re approaching the end of 2016 and projections are being made about what 2017 will look like for the international shipping industry.

Drewry, the world’s leading independent maritime research company, released their over 100-page-long forecaster report, summing up the international shipping industry in 2016 while making projections for the industry in 2017. Universal Cargo colleagues Jerry Huang and Willy Hsu painstakingly went through the report to give an overview of what’s in store for the 2017 international shipping industry.

Not everything in that overview is likely to interest our readers, but there are many important points for shippers looking at the industry.

Possibly one of the best ways to get a feel for how things appear to be shaping for the 2017 international shipping industry is looking at a chart that lists what should be positive and negative developments for the industry in 2017.

Below is the list for you to view followed by my three biggest takeaways from it for shippers.

Pros & Cons of 2017 international shipping

Positive & Negative Developments for International Shipping in 2017 shared by Huang & Hsu sourced from Drewry

1. Higher Freight Rates

This one made it onto both the positive and negative list.

At the very top of Drewry’s positive 2017 developments list shared by Huang and Hsu is higher spot and contract freight rates. Most shippers would think of this as a negative development, and you’ll notice Drewry also placed “shippers will pay higher freight rates” in the negative development list.

While I generally lean toward the shippers’ side when looking at the international shipping industry, I can’t help but think of higher freight rates in 2017 than 2016 as more of a positive than a negative.

Here’s why for the international shipping industry as a whole, higher freight rates are a good thing:

2016 saw record low freight rates. While lower freight rates decrease costs for shippers in the short run and make their bottom lines look better, over the long run it is a problem.

Unsustainably low freight rates is a major factor that played into the collapse of Hanjin Shipping. All the shippers who had cargo get caught up in the fallout of Hanjin’s bankruptcy would probably say they would have paid higher freight rates rather than have their cargo greatly delayed or fail to arrive at all (not to mention other fees and costs many shippers found themselves paying to get their Hanjin shipped cargo).

Freight rates have been pushed down to levels that make it extremely difficult for carriers to make a profit. Increased freight rates increase stability in the international shipping industry.

When making business deals, don’t you want stability? Knowing your cargo will arrive when it is supposed to and knowing extra costs won’t accrue in retrieving cargo that may already be extremely late is worth paying a little more in the first place.

Extremely low freight rates shrink carrier competition, and lead to greater costs in the long run. Speaking of which…

2. Fewer Shipper Choices as the Industry Consolidates

We’ve been talking about this for a long time in this blog. The carrier competition pool is shrinking in the international shipping industry.

In 2017, it is expected that mergers and acquisitions will continue the trend of shrinking the number of carriers for shippers to choose from.

It is certainly not out of the realm of possibility that another major carrier will go bankrupt like Hanjin Shipping did.

This is obviously a big negative for shippers.

Carriers have suffered losses in the billions of dollars as freight rates have dropped to levels impossible or nearly impossible for them to make a profit. Carriers largely brought this upon themselves by ordering ships, usually megaships, expanding capacity way beyond demand, and engaging in freight rate wars.

Now we go into 2017 with Maersk openly strategizing to acquire struggling carrier competition and Mitsui O.S.K. Lines Ltd. (MOL), Nippon Yusen Kabushiki Kaisha (NYK), and Kawasaki Kisen Kaisha, Ltd. (“K” Line)–Japan’s biggest three carriers–planning to merge.

As competition shrinks in the international shipping industry and carrier cooperation continues to increase, risk and rates rise for shippers.

3. Overcapacity Keeps Freight Rate Rise Reasonable

While freight rates are expected to increase in 2017, shippers shouldn’t expect those increases be to unreasonable levels.

This is because overcapacity will not come to an end in 2017.

Overcapacity is one of the biggest factors, if not the biggest factor, creating downward pressure on freight rates.

In Drewry’s negative column is the projection that global container volumes are unlikely to reach growth beyond 2-3%. While scrapping should increase and ship ordering should be non-existent, the global fleet could still grow close to 6% with the delivery of 70 ships of at least 8,000 TEU according to the last item in Drewry’s negative column.

This indicates a continued struggle with overcapacity in 2017, which should keep freight rates in check.

In fact, the overall conclusion that Huang and Hsu shared with Universal Cargo from Drewry’s research is that relief from a bottomed out market plagued by too many ships in light of a lower than expected global trade growth won’t come until 2019/2020.

The international shipping industry will still be a difficult one for carriers over the next couple years and if that relief really is to come in 2019 and 2020, it will require carriers to play their cards right in the meantime. And will they?

Shippers certainly do not need to run for the hills when it comes to 2017 international shipping rates but should be prepared for some increase. At the same time, keeping an eye on the health of the carriers shippers ship cargo through is a smart move.

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Advice for Trump on Dealing with China https://www.universalcargo.com/advice-for-trump-on-dealing-with-china/ https://www.universalcargo.com/advice-for-trump-on-dealing-with-china/#respond Thu, 17 Nov 2016 19:59:51 +0000 https://www.universalcargo.com/?p=7928 China has changed over the last few years, and the U.S. should consider changing its policy toward China according to an excellent, and somewhat long, article called “China’s Great Leap Backward” by James Fallows that The Atlantic published. “The China of 2016 is much more controlled and repressive than the China of five years ago, […]

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President-elect Trump w/ US & Chinese flags

Picture of Donald Trump by Michael Vadon. U.S. & Chinese flags added.

China has changed over the last few years, and the U.S. should consider changing its policy toward China according to an excellent, and somewhat long, article called “China’s Great Leap Backward” by James Fallows that The Atlantic published.

“The China of 2016 is much more controlled and repressive than the China of five years ago, or even 10,” Fallows writes.

Fallows, who has spent much time living in China, sees consistent evidence that the country “is cracking down, closing up, and lashing out in ways different from its course in the previous 30-plus years.”

The areas Fallows points at to indicate a turn away from China growing richer, freer, and easier to deal with are:

Communications, spotlighting increasing censorship; repression of civil society, highlighting things like bulldozing churches and jailing public defenders and public interest lawyers; extraterritoriality, citing attempts of China to extend repression beyond its borders; failed reform, showing a darkening political climate; anti-foreignism, showing how it is creating toughening business conditions with foreign businesses less welcome in China; and the military, emphasizing territorial disputes like what is causing tensions in the South China Sea.

What this all adds up to for President-elect Trump? According to Fallows:

The next president, then, will face that great cliché, a challenge that is also an opportunity. The challenge is several years of discouraging developments out of China: internal repression, external truculence, a seeming indifference to the partnership part of the U.S.-China relationship. The opportunity is to set out the terms of a new relationship at the very moment when it is most likely to command China’s attention: at the start of a new administration.

It seems that Fallows was writing this before the election of Donald Trump played out as he gives advice addressing the next administration rather than President-elect Trump’s specific administration; however, if a president was ever likely to do the sort of thing Fallows suggests, that president would be Donald Trump.

Trump repeatedly has criticized the current economic policies of the U.S. when it comes to China along with previous leaders’ abilities to negotiate with China. We got into that in our previous blog about what a Trump presidency means for shippers.

Fallows suggests the new administration change the premises under which the U.S. deals with China, providing specific strategies he expounds on like picking battles carefully and steadily shaping China’s choices.

Fallows even writes a bit of speech President-elect Trump could give once he steps into office:

For 45 years, my predecessors have committed themselves to a partnership that would help China develop economically and resume its place of prominence among nations. We have believed in helping build a better future for China’s people. Our own national life has been enriched by this contact. This is an achievement of which China’s people, and our own, and the world’s can be proud.

But the relationship has been built on assumptions of balance and mutual benefit. We would open ourselves to China’s people and ideas, and China would be open to ours. We would incorporate Chinese firms into our economy, and our firms would have a fair chance within China. The events of recent years have forced us to reconsider whether China’s leaders still view this as a balanced and mutually beneficial relationship. We hope that on their side they, too, are reconsidering their recent actions and will return to the cooperative path. Chinese leaders often quote famous dictums from their literature, and I will cite one of our famous American sayings: We can do this the easy way, or the hard way. The United States would prefer the easier path of cooperation, which has been so beneficial to our two countries. But we are preparing for the hard way.

With President-elect Trump already having talked about big tariff increases on goods from China as a U.S. tactic in the face of Chinese currency manipulation, such a speech from the next president is not hard to imagine.

Shippers who import from China will certainly be carefully watching the United States’ China policy during this time of transition, but so will the whole world. The economies of the U.S. and China are, of course, woven together and strongly affect the economies of the rest of the world.

Trump has said we wants to shift U.S. policies from a focus on the global economy to a focus on the U.S. economy. Shippers may have to do a little shifting with it.

If you get a chance, read James Fallows’s article. It is worth the time.

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Surprise Move – Korea Line Buying Hanjin’s Asia-US Assets https://www.universalcargo.com/surprise-move-korea-line-buying-hanjins-asia-us-assets/ https://www.universalcargo.com/surprise-move-korea-line-buying-hanjins-asia-us-assets/#comments Tue, 15 Nov 2016 18:46:09 +0000 https://www.universalcargo.com/?p=7926 We now know who will be buying Hanjin’s Asia-U.S. assets. Yes, we’re still talking about Hanjin Shipping. Yes, we know Donald Trump was elected president last week. Yes, we posted a blog on what his presidency means for shippers. No, that story doesn’t trump the biggest news in the international shipping industry: the fallout of Hanjin’s […]

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Hanjin Asia-U.S. Assets being bought by Korea Line

Hanjin Vienna picture by: Afrank99

We now know who will be buying Hanjin’s Asia-U.S. assets.

Yes, we’re still talking about Hanjin Shipping. Yes, we know Donald Trump was elected president last week. Yes, we posted a blog on what his presidency means for shippers. No, that story doesn’t trump the biggest news in the international shipping industry: the fallout of Hanjin’s collapse.

In a turn only a little less surprising than Trump’s election, Korea Line won the bid to buy Hanjin Shipping’s Asia-U.S. assets.

Most industry experts thought the Asia-U.S. assets put up for sale after Hanjin’s collapse would be bought by South Korea’s other major container shipping company, Hyundai Merchant Marine (HMM). There were those who believed Maersk would move in for the acquisition because of Maersk’s announced strategy of acquiring struggling competitors in the ocean carrier business (although I was not among those). But I don’t know of anyone who thought Korea Line would move in and acquire these assets.

The biggest reason this is such a surprise is that Korea Line is not a container shipping company. Here’s a quick rundown of the company from Reuters:

KOREA LINE CORPORATION is a Korea-based company engaged in the provision of marine transportation services. The Company operates a fleet of carriers, including bulk carriers for iron ore, liquefied natural gas (LNG) carriers for natural gas, and tankers for oil and petroleum products. The Company’s customers include POSCO, Korea Gas Corporation and KOREA ELECTRIC POWER CORPORATION.

Notice Korea Line’s focus on bulk shipping. This looks like a big expansion moment for the mid-level shipping company to move into the container shipping sector.

HMM did make a bid for Hanjin’s Asia-U.S. assets, but Korea Line’s bid was better. American Shipper reports:

Korea Line Corp. has been picked as the preferred bidder for the assets of Hanjin Shipping’s business between Asia and the United States, beating out Hyundai Merchant Marine (HMM), according to media reports.

The deal should be done quickly and is good news for the Asia-U.S. employees of Hanjin. Yonhap New reports:

The Seoul Central District Court said the final deal will be signed on Nov. 21, and in addition to the U.S.-Asia route, Korea Line has made a bid for Hanjin’s stake in the Port of Long Beach, California.

Hanjin Shipping owns a 54 percent stake in Total Terminals International (TTI), which operates two facilities in Long Beach and Seattle, and handles some 30 percent of cargo along the U.S. West Coast.

Hanjin Shipping’s Asia-U.S. route logs sales of up to 4 trillion won annually, and its market share stands at 7 percent, the sixth-largest among global shippers.

The court said Korea Line has expressed its intention to offer job security for some 700 land and sea-based employees working for Hanjin Shipping.

With all the financial struggle HMM has had, the stability of those 700 jobs seems much stronger with Korea Line. Workers must have breathed a sigh of relief upon the announcement of Korea Line’s bid being chosen; their labor union’s hopes for this outcome were made clear in an article from Korea JoongAng Daily:

“Our priority is on who can buy out the maximum workforce from Hanjin,” Hanjin Shipping’s labor union for office workers said in a statement Monday before the court’s announcement.

“We have no other option but to hope for Korea Line’s win as job security and financial stability can’t be guaranteed with Hyundai Merchant Marine,” the union’s leader, Chang Sung-hwan, said.

As we’ve been watching the ever shrinking competition pool of carriers in the container market of international shipping, it is interesting to see the possible emergence of a new significant player in container shipping.

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What Does Trump Presidency Mean for Shippers? https://www.universalcargo.com/what-does-trump-presidency-mean-for-shippers/ https://www.universalcargo.com/what-does-trump-presidency-mean-for-shippers/#respond Thu, 10 Nov 2016 20:33:19 +0000 https://www.universalcargo.com/?p=7924 Donald Trump, seemingly despite all polls and predictions, has been elected the next president of the United States, and the impact his presidency could have on international shipping is, as he would say, huge. There is much uncertainty when it comes to what President-elect Trump’s policies will actually be, but the word being used to sum […]

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YouTube Video

President-elect Donald Trump

President-elect Donald Trump – pic by: Gage Skidmore

Donald Trump, seemingly despite all polls and predictions, has been elected the next president of the United States, and the impact his presidency could have on international shipping is, as he would say, huge.

There is much uncertainty when it comes to what President-elect Trump’s policies will actually be, but the word being used to sum up the international trade policy from his platform is protectionism.

In his acceptance speech, President-elect Trump said, “… we will get along with all other nations willing to get along with us. We will have great relationships. We expect to have great, great relationships. We will double our growth and have the strongest economy anywhere in the world….”

While most think the kind of growth numbers Trump promises are not achievable, his focus on turning around the U.S. trade deficit has been a clear throughout his campaign. President-elect Trump wants to see the U.S. increase production and export more than import. In fact, international trade and outsourcing is something he has repeatedly talked about as hurting or--with more Trump-like language--destroying American manufacturing.

Importing at the level the U.S. has in the global economy does not appear to be in the best interest of the U.S. according to the President-elect, and he told the world in his speech that “we will always put America’s interests first.” Through his campaign trail, Trump spoke of tariffs on imports and renegotiating or pulling out of trade deals, all of which has made the international shipping community around the world a bit nervous after his election win.

The worry of slowed trade with the U.S. is evident from the immediate stock drop of the world’s largest ocean carrier by capacity, AP Moller-Maersk upon Trump’s election.

An American Shipper article highlights international trade moves President-elect Trump said he would make while on the campaign trail and reactions from players in the international shipping industry:

[Trump] said he would significantly raise import tariffs to protect American jobs, withdraw from the Trans-Pacific Partnership Agreement negotiated by President Obama and waiting congressional approval, and opened the possibility of discarding the North American Free Trade Agreement if Mexico and Canada don’t renegotiate terms that are more favorable to the United States.

A pullback in U.S. import and export activity would present yet another challenge for the shipping and airline industries, as well as other transport companies that are struggling because of a slowdown in trade and massive overcapacity. Shares of A.P. Moller-Maersk A/S, the owner of leading container shipping line Maersk, fell on the Danish stock exchange amid fears that protectionism could proliferate. Analysts and economists said new protectionist policies in the United States could spread and diminish prospects for a recovery in trade….

Lars Jensen, chief executive officer and a partner at SeaIntelligence Consulting in Copenhagen, said if a Trump administration delivers on protectionist measures, “then clearly that is negative for shipping both directly because you will have less shipment into the U.S., and indirectly there is a risk if a major country starts down a protectionist route for a domino effect of other countries also becoming protectionist.”

The worry of protectionist policies by those around the world are clear. The most obvious effect on shippers of such policies as raising tariffs is an increase in the cost of importing. However, most of President-elect Trump’s talk of tariffs does not indicate duty increases across the board on U.S. imports.

With his focus on U.S. manufacturing, the biggest tariff threats Trump made on his campaign trail was to U.S.  producers that would move production outside of the country, especially U.S. auto manufacturers that have moved and would move more plants away from key electoral states like Ohio and Michigan to Mexico.

In fact, Trump went in to Michigan and directly threatened Ford with taxes on cars, trucks, and parts they would manufacture in Mexico instead of U.S. cities like Detroit. The Detroit News quoted his remarks at the time:

“Let me give you the bad news: Every car, every truck and every part manufactured in this plant that comes across the border, we’re going to charge you a 35 percent tax,” Trump said. “They are going to take away thousands of jobs.”

“Detroit needs a lot of help — and it certainly needs a lot of help when factories are closing to move to Mexico — when you are closing up your car factories in order to build the same factory in Mexico, meaning a modern version of it in Mexico. We just can’t have that. It just can’t happen, and we have to stop it.”

Such unprecedented words from a candidate for president undoubtedly came as music to the ears of many voters in Detroit, Flint, and similar cities that have suffered from the loss of jobs by auto plants shutting down and moving to places where labor is cheaper, like Mexico.

Much has been made of Trump’s comments on Mexico, but for shippers--especially importers--Trump’s talk on China may be the higher concern. The American Shipper article summarizes it nicely as follows:

Trump has said he will direct his Secretary of Commerce to identify every violation of trade agreements and use every legal means to end them. He has also said he plans to label China as a currency manipulator and instruct his Trade Representative to bring trade cases against China, both in the United States and the World Trade Organization (WTO).

Trump also said that if China doesn’t stop taking advantage of trade rules and stealing intellectual property, he would hike tariffs on Chinese products by as much as 40 percent.

Repeatedly, Trump has said that things like China is beating, even killing, the U.S. when it comes to international trade, and he plans to change that. Increased tariffs on goods from China and increased trade cases against China could significantly affect U.S. shippers who import from China.

There has already been worry from shippers about U.S.-China tension over conflict in the South China Sea.

 

Further tension, many shippers worry, could interrupt trade deals with partners in China. However, it is the uncertainty of what President-elect will actually do in terms of international relations that creates the most anxiety.

Billionaire investor and Trump advisor Wilbur Ross is trying to allay fears by clarifying that Trump does not plan to simply drop a unilateral 40% or 45% tariff increase on imports from China. TradeWinds reports:

Ross, who is both a shipping investor and a senior trump policy advisor, told the annual Marine Money Ship Finance Forum that fears over the Republican’s shock victory were overblown.

…Much of the worry over Trump’s approach stems from what Ross called “a misquote” suggesting he would “put a 45% tariff on everything coming out of China.”

Trump’s actual remarks were more nuanced, Ross said, and referred to a potential tactic in the event that Chinese currency is undervalued by as much as 45% and the country is unwilling to negotiate its trade imbalance with the US.

“Then it may become necessary to threaten them with a 45% tariff,” Ross said. “That’s one negotiating strategy. It’s not the words of a madman who’s going to throw tariffs on everything.”

 

All along, Trump has criticized the ability of leaders in government to negotiate with other countries when it comes to issues like international trade, even calling them stupid at times. Trump certainly has emphasized his ability to negotiate, and much of his tariff talk is likely designed to create leverage for international negotiations.

Shippers should take a deep breath and know two things:

1. No president has ever implemented all the things he promised on the campaign trail. Not Obama, not Bush, not Clinton…

2. International trade is not coming to an end. President-elect Trump comes from the world of business, not the world of politics. He is not going to cease all trade.

What are your thoughts on President-elect Trump’s likely effects on international trade and shipping? Share them in the comments section below.

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OCEAN Alliance Details Planned Services https://www.universalcargo.com/ocean-alliance-details-planned-services/ https://www.universalcargo.com/ocean-alliance-details-planned-services/#respond Tue, 08 Nov 2016 19:46:39 +0000 https://www.universalcargo.com/?p=7917 The news out of Beijing at the end of last week on mp.weixin.qq.com is that the carriers of the OCEAN Alliance signed a document laying out the vessel sharing agreement’s planned network of services: Members of the OCEAN Alliance, COSCO Container Lines, CMA CGM, Evergreen Line and Orient Overseas Container Line, today signed a document entitled the […]

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OCEAN Alliance - Evergreen, CMA CGM, OOCL, COSCO

OCEAN Alliance – Evergreen, CMA CGM, OOCL, COSCO

The news out of Beijing at the end of last week on mp.weixin.qq.com is that the carriers of the OCEAN Alliance signed a document laying out the vessel sharing agreement’s planned network of services:

Members of the OCEAN Alliance, COSCO Container Lines, CMA CGM, Evergreen Line and Orient Overseas Container Line, today signed a document entitled the Day One Product, which sets out the proposed OCEAN Alliance’s network, including port rotation for each service loop.

The Day One network intends to deploy around 350 container vessels with an estimated total carrying capacity of 3.5million TEUs to provide one of the most comprehensive service coverage in the market on the following trade lanes. The vessel deployment details for each service loop, will be released around end of this November.

•    20 Transpacific services (estimated 160 port pairs, with 13 Asia – West Coast North America services, 7 Asia – East Coast North America and U.S. Gulf services)

•    6 Asia – Europe services (estimated 110 port pairs)

•    5 Asia – Mediterranean services (estimated 165 port pairs)

•    3 Transatlantic services (estimated 70 port pairs)

•    5 Asia – Middle East services (estimated 70 port pairs)

•    2 Asia – Red Sea services (estimated 35 port pairs)

A couple weeks ago the Federal Maritime Commission (FMC) approved the OCEAN Alliance for business, but did require some change from the alliance’s initial plan.

FMC Commissioner William P. Doyle laid out the terms and conditions the FMC required changed in the OCEAN Alliance’s initial vessel sharing agreement in a statement.

The biggest area of concern was that the agreement originally allowed COSCO, CMA CGM, Evergreen, and OOCL to negotiate jointly for third party services like tug services, barge services, bunker fuel suppliers, stevedoring services, etc, creating a risk of monopsony power over suppliers.

Monopsony is the flip of a monopoly, where instead of having one supplier manipulating the market, it is manipulated by one buyer unfairly affecting the pricing of services or products from multiple sellers.

Doyle’s statement is quoted in full on Marine Log, but here is a highlight, commenting on how the commission required changes in the OCEAN Alliance’s agreement to guard against monopsony:

 

… extensive changes were made to provisions that allowed for joint contracting and procurement. The final language of Articles 5.2(e) and 5.11 removed some joint contracting authorities entirely and limited the remaining authority to jointly contract for transshipment, barge/feeder services, bunker fuel, and facilities by stipulating that those could only occur outside the United States. Article 5.9 was also significantly altered to follow the framework established in the 2M Alliance Agreement (Maersk Line and Mediterranean Shipping Company (MSC). Under that framework, the Parties must negotiate independently and enter into separate contracts with port terminal facilities, marine terminal services (except where a terminal wants to negotiate with the Parties jointly), tug services, stevedoring services, and other services. On the operations side, though, the Parties can still jointly discuss and coordinate on matters such as port schedules, berthing windows, and other operational matters.

 

The United States’ FMC is not the only regulator to approve the OCEAN Alliance.

According to the weixin article quoted at the top of this blog, South Korea’s Ministry of Oceans and Fisheries have given approval, the OCEAN Alliance has finished its EU self-assessment compliance review, and the carriers have filed their alliance agreement to the Ministry of Transport (MOT) of the People’s Republic of China.

While the approval is still being waited for from China, it is very unlikely the MOT will halt the OCEAN Alliance.

All signs point to the services listed above beginning on April 1st, 2017 as planned.

The real question is what will happen with THE Alliance that was planned between  Hanjin, Hapag-Lloyd , Kawasaki Kisen Kaisha (“K” Line), Mitsui O.S.K. Lines (MOL), Nippon Yusen Kaisha (NYK) and Yang Ming.

Hanjin’s collapse and the newly announced plan of merger between “K” Line, MOL, and NYK makes it likely some major changes will happen with THE Alliance.

There is also speculation of change with the 2M Alliance, as differences in strategy between Maersk and Mediterranean Shipping Company (MSC) seem to be appearing. 2M had signed an agreement to discuss letting Hyundai Merchant Marine (HMM) join the alliance, but the addition now looks very unlikely.

As carriers always claim with their alliances, the new OCEAN Alliance prioritizes service quality and schedule reliability. The full list of OCEAN Alliance’s Day One Product Agreement’s planned services, including port stops, is listed below.

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DAY ONE Product:

20 Transpacific services (with 13 Asia – West Coast North America services):

9 Pacific Southwest services:

PSW1: Fuqing-Nansha-Hong Kong-Yantian-Xiamen-LGB/LAX-Oakland-Fuqing

PSW2: Tianjin-Qingdao-Shanghai-PrinceRupert-LGB/LAX-Oakland-Tianjin

PSW3: (AWE3)-Port Kelang-Singapore-Jakarta-Laem Chabang-CaiMep-LGB/LAX-Oakland-Hong Kong-(AWE3)

PSW4: Lianyungang-Shanghai-Ningbo-LGB/LAX-Seattle- Lianyungang

PSW5: Qingdao-Shanghai-Ningbo-LGB/LAX-Oakland-Tokyo-Nagoya-Qingdao

PSW6: Kaohsiung-CaiMep-Chiwan-Hong Kong-Yantian-Kaohsiung-LGB/LAX- Kaohsiung

PSW7: Taipei-Xiamen-Shekou-Yantian-LGB/LAX-Oakland-Taipei

PSW8: Yantian-HongKong-Kaohsiung-Taipei-LGB/LAX-Oakland-Tacoma- Kaohsiung -Yantian

PSW9: Ningbo-Shanghai-Pusan-LGB/LAX-Pusan-Ningbo

 

4 Pacific Northwest services:

PNW1: Yantian-Xiamen-Ningbo-Shanghai-Pusan-Seattle-Vancouver-Yokohama-Yantian

PNW2: (AWE1)-Singapore-Cai Mep-Hong Kong –Yantian-Shanghai-Ningbo-Prince Rupert-Vancouver-Qingdao-(AWE1)

PNW3: Hong Kong-Yantian-Kaohsiung-Shanghai-Ningbo-Tacoma-Vancouver-Tokyo-Osaka-Qingdao-HongKong

PNW4: Chiwan-HongKong –Yantian-Kaohsiung-Vancouver-Seattle-Pusan-Kaohsiung-Chiwan

 

7 Asia – East Coast North America and U.S. Gulf services:

AWE1: (PNW2)-Qingdao-Ningbo-Shanghai-Pusan-New York-Boston-Norfolk-Singapore-(PNW2)

AWE2: Xiamen-Kaohsiung-HongKong-Yantian-Colon-New York-Baltimore-Norfolk-Xiamen

AWE3: (PSW3)-Hong Kong-Cai Mep-Singapore-Port Kelang-Colombo-Halifax-New York-Norfolk-Savannah-Port Kelang -(PSW3)

AWE4: Qingdao-Ningbo-Shanghai-Pusan-Colon-Savannah-Charleston-NewYork-Colon-Qingdao

AWE5: HongKong-Yantian-Ningbo-Shanghai-Colon-Norfolk-Savannah-Charleston-Hong Kong

AWE6: HongKong-Chiwan-Ningbo-Shanghai-Pusan-Houston-Mobile-Miami-Jacksonville-Singapore-HongKong

AWE7: Shanghai-Ningbo-Xiamen-Yantian-Houston-Mobile-Shanghai

 

6 Asia – Europe services:

NEU1: Shanghai-Ningbo-Xiamen-Yantian-SEA HUB-SUEZ Canal-Felixstowe-Rotterdam-BalticPort(s)(To be confirmed)-Felixstowe-SUEZ Canal-SEA HUB-Yantian-Shanghai

NEU2: Tianjin-Dalian-Qingdao-Shanghai-Ningbo-SEAHUB-SUEZ Canal-Rotterdam-Hamburg-Antwerp-SUEZCanal-Shanghai-Tianjin

NEU3: Ningbo-Shanghai-HongKong-Nansha-Shekou-SEA HUB-SUEZ Canal-Piraeus-Antwerp-Felixstowe-Hamburg-Rotterdam-Southampton*-Piraeus-SUEZCanal-SEA HUB-Hong Kong-Ningbo

NEU4: Tianjin-Pusan-Qingdao-Shanghai-Ningbo-Yantian-SEAHUB-SUEZ Canal-Tangier-Southampton-Dunkirk-Hamburg-Rotterdam-Zeebrugge-LeHavre-SUEZ Canal-Khor Fakkan-SEA HUB-Xiamen-Tianjin

NEU5: Shanghai-Ningbo-Yantian-Cai Mep-SEA HUB-SUEZ Canal-LeHavre-Rotterdam-Hamburg-Antwerp-LeHavre-Malta-SUEZ Canal-Jeddah-Nansha-Shanghai

NEU6: Kaohsiung-Ningbo-Shanghai-Taipei-Yantian-Colombo-SUEZCanal-Rotterdam-Felixstowe-Hamburg-Rotterdam-SUEZCanal-Colombo-Kaohsiung

 

5 Asia – Mediterranean services:

MED1: Qingdao-Shanghai-Ningbo-Kaohsiung-Hong Kong-Yantian-SEAHUB-SUEZ Canal-Piraeus-La Spezia-Genoa-Fos-Valencia-Piraeus -SUEZ Canal-Jeddah-Colombo-SEAHUB-Hong Kong-Qingdao

MED2: Qingdao-Pusan-Shanghai-Ningbo-Xiamen-Nansha-Yantian-SEAHUB-SUEZ Canal-Malta-Valencia-Barcelona-Fos-Genoa-Malta-Beirut-SUEZ Canal-Jebel Ali-SEA HUB-Xiamen-Qingdao

MED3: Pusan-Shanghai-Ningbo-Kaohsiung-Chiwan-SEA HUB-SUEZCanal-Port Said -Beirut-Iskenderun-Istanbul Evyap (Izmit)-Istanbul Ambarli(Avcilar)-Constanza-Odessa

-Istanbul Ambarli(Avcilar) -Piraeus -SUEZ Canal-SEA HUB-Pusan

MED4: Qingdao-Shanghai-Ningbo-Taipei-Yantian-Shekou-SEAHUB-SUEZ Canal-Ashdod-Haifa-Alexandria-Piraeus-SUEZ Canal-Jeddah-SEA HUB-Shekou-Kaohsiung-Qingdao

MED5: Shanghai-Ningbo-Pusan-Chiwan-SEA HUB-SUEZ Canal-Malta-Rijeka-Koper-Trieste-Venice-Koper -Malta-Damietta -SUEZ Canal-Jeddah-SEA HUB-Chiwan-Shanghai

3 Transatlantic services:

TAT1: Malta-Livorno-Genoa-Fos-Barcelona-Valencia-Lisbon-NewYork-Norfolk-Savannah-Miami-Algeciras-Valencia*-Malta

TAT2: Southampton-Antwerp-Rotterdam-Bremerhaven-Le Havre-NewYork-Norfolk-Savannah-Charleston-Southampton

TAT3: Le Havre-Antwerp-Rotterdam-Bremerhaven-Charleston-Savannah-Miami-Veracruz-Altamira-Houston-NewOrleans-Miami-Le Havre

5 Asia – Middle East services:

MEA1: Tianjin-Dalian -Pusan Shanghai -Ningbo-Chiwan-Singapore-KhorAl Fakkan-Jebel Ali-Bandar Abbas-Sohar -Port Kelang -Singapore –Shekou-Tianjin

MEA2: Qingdao-Shanghai-Ningbo-Chiwan-Singapore-JebelAli-Dammam-Jubail-Abu Dhabi-Singapore-Qingdao

MEA3: Lianyungang-Qingdao-Ningbo-HongKong –Shekou-Singapore-Jebel Ali-Bahrain-Dammam-Jubail-Port Kelang-Lianyungang

MEA4: Shanghai-Ningbo-Taipei-Shekou-Tanjung Pelepas-Colombo-JebelAli-Bandar Abbas-Port Kelang -LaemChabang*-Hong Kong-Shanghai

MEA5: Shanghai-Ningbo-Nansha-Singapore-Jebel Ali-AbuDhabi-Dammam-Singapore-Nansha-Shanghai

2 Asia – Red Sea services:

RES1: Shanghai-Ningbo-Taipei-Xiamen-Shekou-SEA HUB-Jeddah-Sokhna-Aqaba-Jeddah-SEAHUB-Shanghai

RES2: Shanghai-Ningbo-Chiwan-SEA HUB-Djibouti-Jeddah-Aqaba-PortSudan-Djibouti-SEA HUB-Shanghai

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PMA & ILWU Met About Contract Extension https://www.universalcargo.com/pma-ilwu-met-about-contract-extension/ https://www.universalcargo.com/pma-ilwu-met-about-contract-extension/#comments Thu, 03 Nov 2016 17:47:27 +0000 https://www.universalcargo.com/?p=7915 Tuesday (November 1st, 2016), the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) met to discuss a contract extension. Well, they met to discuss the “concept” of a contract extension. That the two parties met at all on the possibility of extending the contract between the ILWU and their employers at the […]

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ILWU PMA meet about contract extensionTuesday (November 1st, 2016), the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) met to discuss a contract extension. Well, they met to discuss the “concept” of a contract extension.

That the two parties met at all on the possibility of extending the contract between the ILWU and their employers at the West Coast ports is a small miracle.

The current contract does not expire until July 1st, 2019, and while that may seem far off, it is all too close for shippers.

Contract negotiations between the ILWU and PMA tend to be very contentious things. The last contract negotiations actually appeared to be going smoothly but turned out to be anything but when the ILWU orchestrated slowdowns and the PMA retaliated with mini-lockouts.

With the ports already dealing with congestion at the time, the contentious contract negotiations made things so bad at West Coast ports that importers weren’t able to get their goods in time for the holiday season, agricultural exporters watched as their produce rotted on the docks, and many American business partnerships abroad were lost.

What’s sad is that contentious contract negotiations holding the docks and shippers’ good as ransom is common practice when it comes to renewing contracts between the dockworkers and their employers at the ports.

It has been the policy of the dockworkers unions, both on the West and East Coasts, not to renew or extend contracts before the previous one expires. To do so would take away the biggest weapons for creating leverage in negotiations that dockworkers have: slowdowns and strikes.

Unfortunately, this has led to shippers and the entire U.S. economy suffering whenever the end of a contract between the PMA and ILWU is reached.

The previous contract negotiations began early-ish. Contract talks began May 12th, 2014, a little more than a month and a half before the contract at that time would expire on July 1st, 2014. For most of us, a month and a half seems like plenty of time to negotiate a contract, but it was not nearly enough time for the ILWU and PMA to come to terms on a new contract or extension and go against the history of labor unions at the docks making sure the previous contract expires to gain leverage.

It took a little more than a year from the start of contract negotiations on the current contract to the ILWU’s ratification of it on May 22nd, 2015. With that kind of timeline, shippers, retailers, and everyone involved in the supply chain have urged the PMA and ILWU to begin the next set of negotiations early. Really early. Not just a month and a half before the contract is to expire.

After the labor strife caused West Coast ports to lose market share and major carriers to stop calling on the Port of Portland with container ships altogether, shippers were given their first glimmer of hope that the culture of contract negotiations between dockworkers and employers at the ports might be about to change.

In March of 2015, reports hit that the United States Maritime Alliance (USMX) and International Longshoremen’s Association (ILA) were planning to “open discussions” on a new, long-term contract at East and Gulf Coast ports over three years before the current labor contract expires there. It was exactly the type of thing shippers were wanting to hear after losing faith in West Coast ports over the losses they suffered because of labor strife. This news was also not far removed from a planned strike that threatened to shutdown East and Gulf Coast ports during the last set of contract negotiations there.

Unfortunately, the talk of early contract talks between the ILA and USMX might have been just that–talk–only to increase the market share the East and Gulf Coast was pulling from the West Coast.

According to a Journal of Commerce article from just a few months ago (nearly a year and a half after the USMX and ILA said they were planning to open contract discussions), the ILA “is unwilling to open negotiations on a new or extended contract until disputes over the current agreement are resolved…” The article quotes ILA’s executive vice president as saying a new contract “is definitely not in sight.”

With meetings actually in sight between the PMA and ILWU, shippers have a more legitimate hope of a contract being extended before expiration. While shippers, retailers, and the rest of the supply chain are applauding the dockworkers union and their West Coast employers for meeting about an early extension and encouraging the parties to continue, expectations must be tempered in light of history.

The PMA and ILWU are not giving much insight on their meeting and will not comment on it. However, it at least went well enough that another meeting on the topic is planned, though without an actual date.

Here’s the joint press release from the PMA and ILWU on meeting about the concept of a contract extension:

The Pacific Maritime Association (PMA) and International Longshore and Warehouse Union (ILWU) met on November 1st in San Francisco where discussions were held on the concept of a contract extension.

Both parties agreed to resume talks at a future date to be mutually agreed upon.
The current collective bargaining agreement covering 29 west coast ports expires on July 1, 2019.

No additional comments from either party will be made prior to the next meeting dates.

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Shrinking Carrier Competition: Japan’s 3 Big Carriers Merging https://www.universalcargo.com/shrinking-carrier-competition-japans-3-big-carriers-merging/ https://www.universalcargo.com/shrinking-carrier-competition-japans-3-big-carriers-merging/#respond Tue, 01 Nov 2016 20:45:09 +0000 https://www.universalcargo.com/?p=7912 News broke this weekend that Japan’s three biggest shipping companies are merging. On October 31st, Mitsui O.S.K. Lines Ltd. (MOL), Nippon Yusen Kabushiki Kaisha (NYK), and Kawasaki Kisen Kaisha, Ltd. (“K” Line) sent out a Notice of Agreement to the Integration of Container Shipping Businesses announcing plans for the three shipping lines to merge. This […]

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K Line, MOL, and NYK Line merging

Picture: Container ship MOL Presence passing the Golden Gate Bridge by Chris Isherwood

News broke this weekend that Japan’s three biggest shipping companies are merging.

On October 31st, Mitsui O.S.K. Lines Ltd. (MOL), Nippon Yusen Kabushiki Kaisha (NYK), and Kawasaki Kisen Kaisha, Ltd. (“K” Line) sent out a Notice of Agreement to the Integration of Container Shipping Businesses announcing plans for the three shipping lines to merge.

This may just be the scariest thing that happened for shippers this Halloween.

For years we’ve blogged about the struggles carriers have been facing in the international shipping industry. While the overcapacity and downward pressure on freight rates has been good news for shippers when it comes to costs of importing and exporting in the short term, the long term ramifications are much less positive for shippers.

As long as we’ve been talking about carrier struggles and low freight rates, we’ve talked about the eventuality of competition in international shipping shrinking.

In the long run, shrinking competition in the international shipping industry will eventually lead to an increase in freight rates. People always seem to believe when things are good, they’ll remain that way. Perhaps that’s why carriers kept ordering megaships even after the shipping growth did not come close to the numbers previously projected and did not justify the increase in capacity they created.

Hanjin Shipping’s collapse finally drove the point home for people that carriers cannot survive the industry   as it today, and carrier competition really is going to seriously shrink.

However, carrier competition already has been shrinking for some time. Carrier alliances are a sign of that shrinking competition as the major carriers have broken themselves into cooperative groups, but the actual number of shipping lines has shrunk significantly through mergers and buyouts.

There was Hapag-Lloyd merging with (absorbing really) the Chilean shipping company Compania Sud Americana de Vapores (CSAV), CMA CGM buying out Neptune Orient Lines (NOL), and, of course, the huge merger of COSCO and China Shipping.

Now it’s the three-way merger of MOL, NYK, and “K” Lines we’re looking at.

“Kawasaki Kisen Kaisha, Ltd., Mitsui O.S.K. Lines Ltd., and Nippon Yusen Kabushiki Kaisha have agreed, after the resolution by the board of directors of each company held today, and subject to regulatory approval from the authorities, to establish a new joint-venture company to integrate the container shipping businesses (including worldwide terminal operating businesses excluding Japan) of all three companies and to sign a business integration contract and a shareholders agreement,” the companies said in their notice of agreement.

While a name for what the newly merged entity will be called was not given, a breakdown of the shareholders/contribution ratio between the three carriers for the new shipping line was given:

  • “K” Line: 31%
  • MOL: 31%
  • NYK: 38%

With NYK holding the largest share, perhaps that will be the name retained.

The join venture company is planned for establishment July 1st of next year, but commencement of business is not planned until April 1st, 2018.

Of course, all this depends on whether regulatory authorities allow this merger to move forward as planned, so that is worth keeping an eye upon.

Where the recent merger of China’s two biggest shipping companies to form China Cosco Shipping Corporation caused major upheaval in carrier alliances because China Shipping Co. was part of the Ocean Three alliance and COSCO was part of CKYHE, “K” Line, MOL, and NYK are supposed to be part of the planned THE Alliance.

However, things do have to be rethought with the THE Alliance as the defunct Hanjin Shipping was also supposed to be part of the alliance.

According to American Shipper, this merger will make the new joint venture between Japan’s “Big 3” shipping lines the world’s 6th largest carrier by capacity.

In their notice of agreement, the three carriers provided numbers on just how big the new joint venture potentially will be:

Combined sales between the companies come to 2,040.3 billion Japanese Yen ($19.6 billion) per year. Their combined 256 fleets’ capacities add up to 1,382,000 TEU.

This is what the future of the international shipping industry looks like: fewer but larger carriers running the show. This announcement comes shortly after Maersk made the announcement that its new strategy is focused on acquiring smaller, struggling carriers.

Shippers should get ready. As the number of shipping companies shrinks, the prices on importing and exporting will undoubtedly increase.

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OCEAN Alliance Approved by FMC https://www.universalcargo.com/ocean-alliance-approved-by-fmc/ https://www.universalcargo.com/ocean-alliance-approved-by-fmc/#respond Thu, 27 Oct 2016 18:58:16 +0000 https://www.universalcargo.com/?p=7910 As of Monday, the OCEAN Alliance has been cleared for business–at least as far as the Federal Maritime Commission (FMC) is concerned. However, the vessel sharing agreement between CMA CGM, China COSCO Shipping Corporation, Evergreen Line and Orient Overseas Container Line (OOCL) isn’t actually scheduled to begin until April of next year. There are still a couple more […]

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YouTube Video

FMC Approves OCEAN AllianceAs of Monday, the OCEAN Alliance has been cleared for business--at least as far as the Federal Maritime Commission (FMC) is concerned.

However, the vessel sharing agreement between CMA CGM, China COSCO Shipping Corporation, Evergreen Line and Orient Overseas Container Line (OOCL) isn’t actually scheduled to begin until April of next year.

There are still a couple more steps for the OCEAN Alliance to become a reality. European and Chinese regulators also need to approve the alliance.

It is expected that the alliance will get approval. There has only been one carrier alliance that was denied approval by one of these regulators. That was when China’s Ministry of Commerce halted the P3 Network between Maersk, MSC, and CMA CGM back in 2014.

The P3 Network was quickly replaced by the 2M Alliance between Maersk and MSC. China did give that one its approval.

There would be very little chance of China saying no to the OCEAN Alliance with its own China COSCO Shipping as a major player within it.

The international shipping industry is now dominated by carrier alliances; however, the number of alliances seem to be shrinking while the size of them is growing. By next year, three huge alliances are supposed to run the show: 2M, OCEAN Alliance, and THE Alliance.

However, that last alliance, the THE Alliance, is not moving forward as originally planned. THE Alliance was supposed to include Hanjin Shipping, which obviously is not possible with the major carrier’s collapse. There are some rumors that Hyundai Merchant Marine (HMM) might replace Hanjin in the THE Alliance.

HMM was supposed to be joining the 2M Alliance to increase 2M’s presence in Asian region. Maersk and MSC quickly backtracked on the idea HMM would be joining 2M when Hanjin’s collapse provided the opportunity to increase its Asia-U.S. market share without HMM.

Hanjin’s collapse exposed a problem with carrier alliances as cargo contracted with its partner shipping lines in the CKYHE Alliance got stuck on Hanjin ships, some of it still not being delivered to its shippers months after the collapse.

Many would say carrier alliances have more weaknesses than all alliance partners and their customers being susceptible to failure from one alliance member. The most common accusation levied against carrier alliances is that they are only beneficial for carriers while posing greater risk to the rest of the supply chain.

While some think regulators should rethink approving these alliances, they might just be necessary for carriers, which have been struggling to make a profit in the international shipping industry, to stay afloat.

Here is the full press release from the FMC on its approval of the OCEAN Alliance:

October 21, 2016
NR 16-24

Contact: John K. DeCrosta, (202) 523-5911

The Federal Maritime Commission (FMC) has concluded its review of the proposed OCEAN Alliance, FMC Agreement No. 012426, allowing it to become effective on Monday, October 24, 2016.

Today’s announcement follows an exhaustive review process by the Commission that thoroughly examined all aspects of the proposed agreement to assure that competition in the ocean transportation industry would not suffer. Commissioners and Commission staff extensively engaged filing counsel on a number of issues, and took advantage of the opportunity allowed for under the law to issue a Request for Additional Information, which necessitates the filing of further documentation in support of the application.

The OCEAN Alliance is comprised of COSCO Shipping, CMA CGM, Evergreen Marine, and Orient Overseas Container Line Limited (OOCL). Agreement members are now permitted to share vessels; charter and exchange space on each other’s ships; and, enter into cooperative working arrangements in international trade lanes between the United States and ports in Asia, Northern Europe, the Mediterranean, the Middle East, Canada, Central America, and the Caribbean.

“The Commission worked very hard to balance the needs of not only the OCEAN Alliance applicants, but all other parties involved in the intermodal supply chain, with the ultimate goal of safeguarding competition in international oceanborne common carriage, with the American shipping public foremost in mind. The Agreement going into force represents a consensus of what will allow OCEAN Alliance carriers to achieve efficiencies without harming the marketplace,” noted Federal Maritime Commission Chairman Mario Cordero. “I applaud both Commission staff and the filing parties for not only their hard work, but the professional manner in which they addressed matters raised during the review process.”

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ADDITIONAL RELATED READING:

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Hanjin Closing European Operations https://www.universalcargo.com/hanjin-closing-european-operations/ https://www.universalcargo.com/hanjin-closing-european-operations/#respond Tue, 25 Oct 2016 17:51:40 +0000 https://www.universalcargo.com/?p=7909 Drip, drip, drip… You can just hear the sounds of liquidation. It’s still possible that Hanjin could survive as a small carrier in South Korea, but it’s looking more and more like the once major but now bankrupt shipping company will be completely liquidated, as most believe the carrier’s fate to be. The most recent step […]

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YouTube Video

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Drip, drip, drip… You can just hear the sounds of liquidation.

It’s still possible that Hanjin could survive as a small carrier in South Korea, but it’s looking more and more like the once major but now bankrupt shipping company will be completely liquidated, as most believe the carrier’s fate to be.

The most recent step toward liquidation hitting the news is Hanjin’s closing of European operations.

The Wall Street Journal reported yesterday:

Hanjin, South Korea’s largest shipping company, has so far obtained approval from the Seoul Central District Court to close eight of its 10 business operations in Europe, including its regional headquarters in Germany, according to a company spokeswoman.

The remaining two branch offices will also be eventually closed, a court judge said.

“The company’s European route services have completely halted,” Hanjin said in a regulatory filing.

This story of the closing of Hanjin’s European operations comes hot on the heals of another article from Wall Street Journal reporting that Hanjin is working on selling it stake in Total Terminals International (TTI) at the Port of Long Beach:

Korea’s Hanjin Shipping Co. is in talks with Swiss shipping giant Mediterranean Shipping Co. to sell its stake in the Long Beach Terminal as part of a plan to dispose most of its overseas assets after filing for bankruptcy protection in August, people involved in the matter said Friday.

The talks involve Hanjin’s 54% stake in Total Terminals International LLC, which runs Long Beach Terminal in California. MSC owns the remaining 46%.

The deal could be very tempting for MSC, as it would make TTI completely an MSC terminal.

At least that terminal deal would have Hanjin bringing in money. Shutting down European operations doesn’t bring in any cash. However, it will reduce the money bleeding from the company, which saw its shipments stop upon filing for receivership in Seoul’s bankruptcy court.

Still, European operations are yet another bad sign for Hanjin. As if signs are needed to see that things are bad for Hanjin.

Francesca Washtell reported on City A.M. that Hanjin’s stocks plummeted upon the announcement that European operations would be closing:

Shares in South Korean freight giant Hanjin Shipping have dived almost 12 per cent this morning after the company announced it plans to shut its European business.

Hanjin’s stock was trading down 11.8 per cent to 1,005 won this morning.

You would expect Hanjin’s stock to have done nothing but fall since the company entered receivership; however, Hanjin stocks did jump up upon the announcement a couple weeks ago that Hanjin was putting its Asia-U.S. assets up for sale.

Piece by piece, Hanjin is being dismantled as its assets and operations are melting away. The company still does have a chance at survival if it can turn a rehabilitation plan into the court and get it approved. Few, however, believe Hanjin will be successful in that. Drip, drip, drip…

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Is There Trouble in 2M Alliance? https://www.universalcargo.com/is-there-trouble-in-2m-alliance/ https://www.universalcargo.com/is-there-trouble-in-2m-alliance/#respond Thu, 20 Oct 2016 19:45:38 +0000 https://www.universalcargo.com/?p=7907 Don’t look now, but it seems like the honeymoon might be over between Maersk and Mediterranean Shipping Company (MSC) in their 2M Alliance. There is no news about the premier carrier alliance between the two biggest shipping line companies by capacity in the international shipping industry dissolving. However, there has been some public disunity since […]

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Maersk Cargo Ship

Maersk Cargo Ship pic: Maersk Line

Don’t look now, but it seems like the honeymoon might be over between Maersk and Mediterranean Shipping Company (MSC) in their 2M Alliance.

There is no news about the premier carrier alliance between the two biggest shipping line companies by capacity in the international shipping industry dissolving. However, there has been some public disunity since the collapse of Hanjin Shipping.

Hanjin’s collapse gave the 2M carriers an opportunity to snatch trans-Pacific market share. So much so that Maersk and MSC started backpedaling on the idea of letting Hyundai Merchant Marine (HMM) join 2M, the only benefit of which was to increase their presence in Asia-U.S. routes.

The 2M carriers aggressively moved in on Hanjin’s customers.

The carriers started a new service to fill in the gap that Hanjin’s collapse left behind called TP1. Or was it called Maple?

Here’s where cracks were first seen between the two carriers. Their “joint service” was being described in different ways by Maersk and MSC.

A short article from American Shipper highlights the differences in how the carriers described the new service:

On Sept. 7, MSC and Maersk had said they were going to start a new 2M service to assist shippers who saw a sudden drop in capacity when Hanjin Shipping filed for receivership and stopped booking cargo. MSC called the new string its “Maple” service, while Maersk dubbed it the TP1.

Though the companies said they would offer the service jointly, they gave very different versions about what the service would eventually look like.

Both agreed the service would initially have a rotation of Busan, Long Beach, Yantian, Shanghai and Busan, but MSC said the service would eventually call Prince Rupert instead of Southern California, while Maersk said the service would call Los Angeles/Long Beach.

Those are really pretty small details though, right? It’s just the name of the service and its destination that the alliance partners weren’t on the same page about.

It didn’t take long for those little cracks to turn into much more of a rift between the carriers when it comes to this trans-Pacific service.

Alphaliner reported that after only three successive sailings, 2M stopped advertising the TP1/Maple service. Reports started popping up that the service, which Maersk had called long-term, was suspended.

Now all the headlines are about MSC leaving Maersk out on the trans-Pacific service, ignoring the TP1 joint service tag Maersk had given the service and calling the Maple service exclusively from MSC.

Here are excerpts from one such article by the Loadstar on the topic:

MSC confirmed today that it will resume its Asia-US west coast Maple service at the end of the month as an “exclusive” product.

It follows the 2M loop with Maersk being suspended after only three sailings.

Last week, Alphaliner reported that the 2M alliance had suspended the extra loader, dubbed TP1 by Maersk calling at Yantian, Shanghai, Busan and Long Beach. Now, MSC has said the service will resume with the sailing of the 4,675 teu MSC Rochelle on Friday 28 October.

The service was also advertised with a call at Prince Rupert, but the Canadian port was omitted from all three sailings and has been dropped by MSC.

A press release from Maersk Line on 7 September announced the new TP1 service and said: “We are responding to increased demand in the transpacific. With supply chains disrupted, many customers are approaching us for transport solutions for their cargo. The TP1 service is a stable, long-term solution to meet our customers’ needs.”

However, after just three sailings, Maersk Line rowed back on the “long-term” commitment and said: “We are reviewing the plans for TP1 and will update customers and the market in due time. In the meantime, we are deploying extra loaders according to the customers’ needs.”

This suggests a disagreement between the 2M partners over strategy…

All this is coming right on top of the news that Maersk is splitting into two divisions, with a division devoted to shipping focused on acquiring other carriers in the international shipping industry that are struggling.

It is unknown how MSC, as a company, feels about Maersk’s recently publicized strategy. The Loadstar article does point out that MSC seems to be wanting to gain trans-Pacific market share made available by Hanjin’s exit through organic growth while Maersk may be interested in acquiring Hanjin’s Asia-U.S. network that just went up for sale.

Many assume because of Maersk’s announced strategy to acquire other carriers to grow, the company will make a bid on Hanjin’s assets. There have even been reports, and denials from Hanjin, that the bankrupt carrier contacted Maersk and MSC about buying its assets.

I, on the other hand, do not believe Maersk will go after Hanjin’s assets, but save its available capital for going after struggling carriers that have yet to go under. We should find out by early November whether or not Maersk is going to try to acquire Hanjin’s assets.

Even more interesting to watch will be the relationship between Maersk and MSC to see if this trans-Pacific service snafu really is an indication of trouble in paradise.

Beyond the disunity on this route service and possible differences in strategies, there are other factors that could be putting stress on the 2M relationship.

South Africa just raided the two shipping companies as part of a collusion investigation. Bloomberg reports:

South Africa’s Competition Commission searched the premises of six shipping companies including AP Moeller-Maersk A/S as part of an investigation into allegations that they colluded to fix incremental cargo rates between Asia and South Africa.

MSC confirmed that its premises were among those searched and said it’s assisting the relevant authorities with their investigations.

Of course, rate fixing is one of the biggest fears shippers had of carrier alliances from the beginning and one of the top things governing agencies are supposed to be keeping watch for with the approval of vessel sharing agreements between shipping companies.

This is not nearly the first price fixing probe in the international shipping industry that these carriers have had to deal with. Such legal investigations may add stress to the operational marriage between Maersk and MSC.

Speaking of marriage, I’ve often heard it said the number one cause for marital problems and divorce is financial problems. Everyone knows carriers have been through financial stress for several years, with Drewry even saying another collapse like Hanjin’s is likely.

While MSC has one of the least transparent financial situations in an industry that is almost financially opaque, MSC has definitely faced the same challenges as all the rest of the carriers. If its true for a regular marriage, why not a business marriage? Financial stress could be one more factor aiding possible cracks in the 2M carrier alliance.

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Hanjin Creditors Could Sue Shippers for Hundreds of Millions https://www.universalcargo.com/hanjin-creditors-could-sue-shippers-for-hundreds-of-millions/ https://www.universalcargo.com/hanjin-creditors-could-sue-shippers-for-hundreds-of-millions/#comments Tue, 18 Oct 2016 19:00:30 +0000 https://www.universalcargo.com/?p=7903 As if the Hanjin Shipping collapse hasn’t been bad enough for shippers, especially those who are customers of the bankrupt carrier, imagine the company or its creditors suing its shippers for hundreds of millions of dollars. That’s a possibility according to a recent article from The Loadstar: Shippers and forwarders could face multi-million-dollar bills from Hanjin […]

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Hanjin could sue shippers

picture: Scales of Justice – Frankfurt Version by Michael Coghlan with Hanjin ship added

As if the Hanjin Shipping collapse hasn’t been bad enough for shippers, especially those who are customers of the bankrupt carrier, imagine the company or its creditors suing its shippers for hundreds of millions of dollars.

That’s a possibility according to a recent article from The Loadstar:

Shippers and forwarders could face multi-million-dollar bills from Hanjin if its creditors sue customers which failed to deliver all the cargo stated in the Minimum Quantity Commitment (MQC).

According to consultancy SeaIntel, shippers could face claims for between $40m and $300m.

This all hinges on lawsuits that are currently under appeal.

In 2011, The Containership Company (TCC) went bankrupt. TCC went on to sue 75 of the shippers it had contracts with. According to a 2013 article from Shipping Watch, half of those 75 lawsuits were settled, and others went to court.

It really can’t be understated how important, how impactful court rulings and the precedents they set are. People often don’t realize how much they affect their lives.

For example, the Supreme Court case Griswold v. Connecticut overturned a law against contraception and created a constitutional right to privacy that does not explicitly exist in the Constitution. That right to privacy was then used in many court cases, including Roe v. Wade, which gave women the legal right to have abortions in this country.

If, ultimately, TCC wins its appeal in suing shippers it had contracts with, the precedent it would set could open the door for Hanjin or its creditors to sue the shippers with whom it has contracts.

TCC offered below market freight rates for shippers who agreed to Minimum Quantity Commitments (MQCs). There’s probably a lesson to be learned in there about getting what you pay for. On its way to bankruptcy, TCC discontinued the service but then “sued several shippers for breach of contract claiming the shippers were required to pay liquidated damages for failing to satisfy their MQCs,” according to a Lexology.com article.

Lexology.com does a wonderful job of thoroughly explaining the case. You can read that article for all the details, but here are a few key details from it:

After analyzing a form of Contract and the parties fact statements, the Bankruptcy Court ultimately recommended that the District Court find the Contracts valid and enforceable because the Contracts contained the hallmarks of a contract and the specific terms required by 46 U.S.C. § 40502(c)….

The Bankruptcy Court also concluded that TCC did not breach the covenant of good faith and fair dealing by filing the adversary proceedings….

Nevertheless, in its other findings, the Bankruptcy Court did recommend granting summary judgment in favor of the shippers after concluding that TCC’s termination of the Taicang-Los Angeles route excused the shippers’ MQC requirement….

The Bankruptcy Court’s recommendation is pending before District Judge Andrew L. Carter, Jr. under the caption The Containership Company (TCC) A/S et al. v. Apex Maritime Co., Inc. et al., Case No. 16-04913 (S.D.N.Y.).

Here’s how The Loadstar article that started this blog entry summarizes the significance of this case for Hanjin customers:

SeaIntel uses an assumption that about 20% of import shippers do not meet their MQCs, which would mean that Hanjin could have faced a shortfall of some 460,000teu. SeaIntel estimates damages could be $250 per teu.

While contracts covering the 2016-17 year are not relevant, as Hanjin stopped sailing four months in, the previous year’s agreements could be critical as the contract period has expired, and the court has ruled they are enforceable.

TCC shouldn’t even need to win its appeal in suing its shippers in order for Hanjin or its creditors to sue its customers, as the court did rule that the contracts were valid in the TCC case, even if it did find in favor of the shippers.

The Loadstar points out that Hanjin going forward with such lawsuits would be a “nuclear option” that would destroy all hopes of company becoming a viable carrier again. However, many believe there is little chance of Hanjin actually coming back from this collapse. And as the Loadstar says, “if Hanjin is not revived, creditors may want to claim damages.”

For shippers this would be adding insult, and further injury, to injury.

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Hanjin Asia-U.S. Assets for Sale & What It Means https://www.universalcargo.com/hanjin-asia-u-s-assets-for-sale-what-it-means/ https://www.universalcargo.com/hanjin-asia-u-s-assets-for-sale-what-it-means/#respond Thu, 13 Oct 2016 18:22:38 +0000 https://www.universalcargo.com/?p=7901 Well, this might be a little bit early–notices are reported to start going up tomorrow at the earliest–but Hanjin Shipping’s Asia-U.S. operations are going up for sale.  The Wall Street Journal reports: The South Korean bankruptcy court handling Hanjin Shipping Co.’s insolvency proceedings said Thursday it plans to dispose of the firm’s sales and marketing network for […]

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YouTube Video

Hanjin Shipping's Asis-Us Assets for Sale

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Well, this might be a little bit early--notices are reported to start going up tomorrow at the earliest--but Hanjin Shipping’s Asia-U.S. operations are going up for sale.

 The Wall Street Journal reports:

The South Korean bankruptcy court handling Hanjin Shipping Co.’s insolvency proceedings said Thursday it plans to dispose of the firm’s sales and marketing network for its Asia-U.S. route, in an effort to raise funds and help rehabilitate the indebted company.

Fortune reports:

A spokesman for the Seoul Central District Court overseeing Hanjin Shipping’s receivership said assets currently set to be put up for sale include the entire operations of Hanjin Shipping’s U.S. to Asia routes such as manpower systems, five container ships, and 10 overseas businesses.

Reuters reports:

Hanjin Shipping received court approval to seek buyers for assets in order to pay back creditors now in the process of making claims until October 25….

The spokesman for the Seoul Central District Court said the deadline for binding bids is expected to be Nov. 7.

Hanjin Shipping’s collapse is the biggest bankruptcy in the history of the international shipping industry, and it has caused much uncertainty. Years of overcapacity and billion dollar losses by carriers inevitably had to lead to a major bankruptcy like this. However, many thought governments would keep bailing these giant companies out, continuing the “too big to fail” fallacy.

As Hanjin Shipping shrinks or gets completely bought out or dissolved, other shipping companies will get bigger.

The industry’s biggest player, and largest carrier by capacity, Maersk is splitting into two divisions with its new shipping division focusing on acquiring struggling shipping lines.

Many speculated Maersk would buy Hanjin’s assets, but Maersk’s strategy seems more predatory than that. Maersk isn’t looking to get bigger for the sake of getting bigger; the company is looking to shrink the competition pool. Expect Maersk to buy out struggling carriers before they collapse like Hanjin.

If not Maersk, which company is most likely to buy out Hanjin’s assets that are going on sale?

The Wall Street Journal article points to the other big South Korean shipping company, HMM:

Hanjin’s Korean peer Hyundai Merchant Marine Co. will be the first to assess Hanjin’s 37 container vessels. Government officials have said they would back Hyundai in buying Hanjin assets, provided such a move would help it stay competitive.

This really represents a reversal of fortunes for HMM.

HMM was headed for receivership itself in May. With a major restructuring deal on its debt, HMM has managed to escape bankruptcy and possibly see major growth with the acquisition of Hanjin assets. Hanjin was the larger of the two major Korean shipping carriers and included in a new major carrier alliance while HMM was excluded. Hanjin’s collapse shakes up carrier alliances and makes HMM likely to have more than one alliance suitor.

All that is not to say that HMM is in great financial health now. In fact, no carrier really seems to be in good financial health according to Drewry research. The maritime research company’s Z-score index shows almost all major carriers reside in a financial stress zone, and even Maersk is in a cautionary “grey zone”.

The financial health crisis carriers face make another collapse like Hanjin’s likely. But even more likely is Maersk swooping in to devour struggling shipping lines with acquisitions before they collapse.

Other carriers watch Maersk and emulate what it does. Don’t be surprised when other carriers look for opportunities to acquire competing shipping lines as well.

Hanjin’s collapse and the purchasing of its assets can be viewed as a preview of what’s to come in the international shipping industry.

Expect to see fewer major players in the international shipping industry in the upcoming years while the major carriers that remain grow even larger.

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There’s High Risk of More Carrier Collapses Says Drewry https://www.universalcargo.com/theres-high-risk-of-more-carrier-collapses-says-drewry/ https://www.universalcargo.com/theres-high-risk-of-more-carrier-collapses-says-drewry/#comments Tue, 11 Oct 2016 17:45:55 +0000 https://www.universalcargo.com/?p=7899 Will we see more major carriers, like Hanjin, go bankrupt soon? According to the work of a major research company in the international shipping industry, it looks not only possible but likely. The international shipping industry is nowhere near finished cleaning up after the bankruptcy of Hanjin Shipping, and it is at high risk of seeing more […]

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Maersk Cargo Ship

Maersk Cargo Ship pic: Maersk Line

Will we see more major carriers, like Hanjin, go bankrupt soon?

According to the work of a major research company in the international shipping industry, it looks not only possible but likely.

The international shipping industry is nowhere near finished cleaning up after the bankruptcy of Hanjin Shipping, and it is at high risk of seeing more carrier failure in the near future according to Drewry Maritime Research.

Drewry has this thing called a Z-score that indexes the financial stress of carriers. And surprise, surprise, carriers are not doing well.

Drewry issued a “Red Alert” with a recent article that shares just how bad things look for carriers according to its Z-score research. Here’s a quick excerpt that explains the current situation:

During the 2008-09 industry crash Drewry initiated a Z-score freight operators’ financial stress index, which is updated in our monthly Sea & Air Shipper Insight report, to provide a quick reference to the financial fitness of selected service providers. Any reading below 1.8 indicates a higher risk of bankruptcy, which our sample of major carriers collectively have not been able to escape from since the end of 2010. To emphasise the scale of the current financial risk the sample carriers’ average Z-score rating fell to its lowest point since the series started after the second-quarter 2016 financial statements were released.

The carriers that Drewry indexes in its Z-score index are A.P. Moller-Maersk, China Cosco, CSCL (until 4Q15), CMA CGM, CSAV until 3Q14, Evergreen, Hanjin (though it’s being removed since its collapse), Hapag-Lloyd, HMM, Israel Corp (parent of Zim) until 4Q14 then switching to Zim, K Line, MOL, NOL (parent of APL) until 1Q16, NYK, OOIL (parent of OOCL), Wan Hai, and Yang Ming.

While this list does not include every carrier in the industry, MSC being the biggest notable absence, it is plenty to give a good idea of the health of international shipping’s carriers. Obviously, that health is not good.

Even Maersk, the largest carrier in the international shipping industry by capacity, is not looking strong according to Drewry’s Z-score findings.

“Based on the latest available financial reports the Z-score table shows that only two (A.P. Moller-Maersk and OOIL) of the 14 selected companies scored high enough to make it to the cautionary ‘grey zone’, with the remainder struggling in the ‘distress zone’,” Drewry says.

Maersk is looking stronger than other carriers, even making plans to acquire competing carriers, but stronger doesn’t mean strong.

Maersk isn’t in the distress zone, and I would not bet on Maersk to go bankrupt, but the “grey zone” that it is in causes potential business partners to be advised to be cautious before entering into a contract with the company.

The fact that almost all carriers reside below the “grey zone” in the “distress zone” is a scary thought.

Of course, the “distress zone” was where Hanjin resided before its collapse. For years, carriers have been in this zone of financial stress. Drewry’s research shows the situation has only gotten worse with the onset of lower and lower freight rates the industry has experienced recently while plagued with overcapacity (largely self-inflicted by the carriers and their obsession with megaships).

In previous Universal Cargo blogs, I’ve talked about the lack of transparency from carriers in the international shipping industry. Shipper, it would seem, have finally had enough.

Drewry emphasizes shippers’ demand for financial transparency from carriers in the industry since the collapse of Hanjin. Shippers need to know just how much risk there is importing and exporting their goods with various carriers. After all, that risk is high.

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China About to Have Beef with U.S. Exports, & That’s a Good Thing! https://www.universalcargo.com/china-about-to-have-beef-with-u-s-exports-thats-a-good-thing/ https://www.universalcargo.com/china-about-to-have-beef-with-u-s-exports-thats-a-good-thing/#respond Thu, 06 Oct 2016 17:52:22 +0000 https://www.universalcargo.com/?p=7897 With all the bad news for international shipping that came with the collapse of Hanjin Shipping, how about a little good news for the industry? U.S. agricultural exports look to get a huge bump next year as China is planning to lift the ban on U.S. beef. China has banned beef from the U.S. ever […]

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China lifting ban on U.S. beefWith all the bad news for international shipping that came with the collapse of Hanjin Shipping, how about a little good news for the industry?

U.S. agricultural exports look to get a huge bump next year as China is planning to lift the ban on U.S. beef.

China has banned beef from the U.S. ever since 2003, when “mad cow” infected beef was shipped from Washington state. You could say that China has had a beef with U.S. beef for the last 13 years. But you probably wouldn’t because you’re not that corny.

Bovine spongiform encephalopathy--the technical term for mad cow disease--being found in U.S. cow actually shut down many export markets for U.S. beef. But the Chinese market is a huge one. The impact of China importing U.S. beef again cannot be overstated.

An article from the Loadstar about China conditionally lifting the ban on U.S. beef enumerates the market, its recent growth, and its expected growth:

According to a report from Rabobank International, China’s beef imports surged 51% in the first seven months of this year, and one projection envisages a 24% increase in beef and veal imports this year to reach 825,000 tonnes – twice the level recorded in 2013.

The growing appetite and purchasing power of its middle class has catapulted China into the second spot in the global beef-buying hierarchy….

In a statement on agriculture export growth, the US Department of Agriculture (USDA) predicted China would reclaim the top spot in US agriculture exports in 2017, surpassing shipments to Canada.

This is due to the convergence of rising meat exports to emerging markets and a bumper crop of wheat, soybeans and certain other types of produce. USDA projections see agriculture exports growing by $6bn more than previously expected to $133bn next year 2017. The US’s agricultural trade surplus is expected to rise to $19.5bn, up 40% from the $13.9bn surplus expected this year.

US beef exports are expected to reach $5.3 billion in 2017.

Agriculture is one of the few areas where the U.S. exports more than it imports. What? Selling more than spending? In a culture of credit cards and a backdrop of a federal government debt approaching $20 trillion, the U.S. trade deficit was $40.73 billion in August (according to American Shipper). It’s good to see an area in trade where there is a growing surplus.

Of course, China lifting the ban on U.S. beef is a huge factor in why that surplus is expected to grow from nearly $14 billion this year to nearly $20 billion next year.

However, there are a lot of complications involved in removing a ban on a food product exported from one country to another. Will U.S. beef be cleared for export to China soon enough for these lofty predictions to come true?

According to an article from Capital Press, “U.S. beef access to China could come quickly”:

“There’s not a set timeline … but when you look at how quickly China has worked with countries like Canada and Brazil to restore that access once they lifted their ban, I think this could be a matter of months,” said Kent Baucus, NCBA director of international trade.

It is probably a good time for U.S. agricultural exporters to look into deals with Chinese importers interested in beef. The demand is strong, and the upcoming year should provide high profit opportunities for U.S. beef suppliers.

On the actual exporting side, air freight is undoubtedly the best way to go with beef, but there may be situations where reefer containers on ships would work too.

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Hanjin Containers Hog Chassis & Create Congestion @ LA & LB Ports https://www.universalcargo.com/hanjin-containers-hog-chassis-create-congestion-la-lb-ports/ https://www.universalcargo.com/hanjin-containers-hog-chassis-create-congestion-la-lb-ports/#respond Tue, 04 Oct 2016 19:45:41 +0000 https://www.universalcargo.com/?p=7895 A lack of chassis during peak season is causing congestion issues at the Ports of Los Angeles and Long Beach. Sound familiar? Two years ago, the Southern Californian ports were suffering from congestion that no antihistamine could relieve. Among the chief causes of the congestion was a lack of chassis to move shipping containers. Things would go […]

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chassis-hanjin-pool-of-pools-congestionA lack of chassis during peak season is causing congestion issues at the Ports of Los Angeles and Long Beach. Sound familiar?

Two years ago, the Southern Californian ports were suffering from congestion that no antihistamine could relieve. Among the chief causes of the congestion was a lack of chassis to move shipping containers. Things would go from bad to horrific when labor strife added to the problem during the contentious contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU).

While things have been nowhere as bad as the chassis crisis shortly after the carriers sold off their chassis and stopped providing them for U.S. shippers, chassis are still an issue at the port.

The Ports of Los Angeles and Long Beach have done a few things to improve the chassis situation and relieve congestion, including making a deal with DCLI, Flexi-Van Leasing Inc., and TRAC Intermodal, which combined their chassis to form the “gray chassis fleet” or “pool of pools.”

However, Hanjin’s collapse is illuminating just how fragile the chassis situation is while spotlighting criticism of the pool of pools.

Reuter’s pointed out a big new trailer shortage was looming in an article within a couple weeks of Hanjin’s collapse:

The world’s seventh-largest container carrier has more than 500,000 containers, and many already are clogging up ports and truck yards, tying up trailers that cannot be used to handle other cargo. That is beginning to worry freight handlers at U.S. West Coast ports and is the first sign of knock-on effects from the failure of Hanjin.

While Hanjin’s bankruptcy is affecting chassis numbers all over the U.S., and international shipping in general everywhere, a new article from American Shipper points out how the Hanjin chassis situation is especially “critical” at the Ports of Los Angeles and Long Beach:

“The chassis situation is still what I would call critical,” said Weston LaBar, executive director of the Harbor Trucking Association, which represents drayage companies in Southern California.

He estimates at least 10,000 chassis out of a little more than 100,000 chassis in the region cannot be used because they have Hanjin containers sitting on them.

“Other ports are talking about hundreds, here it is thousands,” he noted.

Frustration over the situation has made complaints against the pool of pools louder. There have been rumblings about old chassis needing to be replaced or repaired with more speed to keep enough in circulation at the Southern Californian ports, and now that Hanjin’s collapse has taken so many out of circulation it is a major problem.

The following excerpt from the American Shipper article details how the Hanjin collapse is exacerbating a chassis issue that already exists with the pool of pools:

Even prior to the Hanjin bankruptcy, he said truckers were concerned that there were already a large number of chassis in need of repair. He estimated that between Hanjin’s problems and “out of order” chassis, 18 to 25 percent of chassis in the region might be unavailable.

“We’ve been pretty disappointed with the allotment of chassis in the pool of pools,” he said. “Because repairs were not being made at the pace that they should, we were concerned there were not going to be enough chassis for companies to continue to do operations as they should.”

Noel Hacegaba, managing director and chief commercial officer at the Port of Long Beach, said his port as well as the Port of Los Angeles are attacking the chassis shortage in two ways: first by encouraging the largest source of chassis in the region – the so-called “pool of pools” created by the leasing companies DCLI, Flexi-Van and TRAC Intermodal – to repair containers at a faster clip, and secondly by trying to find locations where containers owned and leased by Hanjin can be stored.

The pool of pools has about 74,000 chassis, and 700 returned to service in just the past week. The percentage of “bad order” chassis has fallen to 7.6 percent from 9 percent in the past two weeks, and Hacegaba said leasing companies are continuing efforts to speed repairs.

That leaves the Ports of Los Angeles and Long Beach scrambling to solve this congestion-creating problem quickly. So far, the solutions posed don’t work for all the parties involved. As Hanjin’s receivership lingers on, this situation looks to only get worse.

We’ll be keeping an eye on the congestion at the Ports of Los Angeles and Long Beach as we know shippers are concerned with peak season shipping so important to holiday sales.

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PMA & ILWU to Enter Talks on “Concept” of Contract Extension https://www.universalcargo.com/pma-ilwu-to-enter-talks-on-concept-of-contract-extension/ https://www.universalcargo.com/pma-ilwu-to-enter-talks-on-concept-of-contract-extension/#comments Thu, 29 Sep 2016 19:26:25 +0000 https://www.universalcargo.com/?p=7889 The Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) are officially going to meet to discuss an early contract extension. Sort of. In a joint press release, the ILWU and PMA announced they will meet in November to “discuss the concept of a contract extension.” The concept of a contract extension? There […]

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Dockworker and cargo containers

Dockworker and cargo containers

The Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) are officially going to meet to discuss an early contract extension. Sort of.

In a joint press release, the ILWU and PMA announced they will meet in November to “discuss the concept of a contract extension.”

The concept of a contract extension?

There has been much pressure from manufacturers, farmers and agribusinesses, wholesalers, retailers, importers, exporters, distributors, transportation and logistics providers, and other supply chain stakeholders for the ILWU and PMA to begin contract negotiations long before the July 1st, 2019 expiration of the current contract.

It took over a year for the current contract to be negotiated and ratified.

During that time, negotiations turned contentious with labor slowdowns from the ILWU and mini-lock-outs in response from the PMA. The result was terrible congestion right during the peak and holiday seasons last year. Imported goods didn’t make it to store shelves for holiday shopping, produce rotted on the docks to agricultural exporters chagrin, and international contracts were lost as the United State’s business reputation suffered abroad.

Back in March, the PMA officially requested to begin early contract extension talks with the ILWU.

It is standard practice of the dockworkers unions not to agree to extensions or new contracts before the previous one expires so they can use their biggest weapons of slowdowns, strikes, and threats of strikes to gain leverage in negotiations.

In light of the inability of the PMA and ILWU to negotiate a contract without costly disruptions to the supply chain, shippers are excited by the news of the parties discussing a contract extension well before the current contract expires.

However, words like “concept of a contract extension” should keep shippers’ excitement tempered. Extending a contract early, as discussed above, really would be a new concept for the ILWU. And just because the ILWU and PMA discuss an early extension does not mean an early extension will actually happen.

On the other hand, this is more progress toward an early contract extension than has been seen in the past. Shippers can’t help but hope this is a sign of a new era of smooth contract transitions.

Such an era would require a change in ILWU practice. Hopefully, the ILWU sees that hard timing the ports over labor demands hurts not just everyone else in the industry but the dockworkers themselves. One doesn’t have to look far to see examples:

West Coast ports lost market share as a result of the congestion creating labor strife outlined above. Shippers and carriers choosing other ports for import and export puts jobs at risk. The ILWU hard-timed the Port of Portland so badly (really taking advantage of the time period between contracts) carriers stopped calling on the port with container ships altogether. That equates to dockworker jobs lost directly because of labor strife.

Now there’s a glimmer of hope that there will be less such occurrences in the future.

The press release announcing that glimmer of hope in the form of November talks is quite short. Here it is in its entirety:

PMA & ILWU SCHEDULE EXPLORATORY CONTRACT EXTENSION TALKS

The Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) have agreed to discuss the concept of a contract extension.

The talks have been tentatively scheduled for November 1 and 2. The current Contract Covering 29 west coast ports does not expire until July 1, 2019.

No additional comments from either party will be made prior to the talks. Following the talks, a statement may be issued.

If you’re planning to contact the ILWU or PMA in regard to the talks, don’t expect much. The last two sentences of the press release could be replaced with, “Don’t call us; we’ll call you.”

As per usual, all shippers can do is wait and hope.

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Divide & Conquer: Maersk Splits to Go After Competition https://www.universalcargo.com/divide-conquer-maersk-splits-to-go-after-competition/ https://www.universalcargo.com/divide-conquer-maersk-splits-to-go-after-competition/#respond Tue, 27 Sep 2016 18:49:28 +0000 https://www.universalcargo.com/?p=7881 It’s a new twist on an old strategy. Usually with divide and conquer, it is the enemies or subjects intended for rule that an entity divides in order to overtake or rule. Maersk, the largest international shipping carrier by capacity in the world, is splitting itself to take over its competition on the waters. Maersk […]

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YouTube Video

Maersk Cargo Ship

Maersk Cargo Ship pic: Maersk Line

It’s a new twist on an old strategy. Usually with divide and conquer, it is the enemies or subjects intended for rule that an entity divides in order to overtake or rule. Maersk, the largest international shipping carrier by capacity in the world, is splitting itself to take over its competition on the waters.

Maersk announced Thursday in a press release that it would be splitting into two divisions, one for shipping and one for oil:

A.P. Møller – Mærsk A/S will become an integrated transport and logistics company with digitalised and individualised customer solutions.

Oil and oil related businesses, either individually or in combination, to be separated from A.P. Møller – Mærsk A/S. Maersk Oil will focus on optimizing and strengthening its strong position in the Danish, British and Norwegian parts of the North Sea.

Reorganising A.P. Møller – Mærsk A/S into two separate divisions; Transport & Logistics and Energy.

Maersk’s diversification between shipping and oil offered the company more stability than other carriers could boast in the middle of tough years of overcapacity and low freight rates in the international shipping industry. However, the oil glut and price crash in 2015 caused Maersk to be dealing with two separate, struggling industries.

Being in two struggling industries at once caused Maersk to post a two-and-a-half billion dollar loss in the fourth quarter of 2015! For that reason alone, it would make sense to split into separate divisions to handle the operations in these two industries.

In Maersk’s press release, Chairman of the Board, Michael Pram Rasmussen says:

The industries in which we are operating are very different, and both face very different underlying fundamentals and competitive environments. Separating our transport and logistics businesses and our oil and oil related businesses into two independent divisions will enable both to focus on their respective markets. This will increase the strategic flexibility by enhancing synergies between businesses in Transport & Logistics, while ensuring the agility to pursue individual strategic solutions for the oil and oil related businesses.

The focus that Maersk’s transport and logistics division will have appears to be the acquisition of smaller carriers.

The Wall Street Journal reported:

“I expect to see consolidation in the industry because many carriers haven’t made money for years and that can’t be sustainable in the long run,” Maersk group chief executive Søren Skou told The Wall Street Journal. “We will make sure we have strong capital and better utilization of assets so we have the fire power to do big things if opportunities come up.”

Make no mistake, Maersk is talking about having the firepower to take over smaller carriers. In fact, Maersk will no longer be expanding by ordering new ships but by overtaking the competition.

“The owner of the world’s largest container shipping line will stop ordering newly built vessels and instead pursue takeovers in an industry that has been plagued by overcapacity for almost a decade,” reports Hellenic Shipping News.

The Hellenic Shipping News article went on to quote Maersk’s Chairman of the Board:

“If Maersk Line needs to grow, it doesn’t make sense to order new ships as there are already too many ships in the market,” Rasmussen said. “So if we want to grow, we need to do it through acquisitions so that we don’t flood the market with more ships.”

Rasmussen said Maersk Line is “well-equipped and ready,” for acquisitions.

While he declined to comment on specific targets, he says options include shipping lines that operate mostly on trade routes overlapping with Maersk’s, which will “give us a lot of synergies.” It’s also looking at rivals who are strong “in an area where we aren’t present,” so they “fill a hole” in Maersk Line’s network, he said.

I love those last two sentences. Maersk is looking at shipping lines in trade routes overlapping with its and trade routes it’s not present in. Yeah, that’s all trade routes.

Maybe instead of divide and conquer, we could call Maersk’s strategy divide to conquer. Expect to see some big news from Maersk’s shipping division as it goes after the competition.

With the announcement of its new strategy, Maersk stocks have risen. Look out carriers, Maersk is coming for you.

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Future of Carrier Alliances Changes with Hanjin Collapse https://www.universalcargo.com/future-of-carrier-alliances-changes-with-hanjin-collapse/ https://www.universalcargo.com/future-of-carrier-alliances-changes-with-hanjin-collapse/#respond Thu, 22 Sep 2016 18:03:26 +0000 https://www.universalcargo.com/?p=7878 Is Hyundai Merchant Marine (HMM) no longer joining Maersk and Mediterranean Shipping Company (MSC) in their carrier alliance? “The memorandum of understanding is only a paper to agree to discuss. We are still in negotiation,” an article from the Loadstar quoted Caroline Becquart, MSC’s senior vice president and head of Asia network and vessel sharing agreements, […]

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YouTube Video

HMM Joining 2M in Question

HMM Joining 2M in Question

Is Hyundai Merchant Marine (HMM) no longer joining Maersk and Mediterranean Shipping Company (MSC) in their carrier alliance?

“The memorandum of understanding is only a paper to agree to discuss. We are still in negotiation,” an article from the Loadstar quoted Caroline Becquart, MSC’s senior vice president and head of Asia network and vessel sharing agreements, as saying about the memorandum of understanding HMM signed with Maersk Line and MSC to join their 2M alliance.

Everyone had all but taken for granted that HMM would would turn the 2M into the 3M, but the Loadstar article mentioned above headlines with, “HMM joining 2M alliance may not be a done deal after all, post-Hanjin.”

The article is all about how Hanjin’s bankruptcy has changed things, possibly making the 2M partners change their strategy and making it likely HMM will not be joining Maersk and MSC in an alliance.

In a Universal Cargo blog sharing the news that HMM entered talks to join the world’s biggest and most exclusive carrier alliance, I brought up the question of why Maersk and MSC would choose HMM to join their alliance in the first place.

Earlier in the month the alliance talks were announced (only a few months ago) it looked like HMM was the major South Korean shipping line about to go bankrupt. In order to keep out of receivership, HMM managed a huge financial restructuring where its creditors required HMM to meet three conditions:

  1. getting bondholders to reschedule debt
  2. reducing charter fees
  3. joining a major carrier alliance

HMM had to join a carrier alliance, but Maersk and MSC certainly didn’t need to let it into theirs.

Perhaps seeing a major shipping line--and HMM’s fellow South Korean shipping line, Hanjin at that--made the 2M carriers rethink HMM’s admission to their club. Maybe the talks were never that serious and HMM oversold the negotiations to join 2M in order to make it look like the shipping company was making the third requirement it needed to stay afloat.

What seems most likely is that 2M was able to get what they wanted without HMM because of the collapse of Hanjin.

HMM was quoted, in a Wall Street Journal article when the news broke of their negotiations to join 2M, as saying, “2M has wanted to enhance its influence in the Asian region. And we want to raise our presence in Asia-U.S. routes. Both sides will benefit from a successful deal.”

After Hanjin’s collapse, Maersk and MSC swooped in to grab market share. The Loadstar article limns 2M’s targeting of Hanjin customers:

… Alphaliner said: “So far, the 2M carriers are most aggressive when it comes to the deployment of additional capacity to cater for Hanjin’s former customers.”

The analyst said the 2M’s new TP-1/Maple transpacific service – introduced to target distressed Hanjin shippers – would deploy ships of 7,800-9,400 teu, which are significantly larger than the 5,000 teu vessels originally announced.

While it looks like Hanjin’s collapse is affecting the future of the 2M alliance, it is definitely having a profound effect on other alliances.

Hanjin belonged to the CKYHE alliance with Cosco, “K” Line, Yang Ming, and Evergreen. The shipping line’s collapse suddenly takes a huge partner out of that equation (while causing some partners to have cargo stuck on Hanjin ships in the meantime).

Hanjin was also supposed to be a major partner in the new THE Alliance with Hapag-Lloyd, Mitsui OSK Lines, NYK Line, K Line, and Yang Ming Marine Transport.

If 2M really doesn’t add HMM to the alliance (as it looks now), perhaps HMM will end up in the THE alliance that originally snubbed it.

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Universal Bizargo: Absurdist Artist Stuck in Hanjin Absurdity https://www.universalcargo.com/universal-bizargo-absurdist-artist-stuck-in-hanjin-absurdity/ https://www.universalcargo.com/universal-bizargo-absurdist-artist-stuck-in-hanjin-absurdity/#respond Tue, 20 Sep 2016 22:30:05 +0000 https://www.universalcargo.com/?p=7877 The typical person generally thinks of international shipping as a boring topic, if he or she even thinks of the topic at all. However, this industry–which profoundly but invisibly impacts that typical person’s daily life–is full of interesting storylines: the huge bankruptcy of Hanjin shipping, dockworker strikes, and the investigation and prosecutions of shipping lines for price fixing, just to name […]

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Universal Bizargo shipping container

Universal Bizargo shipping container

The typical person generally thinks of international shipping as a boring topic, if he or she even thinks of the topic at all.

However, this industry–which profoundly but invisibly impacts that typical person’s daily life–is full of interesting storylines: the huge bankruptcy of Hanjin shipping, dockworker strikes, and the investigation and prosecutions of shipping lines for price fixing, just to name a few.

What’s more, there are even international shipping stories so absurd, so bizarre that they’ve spawned a whole blog series from Universal Cargo called Universal Bizargo. Of course, these odd stories don’t happen every day, and it’s been about two years since the last Universal Bizargo post.

 

It took the Hanjin collapse to bring the series back, but the largest bankruptcy in international shipping history isn’t strange enough in and of itself to inspire a Universal Bizargo post. In fact, the only thing bizarre about the news of a major shipping line going down is that such an occurrence didn’t happen sooner with carriers losing billions of dollars over the better part of the last decade.

What inspired this Universal Bizargo post is a passenger who got stuck on a Hanjin container ship when the company collapsed.

Rebecca Moss on Hanjin container ship

Rebecca Moss in front of shipping containers on Hanjin Geneva Picture: Rebecca Moss

Rebecca Moss is an artist and filmmaker who was selected for Access Gallery’s Twenty-Three Days at Sea: Traveling Artist Residency. That residency put her on the Hanjin Geneva, which got stranded at sea by Hanjin’s bankruptcy.

While having a passenger outside of the crew on a container ship is not unheard of, it is not an everyday occurrence. It’s obviously not an everyday occurrence to have a major carrier file for receivership either. Hanjin’s bankruptcy is nearly unprecedented. It even took what Access Gallery describes as a “highly unconventional” artist residency to get Moss on the Hanjin Geneva right when the shipping line that operates the vessel went under and couldn’t afford to get the ship to port.

Yes, nothing was everyday that got Rebecca Moss stuck at sea, and of course, she is not your everyday artist either.

Moss’s specialty is the absurd.

Some might even describe her art as bizarre: jumping on a pogo stick in a puddle while dressed like a frog, spinning rubble on a record player in front of the remains of WWII concrete pillbox defenses, rolling down a hill onto a patch of set mousetraps

“The predicament in which I currently find myself is extraordinarily absurd,” Moss was quoted by the Wall Street Journal as writing in an email from the ship.

This situation has plunged Rebecca Moss into the international limelights with articles like the Wall Street Journal one referenced above. What’s really amazing is that against incalculable odds, an absurdist is put in this crazily absurd situation. The situation is undoubtedly perfect for Moss’s sensibilities.

A statement she released on Facebook reinforces that:

For those familiar with my art practise, and with my sense of humour, this situation is oddly suited to me and I am sure will inform my work for years to come. In my work I devise slapstick scenarios that seek to understand a dynamic between humanity and a landscape by pushing situations to a point of crisis….

Surely, we can all agree that this turn of events has enormous potential, and is strangely tailored to my interests…

Facebook provided much insight into Moss’s situation, including the following anecdote that would fit perfectly in an existentialist absurdism crossover of a Samuel Becket play and episode of Seinfeld:

“My favourite question was from a company in America, direct to my Facebook, inquiring about frozen french fries that are currently with us in the containers,” [Moss] said. “In a strange turn of events, I ended up becoming a spokeswoman for the plight of frozen french fries.”

A person who works hard to create “scenarios that seek to understand a dynamic between humanity and a landscape by pushing situations to a point of crisis” fell right into such a scenario.

That made Rebecca Moss’s story worthy of a Universal Bizargo post.

On Saturday, Moss’s absurd adventure at sea ended when she was able to disembark in Tokyo, another article from the Wall Street Journal reported.

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Previous Universal Bizargo stories:

UNIVERSAL BIZARGO: HUNGOVER MAN WAKES IN SEALED SHIPPING CONTAINER

UNIVERSAL BIZARGO: MAN TRIES TO SHIP WEAPONS TO LEBANON IN CAR PARTS

UNIVERSAL BIZARGO: MYSTERY OF THE VANISHING SHIP & PHANTOM PIRATES

UNIVERSAL BIZARGO: JAG STOLEN NEARLY 50 YEARS AGO FOUND ON CARGO SHIP

UNIVERSAL BIZARGO: AMERICAN SHIPPING HUMAN BODY PARTS FROM BANGKOK

 

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Carriers Should Have Spent More to Make Ships Better Not Bigger https://www.universalcargo.com/carriers-should-have-spent-more-to-make-ships-better-not-bigger/ https://www.universalcargo.com/carriers-should-have-spent-more-to-make-ships-better-not-bigger/#comments Thu, 15 Sep 2016 20:13:42 +0000 https://www.universalcargo.com/?p=7875 With the collapse of Hanjin Shipping, all eyes in the international shipping industry have turned their gaze on carriers. For years, carriers have struggled to be profitable, suffering huge losses. One of the biggest factors that make profitability difficult for shipping lines to achieve is downward pressure on freight rates. Freight rates are simply too low […]

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From Megaships to Digitization

Picture: Ruth Hartnup

With the collapse of Hanjin Shipping, all eyes in the international shipping industry have turned their gaze on carriers. For years, carriers have struggled to be profitable, suffering huge losses.

One of the biggest factors that make profitability difficult for shipping lines to achieve is downward pressure on freight rates. Freight rates are simply too low for carriers to make a profit against their cost margins.

The previous blog refutes the idea that shippers share the blame for this downward freight rate pressure that has played such a huge role in carriers losing money and Hanjin going bankrupt.

Overcapacity, where there is much more container ship space than cargo to fill it, is the largest factor in pushing freight rates down. It’s basic supply and demand. You can read in that last blog how investing so heavily in megaships, dramatically increasing overcapacity and downward pressure on freight rates, was a big mistake carriers made.

Rather than spend this blog rehashing why investing in bigger and bigger ships was a bad decision by carriers, let’s look at where the shipping lines are beginning to invest that is actually a good idea. It’s a good idea that they should have been focused on instead of their megaship craze.

The Economist published an article called A.P. Moller-Maersk Profits Overboard. The article gets into the world’s largest carriers’ investment strategies. What stands out is the carriers’ shift from building bigger ships to making its ships “smarter” with digitization. Finally.

Maersk Group’s big new idea is to make its existing ships smarter. Mr Toft says Maersk Line will focus on using these ships better by embracing the “age of digitisation”. This is an area in which shipping lags well behind other sectors, such as aerospace. Whereas a modern jetliner creates several terabytes of data a day, it takes the average cargo ship 50 days to produce a single one. Most ships do not even have basic sensors to ensure their hatches are closed before leaving port. Until very recently the industry resisted using data properly, says Martin Stopford, president of Clarkson Research, part of a shipbroker. Now it cannot afford to ignore systems that offer the chance of reducing costs by up to 30% by better co-ordinating the interaction of ships and shore, he says.

The international shipping industry has long lagged behind technology. At the ports it can be somewhat understood, as unions have often fought against new technologies like automation for fear of the loss of jobs; however, it’s hard to understand why shipping lines have avoided new technologies that could benefit them a great deal.

Some might be presumptive and think it is intentional on the part of carriers in order to maintain the lack of transparency shipping lines enjoy. However, it is more likely caused by a lack of ingenuity in the culture of shipping lines, as an executive of one of Maersk’s rival carriers was quoted in the Economist article as saying, “We just watch what Maersk does and copy it.”

Luckily, carriers should soon be copying their way in the correct direction when it comes to technology, as the article describes Maersk’s shift to digitization:

Maersk Line is retrofitting its ships to collect more data. Last year it installed sensors on its containers that track their location and contents. That makes it easier for port terminals to handle them, so ships can leave and start earning money again more quickly. Software also works out how to stack containers on ships more efficiently.

The Danish firm’s three-year-old analytics team has also worked on discovering the optimal speed and course for its ships. They are trying to cut its big repair bills, too. The hope is that predictive maintenance could achieve this quickly. Instead of waiting for ship engines to break down, sensors will report when they need care.

Digitization passes a test carriers seemed to skip with their investments in megaships. A business should ask itself before moving forward with a strategy whether or not that strategy benefits the business’s consumers, partners, and industry as a whole. Even more importantly, does the strategy impact the business’s partners, consumers, or industry negatively?

Ideally, a business strategy should benefit the business, its partners, its consumers, and its industry as a whole.

Unlike the trend toward megaships, a trend toward better technology with digitization from carriers is good for the rest of the industry. Digitization should lead to increased transparency and better reliability in international shipping instead of the huge cost increases and congestion at ports that megaships caused.

Back in May, Martyn Wingrove wrote on Container Shipping and Trade:

Digitisation of vessels and fleets will be the main driver of innovation and business in shipping for the next 10 years, according to class society DNV GL. It predicts further deployment of sensors across fleets of ships, greater levels of remote internet connectivity and developments in data analytics in the future.

It’s good to see a trend from the carriers that could be so positive for the industry.

Just imagine if the billions of dollars carriers spent on building megaships instead went into new technologies for the ships they already had.

The result would have been less capacity, higher freight rates, and cost savings for shipping lines.

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Why Blaming Shippers for Hanjin’s Demise is Ridiculous https://www.universalcargo.com/why-blaming-shippers-for-hanjins-demise-is-ridiculous/ https://www.universalcargo.com/why-blaming-shippers-for-hanjins-demise-is-ridiculous/#comments Tue, 13 Sep 2016 20:06:20 +0000 https://www.universalcargo.com/?p=7827 Following an analysis on Hanjin’s demise released by SeaIntel, shipping blogs and news sources are posting headlines laying responsibility for the major carrier’s bankruptcy on the shoulders of shippers. The articles don’t put all the blame on shippers, but headlines like “Shippers ‘played a major role in Hanjin collapse’” from Lloyd’s Loading List certainly shade the […]

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carriers create money sucking whirlpool

An illustration from Jules Verne’s essay “Edgard Poë et ses oeuvres” (Edgar Poe and his Works,1862) drawn by Frederic Lix or Yan’ Dargent

Following an analysis on Hanjin’s demise released by SeaIntel, shipping blogs and news sources are posting headlines laying responsibility for the major carrier’s bankruptcy on the shoulders of shippers.

The articles don’t put all the blame on shippers, but headlines like “Shippers ‘played a major role in Hanjin collapse’” from Lloyd’s Loading List certainly shade the situation with shippers being at fault.

Blaming Hanjin’s demise on shippers is ludicrous.

We’ll do future blogs discussing SeaIntel’s 33 page analysis on Hanjin’s collapse, but today we’ll talk about the topic of one small section of the analysis that inspired headlines like the one above.

The premise of the section is that shippers have a share in the blame of Hanjin’s collapse and carriers’ struggles in general.

Obviously, SeaIntel is not laying all the blame on shippers with the topic only getting a small section on page 9 of the analysis, and SeaIntel even acknowledges that the point of view might be controversial. I wouldn’t say controversial. I would say wrong.

The point the analyst makes can be understood; however, blaming shippers for Hanjin’s demise would be a very poor interpretation of the circumstances that led to the biggest bankruptcy in international shipping history.

Before I get into where the blame for Hanjin’s demise belongs, here is the section of SeaIntel’s analysis that points a finger a shippers:

It is clear that the shippers with cargo being caught up in this debacle have some tough challenges in the supply chains right now.

However, if we are being objective about this, the shippers are not without their part in creating this situation.

The relentless pressure on rates in recent years have created a situation where the entire carrier industry is heavily loss-making. And it is of course impossible to see a situation where you can both have a stable supply chain and at the same time ensure that the providers of said supply chain are loss making.

We are aware this might be a controversial point of view seen from shipper side, and we are not “blaming” them alone – it takes two to tango. Yes, the carriers have engaged in price wars, and it is the carriers that at times unprovoked offered even lower rates. But we are saying that an industry where one part obtains significant savings while the other part is loss making is not a set-up which is long-term viable.

Hence for the combined collective of global shippers they are facing a future where they have to start planning for increasing costs for ocean shipping compared to the current levels – the alternative is a situation where we will indeed again see large-scale supply chain disruptions.

So here’s the gist of this argument:

Low freight rates have made it difficult for carriers to make a profit, causing huge losses. These huge losses caused Hanjin’s collapse. Since shippers are accepting these low freight rates, even when they don’t cause them, shippers are partially to blame for carriers losing money and Hanjin’s demise.

The section also included the phrase “relentless pressure on rates” after saying “shippers are not without their part in creating this situation,” suggesting that this relentless downward pressure on freight rates comes from shippers.

Shippers did not create this downward pressure on freight rates.

Shippers are the consumers, so they absolutely want the lowest rates they can get. This is economics 101. Supply and demand. The consumer creates demand while looking for the best product or service at the best price.

Placing the blame on consumers for a business going out of business is crazy.

There are two places where the blame lies for carriers losing billions of dollars over the last several years and finally one of the major players going into bankruptcy: the carriers themselves and government interference.

The biggest fault falls on carriers. Carriers increased supply way over demand.

Grossly overestimating how much growth in demand the international shipping industry would experience, carriers invested obscenely in increasing capacity, and stampeded toward the creation and use of megaships. While it would be unfair to expect carriers to foresee the global recession that hit in 2009, which helped dropped demand way below expectations (and capacity), it is not unfair to call their business practices dubious.

I’m not even talking about carriers’ reputation for poor service or all the price fixing that major carriers have been found guilty of lately but of carriers ignoring the shipping industry’s needs that makes their actions dubious.

The decision to have megaships built in general was a bad move on the part of carriers. With ports around the world not equipped to handle the huge ships carriers have commissioned and put on the water, as well as the increase of shippers’ risk with having so much cargo on one ship, among other issues, the only ones who could have benefitted from megaships were carriers. It’s okay for businesses to make decisions that would benefit themselves (in this case, reducing costs by being able to move more cargo in single trips), but when not considering the needs of consumers and business partners (shippers and ports), such decisions often turn out poorly. And so it did for carriers.

The megaship trend became a series of really poor decisions by carriers when demand was obviously not increasing at expected rates, but carriers continued to invest heavily in having megaships built anyway. Because carriers were so enamored with these huge ships, they kept buying them when they didn’t really have the money, when the ships created huge amounts of overcapacity, and when the rest of the industry had to spend heavily and suffer congestion to handle the ships.

Carriers ballooned supply way over demand, creating the overcapacity problem that puts such heavy downward pressure on freight rates. Shippers didn’t do that.

It seems that the big carriers intentionally increased overcapacity to lower rates in order to drive out competition. The SeaIntel analysis’ section on shippers sharing the blame even mentions how carriers engaged in rate wars and “unprovoked offered even lower rates” to shippers.

Back in 2011, we posted a blog on Maersk smugly enduring low freight rates to outlast its competitors, in which its CEO was quoted as saying, “It would be natural if the smaller players in this business, or their banks, start questioning whether it’s a good idea to keep competing.”

Maersk is the biggest player in the international shipping industry when it comes to carrier capacity, so technically, that would make all the other carriers the smaller players in the business, no matter how big that carrier actually is.

While shippers are not to blame, the fault for this mess does not completely rest on carriers.

As years with carriers suffering billions of dollars in loss passed, many carriers should have gone under already. But through the years of poor business practices from carriers, governments have stepped in to bail the giant companies out, keeping them afloat.

Government interference allowed carriers to continue practicing business in ways that create giant money-sucking whirlpools without going under. But eventually a bank and government had to say enough is enough to throwing money away like dumping millions of dollars into the whirlpool of Charybdis.

And that’s why Hanjin collapsed.

 

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Report Those Taking Advantage of Hanjin Collapse to FMC https://www.universalcargo.com/report-those-taking-advantage-of-hanjin-collapse-to-fmc/ https://www.universalcargo.com/report-those-taking-advantage-of-hanjin-collapse-to-fmc/#comments Thu, 08 Sep 2016 17:13:35 +0000 https://www.universalcargo.com/?p=7822 The collapse of Hanjin Shipping, international shipping’s 7th largest carrier by volume, is causing disruption, increased freight rates, and perhaps an opportunity for some to illegally take advantage of shippers. Don’t you wish you had someone looking out for you, shippers? Well, of course, you do have an agency responsible for protecting you against predatory practices […]

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FMC Hanjin Collapse

FMC Hanjin Collapse Hanjin Ship pic: Flickr User Ingrid Taylor

The collapse of Hanjin Shipping, international shipping’s 7th largest carrier by volume, is causing disruption, increased freight rates, and perhaps an opportunity for some to illegally take advantage of shippers.

Don’t you wish you had someone looking out for you, shippers? Well, of course, you do have an agency responsible for protecting you against predatory practices in the international shipping industry. There’s the Federal Maritime Commission (FMC).

The Federal Maritime Commission is responsible for regulating the Nation’s international ocean transportation for the benefit of exporters, importers, and the American consumer. The Commission’s mission is to foster a fair, efficient, and reliable international ocean transportation system while protecting the public from unfair and deceptive practices.

Hanjin’s bankruptcy is a legal matter the FMC cannot actually get involved with; however, the agency is carefully monitoring the situation to make sure marine terminal operators, NVOCCs, freight forwarders, and other shipping lines are not taking advantage of shippers.

Shippers should help in this endeavor.

There are increases in freight rates as well as new fees and cargo disruptions hitting shippers as a result of Hanjin Shipping’s collapse; however, unreasonable increases in cost or decreases in services need to be reported to the FMC.

The FMC wants to hear from shippers as quickly as possible if they think a business or entity in the international shipping industry is taking advantage of the situation and breaking the Shipping Act of 1984.

There are two press releases the FMC put out on the subject of Hanjin’s collapse that encourages shippers to report “improper behavior” (as well as how to do so).

The contents of the press releases are below.

Press Release #1 – SEP 02, 2016
FMC Establishes Protocol for all Public Communications Related to Hanjin Shipping Disruptions:

Contact: John K. DeCrosta, 202-523-5911

The Federal Maritime Commission is aware that Hanjin Shipping has advised its customers that the company’s application to engage in a voluntary restructuring process was denied by its creditors. The Commission is also aware that Hanjin Shipping has disclosed it has filed for court receivership and that these two actions combined have caused uncertainty among the American shipping community about cargo in transit with Hanjin Shipping.

For U.S.-based shippers and cargo owners trying to determine what options they have, the Commission shares this initial guidance:

  • This is a non-United States legal matter at the moment. Hanjin Shipping is a company located in the Republic of Korea and has applied for receivership in that country.
  • This is a legal matter and as such, it is important that affected parties, including shippers, consult with their attorneys on what remedies are available to them.
  • The Commission will be vigilant in watching for, and quick to act on, any improper behavior by other carriers and regulated parties (such as marine terminal operators, non-vessel-operating-common-carriers, and freight forwarders) that would constitute violations of the Shipping Act.
  • The Federal Maritime Commission has no jurisdiction when it comes to resolving bankruptcy claims and does not intercede in legal actions between third parties that will be heard by the courts.
  • The Commission is concerned about the operational and competitive impacts of Hanjin Shipping’s status on the shipping industry broadly. Our staff will be closely monitoring for the foreseeable future for any developments that might impact shipping markets.

The Commission will issue further updates and guidance as circumstances and developments warrant.

Press Release #2 – SEP 01, 2016
Statement Regarding Status of Hanjin Shipping:

Contacts:

John K. DeCrosta, 202-523-5911 (Media & Legislative Branch)
CADRS, 1-866-448-9586 (Reporting Shipping Act Violations & Requests for Assistance)

The Federal Maritime Commission has established a protocol for communicating requests for assistance to the agency concerning developments related to the status of Hanjin Shipping.

Allegations of Shipping Act violations or requests for assistance related to retrieving or receiving cargo in transit should be communicated in writing via:

Email: complaints@fmc.gov

All correspondence should include “URGENT—HANJIN SHIPPING” in the subject line.

The Commission continues to monitor the operational and competitive impacts of this disruption and is particularly interested in learning of any conduct by any regulated entity that may violate the Shipping Act. Members of the shipping public are encouraged to share with the agency any specific allegations of illegal behavior.

When writing the Commission on this matter, the following information should be provided:

Name (If you are assisting someone else, also provide his/her name(s) and your relationship);
Company Name(s), if applicable;
Contact Information and/or Representative(s) (phone, fax, address including zip code, and email, if available)
Name of Person or Company with whom you are having the problem
Contact Information for that Company or Party, including Individual’s Name(s)
Your request should also include:

A full description of the matter (including a description of any attempts already made to resolve the problem);
Your desired solution;
All relevant documentation (e.g., contract, bill of lading, proof of payment, bookings, Order for Service, invoice for the services, emails about the issue, dock receipts, arrival notices, invoices, terminal appointments, terminal operating hours/stoppages, etc.);
A description of the cargo;
The ports of origin and destination (including terminal, railramp, etc.); and
The date of shipment or sailing.
Emails will be referred to the appropriate office with the Federal Maritime Commission for review and assessment of any potential agency action.

The Commission will issue further updates and guidance as circumstances develop and warrant.

The Federal Maritime Commission is responsible for regulating the Nation’s international ocean transportation for the benefit of exporters, importers, and the American consumer. The Commission’s mission is to foster a fair, efficient, and reliable international ocean transportation system while protecting the public from unfair and deceptive practices.

Please do report unreasonable and illegal practices to the FMC.

Click Here for Free Freight Rate Pricing

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Hanjin Collapses, And You Won’t Believe What Happens Next! https://www.universalcargo.com/hanjin-collapses-and-you-wont-believe-what-happens-next/ https://www.universalcargo.com/hanjin-collapses-and-you-wont-believe-what-happens-next/#comments Tue, 06 Sep 2016 07:15:57 +0000 https://www.universalcargo.com/?p=7821 Despite the fact that Hanjin Shipping has been in financial trouble for a long time, the ocean carrier’s collapse last week is major news. The entire shipping industry is affected by South Korea’s largest shipping company filing for court receivership. In the last blog, we covered 3 ways shippers are affected by the Hanjin collapse. We […]

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YouTube Video

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Despite the fact that Hanjin Shipping has been in financial trouble for a long time, the ocean carrier’s collapse last week is major news.

The entire shipping industry is affected by South Korea’s largest shipping company filing for court receivership. In the last blog, we covered 3 ways shippers are affected by the Hanjin collapse. We especially had U.S. shippers in mind, but the effects apply to shippers around the world.

There is this mindset that the really big shipping lines in international shipping are too big to fail. There’s actually good reason for this mindset. Operating losses in the container shipping industry were close to $20 billion in 2009. Yet somehow, all the major carriers kept operating rather than going bankrupt. Drewry called this situation of carriers somehow surviving when they should have died in bankruptcy a zombie apocalypse.

How can anyone be surprised when one of these “zombie” carriers finally collapses? I feel like we’re in a sequel to The Big Short. “There’s a bubble!”

Overnight, Hanjin’s fleet got sidelined because of the company’s receivership filing. Ships are being stranded around the world as ports refuse to take them, while many Hanjin ships are being detained. For many shippers transporting goods through Hanjin, there is no way to retrieve their cargo until the matter is settled.

Here’s the real shocker.

Many shippers are learning that their cargo, even though they did not ship through Hanjin, is stuck on Hanjin ships. Here’s how: carrier alliances.

Carrier alliances are those vessel sharing agreements between these big shipping companies that the carriers told everyone would result in better service for shippers while saving the carriers money in operating costs. Not only have carrier alliances not made service better for shippers, this one is costing its customers.

Hanjin belonged to the CKYHE alliance with Cosco, “K” Line, Yang Ming, and Evergreen. Now shippers who are customers of these other shipping lines are at risk of having their cargo on a Hanjin ship and could face serious delays and fees in order to get their cargo.

Fees on top of delays? Here’s a quick example:

When Hanjin’s court receivership went down, the WBCT terminal at the Port of Los Angeles announced Hanjin put all containers on a hold, so Hanjin containers could not be released. The Hanjin hold is being removed from containers now, but the terminal is charging an Import Delivery Fee of $376.37 per container. Who’s going to feel that fee? Shippers.

 

This is only one way shippers are seeing cost increases from the Hanjin collapse.

Across the industry, carriers are using the decrease in capacity caused by Hanjin’s receivership to push rate increases. We’ll continue to monitor the situation and keep you informed about the fallout of Hanjin’s collapse.

Click Here for Free Freight Rate Pricing

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Hanjin Collapses – How Badly Will it Hurt U.S. Shippers? https://www.universalcargo.com/hanjin-collapses-how-badly-will-it-hurt-u-s-shippers/ https://www.universalcargo.com/hanjin-collapses-how-badly-will-it-hurt-u-s-shippers/#comments Thu, 01 Sep 2016 09:48:34 +0000 https://www.universalcargo.com/?p=7815 There could not have been a worse time for one of international shipping’s major ocean carriers to sink than peak season. However, that’s exactly what’s happened with Hanjin Shipping. South Korea’s biggest carrier suddenly–and not so suddenly–collapsed this week. Reuters reported (as published by CNBC: Hanjin on Wednesday filed for court receivership after its banks decided […]

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YouTube Video

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

There could not have been a worse time for one of international shipping’s major ocean carriers to sink than peak season. However, that’s exactly what’s happened with Hanjin Shipping.

South Korea’s biggest carrier suddenly--and not so suddenly--collapsed this week.

Reuters reported (as published by CNBC:

Hanjin on Wednesday filed for court receivership after its banks decided to end financial support, and ports from China to Spain, the United States and Canada have refused entry to Hanjin vessels in what is traditionally the industry’s busiest season ahead of the year-end holidays.

Perhaps it is the timing that is causing Hanjin’s bankruptcy filing to send shockwaves through the international shipping industry. It was no secret that Hanjin was struggling. In fact, regular readers of this blog aren’t shocked at all by Hanjin’s bankruptcy after reading posts such as these this summer:

THINGS GET WORSE FOR HANJIN

S. KOREAN CARRIERS HANJIN & HMM COULD BE FORCED INTO MERGER

Whether U.S. shippers expected it or not, Hanjin going into receivership affects them. Right now is the busiest time for international shipping as shippers gear up for the holiday season, and that drastically increases the impact of Hanjin’s bankruptcy.

Here are 3 ways shippers are impacted by this major bankruptcy:

Shipment Disruption/Delays

Shippers with cargo on Hanjin ships right now are in a tough spot.

The Reuters quote at the top of this post mentions ports in countries around the world, including the U.S., are refusing entry by Hanjin vessels. A Bloomberg article adds some detail about Hanjin cargo ships unable to berth in the U.S.:

Three Hanjin vessels were stranded off the U.S. West Coast, Kip Louttit, executive director of the Marine Exchange of Southern California said. Large container ships that come within 20 miles of the port complex owe the exchange fees of as much as $1,000, while harbor pilots and tug-boat operators also receive payments for their services to incoming vessels, Louttit said in a telephone interview, without elaborating on the reason for the status of the Hanjin ships.

How long it will take those vessels, with U.S. shippers’ cargo onboard, to get cleared to dock is anyone’s guess.

While this is a major delay for shippers with goods on these ships, delays could also trickle to other shippers whose goods are moving through the ports. Sudden off-schedule clearance for these Hanjin cargo vessels to dock and unload could generate some port congestion.

Decreased Capacity

Reuters points out that Hanjin is the world’s seventh-largest container shipper, making this the international shipping industry’s biggest bankruptcy ever in terms of capacity.

We’ve been talking about the industry struggling with overcapacity in this blog for years. Carriers have been struggling with profitability, creating a “something’s gotta give” situation. This is a major give.

While overcapacity is bad for carriers, it is--generally speaking--a good thing for shippers. Peak season, when the most cargo is normally being shipped, is not when shippers want to see capacity decrease.

This capacity issue is not limited to cargo space on vessels importing goods to the U.S. While Hanjin ships aren’t being allowed to dock, ports also are not taking exports that were bound for Hanjin ships. That has exporters in the U.S. scrambling to reroute cargo to other carriers.

Therefore, the supply chain is majorly affected for both U.S. imports and exports.

Trucking has to be rescheduled or changed altogether. There are truckers and trucking companies counting on Hanjin for large bulks of income. These companies could quickly go under altogether, along with Hanjin. With the sudden surge in shipping activity and grabbing at space during the already busy peak season, carriers gain advantage over shippers, and that means…

Increased Freight Rates

Not surprisingly, freight rates from South Korea to the U.S. jumped immediately upon Hanjin’s bankruptcy. The Bloomberg article states:

Freight charges from South Korea surged about 50 percent after Hanjin Shipping filed for court receivership Wednesday, Korea Economic Daily reported, citing shipping industry officials it didn’t identify. The fees on Hanjin’s main shipping route between Busan and Los Angeles have jumped 55 percent to $1,700 per 40-foot equivalent box from $1,100, it said.

The effect on freight rates is further reaching than just that.

With overcapacity, carriers have struggled to make General Rate Increases (GRIs) to fight the downward pressure on freight rates stick.

With thousands of shippers scrambling for cargo space, carriers are standing firm on September GRIs, even announcing such rate increases in light of Hanjin’s bankruptcy. This means shippers can expect to pay more for their international shipping here in September than last month.

So What Happens Now?

We blogged before how South Korea may force a merger between Hanjin and Hyundai Merchant Marine (HMM). Universal Cargo was told in an email from a colleague in Hong Kong that the South Korean government is considering approval of the measure of merging due to the critical nature of this situation.

Either way, it looks like we’re about to see one less major carrier in the ever shrinking competition pool of ocean carriers.

Click Here for Free Freight Rate Pricing

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Hanjin Collapses – How Badly Will it Hurt U.S. Shippers? https://www.universalcargo.com/hanjin-collapses-how-badly-will-it-hurt-u-s-shippers-2/ https://www.universalcargo.com/hanjin-collapses-how-badly-will-it-hurt-u-s-shippers-2/#respond Thu, 01 Sep 2016 09:48:34 +0000 https://www.universalcargo.com/hanjin-collapses-how-badly-will-it-hurt-u-s-shippers-2/ Hanjin Container Ship Photo by: Flickr user Ingrid Taylar There could not have been a worse time for one of international shipping’s major ocean carriers to sink than peak season. However, that’s exactly what’s happened with Hanjin Shipping. South Korea’s biggest carrier suddenly–and not so suddenly–collapsed this week. Reuters reported (as published by CNBC: Hanjin on […]

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Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

There could not have been a worse time for one of international shipping’s major ocean carriers to sink than peak season. However, that’s exactly what’s happened with Hanjin Shipping.

South Korea’s biggest carrier suddenly–and not so suddenly–collapsed this week.

Reuters reported (as published by CNBC:

Hanjin on Wednesday filed for court receivership after its banks decided to end financial support, and ports from China to Spain, the United States and Canada have refused entry to Hanjin vessels in what is traditionally the industry’s busiest season ahead of the year-end holidays.

Perhaps it is the timing that is causing Hanjin’s bankruptcy filing to send shockwaves through the international shipping industry. It was no secret that Hanjin was struggling. In fact, regular readers of this blog aren’t shocked at all by Hanjin’s bankruptcy after reading posts such as these this summer:

THINGS GET WORSE FOR HANJIN

S. KOREAN CARRIERS HANJIN & HMM COULD BE FORCED INTO MERGER

Whether U.S. shippers expected it or not, Hanjin going into receivership affects them. Right now is the busiest time for international shipping as shippers gear up for the holiday season, and that drastically increases the impact of Hanjin’s bankruptcy.

Here are 3 ways shippers are impacted by this major bankruptcy:

Shipment Disruption/Delays

Shippers with cargo on Hanjin ships right now are in a tough spot.

The Reuters quote at the top of this post mentions ports in countries around the world, including the U.S., are refusing entry by Hanjin vessels. A Bloomberg article adds some detail about Hanjin cargo ships unable to berth in the U.S.:

Three Hanjin vessels were stranded off the U.S. West Coast, Kip Louttit, executive director of the Marine Exchange of Southern California said. Large container ships that come within 20 miles of the port complex owe the exchange fees of as much as $1,000, while harbor pilots and tug-boat operators also receive payments for their services to incoming vessels, Louttit said in a telephone interview, without elaborating on the reason for the status of the Hanjin ships.

How long it will take those vessels, with U.S. shippers’ cargo onboard, to get cleared to dock is anyone’s guess.

While this is a major delay for shippers with goods on these ships, delays could also trickle to other shippers whose goods are moving through the ports. Sudden off-schedule clearance for these Hanjin cargo vessels to dock and unload could generate some port congestion.

Decreased Capacity

Reuters points out that Hanjin is the world’s seventh-largest container shipper, making this the international shipping industry’s biggest bankruptcy ever in terms of capacity.

We’ve been talking about the industry struggling with overcapacity in this blog for years. Carriers have been struggling with profitability, creating a “something’s gotta give” situation. This is a major give.

While overcapacity is bad for carriers, it is–generally speaking–a good thing for shippers. Peak season, when the most cargo is normally being shipped, is not when shippers want to see capacity decrease.

This capacity issue is not limited to cargo space on vessels importing goods to the U.S. While Hanjin ships aren’t being allowed to dock, ports also are not taking exports that were bound for Hanjin ships. That has exporters in the U.S. scrambling to reroute cargo to other carriers.

Therefore, the supply chain is majorly affected for both U.S. imports and exports.

Trucking has to be rescheduled or changed altogether. There are truckers and trucking companies counting on Hanjin for large bulks of income. These companies could quickly go under altogether, along with Hanjin. With the sudden surge in shipping activity and grabbing at space during the already busy peak season, carriers gain advantage over shippers, and that means…

Increased Freight Rates

Not surprisingly, freight rates from South Korea to the U.S. jumped immediately upon Hanjin’s bankruptcy. The Bloomberg article states:

Freight charges from South Korea surged about 50 percent after Hanjin Shipping filed for court receivership Wednesday, Korea Economic Daily reported, citing shipping industry officials it didn’t identify. The fees on Hanjin’s main shipping route between Busan and Los Angeles have jumped 55 percent to $1,700 per 40-foot equivalent box from $1,100, it said.

The effect on freight rates is further reaching than just that.

With overcapacity, carriers have struggled to make General Rate Increases (GRIs) to fight the downward pressure on freight rates stick.

With thousands of shippers scrambling for cargo space, carriers are standing firm on September GRIs, even announcing such rate increases in light of Hanjin’s bankruptcy. This means shippers can expect to pay more for their international shipping here in September than last month.

So What Happens Now?

We blogged before how South Korea may force a merger between Hanjin and Hyundai Merchant Marine (HMM). Universal Cargo was told in an email from a colleague in Hong Kong that the South Korean government is considering approval of the measure of merging due to the critical nature of this situation.

Either way, it looks like we’re about to see one less major carrier in the ever shrinking competition pool of ocean carriers.

Click Here for Free Freight Rate Pricing


Source: UC Blog

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Don’t Turn Your Overseas Shipment into a High Seas Adventure! https://www.universalcargo.com/dont-turn-your-overseas-shipment-into-a-high-seas-adventure-2/ https://www.universalcargo.com/dont-turn-your-overseas-shipment-into-a-high-seas-adventure-2/#respond Tue, 30 Aug 2016 13:00:40 +0000 https://www.universalcargo.com/dont-turn-your-overseas-shipment-into-a-high-seas-adventure-2/ Shipping internationally is much more inherently challenging than shipping domestically; therefore, it is vitally important beforehand that you do the necessary research and strategic planning to ensure the success of your shipment. One of the most important aspects to consider when planning an international shipment is how you are going to transport your goods. To […]

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Shipping internationally is much more inherently challenging than shipping domestically; therefore, it is vitally important beforehand that you do the necessary research and strategic planning to ensure the success of your shipment.

One of the most important aspects to consider when planning an international shipment is how you are going to transport your goods.

To do this in the most cost-effective manner, you need to determine the various modes of transportation available (i.e. sea vs. air), their costs, the time each mode will take for your shipment to arrive, and the potential safety risks to your cargo—and then weigh the pros and cons of each.

Depending upon how quickly you need your shipment to arrive, you may have limited choices.

International Shipping air, ocean, truck, van

International Shipping air, ocean, truck, van

It’s important to keep in mind that delays can occur more frequently with international shipping than with domestic shipments (without it being the fault of the shipping company), and consequently you may need to build in extra time for unexpected delays when making your decision.

Keep in mind when considering costs that there will be fees to pay to Customs as well as Tariffs–and these fees can vary a great deal depending upon the value and nature of the products. Customs also has a variety of regulations as well as paperwork for shippers to complete.

USING THE RIGHT CARGO CONTROL AND PACKAGING TO PROTECT YOUR SHIPMENT

THE most important goal when shipping internationally is doing everything possible to ensure that your shipment arrives safely and free from injury.

The packaging methodology is different from that of regular household and domestic moves in that you often need to protect your shipments from the sea air as well as from the movement inside of containers. Therefore, it is vital to use absolutely dependable and strong Cargo Control to keep your cargo well restrained, as well as the right packaging to protect your goods from any sort of injury.

Nothing can provide you with a 100% guarantee that your shipment will arrive in perfect condition, which is why purchasing insurance is always a good idea. However, much can be done to help ensure the safety of your shipment during the packing process. Here are some ideas to keep in mind:

Corrugated:

The quality of one’s corrugated boxes and their liner boards always makes a significant difference when packing for any sort of move.

Moving boxes can be deceptive, as two boxes can appear similar to the untrained eye on the outside, but be very different in terms of their respective strength, durability, and ability to protect–especially during the ordeal of a major move.

The strength of a corrugated moving box is dependent upon many factors. These include the number and thickness of the flutes, the number of walls (is the box single wall, double wall or tri-wall), the wood fiber used during the manufacturing process, and the percentage of recycled vs. virgin paper. Each of these individual factors plays a role in determining the ultimate quality of your corrugated box.

international shipping cargo ship port

international shipping cargo ship port

When shipping internationally, it’s even more essential to make absolutely sure that you are getting superior, professional-grade corrugated boxes that can withstand crushing and ripping during the stacking and moving process. You need boxes that have earned at least a 32 on the ECT Crush test.

There are several specialty corrugated boxes that international movers are finding to be particularly helpful. These include well-made dish-packs, wardrobe cartons, flat-screen TV boxes, mirror cartons, and sofa boxes. Also very helpful are 48 inch corrugated rolls and 4 X 8 sheets of corrugated.

If you are using an LDN container made from wood, rather than a corrugated box, make sure that you have a heat treated pallet, and that if you are using a type 2 lift van that it is of excellent quality and has received international approvals.

Packaging:

In addition to obtaining quality corrugated boxes, it is important to use quality protective packaging materials in preparation for an international shipment. Two excellent choices for wrapping are Kraft Paper and Orca Wrap.

Orca Wrap is a foam laminate sheet made from polypropylene that has the superb advantage of ventilation holes in the foam. This gives the packaging the ability to actually “breath,” which helps prevent off-gassing and your cargo from “sweating.” Orca Wrap also provides you with excellent cushioning protection.

It is also important not to use 1 ply paper padding but rather a paper pad that is at least 2 ply. 3 ply is even more effective, and some movers will double-up on their use of the 2 ply, adding additional layers of protection while still using 2 ply. As in the case when you select your corrugated boxes, you also want to look for quality paper pads that are dependable and whose sheets you can trust to be uniform and of consistent size.

Finally, furniture moving pads may also be of great help in ensuring the safety of your move.

The best type of moving pad is made from a poly-cotton blend as that found in the Dreadnaught Moving Pad, and when adhered to furnishings or objects with movers’ rubber bands, your shipment will receive a great deal of cushioning protection.

Click Here for Free Freight Rate Pricing

 

About Author:

Mark Hildreth

Mark Hildreth

Mark Hildreth has worked as the salesperson for New Haven Moving Equipment for over two decades and is a former mover and current consultant and speaker to movers on many topics related to domestic and international moving and shipping. Connect via toll free (855) 557-7237 OR on Facebook & YouTube.

 

If you would like to write a guest post or share an infographic or video that relates to international shipping, please contact us!

 Guest Blog


Source: UC Blog

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Blue Cut Fire Disrupts Ports of Los Angeles & Long Beach Cargo https://www.universalcargo.com/blue-cut-fire-disrupts-ports-of-los-angeles-long-beach-cargo/ https://www.universalcargo.com/blue-cut-fire-disrupts-ports-of-los-angeles-long-beach-cargo/#respond Thu, 18 Aug 2016 18:11:15 +0000 https://www.universalcargo.com/?p=7793 If you haven’t heard yet, the Californian fire season has gotten off to a hot and unfortunate start with what’s been dubbed the Blue Cut Fire. To get a feel for just how bad this fire is all it takes is one sentence from 89.3 KPCC’s AirTalk article on the Blue Cut Fire: The Blue […]

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Photo by Jim Smith, San Bernardino CHP

Blue Cut Fire Photo by Jim Smith, San Bernardino CHP

If you haven’t heard yet, the Californian fire season has gotten off to a hot and unfortunate start with what’s been dubbed the Blue Cut Fire.

To get a feel for just how bad this fire is all it takes is one sentence from 89.3 KPCC’s AirTalk article on the Blue Cut Fire:

The Blue Cut Fire surged Monday to over 30,000 acres, chasing more than 80,000 people from their homes in San Bernardino County, all in just over 24 hours.

It just so happens, fire season lines up with peak season for the shipping industry. That means the Blue Cut Fire is not only devastating for those losing their homes, but extremely painful for the country’s largest ports–the Ports of Los Angeles and Long beach–in terms of container volume.

The fire, which is still uncontrolled, has burned cargo routes to and from the Ports of Los Angeles and Long Beach.

Check out this tweet from the County of Los Angeles:

LA County Tweet Blue Cut Fire

LA County Tweet Blue Cut Fire impacting freight movement

During last year’s peak season, the Ports of Los Angeles and Long Beach suffered big financial damages because of congestion largely aggravated by labor strife during the contentious contract negotiations between the ILWU and PMA. Now, the Ports of Long Beach and Los Angeles are looking at the danger of another peak season of congestion and financial damage.

Of course, the ports are not the only ones who feel these financial impacts. Congestion and disruptions to the supply chain are felt by everyone involved in the shipping industry, including truckers and shippers, and the damage also affects local, state, and even the national economy.

According to an article from the Sun, the Blue Cut Fire, stopping cargo flow through an important shipping corridor, could cost California’s shipping industry millions of dollars a day. Here’s an excerpt from the article that describes how shipping is being impacted:

“This is a huge corridor that is being impacted,” said Eric Sauer, vice president of the California Trucking Association. “It’s going to have a trickle effect from the ports on.”

“It’s too preliminary to quantify the full cost to the trucking industry, but it could cost up to $1 million a day in additional operating costs,” Sauer said.

Interstate 15, the main route between Las Vegas and Southern California, closed down indefinitely around noon Tuesday as flames chased tens of thousands of residents from their homes. The flames forced big-rig truckers to make a tough choice — stop at rest stops and gas stations or divert hundreds of miles east or west.

More than 5,000 cargo trucks use the route daily, carrying everything from fresh produce for supermarket shelves to construction tools en route to Las Vegas and back.

“These are major, major corridors,” said Joe Rajkovacz, a longtime trucker and current spokesman for the Western States Trucking Association. “You are looking at something like a 200-mile diversion for truckers.”

For much of Tuesday and Wednesday, the north-south railroad lines for Union Pacific Railroad and BNSF Railway through the Cajon Pass were shut down, delaying the distribution of millions of dollars’ worth of goods.

This fire could be a major blow for the Ports of Los Angeles and Long Beach, which have been working hard to regain shippers’ trust and market share after the congestion of last year’s peak season.

The ports, along with the other players in the supply chain, have been working hard to avoid major congestion.  So far, it appears they are doing well at keeping the congestion down.

The Long Beach Post reports:

Currently, there is no significant pile up of containers at the terminal, [port spokesman Michael Gold] said, with rail lines working to minimize an overflow. Port officials continue to monitor the fire, looking to rail providers Cal OES for updates on infrastructure damage and repair in the Cajon Pass.

Of course, firefighters are working hard to bring the fire under control. However, this massive fire is a huge challenge that continues to spread. One has to wonder if the ports will be able to keep congestion down as shipping routes continue to be impacted.

For shippers, this spotlights worries of relying on these West Coast ports too heavily during peak season. Diversifying shipments and stocking early for the holiday seasons once again look like good decisions by the many shippers who went that route.

Click Here for Free Freight Rate Pricing

 

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Blue Cut Fire Disrupts Ports of Los Angeles & Long Beach Cargo https://www.universalcargo.com/blue-cut-fire-disrupts-ports-of-los-angeles-long-beach-cargo-2/ https://www.universalcargo.com/blue-cut-fire-disrupts-ports-of-los-angeles-long-beach-cargo-2/#respond Thu, 18 Aug 2016 18:11:15 +0000 https://www.universalcargo.com/blue-cut-fire-disrupts-ports-of-los-angeles-long-beach-cargo-2/ Blue Cut Fire Photo by Jim Smith, San Bernardino CHP If you haven’t heard yet, the Californian fire season has gotten off to a hot and unfortunate start with what’s been dubbed the Blue Cut Fire. To get a feel for just how bad this fire is all it takes is one sentence from 89.3 […]

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Photo by Jim Smith, San Bernardino CHP

Blue Cut Fire Photo by Jim Smith, San Bernardino CHP

If you haven’t heard yet, the Californian fire season has gotten off to a hot and unfortunate start with what’s been dubbed the Blue Cut Fire.

To get a feel for just how bad this fire is all it takes is one sentence from 89.3 KPCC’s AirTalk article on the Blue Cut Fire:

The Blue Cut Fire surged Monday to over 30,000 acres, chasing more than 80,000 people from their homes in San Bernardino County, all in just over 24 hours.

It just so happens, fire season lines up with peak season for the shipping industry. That means the Blue Cut Fire is not only devastating for those losing their homes, but extremely painful for the country’s largest ports–the Ports of Los Angeles and Long beach–in terms of container volume.

The fire, which is still uncontrolled, has burned cargo routes to and from the Ports of Los Angeles and Long Beach.

Check out this tweet from the County of Los Angeles:

LA County Tweet Blue Cut Fire

LA County Tweet Blue Cut Fire impacting freight movement

During last year’s peak season, the Ports of Los Angeles and Long Beach suffered big financial damages because of congestion largely aggravated by labor strife during the contentious contract negotiations between the ILWU and PMA. Now, the Ports of Long Beach and Los Angeles are looking at the danger of another peak season of congestion and financial damage.

Of course, the ports are not the only ones who feel these financial impacts. Congestion and disruptions to the supply chain are felt by everyone involved in the shipping industry, including truckers and shippers, and the damage also affects local, state, and even the national economy.

According to an article from the Sun, the Blue Cut Fire, stopping cargo flow through an important shipping corridor, could cost California’s shipping industry millions of dollars a day. Here’s an excerpt from the article that describes how shipping is being impacted:

“This is a huge corridor that is being impacted,” said Eric Sauer, vice president of the California Trucking Association. “It’s going to have a trickle effect from the ports on.”

“It’s too preliminary to quantify the full cost to the trucking industry, but it could cost up to $1 million a day in additional operating costs,” Sauer said.

Interstate 15, the main route between Las Vegas and Southern California, closed down indefinitely around noon Tuesday as flames chased tens of thousands of residents from their homes. The flames forced big-rig truckers to make a tough choice — stop at rest stops and gas stations or divert hundreds of miles east or west.

More than 5,000 cargo trucks use the route daily, carrying everything from fresh produce for supermarket shelves to construction tools en route to Las Vegas and back.

“These are major, major corridors,” said Joe Rajkovacz, a longtime trucker and current spokesman for the Western States Trucking Association. “You are looking at something like a 200-mile diversion for truckers.”

For much of Tuesday and Wednesday, the north-south railroad lines for Union Pacific Railroad and BNSF Railway through the Cajon Pass were shut down, delaying the distribution of millions of dollars’ worth of goods.

This fire could be a major blow for the Ports of Los Angeles and Long Beach, which have been working hard to regain shippers’ trust and market share after the congestion of last year’s peak season.

The ports, along with the other players in the supply chain, have been working hard to avoid major congestion.  So far, it appears they are doing well at keeping the congestion down.

The Long Beach Post reports:

Currently, there is no significant pile up of containers at the terminal, [port spokesman Michael Gold] said, with rail lines working to minimize an overflow. Port officials continue to monitor the fire, looking to rail providers Cal OES for updates on infrastructure damage and repair in the Cajon Pass.

Of course, firefighters are working hard to bring the fire under control. However, this massive fire is a huge challenge that continues to spread. One has to wonder if the ports will be able to keep congestion down as shipping routes continue to be impacted.

For shippers, this spotlights worries of relying on these West Coast ports too heavily during peak season. Diversifying shipments and stocking early for the holiday seasons once again look like good decisions by the many shippers who went that route.

Click Here for Free Freight Rate Pricing

 


Source: UC Blog

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A Peek at Peak Season https://www.universalcargo.com/a-peek-at-peak-season/ https://www.universalcargo.com/a-peek-at-peak-season/#respond Tue, 16 Aug 2016 17:45:08 +0000 https://www.universalcargo.com/?p=7780 It’s happening right now! Peak season for the international shipping industry. Or is it? Traditionally, August and September are huge months for the international shipping industry as U.S. shippers are revving up for the holiday season. This year, the experts have been tapering expectations for the peak season. August is happening right now, so we […]

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Dockworker and cargo containers

Dockworker and cargo containers

It’s happening right now! Peak season for the international shipping industry. Or is it?

Traditionally, August and September are huge months for the international shipping industry as U.S. shippers are revving up for the holiday season. This year, the experts have been tapering expectations for the peak season.

August is happening right now, so we won’t find out until next month how this big month of the traditional peak season turns out with numbers on cargo containers of goods moved through the ports. However, there are July numbers and general shipping trends to give us a peek at how things might be looking.

While August and September are the prime months of the peak season, things start revving up in July. July’s numbers usually give an idea of what kind of peak season will be delivered in August and September.

Higher numbers in July, particularly good cargo movement growth, are considered a portend of good things to come through the August and September months of the peak season.

So how did July look?

We already posted on blog on the big numbers over at the Port of Oakland.

The problem with the 8.8% year over year growth the Port of Oakland saw in July is that it was majorly bolstered by empty containers. Many think those empty containers are a sign of cargo about to move through the port in August and September while others explain it with the larger ships now being deployed by carriers.

The twin Ports of Los Angeles and Long Beach are the ones really watched to see how the international shipping numbers are trending in the U.S. since they’re the country’s largest ports in terms of container cargo moved.

July numbers at the Ports of Los Angeles and Long Beach are a mixed bag.

The Journal of Commerce (JOC) posted an article on how the Los Angeles and Oakland import volumes bode well for the peak season. We already talked about the Port of Oakland’s July numbers, but that article also cites that the port of Los Angeles saw a 5.15% year over year increase in imports for the month of July.

On the other hand, American Shipper posted an article reporting a 7.7% decrease at the Port of Long Beach for container volumes in July year over year.

While JOC put the positive numbers of the Port of Los Angeles and the Port of Oakland together to give a positive spin to the numbers, others combined the Port of Los Angeles with the Port of Long Beach for a more tempered outlook.

The Wall Street Journal, in an article on the top supply chain and logistics news, had this to say:

This isn’t the way container carriers have hoped to see the peak shipping season starting. Combined imports into Southern California’s ports of Los Angeles and Long Beach slipped 0.3% year-over-year in July, suggesting that retailers remain cautious about restocking inventories even as consumer sales get stronger.

I would lean more toward the numbers being less than an optimal start for the international shipping peak season in the U.S.

Considering the fact that labor strife at the Port of Los Angeles (and all along the West Coast) because of contract negotiations between the PMA and ILWU was causing shippers to start diverting cargo to the East and Gulf Coasts, even the increases seen could be explained away as a return of lost market share.

The congestion of last year caused many retailers to be leery of depending on the peak season to get holiday goods to store shelves on time, causing shippers to stock up inventories. Now, we’ll have to wait and see if the peak season really looks like the peak season this year.

Click Here for Free Freight Rate Pricing

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A Peek at Peak Season https://www.universalcargo.com/a-peek-at-peak-season-2/ https://www.universalcargo.com/a-peek-at-peak-season-2/#respond Tue, 16 Aug 2016 17:45:08 +0000 https://www.universalcargo.com/a-peek-at-peak-season-2/ Dockworker and cargo containers It’s happening right now! Peak season for the international shipping industry. Or is it? Traditionally, August and September are huge months for the international shipping industry as U.S. shippers are revving up for the holiday season. This year, the experts have been tapering expectations for the peak season. August is happening […]

The post A Peek at Peak Season appeared first on Universal Cargo.

]]>
Dockworker and cargo containers

Dockworker and cargo containers

It’s happening right now! Peak season for the international shipping industry. Or is it?

Traditionally, August and September are huge months for the international shipping industry as U.S. shippers are revving up for the holiday season. This year, the experts have been tapering expectations for the peak season.

August is happening right now, so we won’t find out until next month how this big month of the traditional peak season turns out with numbers on cargo containers of goods moved through the ports. However, there are July numbers and general shipping trends to give us a peek at how things might be looking.

While August and September are the prime months of the peak season, things start revving up in July. July’s numbers usually give an idea of what kind of peak season will be delivered in August and September.

Higher numbers in July, particularly good cargo movement growth, are considered a portend of good things to come through the August and September months of the peak season.

So how did July look?

We already posted on blog on the big numbers over at the Port of Oakland.

The problem with the 8.8% year over year growth the Port of Oakland saw in July is that it was majorly bolstered by empty containers. Many think those empty containers are a sign of cargo about to move through the port in August and September while others explain it with the larger ships now being deployed by carriers.

The twin Ports of Los Angeles and Long Beach are the ones really watched to see how the international shipping numbers are trending in the U.S. since they’re the country’s largest ports in terms of container cargo moved.

July numbers at the Ports of Los Angeles and Long Beach are a mixed bag.

The Journal of Commerce (JOC) posted an article on how the Los Angeles and Oakland import volumes bode well for the peak season. We already talked about the Port of Oakland’s July numbers, but that article also cites that the port of Los Angeles saw a 5.15% year over year increase in imports for the month of July.

On the other hand, American Shipper posted an article reporting a 7.7% decrease at the Port of Long Beach for container volumes in July year over year.

While JOC put the positive numbers of the Port of Los Angeles and the Port of Oakland together to give a positive spin to the numbers, others combined the Port of Los Angeles with the Port of Long Beach for a more tempered outlook.

The Wall Street Journal, in an article on the top supply chain and logistics news, had this to say:

This isn’t the way container carriers have hoped to see the peak shipping season starting. Combined imports into Southern California’s ports of Los Angeles and Long Beach slipped 0.3% year-over-year in July, suggesting that retailers remain cautious about restocking inventories even as consumer sales get stronger.

I would lean more toward the numbers being less than an optimal start for the international shipping peak season in the U.S.

Considering the fact that labor strife at the Port of Los Angeles (and all along the West Coast) because of contract negotiations between the PMA and ILWU was causing shippers to start diverting cargo to the East and Gulf Coasts, even the increases seen could be explained away as a return of lost market share.

The congestion of last year caused many retailers to be leery of depending on the peak season to get holiday goods to store shelves on time, causing shippers to stock up inventories. Now, we’ll have to wait and see if the peak season really looks like the peak season this year.

Click Here for Free Freight Rate Pricing


Source: UC Blog

The post A Peek at Peak Season appeared first on Universal Cargo.

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New Chinese Regulation Could Be Extremely Costly for US Exporters https://www.universalcargo.com/new-chinese-regulation-could-be-extremely-costly-for-us-exporters/ https://www.universalcargo.com/new-chinese-regulation-could-be-extremely-costly-for-us-exporters/#respond Thu, 11 Aug 2016 09:31:43 +0000 https://www.universalcargo.com/?p=7773 As the 2016 Olympics in Rio drew closer, many athletes were worried about competing for fear of contracting the Zika virus while in Brazil. Some athletes, including golfer Jason Day and American tennis duo Mike and Bob Bryan, even withdrew from the games according to a Firstpost Sports article. It turns out exporters have more […]

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Aedes Mosquito China Zika Regulation

Aedes Mosquito China Zika Regulation

As the 2016 Olympics in Rio drew closer, many athletes were worried about competing for fear of contracting the Zika virus while in Brazil. Some athletes, including golfer Jason Day and American tennis duo Mike and Bob Bryan, even withdrew from the games according to a Firstpost Sports article.

It turns out exporters have more to worry about from the Zika virus than Olympic athletes do.

China regulation requires exporters from certain countries to fumigate cargo before shipping it to China to ensure the cargo is mosquito free so infected mosquitos cannot bring the disease to China.

Guess what country China just added to the list that requires this extra, and quite possibly very expensive, step from its exporters. That’s right, the United States.

USA Today reports:

In a move that could create export delays and add cost, China is now requiring that imported American goods be mosquito-free to prevent spread of the Zika virus, according to a trade advisory issued Wednesday by one of the world’s largest shipping lines.

The advisory from the Mediterranean Shipping Company (MSC), cites an announcement from the Chinese General Administration of Quality Supervision, Inspection and Quarantine:

“With immediate effect, it means that there is a need to provide a certificate of extermination of mosquito. If no certificate is provided, the buyer must fumigate the cargo at arrival at port of destination.”

If you haven’t heard of the Zika virus, here’s a rundown from the CDC:

– Zika is spread mostly by the bite of an infected Aedes species mosquito (Ae. aegypti and Ae. albopictus). These mosquitoes are aggressive daytime biters. They can also bite at night.

– Zika can be passed from a pregnant woman to her fetus. Infection during pregnancy can cause certain birth defects.

– There is no vaccine or medicine for Zika.

– The Florida Department of Health has identified an area in one neighborhood of Miami where Zika is being spread by mosquitoes.

With it being winter right now in Rio, the mosquito population is so low that Zika infection is very unlikely for athletes and spectators of the games. However, new cases are popping up in the U.S.

There is not a nationwide outbreak or anything, but Zika cases keep getting confirmed in Florida, and KHOU reported the first Zika related death of a baby in the U.S. just happened in Harris County, TX. While KHOU said Texas has 99 Zika infected cases, it also reports there are no infected mosquitos in Texas. The same cannot be said about Florida. The Miami Herald reported yesterday:

The Zika toll, and frustration, rose another notch in Miami-Dade County with the latest local case confirmed by state health officials on Wednesday.

The new case brings the total number of local cases in South Florida to 22. State health officials also reported 14 new travel-related cases, for a total of 439 across the state including the first cases in Bay County.

While many are angry that Congress has not taken action in response to Zika cases in the U.S., China’s action in response to U.S. Zika cases is likely to make exporters angry because of its potentially very costly ramifications.

The Agriculture Transportation Coalition (AgTC) has created a page dedicated to the Zika prevention situation between China and the U.S. that says, “This will most certainly disrupt the US exporter’s ability to deliver goods affordably and on-time to foreign customers in China.”

Much is unknown on just how costly the new regulation from China on U.S. exporters will be, and AgTC put together a good list of questions regarding the situation:

-What will the cost be?
-Who will absorb the cost?
-Will it make US goods uncompetitive?
-What happens to goods that are currently on the water in transit to China?
-Can high volume cargo even fumigate at the scale they operate at?
-Which fumigants are acceptable? Methyl bromide? Phostoxin?
-Which fumigants can work with food-grade products?
-Is it better to fumigate in the US or upon arrival in China?
-Which certification parties are acceptable?
-How much time will it add to the supply chain?

We’ll be keeping a close eye on this situation for you, exporters.

Click Here for Free Freight Rate Pricing

The post New Chinese Regulation Could Be Extremely Costly for US Exporters appeared first on Universal Cargo.

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New Chinese Regulation Could Be Extremely Costly for US Exporters https://www.universalcargo.com/new-chinese-regulation-could-be-extremely-costly-for-us-exporters-2/ https://www.universalcargo.com/new-chinese-regulation-could-be-extremely-costly-for-us-exporters-2/#respond Thu, 11 Aug 2016 09:31:43 +0000 https://www.universalcargo.com/new-chinese-regulation-could-be-extremely-costly-for-us-exporters-2/ Aedes Mosquito China Zika Regulation As the 2016 Olympics in Rio drew closer, many athletes were worried about competing for fear of contracting the Zika virus while in Brazil. Some athletes, including golfer Jason Day and American tennis duo Mike and Bob Bryan, even withdrew from the games according to a Firstpost Sports article. It […]

The post New Chinese Regulation Could Be Extremely Costly for US Exporters appeared first on Universal Cargo.

]]>
Aedes Mosquito China Zika Regulation

Aedes Mosquito China Zika Regulation

As the 2016 Olympics in Rio drew closer, many athletes were worried about competing for fear of contracting the Zika virus while in Brazil. Some athletes, including golfer Jason Day and American tennis duo Mike and Bob Bryan, even withdrew from the games according to a Firstpost Sports article.

It turns out exporters have more to worry about from the Zika virus than Olympic athletes do.

China regulation requires exporters from certain countries to fumigate cargo before shipping it to China to ensure the cargo is mosquito free so infected mosquitos cannot bring the disease to China.

Guess what country China just added to the list that requires this extra, and quite possibly very expensive, step from its exporters. That’s right, the United States.

USA Today reports:

In a move that could create export delays and add cost, China is now requiring that imported American goods be mosquito-free to prevent spread of the Zika virus, according to a trade advisory issued Wednesday by one of the world’s largest shipping lines.

The advisory from the Mediterranean Shipping Company (MSC), cites an announcement from the Chinese General Administration of Quality Supervision, Inspection and Quarantine:

“With immediate effect, it means that there is a need to provide a certificate of extermination of mosquito. If no certificate is provided, the buyer must fumigate the cargo at arrival at port of destination.”

If you haven’t heard of the Zika virus, here’s a rundown from the CDC:

– Zika is spread mostly by the bite of an infected Aedes species mosquito (Ae. aegypti and Ae. albopictus). These mosquitoes are aggressive daytime biters. They can also bite at night.

– Zika can be passed from a pregnant woman to her fetus. Infection during pregnancy can cause certain birth defects.

– There is no vaccine or medicine for Zika.

– The Florida Department of Health has identified an area in one neighborhood of Miami where Zika is being spread by mosquitoes.

With it being winter right now in Rio, the mosquito population is so low that Zika infection is very unlikely for athletes and spectators of the games. However, new cases are popping up in the U.S.

There is not a nationwide outbreak or anything, but Zika cases keep getting confirmed in Florida, and KHOU reported the first Zika related death of a baby in the U.S. just happened in Harris County, TX. While KHOU said Texas has 99 Zika infected cases, it also reports there are no infected mosquitos in Texas. The same cannot be said about Florida. The Miami Herald reported yesterday:

The Zika toll, and frustration, rose another notch in Miami-Dade County with the latest local case confirmed by state health officials on Wednesday.

The new case brings the total number of local cases in South Florida to 22. State health officials also reported 14 new travel-related cases, for a total of 439 across the state including the first cases in Bay County.

While many are angry that Congress has not taken action in response to Zika cases in the U.S., China’s action in response to U.S. Zika cases is likely to make exporters angry because of its potentially very costly ramifications.

The Agriculture Transportation Coalition (AgTC) has created a page dedicated to the Zika prevention situation between China and the U.S. that says, “This will most certainly disrupt the US exporter’s ability to deliver goods affordably and on-time to foreign customers in China.”

Much is unknown on just how costly the new regulation from China on U.S. exporters will be, and AgTC put together a good list of questions regarding the situation:

-What will the cost be?
-Who will absorb the cost?
-Will it make US goods uncompetitive?
-What happens to goods that are currently on the water in transit to China?
-Can high volume cargo even fumigate at the scale they operate at?
-Which fumigants are acceptable? Methyl bromide? Phostoxin?
-Which fumigants can work with food-grade products?
-Is it better to fumigate in the US or upon arrival in China?
-Which certification parties are acceptable?
-How much time will it add to the supply chain?

We’ll be keeping a close eye on this situation for you, exporters.

Click Here for Free Freight Rate Pricing


Source: UC Blog

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Is Port of Oakland’s July Shipping Surge Just Empty Numbers? https://www.universalcargo.com/is-port-of-oaklands-july-shipping-surge-just-empty-numbers/ https://www.universalcargo.com/is-port-of-oaklands-july-shipping-surge-just-empty-numbers/#respond Tue, 09 Aug 2016 16:10:52 +0000 https://www.universalcargo.com/?p=7766 The Port of Oakland reported big numbers for the month of July. The numbers were so high, in fact, that they made headlines. American Shipper headlined with “Port of Oakland experiences busiest month in 10 years” and the Wall Street Journal (WSJ) ran a story titled “Port of Oakland Reports Record Container Volumes in July.” […]

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Port of Oakland shipping container surge

Port of Oakland shipping container surge

The Port of Oakland reported big numbers for the month of July. The numbers were so high, in fact, that they made headlines.

American Shipper headlined with “Port of Oakland experiences busiest month in 10 years” and the Wall Street Journal (WSJ) ran a story titled “Port of Oakland Reports Record Container Volumes in July.”

Port executives are practically singing Herman’s Hermits’ “Something tells me I’m into something good” when they speak about the numbers.

Here are the kinds of words coming out of their mouths as quoted in the WSJ article:

“With holiday shipments set to commence, this could be the start of something good,” said the port’s maritime director, John Driscoll.

Here are the kind of numbers we’re talking about as reported by the American Shipper article:

During the month, the Californian port handled the equivalent of 223,619 TEUs, 8.8 percent more than in July 2015 and the most since it lifted 227,996 TEUs in August of 2006.

The port handled 80,508 TEUs of loaded import containers and 77,573 TEUs of loaded export containers in July, year-over-year increases of 1 percent and 3.6 percent, respectively.

Empty inbound container volumes surged 21.5 percent from July 2015 to 17,017 TEUs, while empty outbound container volumes skyrocketed 31.5 percent from last June to 48,521 TEUs.

The thing that really stands out to me are those empty container numbers.

WSJ also highlights the importance of empty containers to the Port of Oakland’s July growth with:

Dockworkers handled nearly 30% more empty containers—48,521 20-foot equivalent units for export and 17,017 import TEUs—in July. Empty containers are usually moved, in anticipation of trade growth, to places where they’re expected to be filled with goods before shipping back.

Obviously, the optimistic Port of Oakland executives are hoping all these empty containers are a sign of large amounts of actual goods about to move through the port.

There should be shipping increases with peak season about to hit; however, numbers are predicted to be down this peak season from last.

Of course, last peak season saw congestion–hugely exacerbated by labor strife during PMA/ILWU contract negotiations–keep goods from reaching shippers or leaving the ports to get to their business partners abroad. That has caused many shippers to play a little safer, stocking up for the holiday season early.

The question is whether this peak season is about to see a dip as predicted, or will the Port of Oakland see a surge precipitated by all these empty shipping containers.

Larger ships are increasing the numbers of empty containers being transported. It’s possible these big July numbers could be as hollow as the shipping containers boosting them. But hopefully, the Port of Oakland really is on to something good.

Click Here for Free Freight Rate Pricing

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Is Port of Oakland’s July Shipping Surge Just Empty Numbers? https://www.universalcargo.com/is-port-of-oaklands-july-shipping-surge-just-empty-numbers-2/ https://www.universalcargo.com/is-port-of-oaklands-july-shipping-surge-just-empty-numbers-2/#respond Tue, 09 Aug 2016 16:10:52 +0000 https://www.universalcargo.com/is-port-of-oaklands-july-shipping-surge-just-empty-numbers-2/ Port of Oakland shipping container surge The Port of Oakland reported big numbers for the month of July. The numbers were so high, in fact, that they made headlines. American Shipper headlined with “Port of Oakland experiences busiest month in 10 years” and the Wall Street Journal (WSJ) ran a story titled “Port of Oakland […]

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Port of Oakland shipping container surge

Port of Oakland shipping container surge

The Port of Oakland reported big numbers for the month of July. The numbers were so high, in fact, that they made headlines.

American Shipper headlined with “Port of Oakland experiences busiest month in 10 years” and the Wall Street Journal (WSJ) ran a story titled “Port of Oakland Reports Record Container Volumes in July.”

Port executives are practically singing Herman’s Hermits’ “Something tells me I’m into something good” when they speak about the numbers.

Here are the kinds of words coming out of their mouths as quoted in the WSJ article:

“With holiday shipments set to commence, this could be the start of something good,” said the port’s maritime director, John Driscoll.

Here are the kind of numbers we’re talking about as reported by the American Shipper article:

During the month, the Californian port handled the equivalent of 223,619 TEUs, 8.8 percent more than in July 2015 and the most since it lifted 227,996 TEUs in August of 2006.

The port handled 80,508 TEUs of loaded import containers and 77,573 TEUs of loaded export containers in July, year-over-year increases of 1 percent and 3.6 percent, respectively.

Empty inbound container volumes surged 21.5 percent from July 2015 to 17,017 TEUs, while empty outbound container volumes skyrocketed 31.5 percent from last June to 48,521 TEUs.

The thing that really stands out to me are those empty container numbers.

WSJ also highlights the importance of empty containers to the Port of Oakland’s July growth with:

Dockworkers handled nearly 30% more empty containers—48,521 20-foot equivalent units for export and 17,017 import TEUs—in July. Empty containers are usually moved, in anticipation of trade growth, to places where they’re expected to be filled with goods before shipping back.

Obviously, the optimistic Port of Oakland executives are hoping all these empty containers are a sign of large amounts of actual goods about to move through the port.

There should be shipping increases with peak season about to hit; however, numbers are predicted to be down this peak season from last.

Of course, last peak season saw congestion–hugely exacerbated by labor strife during PMA/ILWU contract negotiations–keep goods from reaching shippers or leaving the ports to get to their business partners abroad. That has caused many shippers to play a little safer, stocking up for the holiday season early.

The question is whether this peak season is about to see a dip as predicted, or will the Port of Oakland see a surge precipitated by all these empty shipping containers.

Larger ships are increasing the numbers of empty containers being transported. It’s possible these big July numbers could be as hollow as the shipping containers boosting them. But hopefully, the Port of Oakland really is on to something good.

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Source: UC Blog

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Panama Canal Makes Comeback on Suez Canal https://www.universalcargo.com/panama-canal-makes-comeback-on-suez-canal/ https://www.universalcargo.com/panama-canal-makes-comeback-on-suez-canal/#respond Thu, 04 Aug 2016 20:50:23 +0000 https://www.universalcargo.com/?p=7762 “Don’t call it a comeback; I been here for years.” I can just hear the Panama Canal saying those LL Cool J words as it regains market share from the Suez Canal on Asia to U.S. East Coast container shipping. As if canals can actually speak. Since the last blog was a negative one on the Panama Canal, […]

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YouTube Video

Panama Canal Regains Market Share

Panama Canal Regains Market Share

“Don’t call it a comeback; I been here for years.”

I can just hear the Panama Canal saying those LL Cool J words as it regains market share from the Suez Canal on Asia to U.S. East Coast container shipping. As if canals can actually speak.

Since the last blog was a negative one on the Panama Canal, with ships hitting its walls and all, how about a little positivity toward the Panama Canal today?

The opening of the Panama Canal expansion is already effecting a major shift in cargo shipping from Asia to the U.S. East Coast.

Over the last several years, the Suez Canal has been growing in its market share of shipping containers transported by cargo ship from Asia to the U.S. East Coast to the point of the route handling a larger share of the cargo transport than the Panama Canal.

Barely more than a month has passed since the inauguration of the canal’s expansion, but the Panama route has already retaken its lead in market share.

Alphaliner, in issue 28 of the 2016 volume of its newsletter, says:

The Panama Canal this month regained the majority share in terms overall container transport capacity on all-water routes between the Far East and the US East Coast….

The route via Egypt had grabbed a substantial market share of Far East – USEC services in the past few years, as economies of scale and vessel cascading led carriers to deploy 5,500-10,000 teu ships via the Suez Canal, rather than continuing with classic panamax units of 4,000-5,000 teu on the shorter Panama route. Despite the increased distances for some China – USEC port pairs, the Suez route made economic sense, as the scale advantages of lager vessels often outweighed the disadvantages of the longer steaming distance. Now that the old Panama locks’ restrictions have been lifted, the canal is making a strong comeback, regaining much of the all-water market share that was lost to the Suez Canal.

The overall all-water weekly capacity stands at 145,600 teu as at July 2016, for a year-on-year growth of 1.7%. After the launch of the new locks, the Panama Canal’s share of the trade now reaches 57%, compared to 48% at the start of this year. It is expected to increase further over the coming months, as some carriers have yet to up-size their Panama services with neo-panamax and LCS tonnage, while also shifting some of their current trans-Suez services to Panama.

Despite some worries about the new Panama Canal locks’ construction and accidents with large ships hitting the expanded canal’s walls, the sudden shift of container cargo from the Suez Canal to the Panama Canal should only be the beginning.

Many shipping lines have announced plans to move larger container ships through the Panama Canal, shifting their current routes. As these plans take place, Panama’s market share will continue to increase while the market share of containerized cargo through the Suez Canal will decrease.

Still, those accidents happening in the Panama Canal are not insignificant and should be monitored. If ships continue to hit walls, damaging the ships, cargo, and the canal itself, shipping lines may decide the risk outweighs the benefit of the increased cargo loads that can go through the Panama Canal.

So far, no shipping line has announced a change of plans away from the Panama Canal in response to the accidents, leaving the battle for Asia to U.S. East Coast containerized shipping in Panama’s favor.

Right now, the expanded canal is eyeballing the Suez Canal and yelling, “Panama said knock you out!”

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Ships Keep Hitting Walls of Newly Expanded Panama Canal https://www.universalcargo.com/ships-keep-hitting-walls-of-newly-expanded-panama-canal/ https://www.universalcargo.com/ships-keep-hitting-walls-of-newly-expanded-panama-canal/#respond Tue, 02 Aug 2016 08:33:48 +0000 https://www.universalcargo.com/?p=7761 Last week, BBC News reported that another container ship hit a wall of the newly expanded Panama Canal. Yes, another container ship. After being open for about a month, the enlarged Panama Canal already had three accidents according to the BBC article: A Chinese container ship has hit a wall of the recently-widened Panama Canal, amid […]

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YouTube Video

Panama Canal Risky

Nervous smiley added to Roger W’s Panama Canal – Looking Back

Last week, BBC News reported that another container ship hit a wall of the newly expanded Panama Canal.

Yes, another container ship.

After being open for about a month, the enlarged Panama Canal already had three accidents according to the BBC article:

A Chinese container ship has hit a wall of the recently-widened Panama Canal, amid concerns that it has less space for manoeuvres and could be unsafe.

It is the third accident of this kind since the multi-million dollar expansion opened a month ago.

The Xin Fei Zhou, owned by China Shipping Container Lines, suffered a large gash in its hull and is now undergoing repairs.

I guess if ships are going to hit walls, now is the time to for it to happen. It is the time of year for hitting. Across the U.S., NFL teams have begun training camp with players donning pads and hitting each other. Maybe we should just put pads on the Panama Canal’s walls as well as the ships traversing the canal and let them collide, because it seems doubtful we can stop ships from hitting the walls.

Quarterbacks wear red in camp to signify they should not be hit; can we get those Panama Canal walls painted red?

It is unlikely painting the walls red would actually help. There just isn’t enough room for neo-panamax ships to get through the new locks of the Panama Canal.

In a previous blog titled 5 REASONS THE EXPANDED PANAMA CANAL MAY BE TOO RISKY FOR SHIPPERS, I quoted a Hellenic Shipping News article that details how the locks are too small for the largest ships that are now being sent through the canal:

Industry bodies have warned that at 427 m long and 55 m wide, the new locks are too small for the neo-panamax. The largest vessels can measure up to 366 m long and 49 m wide, leaving a distance of just 6 m across the width of the canal and 61 m length-wise, much of which will be taken up by tugboats on either end of the vessel to guide it through the lock. A joint study by the International Transport Workers’ Federation (ITF) and Brazil’s Fundação Homem de Mar (FHM) found that under windy conditions the manoeuvrability of vessels would be compromised, making accidents likely due to the lock’s narrow dimensions.

Warnings that accidents are likely in the expanded Panama Canal is quite different than actual news reports of ships hitting walls. Many shippers already had an uneasy feeling about shipping through the expanded Panama Canal. Now that feeling must be spreading.

What are your thoughts and feelings about shipping through the Panama Canal? Let us know in the comments section below.

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Ports of LA & LB PierPass Fee Increase About to Take Effect https://www.universalcargo.com/ports-of-la-lb-pierpass-fee-increase-about-to-take-effect/ https://www.universalcargo.com/ports-of-la-lb-pierpass-fee-increase-about-to-take-effect/#respond Tue, 26 Jul 2016 14:00:29 +0000 https://www.universalcargo.com/?p=7753 In two weeks, the Traffic Mitigation Fee (TMF) at the Ports of Los Angeles and Long Beach are going to increase. TMF is part of the PierPass OffPeak program designed to reduce congestion at the ports and in the surrounding communities by operating terminal gates during “OffPeak” hours at night and on Saturdays. The program […]

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Port of Los Angeles Smog

Smog over the Port of Los Angeles PICTURE: Nick C. Prior

In two weeks, the Traffic Mitigation Fee (TMF) at the Ports of Los Angeles and Long Beach are going to increase.

TMF is part of the PierPass OffPeak program designed to reduce congestion at the ports and in the surrounding communities by operating terminal gates during “OffPeak” hours at night and on Saturdays. The program also reduces pollution by reducing trucks (and cars around the port) idling in congestion.

The fee increase is 1.9%, which may not sound overly significant but raises the fee to $70.49 per twenty-foot equivalent unit (TEU).

There has been some backlash and complaints to the Federal Maritime Commission (FMC) from shippers since the announcement of the fee increase at the beginning of this month; however, it is unlikely the fee increase will be reversed.

Here is a copy of the PierPass press release the non-profit company also sent to its credit customers regarding the fee increase:

Marine Terminal Operators at Ports of Los Angeles and Long Beach to Adjust TMF on August 8

LONG BEACH, Calif., July 8, 2016 – The West Coast MTO Agreement (WCMTOA) today announced a 1.9 percent increase in the Traffic Mitigation Fee (TMF) at the Ports of Los Angeles and Long Beach, scheduled to take effect on August 8, 2016. The increase will sustain continued operation of PierPass OffPeak gates amid labor cost increases.
Beginning August 8, the TMF will be increased to $70.49 per TEU (twenty-foot equivalent unit) or $140.98 per forty-foot container.

The adjustment falls under Rule 7 of WCMTOA’s Marine Terminal Schedule No. 1, which states, “Beginning in mid-2012, the Fee shall be adjusted annually to reflect increases in labor costs based on Pacific Maritime Association maritime labor cost figures.” The PMA negotiates and administers maritime labor agreements with the International Longshore and Warehouse Union (ILWU).

PierPass launched the OffPeak program in 2005 to reduce severe cargo-related congestion on local streets and highways around the Los Angeles and Long Beach ports. OffPeak established regular night and Saturday work shifts to handle trucks delivering and picking up containers at the 13 container terminals in the two adjacent ports.
Using a congestion pricing model, PierPass charges a TMF on weekday daytime cargo moves to incentivize cargo owners to use the OffPeak shifts. The TMF also helps pay for the labor and other costs of operating the OffPeak shifts.

According to an analysis by maritime industry consultants SC Analytics, the costs incurred by the terminals to operate the OffPeak shifts in 2015 totaled $236.2 million. During the year, the terminals received $168.9 million from the Traffic Mitigation Fee, offsetting only part of the OffPeak program’s costs.

Since 2005, OffPeak has taken more than 35 million truck trips out of daytime Southern California traffic and diverted them to less congested nights and weekends. About half of all port truck trips now take place during the OffPeak shifts.

For those of you who want to know more about PierPass and the OffPeak program, included below is the company’s own overview of PierPass and OffPeak:

PierPass Inc. is a not-for-profit company created by marine terminal operators at the Port of Los Angeles and Port of Long Beach to address multi-terminal issues such as congestion, air quality and security.

PierPass launched the OffPeak program in 2005 to reduce severe cargo-related congestion on local streets and highways around the Los Angeles and Long Beach ports. OffPeak established regular night and Saturday work shifts to handle trucks delivering and picking up containers at the 13 container terminals in the two adjacent ports.

PierPass developed OffPeak as a market-based solution to what was then a critical public problem: after a rapid rise in cargo volume in the early 2000s, drayage trucks were causing severe congestion on the roads and highways and in the neighborhoods around the ports, while thousands of idling trucks caught in this traffic every day added to air pollution. The ports came under strong community and political pressure to find a solution.

OffPeak nearly doubled the potential capacity of the ports without requiring taxpayer funding or waiting years for new infrastructure construction. Since 2005, OffPeak has taken more than 35 million truck trips out of daytime Southern California traffic and diverted them to less congested nights and weekends.

Prior to the OffPeak program, 88% of the containers that were picked up and delivered to the ports by truck did so within the first shift of operations, between 8:00 a.m. and 5:00 p.m., Monday through Friday. Since the OffPeak Program’s started in 2005, approximately 50% of the trucks call during the first shift and 50% during the OffPeak shifts between 6:00 p.m. and 3:00 a.m. on weekdays and between 8:00 a.m. and 5:00 p.m. on Saturdays.

On an average OffPeak weeknight shift in the spring of 2016, 15,000 trucks visited the ports. If all of these trucks were lined up bumper-to-bumper, they would form a line 160 miles long, stretching more than halfway to Las Vegas. Without the OffPeak program, this cargo would be crammed into a single day shift, doubling daytime volumes and once again causing severe congestion, leaving truck drivers stuck in hours-long jams.

Using a congestion pricing model, PierPass charges a Traffic Mitigation Fee (TMF) on weekday daytime cargo moves to incentivize cargo owners to use the OffPeak shifts. The TMF also helps pay for the labor and other costs of operating the OffPeak shifts. All fees collected, minus the costs incurred by PierPass to manage the program, are allocated to the terminal operators according to the volume of cargo they handle.

PierPass was established by the West Coast MTO Agreement, which is on file with the Federal Maritime Commission.

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How To Eliminate Duties Through New Miscellaneous Tariff Bill https://www.universalcargo.com/how-to-eliminate-duties-through-new-miscellaneous-tariff-bill/ https://www.universalcargo.com/how-to-eliminate-duties-through-new-miscellaneous-tariff-bill/#comments Thu, 21 Jul 2016 19:13:36 +0000 https://www.universalcargo.com/?p=7751 A recently passed bill has U.S. shippers primed to save millions of dollars in tax breaks through tariff reductions and eliminations. You might be able to take advantage of this bill to significantly reduce your import costs. The Miscellaneous Tariff Bill (MTB), which is also known as the American Manufacturing Competitiveness Act of 2016, is […]

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YouTube Video

A recently passed bill has U.S. shippers primed to save millions of dollars in tax breaks through tariff reductions and eliminations. You might be able to take advantage of this bill to significantly reduce your import costs.

The Miscellaneous Tariff Bill (MTB), which is also known as the American Manufacturing Competitiveness Act of 2016, is a bipartisan piece of legislation that gets rid of or reduces import duties on raw materials and intermediate products that are not available in the U.S.

The House Ways and Means Committee, which led the way on this legislation, likes to say this bill’s acronym, MTB, also stands for Manufacturing Tax Breaks.

Ultimately, the bill is a tax break for U.S. manufacturers who import materials that are not produced in the U.S. The tax break used to exist, but expired about four years ago, causing a rise in taxes for affected U.S. manufacturers, really hurting their competitiveness.

The Ways and Means Committee elaborated in a blog post:

The last MTB – or manufacturing tax breaks – expired in 2012, so manufacturers have been struggling with higher taxes for several years. According to the National Association of Manufacturers, U.S. companies have been hit by a $748 million tax hike each year, undercutting their ability to compete and costing our economy $2 billion annually.

The new MTB came with reform to the process of getting the this tax break.

There is a three-step process, which includes businesses applying for MTB. The Ways and Means Committee broke it down nicely with an infographic they created:

Infographic on Miscellaneous Tariff Bill

Ways and Means U.S. Government Infographic on Miscellaneous Tariff Bill

So in order to be considered for a reduction or elimination of your import duties, you need to petition the International Trade Commission (ITC).

How do you know if your business should apply to the ITC for a tariff reduction or elimination on your imports?

James L. Sawyer and Mollie D. Sitkowski of Drinker Biddle & Reath wrote a great article, published by the National Law Review, about the Miscellaneous Tariff Bill. In it, they provide the following advice in preparing to apply to the ITC:

  • Identify which dutiable products you import that lack domestic producers such as inputs to manufacturing or processing that occurs in the United States or finished products unavailable in the domestic market, coordinating internally with sourcing teams to identify potential domestic industry opposition;

  • Tailor product descriptions and technical specifications as narrowly as possible to target specific items and increase the likelihood of success, as well as to distinguish products from competitors; and also work to ensure the products are tied to supplier invoices for validation and implementation by U.S. Customs and Border Protection at the time of importation;

  • Analyze import figures and duty liability to ensure that estimated revenue loss for each product will not exceed $500,000 in a calendar year, or structure a duty reduction consistent with that threshold; and

  • Identify which members of Congress may be likely to back your proposal and be prepared to request that they provide support through the public comment process.

If you think you might be able to qualify for MTB, we’ve got you covered:

To get all the information you need to provide when applying for the tax break, click here to go to the International Trade Commission’s PDF MTB Process: Information for Petitions.

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Can Scrapping Container Ships Save Carriers From Overcapacity? https://www.universalcargo.com/can-scrapping-container-ships-save-carriers-from-overcapacity/ https://www.universalcargo.com/can-scrapping-container-ships-save-carriers-from-overcapacity/#respond Tue, 19 Jul 2016 07:44:21 +0000 https://www.universalcargo.com/?p=7689 This year has seen record low freight rates due, in part, to overcapacity. To put it simply, there has been way more space on container ships than demand from shippers to fill it. Overcapacity is not a new problem that suddenly appeared this year. Overcapacity has been putting downward pressure on rates for years now. […]

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Ship Scrapyard Overcapacity

Ship Scrapyard pic by: Ctg4Rahat

This year has seen record low freight rates due, in part, to overcapacity.

To put it simply, there has been way more space on container ships than demand from shippers to fill it.

Overcapacity is not a new problem that suddenly appeared this year. Overcapacity has been putting downward pressure on rates for years now. In fact, five years ago I was writing about carriers suffering billions of dollars in losses as they faced overcapacity.

Despite this major overcapacity issue, carriers’ megaship craze has done nothing but grow, continuing to increase capacity.

Yes, that means more downward pressure on freight rates and, therefore, less profit for carriers.

It’s not the best time in history to be a carrier in the international shipping industry.

You know for whom it is good times? Scrapyards.

According to Drewry Maritime Research this year will see a record high in container ship scrapping (by TEUs):

Drewry’s Container Forecaster (June 2016) found that, for the first time, 450,000teu of containership capacity is expected to be scrapped in just one year, as the containership sector recognises that there are far too many ships chasing too little cargo (see http://www.drewry.co.uk/publications/view_publication.php?id=312).

Carriers know there is way too much capacity out there for the demand from shippers. If you can’t increase demand, shrink supply. Right?

Can scrapping container ships save carriers from the overcapacity that is plaguing them in the international shipping industry?

Scrapping ships certainly is a start, but even getting rid of 450,000 TEUs in one year is not nearly enough to squash the overcapacity problem. Drewry went on in its Container Insight Weekly, quoted above, to say:

Removing 450,000teu of capacity this year, however, accounts for just 2% of the current 20-million-teu-strong global fleet of containerships. This will only make a dent into the over-capacity built during the 2010-15 period, which saw 4.5 million teu in capacity added to the industry globally at a time of slowing demand.

450,000 TEUs subtracted this year versus 4.5 million TEUs added over the last several years? 450,000 from 20,000,000? That’s not much of a dent!

The surge in ship scrapping certainly is a start, but it is not nearly enough to solve overcapacity.

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5 Reasons the Expanded Panama Canal May Be Too Risky for Shippers https://www.universalcargo.com/5-reasons-the-expanded-panama-canal-may-be-too-risky-for-shippers/ https://www.universalcargo.com/5-reasons-the-expanded-panama-canal-may-be-too-risky-for-shippers/#comments Thu, 14 Jul 2016 08:36:28 +0000 https://www.universalcargo.com/?p=7663 After years of labor and billions of dollars have been invested in expanding the Panama Canal to allow much larger cargo ships through, many shippers worry sending their cargo through the canal is too risky. Here are 5 reasons shippers think the expanded Panama Canal may be too risky: Diversification is a key word when […]

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Panama Canal Risky

Nervous smiley added to Roger W’s Panama Canal – Looking Back

After years of labor and billions of dollars have been invested in expanding the Panama Canal to allow much larger cargo ships through, many shippers worry sending their cargo through the canal is too risky.

Here are 5 reasons shippers think the expanded Panama Canal may be too risky:

1. Decreased Diversification

Diversification is a key word when it comes to investing. Even people who know next to nothing about investing know it is a good idea to spread out their investments rather than place all their money in one place. It’s the old platitude, “Don’t put all your eggs in one basket.”

Unfortunately, shippers might not have a choice but to put all their cargo on one ship.

Decreased diversification is a problem throughout the international shipping industry since the onslaught of megaships and carrier alliances. The problem is especially pronounced with the Panama Canal expansion.

Larger ships moving through the Panama Canal means larger portions of shippers’ goods being shipped at one time on a single ship. If something should happen to the container ship transporting shippers’ goods, the loss could be devastating.

Speaking of something happening to a container ship…

2. Increased Chance of Accident

There are strong concerns over the chances of accidents happening in the expanded Panama Canal.

Hellenic Shipping News reports:

Industry bodies have warned that at 427 m long and 55 m wide, the new locks are too small for the neo-panamax. The largest vessels can measure up to 366 m long and 49 m wide, leaving a distance of just 6 m across the width of the canal and 61 m length-wise, much of which will be taken up by tugboats on either end of the vessel to guide it through the lock. A joint study by the International Transport Workers’ Federation (ITF) and Brazil’s Fundação Homem de Mar (FHM) found that under windy conditions the manoeuvrability of vessels would be compromised, making accidents likely due to the lock’s narrow dimensions.

That industry study doesn’t just say that accidents are more likely in the expanded Panama Canal, but that accidents are likely period!

Accidents involving ships that carry larger percentages of shippers’ goods being likely give shippers pause, and very reasonably so.

3. Integrity of Locks

Remember when the newly built locks for the Panama Canal expansion were gushing water back in August?

Perhaps this video will jog your memory:

YouTube Video

Water pouring through the cement walls of the new locks was just one of many problems that caused the Panama Canal expansion to take years longer than initially planned.

These obviously faulty lock walls were not torn down and replaced. They were reinforced. Many worry about the finished product of the expanded Panama Canal. Could the locks start leaking again? What if the locks get hit by a megaship, which is apparently likely to happen?

Many shippers and insurers are questioning the safety of the ships and cargo passing through the Panama Canal because they don’t trust the work that was done in the construction of the expanded canal’s locks.

4. Labor Strikes

Accidents and structural problems are not the only risks to cargo flow through the Panama Canal.

Labor strife could cause congestion or completely stop cargo ships from moving through the Panama Canal.

Then again, how likely is it labor would strike at the port. According to the Hellenic Shipping News article quoted earlier, labor strife and strikes are very possible:

Additional risks of disruption along the route stem from the potential for industrial action by canal workers. Construction workers from the Grupo Unidos por el Canal (GUPC) and National Union of Workers in the Construction Industry (Untraics) staged regular strikes during the nine-year construction of the canal, over a wide range of issues including pay, changes to labour law and allegations of corruption during the construction, contributing to the two-year delay in completing the expansion. With construction work on the canal now complete, the highest risk of strike action is from workers operating the canal. In light of safety issues over the new locks, any accident resulting in employee casualties is likely to spur industrial action. Furthermore, the largest union in Panama, Suntrac, has organised work stoppages over government policy, unrelated to the ACP, indicating a willingness to strike over national issues beyond the authority’s control.

It doesn’t take much imagination to realize how significant the effect of labor strife can be on cargo flow. Just think of all the congestion at West Coast ports during contract negotiations between the ILWU and PMA. If you’re a shipper, you know it was bad. How much worse could it be with full blown strikes?

5. Insufficient Water Levels

If the water is not deep enough in the Panama Canal, giant container ships won’t be able to transport their large loads of shipping containers through the waterway.

According to a New York Times article that calls the Panama Canal a risky bet in its title, “… canal officials discounted warnings that they needed new sources of water, and during a recent drought, shippers had to significantly lighten their loads.”

The article went on to add:

Canal officials had assured the country that no new reservoirs were needed. Later, [canal administrator Jorge L. Quijano] took to scolding Panamanians for using too much tap water, which comes from the same freshwater lake that supplies the canal.

Obviously, there is danger of water levels not being deep enough for new Panamax ships to carry their large cargo loads through.

How do you feel about the newly expanded Panama Canal? Let us know in the comments section below.

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Golden Shipping Containers Instantly Transport People to Other Parts of the World https://www.universalcargo.com/golden-shipping-containers-instantly-transport-people-to-other-parts-of-the-world/ https://www.universalcargo.com/golden-shipping-containers-instantly-transport-people-to-other-parts-of-the-world/#respond Tue, 12 Jul 2016 08:00:29 +0000 https://www.universalcargo.com/?p=7656 If you see a golden shipping container, step inside and be instantly transported to another part of the world. It sounds like science fiction or fantasy, but these portals exist. No, they haven’t actually invented teleportation; however, this may just be the most innovative use of shipping containers yet. And it’s such a simple idea. […]

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If you see a golden shipping container, step inside and be instantly transported to another part of the world.

It sounds like science fiction or fantasy, but these portals exist.

No, they haven’t actually invented teleportation; however, this may just be the most innovative use of shipping containers yet. And it’s such a simple idea. All it really takes is a shipping container, a camera, a microphone, and an internet connection. Oh yeah, and some gold paint.

Shipping containers have been put to all kinds of uses around the world besides, you know, actually shipping things. Shipping containers have been turned into homes (often surprisingly good looking ones), shops, swimming pools, schools… The list goes on and on.

What Shared Studios has done is made shipping containers a means of communication between people of different cultures who are thousands miles apart. Shared Studios paints these shipping containers gold and calls them Portals.

Here’s how Shared Studios describes Portals:

Portals is a global public arts initiative. Each Portal is a gold shipping container equipped with immersive audio and video technology inside. When you enter one, you come face-to-face with someone in a distant Portal and can converse live, full-body, and making eye contact, as if in the same room.

While you’re not physically transported across the globe, Shared Studios has worked hard to make it feel like you’re in the same space as a person thousands of miles away when you step into a “portal”.

A Forbes article by Emma Sandler first informed me of Yale Law School-educated artist and journalist Amar Bakshi and multimedia journalist Michelle Moghtader starting Portals in 2014 and having their project become a part of the U.N.’s “Refugees” exhibit.

From there, I found several articles on how Portals are connecting strangers around the world. Eventually, I found my way to Shared Studios’ site, where I learned “portals” are spreading around the world while other projects like Tunnels, interconnected playgrounds that children can interact with other kids from around the world, are being created.

All of these projects have potential, but Portals is the one that really seems to be taking off. And we always like hearing about projects with shipping containers after they’re done taking off with shippers’ cargo.

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Top 3 News Stories Highlight Bigger is Better Trend in International Shipping https://www.universalcargo.com/top-3-news-stories-highlight-bigger-is-better-trend-in-international-shipping/ https://www.universalcargo.com/top-3-news-stories-highlight-bigger-is-better-trend-in-international-shipping/#comments Thu, 07 Jul 2016 07:53:00 +0000 https://www.universalcargo.com/?p=7654 Try not to hear Steve Carell saying, “That’s what she said!” in your head when considering the international shipping industry’s stance on size: bigger is better. It seems like there is a “bigger is better” attitude in every aspect of international shipping. Bigger ships, bigger carriers, bigger berths, bigger passageways… The top international shipping related […]

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YouTube Video

Big Cargo Ship

Picture by: Ruth Hartnup

Try not to hear Steve Carell saying, “That’s what she said!” in your head when considering the international shipping industry’s stance on size: bigger is better.

It seems like there is a “bigger is better” attitude in every aspect of international shipping. Bigger ships, bigger carriers, bigger berths, bigger passageways…

The top international shipping related stories in the news certainly underscore this bigger is better trend.

Here are those top three news stories:

1. Expanded Panama Canal Opens

The Panama Canal expansion project finally resulted in the grande opening of the new locks over the weekend.

This story is all over the news, including a nice story on the expansion from BBC News that encapsulates the expansion well with:

The new locks are the size of the Empire State Building, with doors that were built using enough steel for 19 Eiffel towers and walls lined with enough basalt rock for two of Giza’s great pyramids.

As such, they can accommodate much bigger ships: monsters able to carry more than 13,000 containers, whereas previously the biggest vessels the canal could accommodate could carry “only” 5,000 of them.

There were plenty of delays and drama in the expansion project (read about the Panama Canal expansion here), but the billions of dollars spent on the project make it clear how important the use of bigger container ships is to the international shipping industry.

2. Hapag-Lloyd/UASC Merger Approved by Shareholders

Carriers are dedicated to using bigger container ships, the biggest of which are dubbed megaships; however, carriers are just as dedicated to making themselves bigger.

Hapag-Lloyd is getting close to completing a merger with UASC. This is just the latest in a series of recent mergers between big shipping companies to make their shipping lines larger.

Splash 24/7 reports:

UASC announced yesterday that its six shareholding states has approved a merger deal with the German line at an extraordinary general meeting on Wednesday.

“Should the merger be approved, Hapag-Lloyd will become the fifth carrier to have a fleet exceeding 1m teu of nominal capacity, and in essence be almost on par with COSCO in terms of global scale,” [Lars Jensen from SeaIntelligence Consulting] said.

“The merger of Hapag-Lloyd and UASC confirms that only by having the scale, a modern container carrier can survive the expected prolonged weakness of the container shipping market,” said Kris Kosmala, a Splash columnist and vice president for Quintiq Asia Pacific.

Big carriers are getting bigger, hoping to dominate international shipping, push smaller carriers out of the market, and simply survive years when profitability is hard to come by for shipping companies.

3. Port of NY/NJ to Handle Biggest Containership  in its History

The final top three international shipping related news story making headlines right now keeps the “bigger is better” motif going.

The Port of New York and New Jersey is set to receive the largest ship it has ever seen berth at one of the port’s terminals.

WWD Business News reports:

The Port Authority of New York and New Jersey and Global Container Terminals USA will welcome the MOL Benefactor — the largest container ship ever to call on the Port of New York and New Jersey at Global Container Terminal Bayonne — during its maiden visit at noon on Friday.

Mitsui O.S.K. Lines Ltd., which owns the MOL Benefactor, noted that the newly built 10,000 TEU container ship successfully passed through the expanded Panama Canal on July 1 Friday, the first neo-Panamax container ship to do so.

Is Bigger Really Better in International Shipping?

Just because the trend in international shipping says bigger is better does not necessarily make it so.

Larger ships, which were meant to save money for carriers, helped increase capacity beyond demand in the industry and push freight rates down to amounts that hurt carriers.

Carriers becoming larger might help them survive rough years for the industry, but it could also shrink competition enough that shippers will face higher freight rates than what the market would normally demand.

Those are just a couple reasons bigger might not be better in international shipping. Do you have more?

Is bigger really better in international shipping? Let us know in the comments section below.

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Much Ado About VGM https://www.universalcargo.com/much-ado-about-vgm/ https://www.universalcargo.com/much-ado-about-vgm/#respond Tue, 05 Jul 2016 08:31:30 +0000 https://www.universalcargo.com/?p=7652 Sigh no more, ladies, sigh no more, … And be you blithe and bonny, Converting all your sounds of woe Into Hey, nonny nonny. –William Shakespeare’s Much Ado About Nothing The new verified gross mass (VGM) rule went into effect on Friday. Despite concerns around the globe about possible interruptions to cargo flow at ports, […]

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VGM cargo containers

VGM cargo containers

Sigh no more, ladies, sigh no more,

And be you blithe and bonny,
Converting all your sounds of woe
Into Hey, nonny nonny.

–William Shakespeare’s Much Ado About Nothing

The new verified gross mass (VGM) rule went into effect on Friday. Despite concerns around the globe about possible interruptions to cargo flow at ports, implementation has gone smoothly so far.

Reports around the world show few to no disruptions at ports due to the new rule requiring shippers to provide the weights of loaded shipping containers in order to get cargo containers loaded onto ships.

We won’t quite sing, “Hey, nonny nonny” yet (if that’s even a thing people actually do).

Implementation of the new rule has only just begun, so it is too soon to say for certain the VGM rule will not cause or contribute to port congestion at port terminals around the world, but all signs point to a smooth transition to the new rule.

While the VGM rule implementation did not carry the same mass panic of Y2K, or the Year 2000 Problem, at the turn of the millennium, one can’t help but see similarity between the building worry each non-disaster produced, which resulted in much ado about nothing.

There is one issue, which shippers are not happy about, being created by the new VGM rule:

Fees.

Just like people found ways to profit from Y2K with companies and consultants charging other companies money to protect them from the Millennium Bug, some carriers, port terminals, and freight forwarders are charging fees for handling the new VGM paperwork.

Shippers feel that in these situations, companies are taking advantage of the VGM rule to unjustly increase the profit they make off of shippers.

The Global Shippers’ Forum (GSF) brought some of these VGM associated fees to life, calling them unacceptable, in a press release:

Regrettably GSF members, mainly in Asia and Africa, report that some carriers and other ‘service providers’ appear to be exploiting the introduction of the new VGM rules by imposing exorbitant and unjustified charges for questionable and unspecified “administration fees” and other “services”.

The GSF is calling for those charges to be withdrawn immediately. The GSF is currently examining the following examples provided by members and will be taking them up with the service providers:

  • China: The global forwarding company Kuhne and Nagel is charging a VGM administration fee for all K&N shipments booked in China – specifically USD 12.75 for full containers if shippers are using the K&N electronic VGM system, or USD 25.00 for manual data entry. Similarly, OOCL Logistics have announced that they will be charging a Verified Gross Mass (VGM) Administration Fee of USD 15 per document for all exports from China.
  • Nigeria: The logistics and shipping firm Grimaldi Agency Nigeria have notified customers that they will weigh containers on departure at a cost of N20,000 per 20 foot container and N40,000 per 40 foot.
  • Sri Lanka: GSF members have advised that shipping lines are considering charging shippers USD 25 for submitting the VGM, and, in cases where the final weight differs from the booked weight, an additional charge of USD 50 for amending the VGM.
  • UK & Ireland: The ports group DP World, which owns both Southampton and London Gateway ports, impose a £1.00 charge for VGMs provided prior to arrival (rising to £3.00 after box arrival but before 24 hour cut off).

Chris Welsh, GSF Secretary-General, said: “Shippers worldwide support the safety goals of the container weighing requirements and are committed to fulfilling their regulatory requirements, but this should not be used by supply chain partners as an excuse to impose unjustified fees.

A nice article from the Journal of Commerce highlights shippers’ frustrations on the issue of VGM-related fees, but also brings balance by sharing a defense of the fees from one such company charging them:

Forwarders, such as DB Schenker, have defended the new fees, arguing that the keying in of VGM data requires extra effort and time. The forwarder added there was also a considerable, and as yet unexplored, financial risk and legal angle to the SOLAS rule.

“It starts with the cost of simple exception management in cases of VGM discrepancies or the inevitable late submission of VGMs, such as making sure containers don’t roll, amending manifests, customs declarations,” Joerg Hopp, DB Schenker director and head of Ocean Freight for North and Central China, told JOC.com earlier this week. “And it ends with the VGM further firming up the chain of legal responsibility and custody in case of accidents involving containers. After all, NVOCCs (non-vessel-operating common carriers), such as DB Schenker, are legally acting as the shipper of record and as such have to provide a correct VGM to the carriers.”

While Mr. Hopp’s argument seems reasonable, I am not sold on the idea that shippers should be charged extra fees when it comes to VGM, especially if they do all the work of providing the weight of their loaded shipping containers themselves.

Freight forwarders are hired to make sure all the intricacies, including paperwork, of international shipping are handled for shippers. VGM paperwork does not seem to be such a burden that freight forwarders would need to charge extra for it.

Here at Universal Cargo, we’ll be monitoring the VGM situation as the transition to the new rule continues. If VGM-related disruptions do start occurring, we’ll keep you up to date. We’ll also be watching to see who wins this debate over VGM-related charges.
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Should Importers Worry About VGM Rule Taking Effect Tomorrow? https://www.universalcargo.com/should-importers-worry-about-vgm-rule-taking-effect-tomorrow/ https://www.universalcargo.com/should-importers-worry-about-vgm-rule-taking-effect-tomorrow/#respond Thu, 30 Jun 2016 21:46:51 +0000 https://www.universalcargo.com/?p=7648 It’s hee-eere. The new Verified Gross Mass (VGM) rule goes into effect tomorrow: July 1st. For many exporters, imagining the little girl from Poltergeist saying that first line of this post fits perfectly with the mood created by the arrival of the new rule from the International Convention for the Safety of Life at Sea (SOLAS) requiring shippers to […]

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Should Importers Worry About VGM?

Should Importers Worry About VGM?

It’s hee-eere.

The new Verified Gross Mass (VGM) rule goes into effect tomorrow: July 1st.

For many exporters, imagining the little girl from Poltergeist saying that first line of this post fits perfectly with the mood created by the arrival of the new rule from the International Convention for the Safety of Life at Sea (SOLAS) requiring shippers to provide the verified weight of loaded shipping containers in order to get them loaded onto cargo ships.

Exporters have been worrying about being in compliance, the costs it might create, the operational changes it might require, what kind of fees and penalties might be levied against them if they’re not in compliance…

The main focus has been on exporters; however, importers are worried too. Should they be? Is this an issue that only exporters need to worry about? Could fees come importers’ way if their shipping partners overseas are not in compliance?

I received an email today in response to a previous blog I wrote about the VGM rule asking about the importers liability in this whole process:

I understand that you did some research on [the VGM rule], which is in effect tomorrow.
Checking to see if you have gotten anything about possible penalties? I know that the shipper is supposed to provide signed docs on the gross mass, but what if it’s not done or it’s not accurate?
Will the importer be liable for anything?

Despite this rule having been officially approved and adopted by the International Maritime Organization’s (IMO) Maritime Safety Committee in 2014, there are still so many unanswered questions two years later as the rule is being implemented.

Exactly what enforcement will look like on the VGM rule is one of the biggest question marks on the subject. Those who are charged with enforcing this rule haven’t been the most helpful on the subject.

Consider the following excerpt from an article posted today on Port Technology International’s site:

… government bodies, the competent authorities to which the IMO is looking to consistently enforce the regulation across the globe have been surprisingly reticent.

Despite encouragement from the IMO for governments to communicate fully with industry stakeholders, around 80% of SOLAS signatory states have yet to publish guidance on national implementation.

There are, of course, notable exceptions, where national competent authorities have engaged actively with industry and other maritime administrations to ensure common understanding of the processes and interpretation of the regulation.

Consistency, however, across the international governmental spectrum has been lacking, causing much frustration.

That frustration is paired with worry.

There’s good reason for worry and frustration as governing bodies have not made it clear what the fees and penalties for failing comply with the new VGM rule will even be.

Could importers be liable for these unknown VGM rule violations?

Here’s my response to that question brought up in the email I quoted above:

The weight of compliance falls on the shoulders of shippers. It is expected that fees and penalties for lack of compliance will be levied against shippers.

Exactly what those fees and penalties will be is still unclear. Which seems crazy with the VGM rule going into effect tomorrow.

For the first 3 months, enforcement is supposed to be “practical and pragmatic” (as suggested by the IMO). However, that isn’t exactly clear and specific either. What is clear is that this 3-month-period of “practical and pragmatic” enforcement does not mean a 3 month delay in the rule actually going into effect.

There is no official grace period for the VGM rule once it goes into effect tomorrow.

It seems the various governing bodies around the world can choose what they deem appropriate in terms enforcement, so there could be a wide range around the world in fees levied against violators of the rule.

Importers should make sure their suppliers and shipping agents are in compliance with the rule as there are situations that would make the importer responsible for any fees or penalties that may arise from failure to provide a VGM.

The type of incoterm deal an importer has would probably determine how responsible the importer (as the buyer) is for fees that might accrue during the import process.

An EXW deal, for example, would make the buyer/importer responsible for the loading and transporting of goods. It is, therefore, reasonable to think that with the assumption of those risks, the fees for not complying would be paid by the importer in an EXW agreement (or any incoterm deal in which the buyer is responsible for the costs and risks through the loading of goods onto a ship).

Deals where the seller assumes the early risks of getting the cargo loaded onto a ship (such as DDP, on the opposite end of the spectrum of EXW), the importer shouldn’t have to worry about such fees. That would all fall under the seller’s responsibility.

However, if the seller is not in compliance, the goods are not supposed to be loaded onto a ship. This could cause harm to the importer through quite possibly very long delays while the seller of the goods (or the seller’s shipping agents) gets the cargo into compliance.

So again, even if the importer is not liable for fees accrued through noncompliance with the VGM, the importer should still make sure his or her partners in other countries are in compliance.

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All Incoterms Made Fast & Simple in New Video Series https://www.universalcargo.com/all-incoterms-made-fast-simple-in-new-video-series/ https://www.universalcargo.com/all-incoterms-made-fast-simple-in-new-video-series/#respond Tue, 28 Jun 2016 14:00:04 +0000 https://www.universalcargo.com/?p=7643 Finally, all Incoterms defined and in one easy to access place! A video series on Incoterms from Universal Cargo’s Universal Shipping News has just been completed, allowing shippers and international businesspeople easy access to the basics of every group of Incoterms: Group E, Group F, Group C, and Group D. This blog combines all the […]

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Finally, all Incoterms defined and in one easy to access place!

A video series on Incoterms from Universal Cargo’s Universal Shipping News has just been completed, allowing shippers and international businesspeople easy access to the basics of every group of Incoterms: Group E, Group F, Group C, and Group D.

This blog combines all the Incoterm videos on one easy to manage page. All you have to do is scroll down to the video(s) discussing the Incoterm(s) you want to know about.

If you want more information on the Incoterms defined in the below videos, each video has a link under it to a blog that covers the same group of Incoterms in more detail.

Group E: EXW

YouTube Video

Click here for more information on Incoterms Group E.

Group F: FCA, FAS, FOB

YouTube Video

Click here for more information on Incoterms Group F.

Group C: CFR, CIF, CPT, CIP

YouTube Video

Click here for more information of Incoterms Group C.

Group D: DAT, DAP, DDP

YouTube Video

Click here for more information on Incoterms Group D.

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Hyundai Might Become Third Member of 2M Alliance! https://www.universalcargo.com/hyundai-might-become-third-member-of-2m-alliance/ https://www.universalcargo.com/hyundai-might-become-third-member-of-2m-alliance/#respond Thu, 23 Jun 2016 21:48:30 +0000 https://www.universalcargo.com/?p=7637 Hyundai Merchant Marine (HMM) stock just shot up by the maximum daily allowable amount. This must make debtors of the nearly $5-billion-in-debt shipping line feel good right about now. In a recent debt restructuring deal, HMM bondholders traded debt for stock on over half of applicable bonds. Bloomberg reports: Hyundai Merchant Marine Co. gained the most in more […]

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Hyundai to Join 2M

Hyundai to Join 2M?

Hyundai Merchant Marine (HMM) stock just shot up by the maximum daily allowable amount.

This must make debtors of the nearly $5-billion-in-debt shipping line feel good right about now. In a recent debt restructuring deal, HMM bondholders traded debt for stock on over half of applicable bonds.

Bloomberg reports:

Hyundai Merchant Marine Co. gained the most in more than two decades in Seoul trading on optimism a restructuring plan for South Korea’s second-biggest container liner will get a boost as it seeks to join the world’s largest shipping alliance.

… Shares of Hyundai Merchant advanced by the daily limit of 30 percent, the most since October 1995…

Why such sudden optimism on the outlook of a company that just weeks ago seemed to be headed for court receivership? It’s all in the final words of the first sentence in the above quote.

HMM has entered talks to join the world’s biggest and most exclusive carrier alliance.

The carrier alliance it seeks to join is not the world’s biggest in terms of number of members. It actually has only two: Maersk and Mediterranean Shipping Co. (MSC). Since Maersk and MSC are the number one and two container lines by capacity, respectively, their 2M Alliance stands head and shoulders above the rest of the alliances.

A new alliance, called THE Alliance, between the shipping lines Hapag-Lloyd, Hanjin Shipping, Mitsui OSK Lines, NYK Line, K Line, and Yang Ming Marine Transport looks to contest 2M’s dominance.

Joining an alliance is one of the three conditions HMM needs to meet in order to stay out of receivership. HMM managed the debt-for-equity deal mentioned above and getting charter fees reduced to meet the first two requirements, and it was expected that HMM would join THE Alliance.

It came as a surprise to many that HMM ended negotiations with THE Alliance and has entered negotiations with Maersk and MSC to join 2M.

Of course, if HMM can manage to join the 2M Alliance, then that would be the optimum alliance of which to be a part. No one questions why HMM would want to join 2M, but some wonder what would cause Maersk and MSC to choose this struggling container line as the one they would allow in.

The Wall Street Journal published a story about HMM entering talks to join the 2M, which contains a quote that addresses why 2M might be interested in HMM:

“2M has wanted to enhance its influence in the Asian region. And we want to raise our presence in Asia-U.S. routes. Both sides will benefit from a successful deal,” Hyundai Merchant said Thursday.

That quote, of course, comes from HMM rather than 2M’s Maersk or MSC. However, that does not negate such a value HMM might bring to the table. With new rival THE Alliance’s size, it is not surprising 2M would want to bulk up a little more and increase its advantage.

Still, negotiations for HMM to join the 2M alliance have just begun and by no means guarantee the new membership will actually be granted. A merger between HMM and Hanjin is also still possible, and that could add a complication to HMM becoming the third member of the 2M Alliance as well.

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Things Get Worse for Hanjin https://www.universalcargo.com/things-get-worse-for-hanjin/ https://www.universalcargo.com/things-get-worse-for-hanjin/#respond Tue, 21 Jun 2016 09:07:01 +0000 https://www.universalcargo.com/?p=7603 Illegal. That’s what Seaspan called Hanjin Shipping Co.’s request for a cut in charter rates on the ships it leases from the container ship leasing company. Kyunghee Park reported on Bloomberg: “We do not accept any rate cut,” [Gerry Wang, Seaspan’s chief executive officer] said in a phone interview Thursday. “We have never done it. We […]

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Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Hanjin Container Ship Photo by: Flickr user Ingrid Taylar

Illegal.

That’s what Seaspan called Hanjin Shipping Co.’s request for a cut in charter rates on the ships it leases from the container ship leasing company.

Kyunghee Park reported on Bloomberg:

“We do not accept any rate cut,” [Gerry Wang, Seaspan’s chief executive officer] said in a phone interview Thursday. “We have never done it. We won’t tolerate a contract re-negotiation. Any call for rate cut is illegal by international laws.”

This is a painful response for Hanjin, South Korea’s biggest carrier, to hear in response to its attempts to lower charter rates by around 30 percent.

According to a friend who’s an expert on international shipping logistics and always looking out for ways on how to make 2000 dollars fast to invest into shipping stocks, Hanjin is trying to avoid being placed under court receivership. While Hyundai Merchant Marine (HMM), South Korea’s other large international shipping carrier, managed deals to swap debt for stock and lower its container ship charter rates to stay out of receivership, Hanjin has not yet found similar success.

These painful words from Seaspan saying that it not only won’t re-negotiate its charter contract with Hanjin, but even the call for such rate cuts is illegal makes the possibility of Hanjin being pushed into a merger with HMM even more likely.

There could, however, be a little bit of sunshine poking through the clouds that dampen Hanjin’s future.

According to Hellenic Shipping News, “Industry sources believe that Wang made tough remarks in order to have advantage over the negotiations.”

That would mean negotiations between Hanjin and Seaspan are not as dead as Wang’s words make them sound.

In fact, there may be another way Hanjin could lower its costs on ships it leases from Seaspan. According to the Bloomberg article:

The Hong Kong-based ship lessor could instead consider ordering new, fuel-efficient vessels from a South Korean shipyard and leasing them to Hanjin Shipping, helping improve the liner’s competitiveness, said Gerry Wang, Seaspan’s chief executive officer.

That alone would not be enough to save the floundering carrier. Hanjin is expected to end up in court receivership.

Of course, getting bailed out at the last moment is not out of the question. HMM did manage to keep afloat after it initially failed to produce lower charter rates in its negotiation with ship lessors. By all accounts that company was expected to go into receivership too. Perhaps a similar turn of events could happen for Hanjin.

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Are Low Freight Rates Bad for Shippers in Long Run? https://www.universalcargo.com/are-low-freight-rates-bad-for-shippers-in-long-run/ https://www.universalcargo.com/are-low-freight-rates-bad-for-shippers-in-long-run/#comments Thu, 16 Jun 2016 19:52:39 +0000 https://www.universalcargo.com/?p=7542 This year has seen record low freight rates. While freight rate pricing has been increasing, shippers are still paying significantly less than in previous years. World Maritime News reported a story about container shipping rates still being short of previous levels based on Drewry Shipping Consultants research, quoting Drewry: There is a long way to go before we […]

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Are low freight rates actually bad for shippers

Are low freight rates bad for shippers?

This year has seen record low freight rates. While freight rate pricing has been increasing, shippers are still paying significantly less than in previous years.

World Maritime News reported a story about container shipping rates still being short of previous levels based on Drewry Shipping Consultants research, quoting Drewry:

There is a long way to go before we can truly call a recovery in spot freight rates. As of 9 June, the year-to-date average of the headhaul WCI rates to Europe and the US are down by as much as 40% compared with full-year 2015 averages. The rate of depreciation is even steeper compared with 2014, which represents the high watermark for spot rates in the last five years,” Drewry [said].

Shippers, of course, are happy to pay less to import and export goods. But should they really be happy to see these prolonged low rates?

Carriers need to see freight rates increase if they expect to be profitable and survive as viable businesses. But have carriers purposely pushed freight rates so low that margins of profitability are hard to reach?

That same Maritime News article mentioned above opened by saying freight rates should be more stable for the rest of 2016, “presuming carriers have ended their rate war”.

While the word “war” has, and rightly so, negative connotations, it sounds positive to shippers in this context. A “rate war” means competition. It means lower prices. That’s what we want to see in business, right? We want healthy competition between the suppliers of a good or service so it can be obtained at fair prices by the consumer rather than a monopoly or oligopoly where one or few suppliers control the industry and can charge whatever they want.

With the onset of bigger ships, especially megaships, now dominating the international shipping industry, capacity has increased beyond demand. Laws of supply and demand dictate that prices should decrease. Freight rates should be lower. But should they be this low? Record low? With struggles to increase them again?

It seems the big international shipping companies, the carriers at the top of the food chain, might have been pushing freight rates down more than supply and demand naturally demanded.

Here’s a little more from that Maritime News article:

Data gleamed from first-quarter 2016 carrier financial reports detail an intense rate war between the major carriers, where every one of them suffered severe freight rate decreases.

Maersk Line was at the forefront of the battle with a 26% drop in revenue per TEU that contributed to a 7% gain in volumes, while other carriers such as APL, Hanjin and K Line weren’t even compensated with larger volumes for their rate discounts.

Maersk, “at the forefront of the battle,” can survive low freight rates that decrease profitability and perhaps even create loss. Maersk is the world’s biggest shipping company and is propped up by an oil side to its business. Many smaller carriers do not have such luxury.

Both of South Korea’s big shipping companies, Hyundai Merchant Marine (HMM) and Hanjin, are at the brink of going under. HMM got bailed out by debt-for-equity swap deals and reduced ship charters, thanks to a little governmental help, but still may be forced into a merger with Hanjin, which hasn’t faired as well so far in getting the help it needs to reach normalization.

The pool (maybe I should say ocean) of carrier competition in the international shipping industry has been shrinking.

This is a time when carriers must work with other carriers in alliances in order to survive.

Of course, at the top of the carrier alliance heap is the 2M vessel sharing agreement between Maersk and the second largest shipping company by capacity, MSC. When seeing those big companies leading a “rate war” that pushes rates way down, shippers may have cause for concern that the biggest carriers are trying to push the competition out.

So while lower freight rates at the moment feel good, they could lead to less competition and higher freight rates later. Freight rates that could be much longer lasting. That would be bad for shippers. And bad for consumers everywhere as 90% of world trade is carried by international shipping industry.

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S. Korean Carriers Hanjin & HMM Could Be Forced Into Merger https://www.universalcargo.com/s-korean-carriers-hanjin-hmm-could-be-forced-into-merger/ https://www.universalcargo.com/s-korean-carriers-hanjin-hmm-could-be-forced-into-merger/#respond Tue, 14 Jun 2016 07:53:06 +0000 https://www.universalcargo.com/?p=7460 South Korea might have been taking notes when China pushed for the merger of its two, big, state-owned shipping companies, Cosco Group and China Shipping Group. South Korea may force Hanjin Shipping and Hyundai Merchant Marine (HMM) into a merger. Nam Hyun-woo reported in the Korea Times: The government said Monday that it will consider merging ailing Hyundai […]

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HMM & Hanjin Merger

HMM & Hanjin Ships Public Doman Pictures by: Shipping21 & Jean-Philippe Boulet

South Korea might have been taking notes when China pushed for the merger of its two, big, state-owned shipping companies, Cosco Group and China Shipping Group. South Korea may force Hanjin Shipping and Hyundai Merchant Marine (HMM) into a merger.

Nam Hyun-woo reported in the Korea Times:

The government said Monday that it will consider merging ailing Hyundai Merchant Marine (HMM) and Hanjin Shipping should they successfully normalize their management.

“Once the normalization program for the two shipping companies is wrapped up, the government will consider various plans including the merger of the companies,” said Financial Services Commission (FSC) Chairman Yim Jong-yong at a news conference.

As the restructuring programs that the debt-riddled shippers are undergoing will install the state-run Korea Development Bank (KDB) as the controlling stakeholder of the firms, the government can lead the merger of the pair in the future.

Obviously, the resulting carrier of a merger between the two Korean shipping companies won’t be as big as that from the Cosco and China Shipping merger.

The result of the Chinese government-initiated merger was the shipping behemoth China Cosco Shipping Corporation Limited, which immediately shook up the alignment of the carrier alliances in the international shipping industry.

Just because the shipping company resulting from a merger between Hanjin and HMM wouldn’t be as big as China Cosco Shipping does not mean it wouldn’t be significant.

Chris Dupin reported in American Shipper:

A merger would catapult them into fifth place behind Maersk, MSC, CMA CGM-APL, and COSCO China Shipping, and ahead of Evergreen, and Hapag-Lloyd. Evergreen, however, with 40 ships on order and Hapag-Lloyd which is talking about a merger or some sort of business cooperation with UASC could leapfrog them in the near future.

Becoming the fifth biggest shipping company by capacity in the world, right behind China Cosco Shipping, would not be bad for two shipping companies that have been struggling mightily to just to stay above water.

We’ve covered HMM’s recent struggles for survival with the blogs: SHRINKING CARRIER COMPETITION: HMM HEADED FOR RECEIVERSHIP and HYUNDAI MERCHANT MARINE KEEPS AFLOAT.

We haven’t talked as much about Hanjin’s struggles. Hanjin’s struggles have been as bad as HMM’s, but while HMM has had recent breakthroughs toward normalization, Hanjin has not had similar luck.

The Korea Times reports:

Creditors of Hanjin Shipping approved a creditor-led restructuring for the shipper in early May, granting a three-month suspension on all payments of principal and interest.

But they conditioned that the shipper should cut charter rates, win approval for debt recast from its bondholders and be included in a global shipping alliance.

“Hanjin Shipping is required to report some progress in its charter rate cut talks by early August,” said an official at one of its creditors. “If it fails in the talks, we have to take a second step.”

Hanjin Shipping has held a first round of talks with 22 owners of its chartered vessels, but failed to receive any positive responses from them.

HMM had a very similar set of requirements put upon it, but has managed them all, with the exception of joining a carrier alliance.

The merging of the companies certainly would make them look more attractive to a carrier alliance, like the new THE Alliance that HMM has been expected to join.

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Are You Ready for VGM Rule Going Into Effect Next Month, Shippers? https://www.universalcargo.com/are-you-ready-for-vgm-rule-going-into-effect-next-month-shippers/ https://www.universalcargo.com/are-you-ready-for-vgm-rule-going-into-effect-next-month-shippers/#respond Thu, 09 Jun 2016 21:44:02 +0000 https://www.universalcargo.com/?p=7386 July 1st is less than a month away. Many in the international shipping industry are nervous about that. That’s because July 1st is when the International Convention for the Safety of Life at Sea (SOLAS) regulation requiring shippers to provide a verified gross mass (VGM) in order to get their cargo containers loaded onto ships goes […]

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July 1st is less than a month away. Many in the international shipping industry are nervous about that.

That’s because July 1st is when the International Convention for the Safety of Life at Sea (SOLAS) regulation requiring shippers to provide a verified gross mass (VGM) in order to get their cargo containers loaded onto ships goes into effect.

Failure to comply means cargo won’t be shipped. It could also mean fines.

Exactly how enforcement of the new rule will go is something of a mystery. Even what compliance actually looks like has been controversially debated.

With the rule requiring shippers to provide a certified or verified weight of every loaded shipping container they’re exporting, many shippers are still trying to figure out how they will get that VGM. But the VGM problem does not rest solely on the shoulders of shippers.

This is a problem the entire supply chain in the international shipping industry faces. If large numbers of shippers fail to meet this new rule, there could be serious disruption in the supply chain. Options must be provided to shippers for acquiring VGM, compliance must be clear, enforcement must be clear, consistent, and fair…

It looks instead like the shipping industry will be bumbling it’s way through this rule change.

“Less than 15% of the 162 IMO Member States that are signatories to SOLAS have given shippers and operators in their jurisdiction any helpful guidelines regarding VGM procedures that become mandatory on 1 July,” the American Journal of Transportation reported.

In the U.S. specifically, shippers have been hearing conflicting messages from current regulations already put them in compliance to major adjustments to their exporting operations will be needed.

Now the worry is that many U.S. shippers will not provide VGM, thinking they’ll be fine and a huge problem will be created July 1st. U.S. shippers do need to provide VGM, but how that weight will be obtained has a broad range of answers.

Carriers could actually provide the service themselves; however, it is clear that carriers do not wish to do so. As much as carriers are struggling in the international shipping industry, adding this service may just be more than they can handle.

The Journal of Commerce (JOC) reports how OOCL, for example, is offering a VGM service, but in a way to discourage shippers from actually using it:

Orient Overseas Container Line will offer to weigh containers — at a steep cost — for shippers who fail to meet a new international container weight rule going into effect this July…

Based on the high cost, the advisory… appears more of an attempt to encourage shippers to provide their own verified gross mass, or VGM, declaration than as a true service. Container terminals and operating ports globally are beginning to offer container weighing services to exporters, some for free and some, like DP World, for up to $245 per container.

OOCL’s large VGM fee seems almost like a fine it is charging shippers if they don’t provide a VGM before their cargo containers reach the carrier. Didn’t get VGM done? Fine, we’ll handle it for you. That’ll be $245.

Ports across the country are approaching VGM in different ways.

Last month, I wrote how ports were taking advantage of the new VGM rule to create a service right at terminals to weigh shipping containers for a fee. But not all terminals offering such a service are planning to charge for it.

“Some U.S. East Coast operating ports, such as Charleston and Savannah, are offering the service for free, while terminals in Baltimore and New Jersey will charge for it,” reports the JOC.

Ports on the West Coast do not plan to create VGM services nor provide the data from any weighing they do of cargo containers for VGM purposes. There is worry on the West Coast that such operations would cause or add to congestion, something West Coast ports have struggled with mightily.

Others in the supply chain are stepping up and creating container weighing services to help shippers meet VGM compliance.

SalSon Logistics is offering a VGM service for just $10 at their “Weight Verification Station” near the Port of New Jersey during port terminal hours according to AJOT.

While such VGM options are popping up, no one knows how well shippers will do at compliance a few weeks from now. The transition could be bumpy.

As such, the International Maritime Organization (IMO) has suggested a “practical and pragmatic” approach to enforcement during the first three months of transition:

In this context, the MSC agreed that while there should be no delay in the implementation of the SOLAS requirements, it would be beneficial if Administrations and port State control authorities could take a “practical and pragmatic approach” when enforcing them, for a period of three months immediately following 1 July 2016. This would help ensure that containers that are loaded before 1 July 2016, but transhipped on or after 1 July 2016, reach their final port of discharge without a verified gross mass and it would provide flexibility, for three months immediately after 1 July 2016, to all the stakeholders in containerized transport to refine, if necessary, procedures (e.g. updated software) for documenting, communicating and sharing electronic verified gross mass data.

But that isn’t enough to ease the minds of many shippers.

Do you know how you plan to be in compliance come July 1st?

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ILWU Slowly Considers Early Contract Negotiations https://www.universalcargo.com/ilwu-slowly-considers-early-contract-negotiations/ https://www.universalcargo.com/ilwu-slowly-considers-early-contract-negotiations/#comments Tue, 07 Jun 2016 20:28:34 +0000 https://www.universalcargo.com/?p=7301   Back in March, the Pacific Maritime Association (PMA) officially requested the International Longshore & Warehouse Union (ILWU) start early talks to extend the current contract that expires in 2019. Is it going to happen? Apparently, the ILWU is considering it, but they’re moving about as fast on the topic as they move containers when […]

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Dockworker and cargo containers

Dockworker and cargo containers

Back in March, the Pacific Maritime Association (PMA) officially requested the International Longshore & Warehouse Union (ILWU) start early talks to extend the current contract that expires in 2019.

Is it going to happen?

Apparently, the ILWU is considering it, but they’re moving about as fast on the topic as they move containers when trying to gain leverage on the PMA during contract negotiations. Which is to say, they’re moving very slowly on the topic.

Ask shippers who import and export through West Coast ports and most will tell you that nothing has hurt them more in recent history than labor strife at those ports.

It took over a year for the PMA and ILWU to negotiate and ratify the latest contract, with negotiations beginning May 12th, 2014 and ratification of the new contract happening May 22nd, 2015. Negotiations seemed to be going smoothly until the ILWU began organized slowdowns in October of 2014 that kept importers from getting goods in time to stock store shelves for the holiday season and made exporters watch as their produce rotted on the docks.

Nothing has hurt West Coast ports in recent history more than labor strife.

The Port of Portland is a perfect example of how the labor union can damage port business. The ILWU hard-timed the port so badly, especially during the contract-less time of the 2014-15 negotiations, that the port lost its carriers who called on the Port of Portland for containerized shipping. All of them as of last month.

The odds of the Port of Portland recruiting container cargo carriers to call on the port are slim because of how much the union slowed down operations there.

The Wall Street Journal reported the following in an article about the port losing its last container cargo carrier:

Port officials added they still hope to recruit another container cargo carrier to call at Portland. Mr. Leavitt said Portland has identified a handful of potential operators but many have expressed wariness of ongoing tension between the port’s dockworkers and the container terminal operator, which has caused delays in handling goods for much of the past two years.

Everyone has been urging the PMA and ILWU to start negotiations early in order to keep these ugly episodes from happening again.

The PMA is definitely onboard. The ports suffered greatly from the congestion that built up during contentious contract negotiations. It was no surprise the PMA requested early talks to extend the contract in March.

ILWU President Bob McEllrath said he would bring up the topic with the union, presumably at the ILWU’s April 18-22 caucus in Panama City, Panama.

Did that happen? Yes.

According to the ILWU’s May 2016 Dispatcher published online on June 1st, McEllrath submitted PMA’s request to the union:

PMA’s contract extension request In March 2016, the Pacific Maritime Association (PMA) sent President McEllrath a request to discuss an extension of the 2014-2019 Longshore Contract. President McEllrath submitted this request to the ILWU Coast Longshore Division Caucus and the issue was discussed. In keeping with the ILWU Coast Longshore Division’s democratic process, the Caucus has submitted the matter to the membership for review and input before taking any official action.

Does this mean there will be early talks to extend the current contract? No.

Historically, the ILWU does not extend a contract or agree to a new one before the current one expires in order to have the full leverage of strikes and slowdowns while not under contract at its disposal.

However, that does not mean things couldn’t be different this time.

The issue has been officially submitted to membership. At least one official discussion of the topic has taken place. Now the issue is before membership for “review and input”.

Obviously, the union is in no hurry to move on this issue. A quarter of a year has passed since the PMA requested early contract talks on extending and this is the most we’ve heard from the ILWU on the subject. But at least the union is considering the topic. Even if it is doing so slowly.

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Hyundai Merchant Marine Keeps Afloat https://www.universalcargo.com/hyundai-merchant-marine-keeps-afloat/ https://www.universalcargo.com/hyundai-merchant-marine-keeps-afloat/#respond Thu, 02 Jun 2016 20:19:07 +0000 https://www.universalcargo.com/?p=7295 Last week when we blogged on Hyundai Merchant Marine (HMM), South Korea’s second largest largest container carrier’s theme song was Queen’s “Another One Bites the Dust” as the shipping company seemed headed for receivership. This week, “Staying Alive” by the Bee Gees seems a better fit. HMM’s future is by no means secure, but the container […]

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Hyundai Merchant Marine Dream container ship

Picture: Shipping21 Hyundai Merchant Marine Dream container ship

Last week when we blogged on Hyundai Merchant Marine (HMM), South Korea’s second largest largest container carrier’s theme song was Queen’s “Another One Bites the Dust” as the shipping company seemed headed for receivership.

This week, “Staying Alive” by the Bee Gees seems a better fit.

HMM’s future is by no means secure, but the container carrier has made big deals this week to keep the company from drowning in bankruptcy.

Joyce Lee reported in Reuters:

A majority of Hyundai Merchant Marine Co Ltd (HMM) bondholders have approved a debt-for-equity swap plan, South Korea’s second-largest shipper said on Wednesday, paving the way for restructuring of the heavily indebted firm’s finances.

HMM, which had debts about 5.2 trillion won ($4.36 billion) at end-March, has about 804.3 billion won in publicly traded bonds outstanding, a spokesman said.

The debt restructuring plan includes a debt-for-equity swap for over 50 percent of the applicable bonds, while the remaining amount is to be payable in three-year instalments, after a two-year grace period.

Last week, HMM’s creditor banks agreed to a 680 billion won debt-for-equity swap.

Getting debtors to take stock for the money HMM owed is huge for keeping the shipping company afloat.

When negotiations with ship charters ended in failure for HMM to get approximately 30% lower charter rates on the container ships they use, it looked like the company would be washed away in a tide of receivership.

Luckily, government aid stepped in.

Pulse News reports, “With the support from the government and state bank, Hyundai Merchant Marine is expected to wrap up talks with foreign ship owners on new favorable terms of leasing out vessels.”

In fact, the article points out that the better vessel leasing terms and debt-for-equity swaps get HMM most of the way to being saved from sinking:

The company has met two of the three conditions creditors laid out for debt relief program and custodianship instead of sending the shipper to court receivership – cutting charter fees and persuading individual bondholders to reschedule debt along with membership to multinational maritime alliance group.

That third condition of joining a carrier alliance appears to be a done deal as well.

Marine Link reports that HMM is joining the new THE Alliance:

According to a government official, key members of THE Alliance said they will support HMM’s membership application. Since the shipper successfully cleared a hurdle of debt adjustment negotiations with its bondholders, HMM’s entrance to THE Alliance is expected to be just a matter of time, he added.

When all is said and done, it appears HMM will remain on the international shipping waters. At least, for now.

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How Mobile is Emerging as Next Major U.S. Port https://www.universalcargo.com/how-mobile-is-emerging-as-next-major-u-s-port/ https://www.universalcargo.com/how-mobile-is-emerging-as-next-major-u-s-port/#comments Wed, 01 Jun 2016 01:15:20 +0000 https://www.universalcargo.com/?p=7283 When you think of major U.S. ports, the obvious ones that come to mind are probably the Ports of Los Angeles and Long Beach on the West Coast, the Ports of New York and New Jersey on the East Coast, and the Gulf Port of Houston. Of course, there are many more U.S. ports worth mentioning; however, […]

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Port of Mobile

Port of Mobile

When you think of major U.S. ports, the obvious ones that come to mind are probably the Ports of Los Angeles and Long Beach on the West Coast, the Ports of New York and New Jersey on the East Coast, and the Gulf Port of Houston.

Of course, there are many more U.S. ports worth mentioning; however, one that many would not think to bring into the conversation is the Port of Mobile.

That could be about to change.

The Port of Mobile is Alabama’s only deep water port, and it is not as though it doesn’t already have significance in the importing and exporting of goods. But right now, the Port of Mobile is on the verge of significant growth that could see it take a chunk of market share from both East Coast and West Coast ports like the Ports of Los Angeles and New York while making it a serious contender with the Port of Houston in the Gulf Coast.

How is the Port of Mobile doing it?

The first is container terminal expansion such as the ones in the Alabama State Port Authority press release of June 16th of last year:

The Alabama State Port Authority (ASPA) welcomed APM Terminals’ announced plans to add two new super-Post Panamax cranes and expand the container facility at the Port of Mobile. The Port Authority and APM Terminals partnered in 2005 to construct Phase I of the container terminal at Choctaw Point to provide customers with access to global networks covering all possible trade routes to and from the Port of Mobile. Under the concession agreement, APM Terminals operates the terminal.

APM Terminals $40 million infrastructure investment will improve approximately 20 acres to increase the container terminal’s capacity to 475,000 TEUs. APM Terminal’s expansion will compliment approximately $50 million invested by the Port Authority to construct an Intermodal Container Transfer Facility that could be serviced by five Class I railroads, including the Canadian National, CSX, Norfolk Southern, Kansas City Southern and BNSF. The Intermodal Container Transfer Facility is under construction with a first quarter 2016 completion.

Many Gulf and East Coast ports have been undergoing expansion projects as the Panama Canal expansion draws nearer to completion in the hopes of receiving bigger ships and more containerized cargo shipments through it.

However, the Port of Mobile also has Canadian National Railway working to make Mobile a gateway to the Midwest and Mid-South parts of the U.S., utilizing that $50 million Intermodal Container Transfer Facility mentioned in the press release quoted above.

With major congestion bogging down West Coast ports, often stemmed from ILWU labor strife, and winter weather often causing congestion at East Coast ports like New York, the Port of Mobile is in a perfect spot to take advantage, handling containerized goods that can easily move via rail to other parts of the country.

Already, success can be seen as Maersk Line, MSC, China Cosco Shipping, and Hanjin Shipping have announced new services that will regularly call on the Port of Mobile.

Expect to see major growth at the port.

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Port of LA Launching Program to Eliminate Port Pollution https://www.universalcargo.com/port-of-la-launching-program-to-eliminate-port-pollution/ https://www.universalcargo.com/port-of-la-launching-program-to-eliminate-port-pollution/#respond Thu, 26 May 2016 20:18:42 +0000 https://www.universalcargo.com/?p=7280 Can the Port of Los Angeles, the continent’s largest port by container volume, completely eliminate its pollution? Not only is that the goal, but the port is rolling out zero and near-zero emission technologies and strategies in a program “expected to reduce more than 3,200 tons per year of greenhouse gases and nearly 28 tons […]

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Smog over the Port of Los Angeles PICTURE: Nick C. Prior

Smog over the Port of Los Angeles PICTURE: Nick C. Prior

Can the Port of Los Angeles, the continent’s largest port by container volume, completely eliminate its pollution?

Not only is that the goal, but the port is rolling out zero and near-zero emission technologies and strategies in a program “expected to reduce more than 3,200 tons per year of greenhouse gases and nearly 28 tons annually of diesel particulate matter, nitrogen oxides and other harmful emissions from operations at [the port],” according to a Port of L.A. press release.

This is actually incredible news.

Imagine 14,100 cars per day being taken off the road of SoCal’s coast. Yes, that would be nice for those driving through the hell that is Los Angeles traffic, but we’re only concerned with the emissions the cars produce right now. Taking away the pollution of those 14,100 cars is what the South Coast Air Basin’s air gains will equate to with this program, according to the Port of L.A.

I won’t spiral this down into an article on the evils of pollution. We all know pollution is bad for the world and our health. Ports around the world are huge generators of pollution, but the Port of L.A. is leading the way toward changing that with the launch of the new Green Omni Terminal Demonstration Project.

The ramifications using, like this program will use, renewable and clean energy around the world at ports, eliminating the smog and greenhouse gases they currently produce, are huge.

Because so often international shipping news is dominated by negative stories like port congestion and carriers struggling to make a profit and survive, this story is a breath of fresh air. Literally.

The Port of L.A. shares in their press release:

… Pasha Stevedoring and Terminals L.P. and the Port of Los Angeles are launching the Green Omni Terminal Demonstration Project, a full-scale, real-time demonstration of zero and near-zero emission technologies at a working marine terminal.

“This is a Wright Brothers moment,” said Jeffrey Burgin, Senior Vice President of Pasha. “We’re going to be the proving ground to change the paradigm of how large industrial facilities can run on clean energy. We’re confident we can show [eliminating pollution from port-related operations] is absolutely attainable.”

Here’s a list of things the press release says the project will utilize to reach its goals:

  • new and retrofitted zero-emission electric vehicles and cargo-handling equipment
  • latest generation of advanced technology for capturing ship emissions from vessels unable to plug into shore power at berth
  •  a microgrid that includes solar generation, battery storage, and an energy management system to maximize usage

Here are the details the press release gives on the project:

Project implementation will start in June with the final design and construction of the solar-powered microgrid. Components include a 1.03 megawatt photovoltaic rooftop array, a 2.6 megawatt-hour battery storage system, “bi-directional” charging equipment that can receive as well as supply power, and an energy management control system.

The project’s developmental fleet of zero-emission cargo handling equipment includes four electrified yard tractors, two high-tonnage forklifts, two drayage trucks and a top handler. Additionally, two wharf cranes will be upgraded with new electrical drives and control systems, and the project will demonstrate ShoreCat, the next generation of the METS-1 (Marine Exhaust Treatment System) for capturing at-berth vessel emissions without plugging into shore power. METS-1, which was piloted at the Port of Los Angeles, is one of only two existing ARB-approved alternatives to shore power.

In addition to integrating zero-emission vehicles and cargo handling equipment into the full scope of terminal operations, the project’s goals are to reduce emissions at berth from non-regulated ships, accelerate the development of commercially viable zero and near-zero emission equipment and solutions.

The project isn’t cheap, costing $26.6 million.

That cost may slow other ports from following suit right away. However, if the program is as successful as expected, other ports around the world should follow the Port of L.A.’s lead.

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Shrinking Carrier Competition: HMM Headed for Receivership https://www.universalcargo.com/shrinking-carrier-competition-hmm-headed-for-receivership/ https://www.universalcargo.com/shrinking-carrier-competition-hmm-headed-for-receivership/#respond Tue, 24 May 2016 18:35:03 +0000 https://www.universalcargo.com/?p=7269 Things are not looking good for Hyundai Merchant Marine (HMM). South Korea’s second largest shipping line has been in financial crisis that it is looking less and less likely to survive. Just in the last blog post, I wrote about the shrinking competition in international shipping as the world’s shipping lines are about to be dominated by […]

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Hyundai Merchant Marine Dream container ship

Picture: Shipping21 Hyundai Merchant Marine Dream container ship

Things are not looking good for Hyundai Merchant Marine (HMM).

South Korea’s second largest shipping line has been in financial crisis that it is looking less and less likely to survive.

Just in the last blog post, I wrote about the shrinking competition in international shipping as the world’s shipping lines are about to be dominated by just three carrier alliances, the 2M, Ocean Alliance, and THE Alliance.

I even wrote, “any carrier not in one of these three alliances looks to be in trouble. APL and Hyundai, I’m looking at you.”

Xiaolin Zeng wrote in a JOC article:

HMM was left out of THE Alliance when it was first announced but said that it would join THE Alliance over the summer after its financial situation was more settled.

HMM will be lucky to be in existence by the end of the summer. Its financial situation is about to settled the hard way.

That JOC article was actually about receivership looming for HMM after negotiations with its ship charters ended in failure to get the lower charter rates the shipping line desperately needed.

The Load Star reported a couple numbers that give a glimpse into how bad things have recently been for HMM:

HMM recorded a $525m loss in 2015 and a $240m loss for the first three months of this year.

The shipping line was attempting to get about a 30% drop in charter rates so it could convince its main lender, state-owned Korea Development Bank (KDB), to execute a debt-for-equity swap that would keep KDB from putting HMM in court receivership.

Since negotiations with its ship charters failed, HMM is almost certainly going into receivership.

The Load Star article went on to explain what that would look like:

… it is likely that the creditors, including shipowners, will only receive a percentage of what they are owed.

In terms of charter hire payments, any breach – including reduced payment – allows the shipowner to terminate the charter and take back the ship.

This would invariably result in ships and cargo being arrested; which would mean a very worrying time for HMM’s customers.

“Cargo being arrested” are key words in there for shippers.

Obviously, failure to deliver goods would shatter what little confidence shippers may have left in HMM.

Is the international shipping industry about to say goodbye to HMM?

I hear some music playing for HMM. No, it’s not a tiny violin; it’s the Queen song, Another One Bites the Dust.

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And Then There Were 3… Carrier Alliances https://www.universalcargo.com/and-then-there-were-3-carrier-alliances/ https://www.universalcargo.com/and-then-there-were-3-carrier-alliances/#respond Thu, 19 May 2016 21:42:45 +0000 https://www.universalcargo.com/?p=7029 When watching the carriers operating in the international shipping industry, the old Agatha Christie mystery, “Ten Little Indians” comes to mind. … And then there were three… If you haven’t read the novel or seen the play or seen the movie adaptation or the other movie adaptation… it’s one of those mysteries where a bunch of […]

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When watching the carriers operating in the international shipping industry, the old Agatha Christie mystery, “Ten Little Indians” comes to mind.

And then there were three…

If you haven’t read the novel or seen the play or seen the movie adaptation or the other movie adaptation… it’s one of those mysteries where a bunch of people (in this case 10) are trapped together, getting killed off one by one. The countdown is marked by ten little Indian figurines that get broken one after another as the people die. There’s also a little nursery rhyme about the little Indians dying one after another that is probably not very PC (that’s politically correct, not personal computer).

The pool of competition of carriers, or shipping lines, in international shipping is shrinking like Christie’s cast of characters.

In 2011, I first started writing that the number of carriers operating in the international shipping would shrink after they suffered huge losses (measured in billions of dollars) due largely to overcapacity and were likely see much more overcapacity in the upcoming years.

It was then, five years ago, that Maersk CEO Nils Smedegaard Andersen said, “It would be natural if the smaller players in this business, or their banks, start questioning whether it’s a good idea to keep competing.”

Would Maersk, as the big dog of international shipping, just wait out the deaths of its smaller competitors?

Well, overcapacity has continued to plague carriers, and the competition pool has shrunk.

There have been mergers and buyouts, but the biggest way carriers are dealing with overcapacity and struggles to maintain profitability is by forming carrier alliances, also known as vessel sharing agreements.

To avoid being wiped out like the Ten Little Indians, carriers huddle into groups, reducing overhead as they share operating costs in order to make money while overcapacity pushes freight rates down.

But now, after the merging of China’s two big shipping companies, Cosco Container Lines and China Shipping Container Lines, into China Cosco Shipping Corporation and it joining CMA CGM, Evergreen Line, and OOCL to form the new Ocean Alliance, all the old carrier alliances are being broken apart.

All the old alliances except the one at the top. The world’s two largest ocean carriers by capacity, Maersk and MSC, will continue on with their 2M shipping alliance.

That leaves all the rest of the carriers, who are part of the ending Ocean 3, G6, and CKYHE alliances, to scramble together into a new alliance that has just been announced (though not all of them seem to be making it in).

That new alliance is the THE Alliance.

It feels really redundant to type the THE Alliance.

Now, as long as the new alliance configurations gain approval, international shipping will be completely dominated by the 2M, Ocean, and THE alliances.

And then there were 3…

For an idea of just how dominant these three alliances will be, according to Alphaliner figures found in a JOC article, the three carrier alliances will control 94% of capacity on Asia-North America routes and own 99% of the market share on Asia-Europe routes.

Basically, any carrier not in one of these three alliances looks to be in trouble. APL and Hyundai, I’m looking at you.

Here’s a quick breakdown of what shipping companies comprise which alliances. First, visually with the Carrier Craziness Bracket (Yes, it’s broken, and yes, I said last time was probably the last time you’d see this bracket, but I did say, “probably”).

Carrier Craziness Bracket

Carrier Craziness Bracket updated with Ocean Alliance and THE Alliance

2M

Maersk

Mediterranean Shipping Co.

Ocean Alliance

CMA CGM

China Cosco Shipping Corporation

Evergreen Line

OOCL

THE Alliance

Hapag-Lloyd

Hanjin Shipping

Mitsui OSK Lines

NYK Line

K Line

Yang Ming Marine Transport

UASC (Expected to be included, and in merger talks with Hapag-Lloyd)

So there you have it. The new world order of international shipping.

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How Ports Take Advantage of SOLAS VGM Rule Change https://www.universalcargo.com/how-ports-take-advantage-of-solas-vgm-rule-change/ https://www.universalcargo.com/how-ports-take-advantage-of-solas-vgm-rule-change/#respond Thu, 12 May 2016 18:06:54 +0000 https://www.universalcargo.com/?p=7028 They say change is a constant. What’s certainly constant about change is someone always finds a way to make money on it. U.S. ports are in position to cash in on the upcoming regulation change that is the hot topic of international shipping. Everyone is talking about the new International Convention for the Safety of […]

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Port of Charleston charging $25 VGM fee.

Port of Charleston charging $25 VGM fee.

They say change is a constant. What’s certainly constant about change is someone always finds a way to make money on it.

U.S. ports are in position to cash in on the upcoming regulation change that is the hot topic of international shipping.

Everyone is talking about the new International Convention for the Safety of Life at Sea (SOLAS) regulation requiring shippers to provide a verified gross mass (VGM) of loaded shipping containers before the containers can be loaded on ships.

How much of an impact is this rule that goes into effect on July 1st going to have on the operation of shippers has been hotly debated.

Many have worried there will be very large operational changes that will hurt shippers; however, the U.S. Coast Guard has said that U.S. laws are actually equivalent to this new rule.

That would mean U.S. shippers are already in compliance, right? So there shouldn’t really be an effect on U.S. shippers, right?

Wrong.

There will be an effect. Here’s what’s really going to happen: fees. VGM fees. Is anyone surprised?

Someone is going to make money off this thing. And, of course, it’s not going to be shippers. Ports just happen to be in the perfect position to turn this rule change into money.

The Coast Guard released a bulletin to highlight versatility in how shippers can provide VGM. Shippers don’t need to weigh the loaded containers themselves; terminals can be authorized to do the actual container weighing.

Ports will take advantage of that by charging a VGM fee to weigh shipping containers for shippers.

The Port of Charleston is going to start charging a $25 fee to provide shippers with a VGM on a shipping container according to an American Shipper article:

The South Carolina Ports Authority on Thursday said it will charge $25 to provide container weight verification on behalf of shippers at the Port of Charleston to comply with new international maritime safety regulations.

What a great service the Port of Charleston is providing shippers, right? Well, here’s the real kicker: They’re charging shippers for something the port already does anyway.

The article goes on:

The Port of Charleston for years has weighed every export container received at its terminals on calibrated scales to meet Occupational Safety and Health Administration regulations requiring terminals to receive the gross weight of the container, or use its own scales to obtain the weight, before it is hoisted by any cargo handling equipment.

“It has been our position all along that we have employed a best practice in safely loading ships in our port for the last 20 years due to our weighing of all export containers,” SCPA President Jim Newsome said in a statement.

Without really doing more work, ports will make more money thanks to the SOLAS VGM rule change.

Ports across the U.S. are beginning to announce these fees, framing them as a service terminals are providing for shippers. And $25 a shipping container is actually on the cheap side.

The Port Newark Container Terminal announced Tuesday “it will provide the service to shippers for $69.10 per unit” according to an article from the Journal of Commerce.

Now a clear picture of what the new SOLAS VGM rule change means for shippers is coming into focus. No real operational change. Just a new fee.

The more things change, the more they remain constant.

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Coast Guard Raises Controversy on New Container Weight Rule https://www.universalcargo.com/coast-guard-raises-controversy-on-new-container-weight-rule/ https://www.universalcargo.com/coast-guard-raises-controversy-on-new-container-weight-rule/#respond Tue, 15 Mar 2016 19:54:33 +0000 https://www.universalcargo.com/coast-guard-raises-controversy-on-new-container-weight-rule/ What’s going on with this new Verified Gross Mass (VGM) rule? Somehow the answer to that question is getting less clear as the July 1st rule change concerning VGM draws near. Ripples of shock spread through the packed crowd, as well as the panel of experts, at the Journal of Commerce’s16th annual Trans-Pacific Maritime Conference in Long Beach, […]

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VGM_Coast_Guard_Shippers.pngWhat’s going on with this new Verified Gross Mass (VGM) rule?

Somehow the answer to that question is getting less clear as the July 1st rule change concerning VGM draws near.

Ripples of shock spread through the packed crowd, as well as the panel of experts, at the Journal of Commerce’s16th annual Trans-Pacific Maritime Conference in Long Beach, CA on March 1st when panelist Paul Thomas, Rear Adm. of the Coast Guard said the SOLAS guidelines on container weight verification going into effect in July are not mandatory.

Journal of Commerce article quotes him as follows:

“They are not mandatory under SOLAS, they are not mandatory under any U.S. regulation. It says that right on top — these are non-mandatory guidelines.”

“The guidelines in this case provide one path to compliance with the mandatory amendments, but it is not the only pathway and the guidelines themselves are not part of the mandatory SOLAS requirements,” he said in an email after the panel.

As far as the Coast Guard was concerned, complying with the VGM rule was a business procedure issue. “SOLAS places no legal obligation on the shipper. It places a legal obligation only on the vessel subject to SOLAS. So if you need to meet that obligation by working on a better business practice with your partners, that’s where you need to focus,” Thomas said.

This is welcome news to shippers, especially exporters in the U.S., who were looking at procedural changes to get the tare of each container of goods they exported or get all those loaded container weighed to provide VGM.

There has been much worry about how this might slow down the supply chain and even be impractical for shippers.

But the World Shipping Council is angry about Thomas’ comments and the Coast Guard’s apparent position on the new regulation.

JOC quoted WSC’s reaction:

“The decision of what is required is not a matter for business discussion, it is not a business practice issue,” [Christopher Koch, senior advisor and former CEO of the World Shipping Council] said. “The Coast Guard’s position is that SOLAS regulation does not apply to shippers and require them to provide a signed VGM, and terminals are not required to enforce what the SOLAS regulation says.”

Koch called the Admiral’s comments a “stunning revelation,” considering the IMO guidelines were submitted by a working group shared by the U.S. Coast Guard, and in a paper co-sponsored by the U.S.

Of course, while shippers welcome the idea of not having to change their business practices, this episode is creating confusion on whether or not that will have to happen.

In the wake of Thomas’ controversial statements about the new SOLAS regulation, the Coast Guard posted an FAQ page (from Thomas’ desk) to provide clarity on this issue.

Here’s a highlight on what the Coast Guard says there about shippers’ responsibility in this new VGM regulation (I added the bolding):

How do SOLAS requirements apply to U.S. domestic shippers?

The USCG’s flag state and port state authorities only extend to U.S. and foreign-flagged ships. The USCG has no authority over domestic shippers. Domestic shippers may be impacted by SOLAS requirements because their domestic and international business partners, who run ships, interpret their obligation to meet SOLAS requirements.

In the case of the SOLAS Regulation VI-2 amendments regarding container weight, some carriers have determined they need to change their operational or business practices to meet the requirements of their flag states (foreign and domestic). As such, domestic shippers may be called upon to change their business practices with these international partners in the global supply chain. This is a business-to-business requirement. For the U.S., the USCG believes that carriers currently comply with SOLAS, and are therefore not requiring domestic shippers to make changes in existing practices.

Proper, accurate weight of shipping containers must be provided to comply with SOLAS and prevent future incidents such as loss of life, loss of vessels, and loss of cargo because of misdeclared cargo weight, which has happened in the past.

The question is how will U.S. shippers make sure they are in compliance with this. And are they already?

Expect more debate on this issue to rage on between now and July 1st.

Continued Reading:

New Shipping Rule Shippers Must Follow to Get Containers Loaded

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Source: UC Blog

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Why Do Companies Hire Logistics Consultants? https://www.universalcargo.com/why-do-companies-hire-logistics-consultants/ https://www.universalcargo.com/why-do-companies-hire-logistics-consultants/#respond Fri, 26 Feb 2016 23:09:15 +0000 https://www.universalcargo.com/?p=7444 Guest Blog by Mark Long A lot of companies already have their own logistic managers. These managers help the company to make a number of logistic decisions. However, such companies may also need to hire a logistic consultant. Despite their own internal expertise, the company will benefit a lot from the knowledge and experience of […]

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Guest Blog

by

Mark Long

logistics consultant resized 600A lot of companies already have their own logistic managers. These managers help the company to make a number of logistic decisions. However, such companies may also need to hire a logistic consultant. Despite their own internal expertise, the company will benefit a lot from the knowledge and experience of a consultant. The consultant will help the company to manage any issues that have to do with their supply chain. They will also help the company to make better decisions on logistical problems.

There are a number of logistics problems that a company may face. They could be growing very rapidly. They could want help with their productivity. They could even want help with their equipment. They could also want to understand the cost of logistics at a product or customer level. The following are some of the reasons why companies choose to hire logistic consultants:

They have more experience

A company may be faced with a unique dilemma that they need to resolve. For example, they may have acquired another company. They may also want to deal with the problem of excess stock or expensive transportation costs. The company may need to get a solution about backloading. They may also want to know how to get cheap freight. A logistics consultant has probably dealt with such issues before. The company will hire a consultant who has experience in dealing with their specific logistics problem. They will know the solutions that work. They will also know the solutions that do not work.

They possess the relevant skills

Logistic consultants have both technical and operational skills. The company may not have the same level of internal expertise. The logistics consultants are experts in their field. They have managerial skills, analytical skills, and technical skills. They can thoroughly analyse the situation and communicate effectively. Their skills have enabled them to manage all the logistical problems that a company may face.

Objective approach

A lot of companies already have a logistics team. However, they prefer to hire a logistics consultant for certain issues. This is because the logistics consultant is not an employee of the company. They can approach the project more objectively. The external consultants will be unbiased in their approach and solutions for the various issues.

Better resources

A company may require quite an amount of time to develop all the resources that it needs to handle logistics. However, for logistics consultants, this is their main area of expertise. Therefore, they always have developed resources and tools. This means that they can begin the process immediately. They use methods that help them to adopt the different approaches in order to solve a company’s logistics problem. The company is therefore more likely to get better assistance if they use the consultants.

Experts in handling different subject matters

There are a number of issues that can be very difficult to manage internally. However, the logistics consultants can provide their expertise on such urgent and difficult matters. They will consider all the specialized operations of a company. They will then offer their own fresh ideas that will help the company to solve their logistical problems.

About the Author

Mark Long is the director of his own Logistics Consultants Firm. He has helped a lot of companies to deal with logistics in unique and common situations. He can provide solutions for issues such as cheap freight and backloading.

Click me

Click on the Guest Blog image above to email Raymond Rau if you would like Universal Cargo Management to publish an original blog from you.

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WHAT THE ISF?! https://www.universalcargo.com/what-the-isf/ https://www.universalcargo.com/what-the-isf/#respond Thu, 08 Oct 2015 23:16:52 +0000 https://www.universalcargo.com/?p=7592 No, it’s not an expletive, but you’d think shippers were cussing when they talk about ISF. Actually, in some cases they probably are cursing because of how much money these three little letters have cost them. Many shippers are needlessly losing money in $5,000 and $10,000 increments. Why? Failure to follow a rule U.S. Customs […]

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ISF shipper informationNo, it’s not an expletive, but you’d think shippers were cussing when they talk about ISF. Actually, in some cases they probably are cursing because of how much money these three little letters have cost them.

Many shippers are needlessly losing money in $5,000 and $10,000 increments. Why? Failure to follow a rule U.S. Customs and Border Protection put into effect all the way back on January 26th, 2009.

The rule is called Importer Security Filing and Additional Carrier Requirements. Shippers would more commonly hear this rule referred to as ISF or 10+2. Not complying with the rule has not just cost thousands of dollars in penalties, as mentioned above, but also increased inspections and cargo delays.

A long, graduated enforcement policy, including things like delayed enforcement, reviews of liquidated damages claims, and even a procedure of giving 3 warnings to violators protected shippers from huge losses while the international shipping industry got used to the new requirements of importing to the U.S.

Full enforcement finally went into effect May 14th, 2015. Shippers now must get ISF correct or pay a heavy price that will undoubtedly evoke heavy uses of expletives.

Failure to file an ISF, late ISF, inaccurate ISF, incomplete ISF, and failure to withdraw an ISF all result in a $5,000 fine. These fines can accumulate; luckily however, the maximum liquidated damages per ISF filing is $10,000. Still, that is a very steep fine on a shipment.[1]

What is ISF?

ISF, as stated above, stands for Importer Security Filing. When we talk about ISF, we’re talking about ISF-10. It is often referred to as 10+2, but the plus two portion are requirements for the carriers instead of the shippers. Shippers have 10 pieces of information that they must provide for U.S. bound cargo.

There is also an ISF-5 for transit cargo; however, enforcement has not yet begun on this second type of ISF.

Here are the 10 data elements required of a shipper for ISF:

  1. Importer of Record or FTZ Number
  2. Consignee Number(s)
  3. Seller (Owner) name/address
  4. Buyer (Owner) name/address
  5. Ship to Party name/address
  6. Manufacturer (Supplier) name/address
  7. Country of Origin
  8. Commodity HTS-6 digit level
  9. Container Stuffing Location
  10. Consolidator (Stuffer) name/address

Important Information for Compliance

It is very important that a shipper links his or her ISF to his or her shipment’s bill of lading (B/L). Many consider this to be an 11th data element to the ISF.

The B/L is required as part of the ISF transmission. If your ISF is not matched to your B/L, when your cargo arrives at port it will look like your ISF was not filed at all. Such cargo shipments will be marked with a failure to file ISF status and their shippers treated as though they were in complete non-compliance to ISF.

Shipments where the ISF was filled out but not matched to B/L are subject to a $5,000 liquidated damages fee. We’ll talk about liquidated damages more in the enforcement section below.

ISF should be filed 24 hours prior to lading and must be linked together as a line-item at the ISF shipment level. ISFs for “exempt” break bulk shipments are required no later than 24 hours prior to arrival.

Putting it as simple as possible, to ensure ISF timeliness, shippers should get their ISF on file 24 hours prior to the vessel departure message. Shippers need to make sure all their ISF data matches up before arrival.[2]

We actually suggest having ISF completed 72 hours in advance instead of the required 24 hours. The problem many shippers run into is missing information from suppliers or overseas agents. You want extra time to communicate with those you’re doing business with overseas in the event any information is missing to avoid a late ISF fee.

At Universal Cargo, we always make sure ISF is completed before the deadline when handling shipments.

Enforcement

The ISF violations listed above from failure to file to failure to withdraw are enforced at a port level. Shippers who violate ISF policy face two kinds of penalties: Liquidated Damages and Cargo Holds.

With the full enforcement that went into effect on May 14th, shippers can be fined $5,000 to $10,000 in liquidated damages on ISF filing violation(s) per shipment. No longer are these liquidated damages fines required to go to CBP-HQ for approval nor are ports required to give shippers warnings as they used to be.

Liquidated damages will be focused on “significantly late” or missing ISF filing and repeat violators.

“Significantly late” could mean different things for different shippers depending on what port they import through. Here’s how the CBP sheds light on this focus in their ISF Enforcement FAQ:

“Significantly late” will be defined by the individual ports, and is intended to only apply to those shipments where the ISF filing (or lack thereof) negatively impacted CBP’s ability to effectively assess risk and hold cargo.

 ISF filings after arrival are always late and exposed to both liquidated damages claims and ISF holds.[3]

One upside, and enforcement policy that has not changed from the graduated enforcement, is that liquidated damages claims against shippers must be issued within 6 months of the violation.

Of course, it is best that shippers make sure they file ISF completely, accurately, and timely to make sure they avoid expensive liquidated damages fines and costly cargo holds.

Tips for the ISF Filing Process

As a friend to your business, Universal Cargo wants to help you avoid liquidated damages fines and cargo holds.

In our next blog, we share ISF tips, like the 72 hour prior filing suggested above, to help you get through filing smoothly so you won’t be treating the ISF acronym as an expletive.

Click Here for Free Freight Rate Pricing

SOURCES:

[1] http://www.shapiro.com/7-importer-security-filing-isf-best-practices-you-shouldnt-ignore/

[2] https://dhs.adobeconnect.com/_a956619115/p29y223nm1i/?launcher=false&fcsContent=true&pbMode=normal

[3] https://www.cbp.gov/sites/default/files/documents/Addendum%20to%20FAQ_Updated%20ISF%20Enforcement%20Strategy.pdf

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Could Florida Become the New “Asia Gateway” for Imports to the U.S.? https://www.universalcargo.com/could-florida-become-the-new-asia-gateway-for-imports-to-the-us/ https://www.universalcargo.com/could-florida-become-the-new-asia-gateway-for-imports-to-the-us/#respond Thu, 01 Oct 2015 23:07:04 +0000 https://www.universalcargo.com/?p=7632 The Ports of Los Angeles and Long Beach have long reigned as the “Asia Gateway” to the United States. When it comes to imports from Asia, the twin ports in Southern California have been the place to ship through. That’s changing. Many factors have gone into the Ports of L.A. and Long Beach losing market share. Bigger ships, […]

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The Ports of Los Angeles and Long Beach have long reigned as the “Asia Gateway” to the United States. When it comes to imports from Asia, the twin ports in Southern California have been the place to ship through. That’s changing.

Many factors have gone into the Ports of L.A. and Long Beach losing market share. Bigger ships, chassis issues, and labor strife have all played roles. We did a whole blog on how the Ports of Los Angeles and Long Beach are losing market share. You can get more details on that by clicking the link below:

How the Ports of Los Angeles & Long Beach are Losing Market Share

But the simple fact is that the Southern Californian ports are losing market share. The L.A. Times reported in June:

The ports handled 39% of U.S. container imports in 2002; that fell to 32% by 2013, according to U.S. census data. They have lost business to competitors at a time when, overall, global trade is booming and imports are rising at all ports, including L.A. and Long Beach.

With the expansion of the Panama Canal fast approaching completion, ports on the East Coast are looking to take advantage and take more market share away from the Ports of Los Angeles and Long Beach.

In Southern Florida, two competing ports are now working together to take that market share. And they may just grow to become the new kings.

PortMiami - Florida New Asia Gateway?

American Shipper reports:

The TPM Asia Conference begins in two weeks in Shenzhen, China, and for the second year in a row, officials from PortMiami and Port Everglades will participate as business partners rather than competitors.

The two ports, along with the Florida East Coast Railway, will share a booth and sponsor receptions at the conference, as well as meet with high-level liner executives and users of ocean services in China.

The joint marketing effort is designed to overcome the lack of awareness about South Florida as an alternative gateway for Asian goods. Today, more than 55 percent of Asian goods consumed in Florida comes through ports outside the state, including ones as far away as Los Angeles.

With good reason, the ports in Florida think Floridians shouldn’t have to look to California for the arrival of their imported goods, even from Asia.

PortMiami and Port Everglades have been getting ready for the bigger ships that will be able to cross the Panama Canal with goods from Asia, as the American Shipper article points out:

… the U.S. Army Corps of Engineers last month completed a dredging project that gives Miami a 50-foot harbor and the ability to handle neo post-Panamax vessels, while Everglades is still in the pre-construction and engineering phase of deepening its harbor in Fort Lauderdale to 48 feet.

The idea of ports working together is not foreign to the Ports of Los Angeles and Long Beach. The two Californian ports have increased their longstanding cooperation to improve productivity. But seeing other ports team up to take market share from them should make the Ports of Los Angeles and Long Beach nervous.

Here’s how the Florida ports are shifting focus from competing with each other to competing with the West Coast ports from the American Shipper article:

Natural competition will always exist between Miami and Everglades, “But if we can grow the pie larger we’ll both succeed,” Port Everglades Chief Executive Steven Cernak said on the floor of the Intermodal Association of North America’s expo in Fort Lauderdale last week.

“At the end of the day, we’re increasing the value of the region. What we’ve ascertained is there’s plenty for both ports to share if we collectively work to grow the business. Neither port can assume the other port’s operations. There’s only so much land to go around. We are at a point that we have to work together,” he said.

The Ports of Miami and Everglades putting aside their regional rivalry to increase Southern Florida’s pie in the market share is a very smart move. In the end, that will benefit both ports and hurt the Ports of Los Angeles and Long Beach.

Moving the Asian import hub from Southern California to Southern Florida could actually make a lot sense for carriers and shippers, not just because of the congestion and labor struggles on the West Coast, but because of the Florida market and the maneuverability of goods to other U.S. markets from Florida.

The American Shipper reported several of the benefits shipping directly to Florida offers:

The pitch to carriers and beneficial cargo owners is that ships have to call in South Florida because it is a large metropolitan market, but can then take advantage of new rail infrastructure to quickly reach other coveted population centers without having to stop at as many ports on the East Coast.

The Florida East Coast Railway in the past two years has added three long tracks of on-dock rail at PortMiami, rehabilitated a damaged rail bridge connecting the port with the mainland and restored a neglected main line to the bridge so that containers can moved directly from the wharf up to Jacksonville and beyond.

In the summer of 2014, the FEC Railway opened an intermodal container transfer facility on property at Port Everglades.

Florida last year surpassed New York as the third most populous state, with more than 19 million residents, but also hosts almost 100 million visitors a year. Central Florida is a huge consumer market and home to many vacation resorts.

Using the FEC Railway, cargo can be offloaded in Cocoa Beach and trucked to the Orlando area.

Port and railroad officials say they can interchange intermodal cars with the CSX and Norfolk Southern railroads in Jacksonville and deliver cargo to Atlanta, Ga., Charlotte, N.C., and Memphis, Tenn., within two days, and to the Midwest within four days.

Eric Olafson, trade development manager at PortMiami, also noted that South Florida has a turbocharged consumer market because many people from Latin America manage multiple households and often stay in the area for three to six months at a time. That means they need to buy goods to furnish their living spaces, as well as clothes and other goods. Many malls in the region average a quarter more business than malls in similar-size areas in the Midwest because of the foreign stay-over phenomenon, he said.

The strong local market offers ocean carriers the ability to collapse their services by stopping in Miami or Everglades and unloading discretionary inland cargo along with containers for South Florida.

Cargo will be on the rail to inland destinations instead of returning to sea and having to be unloaded at another port, enhancing speed to market and creating efficiencies for carriers, Olafson insisted.

The state of Florida is making a concerted effort to market the entire state as a trade and logistics hub. Gov. Rick Scott and the state legislature have invested more than $850 million in port-related infrastructure during the past four years. Enterprise Florida, the economic development arm of the state, is promoting Florida exports and logistics workforce development, while the Florida Ports Council has helped the ports speak with a unified voice on policy and investment issues.

That’s a great deal of appeal for carriers and shippers to import directly to the PortMiami and Port Everglades. With appeal slipping at the Ports of Los Angeles and Long Beach, could Florida become the new “Asia Gateway” to the United States?

If you ask PortMiami, not only could it happen but it is inevitable.

“I think you’re going to see more and more of this promoting Florida because it makes sense,” Olafson said. “And we think once the retailers, the ocean carriers become aware of this the change will be inevitable.”

The Ports of Long Beach and Los Angeles need to watch their backs. PortMiami and Port Everglades are coming for them.

Click Here for Free Freight Rate Pricing

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Could More Ocean Shipping Be the Solution to Climate Change? https://www.universalcargo.com/could-more-ocean-shipping-be-the-solution-to-climate-change/ https://www.universalcargo.com/could-more-ocean-shipping-be-the-solution-to-climate-change/#respond Thu, 24 Sep 2015 23:44:47 +0000 https://www.universalcargo.com/?p=7535 Going green may not be as trendy a topic as it once was, but the maritime shipping industry is still taking the movement very seriously. And when it comes to international shipping through ocean freight, serious advancements are being made. Carbon dioxide or CO2 is the main greenhouse gas associated with global warming. Of course, people and animals […]

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Ocean Shipping Solution to Climate ChangeGoing green may not be as trendy a topic as it once was, but the maritime shipping industry is still taking the movement very seriously. And when it comes to international shipping through ocean freight, serious advancements are being made.

Carbon dioxide or CO2 is the main greenhouse gas associated with global warming. Of course, people and animals release this gas when breathing, but when cars, trucks, planes, ships, factories, power plants etc. emit CO2 by burning fossil fuels, it becomes a pollutant.

According to National Geographic, “In the past 150 years, such activities have pumped enough carbon dioxide into the atmosphere to raise its levels higher than they have been for hundreds of thousands of years.” [Update: National Geographic took down its webpage with this quote. Unfortunately, the claim is also impossible to prove. It is unknown whether that factored into National Geographic’s decision to remove the page.]

The greenhouse effect or global warming caused by the large increase of CO2, along with other greenhouse gas pollutants, is creating a significant risk to Earth’s people and animals. At the same time, people have come to rely on the technologies made possible through the burning of fossil fuels that create CO2 emissions.

This has led the world to seek solutions. It looks like part of the solution will be a surprise to many.

With the United Nations Climate Change Conference coming up in December, the International Chamber of Shipping (ICS) released a fact sheet called Delivering CO2 Emission Reductions: Shipping is Part of the Solution.

ICS boldly claims that part of the solution to climate change is ocean shipping:

Because [ocean] shipping is already the most carbon efficient mode of transport, and becoming more efficient all the time, it is an important part of the solution to climate change. If additional cargo can be moved by sea, instead of less efficient transport modes, this will actually lead to a reduction in the world’s total CO2 emissions.

Since the ICS represents the global shipping industry, this claim of ocean shipping as a global warming solution may seem self-serving. However, there are solid facts to back up the claim.

In the below chart ICS provides in their fact sheet, container shipping is shown to be the lowest mode of transport in terms of CO2 emissions by very significant margins.

ICS Shipping CO2 Emission Comparison

The ICS fact sheet lists the following achievements that have already been made in CO2 emission reductions when it comes to ocean shipping:

– 10% reduction in total CO2 (2007 – 2012)

– Carbon neutral growth

– Mandatory CO2 rules already in force globally

– 20% less CO2 per tonne/km than 2005

Then the fact sheet shows the advancements that are on the way:

– Ships built after 2025 will be 30% more efficient (mandatory IMO requirement)

– Bigger ships, better engines, cleaner fuels and smarter speed management

– More fuel efficient movement through water
(e.g. new hull and propeller designs, satellite assisted trim optimisation, renewable ancillary power)

– 50% CO2 reduction by 2050

Having already achieved 10% CO2 reduction between 2007 and 2012 while demand for world shipping increased is impressive and shows that the industry should be able to reach its 50% CO2 reduction goal while continuing to see growth in world trade.

“Ships transport about 90% of world trade, but now only account for 2.2% of the world’s total CO2 emissions (compared to 2.8% in 2007),” ICS says in the fact sheet.

Adding confidence to the international shipping industry’s ability to reduce CO2 emissions 50% by 2050, is how well the industry has managed CO2 emission reductions to this point. Beyond the 10% reduction mentioned above, the industry is ahead of schedule to achieve a 20% CO2  emission reduction in ships. This will be achieved this year, in 2015, when the long-established goal was by 2020, according to the fact sheet.

The ways ICS points out that the shipping industry will continue to lower CO2  emissions are new technologies, smart operational measures like speed management, and the use of clean fuels like LNG, which stands for Liquified Natural Gas.

ICS represents the global shipping industry as the global trade association for shipowners and operators, comprising national shipowners’ associations from 37 countries and representing over 80% of the world merchant fleet.

I guess the message here is you can be part of the solution to global warming by importing and exporting via ocean freight. Universal Cargo can help you with that.

Click Here for Free Freight Rate Pricing

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Ship Just Got Real: 6 Tips for Small Businesses to Compete Online https://www.universalcargo.com/ship-just-got-real-6-tips-for-small-businesses-to-compete-online/ https://www.universalcargo.com/ship-just-got-real-6-tips-for-small-businesses-to-compete-online/#respond Tue, 22 Sep 2015 22:57:42 +0000 https://www.universalcargo.com/?p=7630 We recently released a couple blogs to help shippers and small businesses make money by selling on Amazon. You can check them out at the following links: Secrets of Making Money on Amazon Like a Boss: How To Get the Buy Box The Secrets of Making Money on Amazon Like a Boss Small businesses selling […]

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We recently released a couple blogs to help shippers and small businesses make money by selling on Amazon. You can check them out at the following links:

Secrets of Making Money on Amazon Like a Boss: How To Get the Buy Box

The Secrets of Making Money on Amazon Like a Boss

Small businesses selling on sites like Amazon find themselves competing with big corporations. That seems daunting, but there is still room for small businesses to make big money selling online.

Trucker Classifieds shared an infographic with Universal Cargo about innovations big companies are making with their online selling that can seem daunting for small businesses. While the infographic highlights the heat big corporations are turning up, it also features 3 tips for small businesses to sell on Amazon or sell online in general.

Here are the 3 tips Trucker Classifieds offered in their infographic:

1. Embrace Delivery & Offer Shipping

2. Customize Your Customer’s Experience

3. Network With Other Small Businesses & Share Shipping Costs

These are excellent tips Trucker Classifieds shared. There are also more things small businesses can do to compete online so you can read a few more tips from your friends here at Universal Cargo below:

4. Find Your Niche

As a small business or a shipper, importing products to sell online, you don’t want to try to compete with the big corporations selling everyday items. Find a product that is unique and that you are passionate about and your odds of success increase dramatically.

For more on this, check out our blog of tips on finding products to import for making money:

3 Tips for Choosing a Product to Import from China for Making Money

5. Address the Reader in Your Copy

Second person is usually not a good point-of-view (POV) to write from if you’re creating a novel. When it comes to sales copy about your product, it’s the best POV. Likewise, first person is the worst POV for product sales copy.

If your descriptions use “I” or “me” when talking about your products, find ways to use “you” to replace those.

NOT: “We created [the product] to…”

INSTEAD: “You’ll love how your [the product]…”

6. Use Great Images

Often, the picture(s) of products are what really end up making the sale.

Make sure you use great images of the product you are selling. The better job you do with your images, the better your sales are likely to be.

Some people don’t bother reading the descriptions at all, only buying based on pictures. For others, it takes a great picture to get them to bother reading the description of a product.

Get Your Own Guest Blog or Infographic Published

If you would like to see a blog you wrote or an infographic you created published on Universal Cargo’s website, we’d love to hear from you. You can really increase your site’s SEO through guest blogging or sharing infographics as Universal Cargo always links back to your website.

Click me

Click on the Guest Blog image above to email Raymond Rau if you would like Universal Cargo Management to publish an original blog from you.

The infographic featured in today’s blog was created by Trucker Classifieds. Here’s a little about the company from their About Us webpage:

“Trucker Classifieds is the first site in the Randall-Reilly family that focuses solely on local job postings. Jumping headstrong into this niche market, Trucker Classifieds is about knowing the needs of the many friends we’ve made in the trucking industry and continuing to provide for them by meeting our friends at their doorstep.”

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Top 10 Most Entertaining International Shipping Blogs https://www.universalcargo.com/top-10-most-entertaining-international-shipping-blogs/ https://www.universalcargo.com/top-10-most-entertaining-international-shipping-blogs/#comments Tue, 08 Sep 2015 23:14:30 +0000 https://www.universalcargo.com/?p=7395 Who says international shipping has to be boring? For many, international shipping is a fascinating subject; however, for many, many, many more, it is not. Yet, over the last several years, Universal Cargo has published popular blogs on the subject. Many read these blogs because they are shippers and need information about international shipping or […]

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Who says international shipping has to be boring?

For many, international shipping is a fascinating subject; however, for many, many, many more, it is not. Yet, over the last several years, Universal Cargo has published popular blogs on the subject. Many read these blogs because they are shippers and need information about international shipping or want to keep up on international shipping news.

However, there are many international shipping blogs we’ve posted that would be entertaining for anyone. Today’s blog compiles a list of the top 10 entertaining international shipping blogs from Universal Cargo.

Let’s begin the countdown from 10 all the way down to the most entertaining international shipping blog.

#10 Fascinating Freight History Posts

racing cargo sailboatsOkay, so you may notice a little cheating throughout this blog. Coming in at #10 are a few blogs listed together. A number of the spots on this list are held by a series of blogs instead of a single blog.

The blogs launching this list of most entertaining international shipping blogs feature fascinating pieces of history that are centered on the international shipping industry.

Do you like spy stories? You can read about corporate espionage in early modern China. Are you a big coffee drinker? How international shipping brought the brew to you is fascinating. Are you into competition and racing? Read about the exciting Great Tea Race of 1866 and how international shipping back in the day literally involved a dangerous boat race across the ocean.

Since history is not everyone’s cup of tea, these blogs ended up at #10 when a lot of people (including my wife, the historian) would rank them higher.

Here are the links:

Freight History: Corporate Espionage in Early Modern China

How the Brew Came to You: International Shipping and Coffee

International Shipping & The Great Tea Race of 1866

international shipping business Jesus#9 Jesus Gives Business Advice

Technically, these tips for business were not written in this blog by Jesus Christ; however, they were inspired by the life and teachings of Jesus.

This two blog series is especially entertaining for those who love business and Jesus. If you’re into one or the other, it’s still entertaining.

Because there may be audience limitations on who might be entertained by this one, it’s early on the list.

7 Tips For Your Business From Jesus Christ Part 2

7 Tips For Your Business From Jesus Christ Part 1

#8 Fun Turkey Facts

This one has fun right in the title so it must be entertaining, right?

As a little entertaining blog on Thanksgiving a number of years back, Universal Cargo published this blog full of facts about turkeys, Thanksgiving, and international shipping stats that are related.

While the blog was entertaining enough, who really reads international shipping blogs on Thanksgiving? Since today is not the holiday full of the three F’s–food, family, and football (did you think another F should have been in there)–now would be a good time to check out this entertaining little blog.

Here’s the link:

Fun Turkey Facts Nothing To Do With Importing or Exporting to Turkey

While this blog originally had nothing to do with importing and exporting from and to Turkey the country, Universal Cargo did do an updated version on a following Thanksgiving including that kind of information.

You can check out that blog too:

Fun Thanksgiving Turkey Facts WITH Turkey Import & Export Data

Universal Bizargo#7 Universal Bizargo

At #7 on the list, we present to you a series of blogs on the strange. Sometimes weird things happen in international shipping. In Universal Cargo’s Universal Bizargo series, we share those weird stories with you.

My personal favorite Universal Bizargo story is the one about a drunken guy who somehow managed to get locked inside a shipping container. But all of these stories are pretty entertaining and deserve to make this list.

Here are the links to these odd tales for you to read the ones that seem the most interesting and entertaining to you:

Universal Bizargo: American Shipping Human Body Parts from Bangkok

Universal Bizargo: Jag Stolen Nearly 50 Years Ago Found on Cargo Ship

Universal Bizargo: Mystery of the Vanishing Ship & Phantom Pirates

Universal Bizargo: Man Tries to Ship Weapons to Lebanon in Car Parts

Universal Bizargo: Hungover Man Wakes in Sealed Shipping Container

#6 What the Freight?!

What the FreightA number of years back, we did a little comic strip at Universal Cargo called What the Freight?! It had something of an Office Space brand of humor, following the misadventures of Harry Ocean as he worked in the international shipping industry.

The comic strip was short-lived, but the name lives on in Universal Cargo’s newsletters.

The following blog links contain some of this obscure little strip:

What the Freight!?! Cargo Shipment Details Matter

What the Freight!?! Gold Not Money?

#5 The Eggie Files

Eggie FilesSpeaking of short-lived, office-based, international shipping comedies, Universal Cargo created a webseries years ago called The Eggie Files.

Only two episodes of the series were made, but the series had some wacky characters and potential.

Landing solidly in the middle of this list is a blog that contained the second episode of the show when it was released back in 2011.

Here’s the link:

UCM Presents – The Eggie Files – Episode 2 “Suspect Package”

#4 Cute Kitten Stowaway

Shipping Container Stowaway KittenI don’t know what it is, but there’s just something that draws people to kittens. Maybe it’s those big cat eyes on cute little bundles of fur that does it. Still, kitty videos are among the most popular videos on all of the internet.

If this blog contained a video of a kitten, it probably would have vaulted up to #1.

Still, as it is, when a cute, little kitten stowed away inside a shipping container and made it all the way to the United States from China, the story captured the imagination and hearts of many readers.

So here’s the link to a story about a kitten that beat out most international shipping blogs in entertainment ranking:

Cute Kitten Stowaway Clings to Life in Ocean Freight Container

#3 Top Movie Scenes Featuring Ports & Shipping Containers

Almost everyone loves movies. And countdown lists (like this one) are pretty popular in and of themselves. Here’s a blog that contains both.

The Iron Man movies have been a smash hit at the box offices. Watching Iron Man 3’s explosive climax that was shot at the Port of Wilmington and featured tons of cargo containers gave us the idea to do a countdown of the top movie scenes featuring ports and shipping containers.

This blog does a great countdown, full of videos that feature ports and cargo containers in feature films and is very entertaining. Here’s the link:

Iron Man 3 & Top 9 Movie Scenes Featuring Ports & Shipping Containers (w/ videos)

#2 Super Shipping

Super ShippingIf you’ve never seen our popular Super Shippingwebseries, you’re missing out. This comedy cartoon about superheroes who quit the hero business to go into international shipping has gained well over 175,000 views on YouTube.

The production value is not as high as that of The Eggie Files, but its number of episodes and its popularity dwarf our first attempt at a webseries.

This blog is not entertaining so much for its writing, but for the fact that it contains all 7 episodes that have been released of this series.

Here’s the link:

#1 Urban Dictionary and International Shipping Terms

Helping this blog to edge out the competition is that its entertainment value is based on the blog itself and not video content that it’s sharing.Urban Dictionary Vs. Shipping Glossary Definitions

The Urban Dictionary is an endless source of entertainment. Comparing the Urban Dictionary’s definitions of shipping terms to their industry definitions is hilarious.

This blog was so much fun, we had to do a second installation. Don’t be surprised to see more editions of International Shipping Definitions Vs. Urban Dictionary Definitions in the future.

Here are the links to the blog series that wins the title of Most Entertaining International Shipping Blog:

International Shipping Definitions Vs. Urban Dictionary Definitions

More International Shipping Definitions Vs. Urban Dictionary Definitions

Your Opinion!

Do you agree with this list? Would you rank these blogs in a different order, remove some from the list, or add others?

Let us know in the comments section below.

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7 Tips to Beat Cargo Theft by ID Theft Like Tom Brady Beat NFL Suspension https://www.universalcargo.com/7-tips-to-beat-cargo-theft-by-id-theft-like-tom-brady-beat-nfl-suspension/ https://www.universalcargo.com/7-tips-to-beat-cargo-theft-by-id-theft-like-tom-brady-beat-nfl-suspension/#respond Thu, 03 Sep 2015 20:16:46 +0000 https://www.universalcargo.com/?p=7462 The big item in the news today is that U.S. District Court Judge Richard Berman ruled to overturn Tom Brady’s four game suspension from the NFL. New England Patriots fans are celebrating. If they saw Jimmy Garoppolo, instead of the guy who’s won four Super Bowls, playing quarterback for their team during the first quarter of the […]

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Cargo Theft Identity Theft Tom Brady FootballThe big item in the news today is that U.S. District Court Judge Richard Berman ruled to overturn Tom Brady’s four game suspension from the NFL. New England Patriots fans are celebrating. If they saw Jimmy Garoppolo, instead of the guy who’s won four Super Bowls, playing quarterback for their team during the first quarter of the season, Patriots fans might think games were being stolen from them through identity theft.

In reality, it would have just been a team and player getting punished for cheating. There’s no real identity theft here and nothing being stolen (like air from footballs or coaching signals through videotapes), except maybe Roger Goodell’s power.

Real identity theft does happen every day, and is being used to steal actual, tangible things from people. Shippers should be more interested in this than Tom Brady and his suspension because identity theft is being used more and more to steal cargo.

Avalon Risk Assessment just released an article on cargo theft by identity theft.

“Cargo theft by identity theft is steadily growing in the logistics industry. CargoNet, a cargo theft prevention and recovery network, reported that nearly 90 million dollars in cargo was stolen in 2014.”

$90 million in cargo was stolen last year alone?!

Shippers’ odds of falling victim to cargo theft is increasing. FleetOwner published the following in an article on this very topic:

Based on its annual analysis of cargo theft activity, FreightWatch International (FWI) believes the risk of cargo theft will increase slightly in 2015 versus 2014, [mainly] because cargo thieves continue to adopt what the firm describes [as] “professional and sophisticated” tactics.

Cargo thieves are not just stealing based on opportunity, but are targeting shippers and their cargo. 30 years ago, when Universal Cargo was established as a freight forwarder, cargo theft usually happened based on opportunity. Now, thieves have strategies and intricate identity theft techniques to steal targeted cargo from shippers; you should have strategies to keep your cargo safe.

Here are 7 tips to help you avoid loss through cargo theft by identity theft:

Tip #1: Work With Established, Trusted Companies

You’re probably working with or going to work with a freight forwarder to help you handle your international shipping.

There are many, many freight forwarders out there. Often, shippers make the mistake of hiring whichever one provides the lowest freight rate pricing quote. However, if the freight forwarder is not well established in the international shipping industry, they may open you up to many importing and exporting problems, as well as being more susceptible to cargo theft through identity theft.

While the freight forwarding company itself probably isn’t going to steal your identity, they may fall victim to deceptive practices from identity thieves or false companies they partner with to move your goods.

Tip #2: Put Identity Theft Policies in Place

It’s amazing how many companies do not have any policies in place regarding identity theft.

When I worked at the Rand Corporation, everyone had to go through identity theft prevention training because the company did research for the government and were required to have policies in place to protect any possible secrets from being stolen.

Of course, you don’t need to be protecting government secrets to have policies to protect your assets. If you don’t have policies in place to safeguard against identity theft, create them. This list of tips could be an excellent starting point for your policy creation.

Tip #3: Train All Employees in ID Theft Policies

This assumes you’ve followed the previous tip and have identity theft policies in place.

Policies do no good if they are unknown or not followed by all employees.

It does not matter the level of the employees in your organization, they should be made aware of and follow your identity theft policies.

Holding a class or meetings on the topic is a good idea. A regularly updated test that covers the policies and the dangers of not following them is strongly recommended to be administered to everyone within your organization.

Tip #4: Verify Employment and Contact Information

We’re not talking about your employees here, but whomever you are working with from the shipping companies or freight forwarders you use to import or export your goods.

In the Avalon Risk Assessment article mentioned above, a fraudulent dispatcher posed as an employee of a known shipping company, presented paperwork and documentation that all appeared legitimate, and stole a shipper’s cargo.

These tactics are becoming more common.

When working on importing or exporting goods with a representative of a company, even a very well-known and reliable company, it’s important that you make sure that representative really works for said company.

Contact the company, not through the information given to you by the agent but through the company’s website. Make sure the person is an employee there AND that the contact information they’ve given you is correct. The criminal may be assuming the identity of an actual employee, so make sure you verify more than just the employee’s name.

Tip #5: Check the Truck

“Fraud or fictitious pick-up is a form of cargo theft that involves criminals posing as legitimate truck drivers to steal cargo directly from shippers,” says the Avalon article.

One way to make sure you don’t fall victim to a fictitious pick-up is by checking the door of the truck that is picking up your goods.

Motor carriers are required by law to print their company name and FMCSA operating authority (MC number) or USDOT number on the side of their trucks. You should make it a policy to make sure this information matches up with the information of the trucking company your freight forwarder has hired to picked up your cargo.

Tip #6: Protect Your Shipping Information

Tom Brady destroyed his phone rather than allow the information on it to get into the wrong hands. You don’t need to go to that extreme, but being careful with the information you share over the phone is important. Actually, not just the phone but e-mail, fax, social media, and any other form of communication too.

You may get carrier inquiries requesting this information. Do not just give it out and make sure your employees know how to handle information mining phone calls, emails, etc.

Tip #7: Always Get Cargo Insurance

Even the most careful shippers and shipping companies can fall victim to cargo theft. It is just one more reason why it is so important to always insure your cargo.

Following the above tips can seriously decrease your chances of falling victim to cargo theft by identity theft, but cargo insurance is likely to be the only thing to protect you from loss if it still does happen.

There are also many other situations that cargo insurance can protect including, but not limited to cargo loss or damage because of shipwreck, piracy, dock accidents, sea storms, containers overboard, and cargo misplacement.

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Is Truck Congestion Better at the Ports of Los Angeles & Long Beach? https://www.universalcargo.com/is-truck-congestion-better-at-the-ports-of-los-angeles-long-beach/ https://www.universalcargo.com/is-truck-congestion-better-at-the-ports-of-los-angeles-long-beach/#respond Tue, 01 Sep 2015 19:34:19 +0000 https://www.universalcargo.com/?p=7485 Congestion at the Ports of Los Angeles and Long Beach hit unbelievable levels during the contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) last summer… and fall… and winter. Lines of trucks spilled out of terminals and the twin ports. Trucks waiting for hours to pick up […]

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Congestion at the Ports of Los Angeles and Long Beach hit unbelievable levels during the contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) last summer… and fall… and winter.

truck congestion at Ports of Los Angeles & Long BeachLines of trucks spilled out of terminals and the twin ports. Trucks waiting for hours to pick up and deliver cargo containers led to fees for shippers, delays in receiving goods, and truckers leaving the business.

Have things gotten better?

At the very least, things couldn’t have gotten any worse, right?

A recent article by Bill Mongelluzzo in the Journal of Commerce (JOC) says that turn times are improving at the Ports of Los Angeles and Long Beach, but have not improved enough for truckers. The real question is whether the time it takes for trucks to get in to terminals, pick up shipping containers, and get out of the port ever will get fast enough.

The decrease in time it takes for trucking transactions to be completed is far from efficient.

Here’s the picture Mongelluzzo paints of how things stand right now:

The average time to complete a trucking transaction at Los Angeles-Long Beach port complex in July fell by four minutes from the prior month, but no one is celebrating.

Even though the average turn time fell to 89 minutes, down from 93 minutes in June, the Harbor Trucking Association of Southern California says turn times at marine terminals must get back down to 60 minutes if the harbor is to operate efficiently. Shorter truck times aren’t just needed for brisker supply chains, but also to keep drayage drivers serving the largest North American container gateway from parking their rigs and finding jobs elsewhere.

Numbers published by the HTA for July indicate that the 13 container terminals in Los Angeles-Long Beach are recovering from the congestion that has been plaguing the largest U.S. port complex for more than a year now, but truck visits are still much longer than they were in early 2014, when turn times were 60 to 70 minutes.

The way things have been consistently going for the last several months, about an hour and a half seems to be the normal visit time for truckers visiting the Ports of Los Angeles and Long Beach.

“…the average truck visit has been stuck in the range of 93 to 89 minutes the past four months, leading HTA Executive Director Weston LaBar to state that he fears the new normal for the harbor is about 90 minutes,” Mongelluzzo writes.

While that is better than things were at their worst, an hour and half is still not good.

However, there is some good news in the JOC article. Some terminals are operating much more efficiently than this 90-minute “new normal” trucking time would indicate.

Here’s how Mongelluzzo explains it:

The average truck visit times, however, tell only part of the story. Drilling down to each of the individual terminals, it is clear that some terminals are performing very well while others have turn times that greatly exceed the average.

For example, the Matson-SSA terminal in Long Beach, consistently records the fastest turn times in the port complex. In July, the average turn time was 43 minutes, and only 1.9 percent of the truck visits took longer than two hours. Truckers consider a turn time of longer than two hours to be unacceptable.

Conversely, the ITS terminal in July had the longest average turn time of 126 minutes, and 45.8 percent of the turn times exceeded two hours.

I suppose if you were a glass half empty type of person you could look at terminals like the ITS one and point out the bad news that there’s a terminal with average truck turn times unacceptably over two hours.

However, being a glass half full type, seeing a terminal where the average is well under the hour standard from before chassis issues, contentious contract negotiations, and other factors led to congestion that cost the Los Angeles and Long Beach market share is great news that truck congestion at the ports can really be solved.

That’s not exactly the good news that’s pointed out in Mongelluzzo’s article. Mongelluzzo’s article ends with the positive the HTA Executive Director sees in this all:

La Bar said that if there is a silver lining in the less-than-acceptable average turn times in the harbor, it is that many retailers and other shippers, anxious to retain truck capacity, have agreed to pay driver waiting time at the terminals.

Shippers agreed to pay driver waiting times. Sure, as if they had any real choice in shelling out cash for these driver waiting or port congestion fees.

The real silver lining is that at many terminals driver waiting time is getting down to acceptable times. 43 minutes is even a pretty good turn time.

Hopefully, shippers will get to stop paying driver waiting time and related fees if the ports can keep working toward higher efficiency.

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BNSF Railway’s New Intermodal Storage Policy Angers Shippers https://www.universalcargo.com/bnsf-railways-new-intermodal-storage-policy-angers-shippers/ https://www.universalcargo.com/bnsf-railways-new-intermodal-storage-policy-angers-shippers/#respond Tue, 25 Aug 2015 20:31:04 +0000 https://www.universalcargo.com/?p=7492 Last week, on August 17th, a BNSF Railway intermodal storage policy change went into effect that is making shippers unhappy. The displeasure with the new policy couldn’t be missed in a recent email I received about BNSF Railway’s new storage policy. Here’s a line from the email: “BN is officially worse than Canadian rails now […]

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shipping_containers_rail_BNSF_Policy_ChangeLast week, on August 17th, a BNSF Railway intermodal storage policy change went into effect that is making shippers unhappy.

The displeasure with the new policy couldn’t be missed in a recent email I received about BNSF Railway’s new storage policy. Here’s a line from the email:

“BN is officially worse than Canadian rails now as the below new policy already started…”

The tone could only be stronger if an expletive or two were added to the sentence.

So what’s the new policy that has people so up in arms? Here’s the announcement BSNF Railway made to its customers in June about the policy that went into effect last week:

Intermodal Storage (Dwell) Policy Changes

 

As part of our ongoing effort to position the intermodal network to handle continued growth for all intermodal customers, the BNSF Intermodal Storage Policy is being modified effective August 17, 2015. Reducing dwell will enable improved velocity and greater processing capabilities at BNSF intermodal facilities. Specific changes include:

 

Facility Group Consolidation
Intermodal facility storage groups will be simplified from three groups to two groups. Group One Intermodal Facilities will accrue storage charges after the day of notification plus 24 hours. Group Two Intermodal Facilities will accrue storage charges after the day of notification plus 48 hours.

Chargeable Days Modification
BNSF is returning to our prior policy of counting all days of the week, including Sunday, as part of the chargeable time calculations.

The phrase “including Sunday” is what has shippers so upset by the policy change.

The end of the “normal workweek” and weekends are common arrival times for shipments. BNSF Railway’s intermodal storage policy change means less time for shippers to get their shipments picked up before fees start accruing.

In a time when the international shipping industry is struggling with a shortage of truckers, getting shipments picked up in time may become a major challenge for many.

In an email in the same thread as the email I quoted earlier, an example of how the policy change affected when a shipment needed to be picked up and a warning for shippers to be vigilant is included:

I had a shipment… arrive into BNSF Houston on Saturday and the LFD [last free day] is today [Monday]. BNSF is beginning to include Sundays into their free time. Before if a shipment arrived on Saturday, I would have at least until Tuesday to pick up.

I guess the worst case situation would be if a shipment arrived on Friday…then we would have to pick up by Sunday. That would mean we’ll need our truckers to prepull Friday.

But please pay close attention to your LFDs.

Please pay attention to your last free day on shipments is a good warning. $150 a day on picking up late is a significant fee.

The example in the email was lucky to be a shipment arriving in Houston. That made it in Facility Group 2. Chicago, Los Angeles, Phoenix, Portland, San Bernardino, South Seattle, Stockton, and St. Louis all fall in Facility Group 1 and get one day less of free intermodal storage.

That means if the shipment mentioned in the email had arrived in Los Angeles on Saturday, its last free day would have been Sunday!

That’s not much of a window to get a trucker in to pick up your shipment in the country’s busiest city when it comes to international shipping.

With 30 years of experience in the international shipping industry, Universal Cargo won’t have major difficulties with this policy change; however, for shippers new to international shipping and BNSF customers in general, this change could be very costly indeed.

What do you think about BNSF Railway’s move to include Sundays in their chargeable time calculations? Let us know in the comments section below.

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How To Get Your GSP Import Duty Refund https://www.universalcargo.com/how-to-get-your-gsp-import-duty-refund/ https://www.universalcargo.com/how-to-get-your-gsp-import-duty-refund/#respond Thu, 13 Aug 2015 20:33:42 +0000 https://www.universalcargo.com/?p=7431 Whose GSP is Automated and Whose is Not We recently blogged about President Obama signing a bill that retroactively extended the Generalized System of Preferences (GSP) so importers can get their qualifying duties reimbursed. For shippers who filed via Automated Broker Interface (ABI) with the Special Program Indicator (SPI) “A,” “A+,” or “A*” refunds will be processed automatically. […]

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Whose GSP is Automated and Whose is Not

Get_Your_GSP_RefundWe recently blogged about President Obama signing a bill that retroactively extended the Generalized System of Preferences (GSP) so importers can get their qualifying duties reimbursed.

For shippers who filed via Automated Broker Interface (ABI) with the Special Program Indicator (SPI) “A,” “A+,” or “A*” refunds will be processed automatically.

The U.S. Customs and Border Protection FAQ – GSP Reauthorization page shares the following for those who

CBP plans to automatically refund duties paid for GSP eligible goods that were submitted via ABI (i.e., ACE, ACS) with the appropriate SPI (entries with the SPI “A”, “A+,” or “A*” as a prefix to the tariff number) during the lapse period of August 1, 2013 through July 28, 2015. Therefore, a request for refund should not be made at the port of entry for any entries previously submitted with the GSP indicator.

Any amounts owed by the United States pursuant to Public Law 114-27 to the liquidation or re-liquidation of any entry of an article will be paid, without interest.

Automated reimbursement for those forward thinking shippers who properly marked their eligible shipments during the GSP lapse is great news.

For those of you who did not mark your shipments through ABI, you can still get reimbursed too. Yours just won’t be automatic.

If you did not submit through the ABI and include the “A”, “A+,” or “A*” codes on your GSP eligible shipments, you will have to request GSP duty refunds by letter.

Here’s how the U.S. Customs and Border Protection (CBP) explains it:

The GSP renewal legislation provides for a 180-days period after the enactment of the Trade Preferences Extension Act of 2015 for importers to request a GSP duty refund – that is, until December 28, 2015.

Unliquidated Entries
ACE filers that did not include SPI Code “A,” “A+,” or “A*” on their entry summary must timely submit a duty refund request to CBP via PSC.  Requests made outside this 270 day PSC time limit must be in writing that provides sufficient information (i.e., the entry number, line number, and requested refund) to enable CBP to locate the entry.

All other filers (including ACS) that did not include SPI Code “A,” “A+,” or “A*” on their entry must timely submit a duty refund request to CBP in writing that provides sufficient information to enable CBP to locate the entry. CBP recommends submitting such filing by PEA.

For unliquidated entries, refund requests must be received by CBP the earlier of the entry’s filing time limit or December 28, 2015.

Liquidated entries
ABI and non-ABI filers that did not include SPI Code “A,” “A+,” or “A*” on their entry must timely submit a request to CBP in writing. The request must contain sufficient information to enable CBP to locate the entry or to reconstruct the entry if it cannot be located.

For liquidated entries, refund requests must be received by CBP by December 28, 2015.

GSP refunds for all other entry summaries (e.g., warehouse withdrawals, change liquidations, re-liquidations, and suspended entry summaries) will be processed in accordance with normal liquidation or re-liquidation procedures.

Any amounts owed by the United States pursuant to Public Law 114-27 to the liquidation or re-liquidation of any entry of an article will be paid, without interest.

Specific Directions for Submitting GSP Duty Refund Requests

So you don’t have to do all the searching through pages on the CBP website, below is the information you need to know for what to include in your formal written request for a GSP duty refund and where to send it. This is from the CBP’s GSP Refund Process page.

Don’t forget that these written requests must be received by the CBP by December 28, 2015.

If an ABI entry summary was filed with payment of estimated duties without the use of the SPI “A,” “A+,” or “A*” as a prefix to the tariff number, a refund of duties deposited must be requested in writing as described below for non-ABI entry summaries.

Non-ABI filers must request a refund in writing from the Port Director at the port of entry by December 28, 2015, regardless if they previously designated a refund on the Customs Form 7501 by using the SPI “A,” “A+,” or “A*” code. The request may cover either single entry summaries or all entry summaries filed by an individual filer at a single port. To expedite refunds, CBP recommends the following information be included in each letter:

  1. A statement requesting a refund, as provided by section 201 of Title II of the Trade Preferences Extension Act of 2015;
  2. An enumeration of the entry numbers and line items for which refunds are requested; and
  3. The amount requested to be refunded for each line item and the total amount owed (not including interest) for all entry summaries.

C. Mail Entries
The addressees on mail entries must request a refund of GSP duties (not including interest) and return it, along with a copy of the CF 3419A, to the appropriate International Mail Branch (address listed on bottom right hand corner of CF 3419A). It is essential that a copy of the CF 3419A be included, as this will be the only means of identifying whether GSP products have been entered and estimated duties and fees have been paid.

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COSCO & China Shipping Merger Rattles Market https://www.universalcargo.com/cosco-china-shipping-merger-rattles-market-2/ https://www.universalcargo.com/cosco-china-shipping-merger-rattles-market-2/#respond Tue, 11 Aug 2015 18:18:14 +0000 https://www.universalcargo.com/?p=7374 Merger from Rumors to Reality To be clear, a merger has not happened yet. But first there were rumors. Then there were confirmed merger talks.  It seems all but inevitable that the rankings of the world’s largest shipping companies is about to shift. Rumor spread that China Ocean Shipping Group Company (COSCO) and China Shipping Group […]

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Merger from Rumors to Reality

Container_Ship_COSCO_China_Shipping_MergerTo be clear, a merger has not happened yet. But first there were rumors. Then there were confirmed merger talks.  It seems all but inevitable that the rankings of the world’s largest shipping companies is about to shift.

Rumor spread that China Ocean Shipping Group Company (COSCO) and China Shipping Group are merging.

Those rumors of merger talks between the state-owned shipping giants put the financial market in an uproar.

On August 7th, the Journal of Commerce (JOC) reported:

The rumor that China’s two main shipping lines, Cosco and China Shipping, planned to merge was again wreaking havoc with the financial markets today as stock prices for the state-owned companies soared enough to lead to a trading halt.

Confirming such news is virtually impossible, but it doesn’t take much to spook China’s jittery financial markets. By the close of trading on the Hong Kong Exchange, Cosco’s share price had risen 13.56 percent and China Shipping Container Line (CSCL) was up almost 24 percent.

A Reuters article on August 11th moves the merger talks from rumor to reality with the halting of trading in the shipping companies’ shares:

The listed units of the two state-owned companies, including COSCO’s flagship ChinaCosco and China Shipping’s China Shipping Development halted trading in their shares from Aug. 10, adding that they were “planning major issues”.

COSCO and China Shipping Co. merging is a big deal. It is only natural to see a big reaction in the financial market at the news, and even rumors, of merger talk.

Gaining from 6 & 7 to 4

The Reuters article reports, “COSCO and China Shipping are currently the world’s sixth and seventh largest container shipping firms, respectively, according to consultancy Alphaliner.”

With a merger, the larger China-owned shipping company would make a significant jump from occupying the sixth and seventh largest shipping company spots to the world’s fourth largest shipping company in the world.

The JOC article projected:

A potential merger would create the world’s fourth-largest single carrier, controlling a good 8 percent of global container shipping capacity. The new entity would be solid on the Asia-Europe trades but would have less share of the market on the other trades.

The COSCO and China Shipping merged company would usurp the world’s fourth largest shipping carrier seat from Hapag-Lloyd, which became the fourth largest carrier by merging with CSAV.

The three largest container shipping companies in the world are Maersk, Mediterranean Shipping Co., and CMA CGM.

Updated Carrier Craziness Bracket

That’s right, I can’t let a major change in the standings of the ocean carriers go without updating my Carrier Craziness Bracket.

Carrier_Craziness_Bracket_COSCO_China_Shipping_Merger-1

The Carrier Craziness Bracket started as a spoof on March Madness brackets to illustrate all the carrier alliances that were happening. Since its creation, the bracket has gotten out of control–broken as many times as your March Madness bracket after you finally decided to put money on it.

It is still easy to see how the world of international shipping carriers is shrinking. The merger between COSCO and China Shipping Co. will be one more step in the ever decreasing number of competitors shipping containers across the oceans.

Chinese Government Driving Force Behind Merger

China is looking to rule international shipping by 2030. China is restructuring, streamlining, merging companies, and allowing a larger private sector role in the country’s economy (and international shipping industry) in order to increase their competitiveness and even dominate globally.

That being said, it is the Chinese government pushing the companies into merger talks.

Reuters reports:

Chinese business magazine Caixin reported on its website late on Monday that the central government had urged the firms to draft a preliminary merger plan within three months, beginning from August, citing an unnamed COSCO executive.

The report said the firms would set up a five-member working group to consider the merger plan, with three members from China Shipping and two from COSCO. China Shipping’s chairman, Xu Lirong, would head the team, it said.

While China is serious about this merger and reform to the state-owned shipping companies, as well as to the private sector of international shipping, this will be no easy task.

The JOC article helps illuminate what a task the Chinese government is undertaking:

… the merger would be driven by the the state-owned Assets Supervision and Administration Commission of the State Council, a powerful authority tasked with the modernization and restructuring of large state-owned enterprises.

… The integrated and complex nature of China’s state-owned shipping ownership structure has resulted in a dizzying maze of companies and subsidiaries, many interconnected and several with dual listings on the Hong Kong and Shanghai exchanges.

Back in 2009, according to the List of International Shipping Operators, the Ministry of Transport approved 214 international shipping companies, about two-thirds of which were state-owned. Some were China-foreign joint ventures and the rest were private firms.

More than 60 of these 214 shipping companies are branches, subsidiaries and joint ventures of the three major state-owned shipping corporations. In fact, in terms of shipping capacity, the three major state-owned corporations comprise 71 percent of the gross tonnage, with 43.5 percent of the capacity held by Cosco alone, according to the Shanghai International Shipping Institute (SISI).

Of course, it always seems that when the Chinese government wants to do something, they make it happen. Don’t expect the complex web of shipping companies and subsidiaries to stop China from achieving this merger and combining COSCO and China Shipping Co. to form the world’s fourth largest carrier.

Free Freight Rate Pricing to/from China

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Why Is This International Shipping Story So Sad? https://www.universalcargo.com/why-is-this-international-shipping-story-so-sad/ https://www.universalcargo.com/why-is-this-international-shipping-story-so-sad/#respond Tue, 04 Aug 2015 19:29:57 +0000 https://www.universalcargo.com/?p=7387 This international shipping story is just plain sad. It starts innocuously enough: “The first container ship to call on the Port of Portland in three months arrived last Tuesday and stayed a day,” reported Joseph Gallivan in the Portland Tribune. A container ship visiting a shipping port is normally not a news item. That a container […]

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This international shipping story is just plain sad.

Sad_International_Shipping_News_StoryIt starts innocuously enough:

“The first container ship to call on the Port of Portland in three months arrived last Tuesday and stayed a day,” reported Joseph Gallivan in the Portland Tribune.

A container ship visiting a shipping port is normally not a news item. That a container ship visiting the Port of Portland is a news item is what makes this so sad. The devil is in the details. This is the first container ship in three months to call on the port. Three months!

Why no shipping container vessels? It is not as though the Port of Portland is not a viable option for container shipping.

Gallivan’s article quotes Greg Borossay, General Manager of Trade Development at the Marine Division of the Port of Portland as saying:

“… The value proposition for bringing containers 100 miles upriver to serve a city the size of Portland is not immediately apparent, but when [shipping companies] see the calculations they see they can make money. It’s a niche market where an ocean carrier can make money at great levels.”

Not only can ocean carriers make money at the port, they have made money at the port.

Borossay added, “If you’re paying top dollar for a specialized service it has to deliver. For 18 years Hanjin were getting what they were expecting and they were happy.”

Gallivan shares in his article that “Hanjin Shipping once handled 2,000 containers a week, and Hapag-Lloyd 600-700 a week” through the Port of Portland.

So why are these big shipping companies no longer bringing their business to the port? If you were skimming Gallivan’s article, it would be easy to miss.

“Those firms pulled out earlier this year after a slow down by longshoremen.”

The truth is it was not “a slow down” that caused the ocean carriers to pull out of the Port of Portland. Several slowdowns and shutdowns orchestrated by the ILWU Local 8 hard-timing the Port of Portland caused the shipping companies to pull out.

When their contract expired during the long negotiations between the ILWU and PMA, the ILWU Local 8 really took advantage. No contract meant no arbitration in place for the Port of Portland to go through the process of trying to resolve the ILWU’s hard-timing tactics. Not that judges ruling against the ILWU at the Port of Portland previously had stopped the ILWU slowing down the work to put pressure on their employers at the port.

The ridiculous thing is that all the slowdowns and shutdowns the ILWU orchestrated at the Port of Portland started because of two jobs.

The ILWU wanted to take control of two jobs–two jobs monitoring, plugging, and unplugging reefer shipping containers–at the Port of Portland that the International Brotherhood of Electrical Workers had been doing for the previous 30 years.

As the ILWU hard-timed the port and brought productivity to incredibly low levels, Hanjin threatened to pull out. In fact, Hanjin even announced quitting service at the port at one point. But the port kept their biggest ocean carrier by offering incentives.

Despite the danger, the ILWU kept hard-timing the port. Over two jobs, the union was willing to put so many more union jobs at risk, as well as hurt the local economy and importers and exporters who ship through the port.

A Hanjin pullout would “end a $250,000 weekly payroll for longshore workers who load and unload the vessels at Terminal 6,” according to the Journal of Commerce. Even when the union was awarded the two jobs, animosity between the union and employers at the port kept the hard-timing going. The ILWU ignored the obvious repercussions and lowered productivity until Hanjin and  Hapag-Lloyd left the port.

Now a container ship calling on the port is news.

It would be laughable if the whole thing weren’t so sad.

You can just hear the desperation at the Port of Portland through Borossay’s quotes in Gallivan’s article:

“[Westwood Shipping Lines’] return [the shipping line suspended operations at the port, but this story of their ship, the Westood Rainier calling on the Port of Portland, marks their return to the port] does establish a link to Asia,” he told the Tribune. “We’re going to need to establish a track record to demonstrate to the larger carriers that the operation is back on track.” He added, “We have four cranes ready to go. We could accept Hanjin back any time.”

The Westwood Rainier call went well. “It’s a bit of a sigh of relief. But one vessel does not make a track record.”

It could be worse. The Port could have been more dependent on shipping container business and been closed down altogether by the union’s actions. Gallivan’s article includes:

Borossay was also keen to point out that containers have never been more than 10 or 15 per cent of the port’s total business. Products such as steel rail, potash and automobiles are a far bigger earner. He said the port had over 1,500 vessel calls last year.

Still, if you don’t think losing the shipping container business didn’t hurt the Port of Portland, shippers, and the the ILWU Local 8, you’re kidding yourself.

If you’re interested in reading more about what happened between the ILWU and the Port of Portland to reach the situation they are now in, you can read our previous blogs. One of them even includes an eerie prediction of the slowdowns that took place all along the West Coast during the contract negotiations between the ILWU and PMA.

Here’s that additional reading:

ILWU Takes Advantage of No Contract, Slowing Down Port of Portland

Judge Rules ILWU Purposefully Slowed Import/Export @ Port of Portland

ILWU Local 8 Should Pay Damages to Portland Shippers

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Secrets of Making Money on Amazon Like a Boss: How To Get the Buy Box https://www.universalcargo.com/secrets-of-making-money-on-amazon-like-a-boss-how-to-get-the-buy-box/ https://www.universalcargo.com/secrets-of-making-money-on-amazon-like-a-boss-how-to-get-the-buy-box/#respond Thu, 30 Jul 2015 20:10:20 +0000 https://www.universalcargo.com/?p=7425 Many people are importing goods and making big money selling on Amazon. You could be one of them! In this blog series, we’re sharing the secrets of making money on Amazon like a boss. Last time, we shared the services you should take advantage of to optimize your sales potential. Today we switch our focus […]

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Many people are importing goods and making big money selling on Amazon.

You could be one of them!

In this blog series, we’re sharing the secrets of making money on Amazon like a boss. Last time, we shared the services you should take advantage of to optimize your sales potential.

Today we switch our focus to the much coveted Amazon Buy Box.

What is the Amazon Buy Box?

In case you haven’t heard of the Amazon Buy Box, it is what all Amazon sellers should strive for.

The Buy Box is that little orange (sometimes white) box that you can click on to add an item you’re looking at on Amazon to your cart.

Amazon_Buy_Box

With all the sellers on Amazon, most products have several retailers competing with each other to sell it. When you click on the Buy Box, you buy the product from Amazon and Amazon chooses which of the many third-party sellers is going to get the sale.

For each product, only one seller can be in the Buy Box at a time and get the most common sales on Amazon.

eWeek.com released a slideshow on Amazon’s Buy Box last year, calling it “the internet’s $80 billion sales button” in the title. As eWeek stated the projection of Amazon topping $120 billion in revenues by the end of last year and over half of that going to the online retailers selling in Amazon’s marketplace, it is hard to disagree with eWeek’s conclusion, “With 82 percent of all sales on Amazon going through the Buy Box, it’s easily the most coveted real estate in online retail today.”

Amazon uses an algorithm to choose the online retailer to win the Buy Box sale. So how can you get that algorithm to choose you?

Amazon’s Buy Box Eligibility

The first place to look when trying to learn how to get into Amazon’s buy box is on Amazon.com itself.

While Amazon keeps its Buy Box algorithm secret, the site does share the requirements to qualify for Buy Box eligibility.

Ultimately, Amazon’s Buy Box is designed to give buyers the best deal. Amazon lists the following as criteria they use to judge sellers for the Buy Box:

  • ODR (Order Defect Rate): We base ODR [on] customer feedback, A-to-z Guarantee claims, and chargebacks.
  • Other seller performance metrics
  • Customer shopping experience offered on an item, such as speed of delivery, shipping options, price, and 24×7 customer service (including through the seller’s participation in Fulfillment by Amazon)
  • Time and experience on the Amazon selling platform
  • Status as a Professional seller.

Knowing how to qualify is good, but we want to go a little deeper and get more pragmatic in how to crack that Buy Box.

Here are 4 tips for getting the Amazon Buy Box:

Tip #1: Use Fulfillment By Amazon

Fulfillment method might actually be the most important factor for getting the Amazon Buy Box.

Amazon pushes their Fulfillment By Amazon (FBA) service and there are big benefits for using it. We talked about this service a bit in our last blog so we won’t spend too much time on it here, but you can bet FBA status will move you up in the rankings.

On top of helping your chances at the Amazon Buy Box, FBA allows you to compete for Amazon Prime sales where Prime members get free shipping. Even if you don’t manage to crack that Buy Box, this gives you a big competitive edge.

Tip #2: Lower Your Price

The most obvious factor that can be seen from products winning the Buy Box is price.

Once you’re eligible for the Buy Box, you need to make sure your price isn’t higher than the competition’s. If you can make your price the lowest on a product, your chance of winning the Buy Box is extremely high.

This is a tricky area because the lower you make your price, the smaller your profits become. But even winning the price competition by a penny is enough.

The next tip could help you balance that lower price with your profit margins.

Tip #3: Import Products in Bulk

Importing products in bulk can help you beat the competition in pricing, as mentioned above, but also help you toward winning that Amazon Buy Box in other ways.

Not only does importing in bulk help you bring down the price at which you can sell products but it increases your inventory depth. Your inventory depth can help increase your ranking and land that Amazon Buy Box in two ways.

First, inventory depth in and of itself is considered in landing the Buy Box. Second, inventory depth increases your status as a professional seller (if you recall, that is in the criteria listed by Amazon).

If you don’t know where to start when it comes to finding a product to import and sell on Amazon, StartupBros.com has a posting about dominating the Amazon marketplace where they show you the following steps on how to use “ASIN piggybacking” to snag a Buy Box and make money on Amazon:

  1. Identify a successful non-unique product and find its ASIN. It will be listed in the Product Details section of the product listing. (shown below)Amazon ASIN Piggy Backing
  2. Research the manufacturer to figure out how you can start reselling the product for yourself. Find out how much it will cost wholesale, and calculate what it will cost you to ship. Is there room between that number and $0.01 less than the current Buy Box-winning price for you to make a profit?
  3. If the answer to #2 is YES, contact the manufacturer and start selling. You’ve just found a gold nugget!
  4. If the answer to #2 is NO, you may still be able to work out a special deal with the manufacturer if you ask for it. However, if you don’t think it’s worth it, look around for other products in the same niche… Chances are, there’s money to be made on a slightly lower ranked product.

Tip #4: Focus on Customer Service

Obviously, customer service is important in any business. It is especially important in landing Amazon Buy Boxes.

Your seller rating is hugely important in competing for the Buy Box.

The customer service you give on Amazon is one of the absolute biggest ways you’re judged for eligibility and ranking for the Buy Box.

Keep that seller rating high by shipping your items quickly (of course, you should be using FBA, which will ensure you’re doing well in this area), responding to customers quickly, and selling a product that is unlikely to have defect issues.

Encouraging feedback from customers is not a bad idea. Positive comments and ratings from customers go a long way.

Speaking of feedback, we’d love yours on this blog. Let us know what you think of these tips and if you have any to add in our comments section below.

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Summary of New Trade Laws Passed by Congress & Signed by Obama https://www.universalcargo.com/summary-of-new-trade-laws-passed-by-congress-signed-by-obama/ https://www.universalcargo.com/summary-of-new-trade-laws-passed-by-congress-signed-by-obama/#respond Tue, 14 Jul 2015 18:27:06 +0000 https://www.universalcargo.com/?p=7575 In the last blog, we discussed Congress passing and President Obama signing into law a bill that extended the U.S. Generalized System of Preferences (GSP) program retroactively. The president actually signed two bills into law that had more effects on international shipping than just allowing shippers to get duties back on GSP eligible imports. In today’s […]

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Obama_Signs_Bill_Bringing_Back_GSPIn the last blog, we discussed Congress passing and President Obama signing into law a bill that extended the U.S. Generalized System of Preferences (GSP) program retroactively. The president actually signed two bills into law that had more effects on international shipping than just allowing shippers to get duties back on GSP eligible imports.

In today’s blog, we lay out the White House’s summary of the trade laws passed and make some comments on them:

Law #1:

TRADE PROMOTION AUTHORITY

Traditionally, trade promotion authority, or TPA, lays out a blueprint for the kind of trade deal the President can negotiate and secure with other countries. Trade negotiating authority has been granted to all but one of our 13 presidents since President Franklin Roosevelt.

The authority Congress is granting to President Obama today is an upgrade — not only does it give him the leverage he needs to close out negotiations on the TPP with 11 countries in the fast-growing Asia-Pacific region, but it ensures that the TPP [Trans-Pacific Partnership] will include the strongest protections in history for our workers and our environment.

Thanks to TPA, here’s what you’ll find in TPP:

This is all about the Trans-Pacific Partnership (TPP). The protections listed above both showing up in the TPP and being enforceable will have to be seen.

Perhaps the best thing this bill does is create transparency in that American people and businesses will be able to see and examine the negotiated deal.

Making this TPP deal is extremely important to the Obama administration. It is why the president fought so hard for these bills, even losing some support from party members and unions along the way. Now the president has the power to negotiate international trade deals like the TPP without the risk of Congress making changes. While Congress does not have the right change or delay trade agreements negotiated by the president, the power for Congress to approve or reject the agreements made is granted by the bill.

President Obama’s goal with the TPP is to strengthen the United States’ position in international trade while leveling the playing ground with labor and environmental protection rules.

The effectiveness of the TPP will have to be seen. I’m sure we’ll get into the topic more in future blogs.

Law #2:

TRADE ADJUSTMENT ASSISTANCE

Trade Adjustment Assistance, or TAA, provides vital job training, income support, and other employment-related benefits to American workers displaced by the forces of globalization. It’s a critically important lifeline that has helped 2.2 million American workers, including more than 23,000 veterans, find a new, often better-paying job.

The program was set to expire on September 30, 2015, but thanks to the bill President Obama is signing, we will not only extend TAA, but restore key provisions that will help support tens of thousands more workers each year by:

  • Making service workers eligible for the program once again, who represented nearly half of the applicants for TAA in 2014
  • Covering service workers retroactively, allowing more than 17,000 workers to reapply for benefits
  • Expanding eligibility to anyone who is impacted by trade with any country, whether we have a trade agreement with that country or not
  • Extending the number of weeks workers can apply for income support by 26 weeks
  • Offering wage insurance for workers over 50
  • Providing career and training support for workers searching for a new job

Glabalization presents a number of challenges. Shippers who import goods tend to know how to take advantage of the world economy. At the same time that importing goods supports jobs and helps build competitive businesses, other businesses struggle to compete.

TAA creates federal assistance for manufacturers, workers, and farmers negatively impacted by import competition or globalization in general.

This part of the bill goes toward extending TAA benefits.

THE AFRICAN GROWTH AND OPPORTUNITY ACT

For 15 years, the African Growth and Opportunity Act (AGOA) has provided tangible economic benefits and opportunities to sub-Saharan Africa by helping African companies improve their competitiveness and invest in building a strong private sector. Also set to expire in September, today’s bill extends AGOA for 10 years and reflects our shared values by providing incentives to adopt good governance and pro-growth/pro-development policies, including on workers’ rights and human rights. The bill also gives the Administration the ability to withdraw, suspend, or limit benefits if designated AGOA countries do not comply with our eligibility criteria.

Helping African countries grow economically through international trade is laudable. Creating opportunity in African countries also creates opportunities for American businesses.

There has been criticism over how enforceable human, worker, and environmental rights are and will be in the above TPA and TPP section. Here we see provisions created for enforcing such policies in the ability to withdraw, suspend, or limit benefits to African countries that do not comply with our criteria.

It will be interesting to see if criticism pops up over how easy it is to dump an African country from the AGOA program.

HOPE FOR HAITI

Haiti is the poorest country on the Western Hemisphere. The Haitian Hemispheric Opportunity Through Partnership Encouragement Act (HOPE II) ensures that Haiti’s apparel industry receives support by increasing access to consumers. In 2013, total export revenues from the textile and garment industry accounted for 91 percent of Haiti’s national export earnings and 10 percent of national GDP. The apparel industry is also among the largest employers within Haiti, creating jobs for nearly 30,000 people, and 65 percent of these workers are women. What the President is signing today extends duty-free benefits on apparel exports from Haiti until September 30, 2025. The HOPE II program has had a clear and direct role in supporting the creation of thousands of jobs in the textile and garment sectors, while providing important protections to workers.

Like the GSP program talked about in the last blog, the HOPE for Haiti program creates duty free imports in the U.S. on selected goods from a specified country, namely Haiti.

Haiti’s struggles have become more recognized by U.S. citizens in recent years, and this program not only aids the country but creates benefits for the U.S. economy as well.

GENERALIZED SYSTEM OF PREFERENCES 

Though it has a wonky name, the Generalized Systems of Preferences program (GSP) is the oldest trade preferences program in U.S. history. Instituted in 1974, GSP is designed to promote economic growth in the developing world by providing preferential duty-free entry into the U.S. market for nearly 5,000 products form 122 designated beneficiary countries and territories. In 2012, the year before the program expired, the U.S. imported $20 billion worth of products, helping developing countries to increase and diversify their trade with the U.S. and grow their economies. U.S. businesses have also paid a high price after this program expired, over $1 billion in fact, on tariffs that previously entered the U.S. duty-free. Its renewal today will help some of the poorest countries in the world, U.S. businesses, and consumers alike.

I’m skipping making comments on the GSP portion of the bills as we did a whole blog on the topic last week.

THE LEVEL THE PLAYING FIELD ACT

American manufacturers, especially those competing against Chinese imports, and American workers need a level playing field to compete and win in the 21st century global economy. The Level the Playing Field Act will help protect our industry by closing loopholes and strengthening the Administration’s ability to respond to foreign companies that try to undercut our domestic production. It will also enhance tools we use to assess and help prevent injury to American companies that are hurt by unfair trading practices.

This is an important area. There has been much criticism over the ability to enforce human rights, environmental, worker, trade, and other protections around the world. If such issues cannot be effectively addressed, regulated, and enforced, U.S. businesses sit at a disadvantage.

Making U.S. requirements less stringent is certainly not the answer. Looking at the effectiveness of these bills to “level the playing field” will certainly be a primary concern of many. Can this bill actually perform in this area?

What do you think of these bills passed by Congress and signed by the president? Let us know in the comments section below.

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Shippers Get Import Duty Reimbursed — GSP is Back Retroactively! https://www.universalcargo.com/shippers-get-import-duty-reimbursed-gsp-is-back-retroactively/ https://www.universalcargo.com/shippers-get-import-duty-reimbursed-gsp-is-back-retroactively/#respond Thu, 09 Jul 2015 23:20:34 +0000 https://www.universalcargo.com/?p=7474 The U.S. Generalized System of Preferences (GSP) program is back! If you’re one of the many shippers who benefited from the GSP program, then you remember vividly when the program expired at the end of July in 2013. U.S. businesses have paid over $1 billion dollars in tariffs that were previously duty-free since the GSP […]

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The U.S. Generalized System of Preferences (GSP) program is back!

Obama_Signs_Bill_Bringing_Back_GSPIf you’re one of the many shippers who benefited from the GSP program, then you remember vividly when the program expired at the end of July in 2013.

U.S. businesses have paid over $1 billion dollars in tariffs that were previously duty-free since the GSP expired, according to the White House.

We posted 3 things you could do about the GSP expiring back when it expired, supporting the efforts to renew the GSP. It only took two years to see the GSP get renewed.

However, the good news is that the GSP has been extended retroactively; therefore, you can get back the money you lost on duties when the program expired.

There is a limited window on getting your money back, so we’ll cover that and how to get reimbursed for GSP duties you’ve paid below.

Passed and Signed “Trade Prefrences Extension Act of 2015” Renews GSP

On June 25th, Congress passed the Trade Preferences Extension Act of 2015. Then on June 29th, President Obama signed the bill.

Title II of the Act authorizes the GSP through December 31st, 2017, as well as making it retroactive back to its expiration on July 31st, 2013.

President Obama actually signed two bills affecting international shipping in a number of ways on June 29th. We’ll get into the other things these bill signings covered in a future blog.

Here’s a video from the White House of the president signing the bills:

YouTube Video

For those of you who don’t know much about the GSP program, it promotes economic growth in developing nations while benefiting many, many U.S. businesses by giving duty-free entry into the U.S. market for selected products from designated countries.

Here’s a description from the White House’s blog:

Though it has a wonky name, the Generalized Systems of Preferences program (GSP) is the oldest trade preferences program in U.S. history. Instituted in 1974, GSP is designed to promote economic growth in the developing world by providing preferential duty-free entry into the U.S. market for nearly 5,000 products form 122 designated beneficiary countries and territories. In 2012, the year before the program expired, the U.S. imported $20 billion worth of products, helping developing countries to increase and diversify their trade with the U.S. and grow their economies. U.S. businesses have also paid a high price after this program expired, over $1 billion in fact, on tariffs that previously entered the U.S. duty-free. Its renewal today will help some of the poorest countries in the world, U.S. businesses, and consumers alike.

How To Get Your GSP Refund

This is quite possibly the biggest thing importers of goods from GSP eligible countries want to know: How do I get my tariff money back?

Shippers need to file formal requests for duty refunds on GSP eligible imports between July 29th, 2015 and December 28, 2015.

Many importers were very prudent, planning for the eventuality that the GSP would be renewed. These shippers marked their imports that previously were eligible for duty-free entry through the GSP with an “A+,” “A” or “A*”.

U.S. importers who designated their GSP eligible imports with the above designations during the time that is covered retroactively may get their entries automatically processed by the U.S. Customs and Border Protection (CBP).

However, it is possible that even these shippers will need to submit formal requests.

Lexology.com explains this well:

… those that have flagged interim entries may not have to file a request for repayment. CBP will reportedly, as in the past, automatically process previously filed entry forms that already contain the GSP designators “A+,” “A” or “A*.” If CBP automatically processes the entries, then importers can expect to receive their refunds 90 days after CBP concludes the liquidation or reliquidation process. It is not yet certain whether CBP will automatically process refunds because during 2014 the President removed Russia and Bangladesh from the list of GSP-eligible countries. Importers who claimed GSP benefits on their entry forms for goods from those countries will therefore not be eligible for a refund, as those items are not duty-free. CBP is currently testing to see if automatic processing is a feasible option and will issue instructions on the processing of claims most likely next week but definitely before July 29.

Don’t think you’re out of luck if you didn’t mark your GSP eligible imports as indicated above.

Lexology explains what you need to do to get your money back:

Importers who did not flag their import entry with an “A+,” “A” or “A*” must submit a “sufficient” formal request to CBP within 150 days of the reauthorization’s July 29 effective date. A “sufficient” request provides enough information to allow CBP to locate or reconstruct the entry. If the good is eligible for the GSP and the importer files a sufficient request, CBP will pay the amount owed within 90 days of the completion of the liquidation or reliquidation process. The repayment does not include interest.

To be eligible for the retroactivity provision the goods must:

1. Be from a country considered a “beneficiary developing country” as of July 29, 2015 (note: Russia and Bangladesh no longer qualify);
2. Be designated an eligible article under the GSP in the Harmonized Tariff Schedule of the United States, as shown by the word “Free” in the “Special” duty-rate subcolumn, followed by the symbol “A+,” “A” or “A*” in parentheses;
3. Have entered the United States between July 31, 2013 and the July 29, 2015 effective date of the provision (“entered” includes the good being withdrawn from a warehouse to be used for consumption); and
4. Have been shipped directly to the United States, without further processing in a non-GSP-eligible country.

Importers must file requests with CBP by December 28, 2015—180 days after the President signed the Act.

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Experts Answer Questions About International Shipping Market & Rates https://www.universalcargo.com/experts-answer-questions-about-international-shipping-market-rates/ https://www.universalcargo.com/experts-answer-questions-about-international-shipping-market-rates/#comments Thu, 02 Jul 2015 21:55:57 +0000 https://www.universalcargo.com/?p=7499 At Universal Cargo Management, we love Drewry Shipping Consultants. Drewry researches and consults on the international shipping industry, and they always have great insights to share. If you want to know more about Drewry, I’ve included the “About Drewry” information from their website at the bottom of this post. On Friday (June 26th, 2015), Port […]

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At Universal Cargo Management, we love Drewry Shipping Consultants.

international_shipping_ratesDrewry researches and consults on the international shipping industry, and they always have great insights to share. If you want to know more about Drewry, I’ve included the “About Drewry” information from their website at the bottom of this post.

On Friday (June 26th, 2015), Port Technology shared a Q&A with Drewry concerning rate volatility in international shipping.

Freight rates are volatile; we all know this. But are there solutions to dealing with the roller coaster of up and down freight rates? If anyone knows the answer, surely it is the international shipping experts at Drewry.

Here are highlights from the Q & A’s with Drewry that Port Technology shared along with some additions related to the questions from yours truly:

What do you think will be the impact of ever bigger ships on spot rates?

The introduction of ever larger ships into a market that is already over supplied has had the effect of increasing rate volatility. The reason is that not only does the upscaling of vessels increase the capacity deployed but also there is the individual carrier behaviour, especially with this first wave of record ships, where shipping lines don’t want to have the ship sail half empty on its maiden voyage. So on top of the structural effect of increasing supply, we’ve noticed the very short term effect of carriers grabbing extra cargo to assure the ship is nicely full and the only way to do so is by dropping the rates.

With the prospect of new ULCV’s entering the trade with a rate of 1 per week between now and the end of the year, we expect freight rate volatility to increase further.

Additional Impact of Bigger Ships:

Drewry, as well as the question itself, was focused on spot rates (freight rates in the spot rate market as opposed to the contract rates carriers have with the big shippers like Walmart), so the answer is limited to the impact of bigger ships on freight rates.

However, bigger ships are having a bigger impact on international shipping than just rates.

Bigger ships have also encouraged the trend toward carrier alliances (no, for once I won’t bust out my Carrier Craziness Bracket at the first opportunity). Not to contradict Drewry, but lowering spot or freight rates is not the only way to fill bigger ships. Another way to fill the ships is having multiple carriers work together, filling the ships with their individual cargo containers of freight.

That’s what the carrier alliances do while, in theory, not working together on sales or freight pricing.

Another effect of bigger ships on international shipping is port impact. Ports are scrambling to make infrastructure changes to handle much larger ships than in the past. Many ports are having to take on hugely costly dredging projects just to make it possible for megaships to call on them.

Meanwhile, the ports that can receive bigger ships already have been experiencing congestion in the adjustment process to receiving much bigger numbers of cargo containers at a time from bigger ships.

We’ve struggled to effectively deal with freight rate volatility and it remains a real issue for our organisation. How can we deal with this?

That’s a question we receive regularly and is in fact a very pertinent question, especially because freight rate volatility, in the face of increasing overcapacity in the coming years, is likely to get worse.

… [I’m skipping past part of the answer for large shippers who deal directly with carriers to the small to medium shippers who would deal through a freight forwarder like Universal Cargo Management.]

The second option, which we see more amongst the small to medium sized freight forwarders rather than BCO’s, is to fully embrace freight rate volatility, and to be fully engaged in the spot market to take short and longer commitments with varying carriers to make sure you have the best possible rate at all times. This obviously requires a lot of time and energy and carries considerable risk when one misjudges the market.

Additional Information:

Most shippers don’t have time to do all the work of making sure they’re getting the best service they need at the best freight rates for the service.

This is where a freight forwarder like Universal Cargo Management comes into play. We do all the working of the market on your behalf while making sure the routing, paperwork, and additional logistics of your imports and exports are handled.

But because freight rates are so volatile, getting a quote on shipping prices should be done within 30 days of shipping.

Are alliances a solution for reducing over capacity?

Alliances are a solution for sharing the commercial risk of operating a string of Ultra Large Container Vessels. Ultra Large Container Vessels (ULCVs) were a solution for improving the operating cost in a commoditised market: when customers select providers solely based on price, it’s the shipping line with the best cost profile that can offer the best prices to its customers and gain market share or generate superior profits.

So alliances were put in place to operate the ULCVs but do not contribute to reducing capacity. If anything, they’ve contributed to increasing capacity by improving the operability of ULCV’s.

Possible Outcome of Alliances:

Drewry, of course, answered that question well; however, I would like to add a possible affect carrier alliances could have on capacity.

Carrier alliances have shifted the capacity market share controlled by carriers in the international shipping industry. Fewer carriers control larger percentages of the market. For example, 2M, Ocean 3, G6, and CKYHE are projected to control 95 percent of the cargo volumes moving in the major east-west trades.

Many carriers have felt the pressure to join an alliance just to compete and survive in the international shipping market.

With the dominance the bigger carriers wield, teamed up together, there is a good chance a number of shipping companies (carriers) will go out of business or get completed absorbed in a merger. If the number of carriers shrink, capacity could shrink or possibly be better controlled.

Do you expect any space issues in the near future?

Currently, the idle vessel fleet is very low and so are scrapping volumes so shipping lines have recently only used blank sailings to reduce capacity. This signals that in general, it’s been cheaper to operate the ship, even at a loss, than to lay it up completely. Pulling a service also has negative commercial repercussions and no shipping line will want to be seen by the market as a first mover in this regard.

All of that will change if the poor rate situation continues to deteriorate and laying up vessels becomes the cheapest option for shipping lines as we have seen it happen in 2009. Consequently, Drewry believes that BCOs should be aware of the potential of space issues should carriers be forced to withdraw services to support rates –O3 Alliance announced the temporary withdrawal of a complete Asia-Europe string yesterday, for example.

Simple Answer for Small to Medium Shippers:

Overcapacity or too much space is the current problem for carriers. You can expect there to be room for your cargo on ships.

If carriers do start trending toward laying up ships, like in 2007, and shrink capacity, room will probably still be found for your cargo but freight rates would probably increase dramatically.

Is it possible to control/regulate this industry vs individual carrier interest in economies of scale?

We currently see no practical way to control or regulate this industry to avoid carriers pursuing economies of scale.

Why So Wordy?

A simple “no” would have sufficed, Drewry. 😉

… Is it the right time now for shippers to take advantage on the low spot rates?

… with current low spot rates, there is indeed an incentive to leave the “fixed” long term contracts and start saving some money in the short term. However one should bear in mind that what goes down, is likely to go up again at some point.

Sound Advice for Shippers:

It’s always a good idea to take advantage of lower freight rates when they’re available and you are able to ship. The nature of freight rates’ volatility means you never know if the pricing on your international shipping will jump to much higher levels in the near future.

Why are the orders of new mega vessels rising? Will the ULCV ordering not cause a cascade effect and result in even bigger rate reductions, when the industry is already in an unsustainable position?

Ordering bigger ships is perfectly rational from an individual carrier’s perspective: in a commoditised market the objective is to achieve the lowest possible operating cost. This can be achieved by using the scale economies offered by these bigger ships.

In a process that is called vessel upscaling, shipping lines maintain existing service patterns but they are being performed with bigger ships. The ships that have become redundant in the process need a new home which is usually found by cascading them to secondary trades. These secondary trades then also experience vessel upscaling and further cascading follows.

Currently, all the mega-alliances [are] engage in upscaling. Capacity is being injected into a market that is already oversupplied and at the same time everyone is putting a brake on scrapping and layups. The result is [a] dramatic over supply situation on all the trade routes and hence the crash in rates. For the next 2-3 years we do not see the situation improve.

Results for Shippers:

If just looking at the last two sentences of Drewry’s answer, this would appear to be the classic carriers’ loss is shippers’ gain. However, the results are more complicated than that.

While shippers are in a position to enjoy lower freight rates from overcapacity, the larger ships have helped create congestion and cost shippers money in the failure of cargo to pass through ports efficiently.

Carriers keep ordering bigger ships because it benefits them in terms of operating costs, regardless of the problems ports face. While it will be hard for carriers to recover higher freight rates over the next 2-3 years, it will be a challenge for the rest of the industry to shift to the higher single ship volumes.

Some of the damages shippers have suffered are much greater than the benefit of lower freight rates. That’s a reason why the cheapest possible shipping price should not be the top concern of importers and exporters.

Click Here for Free Freight Rate Pricing

Here’s that information about Drewry from their website that I promised you at the top of this post:

Drewry’s origins date back to the 1960s when the late founder, George Drewry, recognised that the international shipping industry did not have an independent source of data, information and advice.

H.P Drewry Ltd, as it was then called, was established in London in 1970 as an independent and authoritative provider of information and analysis to the global maritime industry.

Throughout the 1970s and 1980s the publishing base was expanded as new products, such as single client advisory work, were added to the portfolio. The company also expanded into other markets adding new sectors such as containers, ports and shipbuilding.

During these formative years much work was undertaken to build the company’s information and knowledge bases and during this time the Drewry brand became well established.

In April 2000, a management buy-out took place. This allowed Drewry to diversify and to launch new businesses supporting client needs across a broader base of maritime activities including ports, terminals and logistics. We have also opened offices in India, Singapore and China and with these, coupled with our network of associates across the World, Drewry now operates on a global platform.

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Almost Finished Panama Canal Expansion Will Shift Cargo Market Share https://www.universalcargo.com/almost-finished-panama-canal-expansion-will-shift-cargo-market-share/ https://www.universalcargo.com/almost-finished-panama-canal-expansion-will-shift-cargo-market-share/#respond Tue, 30 Jun 2015 18:55:03 +0000 https://www.universalcargo.com/?p=7423 Panama Canal Nearing Completion I can hear the choirs singing, “Soon and very soon…!” Rather than singing about seeing the King, they’re singing about seeing the completed Panama Canal expansion. And the completed expansion could very well affect which coast is king of international shipping in the U.S. But let’s not get too far ahead […]

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Panama Canal Nearing Completion

Panama CanalI can hear the choirs singing, “Soon and very soon…!”

Rather than singing about seeing the King, they’re singing about seeing the completed Panama Canal expansion. And the completed expansion could very well affect which coast is king of international shipping in the U.S.

But let’s not get too far ahead of ourselves. I’ll talk about the completed expansion’s effects on international shipping in an upcoming section. First, let’s look at just how close the Panama Canal expansion is to being finished.

Drewry reports, “the Panama Canal Authority (ACP) stated [the project to widen the canal] was 89.8% done as of the end of May…”

The Miami Herald reports that the Panama Canal expansion is expected to be complete and open to commercial traffic in April 2016.

I suppose April of next year seems a little ways away–and it is about 2 years behind schedule–but considering the expansion was approved in 2006 and work began in 2007, a little less than a year is a very little ways away.

Earlier this month, the filling of the Atlantic side locks took place. Drewry reports, “Filling of the Pacific side locks is now underway, at a rate of 37,000 gallons of water per minute. It is expected to take 90 days.”

The Miami Herald helps give a feeling of just how exciting it is to be at the point of filling the Panama Canal locks with water:

“Filling the locks with water is the culmination of arduous years of labor and the realization that we are within arm’s reach of completion of one of the most impressive infrastructure projects of our time,” said Jorge L. Quijano, chief executive and administrator of the canal authority.

Here are some quick reference numbers on the Panama Canal expansion:

  • Panama Canal Expansion Costs: $5.25 Billion
  • Panama Canal Expansion Approved: 2006
  • Panama Canal Expansion Begins: 2007
  • Panama Canal Expansion Ready for Commercial Traffic: 2016

Purpose of the Panama Canal Expansion

The title of the Drewry article quoted above is “Carriers Jostling for Expanded Panama Canal Positions”. You would expect carriers to be drooling over the Panama Canal expansion with their bigger container ships.

Of course, the expansion of the Panama Canal was not originally meant just to allow bigger ships to pass through. The original purpose of the Panama Canal expansion was to increase its capacity, which was beginning to hit its limits creating long queues of ships.

The Miami Herald reports:

A study showed the canal would reach its capacity in 2011, but the global financial crisis and falling levels of trade “bought some time really,” said [30-year worker for the canal authority and retired executive vice president of planning and business development Rodolfo Sabonge], who was in Miami last Friday to speak at a Trade Connections event sponsored by WorldCity.
“Now the expansion has come just in time,” he said. “The canal wasn’t going to be able to handle the number of ships.” Around 14,000 ships traverse the canal yearly.

But with the trend of carriers moving toward larger ships, the expansion of the Panama Canal is even more important than originally thought.

Panama Canal Expansion Effect on Shipping

There’s a shift that’s been happening in cargo market share from the U.S. West Coast to the U.S. East Coast and the Panama Canal Expansion is expected to increase that market share shift.

World Maritime News reports:

Since January 2013, traffic from Asia to USEC has grown by 26% whereas Asia to USWC volumes have grown much more modestly at around 6%. Asia-US Gulf Coast demand trumps them both, growing at just over 40% but it comes off a very low base and has barely shifted the GC share much beyond 2%, according to Drewry.

The US West Coast remains by far the most widely used gateway for Asian container imports but its share is dwindling quite rapidly. At the start of the century the split was more like 84% USWC to 16% USEC but the later coast has nearly doubled its share in 15 years. The transfer of cargo seems to be intensifying too. Since January 2013 the USWC’s share has fallen from 73% to 69%, while the USEC has gained those four percentage points to reach 29%.

Yeah, there are a lot of numbers and percentages in there, but the message is easy to see. East Coast ports have been taking market share from West Coast ports. Recent slowdowns during the International Longshore & Warehouse Union’s (ILWU) contract negotiations helped many shippers to lose faith in West Coast ports and move shipments to the East Coast, increasing that market share shift.

The Panama Canal expansion will make it even easier for shippers to move their imports and exports from West Coast ports to East Coast ones.

Pretty big shifts in market share are expected by 2020. World Maritime News continues:

Up to 10 percent of container traffic to the US from East Asia could shift from West Coast ports to East Coast ports by 2020, according to a new research conducted by The Boston Consulting Group (BCG) and C.H. Robinson.

In 2014, about 35 percent of container traffic from East Asia to the US arrived at East Coast ports. According to the report, current growth trends would push that share to 40 percent by 2020 without the canal’s expansion. But with the canal expansion in place, the East Coast’s share could reach 50 percent — a 10 percent increase in market share.

East Coast ports have to be excited about the Panama Canal expansion almost being complete. For them, it can’t finish fast enough. West Coast ports are probably feeling the exact opposite way about the Panama Canal expansion completion.

 

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FMC Called Upon to Stop Unfair Congestion Charges to Shippers https://www.universalcargo.com/fmc-called-upon-to-stop-unfair-congestion-charges-to-shippers/ https://www.universalcargo.com/fmc-called-upon-to-stop-unfair-congestion-charges-to-shippers/#respond Thu, 18 Jun 2015 20:19:08 +0000 https://www.universalcargo.com/?p=7428 Shippers are tired of paying the price for port congestion, and rightly so. Demurrage, detention, and per diem fees have unfairly been charged to shippers on top of the lost money and overseas partnerships importers and exporters have suffered due to the ports being unable to move shippers’ imports and exports. Now the Federal Maritime […]

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FMC Called Upon to Stop Unfair Fees to ShippersShippers are tired of paying the price for port congestion, and rightly so.

Demurrage, detention, and per diem fees have unfairly been charged to shippers on top of the lost money and overseas partnerships importers and exporters have suffered due to the ports being unable to move shippers’ imports and exports.

Now the Federal Maritime Commission (FMC) is being asked to do something about these unfair charges.

If you follow Universal Cargo Management’s blog, you’ve seen post and article after post and article about port congestion.

Port congestion was already a problem before slowdowns happened last year on the West Coast due to contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association. Of course, the congestion was made so much worse during the contentious negotiations that products didn’t make it to store shelves for the holidays and U.S. agricultural products rotted on the docks instead of being exported.

These things alone cost shippers plenty of money, but to add insult to injury (or better yet, injury to injury), demurrage, detention, and per diem fees were charged to shippers as well.

Was the congestion the fault of shippers? No! Yet shippers were forced to pay through the nose. And shippers say they’ve had enough.

If shippers have shipping containers on the docks that are stuck in congestion, it is not their fault the shipping containers cannot be removed. And it certainly is not for a lack of trying. Shippers need that freight to get to its final destination!

Such unfair charges hit others in the supply chain, too. Freight forwarders, truckers, and trucking companies have been hit with these devastating double whammies along with importing and exporting manufacturers, distributors, and retailers.

The Los Angeles Customs Brokers and Freight Forwarders Association (LACBFFA), along with 94 other organizations sent a letter to the FMC calling for the federal agency to put an end to these unfair charges and “to ensure that a common carrier or terminal operator provides just and reasonable regulations and practices relating to receiving, handling, storing or delivering property.”

Their legal ground requesting action from the FMC seems solid as well.

Fortunately, the LACBFFA forwarded a copy of the letter to its members, which means that we here at Universal Cargo Management are able to share it with you, our shipping blog readers.

Here is a copy of the full letter to the FMC, including the list of the 95 organizations it is from:

June 10, 2015The Honorable Mario Cordero
Chairman
Federal Maritime Commission
800 North Capitol Street, N.W
Washington, D.C. 20573

Dear Chairman Cordero:

We are following up on our letter of April 27 regarding the FMC’s report on Rules, Rates, and Practices Relating to Detention, Demurrage, and Free Time for Containerized Imports and Exports Moving Through Selected United States Ports. Our organizations represent importers, exporters, manufacturers, retailers, distributors, wholesalers, farmers, truckers and other supply chain stakeholders. We again commend the Commission for releasing the report, which highlights the significant concerns of shippers, receivers, ocean freight forwarders and motor carriers who were assessed demurrage or detention charges during periods of peak congestion at our nation’s ports, even though they were not responsible for the delays that triggered the assessment of the charges. We believe it is now time for the Commission to take action to address the issues detailed in your report.

We strongly believe that the Commission has full authority under the Shipping Act of 1984 (46 U.S.C. § 41102(c)) to ensure that a common carrier or terminal operator provides just and reasonable regulations and practices relating to receiving, handling, storing or delivering property. We believe this section of the governing statute applies to the rules for application of detention and demurrage fees that are published in carrier and terminal tariffs or schedules and to the practices followed by such parties in assessing these charges. In particular, we believe these penalty payments should be prohibited when factors beyond the control of the shipper, receiver or motor carrier make it impossible for them to return chassis or empty containers, or pick up or drop off loaded containers within free time limits.

We are calling upon the Federal Maritime Commission (FMC) to take action on this issue of unfair and unwarranted demurrage, detention, and per diem charges paid by beneficial cargo owners (BCOs) and their motor carriers when circumstances prevent timely pickup and drop off of containers and related equipment. We believe the Commission can and should pro-actively ensure on a going-forward basis that carrier and terminal rules and practices for assessing demurrage/detention against a shipper, receiver or drayman are reasonable, and it should prevent the assessment of such charges when there is port congestion or other events that cause delays that are beyond the control of the shipper, receiver or motor carrier.

We stand ready to work with the Commission to provide additional ideas and advice on this critical issue. Thank you for your consideration.

Sincerely,

Agricultural Retailers Association
Agriculture Transportation Coalition
Almond Hullers & Processors Association
Airforwarders Association
American Apparel & Footwear Association (AAFA)
American Association of Exporters and Importers
American Chemistry Council
American Cotton Shippers Association
American Forest and Paper Association
American Frozen Food Institute
American Import Shippers Association
American Potato Trade Alliance
American Pyrotechnics Association
American Soybean Association
Association of Food Industries
Auto Care Association
California Farm Bureau Federation
California Fresh Fruit Association
California League of Food Processors
California Trucking Associations
California Retailers Association
CAWA – Representing the Automotive Parts Industry
Cookware Manufacturers Association
Columbia River Customs Brokers and Forwarders Association
Customs Brokers and Forwarders Assoc. of Northern California
Customs Brokers and International Freight Forwarders of Washington State
Fashion Accessories Shippers Association (FASA)
Footwear Distributors & Retailers of America (FDRA)
Forest Resources Association
Furniture Shippers Association
Gemini Shippers Association
Global Automakers
Global Cold Chain Alliance
Grocery Manufacturers Association
Green Coffee Association
Halloween Industry Association (HIA)
Harbor Trucking Association
Institute of Scrap Recycling Industries, Inc.
Intermodal Motor Carriers Conference
International Association of Refrigerated Warehouses
International Fragrance Association, North America
International Refrigerated Transportation Association
International Wood Products Association
Juvenile Product Manufacturers Association
Los Angeles Customs Brokers and Freight Forwarders Association
Meat Importers Council of America
Midwest Food Processors Association
Midwest Shippers Association
Motor & Equipment Manufacturers Association
Motorcycle Industry Council
National Alfalfa & Forage Alliance
National Association of Chemical Distributors
National Association of Egg Farmers
National Association of Manufacturers
National Chicken Council
National Cotton Council
National Council of Farmer Cooperatives
National Customs Brokers and Forwarders Association of America
National Fisheries Institute
National Oilseed Processors Association (NOPA)
National Onion Association
National Pork Producers Council
National Retail Federation
National Strategic Shippers Association (NASSTRAC)
New Jersey Motor Truck Association
North American Export Grain Association
North American Meat Institute
North American Shippers Association, Inc.
North American Home Furnishings Association
Northwest Food Processors Association
Pacific Coast Council of Customs Brokers and Freight Forwarders
Pacific Northwest Vegetable Association
PPAI – Promotional Products Association International
Retail Industry Leaders Association
San Diego Customs Brokers and Forwarders Association
Specialized Carriers & Rigging Association
The Hardwood Federation
The National Industrial Transportation League
The Waterfront Coalition
Toy Industry Association
Transportation Intermediaries Association
Travel Goods Association (TGA)
U.S. Apple Association
U.S. Fashion Industry Association
U.S. Hide, Skin and Leather Association
United Fresh Produce Association
US Dry Bean Council
USA Dry Pea & Lentil Council
Washington Farm Bureau
Washington Retail Association
Washington State Hay Growers Association
Washington State Potato Commission
Washington Trucking Associations
Western Growers Association
World Trade Center – Kentucky
CC: Commissioner Rebecca F. Dye
Commissioner Richard A. Lidinsky, Jr.
Commissioner Michael A. Khouri
Commissioner William P. Doyle

Click Here for Free Freight Rate Pricing

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How the Ports of Los Angeles & Long Beach are Losing Market Share https://www.universalcargo.com/how-the-ports-of-los-angeles-long-beach-are-losing-market-share/ https://www.universalcargo.com/how-the-ports-of-los-angeles-long-beach-are-losing-market-share/#respond Fri, 05 Jun 2015 01:31:16 +0000 https://www.universalcargo.com/?p=7420 “Advertisements for shipping to Prince Rupert in British Columbia tout ‘infrastructure solutions’ at the ‘congestion-free’ port,” reports an L.A. Times article headlined with the words “L.A., Long Beach ports losing to rivals amid struggle with giant ships”. Big Ships Big Problems Ports probably feel like the Notorious B.I.G. when he sang “Mo Money Mo Problems”. […]

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“Advertisements for shipping to Prince Rupert in British Columbia tout ‘infrastructure solutions’ at the ‘congestion-free’ port,” reports an L.A. Times article headlined with the words “L.A., Long Beach ports losing to rivals amid struggle with giant ships”.

Big Ships Big Problems

Ports probably feel like the Notorious B.I.G. when he sang “Mo Money Mo Problems”.

Of course the chorus for the ports would sing, “It’s like the more TEUs we come across, the more problems we see.”

Los Angeles Long Beach Ports Losing Shipping Market ShareBig ships create big problems for ports. For the Ports of Los Angeles and Long Beach, big ships have been a big factor in losing market share.

When megaships first started hitting the water, it seemed like the Ports of Los Angeles and Long Beach had a competitive edge as most ports in the Americas couldn’t receive these mammoth ships.

There was excitement back in 2012 when megaship, The Fabiola shattered previous size records when it called on the Port of Long Beach. The Fabiola, 30 feet shorter in length than the Empire State Building is tall, is now one of the smaller megaships out on the water.

Container ships are now much, much bigger than they used to be.

“The average container ship being built now is nearly three times the size of the average a decade ago,” says the L.A. Times article by Chris Kirkham and Andrew Khouri quoted above.

Carriers moving to these huge ships accounts for one of three international shipping buzzwords causing major problems for ports and costing the Ports of Los Angeles and Long Beach market share.

The buzzwords are: Megaships, Alliances, and Congestion.

That L.A. Times article highlights how megaships and alliances work together to create congestion:

To fill enormous ships, ocean carriers are also making agreements to share vessels and pool cargo to save money. Sixteen shipping companies operating in four major corporate alliances now control about 80% of the world’s container shipping fleet, according to industry analyst Alphaliner.

That consolidation has caused immense headaches at port terminals, where longshoremen must sort through containers from multiple carriers before they can be fetched for truckers waiting to pick them up.

Of course now ports all over the world, and the country, are scrambling with infrastructure projects to catch up to and handle the increase in ship sizes.

Other Factors Costing Los Angeles & Long Beach Market Share

While the L.A. Times article focuses on the megaships and alliances as the problems causing congestion, there were other factors causing congestion at the Ports of Los Angeles and Long Beach. The biggest of these other factors was a lack of chassis available to move containers out of terminals at the ports.

Then came labor slowdowns from the International Longshore & Warehouse Union (ILWU) and mini-lockouts in response from the Pacific Maritime Association (PMA) during contentious contract negotiations for dockworkers on the West Coast.

Shippers lost confidence in West Coast ports as imports didn’t get delivered in time to hit the shelves for holiday shopping and agricultural exports rotted on the docks. Of course, many shippers had already lost confidence in West Coast ports like those of Los Angeles and Long Beach when the ports were shutdown by a lockout during the 2002 labor contract negotiations.

“The [Los Angeles and Long Beach] ports handled 39% of U.S. container imports in 2002; that fell to 32% by 2013, according to U.S. census data,” reported the L.A. Times article.

Market Share Percentage Shifts from 2014 to 2015

Datamyne’s free report “Ports & Carriers Ranking January-April 2015 vs. January-April 2014” shows clearly how the Ports of Los Angeles and Long Beach lost market share over the last year in the fallout from the congestion and ILWU contract negotiations:

Datamyne Report Los Angeles & Long Beach Ports Lose Market Share resized 600

Datamyne Los Angeles Long Beach Port Market Share GraphThe dark green bars show the TEUs of cargo discharged at ports from the January through April months of 2015 and the light green bars show the TEUs from the same period in 2014.

While Los Angeles and Long Beach total TEUs dropped, East Coast ports handled more TEUs in a period when there was overall growth in TEUs of cargo shipped.

A 5.05% drop in cargo volume for the Port of Los Angeles made its market share drop from 22.21% during this period in 2014 to a 20.02% market share for the period in 2015. The Port of Long Beach experienced a 4.33% drop in cargo volume resulting in its market share going from 18.20% to 16.53%.

The only ports on the West Coast that managed to increase their volume during this time of overall volume growth were the Ports of Seattle and Port Hueneme. Seattle had a 23.27% volume increase that resulted in its market share going from 2.42% to 2.83%. Hueneme’s 4.24% growth in volume was enough to maintain its 0.30% of the market share.

East Coast ports are the ones that really saw market share gains. The Ports of New York/New Jersey had a 12.6% gain in volume causing it to almost catch the Port of Long Beach in terms of market share. This period in 2014, New York/New Jersey had 15.26% market share; in 2015 the market share jumped to 16.31%, just 0.05% smaller than Long Beach’s market share.

Savannah’s 33.24% volume increase jumped its market share from 6.71% to 8.48%.

“When you are No. 1 in the nation, everybody’s going to come after you,” Gene Seroka, executive director of the Port of Los Angeles was quoted as saying in the L.A. Times article.

They’re not just coming after you, Ports of Los Angeles and Long Beach; they’re succeeding. And don’t forget about the ports from outside the country, like Prince Rupert in British Columbia, that are also going after your market share.

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Who Else Wants More WC Port Drama? Port of Oakland Shutdown by ILWU https://www.universalcargo.com/who-else-wants-more-wc-port-drama-port-of-oakland-shutdown-by-ilwu/ https://www.universalcargo.com/who-else-wants-more-wc-port-drama-port-of-oakland-shutdown-by-ilwu/#respond Tue, 02 Jun 2015 21:03:28 +0000 https://www.universalcargo.com/?p=7613 You know what there hasn’t been enough of lately? ILWU drama at West Coast ports. Don’t worry, the ILWU Local 34 at the Port of Oakland is solving that problem. So much so, in fact, that the Port of Oakland was closed down on Sunday night. Shippers were disgusted with the costly slowdowns and congestion at […]

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You know what there hasn’t been enough of lately? ILWU drama at West Coast ports. Don’t worry, the ILWU Local 34 at the Port of Oakland is solving that problem.

Port of Oakland Shutdown by ILWU resized 600So much so, in fact, that the Port of Oakland was closed down on Sunday night.

Shippers were disgusted with the costly slowdowns and congestion at West Coast ports during the long and contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). When the new contract was ratified by the ILWU on May 22nd, the hope was for port stability on the West Coast, at least for a few years before negotiations start on the 2019 contract.

However, whenever a new contract goes into effect at the ports, there are kinks to be worked out in its implementation.

There seem to be a lot of kinks at the Port of Oakland as Sunday’s shutdown is “the third work stoppage caused by the ILWU in Oakland in just over a week,” according to a PMA statement.

The PMA statement released yesterday (June 1st) announced:

Despite reaching a new agreement in the protracted 2014 negotiations with PMA on a dispatch procedure for Sunday and holiday operations at the Port of Oakland, ILWU Local 34 officials decided not to honor the agreement. Instead, the Union officials refused to dispatch workers for the second shift on Sunday, causing a shutdown of terminal operations at the Port of Oakland.

Sunday’s night shift was the first shift during which the new contract’s dispatch procedure would go into effect. Obviously, it wasn’t an overly effective start.

PMA’s statement doesn’t detail the new procedure saying only, “In short, the dispatch process outlines times by which labor orders must be placed.” A Bill Mongelluzzo article in the Journal of Commerce (JOC) enlightens us on the new dispatch procedure:

In the past, terminal operators had to inform ILWU Local 34 by Saturday morning as to its need for marine clerks for the Sunday night shift. Employers said they often had difficulty ascertaining their needs until the day of the dispatch, so the new contract stipulates that the terminals must file their dispatch needs on Sunday mornings for the Sunday night shifts.

When the ILWU Local 34 did not dispatch workers for the second shift on Sunday that the employers at the Port of Oakland put in for on Sunday morning, the PMA took the matter to an arbitrator. The PMA described the results in their statement:

After the ILWU failed to adhere to the new dispatch procedures for vessel operations for the second shift on Sunday, the PMA took the matter to an area arbitrator who ruled that ILWU officials and dispatchers took a unilateral action in violation of the agreement with PMA. The arbitrator further instructed the ILWU to accept and dispatch employers’ labor orders. The arbitrator also ruled that the ILWU reneged on an agreement to work around the dispute.

After all the drama at the end of the contract negotiations that centered around the ILWU being able to get rid of arbitrators who rule against them, I would expect the ILWU to be gunning for this arbitrator.

The JOC article shared the ILWU’s perspective on Sunday’s event:

ILWU spokesman Craig Merrilees gave a different account of what happened. Local 34 officials charged that the PMA itself did not follow all of the provisions in the new contract concerning the dispatching of marine clerks, but rather “cherry picked” the provisions it wanted to enforce. Nevertheless, the ILWU worked with the PMA to ensure that dispatching for Monday’s day shift worked smoothly, Merrilees said.

The PMA statement did indeed say, “labor orders were properly processed for the first shift on Monday, and operations at the Port of Oakland are currently normal.”

While this new dispatch procedure seems to now be worked out, Sunday’s incident does leave tension between the PMA and ILWU in Oakland as can clearly be seen in the words of the PMA:

“The ILWU in Oakland has a long history of taking unilateral actions that disrupt ongoing cargo operations,” said PMA spokesperson Wade Gates. “We have a new coastwise contract in place that was recently ratified by both parties, a new understanding in Oakland on dispatch and an arbitrator’s ruling finding the ILWU in violation of that new understanding. It’s time for the ILWU leaders in Oakland to recognize these facts, follow the provisions of the new agreement and join us in regaining the shipping community’s confidence in West Coast ports.”

There is still a lot of work to do in regaining the shipping community’s confidence in West Coast ports.

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The Truth About the New ILWU Contract https://www.universalcargo.com/the-truth-about-the-new-ilwu-contract/ https://www.universalcargo.com/the-truth-about-the-new-ilwu-contract/#respond Thu, 28 May 2015 19:49:27 +0000 https://www.universalcargo.com/?p=7580 After the news broke that both the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) voted to ratify the new West Coast longshore contract, the Los Angeles Customs Brokers and Freight Forwarders Association (LACBFFA) forwarded an email to its members from “Our Man in DC” Peter Friedmann. Peter Friedmann has been a great source for […]

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ILWU contract shipping & chassisAfter the news broke that both the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) voted to ratify the new West Coast longshore contract, the Los Angeles Customs Brokers and Freight Forwarders Association (LACBFFA) forwarded an email to its members from “Our Man in DC” Peter Friedmann.

Peter Friedmann has been a great source for information on the ILWU contract negotiations and government action that affects international shipping.

So what was the new email from Friedmann all about? The subject of the email sums it up:

New ILWU Contract – The Truth

Peter Friedmann started the email by tempering celebrations over the new contract saga finally coming to an end and providing five years before negotiation drama hits again. He warns that we don’t really have as long as that.

“Today people are celebrating ILWU ratification of a new five-year contract. BUT IT’S NOT TRUE,” says Friedmann in the email. “It is a four-year contract; expires at the end of June 2019.”

Friedmann is right that this contract expires in four years. So from the shipper’s point of view, it seems to only be a four-year contract. However, it is technically a five-year contract because it goes into effect retroactively.

The negotiation process between the PMA and ILWU took over a year. The old contract expired on July 1st, 2014. That means the new five-year contract’s start date is July 1st, 2014 even though it wasn’t ratified until May 22nd, 2015. The result is that the “stability” of a union contract that shippers need to count on West Coast ports to move their imports and exports has only four years left, as Friedmann says.

Effects of ILWU’s Chassis Jurisdiction

The main point of emphasis of Friedmann’s email was not how long the ILWU contract actually is. The main focus was on how the jurisdiction the ILWU was given over the repair and maintenance of chassis will impact the process of moving shipping containers in and out of West Coast ports.

Friedmann lays out the new procedure of ILWU inspectors checking chassis that has truckers worried, and frankly, has shippers worried, too:

Now what? Come this Tuesday the ILWU starts checking chassis for “road ability”. There is more than a little concern on the part of the dray truckers, about the opportunity for ILWU inspectors to “impact” the process:

All pool chassis and leased chassis must go through roadability at all terminals on the West Coast. Trucker owned chassis and bobtails may use bypass but are subject to verification of ownership if asked. If minor repairs are found to be needed on a pool chassis the repairs can be made during the inspection. If repairs are found to be needed on leased or owned chassis the container will be removed from the chassis and driver will be allowed to exit the terminal. Please be patient at the terminals as all will be experiencing this new procedure.

Already, this could slow things down at the ports. More alarming is the potential that these inspection have to be abused. It’s not hard to imagine the ILWU using inspections to create slowdowns or hard-time ports or terminals over labor disputes.

Chassis Inspection Specifics

Friedmann also provides specifics of the “roadability” inspection requirements in his email:

ROADABILITY INSPECTION REQUIREMENTS
The driver must be in his/her truck during the chassis inspection only

The following items shall be inspected on each chassis:
• Lights – Operational, not missing or broken.
• Reflectors and Conspicuity – Intact.
• FHWA decal – Valid; not expired.
• Mud Flap – Not missing or loose.
• Brake System – Visual check for proper braking action; no missing, broken, cracked, contaminated, loose or worn components; no audible air leaks.
• Landing gear – Intact; No missing or loose components.
• Connecting devices – Intact
• Tires and Wheels – Tires; visual check for good order; no flats, worn, flat spotted or cuts to cord. Wheels; visual check for signs of cracks, bent, loose or missing components.

How smoothly ILWU inspections of chassis go will be something to watch in the upcoming months.

What are your thoughts on the new ILWU contract? Share them in the comments section below.

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Which of These Chassis Plans Will Relieve Congestion at LA/LB Ports https://www.universalcargo.com/which-of-these-chassis-plans-will-relieve-congestion-at-la-lb-ports/ https://www.universalcargo.com/which-of-these-chassis-plans-will-relieve-congestion-at-la-lb-ports/#respond Thu, 14 May 2015 21:48:27 +0000 https://www.universalcargo.com/?p=7472 “Back That Chassis Up” If Juvenile, Mannie Fresh, and Lil Wayne rapped about international shipping, “Back That Chassis Up” would be their biggest song. It would go something like this: Port you workin’ without chass-yeahs, you bad yeah Make a trucker spend his cash yeah, his last yeah Shippers frown when you pause yeah, they […]

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Back That Chassis Up”

If Juvenile, Mannie Fresh, and Lil Wayne rapped about international shipping, “Back That Chassis Up” would be their biggest song. It would go something like this:

Port you workin’ without chass-yeahs, you bad yeah
Make a trucker spend his cash yeah, his last yeah
Shippers frown when you pause yeah, they mad yeah

(CHORUS):

Truck, you looks good, won’t you back that chassis up
You’se a fine cargo-trucker, won’t you back that chassis up
Call me Big Shipper when you back that chassis up
Port, who is you playin’ wit? Back that chassis up

That’s right, they’re spittin’ ’bout the chassis shortage problem that has been such a major factor in creating congestion at West Coast ports, especially the Ports of Los Angeles and Long Beach.

Chassis Shipping Rapping Public Domain Lil Wayne, Mannie Fresh, Juvenile, Sir Mixalot resized 600International shippers are spitting mad about the situation too. And they should be.

Shippers have lost a great deal of money because cargo has gotten delayed by port congestion. Not only have shippers lost money, but they’ve lost that wonderful feeling of receiving their shipping containers of cargo on time and in full.

Of course, Sir Ships-A-Lot probably explains the wonderful feeling of your shipping container of cargo being delivered best in his classic anthem, “I Like Big Rigs”:

I like big rigs and I can not lie
You other shippers can’t deny
That when a truck pulls up with a chassis loaded case
And your cargo in your face
You get sprung

Fortunately, when the contract negotiations between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) that also greatly factored into port congestion ended, the Ports of Los Angeles and Long Beach could focus on solutions to the chassis shortage problem.

Two chassis plans are moving forward at the Ports of Los Angeles and Long Beach to make chassis available so truckers can move shipping containers out of the ports: the Gray Chassis Pool and the Peak Hour Chassis Pool.

Which of these two chassis pool plans will be more effective in reducing congestion at the ports?

Gray Chassis Pool

The “Gray Chassis Pool” is also known as the “Gray Chassis Fleet” and the “Pool of Pools”.

Is the Gray Chassis Pool really great enough to be called the Pool of Pools?

Well, the Ports of Los Angeles and Long Beach worked in cooperation, making a deal between three chassis owning companies, Direct ChassisLink Inc. (DCLI), Flexi-Van Leasing Inc., and TRAC Intermodal to create this chassis pool for the San Pedro Bay ports.

Since the launch of this chassis pool on March 1st, chassis availability has improved markedly.

This improvement in availability of necessary equipment for the moving of shipping containers at the ports has really helped bring congestion down and garnered the praise of drayage/trucking companies.

You can read more about the Gray Chassis Pool in our previous blog about things happening to move cargo at the Ports of Los Angeles and Long Beach.

Peak Hour Chassis Pool

Despite the success seen so far from the Gray Chassis Pool, the Port of Long Beach recognizes it is not enough.

West Coast ports expect vessel, yard, and gate operations to be back to normal by the end of this month according to an article by Bill Mongelluzzo on JOC.com.

But normal isn’t good enough to handle the increased shipping container loads new megaships bring to the ports.

The Peak Hour Chassis Pool is specific to the Port of Long Beach, whose Harbor Commission voted to take bids from companies interested in running the program. Andrew Edwards reported in the Press-Telegram:

The port’s plan calls for the winner of the bids to initially deploy 1,000 chassis. Another 2,000 chassis could be added to the pool at port officials’ discretion. Members of the International Longshore and Warehouse Union would be hired to maintain the chassis.

Steven Rubin, the port’s managing director of finance and administration said during separate budget discussions Monday that port officials plan to spend $10 million on the program during the current budget year and an additional $20 million during the fiscal year that starts Oct. 1.

Bidders have until 10 a.m. June 2 to submit their proposals. The contract could begin July 1.

Conclusion

The Gray Chassis Pool has a leg up on the Peak Chassis Pool in a couple ways:

  1. It encompasses both the Ports of Los Angeles & Long Beach
  2. It has been in effect longer

But what really makes the Peak Hour Chassis Pool exciting is that it is a pool in addition to the Gray Chassis Pool. With the Port of Long Beach already allocating $30 million to this pool, it figures to have a strong positive effect on port operations.

Since the Ports of Los Angeles and Long Beach have been allowed by the Federal Maritime Association to work together, the Peah Hour Chassis Pool should end up benefitting both ports.

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3 International Shipping Buzzwords Breaking Ports’ & Shippers’ Banks https://www.universalcargo.com/3-international-shipping-buzzwords-breaking-ports-shippers-banks/ https://www.universalcargo.com/3-international-shipping-buzzwords-breaking-ports-shippers-banks/#respond Thu, 07 May 2015 19:47:22 +0000 https://www.universalcargo.com/?p=7579 What’s wrong with U.S. ports? Now that the contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) are over (pending ILWU members ratifying the new contract), cargo delays on the West Coast should end too, right? Wrong. And delays are happening at ports on the East Coast as […]

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What’s wrong with U.S. ports?

international shipping buzzwordsNow that the contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) are over (pending ILWU members ratifying the new contract), cargo delays on the West Coast should end too, right?

Wrong.

And delays are happening at ports on the East Coast as well as the West Coast.

What is the problem that is so costly for U.S. ports and international shippers?

The answer to that question can be summed up with the top international shipping buzzwords of the last few years.

Knowing these buzzwords will not only give you an overview of what is happening in international shipping right now, but also make you look cool and sound well-informed at shipping or economy parties. Those are the best parties, right?

We start with the biggest international shipping buzzword of this last year:

Buzzword #1: Congestion

If you’re a regular reader of Universal Cargo Management’s blog, you’ve read this word many times over the last year. In fact, if you keep up on international shipping news in general, especially as it pertains to U.S. ports, shippers, and the country’s economy, you’ve been hearing this word a great deal.

Congestion, congestion, congestion. Now you’ve seen it three more times.

Congestion is what’s happening at U.S. ports and it has been especially bad at West Coast ports during the labor strife of the ILWU contract negotiations.

Many believe the labor slowdowns and mini lockouts during the ILWU contract negotiations were the cause of the congestion at West Coast ports. They’re wrong. Bitter negotiations between the ILWU and PMA did not cause the congestion on the West Coast, they merely made it much, much worse.

What caused West Coast port congestion? The same thing causing congestion at many ports on the East Coast. While there are many factors causing congestion, the biggest factor is concentrated numbers of shipping containers arriving at the ports at once.

That brings us to last year’s top international shipping buzzword.

Buzzword #2: Alliances

We’re not talking about just any alliances here. We’re talking about carrier alliances.

Big shipping companies known as carriers run shipping lines that carry ocean freight shipping containers across the seas from one country to another.

Unfortunately for these shipping companies, they’ve struggled in recent years to make a profit. One of the ways carriers have sought to change their money-losing ways is by forming operational alliances with other shipping companies for transporting cargo across shipping lanes.

This presents a great excuse for me to bust out my Carrier Craziness Bracket to show how many carriers have joined together in alliances.

Carrier Alliances Adding to Congestion Problem for Ports & Shippers

On the outside of the Carrier Craziness Bracket, carriers involved in alliances are listed. They are then connected to the carriers with which they’ve formed alliances.

The big thing to take away from the Carrier Craziness Bracket is that a lot of carriers have formed alliances.

How does this cause congestion?

The way these alliances work together is by filling jointly operated ships with cargo. This way, ships that are fully loaded with shipping containers, or as fully loaded as the carriers can manage, arrive at ports for all those shipping containers to be unloaded at once.

But these as fully loaded as possible ships are not just any ships. That’s right, this brings us to the top international shipping buzzword from a couple years ago (but still a very pertinent internationsl shipping buzzword today)…

Buzzword #3: Megaships

The container ships arriving at ports are much larger than the container ships of years past.

An international shipping trend started happening in the years leading up to now where carriers ordered huge ships known as megaships to be built and delivered. In the last couple years, megaships have been hitting the waters and changing the international shipping scene.

The Wall Street Journal likes to point out that many of these megaships would be taller than the Empire State Building if stood on end.

Carrier alliances work together to fill up megaships that then arrive at U.S. ports which are not actually prepared to effectively and efficiently handle that kind of container volume at once.

A recent Wall Street Journal article shares the kinds of shipping container numbers a single ship can deliver to West Coast and East Coast ports in the U.S.:

West Coast ports already receive megaships bearing as many as 14,000 containers traveling from Asia across the Pacific Ocean, while East Coast ones are receiving 10,000-container vessels from Asia through the Suez Canal. That volume will only grow when expansion of the Panama Canal is completed next year. The widened, deeper canal will allow ships carrying as many as 13,000 containers to travel en route to the East Coast, compared with ships hauling 5,000 containers today.

Congestion will continue as carrier alliances continue to fill megaships and deliver larger quantities of shipping containers to U.S. ports than the ports are able to handle.

U.S. ports are working on improving their infrastructure to handle these megaships, but face budgetary problems, unions resisting mechanization, and space shortages just to list a few of the challenges.

Of course, how the ports can change to keep up with modern international shipping and what they’re actually doing to fight congestion caused by carrier alliances delivering megaships full of shipping containers is a blog for another day.

In the meantime, shippers can expect delays to continue at U.S. ports.

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Ask UCM: Can People Travel As Passengers On Cargo Ships? (w/ Videos) https://www.universalcargo.com/ask-ucm-can-people-travel-as-passengers-on-cargo-ships-w-videos/ https://www.universalcargo.com/ask-ucm-can-people-travel-as-passengers-on-cargo-ships-w-videos/#comments Mon, 04 May 2015 20:32:26 +0000 https://www.universalcargo.com/?p=7465 When we asked last week what you–shippers, our blog readers, our social media followers, or general internet perusers–would like to read about in Universal Cargo Management’s international shipping blog, Matthew Matuse answered our question with a very interesting question of his own. “Is it still possible for people to travel as passengers on cargo ships?” […]

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When we asked last week what you--shippers, our blog readers, our social media followers, or general internet perusers--would like to read about in Universal Cargo Management’s international shipping blog, Matthew Matuse answered our question with a very interesting question of his own.

“Is it still possible for people to travel as passengers on cargo ships?” Mr. Matuse replied.

Ask UCM Passengers on Cargo Ships resized 600This question is not asked of us frequently enough to land a spot in our FAQ section, but it is a relevant enough question to international shipping to be worthy of a blog.

Plus, we take your blog suggestions very seriously. That’s why we ask what you want to read about in our international shipping blog each week, after all.

The simple answer to the question is yes.

In fact, here’s a Youtube video from MrMF22 chronicling his trip across the ocean as a passenger on a cargo container ship.

Here’s an excellent video about international shipping from the TED Talks series. Rose George, the speaker, took passage on the Maersk Kendal to learn about ocean freight shipping on a container ship.

YouTube Video

Both of these videos feature a person who was a passenger on a container ship several years ago now. And Mr. Matuse knew people used to be able to take passage on cargo ships; his question was is it still possible for people to travel as passengers on cargo ships.

Being a passenger on a cargo ship is not the most commonly done thing; however, that does not mean it is not still done.

Perhaps it makes shippers nervous to know that passengers may be on a ship that is importing or exporting their goods. Don’t worry, it is extremely unlikely that such a passenger would be able to manage tampering with any of the shipping containers onboard.

Of course, for peace of mind about your shipping containers of goods, you should always invest in cargo insurance to protect yourself from theft, damage, or any other unexpected event in the course of importing or exporting goods.

Back to being a passenger on a cargo ship. Why would people do it?

Why Travel By Cargo Ship?

There are a number of reasons I’ve seen for people to travel by cargo ship.

  • Education
  • Unique Experience
  • Quiet
  • Low Carbon Travel

Like Rose George in the video above, some people travel by cargo ship to learn more about the crucial industry that delivers 90% of the products you see at stores.

As mentioned before, not many people go out and travel by container ship, so doing so will give you a unique experience that you can tell friends and people you meet about. Some of us could really use interesting conversation topics for parties.

Travelling by cargo ship gives a passenger plenty of time to be on their own. If you don’t like crowds when travelling, this mode of transportation could be perfect for you. There aren’t tons of other passengers around to bother you. Read, relax, contemplate life… You’re free to do this all without interruption on a container ship.

While ocean carriers are getting better and better at reducing carbon emissions in cargo shipping, what really makes being a passenger on a container ship a low carbon way to travel is that these ships are going whether there are any passengers or not. So your addition to carbon emissions is zero in this mode of travel.

UCM Does Not Book Cargo Ship Passengers

It is important to note that we do not arrange passengers to travel on container ships here at Universal Cargo Management. We arrange for your cargo to be shipped internationally. People are not cargo.

In fact, we’re so dedicated to that last statement that we actively support organizations like CAST, ZOE Children’s Homes, and International Justice Mission, which fight human trafficking. You can find out more about these organizations and others we support on our Mission Statement & Charitable Giving page.

While our business is shipping goods, there are companies whose business is booking passengers on cargo ships.

5 Cargo Ship Passage Companies

We’ve saved you the trouble of a Google search by listing five companies with their websites that specialize in booking passengers on cargo ships.

It should be noted that while we are listing these companies here, Universal Cargo Management does not actually endorse any of these companies. We have no knowledge of how good these companies are as our business is international shipping.

Maris Freighter Cruise and Travel Club

https://www.freightercruises.com/

Flightless Travel .Com

www.flightlesstravel.com/plan/cargo-ships/

Maritime Cruises

http://www.maritime-cruises.com/

Freighter Voyages

http://www.cargoshipvoyages.com/

A la Carte Freighter Travel

http://www.freighter-travel.com

Get Blogs On Your Topics

If you have a question or international shipping blog topic, please share it with us. We love posting blogs that you want to read. You can suggest topics in the comments section below or by hitting us up on our social media pages.

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Shocking to Incredible: 3 Top International Shipping News Headlines https://www.universalcargo.com/shocking-to-incredible-3-top-international-shipping-news-headlines/ https://www.universalcargo.com/shocking-to-incredible-3-top-international-shipping-news-headlines/#respond Thu, 30 Apr 2015 00:02:19 +0000 https://www.universalcargo.com/?p=7540 Iran Seizes Maersk Container Ship at Gunpoint Iran detained a Maersk container ship at gunpoint this week, complicating already delicate international relations. Helene Cooper and Danny Hakim reported in the New York Times: The ship, the Maersk Tigris, with 24 crew members, was intercepted by Islamic Revolutionary Guards Corps patrol boats on Tuesday morning while traveling through the Strait […]

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Iran Seizes Maersk Container Ship at Gunpoint

Iran detained a Maersk container ship at gunpoint this week, complicating already delicate international relations.

Container Ship Seized by Iran resized 600 reported in the New York Times:

The ship, the Maersk Tigris, with 24 crew members, was intercepted by Islamic Revolutionary Guards Corps patrol boats on Tuesday morning while traveling through the Strait of Hormuz, a Pentagon official said. The Iranian forces fired shots across the ship’s bow, the official said, after its captain declined an order by the forces to divert farther into Iranian waters.

The official said the ship was traveling through “an internationally recognized maritime route.” After being fired on, it issued a distress call, prompting the United States Navy to direct a destroyer, the Farragut, to the area and to put aircraft on standby to monitor the situation.

Maersk has demanded its container ship and crew be released, but Iran refuses to do so until a legal debt is settled.

The Embassy of the Islamic Republic of Iran in Copenhagen said in a release:

The action by Iranian authorities has been based on the laws and regulations of the Islamic Republic of Iran and in accordance with international laws and norms.

Naturally the ship will be released after settlements of debts by Mærsk Shipping Line and will be allowed to sail to its final destination.

While Iran says the taking of the container ship and its crew is in accordance with international laws and norms, Cor Radings, a spokesman for the charter company that owns and operates the Maersk ship “called the episode a ‘very unusual event so far, and something we have not seen before,’ according to a New York Times article.

UPDATE: IRAN HAS RELEASED THE MAERSK TIGRIS WITH ITS 24 CREW MEMBERS IN GOOD CONDITION.

BBC News reported:

Maersk, the world’s largest container shipping company, had been ordered by an Iranian court to pay $3.6m (3.2m euros) to Pars Oil Products for cargo that allegedly had not been delivered.

Permission for the release of the ship was given after the Iranian authorities received guarantees “for the enforcement of the judicial decision”, the country’s Ports and Shipping Organisation said.

Rickmers said in a statement that Maersk had “put up a security in relation to the underlying court case”.

Continued reading on Iran’s seizure of the Maersk container ship:

Iran Seizure of Maersk Container Ship Tied to Old Cargo Dispute

Maersk insists on release of ship and crew seized by Iran

Maersk Tigris: Iran releases seized cargo ship

Truckers Strike Calls for Government Action

The Truckers Strike at the Ports of Los Angeles and Long Beach over wage theft through misclassification of drivers as independent contractors continues with mixed results.

truck drivers strike shipping headlineThe Ports of Los Angeles and Long Beach say the strike is not causing an interruption to operations.

Striking truck drivers, in association with Teamsters, are calling for the Mayors of Los Angeles and Long Beach to get involved as they claim the four companies the drivers work for are breaking labor laws at the cities’ ports.

While progress has been reached with some trucking companies regarding driver labor, other drayage companies refuse to listen to their drivers’ demands.

Here’s how some of the drayage and logistic companies have responded to this issue according to Reuters:

One company, Shippers Transport Express, agreed to formally hire its drivers and negotiated a union contract with them last year. Another, Green Fleet Systems, reached a “labor peace agreement” with the Teamsters this week.

But Pacer insisted after losing a misclassification case in January that such claims are without merit and vowed to appeal.

For more on the truckers strike, check out out Tuesday’s blog: Truckers Strike at the Ports of Los Angeles & Long Beach.

Container Ship Backlog Cleared at Ports of Los Angeles & Long Beach

The Ports of Los Angeles and Long Beach have made incredible and very visible headway on the congestion that has plagued the ports.

In December, the number of container ships sitting at anchor waiting to birth at the Ports of Los Angeles and Long Beach was in the twenties. In February, over 30 ships were backlogged, unable to get in and get their cargo unloaded at the ports.

Now, when you look out at the ocean past the docks of the Ports of Los Angeles and Long Beach, you’ll see 0 ships anchored and unable to get birthed.

That’s right, ZERO!

Container Ship Backlog Cleared Port of LA resized 600

That’s pretty impressive considering as recent as March 14th, there were still 28 ships at anchor, unable to birth.

In an American Shipper article, the Port of Long Beach boasts about the improvement:

“This morning it has been fluctuating between zero and one containerships,” said Jon Slangerup, the chief executive officer of the Port of Long Beach said Wednesday morning at the port’s annual peak season forecast event. “Ships are now coming in and moving immediately to berth, which is a tremendous improvement in just a few weeks.”

Fluctuating between zero and one containerships, Mr. Slangerup? Does that mean there’s half of a ship anchored out there?

Anyway, great progress is being made in clearing the congestion at the Ports of Los Angeles and Long Beach since the contract negotiations between the International Longshore & Warehouse Union and the Pacific Maritime Association finally concluded.

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Truckers Strike at the Ports of Los Angeles & Long Beach https://www.universalcargo.com/truckers-strike-at-the-ports-of-los-angeles-long-beach/ https://www.universalcargo.com/truckers-strike-at-the-ports-of-los-angeles-long-beach/#respond Tue, 28 Apr 2015 22:45:45 +0000 https://www.universalcargo.com/?p=7628 Just when the Ports of Los Angeles and Long Beach seemed to be making headway in the major congestion problems there, another issue pops up which threatens the delivery of shippers’ cargo from the nation’s busiest sea port. Truckers went on strike Monday against drayage companies at the Ports of Los Angeles and Long Beach. […]

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Truckers Strike Los Angeles Long Beach PortsJust when the Ports of Los Angeles and Long Beach seemed to be making headway in the major congestion problems there, another issue pops up which threatens the delivery of shippers’ cargo from the nation’s busiest sea port.

Truckers went on strike Monday against drayage companies at the Ports of Los Angeles and Long Beach.

Once again, truckers are picketing Pacer Cartage, Harbor Rail Transport (HRT), Pac 9 Transportation, and Intermodal Bridge Transport (IBT).

According to NBC Los Angeles, about 200 of the estimated 500 drivers associated with the companies were on picket lines Monday that extended from the four drayage and logistic companies to Los Angeles and Long Beach port terminals.

Independent Contractors Vs. Employees

Truckers at these four logistics and drayage companies are classified as independent contractors instead of employees. The truckers say this is a misclassification and is resulting in stolen wages. Being reclassified as permanent employees would give the truckers better pay, workplace protections, and benefits.

It’s hard to argue that the truckers should be deemed independent contractors.

KPCC quoted the a spokeswoman from the strike:

“[The truckers] do not set their own rates, and they can’t refuse loads,” says Barbara Maynard, spokeswoman for the organizing effort. “They also cannot go and work for other companies. They cannot take the truck that they are leasing, drive it over to another company and work for them if that company is willing to pay a higher rate.”

While the fight is obviously not over, truckers have already won some battles in this misclassification fight.

Back in February, we posted a blog titled International Shipping Fought the Law & the Law Won which featured truckers winning a lawsuit against one of the four drayage and logistics companies truckers are striking against.

Steve Gorman reported in KFGO that seven truckers won a $2 million claim against Pacer Cartage for classifying them as independent contractors and charging the truckers to lease the international shipping company’s trucks.

In a decision with implications for hundreds of companies and thousands of truckers in Southern California alone, a San Diego County Superior Court judge held that the seven plaintiffs should have been defined as employees of Pacer Cartage under California’s labor law, not as independent owner-operators.

Judge Jay Bloom ruled the seven drivers, who were Hispanic and spoke little English, were entitled to reimbursement for the money California-based Pacer deducted from their wages for the truck leases, insurance, vehicle maintenance, fuel and other out-of-pocket expenses.

Port Terminals Continue Operating Despite Strike

There is good news for shippers in that so far, the truckers strike does not appear to be causing any major disruptions at the Ports of Los Angeles and Long Beach.

KPCC also reported a quote from the perspective of the ports on the truck drivers strike:

Jon Slangerup, CEO of the Port of Long Beach, said the truck drivers’ action would not [affect] operations at the port.

“The Port of Long Beach does not employ or contract with the drivers involved in this informational action, but we respect the rights of the drivers to picket,” Slangerup said. “Our Harbor Patrol officers and Long Beach Police are monitoring the situation and they are keeping the roadways accessible to all who want to do business at the Port.

“Dockworkers have reported to work and truckers have been able to enter and exit the affected terminals without delay. We do not expect that there will be any adverse impact to Port terminals or our ability to continue the outstanding progress that everyone has made in recent weeks to clear the congestion backlog and return to normal operations.”

An article today from the L.A. Times on the second day of the strike reflects the words of Slangerup above with, “L.A. and Long Beach port officials said Tuesday morning there was no noticeable impact to cargo flow.”

Dockworkers have continued going to work, but it is possible they could decide to honor the picket lines from the truckers. However, when the truck drivers went on strike before and the ILWU walked off the job in support, they were ordered back to work within an hour.

Previous Posts on Truckers Strikes

As mentioned above, this is not the first time truckers have gone on strike against Pacer Cartage, HRT, Pac 9 Transportation, and IBT at the Ports of Los Angeles and Long Beach.

To catch up on the history of their battle, check out these previous blog posts:

Shipping News Alert: Truckers Started 2-Day Strike Today

Strike at Los Angeles & Long Beach Ports, But Not By ILWU

ILWU Joins Truckers Strike?

International Shipping Fought the Law & the Law Won

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3 Actions by East Coast Ports to Avoid West-Coast-Like Congestion https://www.universalcargo.com/3-actions-by-east-coast-ports-to-avoid-west-coast-like-congestion/ https://www.universalcargo.com/3-actions-by-east-coast-ports-to-avoid-west-coast-like-congestion/#respond Thu, 16 Apr 2015 21:41:30 +0000 https://www.universalcargo.com/?p=7583 East Coast ports saw a big increase in cargo shipments as shippers diverted their shipping containers from West Coast ports due to severe congestion during the long International Longshore & Warehouse Union (ILWU) contract negotiations with the Pacific Maritime Association (PMA). Of course, East Coast ports want to hold on to their gain in market […]

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East Coast Port Actions to Move CargoEast Coast ports saw a big increase in cargo shipments as shippers diverted their shipping containers from West Coast ports due to severe congestion during the long International Longshore & Warehouse Union (ILWU) contract negotiations with the Pacific Maritime Association (PMA).

Of course, East Coast ports want to hold on to their gain in market share, but recent East Coast port congestion at major ports like that of New York-New Jersey and Virginia might be a hindrance.

Congestion on the East Coast is certainly not hitting the levels seen on the West Coast, but it is enough to cause delays and demurrage fees to cost shippers. And freight rates from China and other Asian countries are already higher to the East Coast than to the West Coast.

So East Coast ports are taking action to fight congestion and maintain the higher confidence shippers have in them over West Coast ports.

Here are three actions taken by East Coast ports, and the Port of New York-New Jersey in particular:

Extended Gate Hours

In the last blog we talked about the congestion at the Port of New York and New Jersey. To battle it and get the cargo out, terminals at the port have extended gate hours.

Last month, JOC reported:

Most container terminals in the Port of New York and New Jersey will keep truck gates open Tuesday — a longshoremen’s union holiday — as they struggle to clear backlogs caused by high volume and bunched ship arrivals.

Several New York-New Jersey terminals kept gates open last week for extended hours. GCT-Global’s gates were open until 9 p.m. through the week and during daytime hours Saturday.

Hellenic Shipping News reported today, April 16th:

A spokesperson from the port authority [of New York and New Jersey] told Port Strategy that the terminal operators have extended gate hours and that Global Terminal has announced that it will, for now, remain open until 6pm each day to accommodate more pickups.

Keeping the gates open longer is a simple way for the terminals to get more cargo moved in a day.

Truck Management Systems

The last blog highlighted how surges of trucks hitting port terminals all at once, especially in the morning when gates first open, is a cause of congestion.

Lines of trucks miles long trying to get into the Port of New York and New Jersey is a sight the terminal GCT Bayonne wants to put an end to.

Commuters would like to see an end to the traffic jams and gridlock that go along with the lines of trucks too.

GCT Bayonne is doing more than wishful thinking. They’re working on launching a truck management system this year where trucks will have appointments for entering the New York-New Jersey port terminal to pick up or drop off cargo.

Back in December, the Journal of Commerce shared an article on the terminal’s plan to launch a truck appointment system. Here’s a small excerpt:

“We’re going to put an appointment system in place, and we’re going to work out the details. Many, many decisions have to be made and questions must be answered, but that is our target right now,” said Richard Ceci, vice president, information technology at GCT USA, operator of GCT Bayonne, previously known as Global Terminal.

“It will require a lot of work, a lot of cooperation, a lot of patience, but this is a paradigm shift,” Ceci said. “In five years, this industry is going to wonder how in the world it ever managed to operate without trucks coming into the terminals with appointments.”

The Port of Virginia, which has struggled to clear backlog cargo due to severe winter weather this year along with the increase in cargo, is also planning to launch a truck appointment system this year.

An industry-wide performance task force recommended the creation of an appointment system for trucks at the ports. East Coast ports are taking the recommendation seriously.

If successful, the truck management systems could help significantly reduce port congestion.

Early Labor Negotiations

As was proved once again by the ILWU and PMA negotiations on the West Coast, every time the coastal contract for the longshoremen expires, shippers suffer through delays in cargo movement.

Longshore unions enact slowdowns to gain leverage on employers and employers use shift cuts and lockouts to put pressure on the union.

The slowdowns on the West Coast were a major factor in the congestion that drove shippers to the East Coast. Shortly after cargo started shifting from the West Coast, East Coast made a move to increase shipper confidence in their ports.

The United States Maritime Alliance (USMX) and International Longshoremen’s Association (ILA) agreed to open discussions on a long-term contract agreement three years before the current contract expires.

While this doesn’t exactly reduce current congestion issues, the move does set up the East Coast to avoid major congestion that could be caused by slowdowns, strikes, or lockouts because dockworkers and employers can’t agree on a new contract when the previous one expires like what just happened on the West Coast.

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What’s Causing Congestion at the Port of New York & New Jersey? https://www.universalcargo.com/whats-causing-congestion-at-the-port-of-new-york-new-jersey/ https://www.universalcargo.com/whats-causing-congestion-at-the-port-of-new-york-new-jersey/#respond Tue, 14 Apr 2015 18:51:52 +0000 https://www.universalcargo.com/?p=7422 The West Coast does not hold a monopoly on port congestion. Congestion problems on the West Coast, especially at the Ports of Los Angeles and Long Beach, have been extremely costly for truckers, shippers, and others in the international shipping industry over the last year. Now, East Coast port congestion is costing shippers and truckers […]

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The West Coast does not hold a monopoly on port congestion.

East Coast Port Congestion CauseCongestion problems on the West Coast, especially at the Ports of Los Angeles and Long Beach, have been extremely costly for truckers, shippers, and others in the international shipping industry over the last year.

Now, East Coast port congestion is costing shippers and truckers money too.

Many shippers have diverted cargo from the West Coast to the East Coast after congestion reached unacceptable levels during the contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA).

Unfortunately, congestion seems to be following the cargo.

Congestion at the Port of New York and New Jersey has gotten so bad that the Journal of Commerce (JOC) reported lines of trucks from the port are creating traffic jams and gridlock that stretches miles:

Backups outside GCT Bayonne on Thursday were so severe that the New Jersey Turnpike used its electronic signs to warn of “marine terminal delays,” and a port authority e-mail asked truckers to temporarily avoid the terminal because of “extreme traffic conditions.”

At mid-morning, the traffic jam outside GCT Bayonne stretched six miles onto the turnpike. Also gridlocked was State Route 440, a surface-level highway that provides an alternate route to the Bayonne facility, which until recently was known as Global Terminal.

So the natural question is…

What’s the Cause of Congestion at the Port of New York-New Jersey?

The blame for the congestion is getting spread around a bit. So let’s look at some of the common places people are trying to lay blame.

Is the Union Orchestrating Slowdowns?

Slowdowns are a commonly used tactic throughout the history of longshoremen unions to protest or gain leverage against employers at the ports.

The ILWU made a bad congestion situation much worse on the West Coast by orchestrating slowdowns during the long contract negotiations with the PMA. So when news hit in March that the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) would start contract talks now, instead of waiting three years for the current contract to expire, and port congestion followed, many pointed a finger at the union.

However, union slowdowns are not the cause of the GCT Bayonne congestion at the Port of New York and New Jersey.

The JOC article quoted above shared that President of GCT USA, John Atkins said “…there have been no longshore labor slowdowns.”

It would be very surprising if the employers at the ports were trying to cover up labor slowdowns.

Is Increased Cargo Causing the Congestion?

As already mentioned, the terrible congestion situation at West Coast ports caused cargo to be diverted to the East Coast. Larger container ships bringing more cargo at once along with high cargo volume peaks at West Coast ports were among the original causes of West Coast Congestion. This seems like a logical cause of congestion at New York-New Jersey.

Another article from the JOC provides a good overview of how East Coast ports saw increased cargo that would normally ship through the West Coast.

East Coast containerized imports in February almost reached parity with West Coast imports, demonstrating the profound shift in trade that has resulted from port congestion and work slowdowns by the International Longshore and Warehouse Union at West Coast ports….

In November, imports at West Coast ports increased 2 percent while imports at East Coast ports increased 13 percent over November 2013. In December, West Coast imports increased 4 percent year-over-year while East Coast imports increased 15 percent.

The real damage to West Coast ports from the work slowdowns and severe congestion came into stark focus in the first two months of this year. West Coast imports declined 24 percent in January from January 2014, but imports on the East Coast increased 9 percent. West Coast imports in February were down 7 percent year-over-year, while East Coast imports increased 14 percent.

Carriers have been sending more ships and larger ships to the East Coast ports in response to the displeasure of congestion at West Coast ports.

Certainly, all this increased cargo shipped through the East Coast ports, especially the busiest East Coast port–New York-New Jersey, is the cause of the congestion and truck backups bleeding out of GCT Bayonne.

Truckers and trucker companies are grumbling that the East Coast ports have taken on more volume cargo than they can handle.

However, John Atkins also says in the first quoted JOC article that the congestion is not caused by the volume and offers another cause:

John Atkins, president of GCT USA, which operates the Bayonne terminal and GCT-New York on Staten Island, said the cause of the delays can’t be blamed on volume. He said traffic through the Bayonne terminal’s truck gates has been at or below normal levels.

Atkins said GCT Bayonne’s semi-automated yard cranes, installed last year as part of a $325 million modernization and expansion, are performing smoothly, and that there have been no longshore labor slowdowns.

He said much of the congestion can be blamed on truck volume surges that create long lines at gates and congestion inside terminals.

Is Trucker Scheduling to Blame for Congestion?

Lines of trucks show up before port terminals open. So many trucks showing up at once is what causes the congestion that is happening at the Port of New York-New Jersey’s Bayonne Terminal according to Atkins in the JOC article:

Atkins said trucks have been arriving “earlier and earlier” before gates open, creating miles-long queues and an early-morning surge that slows terminal operations. He said that when Global cleared its last trucks Wednesday at 10:30 p.m., drivers already were queueing up for today’s gate opening.

“It defies logic,” he said. “We’re fully utilized, so there will be some lines. But a lot of this is because of the unmetered volume coming in all at once.”

This week’s traffic jams outside GCT Bayonne prompted port authority police to reinstate a ban on truck queues outside the terminal before 5:30 a.m. The announcement came after the terminal appealed for truckers to schedule arrivals “more regularly throughout the regular gate hours” of 6 a.m. to 6 p.m.

Large numbers of trucks hitting the port terminals all at once certainly is a problem. But it is also a more complex problem than simply truckers all scheduling their pickups at the same time. However, that is a blog for another time.

The number of trucks hitting the port at once is also certainly made larger by the increased volume of cargo going through the port.

Conclusion

The largest factors in the congestion happening at East Coast ports right now is an increase in cargo volume combined with surges of trucks hitting the ports to pick up and deliver cargo at the same time.

The East Coast congestion has not reached the kind of terrible levels experienced on the West Coast. Largely, this is due to not facing the same chassis problems of the West Coast or a union orchestrating slowdowns to create leverage in contract negotiations.

The biggest logistical issue for the port will be managing the trucking movement in and out of the terminals.

In the next blog, we’ll look at some of the solutions being explored and utilized to help the situation.

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International Shipping Definitions Vs. Urban Dictionary Definitions https://www.universalcargo.com/international-shipping-definitions-vs-urban-dictionary-definitions/ https://www.universalcargo.com/international-shipping-definitions-vs-urban-dictionary-definitions/#respond Thu, 09 Apr 2015 23:24:53 +0000 https://www.universalcargo.com/?p=7475 And now for something completely different… Let’s take a break from news about ports, carrier alliances, ILWU contracts, and other international shipping news stories to be, as would make Monty Python proud, silly. It’s no secret that most people find international shipping to be a boring topic. At the very least, most people aren’t overly […]

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And now for something completely different…

international shipping vs. urban definitions Harry Let’s take a break from news about ports, carrier alliances, ILWU contracts, and other international shipping news stories to be, as would make Monty Python proud, silly.

It’s no secret that most people find international shipping to be a boring topic. At the very least, most people aren’t overly interested in international shipping and don’t know much about it.

Some might even argue that those who are into international shipping are not the most interesting people. Don’t worry, Universal Cargo Management does not agree with this line of reasoning.

However, we thought it might be fun to see how “more interesting people” define some important terms of international shipping.

So, with the help of UrbanDictionary.com, let’s compare international shipping definitions with their urban definition counterparts.

Let’s start with something simple:

shipping

We all know that shipping is the transport of goods, often by an ocean cargo carrier but also includes by air, truck, and rail. Well, not so fast.

Urban Dictionary’s definition of shipping:

A term used to describe fan fictions that take previously created characters and put them as a pair. It usually refers to romantic relationships, but it can refer platonic [sic] ones as well. (Just think of “shipping” as short for “relationSHIP”.)

It generally uses the initials of the characters shipped or a combination of the names, though this is not a rule.

AMshipping
AM-shipping
AM shipping
Ash & Misty shipping
Ashistyshipping

My wife already knew this definition and adds that it also refers to wishing for a romantic relationship between two fictional characters (other Urban Dictionary definitions agree).

For example, my wife is shipping Samwise and Frodo from Lord of the Rings, Joey and Chandler from Friends, and Harry Potter and Draco Malfoy from some series of books or maybe movies. What’s with all the man on man love, honey?

Freight

You might have thought freight was the cargo you are shipping, but Urban Dictionary enlightens us to its true meaning.

Urban Dictionary’s definition of freight:

a women [sic] that has a nice round butt.

That girl has some freight going on.

Look, she is pushing some freight.

Freights

We wouldn’t normally have an ‘s’ at the end of the word freight in international shipping, but to be fair to Urban Dictionary, its definition of this word shows that it does seem to know the international shipping version of freight.

Urban Dictionary’s definition of freights:

slang or poor english for “freight” a non-specific name for an undetermined commodity. Typically used when knowledge of proper transportation terminology is unknown.

“These freights will not drop until tomorrow”

TEU

This is a term we use all the time in international shipping.

Logistics Glossary definition of TEU:

Twenty-foot equivalent unit. Method of measuring vessel load or capacity, in units of containers that are twenty feet long. A 40’ long container measures 2 TEUs.

Urban Dictionary’s definition of TEU:

TEU (Throw Em’ Up)

There’s often those times when tea-bagging a friend, or getting epic revenge on a dirty ex deserves some recognition. These are times when not one middle finger will suffice, but the almighty double.

Term coined by doublemiddle.com

This Idiot got me angry…So I TEU

But check this out. UrbanDictionary.com also knows what a TEU is in terms of international shipping and found a way to make it more interesting.

Urban Dictionary’s definition that merges with international shipping’s definition of TEU:

1. Twenty-foot Equivalent Unit. A shipping container 20 feet long, 8 feet high, and 8 1/2 feet wide, used all over the shipping industry (the standard size makes them very interchangeable and stackable).

2. A person who is so standard for the society that they live in that they resemble a TEU in terms of interchangeability and stackability.

1. He died after an accident with a crane and a TEU.

2. He canceled his vacation because his boss didn’t want him to go to Amsterdam… what a TEU!

Slot

Logistics Glossary definition of slot:

A place for a container onboard a container ship; typically, one TEU fits in a slot.

Now, Urban Dictionary has many definitions for this word. Most I wouldn’t post here because they are a bit misogynistic. However, the top definition is okay to include with just a tiny bit of censoring.

Urban Dictionary’s definition of slot:

slang used in the British armed forces meaning to kill or shoot

Soldier 1: [censored] that was bad, that wanker nearly slotted me!
soldier 2: aye, well if i see him again ill slot the [censored] for sure.

That’s all the terms we have time for today; however, if you enjoyed this, we’ll do it more. Let us know what you think in the comments section below.

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One More Step for ILWU to Ratify New Contract Agreement https://www.universalcargo.com/one-more-step-for-ilwu-to-ratify-new-contract-agreement/ https://www.universalcargo.com/one-more-step-for-ilwu-to-ratify-new-contract-agreement/#respond Tue, 07 Apr 2015 20:09:52 +0000 https://www.universalcargo.com/?p=7510 All this West Coast labor contract ugliness is almost behind us. Maybe. Last week, the International Longshore & Warehouse Union (ILWU) held a Coast Longshore Caucus in San Francisco with 90 delegates reviewing the tentative agreement that was reached February 20th between the ILWU and Pacific Maritime Association (PMA). After going through the proposed agreement line-by-line, […]

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ILWU Voting on Agreement with PMAAll this West Coast labor contract ugliness is almost behind us. Maybe.

Last week, the International Longshore & Warehouse Union (ILWU) held a Coast Longshore Caucus in San Francisco with 90 delegates reviewing the tentative agreement that was reached February 20th between the ILWU and Pacific Maritime Association (PMA).

After going through the proposed agreement line-by-line, the delegates voted by 78% to recommend it to the rank and file, according to an ILWU release.

Now, copies of the agreement get sent to the rank and file union members, who will discuss the possible new contract at local union meetings. The delegates from the Coast Longshore Caucus are expected to be involved in these local union discussions. Then the union will hold a secret ballot vote on the ratification of the tentative agreement into contract.

“This agreement required ten months of negotiations – the longest in recent history,” said ILWU International President Bob McEllrath, “but we secured a tentative agreement to maintain good jobs for dockworkers, families and communities from San Diego to Bellingham. Longshore men and women on the docks will now have the final and most important say in the process.”

The length of the contract negotiations, mentioned by ILWU President Bob McEllrath in the ILWU press release excerpt above, was certainly felt by shippers. Port congestion reached unbearable levels as the ILWU orchestrated slowdowns and the PMA effected mini lockouts by the end of the contentious negotiations.

By the time the rank and file union members have their “final and most important say in the process”, it will have taken over a year to reach a new contract between the ILWU and PMA.

Here’s a quick timeline of these contract negotiations:

  • MAY 12th, 2014 – Contract Talks Begin
  • JULY 1st, 2014 – ILWU Contract Expires
  • FEBRUARY 20th, 2015 – Tentative Agreement Reached
  • APRIL 3rd, 2015 – Delegates Vote to Recommend Agreement
  • MAY 22nd, 2015 – Final Tally of Union Vote to Ratify or Reject Contract

Thankfully, since the end of the negotiations, port productivity at West Coast ports has increased and progress has been made in clearing the backlog of cargo containers at the ports.

While it is expected that the union will ratify the tentative agreement, there are those within the union who are against it.

We already posted an article in Universal Cargo Management’s blog about a militant ILWU faction that opposes ratification of the new contract. That group, the Transport Workers Solidarity Committee, held a rally in San Francisco during the Coast Longshore Caucus to speak against the tentative agreement.

“Left unchecked, it will gut ILWU’s coast-wide power and bury the last militant union in the U.S.,” the Transport Workers Solidarity Committee says about the contract on their webpage promoting the March 31st rally.

SocialistWorker.org posted an article on how the new agreement will weaken the ILWU if it is ratified. Here’s a highlight from that article:

The details of the agreement are still being analyzed and discussed by ILWU members, but if the outlines that have emerged so far are correct, the leaders of the union came up short in critical areas. There are definite or possible concessions on arbitration and outsourcing that put future union jobs at risk, and no apparent progress in dealing with the shipping bosses’ use of new technology to undermine union power.

Overall, the [tentative agreement] appears to continue a pattern for the ILWU leadership: Accept wage and benefit increases for current members at the expense of concessions that will undermine conditions for future dockworkers.

It seems to me that union actions to orchestrate slowdowns at the ports is a much bigger case of putting pressure on the PMA to get wage and benefit increases now at the expense of undermining future dockworker jobs.

With strikes and slowdowns, the ILWU has the ability to basically hold West Coast ports hostage in order to increase their negotiation leverage. When this happens, shippers suffer. Imports don’t arrive that are needed for production or store shelves. Exports don’t get out, which undermines foreign business partnerships.

After the last year of congestion being aggravated to extremely costly levels, many shippers have lost trust in West Coast ports and are taking their cargo elsewhere when possible.

The results are losses to the economy and endangered jobs not just outside the docks, but for would-be future dockworkers.

If the rank and file of the union votes against ratifying the tentative agreement, this whole ugly process drags on. Luckily, that is not expected to happen, especially now that the ILWU delegates have voted to move forward with a recommendation of the agreement.

Click Here for Free Freight Rate Pricing

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West Coast Port Congestion Slowly Getting Better https://www.universalcargo.com/west-coast-port-congestion-slowly-getting-better/ https://www.universalcargo.com/west-coast-port-congestion-slowly-getting-better/#respond Thu, 02 Apr 2015 20:56:09 +0000 https://www.universalcargo.com/?p=7553 The congestion at West Coast ports is getting better. Slowly. Brief Summary of Port Congestion Probably the hardest hit ports by congestion are the Southern Californian Ports of Los Angeles and Long Beach. Over 40 percent of U.S. imports enter the country through the Ports of Los Angeles and Long Beach, but shippers had trouble […]

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The congestion at West Coast ports is getting better. Slowly.

Brief Summary of Port Congestion

Port Congestion Slowly Getting BetterProbably the hardest hit ports by congestion are the Southern Californian Ports of Los Angeles and Long Beach.

Over 40 percent of U.S. imports enter the country through the Ports of Los Angeles and Long Beach, but shippers had trouble receiving their cargo imports because of the congestion caused in large part by bigger ships calling on the ports and chassis being unavailable for the moving of shipping containers.

For more causes of the port congestion, check out our blog: 5 Factors Causing Congestion at the Ports of L.A. and Long Beach.

Not only were imports failing to reach shippers, exports weren’t getting out of the ports either. So U.S. produce rotted on the docks and Christmas inventories didn’t make it to store shelves. And that’s just a small piece of the damage done to businesses and people across the supply chain.

The congestion was made much, much worse by slowdowns during the nine-month-long, contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA).

On February 20th, a tentative contract agreement was reached between the ILWU and PMA which allowed the ports to focus on fixing the congestion problem.

Decreases Reached in Port Congestion

West Coast ports, and the Ports of Los Angeles and Long Beach in particular, have not yet returned to a “normal” level of cargo flow, but improvements have happened since the tentative labor agreement.

Steve Gorman reported the following in an April 1st article in Reuters:

Nine vessels stood idle outside the twin ports on Tuesday and Wednesday, down from the 31 stacked up at anchor during the height of the cargo crisis that reached the point of near gridlock in February, [Los Angeles port spokesman Paul] Sanfield said.

He said berths were normally available as soon as freighters arrived at the two ports, which together handle 43 percent of all containerized goods entering the United States.

Sanfield said the average time it took cargo ships to get in and out of the terminals declined to 7.6 days last week from 8.4 days in early March. Turnaround times usually average four to five days, he said.

Looking out past the docks and not seeing thirty ships waiting to get in and unloaded is nice. But that there is still a backup of close to ten ships does show that the ports have a decent ways to go in clearing the congestion and getting cargo flowing as it should be for shippers.

Los Angeles & Long Beach Ports Work Together

Perhaps the best sign that port congestion will be reduced in a meaningful and lasting way, at least in the Southern Californian ports, is that the Ports of Los Angeles and Long Beach are now working together to solve the problem.

The Port of Los Angeles announced in a press release on March 25th that it has started talks with the Port Long Beach to improve cargo flow.

The Federal Maritime Commission (FMC) agreed at the end of February “to allow the two ports to cooperate far more strategically on finding new ways to prevent congestion and cargo delays, improve the transportation network and enhance air quality,” the release says.

Such cooperation without the FMC’s approval might have run afoul of antitrust laws.

The release shares the following optimistic words about the ports’ cooperation:

“Through this working group, we will engage with our stakeholders to discuss issues and develop solutions for optimizing cargo flow through our ports,” said Port of Los Angeles Executive Director Gene Seroka. “Our ports, customers, labor force and supply chain partners are committed to taking this gateway to a new and higher level of performance, and we’ll accomplish this by working together.”

“Our shared goal is to optimize the performance of the trans-Pacific supply chain,” said Port of Long Beach Chief Executive Officer Jon Slangerup. “The San Pedro Bay has always been the fastest route between Asia and the U.S. and I’m confident we will find ways to significantly increase the velocity of goods movement and overall efficiency of our end-to-end system, thereby reinforcing our gateway as the No. 1 choice for shipments to and from Asia.”

The ports will discuss innovative approaches to improving the efficiency of marine terminal, trucking, rail and vessel operations. The ports also plan to discuss legislative advocacy, security enhancements, infrastructure, technology and environmental improvements related to supply chain optimization.

For more of what the Ports of Los Angeles and Long Beach are doing to fight congestion and get cargo moving more efficiently, check out our blog: 3 Things Happening to Get Shippers’ Cargo Moving at the LA & LB Ports.

Conclusion

There are still many weeks of recovery ahead to clear the congestion at West Coast ports, but progress is being made.

Many shippers have lost faith in West Coast ports’ ability to provide reliable service and have moved their cargo shipments to other ports where possible.

Longshore delegates are currently meeting in regard to ratifying the tentative agreement. If they decide against the contract, the ILWU and PMA would have to go back to the negotiating table and port congestion progress could halt or even move backwards.

While the union is expected to ratify the contract, there is some opposition within the ILWU:

Militant ILWU Group Opposes Ratification of New Contract

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Militant ILWU Group Opposes Ratification of New Contract https://www.universalcargo.com/militant-ilwu-group-opposes-ratification-of-new-contract/ https://www.universalcargo.com/militant-ilwu-group-opposes-ratification-of-new-contract/#respond Thu, 26 Mar 2015 20:31:34 +0000 https://www.universalcargo.com/?p=7549 The news of a tentative contract agreement being reached by the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) was music to shippers’ ears. Nine long months of contract negotiations turned contentious between the PMA and ILWU while shippers could only watch West Coast port congestion keep their imports and exports […]

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The news of a tentative contract agreement being reached by the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) was music to shippers’ ears.

Nine long months of contract negotiations turned contentious between the PMA and ILWU while shippers could only watch West Coast port congestion keep their imports and exports from reaching destination.

When the tentative contract agreement between the PMA and ILWU was announced, everyone assumed it would be ratified and go into effect. But there is a militant group from the ILWU that says not so fast!

The Transport Workers Solidarity Committee opposes the tentative agreement and is holding a rally on March 31st against ratifying the new contract.

March 31st is the Tuesday of the week that ILWU delegates will meet in San Francisco to evaluate the tentative contract agreement and decide if they will recommend approval of the contract.

The Transport Workers Solidarity Committee will hold their rally outside of the international headquarters of the ILWU on Franklin Street in San Francisco with the goal of convincing the delegates not to recommend approval.

ILWU members and delegates are invited to the rally.

If the ILWU delegates still recommend approving the new contract, expect the Transport Workers Solidarity Committee to work to sway the rank and file of the union to vote against the contract and force the ILWU and PMA back to the negotiation table.

After the tentative agreement was reached, I checked the pulse of ILWU’s satisfaction with the new contract by asking Local 54 Longshoreman, LRC, and PAC Chairman David Griffen if his fellow longshoremen seemed happy with the contract.

The longshoremen “seem very happy,” he replied.

ILWU Happy with Tentative Contract resized 600

From all the details that have been released about the new contract that the PMA and ILWU have tentatively agreed upon, it is hard to imagine how union members couldn’t be happy with it.

Bill Mongelluzzo shared the following contract details in a Journal of Commerce (JOC) article about the Transport Workers Solidarity Committee’s rally and opposition to the new contract:

The tentative five-year contract maintains full employer-paid medical benefits. Longshoremen will retire with a pension that tops out at $88,800 a year. Hourly wage increases are more generous than in other contracts dating back to the 1980s. According to the PMA, full-time longshoremen last year earned on average $147,000. The hourly wage in the last year of the contract will increase to $42.18, but many longshoremen work in jobs that pay skill or overtime differentials that increase the base wage by 15 to 30 percent.

Jurisdiction was a sticking point in the negotiations that went on for nine months and led to massive delays up and down the coast. The tentative contract grants jurisdiction to the ILWU to inspect and repair most chassis before they leave the marine terminals, even though PMA-member shipping lines no longer own the chassis.

The tentative contract will also establish a three-member panel in each of the port regions to adjudicate the health and safety and work-rule disagreements that arise frequently on the waterfront. Instead of having just one local arbitrator in Seattle-Tacoma, Portland, Oakland and Los Angeles-Long Beach as is now the case, each panel will include a member nominated by the ILWU, one by the PMA and a third who is a member of either the Federal Mediation and Conciliation service or the American Arbitration Association.

The Transport Workers Solidarity Committee apparently sees the new contract as moving the union toward “business unionism” and away from “militant unionism”. Militant unionism obviously being their preferred type.

“Left unchecked, it will gut ILWU’s coastwide power and bury the last militant union in the U.S.,” the Transport Workers Solidarity Committee says about the contract on their webpage promoting the March 31st rally.

Apparently this militant group of ILWU members and retirees are at odds with ILWU leadership. They also say on the page mentioned aboved:

The ILWU has a proud history of class struggle and the fight for democratic principles codified in the Ten Guiding Principles of the ILWU. Today ILWU officials flaunt these union principles, using top down control to direct longshore workers to cross picket lines and keep contract negotiations secret while the PMA gives the contract to the maritime employers’ Journal Of Commerce.

In Bill Mongelluzzo’s JOC article, he says the Transport Workers Solidarity Committee is playing “loose with certain facts” in that the JOC did receive a copy of the contract, but not from the PMA or any of its members.

To get a better feeling of what the Transport Workers Solidarity Committee is all about, check out what they say they stand for on their purpose page:

We firmly believe and fight for the following:

      • 1. The workers must control their own struggles and our solidarity supports those struggles and never substitutes for workers themselves or their organizations.
      • 2. We recognize that the working class and the employing class have nothing in common. Therefore:
        • A. We oppose the “team concept” of labor collaboration with management and deference to the anti-labor laws which reinforce capitalist domination. Therefore we oppose the business unionist bureaucracy which carries out these policies.
        • B. We stand for the political independence of the working class from the capitalist parties and the capitalist state, its agencies, its courts and its police. We oppose so-called “free trade agreements” based on neo-liberal economic policies which deregulate and privatize industries and services while busting unions.
      • 3. We stand for action against racism, sexism and any other bias in all of their destructive and insidious forms which divide workers in the struggle against capital.
      • 4. We seek to work with union members and unorganized workers, especially immigrant workers, to help build militant unions through working class solidarity here and internationally.

With statements like “the working class and the employing class have nothing in common” and “We oppose the ‘team concept’ of labor collaboration with management”, it would be no surprise if this group vehemently opposes any agreement between the union and employers.

Working class and employing class have nothing in common? Not humanity? Not basic rights? In this particular case, not a common dependence on shippers, who are the consumers that create the need for both managers and workers at the dock to move cargo?

Maybe before they claim to stand against racism, sexism, and any other bias, the Transport Workers Solidarity Committee should recognize their own bias against management.

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Biggest Ship to Ever Call on East Coast Ports Signals Shippers’ Trend https://www.universalcargo.com/biggest-ship-to-ever-call-on-east-coast-ports-signals-shippers-trend/ https://www.universalcargo.com/biggest-ship-to-ever-call-on-east-coast-ports-signals-shippers-trend/#respond Thu, 19 Mar 2015 17:48:39 +0000 https://www.universalcargo.com/?p=7408 For the first time ever, a container ship with a capacity larger than 10,000 TEUs (twenty-foot-equivalent units) called upon U.S. East Coast ports this week. Such megaships have called upon the West Coast, but this may be another sign of East Coast ports gaining on the West Coast. With all the congestion at West Coast […]

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Largest Container Ship to Call on U.S. East Coast Ports resized 600For the first time ever, a container ship with a capacity larger than 10,000 TEUs (twenty-foot-equivalent units) called upon U.S. East Coast ports this week.

Such megaships have called upon the West Coast, but this may be another sign of East Coast ports gaining on the West Coast.

With all the congestion at West Coast ports that was extremely exacerbated by the long and bitter contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), demand increased at East Coast ports with shippers diverting cargo.

It was that increased demand of shippers diverting cargo from West Coast ports that led to this East Coast record setting ship, according to a Joseph Bonney written article in the Journal of Commerce:

“The ship was an extra loader deployed to meet demand following congestion at West Coast ports.”

So what was the ship?

Zim Tianjin:

  • 10,060-TEU
  • 1,145 feet long
  • 150 feet wide
  • 49.5 feet maximum draft

To put the size of the Zim Tianjin in perspective, Christopher Buchanan reported in a WJCL News article, “Stood on end, it would stand nearly as tall as the Empire State Building – 1,454 feet, including its antenna.”

In fact, the title of that WJCL News article is Empire State Building-sized ship docks in Savannah.

Before visiting the Port of Savannah, the Zim Tianjin called at GCT Bayonne in the Port of New York and New Jersey.

Clearance for megaships of this size and bigger is an issue for East Coast ports, and for ports around the world, really. There are many projects in the works to make it possible for the huge ships, which are now the trend in the international shipping industry, to be able to call on ports.

In fact, that JOC article shares the following:

…the Bayonne terminal, the only major New York-New Jersey terminal outside the Bayonne Bridge, which has a 151-foot-vertical clearance that limits the size of ships that can call other port terminals.

The bridge’s clearance is scheduled to be raised to 215 feet in 2016, the same year that larger locks are scheduled to open at the Panama Canal. Those developments are expected to result in calls by larger ships at East Coast ports.

New York-New Jersey is also nearing completion of work to deepen its port channels to 50 feet.

The WJCL article also spoke of projects to allow the East Coast, and the Port of Savannah in particular, to handle the larger ships they’re expecting to see with the expansion of the Panama Canal:

“The economy of scale achieved by Super Post-Panamax vessels is the reason we’re seeing more of them in Savannah – a trend that will only continue after an expanded Panama Canal opens in 2016.”

In order to better accommodate Super Post-Panamax vessels, the Savannah Harbor Expansion Project will deepen the main river channel to 47 feet at low tide (averaging 54 feet at high tide).

In March, the U.S. Army Corps of Engineers issued a $134.5 million contract that will mark the start of dredging.

The contract covers deepening the outer harbor, extending 18.5 miles into the Atlantic Ocean.

Dredging the outer harbor constitutes about half of the project to deepen the 40-mile shipping channel and harbor from deep ocean to Garden City.

Georgia has approved $266 million in bonds to cover the state’s projected share of construction costs.

As the $706 million expansion moves forward, construction funding will shift to federal dollars. Better accommodating larger, more efficient vessels such as the Tianjin will save U.S. companies moving goods through Savannah 20 to 40 percent on transportation.

As the East Coast continues to increase its ability to handle larger ships and makes moves like trying to work out long term labor contracts three years before the current contract expires, West Coast ports will have to work hard to regain shippers’ confidence and maintain their market share.

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ILWU Local 8 Should Pay Damages to Portland Shippers https://www.universalcargo.com/ilwu-local-8-should-pay-damages-to-portland-shippers/ https://www.universalcargo.com/ilwu-local-8-should-pay-damages-to-portland-shippers/#respond Tue, 17 Mar 2015 21:54:10 +0000 https://www.universalcargo.com/?p=7585 A federal judge has ordered the International Longshore & Warehouse Union (ILWU) to pay $60,000 to the National Labor Relations Board (NLRB) for violating a court order to return operations at the Port of Portland to normal, but the union’s actions have cost the port, community, and union itself much more. Because of a labor […]

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ILWU drives Hanjin out of Port of PortlandA federal judge has ordered the International Longshore & Warehouse Union (ILWU) to pay $60,000 to the National Labor Relations Board (NLRB) for violating a court order to return operations at the Port of Portland to normal, but the union’s actions have cost the port, community, and union itself much more.

Because of a labor dispute that has slowed operations and repeatedly shutdown operations at the Port of Portland’s Terminal 6, Hanjin quit calling on the Port of Portland.

Hanjin was the biggest service-providing carrier at the Port of Portland, handling almost 80% of the cargo shippers imported and exported through the port.

Seemingly too little, too late, a bipartisan group of legislators wrote a letter to the ILWU and ITCSI Oregon, the local arm of the Philippines based company that operates Terminal 6.

“We stand unified representing bipartisan leadership of the Oregon Legislature in calling for a fundamental and long-standing resolution of differences that will stabilize the T-6 operation and protect hundreds of ILWU jobs and thousands of trade-dependent jobs in our state,” according to the letter.

“We call upon each of you as leaders to come together as champions of our regional and national economy to foster a path forward that serves all our citizens and respective constituencies.”[1]

This letter comes after the economy in the region around the Port of Portland is suffering severe damage with their local shipping option lost.

Conrad Wilson wrote an article, published on OPB.org, which goes into the chaotic state shippers are in near the Port of Portland:

David Braman, the general manager of Mitchell Brothers Truck Line, said Hanjin’s departure has left many businesses that ship using containers in a state of “chaos.”

“We’re getting inundated with phone call after phone call from people looking for rates,” he said. “Nobody really knowing how they’re going to [get] their freight moved from point to point.”

While some businesses and farmers may turn to East Coast or Gulf ports, most of the goods that were moving through the Port of Portland are now heading to the ports of Seattle and Tacoma, Braman said.

Right now, businesses here have two options: Move containers by rail or truck.

But those trips to Puget Sound shipping terminals can be four times as costly as a trip to the Port of Portland.

Northwest Container, the rail option, has been so busy recently it’s had to close early most days and even turn containers away.

Braman said everything that can’t get on the train has to move by truck. And there’s a shortage there, too.

“There’s not enough equipment to service the area any more,” he said. “Something’s going to get left behind. And we’re all in that same predicament. There’s nobody here that’s up to this speed yet.”[2]
The ridiculous thing about this whole situation is that it all began with two jobs. Two jobs!

The ILWU wanted jurisdiction over two jobs, plugging and unplugging reefer containers, that have been worked by members of the International Brotherhood of Electrical Workers (IBEW) since the 1930’s.

Maybe the ILWU is right in that ITCSI should have taken the two jobs away from the union that has worked them for generations and given the jobs to the ILWU since ITCSI is a PMA member. Maybe.

But what they did was put their desire to control every single possible job at the port over the interests of the port, carriers that call on the port, shippers that import and export through the port, the economy, and even the future stability of the ILWU’s own jobs at the port.

In my opinion, the selfish actions of the ILWU Local 8 are astounding.

Over two jobs, the union went about hard-timing the Port of Portland to the point of driving its biggest carrier away, seriously damaging the local economy, and costing the union many more jobs than the two they were attempting to gain.

Again, shippers could only look on and watch as their interests were damaged. If justice were really served, it’s shippers to whom the ILWU should have to pay damages.

What are your thoughts on the Port of Portland situation? Share them in the comments section below.

Previous blogs on labor dispute at Port of Portland:

Judge Rules ILWU Purposefully Slowed Import/Export @ Port of Portland

ILWU Takes Advantage of No Contract, Slowing Down Port of Portland

Sources:


[2] http://www.opb.org/news/article/hanjins-departure-leaves-regions-shippers-in-a-state-of-chaos/

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3 Things Happening to Get Shippers’ Cargo Moving at the LA & LB Ports https://www.universalcargo.com/3-things-happening-to-get-shippers-cargo-moving-at-the-la-lb-ports/ https://www.universalcargo.com/3-things-happening-to-get-shippers-cargo-moving-at-the-la-lb-ports/#respond Tue, 10 Mar 2015 21:05:15 +0000 https://www.universalcargo.com/?p=7555 Congestion at the Ports of Los Angeles and Long Beach is not new news. During the months of contract negotiations between the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU), congestion was only getting worse. Now that the labor dispute has finally been resolved, the employers and labor should be able to […]

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Solving Port CongestionCongestion at the Ports of Los Angeles and Long Beach is not new news. During the months of contract negotiations between the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU), congestion was only getting worse.

Now that the labor dispute has finally been resolved, the employers and labor should be able to focus on clearing the congestion and getting West Coast ports, especially the Southern California Ports of Los Angeles and Long Beach, flowing smoothly for shippers.

Here are three things being done to get imports and exports efficiently moved at the Ports of Los Angeles and Long Beach, where congestion has hit shippers and economy hard.

1. Increased Cooperation

Shortly after a tentative agreement was announced between the PMA and ILWU, Los Angeles Mayor Eric Garcetti and Long Beach Mayor Robert Garcia put out a joint press release pledging new levels of cooperation between the Ports of Los Angeles, Long Beach, and supply chain stakeholders.

The Ports of Los Angeles and Long Beach already cooperate, but that cooperation is now to be increased. The press release shares:

The two ports recently submitted to the Federal Maritime Commission an updated cooperative working agreement that clarifies and expands on their existing pact. The proposed update… will enable the ports to work together on strategies that will benefit both ports in the areas of supply chain logistics and gateway marketing, as well as environment, security and legislative advocacy.

The Port of Los Angeles posted the following video from the Tentative Labor Agreement News Conference that features Long Beach and Los Angeles Mayors Eric Garcetti and Robert Garcia.

While there’s a lot of lauding the PMA and ILWU for reaching agreement (yeah, good job for putting your own interests ahead of shippers and the economy for 9 months) and Mayor Garcia fidgeting (I sometimes have trouble holding still too), there’s also talk of investing in the Ports of Los Angeles and Long Beach.

YouTube Video

Here’s a highlight of what the ports had to say about their increased cooperation according to the press release:

“With an agreement in place, the ports of Long Beach and Los Angeles can focus on velocity, efficiency and environmental sustainability,” said Port of Long Beach Chief Executive Jon Slangerup. “Together, we will quickly re-establish our gateway as the most efficient route between Asia and North America. We thank Mayors Garcia and Garcetti for their leadership and we will all work to clear the current backlog as quickly as possible and put in place new measures to move cargo quickly even during our busiest times.”

“The changing face of seaborne trade is impacting major ports around the world,” said Port of Los Angeles Executive Director Gene Seroka. “In order to keep our competitive edge, it makes good sense for our ports to strategize and help facilitate changes in the supply chain that will enhance Southern California’s competitive advantage.”

2. New Chassis Pool

One of the biggest factors in creating congestion at the Ports of Los Angeles and Long Beach is the availability, organization, and shortage of chassis.

Chassis are absolutely necessary for the transportation of cargo containers imported and exported through the ports and moved by truck or rail across the country.

The Ports of Los Angeles and Long Beach have worked in cooperation, making a deal between three chassis owning companies, Direct ChassisLink Inc. (DCLI), Flexi-Van Leasing Inc., and TRAC Intermodal to create a chassis pool for the San Pedro Bay ports.

DCLI, Flexi-Van Leasing Inc., and TRAC Intermodal are combining their chassis to form what is called the “gray chassis fleet” or “gray chassis pool” or “pool of pools” to fight the chassis problem.

Whatever they call this pool of chassis, it went into operation on March 1st and is already garnering praise from the drayage part of the international shipping community working at the Ports of Los Angeles and Long Beach, according to a Bill Mongelluzzo article in the Journal of Commerce.

A press release from the Ports of Los Angeles and Long Beach sum up how the new chassis pool works:

Marine terminals have experienced a “chassis imbalance,” created by non-interoperable chassis pools, which has led to delays. The new pact allows more than 80 percent of chassis in service at the ports of Long Beach and Los Angeles to be used interchangeably, which will greatly improve the ease and efficiency of obtaining chassis.

The agreement creates a new chassis supply model with a team of representatives from each of the three pool operators overseeing day-to-day logistics and repositioning of more than 81,500 chassis. The pools will remain commercially independent, with each chassis provider competing for business and setting its own leasing terms and rates. A separate third-party service provider will manage billing and other proprietary information.

Implementation of the agreement is expected to provide immediate relief to the region’s current congestion problems. The process included a review by the Antitrust Division of the U.S. Department of Justice, which found, “The increased flexibility created by the interchangeability will enhance customer service, improve chassis productivity and respond to the desire of the Long Beach and Los Angeles ports authorities to achieve better overall utilization of the region’s chassis fleets.”

3. Peel Off Program

The third way that the Port of Los Angeles is working to solve the congestion problem is a new “peel off” program.

The Port of Los Angeles put out a press release that describes how the program works as follows:

The Port teamed with stevedoring company The Pasha Group, harbor trucking firm Total Transportation Services Inc. (TTSI), several marine container terminal operators and a core group of major retailers to create the program, which involves “peeling off” containers of high-volume customers to a near-dock yard where they are sorted for destination to inland distribution centers.

Under “Peel Off,” import containers loaded with goods belonging to high-volume shippers are stacked together in a block upon arrival at the Port. The terminals expedite TTSI trucks through their gates to retrieve the containers and deliver them to the near-dock yard less than a mile away where they are sorted. The same trucks loop back to the terminals for the next inbound container. The trucks keep boxes moving by delivering outbound containers on the return leg.

The end result is that shipping containers are moved from the docks where they’re unloaded from ships faster and trucks are being used much more efficiently

“We have found an efficient way to get containers to their destination that is beginning to pay off,” said Port of Los Angeles Executive Director Gene Seroka. “We’re acting on our pledge to our customers to harmonize the supply chain and make it work better. Permanently.”

We’ll be watching as the ports clear the backlog of shipping containers over the next few months and see how effective these actions to get shippers’ cargo moving are at making the Ports of Los Angeles and Long Beach efficient.

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Can USMX & ILA Change Labor Negotiations Hurting Shippers? https://www.universalcargo.com/can-usmx-ila-change-labor-negotiations-hurting-shippers/ https://www.universalcargo.com/can-usmx-ila-change-labor-negotiations-hurting-shippers/#respond Thu, 05 Mar 2015 17:27:31 +0000 https://www.universalcargo.com/?p=7920 Remember the 2012/2013 ILA Strike Watch? Wouldn’t it be nice to never have one of those again? Wouldn’t it be nice not to be trying to recover from the port slowdowns and congestion that happened during the West Coast labor negotiations? There don’t have to be union slowdowns, lockouts, strikes, or strike threats every time […]

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Remember the 2012/2013 ILA Strike Watch? Wouldn’t it be nice to never have one of those again?

Wouldn’t it be nice not to be trying to recover from the port slowdowns and congestion that happened during the West Coast labor negotiations?

There don’t have to be union slowdowns, lockouts, strikes, or strike threats every time a union contract expires at the ports.

However, all shippers know they’re in danger of large financial losses every time a labor union’s contract expires.

The East Coast ports made a move to change the current cycle of labor contract negotiations that is so costly to shippers.

Currently, U.S. East and Gulf Coast ports are benefiting from the recent contentious contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) that exacerbated West Coast port congestion with union slowdowns and mini lockouts.

Shippers are diverting cargo from the West Coast to the East Coast in response to unreliability at West Coast ports that has been so costly to shippers during the ILWU contract negotiations.

Of course, it wasn’t long ago that shippers were diverting cargo from East and Gulf Coast ports because of strike threats from the International Longshoremen’s Association (ILA) during the union’s contract negotiations with the United States Maritime Alliance (USMX) at ports on that side of the country.

Shippers are fed up with suffering losses every time a union’s contract expires at U.S. ports.

The USMX and ILA are now making a strong move to bolster confidence in East and Gulf Coast ports while confidence in West Coast ports is at its lowest. This move may end the cycle of damaging shippers every time a union contract expires at U.S. ports.

Joseph Bonney reports in a Journal of Commerce (JOC) article that the USMX and ILA are planning to “open discussions” on a new, long-term contract at East and Gulf Coast ports over three years before the current labor contract expires.

The “open discussions” language is not exactly as strong as the words “starting negotiations” would be, but the idea that the union would be willing to start any kind of contract talks this far ahead of a contract expiring is extraordinary.

Traditionally, the ILWU or ILA would never allow a new contract to be reached before the previous one is expired. Slowdowns, strikes, and threats of strikes are the unions’ weapons for gaining leverage in contract negotiations. Negotiating a contract before the previous contract expires would be giving up those weapons.

When it was suggested back in December a change be made in the way negotiations are done, the ILA was absolute in its refusal to consider making the process less damaging to shippers at the cost of losing its most effective bargaining chips.

Here’s the highlight of the union’s response back in December from a JOC article:

“The answer is no,” [ILA President Harold] Daggett told JOC.com. “We’re going to continue to negotiate the way we negotiate now.”

Daggett said the right to strike is a union’s ultimate leverage in contract negotiations, and that the ILA wants to retain its right to use it in local negotiations.

That’s the typical attitude of the unions that we’ve seen over and over again in contract negotiations. The shippers, whose money and cargo create the jobs, and the U.S. economy are not concerns of the unions but possible hostages to increase leverage in contract talks.

However, for the first time, we are seeing a union say it is open to the idea of negotiating a contract before the previous one expires. JOC’s recent article reports the following on Daggett’s change of tune:

ILA spokesman James McNamara confirmed that the union’s president Harold Daggett, was “agreeable to engaging in conversations” about an early deal on a contract to follow the current six-year agreement, which expires Sept. 30, 2018.

I guess what the union is really saying is that they’re open to talking about negotiating an early deal, not that they’re actually willing to negotiate an early deal. But the way USMX characterizes both parties’ attitudes in the JOC article lends for more optimism to shippers.

“The goal of both parties is a long-term agreement that provides stability for the industry and for labor,” USMX Chief Executive David Adam said in an interview at the 15th annual TPM Conference in Long Beach, California.

USMX and the ILA want to begin preliminary discussions “sooner rather than later, probably in the next several weeks,” Adam told JOC.com.

These may just be timely PR words for East and Gulf Coast ports to boost their market share against the West Coast; however, reaching a long-term labor agreement that brings stability and confidence to shippers exporting and importing through East and Gulf Coast ports is in the best interest of the employers and workers at the ports.

I’d like to think this is a genuine act on the parts of the USMX and ILA to change the negotiating process that is so damaging to shippers and reach a long-term contract before the current one expires. Of course, I also wanted to believe the ILWU and PMA’s pledge to keep cargo moving during their contract negotiations.

Actions will speak louder than words.

 

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Shippers Diverting Cargo from West Coast Ports w/ Data Graphs https://www.universalcargo.com/shippers-diverting-cargo-from-west-coast-ports-w-data-graphs/ https://www.universalcargo.com/shippers-diverting-cargo-from-west-coast-ports-w-data-graphs/#respond Tue, 03 Mar 2015 19:49:10 +0000 https://www.universalcargo.com/?p=7487 The labor dispute coming to an end at the West Coast ports does not mean the ports have regained shippers’ confidence. It will take months to clear up the congestion that reached critical levels during the International Longshore and Warehouse Union (ILWU) contract negotiations with the Pacific Maritime Association (PMA), but many shippers have decided […]

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The labor dispute coming to an end at the West Coast ports does not mean the ports have regained shippers’ confidence.

It will take months to clear up the congestion that reached critical levels during the International Longshore and Warehouse Union (ILWU) contract negotiations with the Pacific Maritime Association (PMA), but many shippers have decided to divert their cargo away from the West Coast ports for years.

Mark Szakonyi wrote a great article for the Journal of Commerce (JOC), which shared the results of their survey of 138 shippers regarding whether or not they planned to divert cargo from West Coast ports in 2015 and 2016.

The results of the survey are not good for West Coast ports.

Just over 65% of the shippers who responded to JOC’s survey reported that they plan to divert cargo from West Coast ports in 2015 and 2016.

65% Shippers to Divert Cargo resized 600These shippers don’t plan to return their cargo to West Coast ports after those two years finish, either. According to the JOC article, “The percentage of shippers planning to permanently reroute some cargo away from the coast is nearly identical to the 66 percent of shippers who said the same thing when they were surveyed by JOC.com in mid-December.”

To where do the shippers plan to divert their cargo?

While JOC’s article indicates a little over 5% of shippers diverting their cargo are unsure to where, the biggest winners of diverted West Coast port cargo are U.S. East Coast ports. Southeast U.S. ports should receive 22.7% of the diverted cargo while U.S. Northeast and Gulf Coast ports are at a dead heat with an expected 16.1% of the cargo.

Not all diverted cargo will go through U.S. ports at all. 14.7% of shippers planning to reroute their cargo reported plans to divert cargo to the Ports of Metro Vancouver and Prince Rupert. Less than 1% said they will use Mexican ports.

Here’s a bar graph of where West Coast cargo will be diverted to in 2015 and 2016 from JOC’s survey data:

Where Will Shippers Divert Cargo resized 600Who’s to blame for the West Coast ports losing cargo?

During the ILWU contract negotiations, port congestion badly hurt U.S. importers and exporters. Delays, fees, lost sales, lost business partners… the damage done to the U.S. economy is in the billions of dollars.

The JOC survey asked shippers whom they blamed for the disruptions at the West Coast ports during the contract negotiations. Was it the union’s fault or the employers’ fault or both?

Largely, shippers blamed the union.

61.7% of the shippers surveyed put the blame solely on the ILWU while only 2.2% of the shippers put the blame solely on the PMA according to the JOC article. 34.5% blame both parties, the union and the employers.

Shippers Blame ILWU or PMA for Port Disruptions resized 600

West Coast ports didn’t actually have to wait for 2015 and 2016 to see cargo diverted to other ports.

Mark Szakonyi reported in the JOC article:

There were already diversions by importers under way last year, especially in the fourth quarter when the West Coast congestion was at its worst. Fourth-quarter import growth was 12.6 percent on the East Coast, 11.8 percent on the Gulf Coast and 5.3 percent on the West Coast, compared to the fourth quarter of 2013. The data is from PIERS, a sister product of JOC.com within IHS.

That dropped the West Coast’s share of imports slightly from 54.57 to 54.04 percent, and increased the East Coast’s share of imports from 39.32 percent to 39.85 percent, and the Gulf Coast’s share from 6.11 to 6.12 percent, according to PIERS.

West Coast ports are making moves to clear the congestion and regain the confidence of shippers. These include a chassis initiative and a free-flow container operation that we’ll talk about in an upcoming blog.

For many shippers, these actions to clear congestion are too little, too late.

On top of that, they feel the issue of labor disputes, especially whenever a new contract is being negotiated, is a core cause of unreliability at West Coast ports that no moves are being made to resolve.

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How Long Will it Take to Clear Congestion at West Coast Ports? https://www.universalcargo.com/how-long-will-it-take-to-clear-congestion-at-west-coast-ports/ https://www.universalcargo.com/how-long-will-it-take-to-clear-congestion-at-west-coast-ports/#respond Thu, 26 Feb 2015 17:37:32 +0000 https://www.universalcargo.com/?p=7376 Now that an agreement has been reached between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) in contract negotiations, West Coast ports can start running smoothly again, right? Not exactly. Shippers will still be waiting through congestion issues at the ports for a while and not because the contract still […]

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Import Shipping ContainersNow that an agreement has been reached between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) in contract negotiations, West Coast ports can start running smoothly again, right?

Not exactly.

Shippers will still be waiting through congestion issues at the ports for a while and not because the contract still has to be voted on and ratified.

With the tentative agreement, there should be an end to ILWU slowdowns (at least until an issue surfaces that the union is unhappy about) and the night and weekend mini-lockouts from the PMA.

Seeing an end to these major congestion factors at the West Coast ports does not mean that cargo being imported and exported through the West Coast ports will immediately start flowing through the ports smoothly. Not by a long shot.

Why will it take time to get the ports moving smoothly and how much time are talking about?

The question of why it will take some time to get West Coast ports moving smoothly is easier to answer than the question of how long it will take to get there.

Still, it is almost a certainty that the answer to how long it will take to get the ports moving smoothly will be measured in months, not weeks.

One of the biggest and most obvious reasons it will take so much time to get port operations back to normal is the time it will take to catch up on and clear the months of congestion and backlog.

After taking just a little over a week off work after the birth of my second son, it took a considerable amount of time to clear the congestion of emails in my inbox. I can hardly imagine having to clear months and months of congestion and backlog of shipping containers at the West Coast ports.

The ports do have an estimate for how long they think clearing their shipping container backlog will take.

HOW LONG BEFORE NORMAL OPERATION ACCORDING TO PORTS:

According to an article from Business Insider, “Port officials have said it would take six to eight weeks to clear the immediate backlog of cargo containers piled up on the docks and several months for freight traffic to return to a normal rhythm once the [ILWU contract] dispute was settled.”

Several months is not exactly a specific amount of time for getting “freight traffic… to a normal rhythm” but it sounds more realistic than the more specific answer Port of Long Beach’s Jon Slangerup gave to CNBC.

It will take West Coast ports about two months to process backlogged work and return operations to normal after a labor dispute led to widespread delays, the Port of Long Beach’s CEO told CNBC on Monday.

Slangerup was quoted in the CNBC article as using the word epic when describing the congestion problem. Clearing that congestion and getting ports moving smoothly in two months would truly take an epic effort.

Perhaps the two months Slangerup predicts is only for the first step of clearing the current backlog of cargo containers, but it certainly seems like he’s saying in two months to fully get port operations back to normal.

That seems unlikely, unless the new normal is congested.

ADDITIONAL REASONS FOR CONGESTION:

The problem with thinking the port congestion problem will be over in two months is that the causes of port congestion have not been solved.

Yes, ILWU slowdowns were a major contributor to port congestion. But there are many causes of port congestion besides the labor dispute between the PMA and ILWU.

Three of the major factors that have caused such terrible congestion at West Coast ports, and the Ports of Los Angeles and Long Beach in particular, are:

  • Bigger Ships & Carrier Alliances
  • Trucker Shortage Problem
  • Lack of Chassis

These are just 3 congestion causing issues from a UCM blog back in September titled 5 Factors Causing Congestion at the Ports of L.A. and Long Beach.

That blog didn’t even include ILWU slowdowns or labor dispute issues of the contract negotiations. It wasn’t until October that negotiations became publicly contentious between the PMA and ILWU. However, in September, I’d already read complaints in emails from truckers at the ports about the union labor moving slowly.

It is important to remember that there is more to the congestion problems at West Coast ports than ILWU slowdowns and PMA mini lockouts. So resolving the contract negotiations is not an instant solution to the port congestion problem.

Especially important on the list above of factors contributing to congestion problems at West Coast ports is the lack of chassis. Since carriers relinquished ownership of chassis, providing them for the transport of shipping containers, there has been a struggle for truckers to get the chassis needed to move shipping containers out of the ports.

REASON FOR OPTIMISM:

I know it sounds like all gloom and doom, but there is reason for optimism at the West Coast ports.

Now that the contract negotiations have come to an end, the PMA members, especially the ports themselves, can focus on solving the issues that cause congestion at the ports such as the chassis crisis.

In fact, some plans are already in place to alleviate the problems, but that’s a blog for another time…

Key to Remember Port CongestionThe key thing to remember is that it will likely take months, not days or weeks, to get West Coast ports moving smoothly again. More patience is going to be required of shippers.

Many shippers have switched from ocean freight to air freight on key shipments to avoid the costly delays of port congestion at West Coast ports. We can help you with that as well as handling your ocean freight shipments.

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PMA & ILWU Reach Contract Agreement But Shippers Deserve Better https://www.universalcargo.com/pma-ilwu-reach-contract-agreement-but-shippers-deserve-better/ https://www.universalcargo.com/pma-ilwu-reach-contract-agreement-but-shippers-deserve-better/#respond Mon, 23 Feb 2015 23:04:25 +0000 https://www.universalcargo.com/?p=7560 After nine months of negotiations, billions of dollars in damages to the U.S. economy, and critical port slowdowns and shutdowns for shippers who depend on West Coast ports for their imports and exports, the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) released the following announcement of a contract being reached: The Pacific […]

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ILWU PMA contract agreement shippers ignoredAfter nine months of negotiations, billions of dollars in damages to the U.S. economy, and critical port slowdowns and shutdowns for shippers who depend on West Coast ports for their imports and exports, the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) released the following announcement of a contract being reached:

The Pacific Maritime Association and the International Longshore and Warehouse Union today announced a tentative agreement on a new five-year contract covering workers at all 29 West Coast ports. The deal was reached with assistance from U.S. Secretary of Labor Tom Perez and Federal Mediation and Conciliation Service Deputy Director Scot Beckenbaugh.The parties will not be releasing details of the agreement at this time. The agreement is subject to ratification by both parties.

“After more than nine months of negotiations, we are pleased to have reached an agreement that is good for workers and for the industry,” said PMA President James McKenna and ILWU President Bob McEllrath in a joint statement. “We are also pleased that our ports can now resume full operations.”

For shippers there is certainly a relief that the negotiations, which hurt so many businesses that import and export goods through West Coast ports, has finally come to an end.

Even though it is a relief that the drama of contract negotiations is over, this short announcement of a tentative contract agreement being reached is hardly satisfactory for shippers.

At the outstart of negotiations, nine long months ago, there was a pledge from the PMA and ILWU to keep cargo moving through the ports. This pledge was copied and pasted at the bottom of several joint statements from the two parties going into negotiations.

To shippers, it seems little more than the effort it takes to cut and paste went into keeping that pledge.

The ILWU and PMA know how crucial the ports are to shippers, retailers, and the U.S. economy as a whole, which is why they made the welcomed pledge to keep cargo moving during their negotiations. Only that pledge was not kept.

There is a problem with a system when a single union, the ILWU in this case, has the power to essentially hold the U.S. economy hostage to gain leverage in contract negotiations. With orchestrated work slowdowns or a strike, the ILWU has the ability to slow or halt port production to the point of causing permanent damage to U.S. businesses and the economy.

Using lockouts, the PMA can do the same thing, shutting down depended upon ports to put pressure on the ILWU through lost wages to union members.

This long negotiation period saw both orchestrated slowdowns from the ILWU, though the union would deny it, and mini lockouts from the PMA. Shippers and the economy were left to wriggle and suffer as the ILWU and PMA selfishly only looked at their own interests.

If the PMA and ILWU looked at the bigger picture, they would see such a disregard for shippers and the economy is not in either party’s best interest.

It wasn’t until the threat of negotiations being moved from warm California to cold Washington, D.C. that this tentative contract agreement suddenly appeared.

Justin Pritchard of the Associated Press reported on Thursday, February 19th that Secretary of Labor Thomas Perez gave the ILWU and PMA the deadline of reaching an agreement by Friday, February 20th or negotiations would have to move to the nation’s capital.

Amazing how the ILWU and PMA were suddenly able to meet that deadline.

Already, the spin is starting that this is a big win for the Obama Administration.

“Helping resolve this dispute has been a top priority,” Press Secretary Josh Ernest said in a statement on Friday, February 20th after the agreement was made.

What a laugh. Since the beginning of negotiations retailers and shippers have been pleading with the White House to get involved in these negotiations and prevent damage to businesses and the U.S. economy.

The White House sat back doing nothing, insisting the ILWU and PMA could work it out on their own while shippers and American businesses lost international business partners, holiday inventory, money, and more.

It was not until the damage these negotiations and the port congestion has been having on the economy hit mainstream media headlines in the last couple weeks that the Obama Administration finally stepped up and got involved.

Shippers, retailers, and the U.S. economy deserve better. Better from government representatives who ignore letter after letter requesting action to prevent economic damages until it’s a big media headline. Better from the ports and unions who put their interests ahead of the rest of the economy without so much as an apology in their announcement of a finally reached contract agreement. Better.

In the end, U.S. businesses and the rest of the world’s nations know that American ports cannot be counted on to deliver whenever it’s time for unions to negotiate a new contract. Something has to change. Other countries can find (and business partners around the world have found) more dependable business partners to do business with in alternative to U.S. businesses that can’t get their products past the ports.

U.S. shippers are looking for alternatives too.

Click Here for Free Freight Rate Pricing

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USWC Ports Current Status – Los Angeles / Long Beach, Oakland, Seattle / Tacoma, Portland https://www.universalcargo.com/uswc-ports-current-status-los-angeles-long-beach-oakland-seattle-tacoma-portland/ https://www.universalcargo.com/uswc-ports-current-status-los-angeles-long-beach-oakland-seattle-tacoma-portland/#respond Tue, 17 Feb 2015 23:32:23 +0000 https://www.universalcargo.com/?p=7362 The post USWC Ports Current Status – Los Angeles / Long Beach, Oakland, Seattle / Tacoma, Portland appeared first on Universal Cargo.

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USWC Ports Current Status Los Angeles, Long Beach, Oakland, Seattle, Tacoma

With the recent PMA lock out on the ILWU this weekend we provide a general overview of the current USWC Port Status from our partner.

Port of Los Angeles / Long Beach

  • 20+ vessels anchored
  • 7-14 day delay at berth over T/T ETA
  • 5+ day delay at the terminal
  • T/T is only a reference now
  • Longer T/T implies carriers need to put more capacity/vessels to maintain weekly service
  • Since more capacity and equipment is on water there is increased pressure on equipment shortage at terminals

Port of Oakland

  • Carriers continue to drop calling Port of Oakland  due to congestion
  • 20+ day delay at berth over T/T ETA
  • 7+ day delay at terminal
  • MSK + CMA already announced all Oakland shipments will be terminated in LA/LB at the CNEEs’ expense
  • Other carriers should be announcing the same soon
  • Evergreen TPS / CPS still calls Oakland along with a few G6 strings
  • Space very tight

Port of Seattle / Tacoma

  • 24 day average delay for shipments
  • Seattle / Tacoma is now the last call on PNW strings
  • IPI shipments now switching to Canada

Port of Portland

  • Hanjin announced Portland service termination and they were the only vessels calling Port of Portland
  • Only option now is to Rail from Seattle / Tacoma using K Line, Cosco, Maersk, or CMA

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Congestion Caused by PMA ILWU Contract Dispute with Images https://www.universalcargo.com/congestion-caused-by-pma-ilwu-contract-dispute-with-images/ https://www.universalcargo.com/congestion-caused-by-pma-ilwu-contract-dispute-with-images/#respond Thu, 12 Feb 2015 22:53:49 +0000 https://www.universalcargo.com/?p=7440 Q:  What’s worse than standing in an elevator for 10 hours listening to elevator music? A:  Waiting for the PMA and ILWU to come to a contract agreement! BAZINGA! Everyone in the USA is eagerly awaiting the outcome of the most recent PMA ILWU contract dispute.  So far the struggle of the two parties to […]

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Q:  What’s worse than standing in an elevator for 10 hours listening to elevator music?

YouTube Video

A:  Waiting for the PMA and ILWU to come to a contract agreement!
BAZINGA!

Everyone in the USA is eagerly awaiting the outcome of the most recent PMA ILWU contract dispute.  So far the struggle of the two parties to come to an agreement has caused crippling effects on the US economy.

Please enjoy the album below, while visually stunning, it does depict the horrors we are facing:

To read more about what is causing these backups check out:  Congestion at Ports of L.A. & Long Beach Causes Container Ship Backup

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West Coast Ports to Shut Down in Days Unless ILWU Accepts Contract https://www.universalcargo.com/west-coast-ports-to-shut-down-in-days-unless-ilwu-accepts-contract/ https://www.universalcargo.com/west-coast-ports-to-shut-down-in-days-unless-ilwu-accepts-contract/#respond Thu, 05 Feb 2015 20:27:26 +0000 https://www.universalcargo.com/?p=7513 Five to ten days: that’s how long we have until West Coast ports completely shut down, according to the Pacific Maritime Association (PMA). Two days ago, we posted a shipping news alert warning shippers to prepare for a shutdown. Now the warning is coming from the PMA. In the midst of the nine-month-long contract negotiations […]

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New Contract or Ports Shut DownFive to ten days: that’s how long we have until West Coast ports completely shut down, according to the Pacific Maritime Association (PMA).

Two days ago, we posted a shipping news alert warning shippers to prepare for a shutdown. Now the warning is coming from the PMA.

In the midst of the nine-month-long contract negotiations between the PMA and International Longshore & Warehouse Union (ILWU), congestion and productivity at the West Coast ports has already been devastatingly costly for shippers who depend on the ports to import and export for their businesses.

Now it looks like the ports will grind completely to a halt… unless…

Yes, there is a hope that international shipping through West Coast ports won’t completely stop.

The PMA has made an “all-in” contract offer to the ILWU. There’s an ultimatum involved. Accept the contract, ILWU, or the ports will shut down.

The PMA has had enough of these negotiations with the union, saying the ILWU’s slowdowns to gain leverage are having the same effect on the ports as a strike but workers are still getting paid.

“Now, the PMA must decide how much longer we are going to pay longshore workers to work slowly. These slowdowns are having the same result as a workers strike, except that workers are still getting a paycheck,” says PMA President James C. McKenna.

Bottom line from McKenna is, “The slowdowns need to stop. The terminals cannot withstand anymore.”

Here’s a video the PMA released of McKenna addressing the situation, presenting a contract, and laying out that the West Coast ports are on the verge of complete meltdown if the ILWU does not accept the contract and things continue as they have been:

YouTube Video

This new contract, which the PMA has concluded “is as far as we can go at this point” includes the following according to the PMA’s press release:

Full-time ILWU workers already earn an average of $147,000 per year, and would see their wages rise roughly 3 percent per year, along with fully paid health care that costs employers $35,000 per worker per year. The maximum ILWU pension would rise to $88,800 per year as part of the proposed five-year contract.

PMA’s offer also meets the ILWU’s two biggest demands: maintenance of their Cadillac health benefits – which feature no worker premiums, no co-pays and no deductibles for in-network benefits– as well as jurisdiction over maintenance and repair of truck chassis. Those two issues consumed months of contract talks, and in both cases PMA has offered significant concessions to the ILWU.

The resulting contract offer calls for a cost increase of roughly five percent each year over the life of the five-year contract.

The PMA offered the following graphs to demonstrate orchestrated slowdowns by the ILWU at West Coast ports:

LA Long Beach ILWU Slowdown from PMA resized 600Oakland ILWU Slowdown from PMA resized 600ILWU production slowdown Oakland from PMA resized 600ILWU slowdown Seattle per PMA resized 600ILWU Seattle production Slowdown per PMA resized 600Tacoma ILWU Slowdown via PMA resized 600ILWU Tacoma Production Slowdown per PMA resized 600

Of course, the ILWU has denied orchestrating slowdowns.

The union does not appear to be agreeing to the new contract.

The ILWU has responded with an article that has a headline which reads: “ILWU tells employers: Finish negotiations, don’t close ports over only a few remaining issues.”

According to the ILWU, and their article, the negotiations are close:

The ILWU is trying to keep dock employers at the negotiating table to finish an agreement that is “extremely close.”

“We’re this close,” said ILWU President Robert McEllrath, who held up two fingers in a gesture indicating how close the parties are to reaching an agreement.

“We’ve dropped almost all of our remaining issues to help get this settled – and the few issues that remain can be easily resolved.”

Reading PMA’s press release does not give the feeling of the last few issues being so easily resolved or that the ILWU is dropping issues. It says the ILWU is adding issues:

The Union has recently made significant new demands, and is also insisting on changes to the decades-long process for selecting arbitrators – trying to change the rules on the waterfront in their favor, giving them the ability to unilaterally remove arbitrators who rule against them.

Certainly, from watching the negotiations drag on and on, it does not seem like the parties are able to easily resolve any issues.

What we’re left with now are ports that have been moving terribly slowly in the midst of awful congestion on the brink of completely shutting down.

The PMA has a contract on the table, with wages and benefits that most Americans would love to have, that the ILWU could sign and we could move toward getting the ports running again. The ILWU seems to be saying, not good enough; we want more.

As the ports are about to shut down, both sides blame the other. In the meantime, shippers and the economy suffer.

Free Freight Rate Pricing 

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Book Review: Factory Man by Beth Macy https://www.universalcargo.com/book-review-factory-man-by-beth-macy/ https://www.universalcargo.com/book-review-factory-man-by-beth-macy/#respond Thu, 05 Feb 2015 00:48:38 +0000 https://www.universalcargo.com/?p=7599 Factory Man: How One Furniture Maker Battled Offshoring, Stayed Local – and Helped Save an American Town This book is the story of the Bassett family in south western Virginia from just after the civil war until now.  It is the story of the U.S. Furniture Industry and how it started, how it grew, and […]

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Factory Man - Beth MacyFactory Man: How One Furniture Maker Battled Offshoring, Stayed Local – and Helped Save an American Town

This book is the story of the Bassett family in south western Virginia from just after the civil war until now.  It is the story of the U.S. Furniture Industry and how it started, how it grew, and was eventually switched to China and South East Asia in the late ‘70’s and ‘80’s.

For those of us in the Shipping and Logistics business it is a fascinating study of an industry that is very near and dear to us, as Furniture is the largest export from China to the U.S. in terms of ocean freight containers.

But what makes this story so interesting is the study of one man, John Bassett lll, who defied all odds and is now an American hero for keeping his company as now a 100% made in the USA Furniture Manufacturer, and had set the trend for other U.S. Furniture Manufacturing occurring as we speak.

The Author Beth Macy did a lot of research in that she spent a lot of time in the inner circles of the many related “furniture family” members in that region which gives the reader a good taste of what life was like and still is to this day.

It is true Americana and would make for an interesting movie with Clint Eastwood playing John Bassett lll.

Beth’s Blog
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Purchase on Amazon

My rating is 5 out of 7 stars.

StarStarStarStarStarNon StarNon Star

devin@universalcargo.com

Read More of Devin's Book Reviews

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Shipping News Alert: Prepare for a Lockout! https://www.universalcargo.com/shipping-news-alert-prepare-for-a-lockout/ https://www.universalcargo.com/shipping-news-alert-prepare-for-a-lockout/#respond Tue, 03 Feb 2015 18:05:56 +0000 https://www.universalcargo.com/?p=7370 Get ready. It looks like the West Coast ports are about to shut down. The Los Angeles Customs Brokers and Freight Forwarders Association (LACBFFA) forwarded the following words of warning from “Our Man in DC” Peter Friedmann: I have refrained from spreading all the rumors, but this one has firm basis and warrants preparation: it appears that […]

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Shipping News Alert West Coast Ports LockoutGet ready. It looks like the West Coast ports are about to shut down.

The Los Angeles Customs Brokers and Freight Forwarders Association (LACBFFA) forwarded the following words of warning from “Our Man in DC” Peter Friedmann:

I have refrained from spreading all the rumors, but this one has firm basis and warrants preparation: it appears that there will be a gradual lockout this week, expanding over the weekend, and fully implemented next week. It is possible the ILWU will take some action to be the “first” to act, but the result will be the same – shut-down of the west coast.

On the positive side, the elected representatives are engaged. A letter from Congress to the parties, and here, legislation from Washington State:

http://lawfilesext.leg.wa.gov/biennium/2015-16/Pdf/Bills/Senate%20Joint%20Memorials/8009-State%20ports%27%20competitiveness.pdf

So shortly after receiving good news on the negotiation front of a tentative agreement over chassis jurisdiction, we have the very bad news of West Coast ports likely being shut down by next week.

Elected representatives are asking President Obama to step in. The questions are whether or not the president actually will step in and how much more are these contract negotiations between the ILWU and PMA going to cost shippers, retailers, and the economy.

*UPDATE ON 2/4/15*

The Los Angeles Customs Brokers and Freight Forwarders Association (LACBFFA) forwarded the following words of warning from “Our Man in DC” Peter Friedmann:

At 2 PM Pacific today (2/4), the Pacific Maritime Assoc. conducted a press conference on the status of the negotiation. PMA did not announce a lock-out, and did not announce a settlement.

PMA described what it has offered (which we presume the ILWU has thus far rejected) and the data on the impacts of the slow-down, which may include these charts:

Click here to see the PMA Data on Port Operations.

There continues to be talk of terminals not ordering labor (thus shutting) over weekends, or otherwise, but nothing confirmed.

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Is a Breakthrough in ILWU Contract Negotiations Finally Here?! https://www.universalcargo.com/is-a-breakthrough-in-ilwu-contract-negotiations-finally-here/ https://www.universalcargo.com/is-a-breakthrough-in-ilwu-contract-negotiations-finally-here/#respond Tue, 27 Jan 2015 23:31:30 +0000 https://www.universalcargo.com/?p=7477 The breakthrough that shippers, retailers, and the economy has been waiting for in the contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) may have just happened. Report of a Breakthrough Sunday morning (Jan. 26th), Universal Cargo Management received an email from the Los Angeles Customs Brokers & Freight […]

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The breakthrough that shippers, retailers, and the economy has been waiting for in the contract negotiations between the International Longshore & Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) may have just happened.

Report of a Breakthrough

ILWU Contract Negotiations Breakthrough resized 600Sunday morning (Jan. 26th), Universal Cargo Management received an email from the Los Angeles Customs Brokers & Freight Forwarders Association (LACBFFA) quoting Peter Friedmann of FBB Federal Relations, who is often called “Our Man in DC”, as saying the following about the PMA/ILWU contract negotiations:

“A long week of bargaining just concluded a little while ago and with some success. This weekend a tentative agreement was reached on the difficult chassis issue. The pace of the dialogue and information exchange picked up speed after the chassis issue [relating to ILWU jurisdiction over chassis repair and maintenance when conducted at locations off the terminals] was concluded. The parties continued to work on the remaining issues with positions exchanged between both parties. PMA and the ILWU will work internally tomorrow morning to prepare for tomorrow afternoon’s bargaining session.

The pace of the negotiations has visibly picked up and the dialogue is more constructive. It seems that both parties are now eager to wrap up these negotiations. Once negotiations are concluded, the parties will have to negotiate the foreman’s supplement as the final part of the negotiation. But it was a productive weekend and there is some light at the end of the tunnel.”

Light at the end of the tunnel. That’s pretty good. But shippers are ready for these negotiations to reach the end of the tunnel.

Wrong About Breakthrough Before

Many thought the light at the end of the tunnel could be seen when the PMA announced a tentative agreement between itself and the ILWU regarding health care benefits back in August. Unfortunately, after a long period of silience, things turned ugly between the ILWU and PMA in November.

Before that, all reports were saying the contract negotiations between the ILWU and PMA were going surprisingly smoothly.

Nothing has run smoothly since. West Coast ports have suffered crippling congestion while the PMA and ILWU hurl insults, accusations of slowdowns, walk offs, and shift cuts at each other.

Why should we believe this tentative agreement regarding chassis jurisdiction is really a breakthrough?

Why This is a Real Breakthrough

There are a few reasons to believe this is the breakthrough it’s being reported to be.

The first reason to believe this is a breakthrough in contract negotiations is the importance of the jurisdiction issue to the ILWU. Jurisdiction is always a big issue for the ILWU. The union wants to control as many jobs as possible.

Think of all the slowdowns the ILWU has orchestrated, hard timing the Port of Portland over the jurisdiction of electrical jobs that monitor, plug in, and unplug reefer containers (that’s refrigerated containers, not cargo containers of weed) at the port.

These are not alleged slowdowns at the Port of Portland by the ILWU since judges have ruled the ILWU has purposefully slowed imports and exports there.

When it comes down to it, the ILWU basically does control the jobs on the waterfront. With a strike, the ILWU can shut down West Coast ports and cost the U.S. economy billions of dollars. Anything that can increase or decrease the ILWU’s power is automatically a top issue for the union.

Since ocean carriers released ownership of chassis, jurisdiction to inspect all chassis before they leave the terminals is a huge power piece. Think of how the ILWU can slow down traffic at the ports by randomly inspecting chassis and increasing the scrutiny of chassis inspections.

Truckers have certainly accused the ILWU of using chassis inspections to slow down traffic at the ports before.

It would be unlikely that any unresolved issue would be a bigger roadblock to completing contract negotiations than chassis jurisdiction.

Bill Mongelluzzo of the Journal of Commerce (JOC) reports that PMA spokesman Steve Getzug confirmed on Monday that the tentative agreement on chassis jurisdiction was reached.

Mongelluzzo went on to write, “ILWU spokesman Craig Merrilees said negotiations continued through the weekend and into Monday, and he described the tone of the negotiations as ‘positive.’”

The PMA and ILWU have had nothing positive to say since things turned ugly in November. Now, not only does the ILWU say the negotiations’ tone has turned positive and “Our Man in DC” say the negotiations’ pace has picked up with constructive dialogue, but Mongelluzzo’s JOC article says:

Indeed, industry sources said the ILWU and PMA are now negotiating with an intensity not yet seen since the talks began on May 12, 2014, and both parties appear to want this saga of mutual recrimination and horrendous delays to end as soon as possible.

What Issues Remain for the ILWU Contract Negotiations

Now the PMA and ILWU must resolve the final issues of the contract negotiations to get this deal done and turn their focus back on smoothing operations of West Coast ports and taking care of shippers’ imports and exports where the focus belongs.

Friedmann, quoted above, mentioned the foreman’s supplement as the final part of the negotiation.

The Mongelluzzo JOC article spoken of above says, “The three major remaining issues in the negotiations appear to be wages, pensions and the length of the new contract.”

These issues are not expected to be major problems for the talks; however, it would not be the first expectations that were wrong if wages, pensions, and length of contract become roadblocks.

Still, an optimist might think negotiations could wrap up within the week. What do you think? Share in our comments section below.

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Top 3 International Shipping News Stories Affecting Shippers Now https://www.universalcargo.com/top-3-international-shipping-news-stories-affecting-shippers-now/ https://www.universalcargo.com/top-3-international-shipping-news-stories-affecting-shippers-now/#respond Thu, 22 Jan 2015 22:51:38 +0000 https://www.universalcargo.com/?p=7534 There’s a lot happening in the world of international shipping which affects shippers. In today’s blog we bring together the three top stories affecting shippers right now. Mayor Makes Leadership Changes at Port of L.A. Los Angeles Mayor Eric Garcetti made an announcement yesterday (Jan. 21st) of leadership changes for the Port of Los Angeles. […]

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There’s a lot happening in the world of international shipping which affects shippers. In today’s blog we bring together the three top stories affecting shippers right now.

Mayor Makes Leadership Changes at Port of L.A.

international shipping news affecting shippersLos Angeles Mayor Eric Garcetti made an announcement yesterday (Jan. 21st) of leadership changes for the Port of Los Angeles.

Starting February 1st, Mayor Garcetti’s Deputy Mayor for City Services, Doane Liu, will become Deputy Executive Director and Chief of Staff at the Port of Los Angeles.

Here are some key excerpts from Mayor Garcetti’s press release:

“The economy is my top priority and the Port of L.A. is our region’s leading economic driver, so it’s critical to me that we have the right team in place to make sure it retains its number-one position and grows as a powerhouse of international trade,” Mayor Garcetti said. “Doane Liu is one of L.A.’s most seasoned and innovative executives, and combined with his personal connection to the port community, I am looking forward to big things from his work there. He will be missed in the Mayor’s Office, but I know we will lean on him just as much in his new position at the Port of Los Angeles.”

“Doane Liu’s experience, expertise and close ties to the surrounding community will be invaluable as we work to boost trade, enhance the waterfront and green our operations,” Port Executive Director Gene Seroka said. “He is the cornerstone of a major reorganization intended to make sure Mayor Garcetti’s vision for America’s Port moves forward full steam ahead.”

In addition to Liu’s new Chief of Staff position, Seroka announced the following members of the Port’s leadership team: Marla Bleavins, Chief Financial Officer; Ron Boyd, Chief of Port Police and Emergency Management; Mike DiBernardo, Marketing and Customer Relations; and Tony Gioiello, Development.

SOURCE: http://www.lamayor.org/mayor_garcetti_announces_port_of_l_a_changes

Great Lakes International Shipping Season is Over

The international shipping season for the Great Lakes is officially over.

On Tuesday (Jan. 22nd) the final cargo ship of the 2014 season, the John G. Munson, docked at Duluth-Superior.

The 2015 international shipping season for the Great Lakes starts near the end of March when the Great Lakes entry-way at the Soo Locks re-opens on March 25th.

SOURCES: http://wtaq.com/news/articles/2015/jan/21/2014-great-lakes-international-shipping-season-over/

http://www.boatnerd.com/news/

ILWU Members in Tacoma March Today in Solidarity with L.A./Long Beach Union Members

Los Angeles Councilman Joe Buscaino organized a march happening today (Jan. 22nd) of International Longshore & Warehouse Union members to protest cuts of night shifts of loading and unloading cargo ships at the Ports of Los Angeles and Long Beach.

The projected number of attendees at this march in San Pedro is 5,000 people.

Now, 700 are expected to be added to that number in Tacoma where Dean McGrath, president of ILWU Local 23, is organizing a simultaneous march in solidarity.

“My fear is that we are creating irreparable damage to our ports complex which could lead to permanent loss of business because the PMA and ILWU cannot reach an agreement,” Buscaino said in an email via Press-Telegram News.

Thanks for making the situation better, Joe. Can a tone of sarcasm be read in that sentence?

The Press-Telegram quoted Buscaino as going on to say, “The fact that the Port of Tacoma has joined our ILWU community march by hosting one as well illustrates the strength and unity of the union.”

As each day passes, worries compound that the ILWU will use their strength and unity to organize a full blown strike on West Coast ports despite the fact that the ILWU and Pacific Maritime Association (PMA) have been joined at the negotiation table by a federal mediator.

Congestion keeps reaching new and higher levels as the ILWU and PMA fight for leverage in contract negotiations. Further port disruptions can be expected as the ILWU marches.

SOURCE: http://www.presstelegram.com/general-news/20150120/tacoma-longshore-workers-to-hold-simultaneous-march-thursday-in-support-of-san-pedro-dockworkers-protest

 

 

 

 

 

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PMA & ILWU Hurt Shippers with War of Attrition https://www.universalcargo.com/pma-ilwu-hurt-shippers-with-war-of-attrition/ https://www.universalcargo.com/pma-ilwu-hurt-shippers-with-war-of-attrition/#respond Tue, 20 Jan 2015 20:45:10 +0000 https://www.universalcargo.com/?p=7578 A war of attrition: That’s what a Journal of Commerce (JOC) article by Bill Mongelluzzo says most Pacific Maritime Association (PMA) employers prefer as a better option to a lockout of the International Longshore & Warehouse Union (ILWU) members at West Coast ports. A war of attrition: That’s what’s happening at the West Coast ports between the PMA […]

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A war of attrition:

That’s what a Journal of Commerce (JOC) article by Bill Mongelluzzo says most Pacific Maritime Association (PMA) employers prefer as a better option to a lockout of the International Longshore & Warehouse Union (ILWU) members at West Coast ports.

A war of attrition:

That’s what’s happening at the West Coast ports between the PMA and ILWU after more than eight months of fruitless contract negotiations.

A war of attrition:

That’s where enemies try to grind away at each other, reducing their opponents’ strength and resources. In theory, the side with the greatest resources wins and the other is forced to give in.

Generally, attrition warfare is avoided by military strategists. It tends to come at great costs and is not as effective as decisive victories.

But going on the ninth month of contract negotiations while West Coast ports suffer unbearable congestion during crucial shipping seasons, effectiveness does not seem to be the PMA and ILWU’s strong suit.

Unfortunately, in the war of attrition between the PMA and ILWU, it is not just the union and their employers that the PMA and ILWU are weakening.

Shippers who import and export goods for their businesses are suffering. The supply chain is being interrupted. The economy is being negatively impacted. All this and more happens (and not for the first time) because the PMA and ILWU have to go to war every time a new contract needs to be negotiated.

The approach from both the PMA and ILWU is wrong.

I’m not saying they’re using the wrong war strategy, that the two sides should make more decisive moves like lockouts or strikes.

Sadly, it seems as though the sides are building toward that already.

No, there hasn’t been a lockout, but last week the PMA stopped having crews of ILWU members load and unload ships at night. The ILWU is calling this a partial lockout.

No, there hasn’t been an ILWU strike, but there have been walk offs, alleged slowdowns, and Thursday will see ILWU marches to protest the shift cuts mentioned above. Let’s see how operational West Coast ports are during that.

While all this drama happens between the PMA and ILWU, shippers are stuck watching their imports and exports get delayed or diverting their cargo to different ports.

Again, the PMA and ILWU’s war approach is wrong. It is not the wrong war strategy; it’s that they should not be at war at all.

What business do you see thrive or even survive when the employers and employees are at war with each other?

Employees should work hard and do their jobs well to provide benefit for the business. Employers in turn should pay their employees equitably and treat them with fairness. The two parties should be in an alliance, not at war!

How can a business take care of its customers when it’s in the middle of an internal war?

West Coast ports are certainly failing to take proper care of their customers as cargo ships sit anchored, truckers can’t get in and out with shipments, and shippers are suffering huge delays to their imports and exports.

Because of the importance of the ports to so many businesses and the U.S. economy as a whole in the globalized world we live in, the PMA and ILWU can survive while they weaken each other and their customers in a war of attrition.

That doesn’t mean businesses that depend on the ports are not getting fed up. The JOC reports on letters being repeatedly sent by increasing numbers of associations of businesses tired of being caught up in the PMA and ILWU’s war:

The latest letter to the head of the Pacific Maritime Association and the International Longshore and Warehouse Union, issued on Friday, lists 175 associations that said their thousands of collective members “desperately need this negotiation to be concluded and operations returned to normal levels of through-put.”

“The growing number of associations represents the growing concern among the business community about the impact that the ongoing contract negotiations and congestion is having on all stakeholders who rely on the ports to move their commerce,” Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, who has helped organize the letters. “More and more companies, both large and small, are feeling the impacts from the congestion at the ports. This is impacting their businesses, the jobs who rely on those businesses and their consumers, both here and abroad.”

It’s time to end this war, PMA and ILWU.

Tags: shippers, PMA

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How Will Carrier Alliances Behave in the 2015 Shipping Market? https://www.universalcargo.com/how-will-carrier-alliances-behave-in-the-2015-shipping-market/ https://www.universalcargo.com/how-will-carrier-alliances-behave-in-the-2015-shipping-market/#respond Mon, 12 Jan 2015 18:26:21 +0000 https://www.universalcargo.com/?p=7418 And then there were four. Four alliances of carriers fight for profitability and market share in the international shipping industry: 2M Ocean 3 CKYHE G6 In our last blog, we outlined the contradictory views of how these carrier alliances will impact the international shipping industry in 2015. Today, we look at how the different alliances are […]

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And then there were four.

Four alliances of carriers fight for profitability and market share in the international shipping industry:

  • 2M
  • Ocean 3
  • CKYHE
  • G6

In our last blog, we outlined the contradictory views of how these carrier alliances will impact the international shipping industry in 2015. Today, we look at how the different alliances are likely to behave in the 2015 international shipping market.

The 2M, Ocean3, CKYHE, and G6 are not identical nor do they have the same assets. This being the case, and obviously with different executives running the different alliances, it cannot be expected for the carrier alliances to have the same stratagems.

Perhaps the fact that the carriers are expected to have different behaviors, pushing and pulling in opposite directions has led to the opposing views of how they will impact 2015.

Lars Jensen, Partner and CEO of SeaIntel shared excellent insight into how we may see the carriers behave in an interview with ShippingWatch that the online media company outlined in an article.

If it were a paper Jensen wrote, his following quote from the ShippingWatch article could serve as its thesis:

“The four alliances differ from each other in terms of services, number and not least the size of their ships, and this gives them a reason to focus on different aspects in their efforts to ensure profitability.”

Here are two areas where carriers are likely to diverge in behavior:

Ship Speed

For a while now, slow steaming has dominated container ship speed in international shipping.

Slow steaming has a virtuous side of reducing emissions, but it’s really the bottom line factor that makes slow steaming so attractive to carriers.

Slow steaming allows container ships to significantly reduce their fuel consumption, which in effect reduces carriers’ costs.

With their many large and megaships, the 2M and Ocean 3 are expected to continue slow steaming.

“Slow steaming is and will remain part of our toolbox, both in relation to capacity management and cost reduction efforts, not least in terms of fuel” said Michael Christian Storgaard, senior press officer at Maersk Line according to Ship and Bunker.

It makes sense for the carriers in these alliances to keep slow steaming, despite low oil prices that would make it seem like speeding ships back up would be profitable, because increasing ship speed would also create or increase overcapacity, which pushes freight rates down.

Drewry, the Maritime research company, said, “…we can be confident in saying that no matter how low [oil bunker prices] go, carriers will not return to sailing containerships at their design speeds for fear of flooding the market with the latent capacity that has been held in check by slow steaming.”

However, CKYHE and G6 do not have the same kind of large ship fleets 2M and Ocean 3 have. According to Jensen in the ShippingWatch article, this gives CKYHE and G6 incentive to speed up their container ships with the low oil prices.

“It’s not only possible to potentially save some money by saving a ship. The big ship you save effectively means that you have more big ships available,” Jensen said via ShippingWatch.

If the smaller two carrier alliances do decide to take advantage of low oil prices and speed up ships to save money and make grabs at market share, the increased capacity should put downward pressure on freight rates for shippers.

Market Focus

Ship speed pays particular attention to the smaller two alliances; however, when Jensen spoke of market focus to ShippingWatch, his attention turned to the two larger alliances.

The focuses of the two larger carriers and the roles they’ll play in the international shipping market are very different from each other according to Jensen.

Jensen sees 2M as likely trying to create stability in the international shipping market while the Ocean 3 makes a run at increasing their market share. This would have the two carrier alliances pushing and pulling the international shipping market in two different directions.

Here’s how Jensen puts it via ShippingWatch:

“2M could potentially act as the one trying to create more stability in the market. Both carriers are primarily interested in improving their profitability per container. They’re not looking to conquer market shares. As such, they could serve as a stabilizing factor in the market.”

“…one could fear that Ocean 3 will approach the market in 2015 looking to increase its market share. This makes sense in terms of the carriers’ setup, and this would pull developments in the opposite direction of what 2M plans to with the market.”

Stable is not exactly a common word for describing the international shipping market. However, a little sense of stability in the market would go a long way toward helping the carriers maintain profitability. It will probably take some time for the carriers to establish a sense of stability as alliances change the landscape of the oceans.

2015 will be a very interesting year to watch how the carrier alliances behave, react to each other, and affect the international shipping market.

Through it all, Universal Cargo Management will be here to help you navigate your imports and exports in the ever changing world of international shipping.

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Carrier Alliances’ Impact on 2015 International Shipping https://www.universalcargo.com/carrier-alliances-impact-on-2015-international-shipping/ https://www.universalcargo.com/carrier-alliances-impact-on-2015-international-shipping/#respond Thu, 08 Jan 2015 23:32:59 +0000 https://www.universalcargo.com/?p=7341 There’s always an element of uncertainty in the international shipping industry. There are always factors that make freight rates volatile, but the 2M, Ocean 3, G6, and CKYHE carrier alliances add a whole ‘nother level of drama to 2015 international shipping. Happy New Year! Peter T. Leach presented the equation 2+2=95 in yesterday’s (Jan. 7, […]

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There’s always an element of uncertainty in the international shipping industry.

There are always factors that make freight rates volatile, but the 2M, Ocean 3, G6, and CKYHE carrier alliances add a whole ‘nother level of drama to 2015 international shipping.

Happy New Year!

Peter T. Leach presented the equation 2+2=95 in yesterday’s (Jan. 7, 2015) Journal of Commerce (JOC) article to point out how these four carrier alliances—2M, Ocean 3, G6, and CKYHE—will control 95 percent of the cargo volumes moving in the major east-west trades.

Here’s a quick look at how the carriers or container lines form together to make these alliances:

2M

  • Maersk
  • Mediterranean Shipping Co.

Ocean 3

  • CMA CGM
  • United Arab Shipping Co.
  • China Shipping

CKYHE

  •  Cosco
  • “K” Line
  • Yang Ming
  • Hanjin
  • Evergreen (Evergreen has finally fully joined the alliance with which it has often worked.)

G6

  • APL
  • MOL
  • Hyundai Merchant Marine
  • OOCL
  • NYK Line
  • Hapag-Lloyd

Of course, I can’t resist pulling the old Carrier Craziness Bracket back out and updating it with a couple more scribbles. It may even be helpful for you visual learners out there.

Carrier Craziness Bracket 2015 resized 600

The two new alliances, the 2M and Ocean 3, launch this month while the existing G6 and CKYHE alliances expand.

What does this mean for international shipping in 2015? That depends on who you ask.

Mr. Leach’s JOC article highlighted several points of view on the impact of these major alliances. Many views are directly oppositional to each other.

Higher Freight Rates?

It’s illegal for carriers to coordinate freight rates with each other, but investigations and charges of it happening are not uncommon.

Many are of the opinion that these alliances will make it easier for carriers to collude on freight rates and shippers will be stuck paying more.

Here are some such opinions the JOC article mentioned above point out:

“As you get larger and larger alliances, you are making collusion easier, whether it’s legitimate or illegitimate,” said the logistics manager for one major U.S.-based importer and exporter. “They are not doing anything nefarious, but alliances make coordination of (vessel) supply easier.” If the new alliances result in a tightening of capacity, this would tend to put a floor under freight rates.

…the logistics manager said carriers heed signals from their alliance partners or other large carriers in other alliances, so when one carrier cuts capacity or rates, others tend to follow the leader. The logistics manager foresees more of this pattern. “It can lead to less competition by more signaling,” he said. “There will be fewer decision-makers needed to allocate or supply capacity, and fewer opportunities for rogue carriers to upset the balance.”

Lower Freight Rates?

While many are under the opinion that freight rates will increase due to coordination and a decrease in competition, there are others who think freight rates will actually decrease due to increased vessel size and the alliances ramping up competition for market share.

Check out these quotes from that same JOC article:

“We’re going to see a constant increase in vessel size, which means a constant lowering of unit costs, so in the long term, we should expect rates to continue to decline,” said Lars Jensen, co-founder and CEO of Copenhagen-based SeaIntel Maritime Analysis.

He thinks members of the Ocean Three Alliance may be tempted to cut rates, even at the expense of profitability. “If these guys want to grow market shares, then you are looking at a very volatile environment,” he said. “China Shipping is not going to run out of money because the Chinese government is not going to let them go bankrupt. United Arab Shipping is owned by the gulf states, which can certainly supply furnish more capital if they need to.”

CMA CGM, which is majority owned by the Saade family, also might decide to cut rates to maintain market share because minority owner Robert Yildirim, is pushing for an initial public offering of stock so he can get his money out of the French line. “It has to come out looking like a success,” Jensen said.

Increased Port Congestion

I’m not putting a question mark after this one. We’ve already seen increased port congestion with larger container vessels calling on ports.

With more megaships due to hit the water in 2015, expect port congestion to continue being a problem as the ports get a handle on how to handle these larger quantities of cargo and shipping containers at once.

Increased port congestion does add support to the people who think the alliances will increase freight rates. Port congestion costs the carriers money and you can expect that cost to be pushed off on shippers with fees and general rate increases.

On top of the risk of increasing freight rates for shippers, congestion causes extra fees in trucking and lost time in getting shipments of goods.

Deteriorated Service?

Carriers have said these alliances will allow them to provide better service to shippers, but many shippers have the opposite outlook on the alliances.

Here’s another view put forth by the JOC article:

Elton Poisler, international logistics manager for ocean transport at DuPont, worries that the growth of alliances will mean deteriorating service. “We’re seeing more and more consolidations, but we’re not seeing crisis planning across the board with ocean carriers,” he said at the NIT League Conference last fall. “We’ve got the 2M now, the G6. What’s the deciding factor in selecting an ocean carrier at this point? It’s the ability to get goods onto and off ships and meet that service commitment.”

Carrier reliability and performance are declining, which is why more shippers are turning to logistics providers and non-vessel-operating common carriers so they can get visibility into their oceanborne cargo, Poisler said.

I suppose that last bit from Poisler could be considered good news for freight forwarders like Universal Cargo Management. We do help shippers have a clear view of what’s happening with their imports and exports.

Improved Service?

As stated above, carriers certainly claim alliances will help them improve service.

It should be noted that carrier alliances should allow for improved management of capacity by carriers. This should help carriers to avoid voyage cancellations that might disrupt the importing or exporting of cargo for shippers.

It certainly seems the potential is there for better service. Here’s a quote that sums it up nicely from the JOC article:

“If you are an alliance that offers five, six or seven weekly sailings, blanking one of those won’t be disruptive because the carriers can move the cargo onto one of the other weekly services,” [Lars] Jensen said. “So from a shipper’s perspective, it is beneficial to have a broad portfolio available, and the only way a carrier can do that is through alliances.”

More Questions Than Answers

It seems there are more questions than answers on how things will look in 2015 with the rise of the carrier alliances.

Our next blog will continue looking at this issue and see how the different alliances are likely to behave. It looks quite likely they will be pushing and pulling in opposite directions, creating some serious international shipping drama… But you’ll have to wait until next week for that.

Tell us what you think about the carrier alliances in the comments section below.

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iView Web Desktop: 5 Features to Make International Shipping Easy (w/ video) https://www.universalcargo.com/iview-web-desktop-5-features-to-make-international-shipping-easy-w-video/ https://www.universalcargo.com/iview-web-desktop-5-features-to-make-international-shipping-easy-w-video/#respond Thu, 01 Jan 2015 18:10:24 +0000 https://www.universalcargo.com/?p=7572 Do you ever feel like it’s hard to keep up with your imports and exports? Where are my shipments now? When will they arrive and at what port? How can I easily communicate this information to my staff, co-workers, or boss? Universal Cargo Management is proud to present iView Web Desktop. iView solves the above […]

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Do you ever feel like it’s hard to keep up with your imports and exports? Where are my shipments now? When will they arrive and at what port? How can I easily communicate this information to my staff, co-workers, or boss?

Universal Cargo Management is proud to present iView Web Desktop. iView solves the above problems and more, putting all the answers to these questions quickly and easily at your fingertips!

As a friend to your business, Universal Cargo Management is always striving to find more ways to help make international shipping easier and pain free so you can spend your time on the aspects of your business where you’re needed most.

Here are the top 5 features of iView that will help you see what’s going on with your shipments, communicate that information effectively, and have time to turn your attention back to what you love most about your business.

1. Tracking

This feature is key. It allows you to track your shipments in a variety of ways. You can sort through different shipments, find the one you’re looking for, and see what the status of it is.

Import Export Tracking

2. Customizable Dashboard

iView’s dashboard is fully customizable so you can navigate it easily. It allows you to quickly see past, current, and future shipments and key statistics. Perhaps you want to view by month, by year, or by quarter. Navigate that way quickly to see what you need!

customizable dashboard

3. Calendar

This feature is a favorite! View the calendar and see what days your shipments are coming in. This allows you to easily see how many containers are coming in on any day and to which ports they are arriving.

Shipping Calendar

4. Export to Excel

This is perfect for communicating your logistics information with others.

UCM iView Web Desktop Excel Logo

This feature makes it easy to send needed information to your accounts payable by email. Or you can email schedules to other businesses you partner with. A spreadsheet is often perfect for giving your staff or co-workers information they need.

You can export data from iView to Excel with just a click of the button.

5. Graphs and Charts

iView allows you to see key data in graphs and charts. These are perfect for presentations or reports you may need to give or so you can easily see an overview of your shipment data in a visual way.

With the ability to so easily export to Excel, making your own graphs and charts from your international shipping and logistics data has never been easier.

This quick video gives an overview of iView Web Desktop.

YouTube Video

Here at Universal Cargo Management, we’re always ready to help you with your import and export needs. Whether you’re shipping by air or using ocean shipping, we’re ready to be a friend to your business.

Click here to get a free freight rate quote or call us at 866-826-2276.

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It’s Time for Mediation, ILWU! https://www.universalcargo.com/its-time-for-mediation-ilwu/ https://www.universalcargo.com/its-time-for-mediation-ilwu/#respond Mon, 29 Dec 2014 22:10:49 +0000 https://www.universalcargo.com/?p=7615 After seven long months of negotiations, the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) are still not even close to a new contract agreement. So the PMA did what shippers and retailers have been calling for since nearly the beginning of negotiations: the PMA requested federal mediation. Now a week has […]

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After seven long months of negotiations, the Pacific Maritime Association (PMA) and International Longshore & Warehouse Union (ILWU) are still not even close to a new contract agreement.

So the PMA did what shippers and retailers have been calling for since nearly the beginning of negotiations: the PMA requested federal mediation.

Now a week has passed since the PMA asked for mediation, but the ILWU has not agreed to it.

ILWU federal mediation twitter conversationI asked ILWU’s Local 54 PAC Chairman David Griffen, who graciously gave Universal Cargo an interview a little while back, how the union felt about federal mediation.

Mr. Griffen said, “I don’t know anyone who doesn’t want negotiations finished with a reasonable deal. We’re all in the same boat.”

While there is room for optimism in that answer, it didn’t exactly answer the question. I responded, “So that means most union members are for mediation?”

“No, not necessarily,” Mr Griffen said. “We don’t know enough of where we are to say: okay, let’s split the difference.”

Now this is a twitter conversation, so maybe the limited number of characters is causing a misunderstanding; however, 7 months seems like a long time for the ILWU not to know where they are in negotiations.

The time has come for a federal mediator to join the table and help the ILWU and PMA to finally come together on a contract.

Come on, ILWU, let an impartial third party help in the negotiations. They won’t just sit down and say, “Okay, let’s split the difference.”

Here is the second press release from the PMA requesting federal mediation:

PMA Renews Call for Federal Mediation in West Coast Longshore Negotiations

SAN FRANCISCO, CA (Dec. 29, 2014) – The Pacific Maritime Association (PMA), which represents employers at America’s 29 West Coast ports, today released the following statement regarding its ongoing contract negotiations with the International Longshore & Warehouse Union (ILWU):

“The ILWU’s press release today underscores the need for federal mediation in these negotiations. Unfortunately, the characterization that the PMA and ILWU have only a ‘few issues’ left to resolve is inaccurate. Significant issues remain unresolved, including wages, pensions, jurisdiction and work rules. Further, the ILWU’s escalating rhetoric on congestion is nothing more than a smokescreen for its slowdown activities.

“The only major coast-wide issue on which we’ve reached tentative agreement is the health care plan – already one of the most generous in America. Even with the tentative health care agreement – identified by the ILWU as its #1 priority when negotiations began in May – the Union has engaged in debilitating work slowdowns over the past two months at terminals up and down the coast.

“The Union’s decision, for example, to limit the number of yard crane operators in Southern California has exacerbated congestion issues in Los Angeles and Long Beach. In the Pacific Northwest, the ILWU slowdowns – which have reduced productivity by as much as 60% –created a meltdown that has backed up cargo for weeks. Now the ILWU has stepped up slowdown activity at the Port of Oakland, reducing productivity to 50% of normal. As a result of ILWU slowdowns, crops are rotting, products aren’t getting to customers, contracts are being canceled, local employees are getting furloughed and businesses are diverting future shipments away from the West Coast.

“Had the Union agreed to extend the now-expired contract, we could have let an arbitrator rule on the slowdowns. But not having a contract extension is like playing a football game without a referee. All the while, the West Coast ports are losing their competitive edge in an environment that will only become more challenging with the opening of the expanded Panama Canal next year.

“PMA’s leadership is acutely aware of and concerned about the ramifications of ILWU work actions on the West Coast’s competitive standing. Our Board and Coast Committee members, who represent carriers and terminal operators, have been intimately involved in these negotiations – starting in the months leading up to the contract talks and in the seven months since talks began.

“The PMA leadership team has offered a ‘no-takeaways’ proposal that includes wage and pension increases on top of the ILWU’s robust compensation package. The average full-time ILWU worker currently earns in excess of $147,000, and is eligible for a pension with a maximum annual benefit of nearly $80,000 – and current proposals would increase these even further. Additionally, PMA has offered to increase the pay guarantee program that enables registered workers to maintain full-time earnings during times of limited work opportunity.

“Given the lack of progress at the table, the ILWU’s continuation of debilitating work slowdowns and the impact those actions are having on businesses throughout America, it’s clear that mediation is required to resolve the many issues that remain at the bargaining table.”

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Will ILWU Caucus End Contract Negotiations? https://www.universalcargo.com/will-ilwu-caucus-end-contract-negotiations/ https://www.universalcargo.com/will-ilwu-caucus-end-contract-negotiations/#respond Tue, 16 Dec 2014 22:36:20 +0000 https://www.universalcargo.com/?p=7623 The International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) have been in contract negotiations for months. For the first several months, negotiations seemed to be going smoothly, but things turned contentious as the PMA reported the ILWU was orchestrating slowdowns in the midst of terrible port congestion. Shippers suffer heavy costs […]

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international shipping ilwu caucusThe International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) have been in contract negotiations for months.

For the first several months, negotiations seemed to be going smoothly, but things turned contentious as the PMA reported the ILWU was orchestrating slowdowns in the midst of terrible port congestion.

Shippers suffer heavy costs from port congestion and have worried that slowdowns will turn into shutdowns if the ILWU and PMA fail to reach agreement. Coalitions of shippers have called for the White House to step in and send a federal mediator, but the White House has refused to get involved.

Even though the holiday shipping season is essentially over, congestion at the ports still seems as bad as ever. The Journal of Commerce (JOC) reported:

As of Friday (December 12th), 13 containerships were at anchor off the ports of Los Angeles and Long Beach awaiting berth space, two more than a two-year high of 11 reached on Oct. 27, according to the Marine Exchange of Southern California.

ILWU members have been working at West Coast ports since July without a contract and there are no protections in place to keep them from walking off the job and shutting down the ports other than a pledge from both the ILWU and PMA to keep cargo moving.

As was just pointed out, cargo is moving extremely slowly.

Starting yesterday, December 15th, the ILWU is holding a caucus of around 90 union delegates in San Francisco. Will this caucus finally bring an end to the negotiations?

Normally, the union calls together a caucus when negotiations have produced something substantive enough to review. This appears to be the case right now.

American Shipper reports:

(Caucus delegates) may review a comprehensive proposal from employers. While not a “last and final” contract, sources say there was a proposal given to the union by the Pacific Maritime Association so that the 90 or so ILWU delegates attending the caucus would have something to review and determine whether or not to accept.

According to the JOC, the ILWU has already reviewed the PMA’s latest offer, made notes, sent it back to the PMA, and await the PMA’s response to the ILWU’s comment. Bill Mongelluzzo, JOC Senior Editor wrote:

PMA spokesman Steve Getzug confirmed that the employers presented the ILWU with their offer on Thursday. The ILWU today responded with its counter proposals. The PMA is considering the union’s response and anticipates that it will get back together with the ILWU “later this week,” Getzug said.

The rest of the international shipping industry community is watching to see how things will turn out at the caucus.

The two most likely scenarios are as follows:

1 – Ideal Outcome

If the ILWU receives an offer response that they find acceptable from the PMA, the caucus could recommend acceptance of the document to the union’s negotiating team. At that point, the document would need to be presented to the union and put to a vote.

While this process could take a number of weeks, this outcome would essentially mean an end of the contract negotiations and the eventual signing of the new contract.

2 – Rejection Outcome

If the ILWU decides the PMA’s response to their notes on the proposal they sent back is not acceptable, the caucus will make recommendations to the union’s negotiation team and send them back to the table.

If the ILWU rejects the document sent by the PMA, it is unlikely much will happen at the negotiating table until after the holidays are over.

How Likely is a Strike?

A strike could be listed as a third possible outcome, but it is not a highly likely scenario.

Despite the recent contention in talks, the ILWU contract negotiations are moving forward as is evidenced by the caucus and sending back and forth of an offer.

Even if the ILWU is orchestrating slowdowns as they have been accused and have a history of doing, we should trust their pledge to keep cargo moving. Even if it is moving at a very slow pace.

A strike would not only be bad for the economy and ports, but would put ILWU jobs at risk. Since it would not be good for anyone, including the ILWU, I would not expect a strike to happen.

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Keep Up With Port Congestion Surcharges With UCM’s PCS Summary https://www.universalcargo.com/keep-up-with-port-congestion-surcharges-with-ucms-pcs-summary/ https://www.universalcargo.com/keep-up-with-port-congestion-surcharges-with-ucms-pcs-summary/#respond Thu, 04 Dec 2014 22:10:29 +0000 https://www.universalcargo.com/?p=7556 Universal Cargo Management is giving you a quick and simple way to keep up with what’s happening with Port Congestion Surcharges. What follows is a summary of what’s been happening with Port Congestion Surcharges. If you want to skip that and get right to the quick and easy tool for knowing the latest status of […]

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Port Congestion Surcharge container shipUniversal Cargo Management is giving you a quick and simple way to keep up with what’s happening with Port Congestion Surcharges.

What follows is a summary of what’s been happening with Port Congestion Surcharges. If you want to skip that and get right to the quick and easy tool for knowing the latest status of Port Congestion Surcharges from carriers, you can scroll down to the bottom of this blog.

The last few weeks have been a roller coaster of news about Port Congestion Surcharges.

First, carriers announced the implementation of feared Port Congestion Surcharges they had filed months ago in case union action slowed or shutdown the ports during the ILWU contract negotiations.

With these Port Congestion Surcharges often being over a thousand dollars, it was looking to be a major financial hardship on shippers who were already experiencing increased fees and delays on their imports and exports caused by congestion at West Coast ports, especially the Ports of Los Angeles and Long Beach.

It is no surprise the announcement of these large Port Congestion Surcharges caused a backlash from shippers, especially since the implementation announcement was that these large fees would be effective immediately imposed on shipments that had already been received by carriers and in some cases even already delivered to port.

The Federal Maritime Commission (FMC) received many complaints regarding the Port Congestion Surcharges and got involved.

FMC Chairman Mario Cordero was quoted in a Journal of Commerce article as saying, “The surcharges that carriers have announced do not apply, in our view, to cargo that’s on the water already, much less cargo that’s already in the ports,” Cordero told JOC.com. “If the cargo is was already in transit, the surcharge would not be applicable.”

Following a statement from the FMC, carriers postponed the implementation of the Port Congestion Surcharges.

While we wrote in our blog here UCM’s that it was possible the Port Congestion Surcharges would never be implemented, we also emphasized the fact that this was a postponement, not a cancellation of the Port Congestion Surcharges.

It didn’t take long for the carriers to again announce the implementation of the Port Congestion Surcharges. This time the carriers announced the implementation starting with shipments picked up on and after late November or early December dates.

Then the news on Port Congestion Surcharges flipped again as carriers once again announced the postponement of these large fees.

Port Congestion Surcharges Postponed

Now shippers are left wondering again if and when Port Congestion Surcharges will strike.

Universal Cargo Management has decided to make it easy on you. We receive announcements, including ones about Port Congestion Surcharges, from carriers. We’ve compiled a file listing carriers, their Port Congestion Surcharge amounts, and the latest on when they will be implemented.

We update this Port Congestion Surcharge file with the latest announcements from the carriers so you can check back here anytime to find out the latest information on Port Congestion Surcharges and when they may be implemented.

All you have to do is click on the Port Congestion Surcharge Summary button below:

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Exclusive Interview with ILWU Member During Contract Negotiations https://www.universalcargo.com/exclusive-interview-with-ilwu-member-during-contract-negotiations/ https://www.universalcargo.com/exclusive-interview-with-ilwu-member-during-contract-negotiations/#respond Mon, 01 Dec 2014 18:21:25 +0000 https://www.universalcargo.com/?p=7504 Today’s blog is a special, exclusive interview with ILWU member David A. Griffen. The ILWU contract negotiations drag on while shippers, businesses, and international shipping industry professionals can just watch and wait, wondering what’s happening. Mr. Griffen has graciously agreed to share the perspective of the ILWU member on the talks and situation at the […]

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Today’s blog is a special, exclusive interview with ILWU member David A. Griffen.

The ILWU contract negotiations drag on while shippers, businesses, and international shipping industry professionals can just watch and wait, wondering what’s happening.

Mr. Griffen has graciously agreed to share the perspective of the ILWU member on the talks and situation at the ports.

Highlights from the interview include expectations of soon resolution and Mr. Griffen’s response to whether or not the ILWU is orchestrating slowdowns.

The below picture is a letter Mr. Griffen wrote to PMA President and CEO James McKenna which is immediately followed by the interview:

ILWU Member Letter to PMA resized 600

Q: How long have you been an ILWU Local 54 member?

A: Off and on since 1978, but full time last 10 years (3rd generation).

Q: What is your position?

A: Longshoreman and our Hall’s PAC Chairman, currently running for LRC.

Q: Your letter says you were in favor of an extension. Did this seem to be true for a majority of union members you work with?

Yes. Originally most seemed to favor a extension, but now we feel PMA would never settle with an extension in place.

Q: Why, in your opinion, has no extension been granted?

A: In the past extensions have been granted when things were all but rapped up, as in 2008. Just not the case this time.

Q: What are the biggest concerns of the union members at West Coast ports?

A: Making sure that we are part of the new ways, mechanization, and that we are trained to do the new jobs, and not have them farmed out of our union and even state.

Q: Are slowdowns being orchestrated or used by the ILWU?

Slowdowns are not being orchestrated: everyone at my local (54) has been working flat out, but without new members it has become relentless. As for  myself, as I write to you I am bruised, battered, sore, and exhausted. But still, I feel very blessed to be working as a longshoreman. I also work with SF/Oakland members (local 10) on a regular basis, and they have told me that they are not slowing down.

Q: What would you like shippers and the public to know about ILWU union members?

A: That we do NOT make anywhere near what PMA has put out. It takes an average of 7 years (about 30% of work force) to achieve membership. In those 7 years, longshoreman are very lucky to make 30K a year (who show up to the hall twice a day, 7 days a week). Most full time members earn about 60K to 90K; which is great, but PMA is using steady workers (members that do not report to the Hall, about 5% of workers, dep on local) and giving you their average: The work is very fast paced and dangerous and we do the best we can, day and night, rain, sleet or snow. Safety is almost always sacrificed for production. Many of us are 2nd, 3rd, 4th, and 5th generation longshoremen, so we see this not as just a great job, but as a legacy worth fighting and dying for.

Longshoremen have a visceral hatred of strikes, lockouts, and nonproductive environments. During the 1971/72 strike: On Sunday my mom would make us ham and lima beans; Monday, leftover ham and lima beans; Tuesday, Bits of ham on lima beans: Wednesday, she would boil the ham bone and pore the juice on the lima beans; Thursday, just lima beans; Friday, fish (Catholic); Repeat. So, we love to work or feel we must, lots of guys work 7 or 10 shifts a week, just to die a year or two after retiring.

Q: What are the biggest safety concerns for longshoremen on the docks?

A: Each terminal and port has different safety issues. For example, the longshoreman who lost her legs (I had worked with her) in Oakland, the terminal operator refused to change the configuration of traffic flow as we had requested until after she lost her legs. We work at risk on a regular basis, so when we actually do raise a concern, it should be heeded. So, I would say that would be the biggest fix, just to take concerns seriously before people get hurt.

At my port, our busiest dock (dk 12), was built in the 1940’s for the war and was meant to be temporary and only used for 5 years. That was over 70 years ago. It’s a mess of a dock.

When a superintendent’s (Ray T, I worked closely with on welding and cutting) vehicle went into the water in ’09, there was no safety equipment (boat was locked and then wouldn’t start) or procedures in place. A longshoremen had died that way the year before. Then finally something was done.

Q: What is your outlook on the ILWU contract negotiations?

A: We seem close to a conclusion, but then, I thought it would be done by Thanksgiving.

My few dealings with PMA have been strange and frustrating. One time, after being shorted on my vacation pay, I called PMA. They agreed I was correct and said they would fix the problem in a week. Many phone calls and many reversals of that first decision later, usually saying that they had never said i was correct and that my issue had been put into the “rejection area”, I was paid. But the whole thing became a 6 month (started in February and ended in August) war of attrition for 200 bucks. But for me, money stopped being the issue after the 2nd week. So, I do feel for my ILWU leadership.

Q: Are there any additional words or messages you’d like to share?

A: I would say that there is no reason to automatically believe management over the workers, but time and again I have seen news accounts, affected industries accounts, blogs and etc. blindly believe and reprint whatever PMA or company officials say, which at times are wildly inaccurate.

Thank you very much for your time and sharing your perspective, Mr. Griffen.

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PORT WARS Episode V: SURCHARGES STRIKE BACK https://www.universalcargo.com/port-wars-episode-v-surcharges-strike-back/ https://www.universalcargo.com/port-wars-episode-v-surcharges-strike-back/#respond Tue, 25 Nov 2014 22:30:42 +0000 https://www.universalcargo.com/?p=7621 Long months ago, in a Federal Maritime Commission (FMC) office not so far, far away… Carriers filed Port Congestion Surcharges to be implemented in the case labor unrest significantly increases port congestion. It is a time of unrest for shippers. With the crucial holiday season arriving, record volumes of shipping containers are imported, only to […]

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Port Wars Congestion Surcharges

Long months ago, in a Federal Maritime Commission (FMC) office not so far, far away…

Carriers filed Port Congestion Surcharges to be implemented in the case labor unrest significantly increases port congestion.

It is a time of unrest for shippers. With the crucial holiday season arriving, record volumes of shipping containers are imported, only to be stuck at ports amongst terrible congestion. Chassis availability, huge container ships, carrier alliances, and trucker shortages are all contributing factors to the port congestion. But the issue that’s been worrying shippers most has been the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) contentious contract negotiations.

Months after the ILWU contract expired, negotiations for a new contract turned ugly. The PMA began putting press releases out at the beginning of November that the ILWU is taking job action, purposely causing slowdowns at the already congested West Coast ports.

ILWU slowdowns and walk offs were exactly what the carriers needed to implement their dreaded Port Congestion Surcharges in amounts from $800 to $1,266 per container.

Carriers announced immediate implementation on containers they’d already received and some they’d even gotten to the congested West Coast ports.

Shippers fought back.

Shippers won their first battle against these large Port Congestion Surcharges, rightfully complaining it was unfair to be hit with such big fees on shipments carriers had already received and were already costing shippers plenty of money in delays, demurrage fees, and congestion fees from truckers.

The backlash from shippers got the attention of the FMC, who looked into the charges.

“The surcharges that carriers have announced do not apply, in our view, to cargo that’s on the water already, much less cargo that’s already in the ports,” Cordero told JOC.com. “If the cargo is was already in transit, the surcharge would not be applicable.”

The FMC’s challenge of the carriers’ Port Congestion Surcharges caused carriers to send out letters announcing suspension of the implementation of the surcharges. However, suspension meant postponement not cancellation of the Port Congestion Surcharges.

Despite shippers’ new hope (yeah, one more not so subtle Star Wars reference) that the carriers’ Port Congestion Fees would never come to fruition, now the surcharges strike back.

Carriers are sending out notices with new dates for the implementation of the Port Congestion Fees. Excerpted from one such letter from Hyundai Merchant Marine (HK) Ltd., below is what carriers are saying to shippers:

Dear Valuable Customers,

It is fully acknowledged that current ongoing unrest labor situation on the US West Coast is having serious negative impact on our vessel and terminal operations that includes cumulative vessel delays, operational difficulties at ports and intermodal moves, and as a result of such crippled situation, the operational cost is significantly increasing with additional expenses as we carry out the daily book of business in Trans Pacific trade for our valued customers.

Consequently, as per the terms of our tariff rule number 2-73 filed in HDMU-040 tariff, we have to announce that CGS (US Ports Congestion Surcharge) will be applied to cargo received on or after November 26 with the following quantum. This charge will be applicable to all cargo to be discharged at U.S. West Coast Ports.

HMM Port Congestion Surcharge Chart

We appreciate for your understanding and cooperation as well. It is hoped that the situation will be returned to normal and we promise that we will do our utmost to carry your cargo as early as possible to where it need to be to satisfy your expectation.

These Port Congestion Surcharge announcements let shippers know carriers are implementing the fees before the extra charged shipments are received.

All carriers, except for a very few, have sent out similar Port Congestion Surcharge notices announcing new implementation dates.

Here’s a Port Congestion Surcharge summary with dollar amounts and dates announced by carriers:

Port Congestion Surcharge Summary resized 600

Whenever possible and for as long as possible, Universal Cargo Management will help shippers avoid these large Port Congestion Surcharges by importing through the last few carriers, like K-Line, that have not yet implemented Port Congestion Surcharges.

TL:DR

For an up to date list of carrier announcments please download below:


Port Congestion
Surcharge Summary

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The Good, the Bad, & the Ugly Affecting Shippers at West Coast Ports https://www.universalcargo.com/the-good-the-bad-the-ugly-affecting-shippers-at-west-coast-ports/ https://www.universalcargo.com/the-good-the-bad-the-ugly-affecting-shippers-at-west-coast-ports/#respond Wed, 19 Nov 2014 23:43:19 +0000 https://www.universalcargo.com/?p=7480 Don’t look now, but Black Friday is next week and so many shippers are thinking they’ll have to get lucky to receive their imports and have products on shelves for the holiday season. If luck plays a part in operations going smoothly at ports, then ports have not been lucky in a while. Congestion at […]

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Don’t look now, but Black Friday is next week and so many shippers are thinking they’ll have to get lucky to receive their imports and have products on shelves for the holiday season.

If luck plays a part in operations going smoothly at ports, then ports have not been lucky in a while. Congestion at the West Coast ports, especially the Ports of Los Angeles and Long Beach, have dominated international shipping news. Every time you look at shipping news, things seem to be worse.

Finally, this week has brought some good shipping news for shippers. However, there is still plenty of bad when looking at the port congestion situation and plenty of ugliness between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) as shippers feel like their cargo is a hostage in contract negotiations.

So in today’s blog, we take a quick look at the Good, the Bad, and the Ugly in the news surrounding West Coast port congestion that’s affecting shippers. That there is a “good” section suggests the tides of fortune may be starting to turn in the favor of ports and shippers.

Clint Eastwood Disdainful Look at Port CongestionHere to help us look at the good, the bad, and the ugly is Clint Eastwood. Okay, that last sentence isn’t true, but you can imagine his voice reading this blog to you if it makes you feel better. Do you feel lucky? Well, do ya, port?

The Good

Port Congestion Surcharge Postponement:

Carriers have postponed Port Congestion Surcharges (PCS) that in most cases were going to cost shippers $1,000+ per container.

Shippers actually have themselves to thank for this one. Backlash from shippers was so pronounced, the Federal Maritime Commission (FMC) got involved and carriers backed off on the fees. PCS have not been cancelled altogether, but carriers have announced PCS will not be implemented until further notice.

Even though PCS have not been completely removed from the picture, there is a decent chance they will not go into effect at all. If carriers never get their PCS going, expect a series of General Rate Increases (GRIs) in the future to try to make up for costs associated with port congestion (maybe that sentence should have gone in the Bad section).

Extra Storage to Relieve Congestion:

The Port of Long Beach has been serious about finding solutions to the congestion crisis occuring there. Last Thursday, the port’s board approved extra storage space that will be operated by a private company as a “Temporary Empty Container Depot” which could significantly help the congestion at the port.

Here’s how it is described in the release announcing the storage space from the Port of Long Beach:

Acting to relieve cargo delivery delays, the Long Beach Board of Harbor Commissioners on Thursday approved the use of Port of Long Beach property as a temporary site for the storage of empty containers, which will help to free up needed equipment to move cargo out of shipping terminals faster.

The “Temporary Empty Container Depot” will be operated on 30 acres of a vacant, undeveloped area on Pier S on Terminal Island.

The temporary depot will help put back into circulation more of the chassis — the wheeled trailer-frames that trucks use to haul cargo containers. Because many terminals are congested due to the current peak in cargo volume and have no room to accept empty cargo containers, more space is needed to temporarily store those empties. The temporary empty container storage depot will provide a location for truckers to deliver empty containers and remove them from a chassis, and then use the chassis to pick up and haul loaded containers to their destination.

“The depot could be ready to start accepting empty containers in two weeks [one week now], which would bring some needed relief to our tenants and the entire supply chain,” said Jon Slangerup, Port of Long Beach Chief Executive.

The Bad

No Federal Mediator

Despite pleas from shippers, President Obama refuses to use his influence to encourage the PMA and ILWU to use a federal mediator in the resolution of the turned ugly contract negotiations which have been making a bad situation at the ports worse.

The following quote from a Journal of Commerce article sums up the White House’s position on the situation well:

“Just last year, there was a long negotiation at the East and Gulf Coast ports,” White House spokesman Frank Benenati told Bloomberg in an e-mail. “And just as the two sides in that case were able to resolve their differences through the time-tested process of collective bargaining, we’re confident that management and labor at the West Coast ports can do the same.”

Interesting that the White House would point to the negotiations between the ILA and USMX on the East Coast because federal mediation was brought in on that situation in order for the negotiations to reach resolution.

Truckers Strike

The word “strike” is not one shippers want to hear right now in connection with the ports. But in the background of all this congestion and the ugliness between the PMA and ILWU, there are truckers who want to unionize and are picketing to make their voices heard.

Teamsters affiliated Justice for Port Truckers is picketing port drayage companies Green Fleet Systems, Pac-9 Transportation, TTSI, QTS Inc., LACA Express, and WinWin Logistics over wage theft and misclassification.

Demonstrations and picket lines from these truckers also show up at the Ports of Los Angeles and Long Beach. Currently, operations at the ports do not seem to be affected, but if the ILWU decides to honor these truckers’ picket lines at the ports as ILWU members did back in July, there is nothing in place to force the union members back to work.

The Ugly

Tension & Accusations Between PMA & ILWU

No surprise that the ILWU contract negotiations is the ugly as this has been sprinkled through the whole blog. Negotiations that seemed to be going well turned ugly between the PMA and ILWU at the beginning of November.

The most recent headline from the PMA on the situation is Longshore Union Slowdowns Continue in Advance of Critical Holiday Shopping Season.

In that release on November 13th, the PMA says the ILWU “continues slowdowns in Seattle and Tacoma, walks off job in Oakland and refuses to dispatch hundreds of skilled workers in Los Angeles and Long Beach”

The ILWU continues to deny orchestrating slowdowns, saying the PMA is deceitfully blaming them for the port congestion problems that are hurting so many shippers.

Clint Eastwood Disdainful Look at Port Congestion

Conclusion with Clint

What do you think about this whole situation, Clint?

Yeah, I think that disdainful look on Mr. Eastwood’s face says it all.

At Universal Cargo Management, we monitor the situation at the ports closely and use this blog to keep you informed on the latest happenings in international shipping news.

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Shipping News Alert: FMC Halts Hefty Port Congestion Surcharges https://www.universalcargo.com/shipping-news-alert-fmc-halts-hefty-port-congestion-surcharges/ https://www.universalcargo.com/shipping-news-alert-fmc-halts-hefty-port-congestion-surcharges/#respond Wed, 19 Nov 2014 20:27:05 +0000 https://www.universalcargo.com/?p=7464 Congestion at West Coast ports, especially the Ports of Los Angeles and Long Beach, has been a growing problem for shippers and everyone involved in the international shipping industry. The problem was made much worse when on Friday, carriers began announcing the immediate implementation of Port Congestion Surcharges (PCS). By Monday (November 17th), carriers clear […]

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Shipping News AlertCongestion at West Coast ports, especially the Ports of Los Angeles and Long Beach, has been a growing problem for shippers and everyone involved in the international shipping industry.

The problem was made much worse when on Friday, carriers began announcing the immediate implementation of Port Congestion Surcharges (PCS). By Monday (November 17th), carriers clear across the board had announced they were charging PCS.

Immediately, there was a backlash from shippers. Understandably frustrated at not being able to get cargo delivered in a timely manner from the ports, angry shippers voiced complaints  that carriers were charging huge fees on shipping containers that already were on the water or delivered to ports.

The average PCS carriers started hitting shippers with were:

  • $800 per 20′ container
  • $1,000 per 40′ container
  • $1,125 per 40′ HQ container
  • $1,266 per 45′ HQ container

Many shippers went straight to the Federal Maritime Commission (FMC) with their angry complaints about these huge PCS.

The FMC responded with a release titled “Port Congestion Surcharges” on Monday, November 17th in which it states:

The Federal Maritime Commission is receiving numerous inquiries regarding the congestion surcharges for “labor unrest” being implemented by ocean carriers as announced in tariff rules required to be published under the Shipping Act of 1984 and the Commission’s regulations at 46 CFR Part 520.

Unless done pursuant to a waiver or exemption, any tariff rule (including surcharges) of a common carrier that results in an increased cost to a shipper may not be effective earlier than 30 days after publication. 46 U.S.C. § 40501(e) and 46 CFR § 520.8. Many carriers previously published in their tariffs advance or conditional notice of an intention to implement surcharges in the event certain conditions are experienced. All such carrier tariff rules, however, must be clear and definite as to the implementation and termination of the surcharge based upon specific criteria related to “labor unrest.”

The Shipping Act and the Commission’s regulations require that the rules applicable to any given shipment shall be those in effect on the date the cargo is received by the common carrier or its agent. 46 CFR § 520.7. Thus, if any labor disruption were to occur at a port after cargo has been tendered by a shipper, a carrier may only lawfully charge the rates in effect on the day the cargo is tendered.

The Commission continues to review congestion surcharge rules published in carrier tariffs and is gathering information from carriers regarding implementation of these surcharges.

I highlighted the two sections of the release that challenge the carriers in charging the PCS as they have done.

Yesterday, carriers began sending notices out that the PCS they were charging have been suspended. Technically, where we’re at is a postponement of PCS, not the cancellation of PCS.

Shipments that have already hit the water or ports will not be charged these huge fees. Again, it should be made clear that while it is possible that these PCS the carriers have been announcing will not go into effect at all now, we are not yet to that point.

The start date of the carriers’ PCS has been challenged and changed. Basically, even though carriers filed well in advance for these PCS, implementing the charges after having received the goods is unfair and has been stopped.

The FMC came through big for shippers here.

The Journal of Commerce published an article titled FMC’s Cordero questions port congestion surcharges in which FMC Chairman Mario Cordero states the FMC’s position:

“The surcharges that carriers have announced do not apply, in our view, to cargo that’s on the water already, much less cargo that’s already in the ports,” Cordero told JOC.com. “If the cargo is was already in transit, the surcharge would not be applicable.”

But he said the fundamental question is whether carriers have met FMC requirements for “clear and definite” tariff or service contract provisions for the imposition of a surcharge. Without a clearly defined trigger mechanism, imposition of surcharges would be “rather chaotic,” he said.

Cordero said the current surcharges appear to be based on carriers’ “observations or findings that there is labor unrest or disruption or slowdowns.” He said he has seen “no evidence” that this is the main reason for port delays. “Labor’s there, labor’s working, there is no stoppage,” he said.

Now the start date carriers can begin implementing these large PCS is for shipments departing on November 20th, 2014.

Perhaps the backlash from shippers and continuing investigation/challenge from the FMC will keep carriers from implementing the PCS altogether. Language in the latest carrier announcements concerning PCS includes phrases where the carriers say they have decided to “suspend this surcharge until further notice”.

For now, Port Congestion Surcharges are delayed. Here’s to hoping they end up cancelled altogether. Otherwise, the below chart lists the amounts carriers announced they would be charging in PCS.

Port Congestion Surcharge Chart

As always, Universal Cargo Management is here as a friend to your business, using our nearly 30 years of experience as a freight forwarder to help your cargo shipping go as smoothly as possible.

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ILWU Walk Offs & Slowdowns Make Bad Port Situation Worse https://www.universalcargo.com/ilwu-walk-offs-slowdowns-make-bad-port-situation-worse/ https://www.universalcargo.com/ilwu-walk-offs-slowdowns-make-bad-port-situation-worse/#respond Tue, 11 Nov 2014 22:14:40 +0000 https://www.universalcargo.com/?p=7527 Things are not going well with the contract negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). The ILWU is resorting to slowdowns and walk offs at a time when congestion is already at a critical point for West Coast ports. Last week, on November 3rd, the PMA said […]

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ILWU makes bad congestion worseThings are not going well with the contract negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). The ILWU is resorting to slowdowns and walk offs at a time when congestion is already at a critical point for West Coast ports.

Last week, on November 3rd, the PMA said in a news release that the ILWU initiated orchestrated slowdowns at the Pacific Northwest ports of Seattle and Tacoma. The ILWU denied it, saying the PMA was lying and trying to blame the union for the congestion happening at the ports.

Three days later, on November 6th, the PMA put out another news release saying the ILWU spread their job action to the Ports of Los Angeles and Long Beach, withholding hundreds of skilled workers from vital terminal jobs and thereby threatening holiday commerce and the U.S. economy.

To say that slowdowns and stoppages at the Ports of Los Angeles and Long Beach are threats to the U.S. economy is no exaggeration. 40% of the nation’s imports go through those Southern Californian ports and during previous shutdowns and threats of shutdowns, it was estimated that the Ports of Los Angeles and Long Beach being closed costs the U.S. economy a billion dollars a day.

The ILWU does not want the blame for that laid upon it.

In response to the November 6th PMA release, the ILWU released another article accusing the PMA of deception, saying the employers are blaming the workers for congestion at the ports when the actual cause is “chassis mismanagement and other supply chain failures.”

The ILWU said they are not responsible for the congestion at West Coast ports, providing this list of congestion causes:

      • Chassis shortage and dislocation;
      • Rail service delays, including a shortage of rail cars nationwide;
      • The exodus of truck drivers who cannot make a living wage;
      • Long truck turn times;
      • Record retail import volumes (increases of 5.3 percent over 2013);
      • Larger vessels discharging massive amounts of cargo;
      • Container terminals pushed to storage capacities; and
      • The peak shipping season (i.e., the August through October pre-holiday surge)

The ILWU is correct that the things on this list are causes of the major congestion at the Ports of Los Angeles and Long Beach. They also brought up the September 22nd fire that happened at the Port of Los Angeles as another source of delays.

Again, the ILWU is correct in saying the fire at the Port of Los Angeles added to the congestion experienced at the Southern Californian ports.

The ILWU being correct about all these causes of congestion does not mean they aren’t orchestrating slowdowns. In fact, it seems quite obvious the ILWU is making a bad situation worse.

Terminal 6 at the Port of Portland was shutdown on Friday, November 7th because all ILWU Local 8 labor had walked off the job by 2:45pm.

The labor union has been causing slowdowns there at Terminal 6 for quite some time. There have been court rulings against the ILWU purposefully slowing down the flow of import and export cargo at the Port of Portland and back in August we were already blogging on how the ILWU was taking advantage of the lack of a contract to hard-time the Port of Portland.

For a while, labor action at Terminal 6 at the Port of Portland seemed isolated, but now it seems orchestrated with ILWU’s action at the Ports of Long Beach and Los Angeles.

By 2pm, also on Friday, November 7th, 4 terminals servicing 11 carriers at the Southern California ports were shutdown by an ILWU walkout.

Again on Friday, November 7th, it was announced that due to the ongoing labor situation in the Pacific Northwest, Terminal 18 up at the Port of Seattle will be only open for import delivery on Monday, Wednesday, and Friday–closed on Tuesday and Thursday. The terminal will not receive any export loads and will not receive or deliver any empties.

Labor hours have increased at the Ports of Los Angeles and Long Beach in attempts to alleviate the recent congestion in recent months, but now union workers are being withheld. When a strong effort is needed most from the ILWU, what we’re seeing is the opposite.

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You Won’t Believe What Furniture Importers Say in these Videos https://www.universalcargo.com/you-wont-believe-what-furniture-importers-say-in-these-videos/ https://www.universalcargo.com/you-wont-believe-what-furniture-importers-say-in-these-videos/#respond Thu, 06 Nov 2014 00:38:39 +0000 https://www.universalcargo.com/?p=7598 At Universal Cargo Management, we love furniture importers and sellers. And sometimes, we can’t believe what comes out of their mouths. More on that in a minute… UCM imports and exports for businesses in a very wide array of industries, but we have many great clients in furniture business who have helped bring the furniture […]

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Furniture Importers Say the Darndest ThingsAt Universal Cargo Management, we love furniture importers and sellers. And sometimes, we can’t believe what comes out of their mouths. More on that in a minute…

UCM imports and exports for businesses in a very wide array of industries, but we have many great clients in furniture business who have helped bring the furniture industry close to our hearts.

There’s probably no one at UCM, or anywhere for that matter, who loves the furniture industry and its businesspeople more than our very own CEO, Devin Burke. That will be clear to see in the surprising videos shared below in this blog.

What makes the videos so surprising? The things the furniture importers say in it.

Probably one of the biggest reasons you hear so many surprising things come out of the mouths of these seemingly mild mannered furniture importers is because you also never know what Devin Burke is going to say.
In case you haven’t heard of it, the North Carolina Department of Commerce sums up the High Point Market as follows:For well over 20 years, Devin Burke has travelled from Los Angeles to North Carolina to attend the High Point Furniture Market.

The High Point Market is the largest furnishings industry trade show in the world, bringing more than 85,000 people to High Point every six months. Serious retail home furnishings buyers can be found in High Point twice a year because if you can’t find it in High Point…it probably doesn’t exist.

High Point MarketWhile there, Devin Burke meets up with UCM clients who import and sell furniture, checks out what’s happening in the furniture market, and makes surprisingly silly videos.

If you thought our Super Shipping series was as silly as UCM gets, then you’ve never walked around the High Point Market with Devin Burke. You don’t need to make the trip to North Carolina to find out what I’m talking about, just check out these videos Devin Burke filmed at the Fall 2014 High Point Market that was held October 18th-23rd.

You don’t have to be in the furniture industry to find these videos entertaining. Devin Burke asking people at High Point about the challenges of business seems innocent enough, but you’ll be surprised at how that starting point launches into some great and funny moments.

There might be some awkward moments, too.

I really suggest watching all 4 videos in this playlist. Some of the highlights of these videos include:

  • A critique of Devin Burke’s fashion. Find out what his dress suggests he’s really selling. Here’s a hint: it’s not legal.
  • What do furniture importers and sellers want from their freight forwarder or logistics advisor that they’re not getting.Some answers will surprise you.
  • Devin Burke gets into a push up contest. Does he win?
  • The next president of the United States of America is predicted. We could be in for another hugely historic election.
  • How is the furniture market looking? It’s in there a little bit, I promise.

YouTube Video


Did you know UCM has a High Point Furniture Market Page? I told you we love furniture importers and sellers. We love furniture exporters too, but that’s a story for a different blog.

If you want to check out some similar videos to the ones above, we have some posted from previous years on the High Point Market Page I mentioned above.

The High Point Spring Market will be held April 18th – 23rd, 2015.

As always, UCM is here as a friend to your business to make your importing and exporting of furniture (or other goods) go as smoothly as possible.

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ILWU Contract Negotiations Turn Ugly: Is ILWU Staging Slowdowns? https://www.universalcargo.com/ilwu-contract-negotiations-turn-ugly-is-ilwu-staging-slowdowns/ https://www.universalcargo.com/ilwu-contract-negotiations-turn-ugly-is-ilwu-staging-slowdowns/#respond Tue, 04 Nov 2014 20:24:20 +0000 https://www.universalcargo.com/?p=7512 “The International Longshore & Warehouse Union (ILWU) has initiated orchestrated slowdowns at the Pacific Northwest ports of Seattle and Tacoma, severely impacting many of the largest terminals during the peak holiday shipping season,” the Pacific Maritime Association (PMA) opened a news release with on Monday (November 3rd). The ILWU responded with its own press article […]

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“The International Longshore & Warehouse Union (ILWU) has initiated orchestrated slowdowns at the Pacific Northwest ports of Seattle and Tacoma, severely impacting many of the largest terminals during the peak holiday shipping season,” the Pacific Maritime Association (PMA) opened a news release with on Monday (November 3rd).

The ILWU responded with its own press article headlining, “Dishonest media offensive by PMA jeopardizes contract negotiations and deflects from a growing congestion problem.”

ILWU Slowdowns Port of Tacoma resized 600Despite the ILWU coast-wide contract expiring back on July 1st and six months of negotiations with no new contract, talks seemed to be going smoothly between the ILWU and PMA.

The last bit of news on the ILWU negotiations came in August when a joint release from the PMA and ILWU proclaimed the parties had reached a tentative agreement on health benefits, which was supposed to be one of, if not THE biggest obstacle-creating negotiation point to getting a new contract created.

It was such good news that all the international shipping news outlets were optimistic about the ILWU contract negotiations and publishing stories about how well and peacefully the talks between the ILWU and PMA were going. I even wrote a blog titled: 2 Reasons the ILWU PMA Contract Negotiations Will Resolve Soon.

Then there was silence. Over two months of silence.

During the silence on the ILWU negotiations, congestion at the Ports of Los Angeles and Long Beach took center stage in international shipping news. If severe congestion and delays at Southern California ports was not bad enough, now shippers have the bad news of slowdowns at Pacific Northwest ports and ugly accusations going back and forth between the PMA and ILWU.

The talks are no longer peaceful.

Is the ILWU orchestrating slowdowns as the PMA says or is the PMA deflecting port congestion responsibility by smearing the union as the ILWU claims?

A classic case of he said, she said? Maybe, but there’s good reason to believe the ILWU is orchestrating slowdowns.

Let’s take a quick look at the press releases from the PMA and ILWU.

The PMA states:

Once the contract expired on July 1st, the parties agreed to continue negotiating in good faith, and to resolve their differences at the table. The PMA and ILWU specifically stated that they were mindful of the broader economic implications of these negotiations. As such, they agreed that normal operations at West Coast ports would continue until an agreement could be reached.

“Now, the ILWU has reneged on that agreement,” said Wade Gates, a spokesperson for the PMA.

The ILWU responds:

PMA’s press statement dishonestly accuses the ILWU of breaking a supposed agreement “that normal operations at West Coast ports would continue until an agreement could be reached.” This is a bold-faced lie. No such agreement was ever made…

In multiple joint press releases from the ILWU and PMA, the statement “both parties have pledged to keep cargo moving” appeared. That certainly sounds like the PMA and ILWU agreed to continue operations at the ports as normal during the contract negotiations. I doubt any shippers read that as, “We’ll keep cargo moving, but much slower than normal.” Now the ILWU is suddenly saying, “We never agreed to that”?

The ILWU says:

…PMA also falsely states that agreement to temporary contract extensions is standard practice.

I looked for such a statement from the PMA and did not find it. What I did find was:

…the ILWU has refused to agree to a temporary contract extension – which it has agreed to during past negotiations – because such an extension would give both parties access to the well-established grievance procedure that has served the waterfront for decades. Jointly appointed arbitrators have continually found slowdowns on the waterfront to be impermissible, but with no contract extension in place, employers cannot access the arbitration process.

The false statement here again appears to be on the ILWU side as the PMA never appears to call temporary contract extensions common practice. Perhaps you could infer from saying the ILWU has agreed to temporary contract extensions during past negotiations that these extensions are standard practice, but I’m not sure the statement actually implies that. Maybe it’s the “well-established grievance procedure that has served the waterfront for decades” that the ILWU thinks serves as implication.

What I do not think is fair on the PMA side is to state that the ILWU did not agree to an extension because it would give both parties access to grievance procedure unless the ILWU actually stated that is why they did not agree to an extension. The PMA should have said they believe the ILWU refused an extension in order to avoid grievance procedure. The PMA would have good reason for their suspicion of the ILWU’s motive.

The last time the ILWU did agree to an extension, it was to cover a short amount of time in July of this year while the PMA and ILWU were taking a recess from talks. During that time, ILWU members walked off the job at the Ports of Los Angeles and Long Beach to do what was supposed to be the unlikely thing of showing solidarity with a rival union, the Teamsters who were leading a truckers strike at the ports. A labor arbitrator ordered them back to work because of the extension.

Meanwhile, judges and arbitrators have repeatedly ruled that the ILWU has been intentionally causing slowdowns at the Port of Portland. Not extending the contract has allowed the ILWU to take advantage with hard-timing tactics at Terminal 6 at the Port of Portland.

There isn’t time to get into the history of ILWU slowdown tactics in this blog, but just looking at the union’s actions at the Port of Portland is enough to know they’ve utilized such tactics.

Then there’s ILWU’s pointing at chassis as the main cause of port congestion. The article the ILWU points to as evidence is about chassis being the main cause of congestion at the Ports of Los Angeles and Long Beach. Los Angeles and Long Beach. The PMA is accusing the ILWU of orchestrating slowdowns at Pacific Northwest ports of Seattle and Tacoma.

But speaking of the Ports of Los Angeles and Long Beach, there have been complaints of the ILWU’s productivity there too. One example I’ve personally seen is this quote from an email sent by a representative of a trucking company called J&M that services the Southern California ports, “Please complain at terminals they are the ones that have to work faster or get rid of that union that is only affecting productivity [sic].”

While many have included the ILWU as a contributor to the congestion at the Ports of Los Angeles and Long Beach, I’ve avoided including the union in the factors causing the LA/LB Port congestion. Perhaps I was too quick to ignore such complaints of frustrated truckers along with the words of industry professionals.

The Ports of Seattle and Tacoma aren’t exactly dealing with the same congestion issues as America’s largest ports by volume down in Southern California. “’We have the highest percentage of under-utilized  terminals on the West Coast. We’re not proud of it,’ said John Wolfe, executive director of the Port of Tacoma,” quoted a JOC article.

It seems hard to believe that big drops in productivity and sudden delays are happening there without union members following slowdown orders as the PMA claims it heard ILWU business agents have sent.

After several days of crippled productivity, employers demanded that union leaders return to normal workplace practices. When the ILWU refused by continuing its severe slowdowns, employers were forced to begin sending workers home, paid for time worked, mid-shift on Sunday.

“In Tacoma, the ILWU is not filling orders for skilled workers, including straddle carrier operators who are critical to terminal operations,” said Gates. “This is like sending out a football team without the receivers or running backs. You can’t run the plays without them,” he said.

Well, the Detroit Lions have been managing to win football games without star wide receiver Calvin Johnson, all 3 tight ends that started the season on their roster, and star running back Reggie Bush. Of course, the Lions did their best to get productive players to fill those receiver and running back shoes. The problem is, the ILWU has motivation not to play the best ball it can as slowdowns are a long-traditioned tactic in contract negotiations.

What we end up with is the PMA saying:

“It is extremely difficult to have meaningful negotiations under the current conditions in which the ILWU is deliberately slowing productivity in order to pressure our member companies.” [–Wade Gates]
And the ILWU saying:

Today’s unilateral media blitz by PMA will only delay progress at a critical point in the contract negotiations.

As what seemed to be peaceful contract negotiations turn ugly, shippers and the economy fall into great risk of suffering.

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Congestion at Ports of L.A. & Long Beach Causes Container Ship Backup https://www.universalcargo.com/congestion-at-ports-of-l-a-long-beach-causes-container-ship-backup/ https://www.universalcargo.com/congestion-at-ports-of-l-a-long-beach-causes-container-ship-backup/#respond Thu, 30 Oct 2014 23:08:22 +0000 https://www.universalcargo.com/?p=7360 We’ve been talking about it for a little while now. The Los Angeles Times calls it a “logistical nightmare”. Claims Journal calls it the Ports of Los Angeles and Long Beach’s “biggest crisis in a decade”. What we’re talking about is the congestion at the Southern California ports, which happen to handle approximately 40% of […]

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container ships idle amid port congestion resized 600

We’ve been talking about it for a little while now. The Los Angeles Times calls it a “logistical nightmare”. Claims Journal calls it the Ports of Los Angeles and Long Beach’s “biggest crisis in a decade”. What we’re talking about is the congestion at the Southern California ports, which happen to handle approximately 40% of U.S. imports.

Our blog has looked at the causes of the congestion:

5 Factors Causing Congestion at the Ports of L.A. and Long Beach

We’ve looked at how the congestion is affecting shippers and the direction the problem is trending in with:

Congestion at Ports of L. A. & Long Beach Getting Worse, Not Better

We’ve even looked at a move the Port of Long Beach has made to alleviate the problem and prevent future repeats of this same congestion issue:

Port of Long Beach Getting Chassis to Alleviate Congestion

What we haven’t looked at are the container ships that have been sitting idle, waiting to unload their cargo. Of course, all it takes is looking out at the Pacific Ocean off the Ports of Los Angeles and Long Beach to do so.

Grace M. Lavigne reported in the Journal of Commerce earlier this week:

Eleven container ships were anchored off the ports of Los Angeles and Long Beach on Sunday, the most waiting at one time in San Pedro Bay in two years, as gridlock persisted at the largest container gateway in the Americas.

The queue dipped to nine on Monday, down from 10 on Saturday and 11 on Sunday but up from seven on Friday, according to the Marine Exchange of Southern California. Last week, the high was on Tuesday, Oct. 21, with eight ships at anchor.

A quote in a Lavigne JOC story from last week helps illuminate the enormity of port congestion causing container ship backups:

“This is very unusual,” [retired Coast Guard Capt. J. Kipling “Kip”] Louttit said. “There’s usually zero wait times with container ships. The only time a container ship is usually at anchor is if something weird happens: a breakdown, a casualty or a Coast Guard holdup. Container ships normally run on rails.”

The port congestion problem at Los Angeles and Long Beach is hurting everyone involved in international shipping. Truckers are spending whole days to get a single shipment out of ports, an impossible situation for making profit. Ship delays cost carriers money. And, of course, shippers get hit with fees from the carriers and truckers while suffering delays on getting their cargo.

The feelings of frustration at the situation seem to be universal. Here are a few quotes from an L.A. Times article by Andrew Khouri on the situation:

“We have a meltdown on the harbor,” said Robert Curry, president of California Cartage Co….

“This is an important time and we need fully functioning ports to make sure goods get to the store shelves,” said Jon Gold, vice president of supply chain and customs policy at the National Retail Federation….

“This is really a perfect storm,” said Port of Los Angeles Executive Director Gene Seroka….

This is not the first time container ship backups have been seen at the Ports of Los Angeles and Long Beach. Lavigne’s JOC article reports:

The last time congestion at the Southern California ports was this severe was when striking office clerical workers crippled the ports in the fall of 2012, Louttit said. The clerk’s strike led to a peak of 30 container ships sitting at anchor at one point, he said….

Congestion at the Southern California ports was also significant in 2004, when Union Pacific Railroad was not adequately staffed to handle the peak season that year, resulting in 65 ships at anchor or steaming offshore, plus 127 ships that diverted to other ports, Louttit said. Other severe episodes occurred in 2002, when the Pacific Maritime Association locked out International Longshore and Warehouse Union dockworkers for 10 days, causing about 30 ships to be anchored at one time with 14 diverted to other ports; and following the 9/11 attacks in 2001, when there were about 25 to 30 ships at anchor, he said.

A large factor in the current backups is high numbers in container ships and cargo volume currently going to the ports. Improving economy and a peak season starting earlier and surging later due to fears of slowdowns or shutdowns because of ILWU contract negotiations contribute to those high container ship and cargo volume numbers.

Perhaps there can be some irony found in shippers prudently adjusting import schedules to avoid possible port delays only to have that trend help increase port delays.

Of course, shippers cannot be blamed for the congestion happening at the ports. The root problems are chassis management and availability, ship sizes, and trucker shortages. Unfortunately, shippers are often the ones having to pay the biggest price, no matter whose fault the problems are.

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Prosecutors Seek Death Sentence for Captain in Tragic Ship Accident https://www.universalcargo.com/prosecutors-seek-death-sentence-for-captain-in-tragic-ship-accident/ https://www.universalcargo.com/prosecutors-seek-death-sentence-for-captain-in-tragic-ship-accident/#respond Tue, 28 Oct 2014 23:00:11 +0000 https://www.universalcargo.com/?p=7631 There’s an old idiom, “The captain goes down with the ship,” that refers to the maritime tradition that a sea captain is responsible for his or her ship and everyone, the passengers and crew, onboard. Usually, when a ship is in distress, the captain forgoes his own safety and evacuation of the ship and concentrates […]

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Sewol - Captain Faces Death PenaltyThere’s an old idiom, “The captain goes down with the ship,” that refers to the maritime tradition that a sea captain is responsible for his or her ship and everyone, the passengers and crew, onboard.

Usually, when a ship is in distress, the captain forgoes his own safety and evacuation of the ship and concentrates on saving everyone else on board. The results have often been the death or a late rescue of the captain.

This was not the case onboard the MV Sewol.

Today’s blog is not a happy shipping news story. The below video shows footage of Captain Lee Joon-seok in his underwear scrambling to get off the ship with the help of rescuers. Meanwhile, hundreds of passengers were drowning.

In fact, according to survivors, passengers were ordered to stay in their rooms. Instead of using the life vests, rafts, and announcements to evacuate the passengers, the captain and crew abandoned them and the ship. The results were that nearly 300 people died. Many of the passengers were high school students on a field trip.

YouTube Video


The above footage enraged the people of South Korea as it was played over and over again on the news, creating a public outcry for the death sentence to be used on the captain. We blogged about that back in June of this year:

Captain Could Be Executed On Murder Charges After Tragic Ship Sinking

Now it’s more than just public opinion calling for the death sentence. Prosecutors asked the court to sentence Captain Lee Joon-seok to death.

According to CNN, “The closing statement was held Monday, and the three judges are expected to issue a verdict and sentencing on November 11.”

No one has been executed in South Korea since 1997. There are some who think executing the captain in this case would be a huge case of scapegoating.

HandyShippingGuide.com posted an article on this story which included a view against taking Captain Lee Joon-seok’s life:

Nautilus General Secretary Mark Dickinson said he was deeply disturbed to hear of the drastic sentences being sought by prosecutors saying:

“From the outset, there has been a concerted drive to criminalise the captain and crew in this incident, and these extreme penalties take the practice of scapegoating seafarers to an unprecedented level. It has become clear since the tragic loss of the Sewol that, as with many other maritime disasters, the causes are complex and it is totally unjust to single out seafarers for such treatment.

“Issues including training, experience, safety management, ship design and construction, and the effectiveness of the regulatory regime are all critical factors in this disaster. It is all-too easy for the South Korean authorities to pin the blame on the captain and crew, while ignoring deep-rooted underlying problems and the rush to this kind of kneejerk justice does no one any favours.

“This disturbing situation is indicative of a regulatory process that has little regard for fair treatment of seafarers and no desire to really understand what happened and thus learn the necessary lessons to improve safety. There is a need for change now, there is an ineffective accident investigation process and an urgent need for a renewed push to improve ferry safety.”

There is certainly plenty of blame to go around, as Mr. Dickinson says above. Overloading the boat with cargo, something the ferry company allegedly tried to cover up with falsified documents, could be added to Mr. Dickinson’s list.

While changes certainly need to be made for improved ferry safety in South Korea as Mr. Dickinson suggests, were the actions of the captain and crew not criminal?

Even if the captain and crew did not have the proper training, wouldn’t common sense suggest evacuating? To instead order passengers to stay in their rooms while the captain and crew got out themselves seems to be knowingly saving themselves at the cost of the lives of the passengers.

The question is, should those actions be punished with the death penalty? What do you think?

Free Freight Rate Pricing

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Port of Long Beach Getting Chassis to Alleviate Congestion https://www.universalcargo.com/port-of-long-beach-getting-chassis-to-alleviate-congestion/ https://www.universalcargo.com/port-of-long-beach-getting-chassis-to-alleviate-congestion/#respond Tue, 21 Oct 2014 22:34:52 +0000 https://www.universalcargo.com/?p=7529 There are several factors contributing to the terrible congestion at the Ports of Los Angeles and Long Beach, which is proving costly for shippers. Read about 5 Factors Causing Congestion at the Ports of L.A. and Long Beach here. Chassis Crisis Causing Congestion Many, including Port of Long Beach officials, are pointing to one issue as the […]

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There are several factors contributing to the terrible congestion at the Ports of Los Angeles and Long Beach, which is proving costly for shippers.

Read about 5 Factors Causing Congestion at the Ports of L.A. and Long Beach here.

Chassis Crisis Causing Congestion

Chassis at Port of Long BeachMany, including Port of Long Beach officials, are pointing to one issue as the largest contributor to the congestion problems at the nation’s two largest ports by volume: chassis. Or a lack there of.

The following came out of a recent news release from the Port of Long Beach:

“We’ve been facilitating discussions about chassis issues for some time,” said Port of Long Beach Chief Executive Jon Slangerup. “Working with the Harbor Commission’s port efficiency subcommittee, we determined that the root cause of the current congestion crisis is the lack of chassis to support peak-level volumes – and no one else was stepping up to address this critical problem.”

It’s not necessarily a problem of not enough chassis being out there. Often, there is a chassis imbalance where some terminals have plenty of chassis while others have none. In the end, the problem is the same: chassis aren’t available where and when needed for moving freight.

If you’re not familiar with the chassis situation or chassis crisis, as it has been dubbed, you can check out these blogs about it:

Where Did All the Chassis Go, Ocean Freight Carriers?

Chasing Chassis Slows International Shipping

The chassis situation has really been exacerbated lately by the combination of the peak season, where imports increase for stores to stock up for the holiday season, and carrier alliances using bigger ships to deliver larger quantities of freight at once.

These factors raise the demand for chassis, which already have poor availability.

Port of Long Beach Addresses the Problem

Finally, it looks like the Port of Long Beach is stepping up to bring solutions to the chassis crisis and terrible port congestion.

In that Port of Long Beach news release quoted above, the following was reported:

At the Oct. 13 meeting, Port staff was directed by the full Harbor Commission at the urging of Slangerup to come up with a proposal within 30 days to obtain additional chassis. If needed, the Port would prepare to establish an organization to purchase, service and manage a pool of supplemental chassis to provide relief whenever there is a shortage of privately owned chassis.

Eric Kulisch then reported in American shipper:

…Port of Long Beach officials convinced two major chassis leasing companies, Direct Chassis Link Inc. and TRAC Intermodal, to add more than 3,000 chassis to the local fleet in the next couple months to provide short-term congestion relief.

It also created a Congestion Relief Team that meets daily to monitor terminal performance and collaborate with industry stakeholders on potential solutions.

With thousands of chassis being pumped into the port, and plans to make them accessible where and when needed, shippers and truckers are hoping to see congestion alleviated.

New Port Leadership Gives Reason for Optimism

“This current peak congestion crisis is something that was avoidable,” Slangerup was quoted as saying in the Port of Long Beach news release, “and we are taking the necessary steps to prevent any such problems from happening again.”

Here’s a little information on Mr. Slangerup from the Port of Long Beach‘s website:

Jon W. Slangerup was named the Port of Long Beach’s Chief Executive in June 2014 by the Long Beach Board of Harbor Commmissioners.

Mr. Slangerup comes to the Port with 34 years of corporate leadership experience and for the past 20 years has served as a president, CEO and/or director of both public and private companies. With expertise in aviation, logistics and clean technologies, Mr. Slangerup has built global businesses ranging from technology startups to a billion-dollar subsidiary of FedEx.

That he is leading the port in addressing this chassis problem head on, something that would probably not have been seen from ports in years past, gives optimism that such problems may actually be prevented in the future as his quote above says.

The Port of Los Angeles also got new leadership in June as they hired Gene Seroka as Executive Director.

Both of these leaders, Slangerup and Seroka, are expected to be more proactive in making the country’s largest volume ports efficient, effective, and attractive to customers.

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Shipping News Alert: ILWU Clerks Walk Off Job in Portland https://www.universalcargo.com/shipping-news-alert-ilwu-clerks-walk-off-job-in-portland/ https://www.universalcargo.com/shipping-news-alert-ilwu-clerks-walk-off-job-in-portland/#respond Thu, 16 Oct 2014 21:40:37 +0000 https://www.universalcargo.com/?p=7624 Struggles continue between the ILWU and Terminal 6 at the Port of Portland. An ILWU walk-off has closed the terminal. ILWU Local 40 Clerks walked off the job at 9:30 am PST, effectively closing Terminal 6 in Portland closed for remainder of the day. A representative of Terminal 6 said, “As for a gate tomorrow we will hire […]

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Shipping Alert ILWU Walk OffStruggles continue between the ILWU and Terminal 6 at the Port of Portland.

An ILWU walk-off has closed the terminal.

ILWU Local 40 Clerks walked off the job at 9:30 am PST, effectively closing Terminal 6 in Portland closed for remainder of the day.

A representative of Terminal 6 said, “As for a gate tomorrow we will hire a full complement of labor and hope that they will return to work.”

With the coastwide ILWU contract expired, labor workers can’t be ordered back to work.

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Word of Wisdom: Gaining Favor for Business Success https://www.universalcargo.com/word-of-wisdom-gaining-favor-for-business-success/ https://www.universalcargo.com/word-of-wisdom-gaining-favor-for-business-success/#respond Tue, 30 Sep 2014 22:48:38 +0000 https://www.universalcargo.com/?p=7629 יָטַב – yatab – yä·tav’ And I said to the king, “If it pleases the king, and if your servant has found favor in your sight, I ask that you send me to Judah, to the city of my fathers’ tombs, that I may rebuild it.” – Nehemiah 2:5 (NKJV) Do you want to take the next […]

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יָטַב – yatab – yä·tav’

And I said to the king, “If it pleases the king, and if your servant has found favor in your sight, I ask that you send me to Judah, to the city of my fathers’ tombs, that I may rebuild it.”

— Nehemiah 2:5 (NKJV)

Do you want to take the next step in your business? Perhaps there’s a big project or contract you would like to be granted. Maybe you’d just like to increase your odds of promotion.

Word of Wisdom Business SuccessToday’s Word of Wisdom, which can help you in achieving business success, comes from the ancient and lovely language of Hebrew and is found in the Biblical Book of Nehemiah.

On the surface, Nehemiah’s story may be hard to relate to. He lived in a different time, a different culture, with different practices… Some scholars even think Nehemiah might have been a eunich, which would make it even harder for a modern person to relate to him. However, his story of success can be paralleled in modern times inside of a business setting.

Nehemiah was a servant in King Artaxerxes’ palace. Which is a nice way of saying he was a slave. Instead of thinking of the story in terms of kings and slaves, for our purposes it would help to think in terms of boss and employee. We might even stretch the analogy for working between a business and current or potential clients or businessperson and current or potential business partners.

The key word, or better yet, Word of Wisdom of the story is יָטַב. Yeah, let’s transliterate that to yatab. The pronunciation is yä·tav’.

Here’s the definition via Strong’s Concordance:

yatab a primitive root; to be (causative) make well, literally (sound, beautiful) or figuratively (happy, successful, right):–be accepted, amend, use aright, benefit, be (make) better, seem best, make cheerful, be comely, + be content, diligent(-ly), dress, earnestly, find favour, give, be glad, do (be, make) good((-ness)), be (make) merry, please (+ well), shew more (kindness), skilfully, X very small, surely, make sweet, thoroughly, tire, trim, very, be (can, deal, entreat, go, have) well (said, seen).

Okay, if your mind is reeling from the expansiveness of that definition, let’s focus in on the “find favour” portion of it. And let’s use the American spelling of favor.

Favor is the English word yatab has been translated into in Nehemiah 2:5 quoted above. Favor is something Nehemiah had in King Artaxerxes. And favor is something you need to gain from your boss, clients, business partners, etc, if you want to have the maximum amount of career success in your life.

Nehemiah wanted to undertake a big project; he wanted to rebuild the burned, torn down, and destroyed wall of Jerusalem. In order to do this, he had to get the permission and endorsement of the king. Because Nehemiah had King Artaxerxes’ favor, Nehemiah went from cupbearer to the man in charge of a huge reconstruction project and a great leader beyond the reconstruction project.

Here are three steps we can take from Nehemiah’s success and apply in our businesses or careers to gain favor and success.

1. Be a Cheerful Worker

Perhaps the biggest characteristic of Nehemiah that helped him gain favor with his “boss”, King Artaxerxes had to do with the way he performed his duties or did his job.

When Nehemiah heard about the walls of Jerusalem being laid waste, he was visibly upset. This was not the norm for Nehemiah.

And it came to pass in the month of Nisan, in the twentieth year of King Artaxerxes, when wine was before him, that I took the wine and gave it to the king. Now I had never been sad in his presence before. Therefore the king said to me, “Why is your face sad, since you are not sick? This is nothing but sorrow of heart.”

–Nehemiah 2:1-2

Despite plenty of legitimate reasons for Nehemiah to be unhappy with his job, his life, the state of the world, Nehemiah had never been sad in front of the king.

Think about all the people you’ve ever worked with. Were there any that always seemed to be unhappy or negative about things? Usually, those aren’t the people we like working with the most. What about people who always seemed positive or cheerful? How much more likely are they to gain your favor?

What kind of attitude do you have at work? Your attitude will go a long way in deciding whether or not you have the favor of a business partner, boss, or client.

I’m not saying you can’t have a bad day. Nehemiah had a bad day and it caught the attention of the king. Because it was out of the normal for Nehemiah to have a bad day, Artaxerxes cared about what was wrong. If every day or most days is a bad day for you, people will stop caring what’s wrong and your business opportunities will decrease.

2. Be Proactive

Nehemiah saw a problem and stepped up to do something about it. He asked the king for the opportunity to solve the problem.

How often do we wait for an opportunity to fall into our laps when there are opportunities all around us waiting to be seized?

Look for a need, see how you can step up to fill that need, and then open your mouth to ask for the opportunity to do it. If you proactively ask your boss for the opportunity to tackle a project or show him or her a need and what you can do about it, you’re likely to gain favor in his or her eyes even if he or she decides against giving you that particular opportunity.

The worst case scenario is an answer of “No.” But that you asked will make it much more likely that you’ll be thought of for future opportunities.

Put yourself forward for promotions, propose a business partnership, offer services to a potential client. Opportunities are awfully difficult to come by when you are unwilling to ask for them.

3. Make a Plan

Then the king said to me (the queen also sitting beside him), “How long will your journey be? And when will you return?” So it pleased the king to send me; and I set him a time.

–Nehemiah 2:6

There’s more to yatab than just being liked. There’s a causative action of making you “to be” something or creating success. The favor of yatab includes being granted opportunity.

King Artaxerxes liked Nehemiah, but Nehemiah was not a wall-builder, he was a cupbearer. Artaxerxes needed a plan from Nehemiah. Nehemiah was able to present the king with specific goals, a time table for the work, and what he needed from the king.

Having a plan adds to your credibility and helps in gaining favor from a potential client, boss, or business partner.

May your attitude, proactivity, and planning gain you much favor or yatab that will aid you in reaching all new levels of success whether in the international shipping business or any other industry you choose.

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5 Factors Causing Congestion at the Ports of L.A. and Long Beach https://www.universalcargo.com/5-factors-causing-congestion-at-the-ports-of-l-a-and-long-beach/ https://www.universalcargo.com/5-factors-causing-congestion-at-the-ports-of-l-a-and-long-beach/#comments Thu, 25 Sep 2014 23:25:36 +0000 https://www.universalcargo.com/?p=7340 The Port of Los Angeles, along with its sister port of Long Beach, is congested. Badly congested. No Vicks or Sudafed is going to take care of it. Frustrations over the congestion are running high for carriers and shippers alike. However, the situation is especially frustrating for shippers who are experiencing delays and increased costs […]

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The Port of Los Angeles, along with its sister port of Long Beach, is congested. Badly congested. No Vicks or Sudafed is going to take care of it. Frustrations over the congestion are running high for carriers and shippers alike.

However, the situation is especially frustrating for shippers who are experiencing delays and increased costs in receiving their imports.

Approximately 40% of U.S. imports arrive through the Ports of Los Angeles and Long Beach. While congestion is common to ports around the world right now, the high volume of cargo that arrives through the Ports of Los Angeles and Long Beach exacerbates the congestion problem there while adding weight to it for the U.S. economy.

Trucking cargo out of the Ports of Los Angeles and Long Beach is increasingly challenging.

Universal Cargo Management Managing Director Kamy Eliassi described the situation as follows:

As we had discussed about Trucking issues that are more relevant in the US now, we are now experiencing the issue at its highest in Los Angeles/Long Beach ports.

Terminals are fully congested with bigger vessels and vessel backlogs and the process of grounding and putting containers on Chassis is taking very long. Truckers in LA are all behind as every delay has a domino effect on all their schedules.

There are a number of factors working together to create or exacerbate the congestion problems at the Ports of Los Angeles and Long Beach as well as other ports around the world. Here are 5 factors contributing to the congestion:

1 – Bigger Ships & Alliances

Big cargo ship port congestionAs the international shipping industry has trended toward bigger and bigger ships–yes, you can say it, megaships–carrier alliances have formed to fill those ships.

Because of alliances loading bigger ships with larger and larger quantities of cargo, unloading cargo ships quickly and efficiently has become more of a challenge for the longshoremen working on the docks.

A Peter T. Leach written Journal of Commerce (JOC) article puts it nicely:

As carriers deploy ever-larger ships, the sheer volume of containers aboard those vessels is starting to overwhelm major gateway ports, challenging their ability to unload import containers on a timely basis. The delays are exacerbated by the alliances carriers are joining to operate and fill the mega-ships. Although this has resulted in fewer ship calls at major ports, the calls by alliance mega-ships are absorbing more port capacity to handle those calls and taking more time to load and unload.

2 – Lack of Chassis

Truck, chassis, shipping containerCarriers used to provide chassis for their container shipments in the U.S. However, as part of the process of recovering from losses in the billions during the Great Recession, carriers phased out that part of their service and sold off their chassis.

The result has been what was dubbed as the chassis crisis.

A lack of chassis has seriously hindered the movement of cargo containers at the Ports of Los Angeles and Long Beach.

Hapag-Lloyd, part of the G6 carrier alliance, wrote out a lengthy explanation of the congestion and delays at the Ports of Los Angeles and Long Beach. Chassis, or a lack there of, were brought up nine times in Hapag-Lloyd’s descriptions of the situations at the various port terminals.

YTI is well operated but cannot cope with increased volume and lack of chassis through-out LGB/LAX area….

CUT is less congested, but is severely impacted by lack of chassis, which leads to 8-14 day delay for on-dock rail program…. They need GACP chassis to perform the cross-terminal shuttle for the rail operation.  With none chassis, the rail program seizes up [sic].

LBCT (OOCL’s terminal) is certainly affected by lack of chassis and lack of truck power, but they are far and away the least congested.  They get one ship a week and work it well.  Any delays you see are the result of lines not being able to pick cargo up due [to] lack of chassis and truck.

APMT is not a G6 terminal, but we have services there.  They have by far the largest throughput in both harbors combined, but they are fluid and uncongested.  We are experiencing delays there, but it is solely because we don’t have chassis or truckers to pick cargo up.

Pier A has been used as a relief valve… Terminal is well run and fluid, but they use BN as on-dock rail provider and we use UP…so, everything for HL is a truck move, and back to the same problem of no trucks and no chassis.

If you read more than the bolded words above, beyond chassis you’d see the word “truck” show up over and over again. That brings us to the next factor in all this congestion.

You can read more about international shipping’s chassis issues here.

3 – Trucker Shortage Problem

A major problem facing the international shipping industry, especially right here in the U.S. is a trucker shortage problem.

Truck drivers are the basic unit of transportation capacity and the glue that holds supply chains together. No container or straight truck or trailer moves without, at some point, a truck driver. Even so, trucking companies, especially truckload carriers, often have great difficulty finding, hiring and keeping drivers….

JOC Driver Shortage coverage page

There simply are not enough truckers to handle all the transporting of cargo that needs to take place.

A lack in truckers to transport cargo translates into delays and increased costs to shippers.

4 – Strong Peak Season Shipping

Just last week I wrote a blog about how cargo volume numbers rose in August.

The blog was really optimistic, focusing on the positives of cargo growth and right from the title begged the question, “Is International Shipping Returning to Pre-Recession Levels?

With all the positives that an increase in shipments means at the Port of Los Angeles, there is also the negative of more cargo and more shipping containers just adds to the congestion problem.

5 – Fire at the Port of Los Angeles

Port of L.A. FireOn top of all the congestion that was already happening at the Ports of Los Angeles and Long Beach, a welding accident caused a fire at the Port of Los Angeles.

Thankfully, the LAPD contained and put out the fire quickly; however, that does not mean the fire did not add to the congestion problems at the port.

The smoke caused evacuations at terminals around the twin ports and then closures at many terminals.

Closed terminals got back up and running quickly, but anyone who doesn’t think this fire added to the backlogs at the ports is fooling him or herself.

Read about the fire at the Port of L.A. here.

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Universal Bizargo: Jag Stolen Nearly 50 Years Ago Found on Cargo Ship https://www.universalcargo.com/universal-bizargo-jag-stolen-nearly-50-years-ago-found-on-cargo-ship/ https://www.universalcargo.com/universal-bizargo-jag-stolen-nearly-50-years-ago-found-on-cargo-ship/#respond Thu, 18 Sep 2014 20:24:44 +0000 https://www.universalcargo.com/?p=7547 You never know what will be found in a shipping container. The recently seized contents of one shipping container led to an unexpected, 46-year reunion. Universal Bizargo, Universal Cargo’s series of bizarre tales from international shipping news, has featured stories with unexpected cargo in shipping containers before, but we are still pleasantly surprised by today’s […]

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UCM's Universal BizargoYou never know what will be found in a shipping container. The recently seized contents of one shipping container led to an unexpected, 46-year reunion.

Universal Bizargo, Universal Cargo’s series of bizarre tales from international shipping news, has featured stories with unexpected cargo in shipping containers before, but we are still pleasantly surprised by today’s shipping container cargo story.

Previous Universal Bizargo stories about guns and optical devices hidden in car parts or a drunken man waking up in a sealed shipping container might have been tales of weird shipping container contents, but neither had the feel-good quality of today’s story.

In 2012 we posted a story about a small kitten found in a shipping container that miraculously survived the 2,700-mile ocean voyage from China to the U.S. without any food or water. That story had the feel-good quality, but was before we launched Universal Bizargo so it doesn’t count.

Another kind of cat found in a shipping container is at the center of today’s Universal Bizargo story.

Stolen 1967 Jaguar XKE Convertible Found 50 Years Later resized 600This cat is a 1967 Jaguar XKE convertible. Finding a car in a shipping container, even a rare classic jag, isn’t that strange. Vehicles get shipped as ocean freight all the time. But this wasn’t just any vehicle shipment.

“… a U.S. Customs and Border Patrol analyst running a routine export check through a stolen car database came up with a hit. The 1967 Jaguar XKE was hot,” reported Justin Pritchard in EIN News Desk.

Discovering a stolen car is not where this story takes a strange turn. It’s WHEN this car was stolen that makes the story bizarre.

Almost half a century ago, the 1967 Jaguar XKE was stolen from Ivan Schneider, a successful Manhattan lawyer.

“New York police still had the March 1968 incident report,” Pritchard wrote. Apparently, when they contacted Schneider about his car being found, he thought they were pulling a prank on him. Instead, he was really being reunited with a car that was stolen from him 46 years earlier.

“This is just a miracle, a miracle. I was 36 years old then, and now I’m 82,” CBS Los Angeles quoted Schneider as saying over the phone to customs officials. “It was my first good car and favorite. It’s a wonderful car.”

Not only is it a “wonderful car”, the 1967 Jaguar XKE is a valuable car.

Pritchard’s story on the car says that even though the car is rusty and scratched, it is still worth about $24,000.

According to Hagerty, the average value of a 1967 E-type convertible, as this model is generally called, is $112,296.

So once Schneider restores the car, which he is planning to do, its value will jump.

Schneider’s long lost Jag was not the only car recovered from the shipping container in which it was found. “… a stolen 1969 blue Chevrolet Corvette and fraudulently obtained 1976 light brown and 2007 white Mercedes models 280 and E350, respectively, and a 2014 red Chevrolet Camaro ZL1, were in a container that was being shipped to the Netherlands,” CBS reported.

Of course, Schneider being reunited with his car nearly 50 years after it was stolen is the most incredible part of the story.

“I couldn’t believe it! … and I still don’t believe it!” Schneider said in a CBS interview.

Because it’s so hard to believe, the story ended up here in Universal Bizargo. Perhaps this story gives hope to all of us who have long lost something valuable. One day it could show up again.

Free Freight Rate Pricing 

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Ebola Epidemic & International Shipping https://www.universalcargo.com/ebola-epidemic-international-shipping/ https://www.universalcargo.com/ebola-epidemic-international-shipping/#respond Tue, 09 Sep 2014 23:44:30 +0000 https://www.universalcargo.com/?p=7445 I’ve avoided this blog subject like the plague. While the Ebola Virus has similar symptoms to the plague, I’ve been remiss in ignoring the Ebola epidemic in this blog for at least three reasons. The current Ebola outbreak is affecting international shipping. The Ebola epidemic is a “global threat”. Ebola is infecting and killing thousands of […]

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I’ve avoided this blog subject like the plague. While the Ebola Virus has similar symptoms to the plague, I’ve been remiss in ignoring the Ebola epidemic in this blog for at least three reasons.

  1. The current Ebola outbreak is affecting international shipping.
  2. The Ebola epidemic is a “global threat”.
  3. Ebola is infecting and killing thousands of people.

Ebola Virus & International ShippingThe first of the above three reasons directly ties Ebola to the overall subject of this blog; however, the second and third are more compelling reasons I should not have been avoiding the subject.

Thankfully, the world is not ignoring this epidemic and health care professionals are willing to put their lives on the line to treat the suffering and try to prevent the further outbreak of the Ebola Virus.

International shipping presents a risk of furthering the Ebola outbreak. Because of that scary reality, no international shipping blog or information outlet should ignore what’s happening right now with the Ebola Virus.

However, while the fear of international shipping spreading the Ebola Virus around the world may be high, the odds of that actually happening are low.

International shipping blogs or information outlets would be wise in attempting to do two things:

  1. To alleviate public fear of global Ebola spread through international shipping.
  2. To inform members of the international shipping industry on best practices to protect against Ebola infection and spread.

I do not mean to make it sound as though the Ebola epidemic happening right now should be taken lightly. Just the opposite.

The Hill reported that the head of the World Health Organization (WHO) called Ebola a “global threat” with the warning that only a significant international response could stop this global Ebola threat.

The article went on to quote the WHO Director General Margaret Chan:

“This Ebola epidemic is the largest, most severe, and most complex that we have ever seen,” Chan said.

“It has become a global threat that requires urgent action…. This is an international issue, a global threat, and it requires a coordinated effort.”

A recent Journal of Commerce (JOC) article notes how shipping is continuing between Ebola-stricken countries–Liberia, Nigeria, Sierra Leone, and Guinea–and the rest of the world (including shipments from these countries to the United States). But it also, very importantly, highlights how Maersk shared that no record of the Ebola virus being transmitted via international shipping exists.

Still, the international shipping industry is taking precautions to guard against Ebola spreading through crews shipping cargo on ships.

Here’s how the shipping companies ICS, IMEC, and ITF in a joint press release advised their members concerning risks calling in countries affected by the Ebola virus:

  1.    The Master should ensure that the crew are aware of the risks, how the virus can be spread and how to reduce the risk.
  2.    The ISPS requirements on ensuring that unauthorised personnel do not board the vessel should be strictly enforced throughout the duration of the vessel being in port.
  3.    The Master should give careful consideration to granting any shore leave whilst in impacted ports.
  4.    The shipowner/operator should avoid making crew changes in the ports of an affected country.
  5.    After departure the crew should be aware of the symptoms and report any occurring symptoms immediately to the person in charge of medical care.

It’s not a bad idea for everyone to be informed about the Ebola Virus, including how it is transmitted and the symptoms of the disease.

Here’s information on the Ebola Virus from the WHO:

Transmission

Ebola is introduced into the human population through close contact with the blood, secretions, organs or other bodily fluids of infected animals….

Ebola then spreads in the community through human-to-human transmission, with infection resulting from direct contact (through broken skin or mucous membranes) with the blood, secretions, organs or other bodily fluids of infected people, and indirect contact with environments contaminated with such fluids. Burial ceremonies in which mourners have direct contact with the body of the deceased person can also play a role in the transmission of Ebola. Men who have recovered from the disease can still transmit the virus through their semen for up to 7 weeks after recovery from illness.

Signs and symptoms

EVD is a severe acute viral illness often characterized by the sudden onset of fever, intense weakness, muscle pain, headache and sore throat. This is followed by

vomiting, diarrhoea, rash, impaired kidney and liver function, and in some cases, both internal and external bleeding. Laboratory findings include low white blood cell and platelet counts and elevated liver enzymes.

The incubation period, that is, the time interval from infection with the virus to onset of symptoms, is 2 to 21 days.

Ebola Affecting International Shipping

In the meantime, shippers should be aware that the Ebola outbreak is affecting international shipping.

The Democratic Republic of Congo has been added to Liberia, Nigeria, Sierra Leone, and Guinea in the list of countries experiencing Ebola outbreak. While international shipping and trade continues with these countries, there have been ships turned away from ports, put into quarantine, and generally delayed because of communicable disease scare.

Cancellations and delays of shipments due to the Ebola outbreak are taking place. Still, most international commerce and shipping continues to take place with stricken countries.

Free Freight Rate Pricing 

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World Record International Shipping – Maersk’s Megaship Video https://www.universalcargo.com/world-record-international-shipping-maersks-megaship-video/ https://www.universalcargo.com/world-record-international-shipping-maersks-megaship-video/#respond Tue, 26 Aug 2014 23:56:04 +0000 https://www.universalcargo.com/?p=7448 Want to see what a world record looks like? Check out this Maersk Line video of the Mary Maersk leaving Algeciras, Spain with 17,603 twenty-foot equivalent units (TEU)! This is crazy awesome! We’ve been talking about the megaship craze in international shipping for quite some time. It’s one thing to talk about megaships, but it’s another thing […]

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Want to see what a world record looks like? Check out this Maersk Line video of the Mary Maersk leaving Algeciras, Spain with 17,603 twenty-foot equivalent units (TEU)!

This is crazy awesome!

We’ve been talking about the megaship craze in international shipping for quite some time. It’s one thing to talk about megaships, but it’s another thing entirely to see one of these behemoths loaded up and leaving port.

Perhaps the legendary leviathan, an unimaginably large sea creature of lore, is a better metaphorical monster description than behemoth of the huge Triple E megaships Maersk is unleashing on the world of international shipping.

Even with pictures and videos, it’s hard to grasp the actual enormity of these megaships. Take a football stadium, add a basketball court, now throw in a hockey arena, and it could all fit comfortably below deck on a Triple E ship, Maersk has said to describe their leviathans.

Kenneth Mollerup Birch, Chief Editor of Maersk Line Communications wrote a great article on the Mary Maersk’s record-breaking voyage that stated the nominal capacity of this megaship is actually 18,270 TEU, so it probably won’t be too long before Maersk breaks this new record they just set.

There was a time when a 667 TEU ship (the difference between the nominal capacity of the Mary Maersk and the TEU it’s actually carrying) would have been considered a pretty big ship.

Ports are having to adjust to be able to handle ships of this magnitude. Most of the world’s ports could not handle one of Maersk’s Triple E ships like the Mary Maersk. Dredging harbors and getting larger cranes is just the start of a port preparing for the task of loading and unloading these monstrous megaships.

It took more than a year for Algeciras to prepare for the full utilization of a Triple E ship, according to Birch’s Maersk article. It quotes Carlos Arias, head of the South Europe Liner Operations Cluster, in regard to the preparation:

“This included the upgrading of four existing cranes and the arrival of four new Triple-E cranes.” [Arias] adds that the port of Tanjung Pelepas [the Malaysian destination port of the Mary Maersk’s record breaking voyage] has had to make similar upgrades, and this was the first occasion where both ends were ready.

Being able to move such high volumes of containers at once has great savings potential for Maersk. Will that potential result in reality? Will such savings, if reached, trickle down to shippers? Will Maersk even be able to fill ships with this kind of capacity?

Birch’s Maersk Article did say that more than half the containers on the ship were empty.

Overcapacity has put downward pressure on freight rates in the past and has been very costly for carriers like Maersk. If the demand isn’t present to fill these megaships, it’s possible ships like the Mary Maersk could create more downward pressure on freight rates.

But then again, maybe Maersk doesn’t really need to fill these Triple E ships with shippers’ goods. Maersk said all those empty containers were being repositioned for re-use in Asia. Repositioning shipping containers must be a need for carriers. And that doesn’t mean there weren’t a great many shipping containers filled with various kinds of goods being shipped.

“We have Danish cheese, frozen pork meat from Denmark, frozen beef meat from Germany, frozen berries, chocolate and candy foodstuff, frozen fish, lobster and frozen shellfish, flower bulbs from the Netherlands, pharmaceutical products, fruits and much more,” Captain Thorvald Hansen of the Mary Maersk was quoted as saying in the Maersk article.

The captain also spoke of the excitement and smooth sailing of the record-breaking voyage.

Now it’s time to see how smooth the transition of utilizing megaships in international shipping will be. The era of the megaship that we’ve been talking about for so long appears to have finally arrived.

 

 

Continue reading about megaships:

Mega Cargo Container Ships Vs. Major Ports of Call

Megalomania: Who Really Benefits from the Megaship Craze?

International Shipping News: Megaship Orders Impeding Recovery of Liner Shipping

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Trucker Shortage Problem For International Shipping & U.S. Economy https://www.universalcargo.com/trucker-shortage-problem-for-international-shipping-u-s-economy/ https://www.universalcargo.com/trucker-shortage-problem-for-international-shipping-u-s-economy/#respond Mon, 18 Aug 2014 16:44:00 +0000 https://www.universalcargo.com/trucker-shortage-problem-for-international-shipping-u-s-economy/ Most of us don’t like to be behind big-rig trucks on the road. Okay, maybe I’m projecting. I don’t like being stuck behind a big-rig truck; however, I want to see more truck drivers out on the road, hauling loads in their big-rigs. How’s that for a case of ambivalence? A major problem the international […]

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Truck Driver ShortageMost of us don’t like to be behind big-rig trucks on the road. Okay, maybe I’m projecting. I don’t like being stuck behind a big-rig truck; however, I want to see more truck drivers out on the road, hauling loads in their big-rigs.

How’s that for a case of ambivalence?

A major problem the international shipping industry is facing is a shortage of truck drivers. Beyond the international shipping industry, the truck driver shortage problem is a challenge for the improving U.S. economy that is increasing the demand for trucking while drivers to do the job can’t be found.

Since Universal Cargo Management is a freight forwarder, we’ll focus on what the truck driver shortage is and the effects the problem has on the international shipping industry, but it is good to realize the truck driver shortage problem has further reaching implications.

The Journal of Commerce (JOC) has a Driver Shortage coverage page that emphasizes the importance of truck drivers and the weight of the trucker shortage problem:

Truck drivers are the basic unit of transportation capacity and the glue that holds supply chains together. No container or straight truck or trailer moves without, at some point, a truck driver. Even so, trucking companies, especially truckload carriers, often have great difficulty finding, hiring and keeping drivers….

Unless trucking companies, logistics providers and shippers work together to finally resolve trucking’s “driver problem,” transportation and logistics costs will rise substantially, and supply chains will be put at risk.

The importance of truck drivers to the supply chain, the international shipping industry, and the economy at large cannot be overemphasized. It’s not mere propaganda that failure to resolve the truck driver shortage problem will result in substantially rising logistics costs and risks to supply chains.

The Problem:

“The American Trucking Associations (ATA) estimates that the U.S. is short 30,000 truck drivers,” Mamta Badkar reported in a Business Insider article.

“The [ATA] group projects the shortage could top 200,000 in the next decade,” Brenda Cronin included in her Wall Street Journal article.

Since the Business Insider and Wall Street Journal are both citing the ATA, let’s go directly to the source:

“Today, the industry has in the range of 30,000 to 35,000 unfilled truck driver jobs,” [ATA Chief Economist Bob] Costello said. “As the industry starts to haul more because demand goes up, we’ll need to add more drivers – nearly 100,000 annually over the next decade – in order to keep pace.”

The problem is filling those jobs.

With an unemployment rate of 6.2%, it would seem that there are plenty of job seekers to fill the truck driver vacancies. Unfortunately, that is not the case.

While long-haul driving does not require an extensive degree, it does require training. From just a precursory internet search of truck driving courses, it takes 17 days at the low end and 8 weeks at the high end to get a commercial driver’s license. Most training programs seem to be from 6-8 weeks.

Add to that chunk of time $5,000 to $6,000 in costs and the initial investment to go into truck driving may scare off many potential job seekers.

There are programs out there which offer paid training and job placement, but even when removing the investment obstacles, becoming a truck driver requires a lifestyle change that is difficult for many.

Truck drivers have long, difficult hours with much time away from family and friends. That’s where the pay is supposed to induce people to this line of work.

Neil Irwin wrote in the New York Times:

The average pay for a long-haul trucker is just shy of $50,000, according to the A.T.A., and an experienced trucker with a good safety record can make significantly more than that. The work typically offers lavish benefits that are increasingly rare for nonunion blue-collar employees.

That does not paint the full picture. Irwin’s NY Times article also included:

Even as trucking companies and their trade association bemoan the driver shortage, truckers — or as the Bureau of Labor Statistics calls them, heavy and tractor-trailer truck drivers — were paid 6 percent less, on average, in 2013 than a decade earlier, adjusted for inflation. It takes a peculiar form of logic to cut pay steadily and then be shocked that fewer people want to do the job.

Dissatisfaction from truckers goes deeper than the pay rates not keeping up with inflation. There have been recent trucker strikes where truckers complain of being wrongfully classified as independent contractors so they would not receive workplace protections like overtime and mandated work breaks as well as receiving lower pay. Complaints also include not being paid for waiting and loading time at ports, helping many truckers receive paychecks that are actually below minimum wage.

New trucking regulations have gone into effect that limit the time truckers can spend driving and increase when they are to take breaks. While these new rules aid in safety of the drivers and others on the road, they also cut into truckers’ profits and have made the job less appealing.

The list of challenges to truckers could be added to by discussing complications made by public health moves like the Clean Truck Program of the Ports of Los Angeles and Long Beach or carriers selling the chassis they used to provide with shipping containers… But in the end, it all comes to the same result:

Truckers are needed, but hard to hire and retain.

Effects on International Shipping

We’ll get into this more in a future blog, but here is a bullet point list of three major effects the truck driver shortage has or is likely to have on international shipping.

    • Delayed shipment pickup and arrival
    • Increased costs and fees
    • Port congestion
Free Freight Rate Pricing


Source: Economy

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ILWU Contract Negotiations Vs. Ndamukong Suh Contract Negotiations https://www.universalcargo.com/ilwu-contract-negotiations-vs-ndamukong-suh-contract-negotiations/ https://www.universalcargo.com/ilwu-contract-negotiations-vs-ndamukong-suh-contract-negotiations/#respond Tue, 29 Jul 2014 21:10:15 +0000 https://www.universalcargo.com/?p=7746 Oh, ILWU contract negotiations, to what shall I compare thee? How about football! And the World Cup is over so I’m talking American football. It’s not just the world of international shipping where contract negotiations are one of the top stories. If you’re a football fan checking out your team coverage while waiting for football […]

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Oh, ILWU contract negotiations, to what shall I compare thee?

How about football! And the World Cup is over so I’m talking American football.

ILWU and Suh contract negotiations resized 600It’s not just the world of international shipping where contract negotiations are one of the top stories. If you’re a football fan checking out your team coverage while waiting for football to finally start, there’s a good chance you’ve read about contract negotiations between NFL players and their respective teams.

Like the ILWU (International Longshore and Warehouse Union) contract negotiations with the PMA (Pacific Maritime Association) have dominated international shipping headlines for months (with the biggest exception being the P3 Alliance failing in its bid for approval), Ndamukong Suh’s contract negotiations have dominated Detroit Lions headlines.

The latest news stories on each sound similar. Both talks are taking a break.

Here’s the latest statement from PMA and ILWU:

After several days of productive contract talks, both parties concluded negotiations on Friday afternoon.

No talks will take place from July 28 to Aug. 1 so that the ILWU can resume unrelated contract negotiations in the Pacific Northwest.

The PMA and ILWU will resume their contract negotiations on Monday, August 4, in San Francisco.

The previous labor contract covering nearly 20,000 longshore workers at 29 West Coast ports expired July 1. While there is no contract extension in place, both parties have pledged to keep cargo moving.

This break from negotiations between the ILWU and PMA comes as no surprise; they previously announced the break was on the way.

The break in negotiations between the Lions and Ndamukong Suh, on the other hand, does come as a surprise. That’s one of the biggest reasons I bring up this comparison.

Yes, contract negotiations between an individual and an organization is very different than negotiations between an organization and another organization (say a union like the ILWU, as a random example). On top of that, comparing NFL or sports industry contracts to international shipping industry contracts may seem like comparing apples to oranges. But there are things that all contract negotiations have in common. Among those commonalities are uncertainty and the possibility that things could fall apart (I didn’t just repeat uncertainty in a different way, did I?).

The Lions and Suh are not merely taking a few day break from negotiations as the ILWU and PMA are doing. The Lions tabled contract negotiations until after the 2014 season. This creates the risk that the Lions could lose Suh altogether. Only days before, the news on the contract was that everyone was optimistic about it getting done.

There’s optimism around the ILWU contract negotiations as well. And with good reason.

Peter Tirschwell said in a Journal of Commerce article, “Despite the absence of a contract, 2014 has been — so far — the smoothest ILWU-PMA negotiation in recent memory.”

So far.

Absence of a contract makes people nervous. Lions fans are nervous about losing their star defensive player after the 2014 season when his contract expires and the ILWU contract already being expired has international shippers worried about losing service at West Coast ports. Of course, port shutdowns would be an incomparably worse scenario than a player leaving one NFL team for another. But with contract negotiations come uncertainty and worry.

Despite not having a new contract, Lions fans know Suh will do his best on the field this season. In fact, Suh likely will try to find a way to play even better in order to increase his value and get more money in his next contract. Unfortunately, international shippers cannot have the same confidence in the ILWU.

The ILWU is working without a contract. Often that means slowdowns or strikes from the ILWU in an effort to create pressure or leverage in the contract negotiations. However, optimism remains high that neither slowdowns nor shutdowns will happen as “both parties have pledged to keep cargo moving” according to their multiple joint statements.

West Coast ports have lost market share in recent years and face more competition than in the past. Traditionally, the ILWU has been more concerned with how much they get in their contracts than with port performance during contract negotiation years, but perhaps the vulnerability of the West Coast ports, and therefore ILWU jobs, will make the ILWU work like an NFL player in a contract year.

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Maersk & MSC Replace P3 Network with 2M Vessel Sharing Agreement https://www.universalcargo.com/maersk-msc-replace-p3-network-with-2m-vessel-sharing-agreement/ https://www.universalcargo.com/maersk-msc-replace-p3-network-with-2m-vessel-sharing-agreement/#respond Thu, 17 Jul 2014 18:15:48 +0000 https://www.universalcargo.com/?p=7383 Goodbye P3, hello 2M. It didn’t take long after China halted plans for the P3 Network, what would have been an operational alliance between the three biggest carriers in the international shipping industry, for two of the P3 carriers to replace the P3 with a vessel sharing agreement. Maersk and MSC both put out Press releases […]

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Goodbye P3, hello 2M.

MSC Maersk Vessel Sharing AgreementIt didn’t take long after China halted plans for the P3 Network, what would have been an operational alliance between the three biggest carriers in the international shipping industry, for two of the P3 carriers to replace the P3 with a vessel sharing agreement.

Maersk and MSC both put out Press releases a week ago to announce a ten-year vessel sharing agreement called the 2M.

The press releases say the vessel sharing agreement will include 185 vessels on 21 strings, with around 2.1 million TEU of capacity.

Both MSC and Maersk seem quite pleased with this vessel sharing agreement.

“MSC is pleased to have reached this agreement with Maersk Line. It represents another positive step in our continual drive to enhance our operational network in terms of scope, scale, efficiency and reliability. Our customers will be able to enjoy these benefits alongside the world class customer service that has been the cornerstone of our business since our formation in 1970.” says Diego Aponte, MSC Vice President.

Mr. Aponte continues “The 2M Vessel Sharing Agreement will enable us to achieve significant reductions in fuel consumption, driving down the carbon footprint of our shipping operations. With sustainability a key area of focus for MSC, we’re delighted that this vessel sharing agreement will mean major cuts in emissions while simultaneously enhancing our service to customers.”

Likewise, Maersk officials gushed about the vessel sharing agreement:

“I am very pleased with our agreement with MSC. We share the same ambition to have as efficient and effective operations as possible. We will continue to provide our customers with competitive and reliable container shipping in the East-West trades at attractive prices. To do so we have to be innovative and take out cost, while keeping a product that is best in class for our customers in terms of coverage, frequency and reliability. Our agreement with MSC is a step towards achieving all of these objectives in the East-West trades,” says Søren Skou, Maersk Line CEO.

Maersk Group CEO Nils S. Andersen welcomes the agreement with MSC.

“Over the last years, Maersk Line has established itself as a leader in the industry through its customer focus and by improving its competitive cost position. With this agreement Maersk Line will be able to further enhance its customer offering while also reducing costs and CO2 emissions. I am confident that Maersk Line’s leadership, also after this positive step, will continue to find new ways to strengthen its customer experience,” says Nils S. Andersen.

While MSC and Maersk are pleased, does the last remaining would-be P3 member, CMA CGM feel left out?

A Wall Street Journal article reports:

The cost savings that Mærsk and MSC stand to realize from the 2M pact present a challenge for CMA CGM, given that the French company currently collaborates with the 2M partners on some services, [chief executive of Copenhagen-based Sea Intel Maritime Analysis] Mr. [Lars] Jensen said. CMA CGM will need new vessel-sharing agreements with other companies “in order to maintain the competitiveness of their own product offering,” he said.

Their exact feelings on the vessel sharing agreement are not known as CMA CGM has declined to comment on it so far.

MSC and Maersk have been fast to point out the differences between this 2M vessel sharing agreement and the P3 Network. Of course, it makes sense they would do so, not wanting to have it shut down.

Both press releases were careful to point out how the 2M’s combined market share is much smaller than the P3 Network’s would have been. The second difference both conveyed was that this agreement is purely a vessel sharing agreement and does not set up a jointly owned but independent organization with executable powers like the P3 Network would have created.

As such, the 2M vessel sharing agreement does not need the kind of approval that was necessary for the P3 Network. Maersk and MSC can go right into operation with this vessel sharing plan.

Here are 12 points Maersk and MSC shared about the 2M vessel sharing agreement in their press releases.

  • The VSA will improve the network efficiency and allow for lower slot costs through improved utilisation of vessel capacity and economies of scale.
  • The VSA will provide more sailings and direct port pairs than the parties offer today individually.
  • The VSA includes 185 vessels with an estimated capacity of 2.1 million TEU on 21 strings in the Asia –Europe, Transatlantic (Europe – US East Coast) and Transpacific (Asia – US East & West Coast) trades.
  • The 21 strings are split as follows: Asia/North Europe: 6, Asia/Mediterranean: 4, Asia/US West Coast: 4, Asia/US East Coast: 2, North Europe/USA: 3, Mediterranean/USA: 2.
  • Maersk Line will contribute with approximately 110 vessels with a nominal capacity of app. 1.2 million TEU (55% of the total capacity).
  • MSC will contribute with approximately 75 vessels with a nominal capacity of app. 0.9 million TEU (45% of the total capacity).
  • Vessels deployed in the VSA will continue to be owned (or chartered) and operated by the two individual lines.
  • The VSA does not include joint marine operations. Each party will thus execute their own operations including stowage, voyage planning and port operations.
  • The VSA does not include any commercial tasks or responsibilities. Each party will continue to have fully independent sales, pricing, marketing, and customer service functions.
  • A joint coordination committee will monitor the network on a daily basis.
  • The duration of the VSA is 10 years.
  • The VSA is expected to start early 2015. The starting date is conditioned by filing of information to and in some cases approvals by relevant authorities.

While the 2M won’t save Maersk or MSC the one billion dollars a year that the P3 was expected to save the ocean freight shipping companies, the cost savings the two companies will receive from this vessel sharing agreement should be substantial.

What are your thoughts on the new 2M? Good? Bad? Put your thoughts in the comments section below.

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Strike at Los Angeles & Long Beach Ports, But Not By ILWU https://www.universalcargo.com/strike-at-los-angeles-long-beach-ports-but-not-by-ilwu/ https://www.universalcargo.com/strike-at-los-angeles-long-beach-ports-but-not-by-ilwu/#respond Tue, 08 Jul 2014 20:26:50 +0000 https://www.universalcargo.com/?p=7548 There’s a strike at the Ports of Los Angeles and Long Beach. The Pacific Maritime Association (PMA) and International Longshore and Warehouse Workers Union (ILWU) released the following statement Monday, July 7th: The parties have agreed to take a 72-hour break from negotiations on a new coast-wide contract while the ILWU attends to an unrelated […]

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strike at Ports of Long Beach There’s a strike at the Ports of Los Angeles and Long Beach.

The Pacific Maritime Association (PMA) and International Longshore and Warehouse Workers Union (ILWU) released the following statement Monday, July 7th:

The parties have agreed to take a 72-hour break from negotiations on a new coast-wide contract while the ILWU attends to an unrelated negotiation taking place in the Pacific Northwest. During this break, starting at 8 a.m. on Tuesday, July 8, through 8 a.m. on Friday, July 11, the parties have agreed to extend the previous six-year contract, which expired last week. The PMA and ILWU are negotiating a new contract covering nearly 20,000 longshore workers at 29 West Coast ports.[1]

That’s right, the ILWU and PMA are stepping away from the negotiating table, but for an agreed upon amount of time with no strike or lockout coming from these contract negotiating parties.

An earlier press release promised the ILWU and PMA would keep negotiating without a strike or lockout until a new contract agreement is reached:

While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU).

Both sides understand the strategic importance of the ports to the local, regional and US economies, and are mindful of the need to finalize a new coast-wide contract as soon as possible to ensure continuing confidence in the West Coast ports and avoid any disruption to the jobs and commerce they support. [2]

Truckers StrikeSo if the ILWU, which people worried about striking, is not striking, who is striking at the Ports of Los Angeles and Long Beach?

Truckers of the Green Fleet, Pac 9 Transportation, and Total Transportation Services Inc. companies are the ones striking. Again.

The issues, including misclassification of truckers as independent contractors instead of employees, are the same as when the truckers went on strike in April.

The difference between then and now is that no expiration for the trucking strike has been offered.

While the ILWU seems committed to negotiating with the PMA and not striking until a contract is reached, will the dockworkers honor the truckers’ picket line? Not likely.

The truckers strike is backed by the International Brotherhood of Teamsters.

“The ILWU and the Teamsters don’t get along” said [trucking industry veteran Greg] Stefflre, the CEO of Fontana-based Rail Delivery Services.  “The ILWU has jurisdiction there [at the Ports], and the Teamsters would like jurisdiction there, so there’s a natural antipathy between the two that I think bodes against them [ILWU members] doing a ‘sympathy’ shut-down.”[3]

Without the ILWU honoring the truckers’ picket lines, this strike is not likely to cause significant disruptions at the Ports of Long Beach and Los Angeles.

All the same, the truckers seem determined to make their strike effective.  Lakewood’s Byron Contreras, who has worked for almost three years as a driver for Green Fleet Systems said, “We’ll be out here as long as it takes.”[4]

Land Line Mag reports:

“We are fed up,” Alex Paz, a former driver with Total Transportation Services Incorporated, toldMSNBC. “When the company misclassifies you, you’re denied Social Security, you’re denied medical, you’re denied workers’ comp.”[5]

Here at Universal Cargo Management, we’ll be watching the situation to make sure your imports move as smoothly as possible.

Free Freight Rate Pricing

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Shipping News Alert: Outlook on ILWU Strike & Congestion Fees https://www.universalcargo.com/shipping-news-alert-outlook-on-ilwu-strike-congestion-fees/ https://www.universalcargo.com/shipping-news-alert-outlook-on-ilwu-strike-congestion-fees/#respond Fri, 27 Jun 2014 21:53:56 +0000 https://www.universalcargo.com/?p=7498 Obviously, the negotiations taking place in San Francisco between the ILWU and PMA are extremely pertinent to shippers who import and export in the US. The way the negotiations go have serious financial implications for businesses and individuals who have cargo they need to ship. The ocean carriers announced and filed Port Congestion Surcharges (PCS) of $800/$1000/$1125 per 20’/40’/HQ contigent on […]

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Shipping News ILWU Strike Congestion Fees OutlookObviously, the negotiations taking place in San Francisco between the ILWU and PMA are extremely pertinent to shippers who import and export in the US.

The way the negotiations go have serious financial implications for businesses and individuals who have cargo they need to ship.

The ocean carriers announced and filed Port Congestion Surcharges (PCS) of $800/$1000/$1125 per 20’/40’/HQ contigent on congestion caused by a ILWU strike or PMA issuing a lockout or other slowdowns related to the contract negotiations.

Obviously, no shipper wants to see such fees jumping up freight rate pricing.

So how likely is such a situation to arise that will cause these PCS to be implemented. While there is congestion being experienced in the Ports of Los Angeles/Long Beach, the following statement from international shipping insider Peter Friedman suggests optimism.

The following is from Peter Friedmann from the Pacific Coast Council:

I am at this moment about 3 blocks away from where the negotiations are taking place in San Francisco. At a meeting which includes most of the ocean carriers and many of the exporters and importers that use West Coast ports, as well as the port directors and senior management for most of the West Coast ports. So this is obviously topic number one. I can tell you that there is really no news to report. In fact we have the lead writers from the four primary maritime trade journals also attending this meeting. Tomorrow morning we have a panel comprised of the executive director of the Port of Oakland, an official with the Machinists union. Two ILWU officers will be in the audience. I frankly do not expect them to say anything, because the parties have been extremely diligent about keeping any of the discussions out of public view. However, we still expect that there will be no contract by the end of June, that they will continue negotiating, that there may be some disruption at the ports for the July 4th holiday and the so-called bloody Thursday memorial. But nothing major, and frankly not enough to cause the carriers to impose the $1,000 congestion surcharges that they have filed at the Federal Maritime Commission. We also have a representative of the FMC here, they are monitoring those congestion surcharges. I believe that the contract will be a three-year contract, that it will likely be signed by the second week of July, and that the disruption at the ports will be fairly minimal. But again, this is not based on any public statements by the presidents of the two parties; however, we did see a press release by one officer of the ILWU who said that the ports and shippers should really not be worried. Usually I would not take that at face value, but I think this year we just may. However, there is right now extreme congestion at the port of LA and Long Beach which is causing huge problems for both imports and exports. New executive director of the Port of Los Angeles will be having dinner with us tonight and I will update what I learn from him. Many people believe that this congestion is due to arrival of some of the huge new container ships, and the fact that productivity remains at the traditional slow levels, but this is not necessarily being done by Labor to influence the negotiations. I will do further update later tonight.

As always, we here at Universal Cargo Management are keeping a close eye on the situation and will be keeping you informed through our blog.

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Captain Could Be Executed On Murder Charges After Tragic Ship Sinking https://www.universalcargo.com/captain-could-be-executed-on-murder-charges-after-tragic-ship-sinking/ https://www.universalcargo.com/captain-could-be-executed-on-murder-charges-after-tragic-ship-sinking/#respond Thu, 26 Jun 2014 23:13:13 +0000 https://www.universalcargo.com/?p=7633 The captain goes down with the ship. Except that’s not what happened on the MV Sewol. Footage of the captain, Lee Joon-seok, scrambling out of the ship in his underwear with the aid of rescuers enrages the people of South Korea. The footage plays over and over again on South Korean news. Public outrage at the […]

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The captain goes down with the ship.

Sewol Captain Faces Murder ChargesExcept that’s not what happened on the MV Sewol. Footage of the captain, Lee Joon-seok, scrambling out of the ship in his underwear with the aid of rescuers enrages the people of South Korea.

The footage plays over and over again on South Korean news.

Public outrage at the captain’s actions is so strong that he has become a hated figure in South Korea who is deserving of execution according to public opinion. He and three of his crew are merely a conviction away from facing the death penalty.

It’s been almost twenty years since the death penalty has been carried out in South Korea. The people of South Korea seem ready to see that change in the case of Lee.

The MV Sewol was traveling from Incheon towards Jeju when it capsized on April 16th of this year. The South Korean ferry was carrying around 500 people.

When the captain and crew were scrambling to safety, hundreds of passengers were drowning. To be exact, 284 people were confirmed killed with another 20 still missing reports CNN.

What makes this event even more tragic is most of the passengers onboard were high school students on their way to a field trip.

How does a tragic accident at sea lead to the captain and some crew possibly facing the death penalty?

“The prosecutor’s office said the captain and three crew members were charged with murder, because they didn’t use the ship’s facilities at their disposal — such as life rafts, life vests and announcements to evacuate passengers.”[1]

The crew had never even been trained for an emergency scenario, an order to evacuate ship was never given, and worse, the “passengers were instructed not to move and to stay in place as the ferry listed.”[2]

It’s easy to understand the outrage at the captain and crew for scrambling to safety while the passengers they should have been responsible for were on their way to death. It makes sense of how the captain and some of his crew are being charged with murder.

The other surviving crew members are being hit with charges of abandonment and violating a ship safety act.

In April, the media was reporting that Captain Lee Joon-seok was being charged with abandoning his boat, negligence, causing bodily injury, not seeking rescue from other ships, and violating “seamen’s law” before charges were upgraded with the capital offense of murder.

Back then, Lee defended his actions saying, “The tidal current was strong and water temperature was cold, and there was no rescue boat. So I had everyone stand by and wait for the rescue boat to arrive.”[3]

Overloading of the ship could have played a factor in the sinking of the Sewol. This is something the ferry company might have been trying to cover up.

According to the Korea Herald:

In a departure report, Chonghaejin Marine Co. told authorities at the Korea Shipping Association that it had 450 passengers, 24 crew members, 150 vehicles and 657 tons of cargo on board…

But shortly after the accident on Wednesday, the ferry operator quickly changed the numbers, reporting that it had 477 people on board and was carrying 1,157 tons of cargo. The ferry was also found to have loaded 180 vehicles….

Chonghaejin Marine Co. has changed its reported number of passengers several times.

A couple days after the accident, one of the passengers who actually did get rescued wasn’t able to handle the guilt he felt over surviving when so many students died.

Kang Min-Kyu, deputy head of Danwon High School who was in charge of the 4-day trip that ended in tragedy hanged himself. He left a suicide note:

“Surviving alone is too painful while 200 remain unaccounted for. I take full responsibility.

“I pushed ahead with the school trip. I will again become a teacher in the afterlife.”[4]

While most of this story is covered by heartbreaking loss of life, there is also an incredible spark of selflessness and life saving in the midst of it all. Students saved Kwon Ji-yeon by passing the six-year-old girl to the safety of a rescuing boat.

Survivor Yu Ho-sil said: “Somebody shouted to take the baby and other students passed the baby outside.”[5]

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Judge Rules ILWU Purposefully Slowed Import/Export @ Port of Portland https://www.universalcargo.com/judge-rules-ilwu-purposefully-slowed-import-export-port-of-portland/ https://www.universalcargo.com/judge-rules-ilwu-purposefully-slowed-import-export-port-of-portland/#respond Tue, 03 Jun 2014 19:42:24 +0000 https://www.universalcargo.com/?p=7486 There are tensions at the Port of Portland. A judge’s ruling on Friday (May 30th) sparked more anger and controversy there, increasing that tension. What’s going on? I’m glad you asked. There’s a fight over jobs. The International Longshore and Warehouse Union [ILWU] pretty nearly has a monopoly on waterfront jobs. Imports and exports go […]

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There are tensions at the Port of Portland. A judge’s ruling on Friday (May 30th) sparked more anger and controversy there, increasing that tension.

What’s going on? I’m glad you asked.

There’s a fight over jobs. The International Longshore and Warehouse Union [ILWU] pretty nearly has a monopoly on waterfront jobs. Imports and exports go through the ILWU men and women at the ports. The ILWU is doing its best to keep a tight grip on all the port jobs.

But there are some jobs at the Port of Portland that haven’t gone to the ILWU. Fighting over these jobs is the source of tension at the port.

ILWU Slowdown JudgmentFor years, the port has employed International Container Terminal Services Inc (ICTSI) electricians not ILWU members to handle things like plugging, unplugging, and monitoring reefer containers (refrigerated shipping containers).

The ILWU believes these jobs should no longer be the responsibility of the port, able to hire anyone they want, but the responsibility of the unions as part of the labor agreement made back in 2008.

The Port of Portland has not seen it this way and the battle over who controls these jobs went to court and created part of the prologue for the case a judgment was made Friday.

An article from HandyShippingGuide.com reports:

[Friday’s judgment] comes after rulings on who was contracted to work on reefer boxes as they passed through the supply chain. A previous judge took the view that the electricians, employed by the port, had responsibility for plugging, unplugging, and monitoring refrigerated containers not the longshoremen who work for Philippine group ICTSI. In the judge’s opinion this was traditionally the status quo whereas the unions believed that the International Longshore and Warehouse Union’s (ILWU) 2008 coastwise labour agreement with the Pacific Maritime Association (PMA) meant responsibility for these works had transferred to its members. For thirty-six years the work was the responsibility of the port but the union maintains that when the terminal management transferred to ICTSI so did responsibility for the equipment concerned and the PMA deemed it to be an ILWU staff job. [1]
The port believes that the ILWU workers have intentionally slowed down the movement of shipping containers being imported and exported through the Port of Portland, specifically Terminal 6, over ILWU’s displeasure with the decision to allow these jobs to continue to go to electricians hired by the port instead of the union.

There have, in fact, been many slowdowns and long, unpredictable wait times at Terminal 6 at the Port of Portland where all this job drama is centered. We’ve even tweeted and shared on Facebook to our followers about delays at the port’s terminal.

On Friday, an Administrative Law Judge for the National Labor Relations Board ruled in agreement that the ILWU has been intentionally slowing down freight movement at the Port of Portland’s Terminal 6.

Immediately and not surprisingly, the ILWU attacked this judgment.

“It’s an absurd outcome,” said Troy Mosteller, secretary-treasurer of ILWU Local 8. He said the ruling would force union laborers to work in a way that “puts lives at risk or be accused of hard timing” International Container Terminal Services International Oregon…[2]
Union officials said ICTSI Oregon is trying to force union operators to violate federal safety standards. The ruling means, in effect, “we should operate in bypass mode, risk our lives and the lives of others, lifting cargo with a crane higher than the cranes established maximum lift capacity,” said Leal Sundet, the ILWU’s Coast Committeeman. [3]I’m ready to agree with the union as they continue to argue in an OregonLive article of the Oregonian:

A judgment that says workers should work and operate machinery in an unsafe manner is appalling. As what gets quoted in articles of the judgment is finding that ILWU is guilty of having “deliberately worked in a less productive manner—by operating their cranes at a reduced speed, refusing to hoist their cranes in ‘bypass mode’ to discharge high containers, refusing to move two 20-foot containers (‘twin 20s’) at a time on older trailers, and driving their trucks slowly…” it is easy to see this as a slap in the American worker’s face, throwing worker’s rights backward.

But reading the actual decision changes perspective from reading about the ILWU response:

As summarized below, there is ample record evidence supporting these allegations:

Local 8 crane operators unnecessarily working their cranes in a slow “box” pattern (rather than a smoother “arc” pattern) throughout the relevant period…

… Local 8 truckdrivers driving slow, at 3–5 mph instead of the usual 15 mph, and taking indirect routes around the yard, for no apparent reason…

… crane operators operating in such a manner 2 days in a row… that both performed only about 15 net container moves per hour, far below normal…

…an incident… when most of the Local 8 truckdrivers on two gangs were taking the “scenic route” around the yard and leaving the crane hook hanging for no apparent reason…. many of the drivers refused to comply with the foreman’s order to take the direct route until after he threatened them with discharge….

 Brian Yockey… overheard an experienced Local 8 crane operator on the radio state that the operators were no longer “allowed” to use the bypass mode to hoist their cranes past a certain safety limit to discharge high containers. Yockey immediately contacted Craig Bitz, a Local 8 Labor Relations Committee (LRC) representative and relief business agent, and reminded him of the parties’ longstanding agreement and practice of using the bypass mode in such situations. Bitz responded that operating in the bypass mode was an OSHA violation, and that the Union was “not going to work in a manner to help [ICTSI] as they have in the past” because of the complaints ICTSI had filed against Local 8 members. ICTSI therefore had to shift ballast to get the ship lower in the water, which added several hours to the operation….

… [Bitz] did not deny telling Yockey during their conversation about the bypass mode that the Union was not going to help the Company as it had in the past because of all the recent complaints against Local 8 and its members….

Jan Holmes, the standing area arbitrator at the terminal for many years, specifically found that three Local 8 crane operators engaged in a slowdown while working a Hapag Lloyd vessel… based on their exceptionally low production figures… and other evidence presented at the formal hearing, including videotape of the operation…[4]
As court decisions keep going against the ILWU about purposefully creating slowdowns, the evidence seems to clearly support they’ve used such tactics.

With negotiations currently underway for a new contract between the ILWU and the Pacific Maritime Association concerning west coast dockworker jobs, it can only be hoped no such tactics will come into play. Nor a lockout or strike.

The costs could be high for shippers, businesses, and the economy.

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8 Tips for Palletized Ocean Cargo Shipping https://www.universalcargo.com/8-tips-for-palletized-ocean-cargo-shipping/ https://www.universalcargo.com/8-tips-for-palletized-ocean-cargo-shipping/#comments Thu, 29 May 2014 17:51:09 +0000 https://www.universalcargo.com/?p=7409 Guest Blog by Mitch from Kensington Van Rental  International ocean cargo shipping has its advantages and disadvantages, but when used wisely it can be your main and most useful method for overseas shipping. Shippers have to decide on the way they want to prepare their cargo so it can be safe from harm during the […]

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Guest Blog

by

Mitch from Kensington Van Rental 

International ocean cargo shipping has its advantages and disadvantages, but when used wisely it can be your main and most useful method for overseas shipping. Shippers have to decide on the way they want to prepare their cargo so it can be safe from harm during the trip. The following tips will help establish how that can be done using pallets and why:

Tip #1 – Use Standard Pallets & Stacking Sizes

Tips for Palletized Ocean ShippingWhen your cargo is being palletized, the shipping boxes will be stacked on a pallet in a pattern that allows the most boxes to fit within a reasonable set of dimensions. They may be stacked up to five feet high, but should not exceed sixty inches total.

Once the whole set of boxes is shrink-wrapped with plastic film, it will be safe and ready for transport. The standard-sized US pallet has the following dimensions: 48″x 40″x 6″ or 1.2 x 1.0 x 0.15m.

The international ocean cargo industry allows different sizes, but you should remember that forklifts can handle pallets of certain sizes, so there should be at least a minimum clearance they can work with safely. This is the reason why you should stick to the standard size when possible so things can be handled with greater ease and safety.

Pallets exceeding the previously mentioned dimensions as well as the safe limits of weight may need special approval before they’re shipped.

Tip #2 – Check Wood Shipping Regulations

Keep in mind that there are still restrictions for wooden packing in some countries, so you will need to check for such before you decide to ship your cargo. This will save you many headaches down the line.

Tip #3 – Properly Label Palletized Boxes

You should label every single box and unit within the pallet you’re planning to ship.

Remove or cross out the old labels and you will succeed in making sure there will be no mistakes, even if something unexpected happens. This will help your cargo be recognized even if the pallet breaks down and gets spilled during accidents.

Label at least both sides of the pallet for greater ease and include the ocean carrier’s booking number as well as the contact information of the consignee. You should not write anything mentioning commodity on your shipping boxes. You will describe that in the shipping documents, which will be submitted to the shipping company itself.

Tip #4 – Evenly Stack Boxes

When it comes to stacking and loading, always remember to stack the boxes evenly and squarely from corner to corner.

Never allow boxes to hang from the pallet or else you’ll have great trouble fitting them in their place.

Tip #5 – Make Pallets Stackable

Make sure you keep the top of the pallet flat so there will be less damage to the boxes when and if stacked on top of each other. This will keep things better organized, but is also largely dependent upon the nature of the cargo being shipped.

Tip #6 – Reinforce Boxes

You can put some fiberboard between the boxes if you’re worried they may get crushed during transport. This will require some skillful stacking. Just make sure you do things right before you ship.

Tip #7 – Protect Your Cargo from the Elements

You can cover the top of the pallet with a plastic film so it will be protected from the elements when it’s outside. It requires a small bit of work, but if it becomes part of the packing routine, then it will greatly improve the odds of your cargo surviving such conditions without damage.

Tip #8 – Secure Pallets

You must keep in mind that you need to really secure the pallets.

This can be done with a good, 70-gauge stretchwrap that passes through the bands and the voids around the pallet. You can also use rayon, nylon, steel, polypropylene or polyester to band the cargo.

Make sure you use shock absorbers or cushioned pallets for sensitive cargo.

Click Here for Free Freight Rate Pricing

This has been a guest blog from:

Mitch of Kensington Van Rental.

Mitch has been involved in logistics and transportation business for a couple of years. He likes to distribute his knowledge through guest blogging so that it would be of help for all the readers who are interested in the subject.

Find more helpful info here: Kensington van rental

Click me

Click on the Guest Blog image above to email us if you would like Universal Cargo Management to publish an original blog from you.

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Top International Shipping News & Blog Resources https://www.universalcargo.com/top-international-shipping-news-blog-resources/ https://www.universalcargo.com/top-international-shipping-news-blog-resources/#respond Tue, 27 May 2014 21:20:59 +0000 https://www.universalcargo.com/?p=7470 Today’s blog is a little bit different. Rather than looking at a news story that affects international shipping or giving international shipping tips, I’m going to share a list of some of the top news resources for articles relating to international shipping. This isn’t like Supply Chain Opz’ SCM Global 50, that listed Universal Cargo […]

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Today’s blog is a little bit different.

Rather than looking at a news story that affects international shipping or giving international shipping tips, I’m going to share a list of some of the top news resources for articles relating to international shipping.

This isn’t like Supply Chain Opz’ SCM Global 50, that listed Universal Cargo Management’s blog as one of the top supply chain blogs, where using data gathering and methodology determines the list of international shipping resources. Instead, these are some of the most likely websites you’ll see me use as sources for international shipping news blogs.

These international shipping news resources are some of the most common places I look to find stories about international shipping. Often, I’ll go to these resources trying to find articles on something I already know is happening in the international shipping industry. Sometimes, I’ll go to these resources and discover international shipping related stories that I never would have heard about despite working for a well-connected freight forwarder.

There are many more international shipping news resources I read and use as source material, but these are some of the top ones to check out.

Supply Chain Brain 

http://www.supplychainbrain.com

Supply Chain Brain has a great website of international shipping articles.

What I like most about Supply Chain Brain’s site is that you can easily browse it by category. The site has 17 different Logistics/Freight categories including Air Cargo, Global Logistics, and Ocean Transportation.

If I don’t know what I’m going to blog about yet, Supply Chain Brain is one of the first places I go to brainstorm ideas and see the most recent articles they’ve posted on international shipping related topics.

Here’s a little bit of how Supply Chain Brain describes itself:

SupplyChainBrain is the world’s most comprehensive supply chain management information resource. In addition to providing complete coverage of all fundamental supply chain principles, SupplyChainBrain identifies emerging trends, strategies and best practices, forward-thinking ideas, cutting-edge solutions and the latest innovations – and continues to write and report on these as they evolve and mature.

Reuters

http://www.reuters.com

If you read this blog regularly, then you see me quote articles from Reuters frequently.

As you’ll find with a number of news resources on this list, Reuters is not all about logistics or international shipping. What Reuters does offer is international news. It’s not surprising that international news often affects international business.

If you’re strictly interested in international shipping articles and news, keep coming here. I’ll sort through Reuters and similar news sources for stories that impact international shipping. But Reuters is worth reading for their comprehensive, worldwide news coverage and a focus on news that affects business.

Here’s a little bit from Reuters on how they describe themselves:

Thomson Reuters is the world’s largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.

The Wall Street Journal

http://online.wsj.com

Like Reuters, you’ll see me quote and cite stories from The Wall Street Journal very commonly.

I probably don’t have to tell you much about The Wall Street Journal. Their reputation should precede them… and way precede this blog. But it is worth mentioning that news affecting the world of international shipping is often covered in the Wall Street Journal.

Rather than describe them, I’ll go straight to what The Wall Street Journal has to say for itself:

Winner of 35 Pulitzer Prize Awards and considered the gold-standard of journalism, The Wall Street Journal is the industry leader delivering the most crucial news of the day, insightful opinion and fair-minded analysis. With expanded color capabilities, new adjacencies and section cover positioning, advertisers have more ways to connect with a powerful, influential and affluent target audience.

Marine Link

http://www.marinelink.com

You don’t see me quoting and citing Marine Link as often as Routers or the Wall Street Journal, but it is still an excellent resource for international shipping news.

As a matter of fact, this is a news resource specifically relating to international shipping.

Marine Link is the website for reading not one, but two international shipping related magazines: Maritime Reporter and MarineNews.

I’ll often go here, see what’s happening, read stories on international shipping news, and see if there’s anything I want to share with Universal Cargo Management’s blog readers. If you’re a regular reader of our blog, this is probably an excellent site for you.

As I’ve now established the pattern, here’s a bit from Marine Link about itself:

The online home of Maritime Reporter and MarineNews magazines has been serving the maritime industry since 1999, with breaking business news and information on events, regulations, and developments. Every month more than 95,000 users log on for industry updates and company news, with MaritimeToday delivering daily email news service. RSS Feeds are available in all relevant industry categories, and news can be followed on Twitter at ShipNews.

Journal of Commerce

http://www.joc.com

Ah, JOC, I have such mixed feelings about you.

The Journal of Commerce is as good as it gets for international shipping news. The problem is they have a somewhat steep subscription fee. If I’m not mistaken, it’s somewhere around $300 a year (I guess it’s not that steep if you break it down by the day).

Still, you can expect breaking news on international shipping stories, expert analyses, and great international shipping data from the JOC.

Because you can’t just freely read their content online, I have a tendency to rank JOC lower than they deserve. When it comes to an international shipping news resource, it doesn’t get better than JOC in terms of quality and up to the minute reporting. That’s impressive in an industry as volatile as international shipping.

Let’s let JOC give the DL on JOC:

JOC.com is the world’s most visited site serving the container shipping and international supply chain industry. Subscribers to joc.com gain access to the largest source of democratised market information in one easy to use portal. Real-time, breaking industry news, expert analysis, and a great depth of actionable data allow subscribers to stay on top of industry trends and make better business decisions.

American Shipper

http://www.americanshipper.com

American Shipper is a lot like JOC. Both provide excellent news coverage and data on the international shipping industry. Both have subscription fees.

American Shipper is a bit more accessible than the Journal of Commerce. A free registration gains you access to some of their content, but a premium membership is needed to access most of the of the articles you’d really want to read.

Still, there are many excellent articles you can read without the premium membership and the subscription fee is more than $100 less than JOC’s fee.

Just a little about American Shipper from American Shipper:

Howard Publications was founded by David A. Howard in 1951 and has published magazines covering international logistics and transportation since that time. American Shipper magazine was first published under that name in May 1974 and is designed to serve the information needs of shippers, carriers and third parties involved in international transportation and for executives managing international logistics and supply chains.

Los Angeles Times

http://www.latimes.com

Local newspapers are now showing up as international shipping news resources? Yup. I don’t apologize for that.

Local newspapers in cities with major ports are excellent news resources on international shipping related topics. Especially topics pertaining to the particular port at that city.

Few things impact international shippers faster than disruptions at the ports they import and export through.

If you keep reading this blog, you’ll see the L.A. Times get cited often in the near future as the union longshoremen who work the west coast ports are negotiating a new contract. You’ll likely see articles cited and quoted from other coast and port cities too.

The reason Los Angeles Times stands out from some of the other local cities’ papers in places with a port, is the size and prominence of the Los Angeles/Long Beach ports and how well the L.A. Times tend to cover what’s going on there.

The World and Business sections can also have some good stories that pertain to international shipping.

A quick “about us” from the L.A. Times:

The Los Angeles Times is the largest metropolitan daily newspaper in the country, with a daily readership of 1.5 million and 2.6 million on Sunday, more than 22 million unique latimes.com visitors monthly and a combined print and online local weekly audience of 4 millionThe Pulitzer Prize-winning Times has been covering Southern California for more than 132 years.

The New York Times

http://www.nytimes.com

There’s not much reason to get into why this one is on the list or about the paper as the former was covered in the L.A. Times section above and the latter can be pretty much wrapped up in general knowledge.

Still, I feel like I should write something here. I only put these two local papers in because the prominence of these papers and their corresponding ports cause them to be cited and quoted more often than other local papers.

It’s actually hard to call The New York Times a local paper as its distribution is so wide.

Similarly to these papers, I’ll often use papers that cover specific regional areas where there are ports or large amounts of international shipping activity happening. Seeing quotes from papers like the China Post is not uncommon in Universal Cargo Management’s blog.

But let’s not digress too much. Here’s a little bit on the New York Times from none other than the New York Times:

The goal of The New York Times is to cover the news as impartially as possible — “without fear or favor,” in the words of Adolph Ochs, our patriarch — and to treat readers, news sources, advertisers and others fairly and openly, and to be seen to be doing so. The reputation of The Times rests upon such perceptions, and so do the professional reputations of its staff members.

Hopefully, you’ll find these international shipping news resources as useful as I do. But if you don’t want to sift through them for international shipping stories, you can always subscribe to this blog where we do that work for you.

Universal Cargo Management is actually a resource for all your international shipping needs. Let us help you with your imports and exports.

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Supply Chain Opz Names UCM in 50 Best Global Supply Chain Blogs https://www.universalcargo.com/supply-chain-opz-names-ucm-in-50-best-global-supply-chain-blogs/ https://www.universalcargo.com/supply-chain-opz-names-ucm-in-50-best-global-supply-chain-blogs/#comments Tue, 13 May 2014 23:51:19 +0000 https://www.universalcargo.com/?p=7600 Here at Universal Cargo Management, we work hard to not only take care of your international shipping needs, but to regularly post international shipping content to inform, assist, and even entertain those who are in or curious about the international shipping industry. Did I write “international shipping” enough times in that much too long opening […]

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Here at Universal Cargo Management, we work hard to not only take care of your international shipping needs, but to regularly post international shipping content to inform, assist, and even entertain those who are in or curious about the international shipping industry.

Did I write “international shipping” enough times in that much too long opening sentence?

SCM Global 50 BadgeIt seems our blog caught the attention of Supply Chain Opz, who selected us to be a part of their SCM Global 50 list.

SCM Global 50 is a list Supply Chain Opz compiled of 50 top Supply Chain Management (SCM) blogs that they highly recommend to their readers.

We don’t like to toot our own horn or pat ourselves on the back here at Universal Cargo Management, but when someone else does it for us, it’s okay to highlight it, right?

According to Supply Chain Opz, the way they compiled the list was by gathering data as follows:

What we want to do is to discover [are] some good blogs covering various issues in global SCM. To do this, we search extensively using standard Google search. The preliminary result is the list of 1,000 blogs. After that, we make the first cut by reviewing potential 100 blogs. Then, we finalize the results based on quality of information, timeliness of information and overall diversity.

Universal Cargo Management, with our blog on the final list, is in good company, including the U.S. government with its Commerce Blog.

Okay, some of you may not think of the government as good company, especially if you’re pro big business and think the government has gotten too intrusive. What I have to say to you is we don’t really tend to get into those kinds of government issues on this blog. (We would hate to make the government angry and cause a possible slowdown on the cargo we’re shipping at customs clearance.)

But if you like reading about the international shipping issues we do get into on our blog, Supply Chain Opz’ SCM Global 50: Best Global Supply Chain Blogs 2014 may be excellent for you to check out.

The list is full of blogs on international shipping or supply chain management which are listed in no particular order on Supply Chain Opz’ website.

According to their website, Supply Chain Opz is a company that supplies readers with unbiased information on supply chain management concepts, techniques, and case studies that have a pragmatic application.

Universal Cargo Management would like to thank Supply Chain Opz for featuring our international shipping blog on their list and thank you, our readers, for, well, reading. Twice a week (on Tuesdays and Thursdays) we provide new blogs about international shipping news, information, or related topics for you to read.

When there is urgent shipping news, we post extra blogs. To subscribe, enter your email in the subscribe box on the right side of this webpage.

Always remember, UCM is here to help you with your international shipping needs as a friend to your business.

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11 Thought Dead After International Shipping Collision https://www.universalcargo.com/11-thought-dead-after-international-shipping-collision/ https://www.universalcargo.com/11-thought-dead-after-international-shipping-collision/#respond Thu, 08 May 2014 22:26:01 +0000 https://www.universalcargo.com/?p=7587 Never let them tell you international shipping isn’t dangerous. The dangers of shipping cargo across the seas and oceans from port to port are ever present, even without terrorism or piracy. At about 2:22am on Monday, May 5th, the container ship MOL Motivator 021E collided with the cargo vessel Zhong Xing 2 in Chinese territorial […]

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Never let them tell you international shipping isn’t dangerous. The dangers of shipping cargo across the seas and oceans from port to port are ever present, even without terrorism or piracy.

MOL Motivator international shipping collision resized 600At about 2:22am on Monday, May 5th, the container ship MOL Motivator 021E collided with the cargo vessel Zhong Xing 2 in Chinese territorial waters.

While the damage to the MOL Motivator was minor and none of its cargo reported damaged, according to a customer info letter from Hapag-Lloyd, the Zhong Xing 2 was not so lucky.

The much smaller cargo vessel sunk with its cement cargo and, much worse, it would seem 11 of its 12 crew members trapped aboard.

Search parties have been looking for the 11 crew members. South China Morning Post reports:

An air and sea search-and-rescue operation co-ordinated by the Guangdong Maritime Rescue Co-ordination Centre was launched, the Hong Kong Marine Department said. Mainland authorities also deployed a fixed-wing plane to search the area.

From Hong Kong, seven Marine Police launches, three fireboats, two diving vessels and a Government Flying Service helicopter were also involved in the search.

Captain Bruce Wong Ho-man, deputy manager of flight operations with the Government Flying Service, said a helicopter was sent out on two sorties – once in the morning and once in the afternoon.[1]

All this has been to no avail, leading most to believe that the 11 missing crew were trapped aboard and unable to escape before the cargo vessel sank. But the search still continues.

The one found crew member was rescued by a passing fishing boat about a half hour after the collision according to the South China Morning Post.

The South China Morning Post went on to describe the 46-year-old survivor as a mainland man, saying he suffered minor scratches to the arms and legs and was ferried to Hong Kong before being taken for treatment to Ruttonjee Hospital in Wan Chai.

Authorities are still investigating the cause of the accident.

Safety4Sea reported that heavy rain and low visibility are said to have been factors in the collision, but local authorities have not confirmed whether or not this information is true.

Safety4Sea also reports an oil slick has been spotted along with debris from the cargo vessel and container ship collision.

The accident is a tragic reminder of the dangers of ocean shipping for the men and women working hard at sea to transport shippers’ import and export cargo. It’s also a reminder to shippers of the importance of cargo insurance.

While the crew members and cargo of the Zhong Xing 2 were lost, the MOL Motivator was able to proceed to Yantian according to the Hapag-Lloyd customer info letter as it was still able to sail under its own power according to a MOL press release.[2]

The MOL Motivator 021E was then replaced in the SVS Service it was sailing in by the MOL Precision 062E in Yantian as a precaution.

The Hapag-Lloyd customer info letter detailed that the MOL Motivator was phased out after full discharge on Tuesday, May 6th and the MOL Precision was phased in on Wednesday, May 7th.

The MOL Precision is taking over all east-bound export cargo while all the west-bound import cargo had already been discharged in previous ports with the MOL Motivator’s regular rotation.

Here at Universal Cargo Management, we’re taking a moment to pray for or think of the crew lost in this tragic accident and their families as our individual faith allows.

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To keep up on news, events, and issues that affect the international shipping industry, subscribe to our blog by entering your email in the box on the right side of this page.

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Will Shippers Be Looking at Big Congestion Surcharges? https://www.universalcargo.com/will-shippers-be-looking-at-big-congestion-surcharges/ https://www.universalcargo.com/will-shippers-be-looking-at-big-congestion-surcharges/#respond Tue, 06 May 2014 23:53:17 +0000 https://www.universalcargo.com/?p=7601 *EDIT (June 18, 2014):  Congestion Surcharge, should it be applied by carriers, affects ALL shipments Inbound to USA regardless of Port of Entry.* Just what we all want to hear about. More international shipping surcharges after we’ve been talking about these chassis fees. The Journal of Commerce (JOC) reported yesterday (Monday, May 5th) on Hapag-Lloyd informing […]

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*EDIT (June 18, 2014):  Congestion Surcharge, should it be applied by carriers, affects ALL shipments Inbound to USA regardless of Port of Entry.*

Just what we all want to hear about. More international shipping surcharges after we’ve been talking about these chassis fees.

international shipping surcharges resized 600The Journal of Commerce (JOC) reported yesterday (Monday, May 5th) on Hapag-Lloyd informing its customers that the shipping carrier is ready to charge large surcharges on shipments to and from the U.S. if the International Longshore and Warehouse Union’s (ILWU) contract negotiations with the Pacific Maritime Association (PMA) cause work stoppages.

Hapag-Lloyd is not alone. JOC reports:

Hapag-Lloyd is one of at least 12 carriers that have filed their tentative plans for congestion surcharges with the Federal Maritime Commission, said Niels Erich, a spokesman for the Transpacific Stabilization Agreement. Two additional carriers have indicated they will also file congestion surcharges, Erich said today.

What kind of numbers are we talking about with these congestion surcharges on international shipping to and from U.S. West Coast?*

How about $800 per 20-foot container and $1,000 per 40-foot container per the JOC article? Ouch.

What hurts more is the possibility of such fees hitting before a work stoppage actually even occurs.

Two weeks ago, at Universal Cargo Management’s sales meeting, one of the big topics the team was talking about were possible congestion fees at West Coast* ALL US ports from carriers leading up to the ILWU contract expiration.

As soon as May 15th, carriers could be levying congestion fees of $800 on 20’ shipping containers, $1,000 on 40’ shipping containers, and $1,125 on 40HQ shipping containers.

The reason for early congestion fees like these would be from increased shipping now through the West Coast*US ports by shippers worried about possible strikes, shut downs, and slow downs that might happen if contract negotiations between ILWU and PMA fail to reach agreement by the time the current contract expires on July 1st or shortly thereafter.

No one actually expects a new contract to be reached before the previous one expires. By negotiation practice, ILWU will not reach agreement before the July expiration in order to gain increased negotiation leverage.

However, that does not mean there will be a strike or lock out resulting in port slow downs or shut downs and then large congestion surcharges on top of shipping delays for shippers.

All the same, carriers are ready with the surcharges if congestion should get bad at the West Coast* US ports.

To shippers, this must just feel like a double whammy. Many are watching the situation nervously and could be chanting under their breath, “No whammies, no whammies, no whammies!”

With the possible surcharge amounts being so large, many shippers are wondering if this isn’t just a chance for carriers to gouge them on their international shipping.

Carriers are addressing those concerns according to the JOC article:

Maersk understands the concerns of its customers at this time of uncertainty, so the company is reminding shippers that a congestion surcharge is possible if the carrier incurs significantly higher costs that could result from port congestion associated with the negotiations, he said.

If carriers should implement congestion surcharges, they intend to quantify their additional costs as precisely as possible so that customers will see the charge as reimbursement for actual expenses rather than as an opportunistic attempt to create a new profit center.

Watching ILWU contract negotiationsCarriers having surcharges ready does not mean that they absolutely will be imposed. Nor, if imposed, the surcharges will be imposed in full.

Levying congestion surcharges without actually being hit by real expenses from port congestion would be a bad business move from carriers. It makes it seem unlikely surcharges will actually hit in the lead up to the ILWU contract expiration and only after if negotiations really go south.

Still, there’s plenty of reason to watch negotiations closely as they start on May 12th.

And you’d better believe that we’ll be watching the situation very closely here at Universal Cargo Management to make sure your international shipping goes as smooth as possible.

SOURCE:

http://www.joc.com/maritime-news/container-lines/hapag-lloyd/carriers-ready-surcharges-case-us-west-coast-disruptions_20140505.html

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Wall Street Getting Into International Shipping Because of a Novel? https://www.universalcargo.com/wall-street-getting-into-international-shipping-because-of-a-novel/ https://www.universalcargo.com/wall-street-getting-into-international-shipping-because-of-a-novel/#respond Thu, 01 May 2014 21:03:27 +0000 https://www.universalcargo.com/?p=7518 Perhaps having a main character who is a New York hedge fund manager is what drew so many Wall Street investors to the book The Shipping Man. According to an article from Bloomberg: In recent months, references to the book have turned up in hedge funds’ mailings to clients, billionaire Wilbur Ross’s speeches, conference calls with […]

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Perhaps having a main character who is a New York hedge fund manager is what drew so many Wall Street investors to the book The Shipping Man.

According to an article from Bloomberg:

In recent months, references to the book have turned up in hedge funds’ mailings to clients, billionaire Wilbur Ross’s speeches, conference calls with traders, investment-bank research reports and syllabuses for university courses in London, Hamburg and New York.

Wall Street International Shipping InvestingApparently, the international shipping industry has become “the thing” in Wall Street. Or at least an industry of high interest for investors recently.

That Bloomberg article went on to cite Marine Money’s newsletter in that “private-equity firms pumped more than $7.2 billion into the [international shipping] industry in 2013.”

Marine Money International’s president just happens to be Matthew McCleery, the author of The Shipping Man. But McCleery is not an author turned “international shipping and finance expert” to sell his books; it’s the other way around.

Just a quick pull from his biography on Amazon below The Shipping Man gives an idea of where McCleery gets his authority to capture the worlds of finance and international shipping:

Matthew McCleery joined Marine Money International in 1997 following his graduation from the University of Connecticut School of Law. He served as Managing Editor until 2001, when he was named president of Marine Money. Over the last fifteen years, Matt has had the privilege of friendship with many of the world’s leading shipowners and financiers. Currently, Matt spends much of his time advising on international ship financing transactions in his role as Managing Director of Blue Sea Capital, Inc. He has served as a member of the board of directors of two NASDAQ-listed Greek shipping companies, a private equity fund, and other industry organizations…

The Shipping Man NovelThis background allowed him to create a book that is described both “financial thriller” and “ship finance text book.”

And it seems like most stock picking services speculate that Wall Street investors are using it as ship finance text book. At the very least, it has awareness of the shipping industry increased in the investment sector and international shipping investments have become a popular bet.

The volatile nature of the international shipping industry can actually be attractive to Wall Street investors, looking for investments that can swing from low numbers into high returns.

With international shipping still being on the low end of things, trying to recover from “the Great Recession”, now seems like the perfect time for investors to make a move in this industry, whether it is entering partnerships with shipping companies, funding ship purchases, or buying ship debt–which for my money sounds like the wisest of the three investment examples Bloomberg mentioned before going on to:

“Now is a great time to be buying these loans because there’s an oversupply,” Marc Lasry, co-founder and chief executive officer of Avenue Capital Group LLC, a New York-based company which oversees $13.6 billion including shipping debt, said by phone April 24. “We’re at or close to the bottom.”

But if you just want to get an inside look at the international shipping or finance industries while being entertained and not risking your money, reading The Shipping Man is a way to go.

If you like it, a sequel has been released called Viking Raid. And it seems likely a third book will be on its way too.

Super ShippingOf course, we do our best to give you an inside look at international shipping and be somewhat entertaining with our blog, though it doesn’t combine the suspense and action of a thriller novel.

But if you’re more into comedy, watch Super Shipping for an entertaining international shipping story. It won’t take as long as reading the full Shipping Mannovel, but it won’t be as educational either.

And as always, we’re ready to help you with your international shipping needs.

Click Here for Free Freight Rate Pricing

Sources:

http://www.bloomberg.com/news/2014-04-30/life-imitates-novel-as-wall-street-bets-on-shipping-debt.html

http://www.amazon.com/The-Shipping-Man-Matthew-McCleery/dp/0983716307

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Shipping News Alert: Truckers Started 2-Day Strike Today https://www.universalcargo.com/shipping-news-alert-truckers-started-2-day-strike-today/ https://www.universalcargo.com/shipping-news-alert-truckers-started-2-day-strike-today/#respond Mon, 28 Apr 2014 22:06:35 +0000 https://www.universalcargo.com/?p=7561 Truckers who move import and export cargo in and out of the Ports of Los Angeles and Long Beach went on strike today (Monday, April 28th). Justice for Port Truck Drivers, a group backed by Teamsters Local 848 union, is organizing the strike and has more than 100 truckers striking at three trucking companies as well as […]

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Shipping News AlertTruckers who move import and export cargo in and out of the Ports of Los Angeles and Long Beach went on strike today (Monday, April 28th).

Justice for Port Truck Drivers, a group backed by Teamsters Local 848 union, is organizing the strike and has more than 100 truckers striking at three trucking companies as well as picketing trucks as they enter the Ports of Los Angeles and Long Beach.

The three trucking companies are:

Green Fleet, Pac 9 Transportation, and Total Transportation Services Inc.

The L.A. Times reports that Justice for Port Truck Drivers “accused trucking companies of wrongfully classifying truck drivers as independent contractors, a classification that denies drivers workplace protections such as overtime and mandated work breaks. It also results in lower pay, the group said.”

Port Truckers Strike Los Angeles Long BeachTruckingInfo.com reports that according to Justice for Port Truck Drivers “port truck drivers work long hours, hauling nearly $4 billion worth of cargo every day for companies such as Walmart, Ikea, and Home Depot, yet often receive paychecks below the minimum wage.”

TruckingInfo went on to highlight some recent victories by truckers and union organizers against port trucking operations:

Earlier this month, seven port truck drivers employed by Pacer Cartage who were misclassified as independent contractors were awarded a total of more than $2.2 million by California officials. In March, drivers for Pacific 9 Transportation in California settled their differences against their carrier, giving them employee rights, including the right to form a union.

The classification battle is one that truckers have been fighting with trucking companies for a while.

L.A. Times reported:

…port drivers in California have filed more than 500 complaints of wage theft related to misclassification, according to the state Department of Industrial Relations. The agency said 32 drivers have won decisions against 13 trucking firms, securing $3.8 million in wages and penalties.

This truckers strike comes at a time when the Ports of Los Angeles and Long Beach are seeing increased cargo as shippers fear a possible dock workers work stoppage as the ILWU contract expires this summer.

Here at Universal Cargo Management, we’re keeping an eye on the situation and how international shipping cargo is moving through the ports. As always, we’ll continue to share with you the major happenings in the international shipping industry and take care of your shipping needs.

SOURCES:

http://www.latimes.com/business/money/la-fi-mo-port-truck-drivers-strike-20140428,0,7326284.story?track=rss#axzz30DPtcKTW

http://www.truckinginfo.com/news/story/2014/04/port-truckers-staging-48-hour-strike.aspx

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What’s Up with these Chassis Fees on My International Shipping?! https://www.universalcargo.com/whats-up-with-these-chassis-fees-on-my-international-shipping/ https://www.universalcargo.com/whats-up-with-these-chassis-fees-on-my-international-shipping/#respond Wed, 23 Apr 2014 18:29:23 +0000 https://www.universalcargo.com/?p=7346 Have you noticed new chassis fees on your international shipping bills lately that didn’t used to be on your invoices? You’re not alone. What’s going on? Many international shippers are perplexed by new chassis fees after years of importing and exporting with no such chassis fees. Why are shippers suddenly paying for chassis separately from […]

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Have you noticed new chassis fees on your international shipping bills lately that didn’t used to be on your invoices?

You’re not alone.

What’s going on? Many international shippers are perplexed by new chassis fees after years of importing and exporting with no such chassis fees. Why are shippers suddenly paying for chassis separately from trucking fees?

chassis fees international shippingHere’s the deal.

Traditionally, carriers have provided chassis in the U.S. market. This practice goes way back to carriers breaking into the U.S. market with containerized shipping.

Now, carriers are getting away from providing chassis in the U.S. market. (This is actually the way it already is most markets around the world.) In fact, they’ve been getting out of the chassis side of the international shipping business in the U.S. market for the last few years, selling off their chassis.

How carriers have lost billions of dollars in recent years has popped up over and over in Universal Cargo Management’s blogs. As a piece of reducing costs and generating some much needed cash by liquidating their chassis stocks, chassis found new owners and truckers found themselves being responsible for providing the chassis necessary to load up shipping containers and get them to and from ports and shippers.

While there are arguments that the new chassis model replacing the old carrier-owned chassis model will create more efficiency at ports, the changes in practices regarding chassis have caused slow downs at ports.

Work is being done on solving that problem, but what about the problem of these chassis charges on your international shipping? Why must those charges accrue? Is anything being done to stop it?

As mentioned above, truckers are becoming responsible for providing chassis in the U.S. instead of the carriers. That means renting the chassis from the new owners who bought/are buying the chassis from the carriers.

Renting a chassis costs truckers or trucking companies between $25 and $30 pre day on average.

Those are significant costs. Costs that would be awfully difficult for the trucking industry to just swallow. How does business work? Increased costs need to be accompanied by increased income. So the costs get passed on to consumers. Profits must be made. That’s the point of business, right?

This means those chassis costs are being passed from truckers/trucking companies to shippers as new players, chassis owners, enter the international shipping game.

The chassis situation looks a little different in different parts of the country. Selling chassis on the East Coast side has been happening for a while and the transition has been a little smoother. On the West Coast, especially at the Ports of Los Angeles/Long Beach, carriers held off for a while on selling chassis. That made it hit harder when the selling really started taking off in Southern California.

Shortages on chassis being where they’re needed when they’re needed currently seem like larger problems on the coasts than places like the Midwest. But everywhere in the country, adjustments have to be made for the new chassis practices of international shipping in the U.S. market. And that’s not to say the chassis situation doesn’t have potential to become more difficult in the Midwest than it currently is.

There is no single, clear solution for the logistic problems created by shifting chassis practices. The one thing that does seem consistent is the fees. Chassis fees are popping up all over the country.

At least now you know what the deal is with them:

The costs have trickled from carrier to trucker to shipper.

Would it feel better if trucking companies just increased their prices to cover chassis prices instead of adding it as an extra line item for chassis fees? Six one way, half dozen the other.

No matter what comes in the international shipping industry, Universal Cargo Management is ready to provide you with the best service possible. And we’re always ready to give you free freight rate pricing.

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What Does Obamacare Have To Do With International Shipping Stability? https://www.universalcargo.com/what-does-obamacare-have-to-do-with-international-shipping-stability/ https://www.universalcargo.com/what-does-obamacare-have-to-do-with-international-shipping-stability/#respond Mon, 21 Apr 2014 22:09:11 +0000 https://www.universalcargo.com/?p=7525 A billion dollars a day. That’s all estimates say strikes or lockouts at West Coast ports cost the U.S. economy.  As Seth Meyers would say, “To give you an idea of how much money that is, I can’t give you an idea of how much money that is.” Could we be looking at West Coast […]

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A billion dollars a day.

That’s all estimates say strikes or lockouts at West Coast ports cost the U.S. economy.  As Seth Meyers would say, “To give you an idea of how much money that is, I can’t give you an idea of how much money that is.”

International Shipping Stability Obamacare resized 600Could we be looking at West Coast port shutdowns this summer?

Yup.

Once again, it’s a contract year for union longshoremen.

Already? Didn’t this just happen?

Yup.

Shippers, carriers, and international shipping professionals like freight forwarders are look at contingency plans for the possibility of West Coast ports shutting down due to labor contract disputes.

In 2012/2013, we were dealing with this on the East Coast. Now it’s the West Coast’s turn. And here’s a familiar name for controversy at the forefront of the conversation: Obamacare.

Quite possibly the biggest issue that could clog up negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), thwarting stability in international shipping, finds its source in Obamacare.

What in the world could Obamacare possibly have to do with international shipping stability?

The Affordable Health Care Act, the actual name of Obamacare, has a thing in it called a “Cadillac” tax. Obamacare’s Cadillac tax is a tax on generous health care plans to subsidize health care for U.S. workers who have little or no health insurance.

For union workers of the ILWU, employers pay 100% of the premiums of their health care plan and union members only pay a $1 co-pay for prescription medicine.[1]

What?! That’s not a Cadillac health care plan, that’s a Lamborghini health care plan!

Anyway, ILWU members certainly receive generous health care plans that will be taxed by the “Cadillac” tax of Obamacare starting in 2018.

This tax will cost the industry $150 million a year that employers don’t want to pay for entirely. And “the ILWU has always considered medical benefits to be sacrosanct.”[2]

In other words, expect a lot of huffing and puffing over the healthcare issue in these negotiations.

Now, it’s possible, the parties may agree to make this only a three year contract instead of a six year contract, hoping that the “Cadillac” tax and maybe Obamacare altogether will be done away with by 2018.

Even if that happens, don’t expect a deal to happen before the current contract expires on July 1st.

Basically by policy, the ILWU will not resolve a contract before the current one expires. They gain leverage by making sure negotiations go beyond contracts and deadlines. How do you think they manage to get that incredible health care deal along with average wages of $137,253 for general longshoremen; $154,842 for marine clerks; and $213,120 for walking bosses or foremen?[3]

Yes, the ILWU make very good money with excellent benefits. But as we evidenced by the ILWU Local 63 Office Clerical Unit (OCU) in December of 2012, they won’t hesitate to strike.

Of course, it only takes remembering back a couple contracts ago to 2002 to know an employer lockout is not out of the question either.

PMA President Jim McKenna is trying to assure everyone that this year’s negotiations will be successful without any work stoppages, predicting agreement to be reached by mid to late July.

Whatever happens, here at Universal Cargo Management, we’re always prepared to make your imports and exports ship as smoothly as possible despite international shipping stability issues facing the industry.

It helps having been a freight forwarder for nearly 30 years.

Sources:

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Hapag-Lloyd CSAV Sign Merger: Now 4th Largest Shipping Carrier https://www.universalcargo.com/hapag-lloyd-csav-sign-merger-now-4th-largest-shipping-carrier/ https://www.universalcargo.com/hapag-lloyd-csav-sign-merger-now-4th-largest-shipping-carrier/#respond Thu, 17 Apr 2014 21:39:04 +0000 https://www.universalcargo.com/?p=7582 Yes, approval from competition authorities will be necessary, but Hapag-Lloyd and CSAV have signed a binding agreement that merges Compañía Sud Americana de Vapores’ cargo container shipping business in its entirety with Hapag-Lloyd. Hapag-Lloyd will now be the 4th largest international shipping carrier in the world. More importantly, it makes Universal Cargo’s Carrier Craziness Bracket correct. […]

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Yes, approval from competition authorities will be necessary, but Hapag-Lloyd and CSAV have signed a binding agreement that merges Compañía Sud Americana de Vapores’ cargo container shipping business in its entirety with Hapag-Lloyd.

Hapag-Lloyd will now be the 4th largest international shipping carrier in the world.

More importantly, it makes Universal Cargo’s Carrier Craziness Bracket correct.Carrier Craziness Bracket Hapag-Lloyd Merger
Okay, maybe that’s not more important.

Last time we blogged about this merger the two shipping companies had only signed a Memorandum of Understanding. It was nothing binding, but enough to let the world know they were serious about merging.

Hapag-Lloyd and CSAV’s intentions to merge are now much more than intentions.

The merger was signed yesterday. Here’s an excerpt from the press release on Hapag-Lloyd’s website:

“I am delighted that we have succeeded in concluding this partnership through which our two companies are playing an active part in consolidating the liner shipping industry. This day is an important milestone in the history of Hapag-Lloyd,” said Michael Behrendt, Chairman of the Executive Board of Hapag-Lloyd, upon signing the agreement. “The transaction increases the value of the Company and therefore also the value of our shareholders’ shares.”

“By joining forces, we are creating a stronger, larger and more global company with significant economies of scale and a considerably improved competitive position,” said Oscar Hasbún, CEO of CSAV. The combination of CSAV’s container shipping business with Hapag-Lloyd will result in annual synergies of at least USD 300 million. Service networks and fleets of both companies complement one another ideally. “The combination with CSAV, Latin America’s leading container shipping line, considerably strengthens Hapag-Lloyd in this growth market and adds a strong position in the North-South traffic to the company’s global network and to its established strength in East-West traffics”, said Oscar Hasbún.

Hapag Lloyd CSAV Merger SignedThe article there also shared details of the post merger size of Hapag-Lloyd. They will have “200 vessels with total transport capacity of around one million TEU, an annual transport volume of 7.5 million TEU and a combined turnover of 9 billion Euro.”

CSAV will become a core shareholder of Hapag-Lloyd, holding a 30% share of the post merger shipping company and then will increase to 34%.

To the right is a picture of Michael Behrendt, Chairman of the Executive Board of Hapag-Lloyd and Oscar Hasbún, CEO of CSAV after the merger signing that Hapag-Lloyd posted.

The article on Hapag-Lloyd’s site says “the relevant corporate bodies of both companies have already approved the merger” but dissidence from more than 5% of CSAV’s minority stockholders could stand in the way of the merger. Such dissidence doesn’t seem likely.

What do you think?

Are you in favor of the Hapag-Lloyd, CSAV merger? Let us know in the comments section below.

As always, Universal Cargo Management will continue to keep you updated on what’s happening in the world of international shipping. We’re also ready to help take care of the import or export of your cargo.

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Carrier Craziness Bracket! International Shipping Alliance Overview https://www.universalcargo.com/carrier-craziness-bracket-international-shipping-alliance-overview/ https://www.universalcargo.com/carrier-craziness-bracket-international-shipping-alliance-overview/#respond Wed, 09 Apr 2014 23:47:43 +0000 https://www.universalcargo.com/?p=7446 March Madness is over and you thought you were done with brackets. Wrong. As wrong as my NCAA bracket. To give you a carrier alliance overview, here comes the 2014 Carrier Craziness Bracket! Carrier alliances, like the P3 Network, G6 Alliance, and CKYH Alliance, are narrowing competition in the international shipping field. Showing the alliances […]

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March Madness is over and you thought you were done with brackets. Wrong. As wrong as my NCAA bracket. To give you a carrier alliance overview, here comes the 2014 Carrier Craziness Bracket!

Carrier alliances, like the P3 Network, G6 Alliance, and CKYH Alliance, are narrowing competition in the international shipping field. Showing the alliances in bracket form makes it easy to see just how the competition is shaping up.

Carrier Craziness Bracket resized 600

For those of you who like hard data, Drewery has done an excellent job of compiling information on what the 3 big alliances look like in terms of ship deployment, sailings, market percentage by capacity, and so on.

Below are tables from that data to help us get a look at how things are now and get a peek at what the international shipping waters will look like later this year when the alliances’ latest plans are supposed to be in full implementation.

P3 Network

Beginning of Year & Post Implentation:

P3 Alliance Jan. 2014

P3 Alliance post implementation

G6 Alliance

Beginning of Year & Post Implentation:

G6 Alliance Jan. 2014

G6 Alliance post implementation

CKYH Alliance

Beginning of Year & Mid 2014:

CKYH Alliance Jan. 2014

CKYH Alliance (mid 2014)

As new megaships hitting the water over 2014 and 2015 combine with carrier alliances trying to control capacity, shippers can expect spot freight rates to remain volatile and GRIs from the carriers to be a constant.

As price focused as we all tend to be with our international shipping, freight rate pricing may not be the most important place for shippers to look as these alliances reach full implementation.

Service is the key to the carrier alliance situation for shippers. Carriers have been promulgating the message that combining their ships and other capacity & operations resources will benefit shippers in terms of service.

However, Drewery says “missed sailings will be a major capacity management tool” for carriers. Could this be a negative service sign for shippers? It hardly sounds like good service for shippers.

On the other hand, resources of alliance member carriers working together should be able to create smoother and more efficient cargo movement and the “missed sailings” could simply be due to cargo combining on less ships, allowing unecessary sailings to be cancelled without delaying cargo shipping.

What we know for certain is that carrier alliances are moving forward into the future of international shipping.

We’ve been discussing carrier alliances and their effects on international shipping competition in our blog at great length.

You can go beyond this carrier alliance overview by going through our posts on the subject below which also include the Hapag-Lloyd, CSAV merging, and the carrier cargo pricing collusion investigation. A list of related posts are below.

In the meantime, we’re always ready to give you the best service possible and offer free freight rate pricing.

Carrier Alliance Posts:

Watch Out International Shipping Competition: FMC Approved P3 Network

Will Shippers Benefit from P3 Alliance of Largest Container Shipping Carriers?

Carving Carrier Competition: Cosco & China Shipping Form Alliance

Ever Shrinking Carrier Competition – Hapag-Lloyd and CSAV Merging

Hunger Games of the Sea: G6, P3, & CKYH Alliances Fight for Shipping Dominance

Catching Fire on the Sea: International Shipping Moves & Counter Moves

Mockingjay Asks What Effect Do Carrier Alliances Have on Shippers?

Holy Cargo Collusion, Batman–Shipping Companies Under Investigation!

World’s Largest Container Shipping Carriers Form Triumvirate

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International Shipping Tips and Guidelines for Air Freight https://www.universalcargo.com/international-shipping-tips-and-guidelines-for-air-freight/ https://www.universalcargo.com/international-shipping-tips-and-guidelines-for-air-freight/#comments Wed, 02 Apr 2014 18:08:25 +0000 https://www.universalcargo.com/?p=7502 Guest Blog by Greg Thompson If you have ever had the pleasure of working on international freight shipping, then you know how many details one must keep track of for it to go smoothly. The following tips will give you details you will need to know if you want to deal with air shipping with […]

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Guest Blog

by

Greg Thompson

If you have ever had the pleasure of working on international freight shipping, then you know how many details one must keep track of for it to go smoothly. The following tips will give you details you will need to know if you want to deal with air shipping with as little trouble as possible:

  • International Shipping Tips and Guidelines resized 600The first thing you will need to consider is the expenses you will need to cover. When it comes to domestic freight, things are usually pretty straightforward, but things get progressively more difficult and different when you go into international territories. After all, it’s rare that your cargo will only travel from point A to point B by plane, but there will also be some ground transport involved. You will need to be aware of the entirety of where the cargo will pass through and how it will be handled. This will help you keep tabs on it while it’s in transit. You should call your freight shipping company for details surrounding these bits of information.
  • You must also make sure you have secured a good amount of packaging for all the items being shipped. Although containers are sturdy, you would do well to make sure things are properly secured inside as well. This means ample amounts of padding, pallets, and strong cardboard boxes for all items being shipped. This will ensure they will be as safe as possible during the trip. Freight may be handled several times during transport, so you would do well to be thorough in the packing department.
  • You should also make sure you use the exact measurements and weight of the items being shipped. This will be necessary as the trucking companies and airlines will need the information to calculate more than just prices, but the fuel involved in moving them. The inaccurate calculation of your cargo can cause the freight to be held over until a carrier verification is complete if it’s in odds with the measurements and weight stated. Customs can be very strict when it comes to discrepancies between what’s listed and what is.
  • International Shipping Tips and Guidelines2Make sure you describe the contents of your shipment clearly and accurately as well. I cannot stress that enough as discrepancies between the stated cargo and what’s really inside will not be looked upon kindly. The moment customs find any such differences you will have a whole lot of problems on hand, so before you send your cargo out make sure you’ve declared everything there is to declare and that nothing is missing.
  • Now comes the other very important aspect of the whole shipping operation: you will need to make sure you cover all documents needed without any problems. Pay special attention to the commercial invoice. Once you have the weight and dimension of your cargo, as well as their description, then you will need to add the actual market value of the goods, if they were not offered for sale, as well as their HTS code. This will help with the commercial invoice. Just remember that the easier it is to find the information on your documents, the easier it is to avoid negative scrutiny from customs agencies around the world. Keep things accurate and cover all necessary documentation.

This was a guest blog by Greg Thompson.

Greg is blogger and freelance writer. He is presently focused on shipping and removals related matters. Therefore, his current article treats this theme. You may obtain further helpful information by visiting:Paddington man with van

Click me

Click on the Guest Blog image above to email Raymond Rau if you would like Universal Cargo Management to publish an original blog from you.

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Word of Wisdom: Sowing & Reaping Business Success https://www.universalcargo.com/word-of-wisdom-sowing-reaping-business-success/ https://www.universalcargo.com/word-of-wisdom-sowing-reaping-business-success/#comments Tue, 01 Apr 2014 20:37:33 +0000 https://www.universalcargo.com/?p=7493  זָרַע – (zä·rah’) In the morning sow your seed, And in the evening do not withhold your hand; For you do not know which will prosper, Either this or that, Or whether both alike will be good. –Ecclesiastes 11:6 (NKJV) Most of us are not vintners, planting and tending a vineyard or farmers, planting and […]

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 זָרַע – (zä·rah’)

In the morning sow your seed,

And in the evening do not withhold your hand;

For you do not know which will prosper,

Either this or that,

Or whether both alike will be good.

–Ecclesiastes 11:6 (NKJV)

Most of us are not vintners, planting and tending a vineyard or farmers, planting and growing crops; however, we all sow seeds every day.

Word of Wisdom Sowing for Business SuccessThe Word of Wisdom we look at now comes from the rich, ancient language of Hebrew and is more applicable to each of us than it at first may appear.

The Hebrew word’s literal meaning is to sow or scatter seed; but in its figurative history, this word has been used to provide wisdom in all areas of life.

Transliterated as “zara”, this word conveys the first part of the concept of sowing and reaping or planting and harvesting.

On the most basic level, the concept of sowing and reaping works like this:

A farmer who plants many good seeds is likely to have a rich harvest. Planting bad seeds will yield a poor harvest. Planting no seeds can only end in a harvest of nothing.

This idea is used figuratively all through Hebrew scriptures and in the teachings of Jesus and the apostolic writings found in the New Testament of the Christian Bible.

When it comes to business, it is easy to apply the concept of sowing and reaping.

Perhaps one of the easiest ways to think about it is in terms of investment and ROI. We all would like our work and investments to return huge dividends right away like the Pentateuch describes Isaac receiving in the land of Gerar.

Then Isaac sowed in that land, and reaped in the same year a hundredfold; and the Lord blessed him.

–Genesis 26:11 (NKJV)

But in most cases, sowing and reaping works more like it is described in that Ecclesiastes verse at the top. Sow seeds and work hard, not knowing which ones will prosper.

It’s true when developing products or finding and pursuing business leads, we don’t know which ones will prosper. But this can be mitigated by good research in product development and by screening leads to increase odds of success.

For real success in business, the sowing and reaping principle should be applied further than just working hard.

I said at the beginning that we all sow seeds every day. We do it with our attitudes (a smile or roll of the eyes could be more than a momentary thing), the way we treat people, how we follow through on our word or commitments… Even if you spend your whole day in bed, you’re sowing a seed of either rest or laziness.

You shall not sow your vineyard with different kinds of seed, lest the yield of the seed which you have sown and the fruit of your vineyard be defiled.

–Deuteronomy 22:9 (NKJV)

While this verse seems quite literal, it can be applied figuratively to your business and life.

Sowing & Reaping Business SuccessIf you’ve planted seeds by being lazy in one part of your business or lying and cheating somewhere else, a harvest is likely on the way that can “defile” your whole business.

Sowing seeds of integrity with your business and personal relationships, being honest, fair, and hardworking in all your dealings, will go a long way producing prosperous results.

At first, the process can seem quite slow.

You work hard and sow many seeds. Then you wait (hopefully while sowing more good seeds) because there’s always a waiting time between sowing and harvesting for seeds to grow. Some of the seeds produce, some of them don’t.

But there is an amazing thing about sowing and reaping. Over time, if you consistently sow good seeds, there’s a cumulative effect.

With the seeds you sowed years ago, you’ll be reaping in good results now as well as reaping in the benefits from newer seeds you’ve sown along the way.

To many looking at you from the outside at this point it may seem that, like Isaac, you’ve reaped a hundredfold what you sowed this year. And in actuality, that could be the case.

What kind of seeds are you planting for the future of your business and your relationships?

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Watch Out International Shipping Competition: FMC Approved P3 Network https://www.universalcargo.com/watch-out-international-shipping-competition-fmc-approved-p3-network/ https://www.universalcargo.com/watch-out-international-shipping-competition-fmc-approved-p3-network/#respond Thu, 27 Mar 2014 23:21:27 +0000 https://www.universalcargo.com/?p=7594 We’ve talked about carrier alliances and specifically the P3 Network quite a bit in Universal Cargo Management’s blog. But last week, there was big news on the P3 Network that makes it worth talking about some more. P3 Network Clears Major Hurdle The triumvirate of Maersk, Mediterranean Shipping Co., and CMA CGM, known as the […]

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We’ve talked about carrier alliances and specifically the P3 Network quite a bit in Universal Cargo Management’s blog. But last week, there was big news on the P3 Network that makes it worth talking about some more.

P3 Network Clears Major Hurdle

The triumvirate of Maersk, Mediterranean Shipping Co., and CMA CGM, known as the P3 Network, crossed a big marker toward becoming a reality last week.

FMC Approves P3 NetworkThe Federal Maritime Commission, after an extensive review, has approved the plan of the world’s 3 largest shipping lines to cooperate with their operating activities of international shipping on the world’s major trade lanes.

Commissioner William P. Doyle said in his statement on the decision, “I am in favor of nottaking any further action to delay the implementation of the P3 Network Vessel Sharing Agreement.”

Commissioner Doyle went on to say, “I am particularly pleased that the P3 Parties have reconsidered how they would handle negotiations with third parties, suppliers, small businesses, and other service providers.” [1]

Doyle was referring to Article 5.4(b) of the P3 Network proposal that allowed the joint contract negotiations from these 3 shipping lines with marine terminal operators, dockworkers, tug operators, and other international shipping industry providers or suppliers.

Here’s how 5.4(b) was originally set up and how it was changed.

Original Language Article 5.4(b):

The Parties or any two of them may (where they are legally permitted to do so) negotiate jointly and to contract jointly and/or individually with marine terminal operators, stevedores, tug operators, other providers or suppliers of other vessel-related goods and services and/or inland carriers; provided, however, that any joint negotiations/contracts with an air, rail or motor carrier or group of such carriers with respect to services to be provided within the United States shall be subject to the U.S. antitrust laws.

New Language (in italics) Article 5.4(b):

The Parties shall negotiate independently with and enter into separate individual contracts with marine terminal operators, stevedores, tug operators, other providers or suppliers of other vessel-related goods and services and/or inland carriers in the United States; provided, however, that the Parties are authorized to discuss, exchange information, and/or coordinate negotiations with marine terminal operators relating to operational matters such as port schedules and berthing windows; availability of port facilities, equipment and services; adequacy of throughput; and the procedures of the interchange of operational data in a legally compliant matter.[2]

Dissenting Opinion on FMC’s Approval of P3 Network

Not all the commissioners of the FMC were in favor of approving the P3 Network.

Commissioner Richard A. Lidinsky, Jr. wrote in a dissenting  opinion:

…this agreement is in reality not an alliance or true vessel sharing arrangement. Rather, it is in effect a merger of the top three global liner companies.

This agreement will allow the controlling carrier the ability, when coupled with existing discussion agreements, to deploy its assets along with those of the other two carriers, to dominate vessel competition and narrow shipper options at U.S. ports.[3]

Certainly many in the international shipping industry agree with Commissioner Lidinsky’s opinion.

There has been fear among those in the international shipping community that this “ship sharing” alliance between the 3 largest shipping carriers will hurt competition, driving out other, smaller carriers, and eventually drive up international shipping costs as well as hurting contract negotiations with these carriers.

FMC Provision on P3 Network

With its approval of the P3 Network, the FMC is not planning to close its eyes and let these carriers do whatever they want with their triumvirate.

Commissioner Doyle stated:

I do want to offer a word of caution, the P3 Parties should be mindful of the antitrust probes that are being conducted in the oceanborne transportation sector – worldwide. To this end, the Federal Maritime Commission is not taking its hands off the wheel and is hereby instituting a monitoring program for the P3 Network Alliance.[4]

The FMC is to review P3 agreements before they go into effect and forbid any that are “substantially anticompetitive”.

It looks like we’ll soon find out how uncompetitive the international shipping waters are with the 3 biggest carriers working together. But there still are a couple more hurdles the P3 Network has to clear first…

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Shipping News Alert: Midwest Rail Operations https://www.universalcargo.com/shipping-news-alert-midwest-rail-operations/ https://www.universalcargo.com/shipping-news-alert-midwest-rail-operations/#respond Tue, 25 Feb 2014 22:46:59 +0000 https://www.universalcargo.com/?p=7584 This is an update from BNSF Railway. Midwest Rail Operations Update Chicago Area Hub Status Local intermodal operations, inventories and operations are current at BNSF Chicago area hubs. CTCO Designates Chicago Area Operations at Alert Level 3  However, the Chicago Transportation Coordination Office (CTCO) – all U.S. and Canadian Class 1 railroad representatives – still have […]

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This is an update from BNSF Railway.

Midwest Rail Operations Update

Shipping News AlertChicago Area Hub Status
Local intermodal operations, inventories and operations are current at BNSF Chicago area hubs.

CTCO Designates Chicago Area Operations at Alert Level 3 
However, the Chicago Transportation Coordination Office (CTCO) – all U.S. and Canadian Class 1 railroad representatives – still have the Chicago area operations across all carriers at alert level 3.

Alert level 3 is based on the impacts of accumulated weather conditions, and backlogs created by number of trains being re-crewed, locomotive power deficits, and over-subscribed terminal capacity standards.

In response to alert level 3 conditions, all railroad carriers are working together to re-route certain traffic destinations to other gateways when possible.

24-Hour Command Center Focal Points

  • Coordinating with connecting eastern carriers to use alternate gateways instead of normal Chicago interchange and processing points
  • Identifying levers for all types of rail business coordination (including but not limited to intermodal), including train blocking, right-sizing interchanges for maximum throughput, diverting traffic to alternate gateways, adjusting frequency of deliveries to match capabilities, etc.

We recognize the continuing impact that current conditions are having on our customers and we remain committed to fully restoring service levels.

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How To Import For Selling On eBay https://www.universalcargo.com/how-to-import-for-selling-on-ebay/ https://www.universalcargo.com/how-to-import-for-selling-on-ebay/#respond Thu, 20 Feb 2014 08:14:00 +0000 https://www.universalcargo.com/how-to-import-for-selling-on-ebay/ by Jared Vineyard Many Chinese exporters are making millions of dollars in annual sales on eBay, Amazon, and similar sites. But that’s not stopping U.S. importers from selling millions of dollars worth of merchandise made in China or imported from elsewhere on eBay as well. Despite a trend from Chinese manufacturers shifting from a business-to-business […]

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by Jared Vineyard

Many Chinese exporters are making millions of dollars in annual sales on eBay, Amazon, and similar sites. But that’s not stopping U.S. importers from selling millions of dollars worth of merchandise made in China or imported from elsewhere on eBay as well.

Despite a trend from Chinese manufacturers shifting from a business-to-business sales model to a business-to-consumer model, there are still advantages US importers have for selling goods in this market.

While you can’t expect to make millions importing and selling on eBay over night, there’s no reason you can’t successfully import goods from China (or elsewhere around the world) and make money selling them online.

Here’s a quick rundown on how to import for selling on eBay, Amazon, and other online sites.

1 – Choose a Product

Choosing Product to ImportI know you’re excited to get started, but slow down and take your time here.

How do you go about picking a product to import and sell online?

There are two words you want to remember: niche and passion.

I’ll start with passion. There are many, many goods out there that you could import and start selling online. But if you want to really be successful, your best bet is picking a product you’re passionate about.

Passion is contagious. When you’re excited about something it shows. Your knowledge and love for the product you’re selling will resonate with consumers and help you make sales.

Selling a product that you’re passionate about will also keep you energized and excited to promote it and help you build your own brand. This is huge in skyrocketing you from someone just selling some items online to a successful, self-made entrepreneur.

You want a product you’re passionate about, but don’t pick something you buy all the time. This brings us to niche.

If you’re trying to sell something that is readily and easily available at the local store, the odds are you’ll have trouble competing to sell it. You want a product that is a little more unique or specialized.

Importing Wine Glasses for eBayOne way to find your niche is by thinking about the things you’re into. If you’re really into wine, perhaps distinctively designed wine glasses and accessories would work for you. Niche doesn’t have to be way out of the ordinary things.

Still, many eBay sellers find success importing things like electronics, clothing, and jewelry. Just make sure the products are ones that you love and are proud to sell. A niche can be found in any of these general and basic sounding categories.

Strong recommendation: Avoid name-brand knock-offs, or even worse, companies claiming to sell you actual designer items for cheap (can you smell that? Scam!).

2 – Sample & Test

Before importing a product in bulk to sell on eBay or Amazon, get a sample from the manufacturer.

This is actually easier since manufacturers in China have started selling more business-to-consumer over the last few years.

Sampling is important because you don’t want to waste money on tons of useless goods you can’t sell.

Two excellent resources for finding products and manufacturers for your new importing business are:

You can search by product or manufacturer, browse, and find products that look great to you.

importing to sell on eBay bullseyeStrong recommendation: Make sure the manufacturer you’re thinking about importing goods from is top rated and takes Paypal payments.

Do a little negotiating to get the best possible price for a sample product to be sent to you.

Once you receive the sample product, check it out and make sure you love it. Then, put it on eBay and see if it’s something you can actually sell at a profit.

If you can proudly sell the item on eBay for a profit, bullseye!

Go back to the manufacturer and negotiate (actually negotiate; haggling seems to be much more common around the world than in the U.S.) for a bulk shipment.

Then you can move on to step 3…

3 – Get a Freight Forwarder

I won’t spend much time here at the risk of sounding too promotional.

Let’s just say importing isn’t so tricky when you let people who know what they’re doing handle it for you.

Getting a freight forwarder with partners in China (or wherever you’re importing from) to handle the shipping of the goods you order from your manufacturer will get your products from China to you at a competitive price so you can start selling on eBay and making money.

With some freight forwarders, you’ll also have to hire a separate customs broker. Universal Cargo Management can handle your customs clearance as well as the actual shipping.

In-Depth Advice for Selling on eBay

A great resource we recommend for successfully selling online is sell-on-eBay-guru (and UCM client) Skip McGrath.

Whether you’re a beginner or already a professional eBay seller, Skip McGrath’s website will give you tips and tools to take your eBay business to the next level.

Share your own advice on importing to sell on eBay in the comments section below.

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Source: China

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Shipping News Alert: Port of Oakland Congestion & Trucking Fees https://www.universalcargo.com/shipping-news-alert-port-of-oakland-congestion-trucking-fees/ https://www.universalcargo.com/shipping-news-alert-port-of-oakland-congestion-trucking-fees/#respond Wed, 19 Feb 2014 20:14:03 +0000 https://www.universalcargo.com/?p=7426 Delays at ports across the country have been difficult for truckers and shippers this winter. At Universal Cargo Management, we work hard to make sure your imports and exports ship as smoothly as possible. While we keep an eye on what’s happening at the various ports to provide you with the best service possible, we […]

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Shipping News AlertDelays at ports across the country have been difficult for truckers and shippers this winter.

At Universal Cargo Management, we work hard to make sure your imports and exports ship as smoothly as possible.

While we keep an eye on what’s happening at the various ports to provide you with the best service possible, we also like to share the shipping situations that are happening with you.

Heading into the weekend last week, Jimmy Ting released the following update on the Port of Oakland.

PORT OF OAKLAND CONGESTION UPDATE – TRUCKERS BEGINNING TO CHARGE WAITING TIME

February 14, 2014 · by Jimmy Ting· in Port of Oakland. ·

We received a message today from one of our long time trucking partners that they will begin charging for waiting time at the terminals. They will provide two hours of free waiting time. However any additional time will be billed at $55 an hour. We have other truckers who have long since instituted a waiting time fee. We urge importers and exporters who rely on these truckers to please be patient and understanding. The truckers really are struggling to make a living as they continue having to waste more time at the terminals trying to get containers. We have been told that drivers have been experiencing wait times ranging from two to five hours.

Here’s our latest update of the four main terminals serving the port of Oakland.

1.) Ports America – This port seems to have taken over the number one ranking as the biggest offender from the standpoint of terminal congestion. Containers arriving at the port are taking more days than usual to become available for pick up. They are often times sitting in locations that truckers are not allowed to pick up at. We’ve seen containers remain unavailable for over one week (beyond the free time allowed by the terminal). Right now, Ports America is extending their free time in these situations. This has even affected containers that are subject to Customs examinations. However you do have to be careful which carrier you are using. Hapag Lloyd recently billed a customer for storage fees despite the fact that the container was not available for pick up. Also note that even once containers are available, the first available pick up appointment is usually a few days later.

I do believe some of the carriers using Ports America understands they have a major congestion issue. The past two weekends, they have had Saturday gates open to help relieve some of the congestion. They plan on opening a Monday gate on Presidents’ Day.

2.) SSA Terminal – SSA is still dealing with long wait times. Adding to the headache, SSA sent out a message today that they are dealing with chassis shortages.

3.) Ben E. Nutter – Things are hopefully going to be looking up in the coming month at this terminal. The broken transtainer was fixed last week. However we currently are still seeing delays in container availability and congestion within the terminal. Let’s keep our fingers crossed that this terminal can right itself in the coming month.

4.) Trapac – This terminal seems to have received the least amount of complaints.

Some members of the shipping community have asked whether it is worthwhile to consider Los Angeles-Long Beach as an alternative. Please note that Los Angeles-Long Beach is also facing congestion issues related to chassis shortages.

I will be attending a CBFANC town hall meeting next week with other brokers, freight forwarders and hopefully some representatives from the Oakland terminals. I will report back with news from our meeting.

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3 Cargo Shipping Scams to Avoid https://www.universalcargo.com/3-cargo-shipping-scams-to-avoid/ https://www.universalcargo.com/3-cargo-shipping-scams-to-avoid/#respond Tue, 18 Feb 2014 22:24:51 +0000 https://www.universalcargo.com/?p=7350 Guest Blog by Gareth Collins The shipping industry of today as well as the maritime commerce one has been experiencing a rise in fraud cases with different levels of ingenuity and sophistication in the last decade or so. This often forces us to keep a sharp eye open for any possible dummy companies and other […]

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Guest Blog

by

Gareth Collins

Cargo Shipping Scams to AvoidThe shipping industry of today as well as the maritime commerce one has been experiencing a rise in fraud cases with different levels of ingenuity and sophistication in the last decade or so.

This often forces us to keep a sharp eye open for any possible dummy companies and other possible sources of such issues.

The following article will point out 3 of the most common ways fraudsters may attempt to take advantage of a client or even a cargo shipping company:

1 – Forged Bill of Lading Scam

This type of fraud attempts to take advantage of a fake bill of lading, which looks almost unrecognizable from an original, aiming toward the unlawful acquisition of the cargo in question.

Such a fraud requires a lot of information gathering on account of the fraudsters, such as a copy of the actual bill of lading to ensure forging is believable. The actual ship owner and actual receiver of cargo are then left to pick up the pieces as the thieves escape detection with the contents of the cargo itself.

You should always make sure you are aware of the chain of custody when it comes to bills of lading. Check local shipping agents as they will need to make sure all documentation is genuine and actual. If you encounter repeating errors in documents or inconsistencies, you should put a halt to any shipping operations with the client in question until the situation has been investigated or uncovered as fraudulent.

2 – Fake Cargo Sale Scam

In this case the fraudsters will attempt to create genuine bills of lading that emulate the real thing as closely as possible, even down to copying corporate logos and document styles as well as even including a large portion of real shipping details.

The fraudsters will appear to be very well informed about the nature of the cargo being shipped. They may even know the trading pattern of the vessel in question, giving details about the route and possible cargo so they can make the transaction as close as possible to appearing legal.

They will offer to sell cargo that is supposedly on board the vessel; however, the fraudsters will attempt to seek a buyer for their phantom cargo by either obtaining direct payment or via a Letter of Credit.

You should keep in mind that a lot of social engineering and research is needed for a scam of this kind. You may need to do some serious checks to catch the offending party in their tracks. One of the most common things about a scam of this kind is the fact that the deal offered is often way too good to be true, giving a major discount compared to the usual market prices.

3 – Trojan Container Scam

This type of fraud most often uses the premise that the container in question has a specific type of cargo within, when in fact the contents are quite different.

You can experience a great number of issues with it, ranging from smuggled goods to immigrants, illegal drugs, and even downright trash meant to emulate the weight of the listed goods in question.

The carrier often risks criminal charges, fines, detention or worse. You should do whatever you can to check cargo manifests as well as the contents of the cargo containers themselves to avoid scams of this kind at all costs.

 

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This was a guest blog by Gareth Collins.

Gareth is an expert in the field of relocation and shipping worldwide. Read more from him by visiting the Fulham house move website.

Click me

Click on the Guest Blog image above to email Raymond Rau if you would like Universal Cargo Management to publish an original blog from you.

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Chasing Chassis Slows International Shipping https://www.universalcargo.com/chasing-chassis-slows-international-shipping/ https://www.universalcargo.com/chasing-chassis-slows-international-shipping/#respond Thu, 06 Feb 2014 23:09:38 +0000 https://www.universalcargo.com/?p=7394 Snow and ice aren’t the only things causing shipping delays this winter. Changes in the ownership and management of chassis has been creating significant problems and delays for truckers picking up cargo containers at marine terminals. High cargo volumes combined with a harsh winter that has affected cargo movement across the continent have done enough […]

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Snow and ice aren’t the only things causing shipping delays this winter. Changes in the ownership and management of chassis has been creating significant problems and delays for truckers picking up cargo containers at marine terminals.

cargo container truck chassisHigh cargo volumes combined with a harsh winter that has affected cargo movement across the continent have done enough to frustrate truckers with long wait times at ports and shippers with delays in receiving their cargo. So how about one more hiccup in the process?

Hiccup may be a bit of an understatement. Bill Mongelluzzo, Senior Editor for the Journal of Commerce wrote an excellent article on this problem titled Chassis Crisis at LA-LB. The chassis problem is a crisis?

What is this chassis crisis?

Is there a shortage? No. Are there new regulatory requirements to which the industry has to adjust? No. And why is this crisis specifically happening at the Ports of Los Angeles/Long Beach?

The problem is change of chassis ownership. Carriers used to own the chassis used in international shipping. But over the last few years carriers have been exiting the chassis business, selling off chassis.

Mongelluzzo’s article outlines how the carriers gradually sold off chassis at locations around the nation toleasing companies, chassis pool operators and other third-parties, but waited on selling the chassis in Southern California because of the complexity of the operations there.

The wait is over. Carriers are selling the chassis and the result according to the JOC article is “unusually long turn times because marine terminals do not have the types and quantities of chassis that truckers need. ‘The chassis are not being positioned where they are needed,’ said Vic LaRosa, CEO of TTSI, a Southern California drayage company.”

This is a big problem. According to Bruce Wargo (quoted in the JOC article), president of Pier Pass Inc., which manages the Los Angeles-Long Beach extended gate time program on behalf of the terminal operators, the chassis problem is a more important issue than turn times. “In fact, chassis are a big part of the turn-time problem.”

After facing huge losses in the billions of dollars, it made sense for carriers to sell off chassis, allowing other companies to handle that aspect of the international shipping business. Liquidating the chassis created cash flow for them and allowed them to focus on the more profitable aspects of international shipping, freight rates and filling their shipping lines with cargo containers.

But the situation created in the ports of Los Angeles/Long Beach is not good for shippers, not good for truckers, and ultimately, not good for the carriers.

“Congestion at the marine terminals is not only causing terminals to shut out truckers, but in one extraordinary case, a terminal operator was forced to tell a shipping line not to dock its vessel because the terminal did not have enough chassis on hand to handle the containers that would be discharged,” reported Mongelluzzo.

No one seems to want to pay for moving chassis to where they are supposed to be and the problem is unfairly falling to truckers. They are often being instructed to move chassis for free when they should be hauling a cargo load.

With the Port of Los Angeles/Long Beach being the biggest in the nation in terms of shipment volume that goes through it, this chassis issue is serious. Calling it a crisis may not be an overstatement.

The same reasons that make this a critical problem mean that the chassis problem will be solved.

The Port of Long Beach has a Chassis Operations Group searching for a more efficient chassis supply model. Ocean carriers, terminal operators, beneficial cargo owners, trucking companies, railroads and the International Longshore and Warehouse Union are all represented in the group. All these parties have strong interest in solving the problem.

The Chassis Operations Group’s webpage includes meeting minutes, a guidebook on chassis supply models, and a white paper on the problem if you want to read more on this issue.

 

Click Here for Free Freight Rate Pricing

 

Source:

https://www.joc.com/trucking-logistics/drayage/chassis-crisis-la-lb_20140203.html

http://www.polb.com/economics/chassis.asp

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Shipping News Alert: New Snow Storm Affecting Midwest Rail https://www.universalcargo.com/shipping-news-alert-new-snow-storm-affecting-midwest-rail/ https://www.universalcargo.com/shipping-news-alert-new-snow-storm-affecting-midwest-rail/#respond Wed, 05 Feb 2014 22:08:05 +0000 https://www.universalcargo.com/?p=7745 This is an update from BNSF Railway. A new storm system with expected snowfall levels of 5 to 10 inches is moving across the Midwest, affecting BNSF territories in Illinois, Missouri, Indiana, Iowa, Nebraska, Kansas, Oklahoma and Colorado. The storm system began Monday, February 3, and is expected to continue through the week. This storm […]

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This is an update from BNSF Railway.

Shipping News AlertA new storm system with expected snowfall levels of 5 to 10 inches is moving across the Midwest, affecting BNSF territories in Illinois, Missouri, Indiana, Iowa, Nebraska, Kansas, Oklahoma and Colorado. The storm system began Monday, February 3, and is expected to continue through the week.

This storm system is slowing switching, rail and hub operations throughout the Midwest and into Chicago. The added challenge of extreme subzero temperatures across BNSF northern routes will adversely affect arrivals, departures and train sizes between Chicago and the Pacific Northwest.

Actions taken:

  • Last week, the Chicago Transportation Coordination Office – all U.S. and Canadian Class I railroad representatives – met with Chicago rail and switch carriers about ongoing “Alert Level 3” conditions.
  • We identified levers for all types of rail business coordination (including but not limited to intermodal), including train blocking, right-sizing interchanges for maximum throughput, diverting traffic to alternate gateways, adjusting frequency of deliveries to match capabilities, etc.

24-hour command center operations continue to focus on:

  • Redistributing traffic between BNSF intermodal facilities.
  • Coordinating with our connecting eastern carriers to use alternate gateways instead of normal Chicago interchange points.
  • Maintaining elevated levels of personnel in supervisory and field hubs, operations, and engineering.

While progress has been made at all BNSF Chicago facilities since last week -noted by improvements in outbound units pending loading, inbound units pending de-ramp, and overall terminal inventory levels – normal operations and service levels have not been fully restored. The current storm system noted above is expected to delay progress toward full recovery.

We recognize the severe impact that current conditions are having on our customers and we are committed to restoring service levels as quickly as possible.

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Shipping News Alert: Port & Rail Closures & Delays Due to Storms https://www.universalcargo.com/shipping-news-alert-port-rail-closures-delays-due-to-storms/ https://www.universalcargo.com/shipping-news-alert-port-rail-closures-delays-due-to-storms/#respond Wed, 05 Feb 2014 19:07:34 +0000 https://www.universalcargo.com/?p=7605 This is an advisory from APL: Please be advised that another winter storm is moving through the US Midwest and Northeast.  As a result of this winter weather, several port, rail and container yard facilities have either closed or have limited operations.  Delays to cargo moving to or through this geography should be expected. As […]

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This is an advisory from APL:

Shipping News AlertPlease be advised that another winter storm is moving through the US Midwest and Northeast.  As a result of this winter weather, several port, rail and container yard facilities have either closed or have limited operations.  Delays to cargo moving to or through this geography should be expected.

As of February 5, the following locations are impacted by adverse weather conditions.  Please note that terminals will continue to assess conditions as the weather impact changes.

NY/NJ – Maher Terminal – Closed and extending free time one day; APMT – Delayed opening; Global – open; APL CY – Closed

Indianapolis – CY – Closed 

Open but with restricted operations due to snow and ice: Cincinnati CY, Columbus CY, Cleveland CY, Detroit CY, Louisville CY, Pittsburg CY, St. Louis CY, Kansas City CYs, Omaha CY

The series of winter storms has resulted in rail car imbalances that are negatively impacting cargo movement via rail throughout the US and Canada.  Additionally truck power has been extremely hard hit by the series of storms and facility closures.

APL is working with our venders to minimize the impact of these extreme weather conditions on the movement of your cargo.  However, please plan for several days delay for cargo movement in or through the NY/NJ port complex.

Universal Cargo Management is closely monitoring port and rail situations to ensure your imports and exports ship smoothly as possible.

To be kept up to date on international shipping events and news, subscribe to our blog.

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Shipping News Alert: Cargo Delays https://www.universalcargo.com/shipping-news-alert-cargo-delays/ https://www.universalcargo.com/shipping-news-alert-cargo-delays/#respond Mon, 27 Jan 2014 23:18:34 +0000 https://www.universalcargo.com/?p=7396 This is a service advisory from APL. Please be advised that extreme winter weather in January has had a negative impact on cargo movement.  APL is closely working to minimize the impact to your shipment.  However, please note the following significant events. NY-NJ Terminals – The New York and New Jersey Terminals have been exceptionally […]

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This is a service advisory from APL.

international shipping news alertPlease be advised that extreme winter weather in January has had a negative impact on cargo movement.  APL is closely working to minimize the impact to your shipment.  However, please note the following significant events.

NY-NJ Terminals – The New York and New Jersey Terminals have been exceptionally impacted by consecutive winter storm [sic.] in January 2014.  The terminals have been closed two times this month.  While the terminals have added extended hours, both inland and port operations have been negatively impacted by winter weather.  Rail cargo delay averages six days from vessel discharge.  Ships berthing have also been delayed up to four days.  As a result of adverse operations, chassis availability has been negatively impacted.

All US East Coast terminals have been impacted to some degree as a result of winter weather and the delays in New York/New Jersey.

Los Angeles Basin – Due to severe weather in the Midwest and East Coast, rail movement was delayed in arriving to the West Coast.  Additionally a Jan 21 derailment blocked the Union Pacific mainline, resulting in rail car shortages for inland movement of Los Angeles discharge cargo.

Vancouver Rail Car Shortages – Extreme cold in Canada has reduced train size capabilities for cargo movement.  As a result, a significant number of containers have discharged at the Port of Vancouver and are awaiting inland movement.  The Canadian National Railroad has advised that it will take 3 to 4 weeks to return to normal rail car flow.

 

Subscribe to our blog to keep up with the latest updates in the international shipping industry.

 

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Shipping News Alert: Congestion at Several U.S. Ports Causing Delays https://www.universalcargo.com/shipping-news-alert-congestion-at-several-u-s-ports-causing-delays/ https://www.universalcargo.com/shipping-news-alert-congestion-at-several-u-s-ports-causing-delays/#respond Fri, 17 Jan 2014 18:29:04 +0000 https://www.universalcargo.com/?p=7484 Severe port congestion and rail delays are slowing many inland shipments throughout the U.S. Here are the three most notable ports experiencing congestion and causing shipment delays: Ports of Los Angeles/Long Beach, especially the PCT & ITS terminals. Port of Oakland, specifically SSA terminals. Ports of New York/New Jersey. Beyond delays to imported shipping containers’ delivery, […]

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Shipping News AlertSevere port congestion and rail delays are slowing many inland shipments throughout the U.S.

Here are the three most notable ports experiencing congestion and causing shipment delays:

Ports of Los Angeles/Long Beach, especially the PCT & ITS terminals.

Port of Oakland, specifically SSA terminals.

Ports of New York/New Jersey.

Beyond delays to imported shipping containers’ delivery, there is a danger of truckers charging congestion fees to shippers.

Obviously, major congestion that delays the delivery of imported goods is bad for shippers. Port congestion is also a major problem for truckers who get stuck waiting at ports for hours and hours, unable to load up and get on the road, costing them money.

UCM will be keeping an eye on the port congestion situations and give you updates.

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Mockingjay Asks What Effect Do Carrier Alliances Have on Shippers? https://www.universalcargo.com/mockingjay-asks-what-effect-do-carrier-alliances-have-on-shippers/ https://www.universalcargo.com/mockingjay-asks-what-effect-do-carrier-alliances-have-on-shippers/#respond Tue, 14 Jan 2014 20:05:42 +0000 https://www.universalcargo.com/?p=7488 This blog is the third part in a series about the G6, P3, and CKYH carrier alliances. Check out Part 1: Hunger Games of the Sea: G6, P3, & CKYH Alliances Fight for Shipping Dominance and Part 2: Catching Fire on the Sea: International Shipping Moves & Counter Moves. The Mockingjay became a symbol for the people of […]

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This blog is the third part in a series about the G6, P3, and CKYH carrier alliances. Check out Part 1: Hunger Games of the Sea: G6, P3, & CKYH Alliances Fight for Shipping Dominance and Part 2: Catching Fire on the Sea: International Shipping Moves & Counter Moves.

Hunger Games of the Sea Mockingjay CarriersThe Mockingjay became a symbol for the people of different districts in the Hunger Games series to unite against their oppressive government. There’s no such symbol for real life shippers; however, shippers from the U.S. and China are uniting to oppose the P3 Network.

As shipping lanes are becoming more and more controlled by carrier alliances instead of being filled by ships from different competing carriers, worries are springing up about how these powerful alliances, especially the P3 Network, will negatively affect shippers.

With the P3 Network and G6 Alliance expansion approach approval, there seem to be positive and negative effects they will have on international shipping and shippers. Before we outline the negative effects of the alliances that have shippers worried, let’s take a look at the positive.

Positive Effect of Alliances on Shippers – Increased Shipping Service Frequency

International shipping service does have room for improvement.

Carriers in the international shipping industry have been known for being inconsistent, even bad, when it comes to keeping cargo ships on schedule. And if a shipper’s cargo containers miss a ship loading deadline, it could cost the shipper several days or even a week and beyond to get their cargo delivered.

The P3 Network and G6 should both create serious increases in sailing frequencies from port to port, supplying considerable improvement to international shipping service. Even Evergreen joining the CKYH Alliance could cause some sailing frequency increase.

For example, an article from Hellenic Shipping News reports:

Assuming that the future G6 network will be the sum of the current New World Alliance and Grand Alliance services, frequencies between major ports will reach record levels. This means five direct weekly sailings from Shanghai to Los Angeles and four direct weekly services from Rotterdam to New York.

To US inland destinations such as Chicago, which can be reached from Asia via Los Angeles/Long Beach or via Pacific Northwest ports and can be reached from Europe via New York, Norfolk or Montreal, there will be even higher frequencies of sailings.

Increased sailing frequencies is a big win for shippers. With it, shippers should have more flexibility on cargo shipping combined with better schedule reliability from carriers.

Potential Negatives Outweight Potential Positives of Carrier Alliances

Unfortunately, most of the potential ways carrier alliances like the P3 Network will affect shippers are negative. That’s why The Asian Shippers Council, the China Shippers Association, the Hong Kong Shippers Council, the US Shippers Association, Med-America Shippers Association, Gemini Shippers Association, Fashion Accessories Shippers Association, and the International Longshoremen’s Association are all opposing the P3 Network.

Cargonews Asia caught the feeling many shippers have over the P3 Network:

“With 255 vessels totalling 2.5 million TEUs, the P3 will be dominant in the east-west trade – 42 percent of Asia-Europe trade, 50 percent Asia-Mediterranean and 24 percent transpacific.”
[Asian Shippers’ Council] chairman John Lu said: “Such concentration of capacity is untenable. We fear for the worst should the P3 get regulatory approval.”

Negative Carrier Alliance Effect on Shippers – Competition Crushing

It’s not likely the savings the alliances create in underlying operating costs will translate to lower freight rates for shippers.

It has been suggested that lower underlying costs for carriers will result in more stability in the international shipping industry. But as this whole series paralleling carrier alliances with the Hunger Games has suggested, the results are more likely that many weaker carriers will die, being driven out of business by the stronger.

With fewer carriers controlling huge chunks of the market while improving their operating costs through these alliances, the ability to drive competition out of business drastically increases.

If the competition shrinks to near monopoly levels, freight rates are likely to increase while service suffers.

Negative Carrier Alliance Effect on Shippers – Freight Rate Collusion

Carrier Alliances are supposed to be strictly operational while the carriers in the alliances still compete for customers. The alliances are not pricing cartels.

Yet, there is much worry that there will be or even is already communication between carriers about freight rate pricing. That international shipping carriers are already under investigation for freight rate collusion doesn’t help matters.

Shanghai Shipping Freight Exchange’s article sums up this legitimate concern well:

“Shippers can never be sure whether [A P Moller-Maersk, MSC and CMA CGM, the P3 Network carriers] have talked about rates or not. Shippers are suspicious whether these shipping lines are just service sharing, or consolidating all the operations,” the Hong Kong Shippers Council said. “If they have such a big market share, they will easily come up with very unfavourable freight charges; they may even demand double freight rates during the peak seasons.”

Even without collusion, freight rates could easily hike from the smaller competition pools created by the alliances.

Negative Carrier Alliance Effect on Shippers – Increased Risk

This one is more for larger shippers. Spreading out shipments between different carriers supplies risk mitigation from cargo damage by having their cargo containers on different ships. It’s kind of like the old platitude of not having all your eggs in one basket.

With alliances sharing ships, this strategy becomes difficult as the two carriers could easily sail the shipments together. Despite the shippers attempt to separate her eggs into different baskets, the carriers dump them all together. Then if something happens to that basket…

Negative Carrier Alliance Effect on Shippers – Additional Fears

There are more issues shippers are worried about.

These fears include transit times increasing from increased use of transhipment hubs, alliances growing to include feeder services like inland rail from hubs, powerful carriers being able to put pressure on terminal operators, and carriers having increased influence on jobs all across the supply chain.

Conclusion

If the carrier alliances keep moving forward as planned, it seems inevitable that smaller carriers will be pushed out of the market.

The international shipping industry and its freight rates have always been volatile. With bigger carriers taking control of more of the market and sharing resources through alliances could bring more stability and increased service.

With the decrease in service, freight rates may be driven up while service eventually suffers.

Time will tell how all the moves made by the various carriers as they fight for dominance in the Hunger Games of the Sea, but there’s plenty of room for speculation now.

What are your thoughts on the carrier alliances?

Click Here for Free Freight Rate Pricing


Sources/Further Reading:

http://www.hellenicshippingnews.com//News.aspx?ElementID=a61cf558-5bf2-445d-8b9b-e11a512b090d

http://www.cargonewsasia.com/secured/article.aspx?id=3&article=32327

http://www.ssefc.com/english/html/News_Center/Market_News/2013/1213/1592.html

http://www.seanews.com.tr/article/worldship/116923/P3-Alliance-competition/

http://www.cslexp.com/us-dockworkers-union-voices-opposition-p3-network/

http://www.cargonewsasia.com/secured/article.aspx?id=3&article=32327

https://www.universalcargo.com/blog/bid/100164/Holy-Cargo-Collusion-Batman-Shipping-Companies-Under-Investigation

http://theloadstar.co.uk/p3-plans-come-renewed-attack/

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Catching Fire on the Sea: International Shipping Moves & Counter Moves https://www.universalcargo.com/catching-fire-on-the-sea-international-shipping-moves-counter-moves/ https://www.universalcargo.com/catching-fire-on-the-sea-international-shipping-moves-counter-moves/#respond Wed, 08 Jan 2014 21:16:42 +0000 https://www.universalcargo.com/?p=7469 This is the follow up to last week’s blog, Hunger Games of the Sea: G6, P3, & CKYH Alliances Fight for Shipping Dominance. In an arena of oceans and seas, giant ships filled with thousands of cargo containers sail from continent to continent. They’re owned and filled by huge shipping companies known as carriers. Forming alliances […]

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This is the follow up to last week’s blog, Hunger Games of the Sea: G6, P3, & CKYH Alliances Fight for Shipping Dominance.

hunger games international shippingIn an arena of oceans and seas, giant ships filled with thousands of cargo containers sail from continent to continent. They’re owned and filled by huge shipping companies known as carriers. Forming alliances and making moves and counter moves, the carriers battle for international shipping dominance. How many carriers will survive is unknown.

Let the games begin!

Today we look at the moves and counter moves the carriers and their alliances are making to rebound from billion dollar losses and beat out the competition in the world’s cargo shipping industry.

Let’s start with the favorites, the carriers who would be the Careers in the Hunger Games: Maersk, Mediterranean Shipping Co., and CMA CGM. Together, these three largest carriers in the world, have formed the P3 Alliance.

Of the three carrier alliances–the G6, CKYH, and P3–the P3 is the latest to form, but it is also making the most waves. This alliance was so recently formed and announced that it has not yet even been approved by regulators.

Still, everyone seems to be moving forward as if approval is a foregone conclusion.

In an article from the Wall Street Journal by Costas Paris about the U.S. Federal Maritime Commission, the European Union’s Competition Commission, and China’s Transport Ministry meeting in regards to the alliance quoted one of the people with direct knowledge of the matter as saying:

“The regulators have determined that the P3 isn’t a merger, but an alliance. This means that it will probably be approved, but it will include clauses to protect parties like cargo owners, fuel providers and smaller competitors from price fixing and unfair competition.”

Many importers, exporters, and freight forwarders are worried about how this alliance will affect freight rates. But it’s the other carriers who have the most to worry about an alliance from the three biggest carriers in the world.

According to a Supply Chain Digest article, the “2.6 million TEU total [P3 ships to be employed] represents just under 15% of the total global container fleet.” That’s a significant amount of the world fleet, but may not sound that intimidating.

However, when realizing the way these ships will be used in some of the biggest shipping lanes in the world, it quickly becomes clear just how powerful a force the P3 Alliance could be. Hellenic Shipping News reports:

“The capacity shares of the P3 alliance (Maersk, MSC, CMA CGM) in the Asia-North Europe trade would reach 41% – much more than the share of the current biggest alliance, the G6 with about 22%.”

So the move of the P3 Alliance is a big one. And the G6 Alliance is quickly making a counter move.

The Journal of Commerce reported on December 3rd:

The G6 Alliance unveiled plans today to expand into the trans-Atlantic and Asia-U.S. West Coast trade lanes in a widely expected response to the proposed P3 Network partnership between the world’s three largest carriers, Maersk, Mediterranean Shipping Co. and CMA CGM.

The G6 carriers — Hapag-Lloyd, NYK, OOCL, Hyundai Merchant Marine, APL and MOL — will deploy 240 container ships serving 66 ports in Asia, America and Europe.

The alliance plans to complete the expansion of services by the second quarter of 2014, pending regulatory approval, to coincide with the launch of the P3 network on the Asia-Europe, trans-Atlantic and trans-Pacific routes.

So the three biggest carriers in the world form an alliance then the current G6 Alliance expands and combines more of its services. It quickly becomes apparent that competition seems to be shrinking as Hellenic reports:

…if the G6 alliance carriers (New World Alliance and Grand Alliance) merge all their transatlantic services, they will have a share of about 46% of total transatlantic capacity, more than the current biggest group, MSC with about 16%.

…just two carrier alliances (P3 and G6) could control more than 80% of transatlantic capacity and more than 60% of Asia-North Europe capacity.

Then there’s the CKYH Alliance (which has also been called the “Green Alliance”). There have been several stories circulating about Hanjin Shipping (the “H” in the CKYH Alliance) planning to invite Evergreen Marine Corp. to join that alliance.

Evergreen container shipEvergreen Marine Corp. is the China’s largest container shipping company and would be a strong addition to the CKYH Alliance. Evergreen has worked with this alliance some in the past, so a pretty strong relationship already exists there.

An article from Taipai Times reports that Evergreen is considering joining the CKYH Alliance and paints a picture of Evergreen as a shipping company upgrading its fleet with a bright outlook for 2014.

Evergreen joining CKYH would be one more way in which the international shipping world shrinks into a field of alliances.

With each story, every move and counter move, we see alliances trying to strengthen themselves and grow to take a larger chunk of the market. How will this world of alliances in international shipping affect you, the shipper?

Check out our blog next week where we look at that question.

Click Here for Free Freight Rate Pricing

Sources/Continued Reading:

http://www.lloydsll.com/freight-directory/sea/hanjin-may-invite-evergreen-to-join-the-ckyh-alliance/20018090692.htm;jsessionid=886E6C3B61C7C5F190A3160D25E52224.cb1a6af26f4f089d0d4cce62279dcbca5a310b19#.UsUNahYk_ww

http://online.wsj.com/news/articles/SB10001424052702304866904579267851984589232

http://www.hellenicshippingnews.com//News.aspx?ElementID=a61cf558-5bf2-445d-8b9b-e11a512b090d

http://www.scdigest.com/ontarget/13-12-11-2.php?cid=7663&ctype=content

http://www.taipeitimes.com/News/biz/archives/2014/01/06/2003580609

https://www.universalcargo.com/blog/bid/97279/World-s-Largest-Container-Shipping-Carriers-Form-Triumvirate

https://www.universalcargo.com/blog/bid/100164/Holy-Cargo-Collusion-Batman-Shipping-Companies-Under-Investigation

https://www.universalcargo.com/blog/bid/97352/Will-Shippers-Benefit-from-P3-Alliance-of-Largest-Container-Shipping-Carriers

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Hunger Games of the Sea: G6, P3, & CKYH Alliances Fight for Shipping Dominance https://www.universalcargo.com/hunger-games-of-the-sea-g6-p3-ckyh-alliances-fight-for-shipping-dominance/ https://www.universalcargo.com/hunger-games-of-the-sea-g6-p3-ckyh-alliances-fight-for-shipping-dominance/#respond Thu, 02 Jan 2014 22:56:35 +0000 https://www.universalcargo.com/?p=7357 It’s a chess match to stay alive. No, it’s not as dramatic or exciting to read about as Suzanne Collins’ The Hunger Games where Katniss Everdeen is placed in an arena with 23 other kids where they must all fight until only one child is breathing. No, it doesn’t have that Highlander mentality of “There can […]

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It’s a chess match to stay alive.

International Shipping Hunger GamesNo, it’s not as dramatic or exciting to read about as Suzanne Collins’ The Hunger Games where Katniss Everdeen is placed in an arena with 23 other kids where they must all fight until only one child is breathing. No, it doesn’t have that Highlander mentality of “There can be only one.”

But as the games for international shipping supremacy play out, it seems unlikely that all the carriers on the arena of the oceans will survive.

A Quick Prologue

The international shipping industry experienced a boom with increasing freight rates and record shipping numbers in 2007 and 2008 so carriers were making huge ship orders to increase their capacity, anticipating continued growth in the global economy.

However, right around that time a great recession was starting to occur in the U.S. and by 2009 there was a global recession.

Skip forward to 2011 and those ships the carriers ordered when things were good are hitting the water, overcapacity is pushing down freight rates, and carriers are losing billions of dollars.

Alliances Form

When times get hard, the strong often survive while the weak die out. But if you’re not one of the biggest and strongest, joining forces with others can increase your strength and your odds of survival.

Just like alliances formed between tributes in the arena of the Hunger Games, alliances formed between carriers on the arena of international waters.

In late 2011, the G6 Alliance was formed. The carriers in this alliance were Hapag-Lloyd, NYK Lines, Orient Overseas Container Line, Hyundai Merchant Marine, APL, and Mitsui O.S.K. Lines.

In 2012, the G6 Alliance was cooperating in the Asia-Europe and Mediterranean trade lines. in 2013, they expanded to working with each other in the Asia-North America East Coast trade lanes.

In June of 2013, the 3 largest container shipping carriers–Maersk, Mediterranean Shipping Co., and CMA CGM–announced their plans for an alliance for East-West trade. They call it the P3 Network.

The biggest and strongest carriers forming an alliance brings to mind the Careers from the Hunger Games. This alliance is the most dreaded by other carriers, worried about the dominance the 3 largest carriers in the world working together could have on the international shipping industry.

If that wasn’t enough, there is one other alliance to factor into the situation that has already been in existence before the G6 Alliance and P3 Network: the CKYH Alliance consisting of COSCO, K Line, Yang Ming, and Hanjin. Evergreen, while not actually part of the alliance, has worked with the CKYH Alliance in the past.

How Alliances Work

Keeping with the Hunger Games comparison, carrier alliances cannot be complete.

In the Hunger Games, alliances form with the knowledge that the members will eventually have to compete with each other for their lives. Alliances between carriers still have an underlying competition between them. In theory.

Carrier alliances mean they share ships operating in shipping lanes. Carriers cannot work together on setting prices (although many carriers are under investigation for price collusion now). It is not a merger of companies. They still compete with each other for customers paying various freight rates to ship their containers of goods.

For example, the P3 Network will act like a separate company from Maersk, Mediterranean Shipping Co., and CMA CGM, handling the operations of the shipping lines while the three carriers work separately marketing and acquiring shippers and freight forwarders as customers.

Let the Games Begin!

Now the players are on the field and alliances have been formed. The stakes are high as these giant companies face uncertain times after suffering billions in losses and face the risk of collapse.

In the next blog, Catching Fire on the Sea, we’ll look at moves and counter moves made by carriers and their alliances and see for whom the odds appear to be in favor.

Related Reading:

https://www.universalcargo.com/blog/bid/97279/World-s-Largest-Container-Shipping-Carriers-Form-Triumvirate

https://www.universalcargo.com/blog/bid/100164/Holy-Cargo-Collusion-Batman-Shipping-Companies-Under-Investigation

https://www.universalcargo.com/blog/bid/97352/Will-Shippers-Benefit-from-P3-Alliance-of-Largest-Container-Shipping-Carriers

http://www.lloydsll.com/freight-directory/sea/hanjin-may-invite-evergreen-to-join-the-ckyh-alliance/20018090692.htm;jsessionid=886E6C3B61C7C5F190A3160D25E52224.cb1a6af26f4f089d0d4cce62279dcbca5a310b19#.UsUNahYk_ww

http://online.wsj.com/news/articles/SB10001424052702304866904579267851984589232

http://www.hellenicshippingnews.com//News.aspx?ElementID=a61cf558-5bf2-445d-8b9b-e11a512b090d

http://www.scdigest.com/ontarget/13-12-11-2.php?cid=7663&ctype=content

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How To Get Accurate Freight Rate Pricing (5 Simple Steps) https://www.universalcargo.com/how-to-get-accurate-freight-rate-pricing-5-simple-steps/ https://www.universalcargo.com/how-to-get-accurate-freight-rate-pricing-5-simple-steps/#comments Thu, 12 Dec 2013 18:27:36 +0000 https://www.universalcargo.com/?p=7506 So you need to find out the cost of international shipping. Maybe you’re getting into international business,importing goods from China to sell here in the U.S. or exporting your goods to another country to gain a whole new market for your product. Perhaps you’re about to move internationally and want to ship your household goods […]

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So you need to find out the cost of international shipping.

How To Get Freight Rate PricingMaybe you’re getting into international business,importing goods from China to sell here in the U.S. or exporting your goods to another country to gain a whole new market for your product.

Perhaps you’re about to move internationally and want to ship your household goods overseas.

There are many situations that could cause you to need accurate freight rate pricing for international shipping. But in order to get an accurate freight rate quote, there is specific information a freight forwarder is going to need from you.

Here are some guidelines to help you get the freight rate pricing you need so your importing or exporting can be handled smoothly. Follow these steps and you’ll be able to get freight rate pricing effectively and efficiently.

1 – Request Your Freight Rate Pricing Within a Month of Shipping

I know this doesn’t seem ideal, but shipping rates (and the international shipping industry in general) are very volatile, especially in the spot rate market. You can’t get a quote for a shipment you want to export or import a year from now. In fact, you can’t even get a quote for cargo you’re shipping a few months down the line.

Quoted shipping rates are usually good for about 30 days so for accurate freight rate pricing on your shipment, you need to get your quote within about a month of shipping it.

If you have no idea what the cost of shipping is and need to get an idea of rates, you can get a quote on what it would cost if you were shipping now. But it’s important to remember due to the volatile nature of this industry, rates could be quite different when it comes to the actual time you plan to import or export your goods.

Click here to find out why shipping rates are so volatile.

2 – Know What You’re Shipping

This seems obvious, but you’d be surprised how many people try to get shipping rates without the specifics of what they’re shipping.

Rules and costs change for different types of goods being shipped. Shipping household goods is very different animal from shipping metal, wood, or mass produced T-shirts.

Different types of items cause a freight forwarder to have to ship through different carriers they have contracts with and also can affect the customs requirements and cargo insurance of exports and imports.

3 – Know the Size and Weight of Your Shipment

Are you shipping by the cargo container or are you shipping LCL (Less than Container Load)?

If you’re shipping air freight instead of by ocean, your freight rate pricing is going to be based on the size and weight of your shipment.

For ocean freight, usually your shipping by the container. But you’ll need to know if you need a 20′, 40′, 40’HQ, 45’HQ, 53′, or reefer (refrigerated) shipping container. The most common are the 20′ or 40′ cargo containers.

Of course, it’s possible you’re shipping LCL over ocean. In most cases, you’ll be charged by the cubic meter in such cases.

Weight can still be a price factor in ocean freight. Usually, things that are extremely heavy like heavy machinery are the sorts of things that have weights which will affect shipping rates in ocean freight.

4 – Know Where You’re Shipping To and From

Again it seems obvious, but there are a number of options when shipping internationally.

Universal Cargo Management offers door to door service as well as port to port service. You might need your goods picked up at your factory and delivered only as far as the port in the country/city you’re exporting to where your business partners will handle things from there.

Being specific about the the pick up and delivery addresses for your international shipping will allow your freight forwarder to give you accurate pricing on the trucking portion of your import or export.

5 – Have All Information Ready When You Contact Freight Forwarder

Be ready to give your freight forwarder all this information: When you’re shipping, what you’re shipping, the specific size and weight of your shipment, and where you’re shipping to and from.

Having all this information together before contacting a freight forwarder will ensure you get freight rate pricing efficiently and accurately.

Universal Cargo Management is ready to give you freight rate pricing on your ocean freight or air freight imports and exports at any time. You can call us at (866) 826-2276 or fill out our easy online freight rate form.

Click Here for Free Freight Rate Pricing

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Toppled Shipping Containers on Cargo Ship from Typhoon Haiyan https://www.universalcargo.com/toppled-shipping-containers-on-cargo-ship-from-typhoon-haiyan/ https://www.universalcargo.com/toppled-shipping-containers-on-cargo-ship-from-typhoon-haiyan/#respond Tue, 10 Dec 2013 17:55:47 +0000 https://www.universalcargo.com/?p=7483 Drivers heading down Highway 99 as Thanksgiving was approaching were given something extra to be thankful for as they overlooked the Port of Seattle. A Maersk container ship could be seen from the freeway with many of its shipping containers toppled and/or damaged. The drivers viewing the mess of containers on the ship could be […]

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Drivers heading down Highway 99 as Thanksgiving was approaching were given something extra to be thankful for as they overlooked the Port of Seattle. A Maersk container ship could be seen from the freeway with many of its shipping containers toppled and/or damaged.

The drivers viewing the mess of containers on the ship could be thankful the shipping containers were not holding their goods.

The Arnold Maersk, traveling from Busan, Korea, hit severe weather credited to Typhoon Haiyan that ripped through the Philippines and killed thousands of people.

Toppled Shipping ContainersReports are actually a bit conflicting. According to MYNorthwest.com, the container ship travelled through the typhoon. KGW reported that the Maersk vessel “came from the typhoon area. Coast Guard officials say the ship encountered very rough seas, but was not directly impacted by the typhoon.”

The latter description sounds much more likely in light of how devastating Typhoon Haiyan was.

The Arnold Maersk and the crew that was on board were much more fortunate than those in the Philippines. No one on board was killed and the ship itself was not damaged. The Coast Guard did report that 53 cargo containers were damaged and 18 were lost overboard as the Maersk container ship fought its way through the storm.

“Incidents like this aren’t uncommon,” the Seattle times credited Coast Guard spokeswoman Kathleen McCaffrey as having said. “But on average, just five containers end up in the sea. This ship is getting a lot of attention, she said, because it can be seen from Highway 99.”

The ship managed to dock at the Port of Seattle with extremely precarious-looking shipping containers that would require much work from longshoremen to clear.

These kinds of incidents, especially with the Coast Guard comment that they are not uncommon, highlight the importance of cargo insurance for ocean freight shipments.

According to a 2011 article from Monterey Bay Aquarium Research Institute, 10,000 shipping containers fall off cargo ships each year.

If ever your cargo shipment ends up in a shipping container that goes overboard or looks crunched like the damaged shipping containers on the Maersk Arnold, you’ll be glad your cargo was insured.

Protecting your cargo goes beyond insurance. Proper loading of a shipping container is also very important. We also have a blog on proper container loading practices and container loading guidelines.

Click Here for Free Freight Rate Pricing

Sources:

http://seattletimes.com/html/picturethis/2022321479_toppledcontainersonshiparriveinseattleport.html

http://www.kgw.com/news/Ship-containers-topple-at-Port-of-Seattle-233153971.html

http://mynorthwest.com/11/2400890/Ship-with-dozens-of-damaged-containers-limps-into-Port-of-Seattle

http://www.mbari.org/news/news_releases/2011/containers/containers-release.html

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Shipping Container Jail Cells? https://www.universalcargo.com/shipping-container-jail-cells/ https://www.universalcargo.com/shipping-container-jail-cells/#respond Mon, 02 Dec 2013 20:24:08 +0000 https://www.universalcargo.com/?p=7463 Over the last few years, we’ve been seeing more and more creative uses for shipping containers, including housing, restaurants, stores, and art. Here’s one more for the list: jail cells. Go to shipping container. Go directly to shipping container. Do not pass go. Do not collect $200. This seems like something from a movie or […]

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Over the last few years, we’ve been seeing more and more creative uses for shipping containers, including housing, restaurants, stores, and art. Here’s one more for the list: jail cells.

Go to shipping containerGo to shipping container. Go directly to shipping container. Do not pass go. Do not collect $200.

This seems like something from a movie or a board game; however, it’s real life.

According to an article from ABC News, overcrowding of jails in Victoria–a state in south-east Australia–has led Corrections Victoria to the decision of housing prisoners in shipping containers.

Maybe this will make for easier prisoner transfers. They could just be shipped right in their cell from one location to another. Okay. Maybe not.

Prison population in Victoria this year has risen by 11% to nearly 6,000 according to the article. No other state in Australia has prison population growing at such a fast rate and it has Corrections Victoria scrambling for space to keep up with the growth.

ABC reports that Dhurringile prison, in the north of Victoria, will have 50 shipping containers installed to house 100 prisoners.

“They’re sealed containers and they’re fitted out with the same amenities that you would have in a regular prison cell, with showers, basins, beds and cupboards,” ABC quotes Corrections Commissioner Jan Shuard as saying. “They’re quite a generous space for people to be able to use as their room.”

Shipping container cells will be used in minimum security prisons. Some worry about how effective they will be. The ABC article says:

The shipping containers will not be connected to the prison’s intercom system, meaning the doors will remain unlocked to allow quick exit in the event of an emergency.

It is proposed infrared beams will be used to help staff identify prisoners who escape.

Prison cells with unlocked doors? That sounds like bare minimum security to me. Victoria may want to invest in a few more of those “Prison Area: Do not pick up hitchhikers” signs.

For more stories about shipping containers, from uses beyond international shipping to useful tips to weird stories, check out the following blogs:

What is Google Doing With All Those Shipping Containers?

How a Box Changed History: the Shipping Container Story

Hurricane Sandy Inspires Shipping Containers as Emergency Housing

How To Open a Shipping Container When the Doors Are Stuck

Universal Bizargo: Hungover Man Wakes in Sealed Shipping Container

Proper Container Loading Practices and Container Packing Guidelines

Source/Continued Reading:

http://www.abc.net.au/news/2013-12-03/shipping-container-cells-to-ease-overcrowding-in-victorian-pris/5131264

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Fun Thanksgiving Turkey Facts WITH Turkey Import & Export Data https://www.universalcargo.com/fun-thanksgiving-turkey-facts-with-turkey-import-export-data/ https://www.universalcargo.com/fun-thanksgiving-turkey-facts-with-turkey-import-export-data/#respond Wed, 27 Nov 2013 22:43:44 +0000 https://www.universalcargo.com/?p=7532 Since Universal Cargo Management posts a blog every Tuesday and Thursday, I find myself writing an International Shipping Thanksgiving Day Blog every year. As you can imagine with such a perfect pairing, it’s wildly popular. Who isn’t thinking about international shipping on Thanksgiving, after all? Two years ago I posted fun turkey facts that have […]

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Since Universal Cargo Management posts a blog every Tuesday and Thursday, I find myself writing an International Shipping Thanksgiving Day Blog every year.

As you can imagine with such a perfect pairing, it’s wildly popular. Who isn’t thinking about international shipping on Thanksgiving, after all?

Two years ago I posted fun turkey facts that have absolutely nothing to with exporting and importing to and from Turkey. This year, I bring those fun turkey facts back, but this time I mix in data about Turkey’s global business. That’s right, because everyone was begging for it.

Yes, these Turkey Facts are our way of saying “Happy Thanksgiving!” In honor of Turkey Day, here we go:

No, these are not about importing and exporting Turkish goods. But if you want a rate quote for shipping to or from Turkey, click here.

Proud TurkeyThe average American eats between 16 and 18 pounds of turkey every year. (WHSV)

Considering how many Americans are vegetarians, some of us must really be downing a lot of turkey meat! At least, I hope it’s meat.

As of last year (2012), the U.S. is ranked the 9th highest country in imports from Turkey. (TurkStat)

9th place is the best we can do? Come on, shippers. Pick your products to import from Turkey and UCM will set up the international shipping so we can at least get the bronze metal this year.

Californians are the largest consumers of turkey in the United States. (WHSV)

I’m not sure if this means Californians eat more turkey than the rest of the country or if people in California are bigger than the people living in other states.

The U.S. is ranked 4th in countries Turkey imports from. (TurkStat)

That’s better than 9th, but still not even a bronze metal.

Turkey Map FlagGetting the larger end of a turkey’s wishbone cannot help you in global business.

But it can help you take care of business on the food stuck in your teeth.

3.7% of Turkey’s exports went to the U.S. last year. (TurkStat)

Germany had the largest share, hogging 8.6% of Turkey’s exports.

About 5 billion pounds of ready-to-cook turkey meat are sold in the U.S. annually, says Joel Brandenberger, president of the Washington-based National Turkey Federation. (CNN)

Almost makes you wish you were in the turkey business… Almost.

6% of Turkey’s imports come from the U.S. last year. (TurkStat)

China edged us out of the bronze medal on this one. It’s like Olympics gymnastics all over again.

The Turkey Trot ballroom dance got named after the short, jerky steps a turkey makes. (Infoplease)

And few dances carry such grace and dignity.Brown Turkey

Turkey’s exports to the U.S. grew by 22.3% last year from the previous one. (TurkStat)

I’ve got nothing interesting to say about that factoid.

About 280 million turkeys are sold for Thanksgiving celebrations in the U.S.(WHSV)

Turkey trafficking has almost reached epidemic levels.

Turkey imports from the U.S. shrunk by 11.9% last year. (TurkStat)

Maybe if we’d tried a little harder to maintain our exports to Turkey, China wouldn’t have edged us out of the bronze last year.

Turkeys can run 20 miles per hour and fly 55 miles per hour. (Aristotle.net)

If they were a little smarter, turkeys could be trained to ship themselves to Thanksgiving dinners. But then they might know better than to show up.

They don’t celebrate Thanksgiving in Turkey.

They would have about as much reason to celebrate to celebrate this American holiday in Turkey as they would to celebrate the 4th of July.

No turkey anywhere calls Thanksgiving “Turkey Day”.

Don’t get so caught up in the turkey you forget to be thankful for the blessings in your life.

Have a happy Thanksgiving!

 

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Holy Cargo Collusion, Batman–Shipping Companies Under Investigation! https://www.universalcargo.com/holy-cargo-collusion-batman-shipping-companies-under-investigation/ https://www.universalcargo.com/holy-cargo-collusion-batman-shipping-companies-under-investigation/#respond Tue, 26 Nov 2013 00:06:12 +0000 https://www.universalcargo.com/?p=7451 Go back to 2011. Carriers experience losses in the billions of dollars. In 2012, those shipping companies put together strategies to raise freight rates and regain profitability. General Rate Increases (GRIs) are at the top of the carriers’ strategies to make it happen. The major trans-Pacific shipping lines came together in the Transpacific Stabilization Agreement, allowing […]

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Go back to 2011. Carriers experience losses in the billions of dollars.

In 2012, those shipping companies put together strategies to raise freight rates and regain profitability.

General Rate Increases (GRIs) are at the top of the carriers’ strategies to make it happen.

The major trans-Pacific shipping lines came together in the Transpacific Stabilization Agreement, allowing them to plan and synchronize GRIs.

Batman Cargo CollusionI thought international shippers might see this like all the villains teaming up in the 1960’s Batman movie for an evil conspiracy. I also argued that carriers shouldn’t really be seen as the bad guys of international shipping as they provide the service that allows importers and exporters to do international business.

However, now in 2013, carriers are being investigated for allegedly illegally colluding to raise freight rates on global shipping routes.

Holy cargo collusion, Batman!

The Wall Street Journal reports that the European Union’s antitrust regulator is investigating possible price fixing by shipping companies. In the article by Costas Paris and Martina Stevis, they detail:

The European Commission said on Friday that it is investigating the way these companies announce price increases and whether their actions were, in essence, a veiled effort to coordinate price hikes. The commission declined to name the firms under investigation, but two shippers—Denmark’s A.P. Moller-Maersk and France’s CMA CMG—said they had either been informed they were part of the probe or intended to cooperate. Both said they have acted legally in their pricing practices.

There is not much reported on the specifics of the investigation, but here are key points reported in the Wall Street Journal article:

– 14 shipping companies are under investigation, including major world container-shipping companies from Europe and Asia.

– “Transparant” price increase announcements may have been illegal signaling of price intentions between shipping companies to fix pricing.

–  Price announcing being probed has been happening since 2009.

Often, Universal Cargo Management has blogged about GRIs and other rate increases carriers have announced. There have been several over the last couple years as the big shipping companies have been trying to rebound from the terrible losses of 2011.

Carriers have managed to increase freight rates over the last couple years, especially in the spot rate market. However, making announced GRIs stick has been a struggle.

The Wall Street Journal article exemplifies this struggle as follows:

Maersk, CMA CGM and Switzerland-based Mediterranean Shipping Co., the world’s top three container shipping firms by capacity, have announced prices increases, roughly simultaneously, three times so far this year, with a fourth hike planned for December. But those attempts have all been undercut by smaller container companies offering cheaper pricing, and the hikes didn’t stick.

In June, the world’s three largest container shipping carriers, Maersk, Mediterranean Shipping Co., and CMA CGM announced a long-term operational alliance on East-West trades, calling the triumvirant the P3 Network.

The decrease in competition from this alliance could be a bad thing for international shippers, as was considered in our blog, Will Shippers Benefit from P3 Alliance of Largest Container Shipping Carriers?

Of course, if it turns out the shipping companies were already cooperating to illegally fix prices as is being investigated, it could hinder the triumvirate from being allowed to make the official alliance.

The Wall Street Journal article says,

The probe could result in steep fines if investigators find evidence of collusion. But it also puts a fresh cloud over a separate effort by Maersk, MSC and CMA CGM to bolster their business [the P3 Alliance]…. The EU is currently weighing whether to approve that deal—set to go into effect sometime next year, pending green lights from regulators in Europe, the U.S. and China.

Maersk and MSC have both announced that in their view they have acted fully within the law.

It will be interesting to see whether the European Commission ends up sharing that view.

Source:

http://online.wsj.com/news/articles/SB10001424052702304337404579213523015029740

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What is Google Doing With All Those Shipping Containers? https://www.universalcargo.com/what-is-google-doing-with-all-those-shipping-containers/ https://www.universalcargo.com/what-is-google-doing-with-all-those-shipping-containers/#respond Tue, 05 Nov 2013 22:06:18 +0000 https://www.universalcargo.com/?p=7524 A barge appears on the water with a structure built on it of shipping containers stacked four stories tall. Then another. One in San Francisco floating near Treasure Island. The other in the Portland Harbor. Despite all the shipping containers, these are not international shipping vessels. So what are they? Ask Google. But don’t expect them […]

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A barge appears on the water with a structure built on it of shipping containers stacked four stories tall. Then another. One in San Francisco floating near Treasure Island. The other in the Portland Harbor.

Google's Shipping Container BargeDespite all the shipping containers, these are not international shipping vessels. So what are they?

Ask Google. But don’t expect them to tell you.

Articles have been popping up left and right online about these mysterious shipping container structures floating on the water. All the articles keep coming to the conclusion that Google owns them. What they can’t agree on is what they’re for.

According to the Portland Press Herald:

Some experts who were shown photographs of the structures speculate that they could possibly be prototypes for floating data centers that would use ocean water for cooling servers and ocean waves for energy.

Google was granted a patent in 2009 for such a structure.

CNET found an engineer, who has been kept anonymous by his or her own request, that claimed to work on a project around the time Google got the patent for a Google backup data storage center. Daniel Terdiman reported the following from the source on CNET:

Google was “looking at putting together a data center, or really…a backup center, in case of some kind of natural disaster,” the engineer told me. “They’d have all their data from the region backed up at this center. This could easily tow it with a tug out of the area, and be able to easily bring it back in and get it up and running while facilities would be down in the area. And…the master plan at the time was to build upwards of a dozen of these things. About four in the States, and then have them worldwide, over in Asia, Europe, South America. They were planning on putting in a lot of these things worldwide.”

While backup storage centers would make sense for Google, more articles than not think these structures are meant to be floating stores for Google Glass–the new computer Google has been developing that users wear like a pair of glasses.

Either way, Google isn’t saying and the mystery becomes more enticing for people.

The mystery gained another layer of interest as construction has suddenly stopped.

According to a CBS affiliate, the reason for the construction suddenly stopping is Google doesn’t have a permit:

Google does not have a permit for a floating anything.

“Google has spent millions on this,” said an insider close to the San Francisco Bay Conservation and Development Commission. “But they can’t park this barge on the waterfront without a permit, and they don’t have one.”

A BCDC official confirmed the agency has held discussions with Google about “hypothetical operations” on the water, but he complained the tech giant has been vague about how the barge would be used.

Is Google building floating data centers, Google Glass stores on the water, or a fleet of shipping container bases for their plots of world domination?

Surely the shipping container structures couldn’t be for dastardly purposes when built by a company with a motto of “Don’t be evil.”

Maybe the shipping container structures are just party barges for Google co-founders Larry Page and Sergy Brin. We do know at this point what happens on the barge stays on the barge.

If you know what Google is doing with all those shipping containers, let us know in the comments below.

And as always, if you need a shipping container for, you know, actually shipping something, contact us for afree rate quote on your international shipping needs.

Click Here for Free Freight Rate Pricing

Sources/Further Reading:

http://www.pressherald.com/news/Myserty_Portland_barge_and_San_Francisco_barge_appear_linked_.html

http://news.cnet.com/8301-1023_3-57609509-93/san-franciscos-bay-barge-mystery-floating-data-center-or-google-glass-store/

http://sanfrancisco.cbslocal.com/2013/10/25/secret-google-facility-found-floating-on-san-francisco-bay/

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UCM’s Halloween Pumpkin Carving Contest https://www.universalcargo.com/ucms-halloween-pumpkin-carving-contest/ https://www.universalcargo.com/ucms-halloween-pumpkin-carving-contest/#respond Thu, 31 Oct 2013 20:35:12 +0000 https://www.universalcargo.com/?p=7612 I carved a pumpkin and I liked it… Universal Cargo Management welcomed Halloween with a good old fashioned pumpkin carving competition (all pictures can be found on our Facebook page). Members of UCM’s staff created teams and put in great entries for a tight competition. Here’s a peek at the finalists of the competition. Daphne Chang, Ivy […]

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I carved a pumpkin and I liked it…

Universal Cargo Management welcomed Halloween with a good old fashioned pumpkin carving competition (all pictures can be found on our Facebook page).

Happy Halloween UCM PumpkinsMembers of UCM’s staff created teams and put in great entries for a tight competition.

Here’s a peek at the finalists of the competition.

Jack o'lantern Team Work HardDaphne ChangIvy Ying Zhao, Jenny F. Chang, and Lupe Montano joined together to form Team Work Hard.

The name actually describes its members very well.

Team Work Hard gave a creative twist to the classic jack o’lantern, using seeds and pumpkin innards spewing out of its mouth, with their entry.

This jack o’lantern made a splash immediately with those who saw it and was sure to be a contender in the competition.

The other finalist team broke from the traditional jack o’lantern altogether and went with a Universal Cargo Management international shipping theme.

UCM pumpkin carving Team YOLOPerhaps Team YOLO, composed of Raymond Rau and Wesley Jew, succeeded in garnering an unfair advantage by entering a group of four carved pumpkins–a large one with UCM’s logo artfully carved into it and three small ones to represent ocean freight, air cargo, and trucking.

When it came time for the judging, UCM’s Managing Director, Kamy Eliassi chose Team YOLO’s entry.

Going with carved pumpkins that promoted UCM and the freight forwarder’s main services payed off well in getting the company’s managing director’s vote.

But next to judge was UCM’s President, Shirley Burke.

The creative use of the pumpkins innards payed off in gaining Shirley’s sensibilities and she chose Team Work Hard.

It was a split decision, making these two entries the finalists. The decision would come down to UCM’s CEO, Devin Burke.

The decision was difficult, but the jack o’lanterns promoting his company won Devin over and Team YOLO was declared the winner of the 2013 UCM Pumpkin Carving Competition.

Congratulations Ray and Wesley!

To see all the pics from UCM’s pumpkin carving competition, visit our Facebook page.

Happy Halloween!

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Top 5 Scariest International Shipping Waters https://www.universalcargo.com/top-5-scariest-international-shipping-waters/ https://www.universalcargo.com/top-5-scariest-international-shipping-waters/#respond Mon, 28 Oct 2013 22:17:27 +0000 https://www.universalcargo.com/?p=7562 Often, people think being on a vessel handling ocean freight is boring and all routine; however, there are many waters out there where international shipping can be downright scary for the sailors transporting shipping containers of goods. In honor of Halloween, here’s a list of the top 5 scariest international shipping waters… #5 – Gulf […]

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Often, people think being on a vessel handling ocean freight is boring and all routine; however, there are many waters out there where international shipping can be downright scary for the sailors transporting shipping containers of goods.

In honor of Halloween, here’s a list of the top 5 scariest international shipping waters…

#5 – Gulf of Guinea

Piracy has been rising off the west coast of Africa, specifically in the Gulf of Guinea.

In fact, 2 Americans were kidnapped from a U.S. flagged ship off the coast of Nigeria just last week according to an article from USA today.

“The ship’s captain and chief engineer were abducted early Wednesday morning, according to the British security firm AKE,” the article reports.

Piracy is one of the scariest things in today’s international shipping waters. To prove the point, 3 of the 5 places on this list are here because of pirates.

#4 – Arctic Shipping Routes

Arctic Shipping RoutesNortheast Passage, Northwest Passage, Northern Sea Route… I’m doing a little lumping with the emerging trans-Arctic shipping routes as I create this list, but I think lumping them together is fair here.

Looking for routes through the Arctic Ocean has cost the lives of many explorers through the centuries; but, with climate changes and Arctic ice melting, routes are being successfully forged through the Arctic Ocean now.

While the history of sailor deaths in the Arctic Ocean adds to the scary factor of international shipping routes through the Arctic, it’s other factors that make these waters rank on this list.

The potential money to be made off these hugely geographically shortening routes will cause two things, in my humble opinion: A rush to get ships sailing trans-Arctic and political battles over whose territory those Arctic routes are.

I have trouble imagining these factors won’t add to the dangers of ships working their way through the icy Arctic waters (often icebreaking their way through).

If something goes wrong while a cargo ship (or any ship) navigates the Arctic, help is not likely to be near. Figuring out rescue plans for a ship in trouble in the Arctic and especially putting in infrastructure to give a real chance at Arctic water rescues is no easy task.

I can’t imagine the survival rate would be long if something went wrong in these frozen waters and as the horror cliche goes, there would be no one there to hear you scream if it did.

#3 – Gulf of Aden

Because of the desperation left in the wake of Somalia’s civil war, the Gulf of Aden has become a hotspot for piracy. Really, all the waters around Somalia, including the Gulf of Aden, the southern Red Sea, off Yemen and Oman, the Arabian Sea, off Kenya and Tanzainia, off Seychelles and Madagascar, off Mozambique, in the Indian Ocean, and off the Indian west coast and Maldives west coast, have high levels of pirate activity.

Giving this spot in the scariest international shipping waters list specifically to the Gulf of Aden instead of the waters around Somalia in general is because the Gulf of Aden now is what pops into most minds when talking about Somali piracy.

The Gulf of Aden keeps popping up in the news with pirate related stories. Somali piracy gets an extra spotlight thanks to Captain Phillips, a movie starring Tom Hanks about a captain whose ship gets boarded.

Over the last couple years, increased security in the Gulf of Aden and waters around Somalia have helped decrease the pirate attacks happening there. But because the Gulf of Aden is now so known for piracy, its scary level is heightened even though there are waters where even more piracy is happening.

#2 – Suez Canal

The Suez Canal is an international shipping chokepoint. That already sounds scary without getting into why the Suez Canal makes the scariest international shipping waters list.

This narrow straight is crucial to the world economy as much of the oil from the Middle East to oil dependent countries like the United States is transported through the Suez Canal.

Where things get scary is with the stability of Egypt. Social and political unrest in the country threatens the security of the Suez Canal. It is a vulnerable place for cargo vessels to fall under attack and closure of the Suez Canal is completely possible, adding just a bit more scare factor.

What stops the Suez Canal from being even higher on this list is that it is not without security and if it were closed down, cargo ships (and a whole lot of oil tankers) would be rerouted rather than immobilized (though a scenario where a sudden shutdown with ships traversing canal are trapped is imaginable).

The Suez Canal has been shutdown before.

National Geographic reported in a Geography in the News article about international shipping chokepoints that “Egypt closed the canal from 1967 to 1975 in response to the Arab-Israeli War, also called the Six-Day War fought between Israel and Egypt, Jordan and Syria. During that time, oil tankers sailed around the Cape of Good Hope at the southern tip of the African continent to reach the West.”

There would be economic effects around the world if the Suez Canal were closed, but closure of the chokepoint would not put the world in a chokehold.

All the same, taking a ship through the Suez Canal when the canal has to be heavily guarded and is a strategic political and terrorist target gives plenty of reason for it to rank high on the scariest routes of international shipping list.

This video of a terrorist group launching grenades at a cargo ship moving through the Suez Canal exemplifies how scary this international shipping route can be.

YouTube Video

#1 – Waters Around Indonesia & Malay Peninsula

It might be a surprise that these waters get the number one ranking on the scariest international shipping waters list, but Australia’s Herald Sun reports, “Shipping industry figures show that the waters around Indonesia and the Malay Peninsula is the world’s hotspot for pirates.”

There’s actually more piracy happening here than anywhere else as it grows at an alarming rate.

That Herald Sun article went on to say, “Indonesia has experienced a more than 50 per cent surge in pirate attacks in the first half of 2013. Of the 48 attacks reported, 43 involved pirates boarding vessels and assaulting the crew, the International Maritime Bureau announced.”

Keep Your International Shipping from Being Scary

With over 27 years as a trusted freight forwarder, Universal Cargo Management has the experience and know how to make your imports and exports happen without a hitch.

Always ready to give you a quote on your international shipping, contact us and keep your shipments from getting scary.

Click Here for Free Freight Rate Pricing

Sources/Continued Reading:

http://www.usatoday.com/story/news/world/2013/10/24/americans-kidnapped-by-pirates/3178141/

http://newswatch.nationalgeographic.com/2013/10/26/geography-in-the-news-international-shipping-chokepoints/

http://www.theblaze.com/stories/2013/09/05/video-shows-terrorists-launching-rpgs-at-giant-cargo-ship-in-strategic-suez-canal-heres-why-it-matters/#

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Government Shutdown Over – Relief for International Shippers https://www.universalcargo.com/government-shutdown-over-relief-for-international-shippers/ https://www.universalcargo.com/government-shutdown-over-relief-for-international-shippers/#respond Thu, 17 Oct 2013 20:53:51 +0000 https://www.universalcargo.com/?p=7744 by Jared Vineyard The nation breathes a collective sigh of relief that the government shutdown is over. Many are angry over the levels of dysfunction that exist in Congress, but things could have been worse. Much worse. Especially for international shipping in the country. In case you haven’t heard the news, the Chicago Tribune reports: A […]

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by Jared Vineyard

The nation breathes a collective sigh of relief that the government shutdown is over.

Many are angry over the levels of dysfunction that exist in Congress, but things could have been worse. Much worse. Especially for international shipping in the country.

In case you haven’t heard the news, the Chicago Tribune reports:

A 285-144 vote in the House followed an overwhelming vote in the Senate on the agreement negotiated by Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) to end a tense political standoff that shut down federal programs for 16 days and led to the furlough of hundreds of thousands of federal workers.

The Democratic-led Senate passed the measure on a 81-18 vote and Obama signed the bill into law about 11:30 CST.

The White House budget office said federal workers should plan to return to work on Thursday morning.

In other words, furloughed workers should be going back to work today, getting customs and all the government agencies that affect your international shipping clearances back to full strength.

Luckily, there were not major delays from Customs and Border Protection (CBP), as most of the government employees there were considered essential.

However, that’s not to say there were no delays experienced in people’s international shipping experience or that none will be experienced. As the real extent of the delays and costs accrued by the shutdown cannot be fully assessed yet.

Government Shutdown Over Customs Clear CargoThere are about 6,000 employees who will be returning to work at CBP. There will surely be a great deal of work to catch up on. And it is likely, their normal workload is about to increase.

Where the biggest delays were being felt is where imports or exports required agencies like the U.S. Consumer Product and Safety Commission, Food and Drug AdministrationEnvironmental Protection Agency, United States Department of Agriculture, and so on to put their stamp of approval on the clearance of shippers’ cargo.

As these agencies work hard to catch up on their inspections and clearance approvals, the CBP could see an increase in workload from them. This on top of a busy time for importing with the holiday season approaching and workers already stressed about over two weeks of work lost (which should be eased by the back pay they are to receive) and trying to get caught up could still produce longer than usual clearance of international shipping cargo.

Still, it is fortunate that this government shutdown ended before a huge backlog of cargo clearance built up, stalling the international shipping community that is so vital to the United States’ economy.

The last time there was a government shutdown like this (in 1995/1996), it was for a total of 27 days according to the oh so reliable Wikipedia. Of course, that last government shutdown was split into two parts, the first part happening in November of 1995 and the second in December of ’95 through January of ’96. Hopefully, this government shutdown will not see a part two.

The Chicago Tribune article quoted Rep. Charlie Dent, a Republican from Pennsylvania, as saying the following about this government shutdown’s end with the passage of the new bill:

“It’s not a win for anyone, particularly the institution of Congress or the presidency for that matter. The bill represents the conclusion of a difficult period from which I hope that many can draw important lessons.”

I think the American people can agree with the sentiment, but may have uncertainty about the conclusion of a difficult period part.

If this were a political blog or even an economic blog, there would be more to say about the raising of the debt limit, what should be done by the January date this funds the government through or the February date through which it allows borrowing to continue, but our focus here is international shipping.

The good news is that for most shippers, there should be no delays or disruptions for your imports and exports (key word being “should”). For those of you who have already experienced some delays waiting for a government agency to perform an inspection of your goods for export, you should be able to expect an end to your waiting soon.

Leave your comments on the government shutdown and international shipping in the section below this blog.

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Sources:

http://www.chicagotribune.com/news/chi-government-shutdown-20131016,0,1118789.story

http://en.wikipedia.org/wiki/United_States_federal_government_shutdown_of_1995–96

Tags: exports, international shipping imports, customs, government shutdown

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How To Open a Shipping Container When the Doors Are Stuck https://www.universalcargo.com/how-to-open-a-shipping-container-when-the-doors-are-stuck/ https://www.universalcargo.com/how-to-open-a-shipping-container-when-the-doors-are-stuck/#respond Tue, 15 Oct 2013 20:58:31 +0000 https://www.universalcargo.com/?p=7347 TT Club, an insurance company that specializes in the insurance of Intermodal Operators, NVOCs, Freight Forwarders, Logistics Operators, Marine Terminals, Stevedores, Port Authorities, and Ship Operators, has a great article with the heading, “Opening doors, when things are not so easy.” If you didn’t know TT Club was an insurance provider in the world of international […]

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TT Club, an insurance company that specializes in the insurance of Intermodal Operators, NVOCs, Freight Forwarders, Logistics Operators, Marine Terminals, Stevedores, Port Authorities, and Ship Operators, has a great article with the heading, “Opening doors, when things are not so easy.”

If you didn’t know TT Club was an insurance provider in the world of international shipping, you’d think the article is about opening those metaphorical doors of opportunity when things aren’t going well for you (like not being able to get your lumber inspected for export because of the effects of a government shutdown.)

However, the doors TT Club’s article is about are literal doors, specifically shipping container doors.

We’ve all had experiences with doors that are hard to open. The TT Club article describes a car door frozen shut. Having grown up in Michigan, I’m familiar with that situation. Living in Southern California now, I don’t have to worry about that now.

But that doesn’t mean I don’t still have to deal with doors getting stuck.

In fact, recently the door on our bedroom started sticking. A couple days ago, I heard banging coming from the bedroom followed by my wife calling my name. I was caught by surprised. Normally, I’d be present for such sounds. Turned out, my wife was trapped in the bedroom, unable to get the door open.

How to Open Shipping Container DoorsI didn’t have much trouble getting that door open. It certainly didn’t present the kind of difficulty a stuck shipping container door can present. According to TT Club, injuries happen when personnel are opening and closing shipping container doors and those injuries are on the rise.

TT Club says such injuries are often the result of an inappropriate technique being used to open shipping containers, especially employing the use of mechanical force like trying to pry the doors open with a crow bar.

Shipping container doors are not like car doors or bedroom doors. There are four or five hinges per shipping container door and the hinge pins must be lined up right for the doors to be free to fully open and close as they’re supposed to. Even then, if you are trying to open a shipping container that is on a trailer, chasis, or even the ground where the locking gear handles are at an inconvenient height, it will make the shipping container difficult to open.

Here are tips for safely opening a shipping container straight from TT Club:

1. Open Shipping Container at Proper Height.

The shipping container’s “handles should be directly in front of you and at a height that is above the waist and below the shoulders,” TT Club says.

2. Use Proper Technique.

“Technique is all-important. Start with the two lock rods on the right hand door, lift the handles out of the retainers and rotate them together as far as they will go. This should be more than 90º and rotation beyond 90º often initiates the door opening process by forcing the cams out of their keepers. Then grasp the vertical locking bars, one in each hand, so that your hands are just below shoulder height and pull back with your body, using your leg muscles rather than your back,” TT Club says.

“If the door is still stuck,” TT Club continues, “unless specifically advised against doing so (ie. the container is carrying a flexitank or bulk cargo), open the locking bars on the left hand door and then grasp the inner locking rod of both doors and pull back, again using your body not your back. If the door still will not open, ask a colleague to pull on one door while you pull on the other.”

3. Avoid Frustration and Crow Bars

TT Club says that injuries almost always occur when frustration takes over and mechanical means such as a crow bar or a fork truck are used to try to open the shipping container doors.

If you feel yourself getting frustrated, step back, take a deep breath, and compose yourself. It’s not worth getting hurt over and there’s probably a reason the shipping container doors won’t open.

TT Club says there are four likely reasons a shipping container door won’t open. Here’s what they list:

  1. The container frame is racked so that the door gear will not operate correctly. This may be caused by cargo shifting during transit. Look at the container to make sure that the doors are aligned and level, both top and bottom.
  2. The hinge pins and blade are seized due to corrosion.
  3. The door gasket has been damaged and is preventing opening. Door gaskets are designed to present two or more fins against the structure or adjacent door. These are generally flexible but when the gasket is damaged, they may become hard or blocked thus jamming the door closed, or preventing it being closed.
  4. Water has become trapped between the doors and frozen, particularly relevant to refrigerated cargoes, or containers with moisture releasing cargoes in cold weather.

TT Club recommends that if the doors cannot be opened when you go to pack it, send the shipping container back.

Sometimes, a shipping container has already been packed and has arrived and the doors won’t open. If this is the case, follow the steps above. Move forward by trying to pull both doors open at a time, using more and more power. If it takes more than two people, report the problem to the container operator.

In this situation, it is also important to be aware that the contents of the container could fall out and be a hazard. It is always good to be watching out for this, especially as the contents of a shipping container can shift over the course of international shipping.

One way to make opening the doors safer for you and your cargo is to use proper shipping container loading practices for your ocean freight. We have a blog you can check out about proper shipping container loading practices and guidelines.

TT Club reiterates reporting anything unusual about shipping container doors. For more information about maintaining shipping container doors, you can check out TT Club’s article by clicking the source link below.

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Source:

http://www.ttclub.com/publications/tt-talk/article/tt-talk-opening-doors-when-things-are-not-so-easy-5844/

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How the Government Shutdown Affects Imports and Exports https://www.universalcargo.com/how-the-government-shutdown-affects-imports-and-exports/ https://www.universalcargo.com/how-the-government-shutdown-affects-imports-and-exports/#respond Thu, 10 Oct 2013 18:14:09 +0000 https://www.universalcargo.com/?p=7372 Government shutdown. It’s happening. It has many effects. If you’re an international shipper, you know government paws have to touch all imports and exports. You know, that little thing called customs? So how does the government shutdown affect international shipping? First, a very brief overview of why we’re seeing a government shutdown: It’s Congress’ job […]

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Government shutdown. It’s happening. It has many effects. If you’re an international shipper, you know government paws have to touch all imports and exports. You know, that little thing called customs? So how does the government shutdown affect international shipping?

First, a very brief overview of why we’re seeing a government shutdown:

It’s Congress’ job to pass a spending bill to fund the government. Congress can’t seem to do its job because Republicans and Democrats are fighting over The Patient Protection and Affordable Care Act a.k.a. Obamacare. So we get a government shutdown.

Don’t worry, despite not being able to manage this whole doing their job thing, the men and women who represent us in the House and Senate will still get paid their six figure salaries.

Yes, I am being a bit harsh.

Still, if I ever run for president, my campaign will include paying my position, and probably Congressional positions too, what the average American worker makes (technically, I couldn’t legally change the pay of the president until the next one took over, but refunding most of my wages shouldn’t be a problem since being a multi-millionaire is basically a prerequisite for being President of the United States). Perhaps paying multi-millionaires $400,000 a year while letting them live rent free in a mansion and giving them expense accounts on top is a microcosm of how our government finds itself spending close to $2 billion more a day than it makes.

Sorry. I digress.

Want a larger overview of the government shutdown? You can go to CNN. Or Google it. Just don’t ask random people on the street since, as this Jimmy Kimmel clip shows, they probably don’t know the difference between The Affordable Care Act and Obamacare… Oh, wait. Still, I’ll bet they’d tell you whether the shutdown is the fault of the Republicans, the Democrats, or Obama.

Now, to the effects the Government Shutdown is having when it comes to importing and exporting goods…

The Government Shutdown has importers and exporters scared.

The mood and outlook of shippers can have a serious impact on the number and size of cargo shipments in the international shipping industry.

A Market Watch blog highlights the worries many retailers are having with the government shutdown that caused 6,000 U.S. Customs and Border Protection (CBP) employees to get furloughed at a time when shipments for the holiday season are coming in.

Government Shutdown Affects Customs 6,000 is a big number, but looks a little smaller when compared to the 58,000 CBP workers you start out with. CBP inspectors are considered “essential staff” so cargo is being processed without major delays from the CBP so far.

If only that were the whole story.

There is plenty of growing potential for delays from the CBP as the shutdown goes on. The longer the shutdown lasts, the more severe the danger of delays grows. But where the real nervousness for shippers comes in is from other government agencies which have a part in clearing cargo.

The Market Watch blog highlights it like this: “…once containers clear the ports, the U.S. Consumer Product and Safety Commission, Food and Drug AdministrationEnvironmental Protection Agency, and United States Department of Agriculture are also required to put their stamp of approval on imported products.”

Chances are good that if your imports or exports have to deal with these agencies or ones like them, you’re feeling the heat of the government shutdown already.

“The U.S. government’s partial shutdown is beginning to gum up trade,” according to The Wall Street Journal.

In an article from The Wall Street Journal it’s reported, “More than 40 government agencies, including the EPA, the Department of Agriculture and the Department of Commerce, are involved in trade shipments, said Ms. [Marianne] Rowden [president of the American Association of Exporters and Importers]. Fourteen agencies have ‘release and hold’ authority that trumps clearance from U.S. Customs and Border Patrol, she said.”

The article goes on to report that many of these government agencies “have pared staffs and closed websites”.

The article features a number of places where the government shutdown has caused problems for U.S. imports and exports including The Bureau of Industry and Security not giving necessary export authorizations, the EPA not clearing pesticides for importation, and USDA’s Animal and Plant Health Inspection Service not having inspectors available to clear things like wood for exportation.

Delays in being able to import or export products like the ones above and more are major hits, not just to particular businesses, but to the U.S. economy as a whole.

If your international shipping involves things like metals, wood, drugs, certain electronics, and the many more goods that require special authorization from government agencies other than the CBP, you could be in for serious delays. Those delays will only get worse the longer the government shutdown goes on.

I liked the close of the Wall Street Journal’s article:

[Not being able to move a load of lumber because the shutdown has no one available to inspect the wood] has caused Mr. Hodges, chairman of Titan Transfer Inc., to conclude that his wood inspection is “nonessential.” But multiply his load by many others and “it’s probably deemed more essential than a lot of people think,” he said. “None of ’em in Washington have much of a clue about what happens in the Main Streets across the U.S. They live in La-La Land.”

Here in the real world, businesses and people’s jobs depend on international shipping. It is essential to the U.S. economy. During the government shutdown, Universal Cargo Management will do everything possible to make sure your imports and exports still go as smoothly as possible. That’s our job. And I dare say we get it done a whole heck of a lot better than Congress gets national budgets done.

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Sources:

http://blogs.marketwatch.com/behindthestorefront/2013/10/07/government-shutdown-worries-merchants-counting-on-imports-clearing-customs/

http://online.wsj.com/news/articles/SB10001424052702304441404579121654233728452

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Delays at Port of Oakland May Get Worse from Truckers Strike https://www.universalcargo.com/delays-at-port-of-oakland-may-get-worse-from-truckers-strike/ https://www.universalcargo.com/delays-at-port-of-oakland-may-get-worse-from-truckers-strike/#respond Tue, 08 Oct 2013 22:50:15 +0000 https://www.universalcargo.com/?p=7439 For the past three months SSA Terminals have had severe delays at the Port of Oakland. Inside Bay Area News described it as “a debilitating cargo backlog” in an article about a month ago. The backlog of cargo containers and delays in trucking them out of the Port of Oakland has caused shippers to wait weeks […]

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For the past three months SSA Terminals have had severe delays at the Port of Oakland.

Inside Bay Area News described it as “a debilitating cargo backlog” in an article about a month ago.

The backlog of cargo containers and delays in trucking them out of the Port of Oakland has caused shippers to wait weeks to get the goods they imported.

In the above mentioned article, Inside Bay Area News described the situation of one such shipper: Greg Long, owner of a design firm in San Francisco called GAMAGO. He had to wait three times as long as normal, a full three weeks, for a shipping container of goods to clear customs and be delivered.

That’s longer than it took for the vessel to sail from China to Oakland with his shipping container onboard!

Delays at Port of OaklandLong was quoted in the article as saying, “One of our shipping companies has refused to send drivers to the port because they just stay there waiting.”

It’s not only shippers who are hurt by this backlog and delay situation with SSA Terminals at the Port of Oakland. Truckers are getting hurt and many, if not most, that truck shipping containers out of Oakland are only serving existing clients.

According to an email that recently was circulated to Universal Cargo Management’s staff, there is rumor of a possible strike this week from Oakland truckers. That strike has not been confirmed, but it would not be the first action truckers have taken in this situation.

Contra Costa Times News reported that truckers staged a blockade that shut down the SSA terminal at the Port of Oakland and blocked access to several more in August.

Truckers have been finding themselves waiting up to 6 or 7 hours to pick up a single load. As truckers are paid by the load, this has a serious impact on their profits. The conditions of the situation make it even worse.

Due to safety regulations at the port, truckers are not allowed to get out of their vehicles at the port and are subject to fines if they do.

“How do you expect us to sit inside the truck for six hours and not get out?” ABC 7 KGO-TV San Francisco quoted trucker Sukhdeep Singh as saying.

The barricade and pickets of the truckers was successful as the union dockworkers (longshoremen) chose not to cross the picket line and go to work.

The first email I saw on the backlogs and backups at the Port of Oakland said the waiting times are more than truckers can bare as the union dockworkers are working extremely slowly. However, ILWU Local 10 President Mike Villeggiante put all the blame on SSA, according to the Inside Bay Area News article.

Villeggiante said the company took two berths out of operation when cargo volumes grew.

“It has nothing to do with labor,” Inside Bay Area News quoted Villeggiante as saying. “They’re trying to move a lot of cargo from one area, and it just isn’t functioning.”

SSA did take over two terminals next to one they already operated in order, at least in part, to be able to handle the new mega-ships that have become so popular in the international shipping industry. Of course, SSA is not likely to agree that they are to blame for the delays and apparently the Port of Oakland doesn’t lay the blame where the ILWU does either.

The port put some of the blame back on the longshoremen.

The Inside Bay Area News article reported that port spokesman Robert Bernardo “said the problem has been exacerbated by the Independence Day holiday and three ensuing one-day labor stoppages by the longshoremen — including one to protest SSA’s takeover of the terminal.”

Longshoremen have gotten extra work through the situation as the port opened for extra hours over weekends to try to get the situation back under control.

The problem is, things are still backed up and delays are still happening at the Port of Oakland. However, the big problems are centered at SSA Terminals. If you have goods being imported through the Port of Oakland at other terminals, like Port of America. Unfortunately for this situation, more carriers use SSA.

While this situation is being resolved, Universal Cargo Management is strongly recommending other routing options for your imports that might normally come in through SSA Terminals at the Port of Oakland. That might include looking into other terminal options or even importing through the Port of Los Angeles/Long Beach and bringing up shipping containers via rail.

Your sales representative will help you through your options and our ops people will work hard to see that your shipments move as smoothly as possible.

We’ll keep an eye on the situation to see when things get better or in the event of things getting worse with another truckers strike.

Sources:

http://www.insidebayarea.com/news/ci_23827285/oakland-port-struggles-solve-cargo-backlog

http://www.contracostatimes.com/news/ci_23892956/port-oakland-truckers-block-berths-protest-slow-turnaround

http://abclocal.go.com/kgo/story?section=news/local/east_bay&id=9213270

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IMO Passes Shipping Container Weighing Regulation https://www.universalcargo.com/imo-passes-shipping-container-weighing-regulation/ https://www.universalcargo.com/imo-passes-shipping-container-weighing-regulation/#respond Thu, 03 Oct 2013 18:02:27 +0000 https://www.universalcargo.com/?p=7414 This is an update to our recent blog, Is Mandatory Weight Verification of Shipping Containers on the Way? The answer seems to be yes, but with a compromise for shippers where it is not feasible. The previous blog looked at the work the International Maritime Organization (IMO) has been doing to address the prevalent and dangerous problem […]

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This is an update to our recent blog, Is Mandatory Weight Verification of Shipping Containers on the Way?

IMO shipping container weighingThe answer seems to be yes, but with a compromise for shippers where it is not feasible.

The previous blog looked at the work the International Maritime Organization (IMO) has been doing to address the prevalent and dangerous problem of shipping containers with misdeclaired weights in the international shipping industry.

A new regulation proposal for mandatory weighing of shipping containers has been approved by the IMO to ammend their Safety of Life at Sea (SOLAS) regulations.

There was a call for making it mandatory that all shipping containers be weighed before being loaded on ships to confirm the declared weight of goods-filled shipping containers, but there has been concern about the practicality of such regulation and debate over how it would be implemented.

The IMO has been working for some time on regulations that will present a solution. They were expected to pass regulation on making shipping container weighing mandatory, but a compromise has been made in the new regulations/ammendment to the SOLAS Convention they passed.

Weighing the loaded containers is the “gold standard” but the compromise is to allow verified weighing of all the individual items loaded into the container, including pallets and packing materials, and adding it to the weight of the shipping container itself.

In other words, if the loaded shipping container cannot be weighed, shippers are allowed to get the weight with the formula of Goods + Dunnage + Tare = Container Weight.

Captain Richard Brough is the technical director at the International Cargo Handling Coordination Association (ICHCA). ICHCA was the joint-chair of the correspondence group the IMO set up to to create the new regulations/ammendment on mandatory shipping container weighing.

An article from The Loadstar quoted Captain Brough as saying, “Over the last year a number of countries and interested parties have made the point to us that there are many parts of the world where there is not the equipment or the finance to acquire it to weigh every container, and so an alternative method was needed.”

While Loadstar’s article included a confirmation from Captain Brough that the amendment passed in the IMO “without any objections” the article did go on to report objection from the International Transport Workers Federation (ITF):

“This was the ideal opportunity to finally bring in a system which would lessen the risk that unweighed and misdeclared containers pose to dockers, seafarers, truck drivers, the general public and the environment. Instead we have a compromise that in some countries will put in place a process that is likely to be bedevilled by the obvious questions: who will certify, when, and how?” Loadstar quoted ITF president and dockers’ section chair Paddy Crumlin as saying.

The World Shipping Council (WSC) on the other hand is extremely pleased with the new regulations/amendment. An article from the Journal of Commerce (JOC) reported:

“We have worked with the IMO to address the problem of incorrect container weights for over six years and now with the input of many governments and industry organizations, including responsible shipper associations, we are pleased that the [Safety of Life at Sea] amendments and related implementation guidelines have been approved by the DSC,” said Chris Koch, WSC president and CEO, in a written statement.

Loadstar quoted the excited Koch, giving a schedule for the implementation of the new mandatory weighing regulations:

“We look forward to approval by the Maritime Safety Committee (MSC) in May 2014 and the final adoption in November 2014. The container shipping industry will continue to work with all supply chain stakeholders on the processes necessary to ensure smooth implementation, which could occur in July 2016.”

There are bound to be some debate and controversy about the new weighing regulations between now and their implementation in 2016. Hopefully, the implementation will be smooth as the WSC envisions.

We’ll all be watching to see if significant costs or shipping delays happen anywhere as weighing procedures take effect. Of course, Universal Cargo Management will be keeping an eye on all the changes to make sure your imports and exports go smoothly.

 

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Sources/Continued Reading:

http://www.joc.com/regulation-policy/transportation-regulations/international-transportation-regulations/imo-approves-compromise-proposal-weighing-containers_20130920.html

http://theloadstar.co.uk/imo-passes-mandatory-container-weighing-but-with-a-compromise-for-shippers/

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Shipping News Alert: Delays at Port of Oakland https://www.universalcargo.com/shipping-news-alert-delays-at-port-of-oakland/ https://www.universalcargo.com/shipping-news-alert-delays-at-port-of-oakland/#respond Thu, 03 Oct 2013 17:03:08 +0000 https://www.universalcargo.com/?p=7454 For the last 3 months, the Port of Oakland has been experiencing delays and backlog at SSA terminals. Waiting time at the port is causing a blockade from truckers. Shippers should try to avoid the SSA terminal for their imports and exports through the Port of Oakland or consider shipping through an alternative port such […]

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Shipping AlertFor the last 3 months, the Port of Oakland has been experiencing delays and backlog at SSA terminals.

Waiting time at the port is causing a blockade from truckers.

Shippers should try to avoid the SSA terminal for their imports and exports through the Port of Oakland or consider shipping through an alternative port such as Los Angeles/Long Beach.

We’ll have a full blog on this on Tuesday.

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Tips to Choose the Best Shipping and Auto Transportation Companies https://www.universalcargo.com/tips-to-choose-the-best-shipping-and-auto-transportation-companies/ https://www.universalcargo.com/tips-to-choose-the-best-shipping-and-auto-transportation-companies/#comments Tue, 10 Sep 2013 23:35:18 +0000 https://www.universalcargo.com/?p=7478 Guest Blog by Mary James from Pacific Tycoon. There are various reasons people choose one transportation company or other in order to meet their shipping needs. Whatever your reason be and the number of cars you own, there is always a transportation solution present around you. All you have to do is to choose the […]

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Guest Blog by Mary James from Pacific Tycoon.

There are various reasons people choose one transportation company or other in order to meet their shipping needs. Whatever your reason be and the number of cars you own, there is always a transportation solution present around you. All you have to do is to choose the right option for you.

Many people do not have a pleasant experience with the shipping companies just because they do not know how to choose the best one. The next time you are in need of such a service, always abide by the following rules to save your money and avoid any unpleasant situation.

While shipping companies can be a great option for long-distance car relocation, they might not always be the most cost-effective solution, especially for shorter trips. This is where used car dealers come in. They offer a vast selection of vehicles at various price points, allowing you to find the perfect car that fits your budget and needs.

When considering buying a car, used car dealerships can be a treasure trove, particularly if you’re looking for SUVs. With families increasingly opting for spacious and versatile vehicles, the market for suv cars for sale second hand is booming. These dealerships often stock a wide range of SUVs from different manufacturers and model years, giving you the flexibility to find one that perfectly suits your lifestyle and driving preferences. Moreover, reputable used car dealers thoroughly inspect their vehicles and often provide warranties for added peace of mind.

When navigating the myriad options at a used car dealership, the allure of SUVs isn’t the only attraction. For those with an eye on environmentally friendly transportation, electric vehicles (EVs) are increasingly in demand. Among the array of offerings, the BYD brand stands out as a leader in the EV market, offering eco-conscious drivers both reliability and sustainability. Discerning buyers may find themselves drawn to the prospect of a used byd for sale. In the realm of used car dealerships, the emphasis isn’t solely on the transaction but also on providing customers with a seamless and trustworthy experience.

When considering the sale of your vehicle, understanding its valuation is crucial. Accurate car valuation hinges on multiple factors including the make, model, year, mileage, and condition. For those selling a sorn car, the process can be slightly different. Declaring a vehicle as SORN (Statutory Off Road Notification) means it isn’t driven or kept on public roads, which could impact its value. Potential buyers might factor in the cost and effort required to make the car roadworthy again. Therefore, having a clear, honest assessment of your car’s current state can help set realistic expectations and foster trust with prospective buyers.

After securing the ideal vehicle from a used car dealership, owners often turn their attention to enhancing the comfort and aesthetics of their new ride. One popular accessory that can elevate both the style and longevity of a car’s interior is high quality seat covers. These covers not only add a touch of personalization but also serve as a practical solution for protecting the seats from everyday wear and tear. With a plethora of options available, owners can select seat covers that complement the interior design scheme while providing durable protection against spills, stains, and fading. Whether opting for sleek leather covers or breathable fabric options, the addition of seat covers unlimited offers peace of mind, ensuring that the car’s interior remains pristine for years to come. As owners invest time and effort into maintaining their vehicles, the inclusion of seat covers becomes a thoughtful gesture towards preserving their prized possession, akin to safeguarding a cherished loved one.

Always opt for fast services from a renowned shipping company

The first thing that you would need in case of auto transportation is fast delivery. There are numerous such companies who fail to deliver the package in time. So, be careful before choosing one. If you know someone who has availed some good services in the past, always go for it. Shipping of a vehicle is only a matter of days and not weeks for those companies who are familiar with the term ‘terminal’. It is a place where vehicles are kept before discharging for carriage. So, stay away from those companies who deliver using terminals.

Door to door shipping services – the best one

This will on one hand provide you some mental peace and also let you be sure about the pride of the company handling the transportation. The companies that are really authentic in this business always provide door to door service. This can reduce your headache to a great extent. They provide a personal representative who will be in charge from pick up to the delivery of your car. They make sure that the car is delivered to you in exactly the same condition in which they pick it up.

Auto Shipping Tips Avoid this with a good auto transportation company

Tracking system is a must in case of auto transport

In order to retain your peace of mind, most of the transport companies provide you with tracking numbers. Once you log in the company website with your tracking number, you will get the details of the transportation process. This also speaks for the confidence of the companies who are sure to deliver your car within time.

[UCM has the iView Web Desktop for you to track your shipments and more.]

Enclosed car transport is always necessary

No one would want their car to get damaged by getting exposed to dirt or water en route to the delivery point. So, it is better to go for the enclosed transportation vehicles. It might cost a bit more, but your car will be completely safe from any kind of natural hazards.

The auto shipping rates should always include insurance

If you get such companies which include the insurance cost within the transportation charges, it’s the best one. You don’t have to worry about any kind of additional charges. Under this clause, all the drivers are bound to abide by all the safety guidelines ensuring maximum safety for your car.

Apart from all these things, you must keep yourself legally safe. So, take a look at some of the features that the trucks should maintain:

  • Truck height should not be more than 14 feet.
  • Truck width should definitely be less than 8.5 feet.
  • The length for single unit should be within 40 feet whereas, for multiple units, the length depends on the road.
  • The overall weight limit should strictly be under 80, 000 pounds.

Abide by the given rules and you will never face a problem in case of shipping and auto transportation.

Conclusion:

Transportation of vehicles is not a matter of headache if you follow some simple rules and do a bit of research before choosing a transportation company. These rules can save your vehicle from any possible damage and also save you from getting into any unpleasant situations.

Mary James

Mary is a skilled guest blogger.

She writes articles on a variety of topics but her main interest is on shipping and auto transportation related topics like you’d find at Pacific Tycoon.

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CMA CGM Forms Ocean Three Alliance with UASC & China Shipping https://www.universalcargo.com/cma-cgm-forms-ocean-three-alliance-with-uasc-china-shipping/ https://www.universalcargo.com/cma-cgm-forms-ocean-three-alliance-with-uasc-china-shipping/#respond Tue, 10 Sep 2013 18:16:33 +0000 https://www.universalcargo.com/?p=7373 The Carrier Craziness Bracket is back! When China’s Ministry of Commerce halted the P3 Network back in June, it busted my Carrier Craziness Bracket faster than upsets and choosing my alma mater, Western Michigan University to advance in the NCAA Tournament wrecked my March Madness bracket. New developments in carrier alliances have lent to an […]

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The Carrier Craziness Bracket is back!

When China’s Ministry of Commerce halted the P3 Network back in June, it busted my Carrier Craziness Bracket faster than upsets and choosing my alma mater, Western Michigan University to advance in the NCAA Tournament wrecked my March Madness bracket.

New developments in carrier alliances have lent to an updated Carrier Craziness Bracket which maps out the carrier alliance situation in international shipping:

Carrier Craziness Bracket resized 600

The Carrier Craziness Bracket is all about shipping lines forming alliances (or even merging), a trend that began after carriers suffered losses in the billions of dollars when the global recession hit. To increase efficiency, market share, profits, and just plain survive, alliance after alliance has been formed between carriers.

The biggest and baddest of the alliances was the P3 Network between the three largest shipping companies in the world: Maersk, MSC, and CMA CGM. Many feared what this alliance would do to competition in international shipping, but China put those fears to bed by vetoing the alliance.

It didn’t take long for Maersk and MSC to respond with a new vessel sharing agreement called the 2M. You can read all about the 2M agreement replacing the P3 Network here.

Upon the 2M Vessel Sharing Agreement’s announcement, CMA CGM–the smallest of the “big 3” shipping companies–appeared to be the odd man out. But would you really expect CMA CGM to sit back and do nothing?

On Monday, CMA CGM announced signing 3 agreements that amount to a service-sharing alliance with China Shipping Container Lines Co Ltd (China Shipping Co. in the Carrier Craziness Bracket) and United Arab Shipping Co (UASC). This new alliance is called the Ocean Three.

Here are the details CMA CGM laid out on Monday, September 8th:

Under the name of OCEAN THREE, the agreements concern the following maritime trades: Asia-Europe, Asia-Mediterranean, Transpacific and Asia-United States East Coast.

The agreements (a combination of Vessel Sharing Agreements, Slot Exchange Agreements and Slot Charter Agreements) will complete the CMA CGM offering on the biggest global maritime markets:

  • On the Asia-Europe trade: 4 weekly services, which complete the 2 existing services, thereby offering 6 departures per week
  • On the Asia-Mediterranean trade: 4 weekly services, 2 to the Mediterranean, 1 to the Adriatic and 1 to the Black Sea the only one on this market
  • On the Transpacific: 4 weekly services to California and 1 service to the Pacific Northwest (United States and Canada)
  • On the Asia-US East Coast trade: 1 service via the Suez Canal and 1 service dedicated to the Gulf of Mexico.
  • The agreements on the Transatlantic trade are being finalized and will soon be announced.

This new offering will combine both speed and reliability. Rotations will be optimized with calls in all the biggest Asian, European and North American ports, using transshipment hubs common to the three partners.

The number of weekly calls proposed and the transit times will be among the best on the market, thereby responding to the expectations of our clients.

CMA CGM followed with an update that included the following key highlights of the Ocean Three on Tuesday, September 9th:

Key Highlights:

3 Main Trades

17 Fixed-day weekly loops

159 Vessels

1,5 Million TEU capacity

199 Weekly calls

93 Ports of call

The Ocean Three will require approval from the Federal Maritime Commission (FMC). Since the FMC approved the P3 Network between the three largest shipping companies, it is likely the Ocean Three will also receive approval with the largest of the three participating shipping companies being only the world’s third largest carrier.

Coming in at the fourth largest shipping line company is Hapag-Lloyd if its merger with Compania SudAmericana de Vapores (CSAV) makes it through approval.

According to Reuters and their sources, Hapag-Lloyd and CSAV “will win conditional European Union approval for their merger…” Approval from the U.S. has already been granted.

*This just in (9/11/14):  European Union has approved Hapag-Lloyd and CSAV Merger.  Approval pending in a few other jurisdictions.*

Of course, if the Hapag Lloyd merger or Ocean Three agreements get halted by regulatory authorities, I’ll be ready to scribble more on the Carrier Craziness Bracket.

 

 

RELATED BLOGS – HUNGER GAMES OF THE SEA TRILOGY: 

Hunger Games of the Sea: G6, P3, & CKYH Alliances Fight for Shipping Dominance

Catching Fire on the Sea: International Shipping Moves & Counter Moves

Mockingjay Asks What Effect Do Carrier Alliances Have on Shippers?

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International Shipping Industry Overview Part 1 https://www.universalcargo.com/international-shipping-industry-overview-part-1/ https://www.universalcargo.com/international-shipping-industry-overview-part-1/#respond Tue, 03 Sep 2013 18:02:56 +0000 https://www.universalcargo.com/?p=7369 Want an overview of how the international shipping industry is looking? Specifically looking at ocean freight? You’re in the right place. It’s time for a good old fashioned nerdy blog covering what’s happening with the ocean carriers and container shipping in the ever volatile world of exporting and importing goods. Increasing Container Ship Dimensions Megaships, […]

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Want an overview of how the international shipping industry is looking? Specifically looking at ocean freight? You’re in the right place. It’s time for a good old fashioned nerdy blog covering what’s happening with the ocean carriers and container shipping in the ever volatile world of exporting and importing goods.

Increasing Container Ship Dimensions

Megaships, megaships, megaships. We’ve heard no end to talk about bigger and bigger container ships over the last few years.

International Shipping OverviewIt has been something of a race between carriers to deploy bigger and bigger ships. All about gains in economic efficiency, shipbuilding trends have been to create Ultra-Large Container Ships (ULCS)–Ah, what’s a nerdy blog without a good acronym or two.

The expectation is that ULCS will rise from currently being 6% of the total operated fleet of the top 20 carriers to over 10% by 2016.

With the market being so volatile (that’s a theme you should know well if you’ve followed the international shipping market over a period of time), carriers have to upgrade their fleets in order to reduce unit operating costs. Now single ships carry much larger TEU capacities.

Note: (For those of you a little newer to international shipping, TEU = twenty-foot equivalent unit, measuring how much a vessel can carry in 20′ containers. Just one of the many nerdy acronyms of international shiping, but also one of the most common ones you’ll see. It’s not uncommon to see this acronym all in lower case letters.)

In European trade, ships with capacity of over 13,000 TEU are set to serve. Trans-Pacific trade, while starting to see megaships or ULCS on the water isn’t quite accommodating as large of ships as European trade. Trans-Pacific West Coast can accommodate ships with 10,000 to 12,000 TEU while the Trans-Pacific East Coast is can handle 8,000 TEU sized ships via the Suez Canal.

Note: (The Panama Canal should be able to handle ships of this size as soon as it completes expansion in 2014 or 2015 and is expected by many to largely increase the number of ULCS reaching the U.S. East Coast.)

Idle Ships Down & Fleet Scrapping Up

Controlling capacity is huge for carriers trying to keep freight rates profitable. Two of the ways they manage capacity is by parking active ships on a coast somewhere, making them idle, or scrapping ships altogether. Scrapping ships is, of course, also part of updating and upgrading fleets.

Idle containerships is actually down at the moment. Idle ships larger than 500 TEU is at the lowest levels seen since October of 2011. Alphaliner figures show 182 units for 387,000 TEU are currently idle. That’s 2.3% of the total fleet.

Small vessels that are under 500 TEU are the most impacted right now by carriers making ships idle. When it comes to the number of ships idle that are over-panamax, that number has shrunk to 4 units, including 2 MOL ships about to rejoin the ships in operation in the next few weeks.

Note: (Panamax is the term for the largest size ship that can travel through the Panama canal.)

When it comes to fleet scrapping, those numbers are way up. With all the large ULCS vessels hitting the water spoken about in the last section, you would expect capacity to be growing at an alarming rate. The growth rate of the fleet has not reflected the huge influx of megaships or ULCS because of what a high speed ship scrapping is happening at.

2009 set the record for scrapping at 379,000 TEUs being eliminated from the world fleet. The total scrapping in 2013 is expected to exceed that and set a new record.

International Shipping Overview Continues

Part 2 of this blog gives an overview of the international shipping industry looking at the topics of TP Trade, GRI and PSS Development, and Market Rates. That’s right, plenty more nerdy acronyms to cover.

Of course, if you need specific freight rates right now, Universal Cargo Management is always ready to give you free freight rate pricing on your imports and exports.

Click Here for Free Freight Rate Pricing

Source:

Jerry Huang, Director of Ocean Freight Procurement Asia Toll Global Forwarding/Seamaster Global Forwarding — 9-2-2013

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Is International Shipping Industry Perfect for a Terrorist Attack? https://www.universalcargo.com/is-international-shipping-industry-perfect-for-a-terrorist-attack/ https://www.universalcargo.com/is-international-shipping-industry-perfect-for-a-terrorist-attack/#respond Tue, 20 Aug 2013 23:19:17 +0000 https://www.universalcargo.com/?p=7593 Terrorism, terrorists, terrorist attacks… These have become common household words in the modern, post 9/11 world. We hear the words so much that perhaps we’ve gone numb to them. Until something like the Boston Marathon bombing happens. Part of the tactic of creating fear through terrorism, is the unknown place a terrorism attack might happen […]

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Terrorism, terrorists, terrorist attacks… These have become common household words in the modern, post 9/11 world. We hear the words so much that perhaps we’ve gone numb to them. Until something like the Boston Marathon bombing happens.

Part of the tactic of creating fear through terrorism, is the unknown place a terrorism attack might happen next and its therefore unexpected nature.

According to the maritime security firm Gulf of Aden Group Transits (GoAGT), a place to expect and prepare for a terrorist attack is in the maritime industry.

In fact, GoAGT (an official sponsor of the upcoming London International Shipping Week, btw) posted an article on their site with the alarming title, “Maritime industry perfect for a terrorist attack.”

Hmm… a maritime security company raising alarm about a security risk in the maritime industry? One might think they’re just being alarmists to drum up more business. While raising awareness of security issues does serve the businesses own interests, this is their topic of expertise and should not be ignored in their risk assessment.

GoAGT warns that a maritime attack from Al-Qaeda or other affiliate terrorist groups is increasingly likely as follows:

“The resurgence of Al-Qaeda and affiliate organisations is occurring alongside some of the worlds’ most strategically vulnerable and crowded waterways. The largely unforeseen consequence of the Arab Spring is that it has given terrorists groups a new lease of life and the means to do real harm to maritime activity in the Mediterranean, the Suez Canal and at other key strategic choke points,” said Gerry Northwood OBE, COO of GoAGT.

“The growth of sea traffic has made the maritime industry a target rich environment and it isn’t just the obvious targets like oil platforms and large cargo ships which are at risk, but the cruise liner industry provides Al-Qaeda with another opportunity to hit targets where the casualty numbers could be in the thousands,” he warned.

Whether or not the maritime industry would be the best place to make an attack, the article states that such a terrorist attack “would be seen by Al-Qaeda as a headline attack that would promote their cause.”

In “a traditionally terrorism free environment,” as Gerry Northwood is quoted calling it, a maritime terrorist attack “could have a high impact both physically and mentally” in the industry.

international shipping maritime terrorist attackIt is not as though international shipping, specifically maritime, ha not seen attacks. Piracy is a serious security threat in todays international waters, especially those around Somalia and that includes the Gulf of Aden.

That area is exactly the kind of place a maritime security firm like GoAGT would thrive and is very needed. But also a strong area to be the thick of dealing with existing threats but gathering information on them from that region and other hot spots around the world.

GoAGT’s information and statements, their post says come from “not only on the Foreign Office warning to ships transiting through the Gulf of Aden but on a number of threats coming from Yemen, Egypt and Somalia.”

Here are threats that raise the likelihood of terrorist attacks on the maritime international shipping industry highlighted by GoAGT:

The situation in Yemen has escalated as a result of Al-Qaeda’s talks about a major series of attacks in the Middle East, including warnings issued by the UK Government and the Department of Transport raising the International Ship and Port Facility Security threat to level 3….

The latest developments in Egypt have seen a threat against the Suez Canal… Recent arrests of insurgents indicate that they had plans and the capability to carry out attacks on Suez Canal traffic.

In Somalia, links between pirates and Al-Shabaab militant group appear to have seen a growth with pirates being hired to transfer weapons and people from Yemen to the country. This includes proven links between pirate chiefs and Al-Shabaab leaders.

Of course, vigilance over maritime security is a serious responsibility anywhere in the world, not just in the hot spots mentioned above.

Here at Universal Cargo Management, we take the security of your imports and exports as well as the international shipping infrastructure here and abroad very seriously. We do our part in terrorism prevention and preparedness as a validated Customs-Trade Partnership Against Terrorism (C-TPAT) member.

If a terrorist group does think the international shipping industry a good place for terrorist attack, they should know they won’t catch this industry unawares.

Click Here for Free Freight Rate Pricing

Source:

http://goagt.org/about-goagt/news/maritime-industry-perfect-for-a-terrorist-attack/

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Word of Wisdom: Tsalach https://www.universalcargo.com/word-of-wisdom-tsalach/ https://www.universalcargo.com/word-of-wisdom-tsalach/#comments Fri, 09 Aug 2013 20:46:46 +0000 https://www.universalcargo.com/?p=7434 The post Word of Wisdom: Tsalach appeared first on Universal Cargo.

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by Jared Vineyard

צָלַח tsalach {tsaw-lakh’}

or

צָלֵחַ tsaleach {tsaw-lay’-akh}

Word of Wisdom

Live long and prosper. Thanks, Spock. You know just what we want.

We all go into business with hopes to prosper. So I couldn’t think of a more appropriate word of wisdom than the one for today.

It is the Hebrew word translated as prosper in the Genesis story of Joseph.

The story of Joseph is one that has been treasured by millions of people over the course of thousands of years.

Perhaps the story is so treasured because Joseph is so relatable. Joseph is a man with a dream. We all have dreams. He’s part of a family, as are we all. He doesn’t always get along with his siblings. What siblings do? They sell him into slavery. Uh… He becomes the second most powerful man in the most powerful country in the world.

Okay, maybe his story isn’t all that relatable.

The prosperity Joseph reaches is to a level we only dream of. But in the word translated as prosper in the story of Joseph is a lesson for bringing prosperity to our lives.

The word is:

tsalach {tsaw-lakh’} or tsaleach {tsaw-lay’-akh}; a primitive root; to push forward, in various senses (literal or figurative, transitive or intransitive):–break out, come (mightily), go over, be good, be meet, be profitable, (cause to, effect, make to, send) prosper(-ity, -ous, – ously).

I know, reading definitions can feel like a jumble of words by the end, especially definitions of words as versatile as tsalach. At least I’m not talking grammar.

Sometimes, we skip over the part of the definition that describes the senses a word can be used in. While I think it is significant that the prospering tsalach describes can be literal or figurative, what interests me here is that the word can be transitive or intransitive.

What did I say about grammar?

Using a word (specifically a verb) in the transitive sense, the subject of the sentence acts directly upon the object of the sentence.

When you read the story of Joseph, tsalach is certainly used in a transitive way. God prospers Joseph. In the previous sentence, God is the subject and Joseph is the object. Prospers (tsalach being its primitive root) is the transitive verb of the sentence.

But in the very story itself, the intransitive sense of the word seems to be illustrated.

When a verb is used in the intransitive sense, it does not act upon a certain object. The verb is simply what the subject does.

Joseph prospers.

What stands out to me in the tsalach definition of prosper is the phrase “to push forward”. You’ll see it near the beginning of that definition above.

Joseph always pushes forward. Even when things go wrong. Even when things go terribly, unfairly, ridiculously wrong.

When you read the story of Joseph, it seems like every time things are going well for him (he’s prospering figuratively or literally), horrible circumstances beyond his control take him to the depths of poverty, slavery, imprisonment. This doesn’t seem like prospering. This can’t be tsalach.

But Joseph does tsalach (yeah, you can ignore the grammar in this sentence). Joseph pushes forward.

Joseph doesn’t give in and give up to the situations in which he falls. After his brothers sell him into slavery, Joseph pushes forward. He works hard and prospers. Joseph’s master sees his good work and puts him in charge of the household. When Joseph is falsely accused and thrown into prison, he pushes forward and prospers. Soon Joseph is put in charge of operations at the prison.

Joseph doesn’t sit around blaming God, blaming his brothers, blaming his boss–I’m using a term more relatable to us than master, but maybe you’ve felt like a slave at a job. Joseph pushes forward. I’m sure as a human, he did get angry at all of the above and he probably did blame them at times for his woes, but… you get the point.

In the end, Joseph realized his dream because he pushed forward, no matter what the circumstances. He prospered. We can, too.

Ignoring the God aspects of the story, there is still wisdom the atheist or irreligious person could pull from from the scriptures of the Torah or Bible. There is wisdom to be pulled from the word tsalach.

Push forward. No matter the circumstance. No matter how business looks, whether international or domestic. No matter how people and life treat you. Push forward. And prosper. Until you realize your dreams. And then continue pushing forward.

Live long and tsalach.

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International Shipping Industry Sees Drop in Peak Season Cargo Shipping https://www.universalcargo.com/international-shipping-industry-sees-drop-in-peak-season-cargo-shipping/ https://www.universalcargo.com/international-shipping-industry-sees-drop-in-peak-season-cargo-shipping/#respond Thu, 08 Aug 2013 23:03:43 +0000 https://www.universalcargo.com/?p=7392 During the 3rd quarter of the year, international shipping spikes with retailers importing goods for back to school sales and the holidays. We call it the peak season. Carriers increase capacity as importing and exporting goods hugely increase. It’s importance to ocean carriers, freight forwarders, and shippers can’t be overstated; however, according to Drewery, the […]

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During the 3rd quarter of the year, international shipping spikes with retailers importing goods for back to school sales and the holidays. We call it the peak season. Carriers increase capacity as importing and exporting goods hugely increase. It’s importance to ocean carriers, freight forwarders, and shippers can’t be overstated; however, according to Drewery, the importance of the peak season is waning.

Dropping Peak SeasonThe proportion of annual cargo container shipments during the 3rd quarter peak season has dropped over the last few years.

The graph to the right from Drewery’s research shows the way cargo shipments have spiked during the 3rd quarter (peak season) from ’04 to 2012.

The international shipping industry has come to expect large spikes in that 3rd quarter, often that is what makes the year break into profits for companies.

In the graph, you can see spikes decreasing in recent years. Ah, squiggly lines just aren’t what they used to be.

Looking at those spikes, it might not even seem like that big of a change in the patterns of shipping and not that big of a deal.

Obviously, there are still spikes in the peak season, but decline in the amount of increase seen in the peak season is reason for carriers and others in the international shipping industry to be concerned.

The indication seems to be a change in spending patterns and shipping patterns, according to Drewery’s research. Ocean carriers and NVOCCs like freight forwarders need to adjust to the way shipper’s needs and practices are changing.

Here’s how Drewery puts it:

Compared to the halcyon pre-recession days of 2004-2007, when an average 27.1 % of each year’s total traffic was shipped from Asia to the US between July and September, only 26.4% was shipped last year. The proportion to Northern Europe fell from 26.8% to 25.7%, and to the Mediterranean, from 26.1% to 24.4% respectively.

The differences may seem small, but it does suggest that consumers’ buying patterns are changing, or traders have found a better way of meeting their needs, at a time when ocean carriers’ usually inject additional vessel capacity and container equipment. In other words, the seasonal transition from winter to summer cargo flows in the northern hemisphere has become more gradual, with stocking up for the summer in the second quarter gaining in importance.

We used to always hear about the peak season from carriers and with the peak season, a peak season surcharge would come.

Suddenly, the words peak season haven’t been on everybody’s lips anymore and carriers have been having trouble imposing a solid peak season surcharge through the peak season.

What we’ve seen over the last couple year’s, especially as carriers have been recovering from heavy losses in 2011, are GRIs or General Rate Increases that Drewery says “may be a more honest way of requesting freight rate increases” than a peak season surcharge.

Drewery goes on to say, “Extra money in the peak season to pay for the risks associated with the sudden provision of extra vessel capacity and temporary container equipment imbalances no longer seems such a big deal.”

Perhaps this is in part because carriers have been implementing GRIs throughout the year (not just during peak season) in order to bring freight rates back up to profitable margins over the last couple years.

Drewery’s final conclusion about the change in shipper’s patterns and the drop in the peak season is as follows:

Whatever happens, the change in buying pattern means that, in the interim, ocean carriers can no longer rely on the third quarter of each year being such a high revenue earner. It also means that the seasonal introduction of additional vessel capacity needs to be made gradual from March onwards, instead of being designed around the third quarter only.

Maybe the decline of 3rd quarter, peak season shipping over the last few years will not continue into the future. Perhaps, as economies continue to recover from recessions and lows that have been experienced, peak seasons will see growth.

Then again, the decline in the peak season could just as easily continue and the international shipping industry will change its practices to meet the demands of its customers.

No matter what, Universal Cargo Management will be here to handle your shipping needs.

Click Here for Free Freight Rate Pricing

Source:

http://ciw.drewry.co.uk/features/relevance-of-peak-season-on-the-wane/?utm_campaign=CIW%3A+Email+29%2F7%2F13+CRM+List&utm_source=emailCampaign&utm_medium=email&utm_content=#.UgLhWhYk_ww

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Top 7 International Shipping Resources from UCM https://www.universalcargo.com/top-7-international-shipping-resources-from-ucm/ https://www.universalcargo.com/top-7-international-shipping-resources-from-ucm/#respond Tue, 23 Jul 2013 18:35:13 +0000 https://www.universalcargo.com/?p=7385 In the spirit of Devin’s Sevens, today’s blog features the top ten resources Universal Cargo Management offers to help you with your international shipping. This is by no means a complete list of the services or resources that UCM offers, but this list shows off some of our most popular, and certainly very useful, resources […]

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In the spirit of Devin’s Sevens, today’s blog features the top ten resources Universal Cargo Management offers to help you with your international shipping.

This is by no means a complete list of the services or resources that UCM offers, but this list shows off some of our most popular, and certainly very useful, resources and services to help you have smooth importing and exporting experiences.

7 – FAQ Page

Have questions about international shipping? You’re not alone.

Universal Cargo Management wants to answer your questions. There are a number of questions that we get over and over again. For these, we created a frequently asked questions (FAQ) page.

Some questions are those asked by people new to international shipping while some come from businesspeople and shippers who have experience importing and exporting.

Questions include basic things like “What is a freight forwarder?” and “Any advice for a first time shipper?” to “Can I get payment terms?” and “Can I get cargo released without presentation of the OB/L?”

6 – Logistics Glossary

Every industry has its own lingo and terminology, but sometimes it seems like the international shipping industry has more than most.

We’ll make sure your imports and exports ship as smoothly as possible whether or not you know the terms of the industry, but this resource will make it so you won’t get lost when people start talking about FEUs and reconsignment and dunnage and so on.

So here’s a little glossary container a lot of common terms of the international shipping industry.

Click me

5 – Incoterms Reference Guide

Incoterms are another set of terms the international shipping industry has that have been standardized across the board.

We have a handy reference chart for incoterms that shows who is responsible for cargo and when.

incoterms reference chartWithout a basic understanding of incoterms and how they work, this chart can be a little confusing.

UCM also did a blog series on incoterms.

The first blog is What’s the Deal with Incoterms?

Then we did 3 blogs defining each of the incoterms.

The first blog defined incoterms EXW, FCA, FAS, and FOB.

Part 2 defined incoterms CFR, CIF, CPT, and CIP.

Part 3 gave the definitions of incoterms DAT, DAP, and DDP.

That segues us nicely to the next resource.

4 – UCM’s International Shipping Blog

You already know we have a blog because you’re reading it right now.

But, perhaps you didn’t know that we post international shipping related blogs twice a week, usually on Tuesday and Thursday.

We’ll keep you up to date with international shipping news as well as issues, events, and developments that affect importing and exporting. Sometimes, our blog is even good for a laugh.

3 – iView Web Desktop

iView Web DesktopOur customizable iView Web Desktop makes it easy for customers to track their imports and exports.

Logging onto iView Web Desktop you can use the features to know what’s going on with your shipments, keep it all organized, and communicate that information clearly easily.

Here’s a blog showing the features the iView Web Desk and how it can help you with your international shipping.

2 – Supply Chain Value Added Services (VAS)

UCM teamed up with TOLL to bring you this new Value Added Services (VAS) which offers complete overseas warehousing and distribution.

VAS can totally re-engineer and revolutionize your supply chain by doing things like combining supplies from multiple countries and distributing them in US locations.

We can customize your VAS to include as many or as few services as your business needs.

Click here for more on our Value Added Services and to see how it could help take your business to a whole ‘nother level.

1 – Friendly Freight Rate Pricing

Of course, the number one thing to help you with your international shipping is friendly freight rate pricing for your imports and exports from and to just about any location on the globe.

We handle air cargo, ocean freight, and even have Express4Air to handle smaller packages than 100kg.

We’re always here, ready to quote you on your international shipping.

Click Here for Free Freight Rate Pricing

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Selling Online with Amazon & eBay Guru Skip McGrath Recommends UCM https://www.universalcargo.com/selling-online-with-amazon-ebay-guru-skip-mcgrath-recommends-ucm/ https://www.universalcargo.com/selling-online-with-amazon-ebay-guru-skip-mcgrath-recommends-ucm/#respond Thu, 11 Jul 2013 17:06:10 +0000 https://www.universalcargo.com/?p=7455 Do you have your own business selling online? Want to increase your sales and better manage your costs to generate more profit? If you’re just starting to use sites like Amazon and eBay to make money or already have a healthy income stream from online sales, one of the best resources out there to grow […]

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Do you have your own business selling online? Want to increase your sales and better manage your costs to generate more profit?

If you’re just starting to use sites like Amazon and eBay to make money or already have a healthy income stream from online sales, one of the best resources out there to grow your online business with eBay and Amazon is Skip McGrath.

What makes McGrath such a great resource is he knows what he’s doing from personal experience and success, generating over $20,000 a month in online sales and shares his knowledge and wisdom of selling goods on Amazon and eBay on his website.

Here at Universal Cargo Management, we don’t post a bunch of blogs about selling online or how to have a successful business doing so. We post about international shipping since, as a freight forwarder, that’s our expertise. We leave selling online to experts on that subject like Mr. McGrath.

import for selling onlineHowever, the two topics do have room to intersect. Importing goods to sell online can be a very lucrative business. It may be your path to financial freedom and independent wealth instead of working for someone else at a 9 to 5 pace.

The reason we bring up Skip McGrath is that he’s a client of Universal Cargo Management and he brought us up on his online seller’s resource website in his June edition titled: Expand your business Internationally with eBay and Amazon.

Section 4 of the edition is Importing Goods Directly From Asia to Sell on eBay and Amazon.

In it, McGrath breaks down what you need to import from Asia (though it could also be applied to other locations around the globe) to successfully sell online. Here’s an excerpt:

When most people think of importing they think, “too complicated.” There is some truth to that, but there are actually some easy ways to do this. I have been importing directly from overseas for the past year, and in general things have gone pretty well. My secret – I have found people to help me, they do all the complicated stuff for me.

There are three services you need to import successfully.

  1. An agent or trading company in Hong Kong or China. I recommend Hong Kong because it used to be an English-speaking British Colony and, in general, the people you deal with there tend to communicate better in English and they also tend to have more international experience.
  2. Customs Broker – this is a person who clears your items through customs for you.
  3. Freight Forwarder – When you buy goods in Asia, you are usually quoted a price that is FOB their warehouse loading dock. That means you have to arrange transportation. This is what a freight forwarder does for you.

McGrath goes into more detail on these as well as sharing how he finds source products to successfully sell online, but he also posts this teaser about those 3 things you need to import successfully:

“What if you could find all three of these in one? That is what I do -and I am going to share my resources with you.”

When McGrath talked about finding people to help with all the things he needs for his imports, he was talking about us here at Universal Cargo Management. Here’s how he describes it:

Now I have teased you long enough – How can I find all three resources in one place to help me? I use a company in Los Angeles called Universal Cargo. First, they have connections with reliable trading companies (agents) in Hong Kong, China and other Asian countries. Second, they will connect and deal with a customs broker on your behalf. And lastly they act as your freight forwarder and will arrange shipping. So you can get all three resources you need in one place from a company that has been in business in the US for over 25 years and is already used by a number of eBay and Amazon sellers including myself.

One thing about shipping; Universal Cargo is a large company which means they do volumes of shipping with the major shipping companies. So even if you want to bring in a small shipment via air from Asia, let them get the quote for you as their rates will be cheaper than you or the manufacturer will get due to the volume of business they do.

McGrath even took the time to mention our Gringos for Hire video. “When you get to the home page be sure and watch the irreverent and somewhat politically incorrect video. It’s only a couple minutes long and is really funny.”

We’re extremely happy to help Skip McGrath with his imports so he can continue increasing his success with online sales of goods using eBay and Amazon. We’d be more than happy to help you import goods to do the same.

A big thank you and shout out goes to Skip McGrath from all of us here at Universal Cargo Management. We hope to continue handling his imports for many years to come and recommend him as a resource to you in growing your online sales and profits.

Click me

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Career Success Interview: Ed Tommasi, "Gringos for Hire" Exec Producer https://www.universalcargo.com/career-success-interview-ed-tommasi-gringos-for-hire-exec-producer/ https://www.universalcargo.com/career-success-interview-ed-tommasi-gringos-for-hire-exec-producer/#respond Thu, 04 Jul 2013 04:40:00 +0000 https://www.universalcargo.com/career-success-interview-ed-tommasi-gringos-for-hire-exec-producer/ By now, there’s a good chance you’ve seen “Gringos for Hire,” Universal Cargo Management’s funny new video from commercial video production. If you haven’t, you can watch at the bottom of this blog. We caught up with the mind behind this video–Ed Tommasi, Executive Producer at FaceHead Media–to ask him about the creation of the video, […]

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Ed Tomassi - Face Head MediaBy now, there’s a good chance you’ve seen “Gringos for Hire,” Universal Cargo Management’s funny new video from commercial video production. If you haven’t, you can watch at the bottom of this blog.

We caught up with the mind behind this video–Ed Tommasi, Executive Producer at FaceHead Media–to ask him about the creation of the video, film production, working with UCM, and more.

Here are the results of that interview:

Q: Ed, you and your company created the “Gringos for Hire” video for UCM; what inspired the idea for this video?

  • The world business market is so different than it was just a couple years ago and if you don’t stay up with the changing times, you’re going to get lost behind. These days, we are hiring more and more from outside the US. So we tried to take a unique approach to an everyday situation.

Q: What was he process of making this video like?

  • With any video Facehead Media produces we first look at the overall concept of the video and decide who on our team would creatively be the best fit. From there, we start building the production from the ground up. It’s the tiniest details that are often times MOST important.

Q: Have you received much feedback on the “Gringos for Hire” video?

  • Everyone we’ve shared the video with loves it. It’s a fun storyline that’s fast paced enough to keep the audience interested the whole time.

Q: Tell us a little about your company.

  • The heart of Facehead Media is outside-the-box, radically creative video content. We sincerely believe that if people are meant to watch something, it should entertain, inform and inspire… and that’s our goal. We’re passionate about creating fun, sharable content whether that be a commercial, music video or feature film. Our team works hand in hand with clients and ad agencies to deliver media that exceeds expectations and engages the potential audience.

Q: It seems you have a wide range of project types from music videos and commercials to feature films, as well as working in different genres from comedy to horror. Would you say Facehead Media has a specialty?

  • We LOVE comedy. It’s the easiest way to communicate with people and get a message across. We believe in having fun, and we think it translates into our work.

Q: How did you get started in film production?

  • I first started as an intern at a production company in NY and eventually was offered a position within the company. From that point I tried to learn and experience as much as possible with the production world. I’ve worked in everything from casting, feature film financing, producing, and probably every other position on set you can imagine.

Q: What is your favorite project you’ve worked on?

  • FaceHead Interview SetI’d say my favorite project is a fitness company trailer that hasn’t been released yet. It was so big and ridiculous in size, that we were able to really have fun with the script and message. We even went out and rented a real bear skin rug, bear head and all. Here are some pics from set.

FaceHead Interview crew

Q: Do you have any big projects coming up we should keep our eyes open for?

  • We’re in pre-production on a feature film at the moment. We’re finishing up casting now and should be on set shooting within the next 6 weeks.

Q: I hear you actually used to work for UCM; what was your role here?

  • I was a part of the sales team.

Q: What was the best and worst parts of working for UCM?

  • 100% the best part about working for UCM was working for Devin. He is one of the most brilliant and creative businessmen I know and a generous friend and mentor. Coming into work for someone like Devin is great. It’s one thing when a company says that they care about their employees and another thing when they TRULY do… like UCM!

Q: Why did you leave?

  • It was an incredible opportunity that Devin and Shirley gave me and I learned a lot, but in the end, production was always on my heart.

Q: What advice would you give a shipper talking to a freight forwarder salesperson?

  • That getting the LOWEST price should not be the MOST important thing. While yes, it’s important, I think the relationship is more important. Knowing you can connect with your freight forwarder anytime you want is really important. I think the term, you get what you pay for, can apply here. So make sure prices are competitive, but also make sure you believe and trust what the salesperson is saying.

Q: What advice would you give to someone wanting to pursue a career in film production?

  • Just do it! I hear a lot of people talk about wanting to try it, but not nearly as many people who just do it. Learn from experience…

Q: If a company wanted to hire you to create a video for them, how would they go about doing that?

  • The best first step is simply emailing us. We can help develop a concept and then implement it. Ed@FaceheadMedia.com

Q: If you were exporting or importing cargo, let’s say production equipment, what company would you use to handle your shipment?

  • From first hand experience, there is no one I would trust more than Devin and UCM.

I just had to check and make sure that was your answer.

Q: Finally, if a tree fell in the woods and no one was there to hear it fall, how would you tell that tree’s story on film?

  • Egh… I’d say it sounds like a slow story that might make me fall asleep. Do you have any ideas about a hunter or meat factory? We’d also accept time travel or fan made sequels to the popular tv series LOST.

Thank you very much, Ed, for taking the time to answer a few questions for us.

For more about Ed and FaceHead Media, you can visit FaceHeadMedia.com.

Below is “Gringos for Hire” in case you haven’t seen it yet or just want to watch it again.


Source: Export

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Enter “The Box” to Win a Free Tablet from UCM https://www.universalcargo.com/enter-the-box-to-win-a-free-tablet-from-ucm/ https://www.universalcargo.com/enter-the-box-to-win-a-free-tablet-from-ucm/#respond Tue, 02 Jul 2013 21:43:34 +0000 https://www.universalcargo.com/?p=7625 Story of “The Box” True, in 1956 Malcolm McLean introduced his patented shipping container that loaded on truck, train, and ship, changing how the world ships cargo. But, “The Box” was here first. What many know is during World War II, the U.S. Army developed a shipping container called The Transporter and then The Container Express, a.k.a. […]

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Story of “The Box”

The Box - Win a TabletTrue, in 1956 Malcolm McLean introduced his patented shipping container that loaded on truck, train, and ship, changing how the world ships cargo. But, “The Box” was here first.

What many know is during World War II, the U.S. Army developed a shipping container called The Transporter and then The Container Express, a.k.a. CONEX, to ship soldiers’ household goods, supplies for troops, and equipment spare parts.

What many don’t know is the U.S. government also developed a smaller metal container, “The Box” to carry secured intelligence and counterintelligence information that was vital to U.S. and allied successes from WWII through the end of the Cold War.

“The Box” played a crucial role in countless classified missions including “Listen Blondi”, where Hitler’s German Shepherd was replaced with a spy dog; “Kim Jong Can Golf”, where beautiful golf courses were created in North Korea in attempts to distract its dictator from war; and “Communism Doesn’t Work”, speeding the inevitable demise of the Soviet Union’s communist run economy.

“The Box” has changed its look through the years, sporting a fake nose and toothbrush mustache during its counterintelligence missions in Germany, a slightly dulled and depressing red paint job in the Soviet Union, and now a stylishly modern shipping look with Chinese markings and the Universal Cargo Management logo.

“The Box” has retired from espionage, but still loves carrying information and mystery. So it holds the information of potential winners of an iPad, Galaxy, or other Tablet of their choosing from UCM. Is your name in“The Box”?

Enter “The Box” for a Chance to Win a Tablet from UCM

“The Box” will grant you access to win a Tablet!

That’s right, Universal Cargo Management is giving away another free tablet and “The Box” will be your ticket in.

In short, UCM will collect business cards to be placed within “The Box.”

Once the contest period ends we will draw 1 lucky winner to receive an iPad, Galaxy, or other tablet of their choosing.

Please see below for contest details and official rules.

How UCM clients enter the contest:

If you are already an established UCM client, we thank you for your continued support.  If you would like to enter “The Box” keep your eye out for UCM Logistics Specialists in your area or at the trade shows you attend.

When you spot “The Box” and/or our UCM Logistics Specialists flag them down and snap a photo.  Upload that photo to one of your social media accounts and tag the appropriate UCM social media account.  We will even allow you an additional entry for each social media site you upload your photo to and tag UCM in.

Upon completion, our UCM Logistics Specialists will take your business card and put it into “The Box” for a chance to win an iPad, Galaxy, or other tablet.

How potential UCM clients enter the contest:

We are always out searching for new shipping partners.  Don’t miss your chance to enter “The Box” and win an iPad, Galaxy, or other tablet.  Whether we meet you at a trade show or come by your office for a visit, be ready for some contest action.

When you meet “The Box” and/or our UCM Logistics Specialists agree to join our mailing list and drop your business card in “The Box” for an opportunity to win.  Our mailing list includes weekly blogs, quarterly newsletters, urgent shipping industry news and alerts, and other UCM materials.

Once you agree to join our mailing list and drop your business card into “The Box” you are all set for a chance to win an iPad, Galaxy, or other tablet.  You will receive a confirmation email before any mailing list emails are sent to you.

Check out the official rules below.

Download
Rules & Regulations

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World’s Largest Container Shipping Carriers Form Triumvirate https://www.universalcargo.com/worlds-largest-container-shipping-carriers-form-triumvirate/ https://www.universalcargo.com/worlds-largest-container-shipping-carriers-form-triumvirate/#respond Thu, 20 Jun 2013 17:14:56 +0000 https://www.universalcargo.com/?p=7404 On Tuesday of this week, the world’s three largest container shipping carriers, Maersk, Mediterranean Shipping Co., and CMA CGM announced a long-term operational alliance on East-West trades, reported American Shipper (AS). The three giant container shipping carriers have named this operational alliance the “P3 Network”. The AS article quoted Vincent Clerc, chief trade and marketing officer […]

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Largest Container Shipping Carriers TriumvirantOn Tuesday of this week, the world’s three largest container shipping carriers, Maersk, Mediterranean Shipping Co., and CMA CGM announced a long-term operational alliance on East-West trades, reported American Shipper (AS).

The three giant container shipping carriers have named this operational alliance the “P3 Network”.

The AS article quoted Vincent Clerc, chief trade and marketing officer for Maersk as saying P3 stands for “project three”. According to Clerc, the name was something they were calling this alliance plan to begin with and it simply stuck.

In my mind, it makes more sense for P3 to stand for “powerful 3”.

The 3 largest, most powerful carriers are combining their fleets and management of them for the Asia – Europe, transpacific, and transatlantic shipping routes.

The best word I can come up with to describe this alliance is triumvirate.

In theory, and often on paper, all parties are equal in a triumvirate. That’s theory. In practice, the three powerful parties that align in a triumvirate are rarely, if ever, equal. In the case of the P3 triumvirate, it is no different.

With megaships, especially those held by Maersk, hitting the waters and these three carriers bringing different capacity amounts to these shipping routes, it seems unlikely the shared power in this alliance would be split into even thirds.

AS reports that Maersk brings ships with 1.1 million TEUs, or 42 percent of the P3 Alliance capacity, to the table; MSC contributes 900,000 TEUs or 34 percent of the capacity; and CMA CGM about 600,000 TEUs or 24 percent of the capacity.

The most famous triumvirates in history served a purpose and then quickly fell apart with one member left standing.

Think about those famous triumvirates of Rome. With the First Triumvirate, consisting of Julius Caesar, Pompeius Magnus (“Pompey”), and Marcus Crassus, Crassus died and Caesar and Pompey went into civil war until Caesar defeated Pompey.

First Triumvirate of Caesar, Crassius and Pompey

Perhaps the more famous triumvirate out of Rome is the Second Triumvirate of Octavian, Mark Antony, and Marcus Aemilius Lepidus immortalized in Shakespeare’s Julius Caesar who rose against Brutus,  Cassius, and the other conspirators who killed Julius Caesar. Octavian came out on top of this group.

Of course, this alliance of container shipping carriers is not a political alliance to gain control of a country or region. They certainly could have a long long-term alliance as their announcement states.

The three largest carriers governing their ships together is much more likely to lead to smaller container shipping carriers getting swallowed up.

But if many of the smaller carriers failed to compete and stay viable against the P3 Network, is it possible the triumviri would turn on each other, have a complete merging, or a buyout?

In December of 2011, we posted a blog here on the Universal Cargo Management website about Maersk poising to outlast competitors. 2011, in the midst of overcapacity and freight rates being pushed down to low levels, was a rough year for container shipping carriers creating losses in the billions of dollars.

Carriers have managed to push freight rates and profits back up since then, but they have still been going through some difficult times. It may end up being extremely difficult for some of the smaller carriers to compete and keep their lines open competing against the most powerful three carriers working together.

The big quote of that 2011 article was, “Maersk says it is prepared to outlast its rivals.” Joining its top two rivals is probably the better strategy than simply sitting around trying to outlast.

It’s also not as though these carriers have not partnered together in different ways over the years, but nothing to the extent of this planned network.

The AS article reports, “The three carriers [Maersk, Mediterranean Shipping Co., and CMA CGM] hope to begin operation of the network in the second quarter of next year, subject to obtaining the approval of relevant competition and other regulatory authorities.”

This union of carriers could create more stability in freight rates over these East-West trade routes as well as make it easier for the powerful three to push freight rates higher as they would be able to better control capacity.

How would the smaller carriers react to the P3 Network? Trying to drop ocean freight rates under the P3 Network’s would be difficult. Surely, the largest container shipping carriers in the world could dip their prices under whatever the other carriers can and hold their prices there longer.

A freight rate bidding war would seem good to shippers for a while as it would mean lower freight rates, but only for a while. It would be terribly difficult for carriers to stay afloat under such conditions. Then, with less carriers and competition, freight rates would shoot back up.

Perhaps the smaller carriers will work at increasing their alliances and form larger networks to avoid being all by themselves on waters traversed by such leviathans.

Still, that would shrink the number of parties competing with their own ocean freight rates too.

It will be interesting to see what happens in terms of “obtaining the approval of relevant competition and other regulatory authorities” and what kind of game changer this triumvirant could turn out to be.

What are your thoughts on this P3 Network? Share with us in the comments section below.

Source:

http://www.americanshipper.com/Main/News/NEWSFLASH_Maersk_MSC_and_CMA_CGM_announce_new_alli_54210.aspx?taxonomy=Markets

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How a Box Changed History: the Shipping Container Story https://www.universalcargo.com/how-a-box-changed-history-the-shipping-container-story/ https://www.universalcargo.com/how-a-box-changed-history-the-shipping-container-story/#respond Tue, 18 Jun 2013 23:32:59 +0000 https://www.universalcargo.com/?p=7400 Let’s get in a DeLorean and travel back in time. We’ll go back 57 years. You’re standing on a dock at the busy Port of Newark as large numbers of union dockworkers load a ship.Ocean freight cargo in bags, barrels, crates, and even loose items are being loaded onto a ship. A large sack next […]

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Let’s get in a DeLorean and travel back in time. We’ll go back 57 years.

You’re standing on a dock at the busy Port of Newark as large numbers of union dockworkers load a ship.Ocean freight cargo in bags, barrels, crates, and even loose items are being loaded onto a ship. A large sack next to you is open. Looks like a few items have been taken as it waits to be loaded with all the other loose items going on the ship.

This is the way ocean freight shipping is done in 1956 and has been done for as long as any of the longshoremen can remember. It’s called break bulk shipping. Loading and unloading a ship takes as long as it does for a ship to sail across the sea to its destination. The costs of labor, time, and stolen items like whatever was in the sack next to you make doing international business fiscally impossible for most companies.

WWII Tanker turned Container ShipSuddenly, the dockworkers stop. You follow their curious gazes down the port to what looks like a WWII oil tanker. Painted on it are the words SS Ideal X.

Dockworkers can’t believe their eyes as you witness large, metal boxes craned directly off truck chasses and onto the ship.

“That’s that ship owned by Malcom McLean. He don’t know nothin’ about ocean shipping,” shouts a dock manager. “Get back to work!”

Nervous grumblings are heard from the longshoremen. “There’s more people watching that thing than loading it.” “Are they going to start loading all the ships ’round here like that?” “We goin’ ta lose our jobs?”

Freddie Fields, a top official of the International Longshoremen’s Association watches the ex-tanker get loaded in disgust. “I’d like to sink that son of a bitch,” he says.

A gust of wind blows today’s paper in your face that was discarded by one of the dockworkers as they get back to loading all the various items on the ship in front of them. Remember the date printed at the top:

Thursday, April 26 1956.

This is a date that quietly marked history and began a process of change that made the world what it is now.

It’s true that Malcom McLean was not very experienced in ocean shipping. Saving up money from his job pumping gas, McLean bought a truck and founded the McClean Trucking Co. with his siblings.

He built the company up into the second largest trucking company in the United States. As he looked into moving cargo from his trucks onto ships, McLean saw the inefficiencies of break bulk loading and the wasted cargo space that would be created by putting whole trucks on ships. So he innovated.

His concept was shipping containers that could be removed from the chasses of trucks, loaded onto ships, and then put back onto the chasses of trucks or on trains and continue to be transported.

Similar ideas had been tried in different parts of the world through history, but never as successfully as Malcolm McLean’s design.

Because law prevented a trucking company from also owning a ship line, McClean sold his trucking company in 1955 and bought the Pan-Atlantic Steamship Company and the Gulf Florida Terminal Company.

He bought a couple WWII tankers and converted them to carry his new shipping containers and on April 26, 1956, intermodal cargo transportation was being pioneered as the SS Ideal X shipped 58 35-foot shipping containers from Port Newark, New Jersey to the Port of Houston, Texas, where the shipping containers were loaded onto trucks.

Back then, longshoremen hand-loading a ship cost $5.86 a ton. Shipping containers brought the cost down all the way to 16 cents a ton.

Containerized shipping has completely transformed cargo transportation, opening up international trade and a world economy the likes of which was previously unheard of.

At the same time as container shipping created jobs by growing ship lines, ports, and businesses by dramatically increasing shipping profits and making it possible for products of all kinds to be imported and exported easily, there were many jobs on the docks were lost due to containerized shipping.

Using container shipping instead of break bulk shipping made as many as 19 out of 20 longshoremen unnecessary. For a couple decades, the unions fought containerized shipping; but, with its incredible benefits, such battles were a lost cause.

Now, being able to contact a freight forwarder to export or import your goods to China, Europe, Australia, or anywhere around the world is possible because a box changed the world.

 

 

 

Sources:

http://www.johntomlinson.com/docs/history_and_impact_of_shipping_container.pdf

http://en.wikipedia.org/wiki/Malcom_McLean

http://gcaptain.com/container-ships-a-brief-history/

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3 Common International Shipping Mistakes and How To Avoid Them https://www.universalcargo.com/3-common-international-shipping-mistakes-and-how-to-avoid-them-2/ https://www.universalcargo.com/3-common-international-shipping-mistakes-and-how-to-avoid-them-2/#respond Thu, 13 Jun 2013 23:21:43 +0000 https://www.universalcargo.com/?p=7397 1. Mistiming an Import or Export Timing is important for everything in life. Forinternational shipping, timing is crucial. Properly timing a shipment can be tricky for the inexperienced. This is why mistiming an import or export is a common international shipping mistake, especially for first time shippers. Perhaps you want a shipment imported or exported […]

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1. Mistiming an Import or Export

Timing Import ExportTiming is important for everything in life. Forinternational shipping, timing is crucial.

Properly timing a shipment can be tricky for the inexperienced. This is why mistiming an import or export is a common international shipping mistake, especially for first time shippers.

Perhaps you want a shipment imported or exported fast. You get a quote and find out the transit time alone is over two weeks. If you promised the goods sooner, this could be a serious problem.

A common situation new shippers find themselves in is getting a freight rate quote, waiting, and then trying to set up the shipment only to find their freight rate quote has expired.

Generally speaking, the fastest way to ship goods internationally is by air. Often, air cargo is more expensive than ocean freightand best to do with small to medium sized shipments. Larger shipments are commonly better to ship containerized by ocean freight.

When it comes to timing international shipping, time for loading, transit to and from ports or terminals, and terminal cutoffs are among things that must be considered.

How To Avoid this Mistake

Research shipping times.

With just a little bit of online research, you can get a decent approximation of how long it will take to import or export from one specific location to another. For more specific details on how long a shipment will take, call a freight forwarder or shipping company that regularly imports or exports between the origin and destination locations you’re looking for.

It will be much easier to properly plan your time tables having done a little bit of homework ahead of time.

Get a quote within a month of your shipment date.

Shipping rates are extremely volatile. As a general rule, freight rates are good for about a month.

So prepare for your shipment, have all the details ready for your freight forwarder, and give them a call or fill out a freight rate request within 30 days of when you want to ship your goods.

2. Failing to Properly Insure Goods

Damaged Cargo Ship ContainersDamaged or stolen goods happen. Ships crash, modern piracy exists and is quite strong in some waters, temperatures can go up into triple digits and fall below freezing on the same voyage, cargo gets jostled, falls overboard…

Stuff happens. That’s why cargo insurance is important.

Too often, shippers try to bipass insurance or improperly insure their goods.

Insurance is different for different types of goods. For example, household goods have to be professionally packed by certified professionals in order to be insured. Not knowing little things like this, some people have paid money and thought their cargo was insured when, because of something like how their goods were packed, they’d bought worthless insurance.

It’s important to not only insure the cargo you’re importing or exporting, but properly insure it.

How To Avoid this Mistake

Learn about your insurance options.

Discuss insurance options with your freight forwarder or shipping company. Most will have insurance options to offer you so you don’t have to go to an outside company.

In the discussion, make sure you talk about what kind of cargo you are importing or exporting, what the insurance does and does not cover, and any special provisions of the insurance policy options.

3. Going with the Cheapest Freight Rate Possible

freight rate pricingThis is a mistake that really gets people.

You’re an international businessperson out to make the best profit you can or a frugal person shipping your household goods to another country so you shop around, find the lowest freight rate possible, and go with that company.

But wait. The rate, while important, is not the most important thing when choosing a freight forwarder or international shipping company.

Universal Cargo Management works hard to get the best best rates we can for you whether you’re shipping to or from China or anywhere else in the world; but, we work even harder to make sure everything goes smoothly with your shipment.

When choosing a freight forwarder or shipping company, it’s important to consider a number of factors. How long have they been in business? How responsive are they to you as a customer? How knowledgeable are they about what you’re shipping and the regulations of the country you’re shipping to? Will they know what to do if something goes wrong?

A freight forwarder or shipping company that has not been in business long often lacks the experience and know-how to handle all the little details that can complicate international shipping in order to ensure a smooth import or export experience.

Choosing the company with the cheapest freight rates may become much more costly if your shipment gets delayed, held up at customs, lost, or mishandled.

I’m trying really hard to avoid the old cliché, you get what you pay for…

Ways to Avoid this Mistake

Check how long the freight forwarder or shipping company has been in business.

There’s a big difference in how secure you’ll feel with a company that has only been in business a handful of months or years as opposed to a company like Universal Cargo Management that’s been a trusted freight forwarder for nearly 30 years.

See if the company has references.

You’re more likely to have a positive experience with a company that has a good track record of customer satisfaction.

Ask about the freight forwarder or shipping company’s experience with your type of goods and the country you’re exporting to or importing from.

Wording here is important. Don’t just ask if the company has experience. The sales rep could just say yes and keep moving. Ask about the experience.

Your sales rep or account manager may not know the answers offhand as to the company’s history with your goods or the country you’re importing from or exporting to. And that’s okay, but they should be able to find out for you.

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4 Tips on How to Compare International Shipping Companies https://www.universalcargo.com/4-tips-on-how-to-compare-international-shipping-companies/ https://www.universalcargo.com/4-tips-on-how-to-compare-international-shipping-companies/#comments Tue, 21 May 2013 23:26:12 +0000 https://www.universalcargo.com/?p=7398 By Grace Bailey International shipping is not a cheap task, that’s why it’s best to use the services of one international shipping company and ideally to build a long-lasting relationship with the provider. That’s the best way to ensure on-time delivery, great service, and at one point, a reduction of fees as well. Nowadays, there […]

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By Grace Bailey

International shipping is not a cheap task, that’s why it’s best to use the services of one international shipping company and ideally to build a long-lasting relationship with the provider. That’s the best way to ensure on-time delivery, great service, and at one point, a reduction of fees as well.

International Shipping Truck

Nowadays, there is nothing easier than sending goods wherever you’d like to in the world. International delivery is becoming faster and faster with each day and it’s also cost-efficient, especially if you are sending large amounts.

Before you choose a freight forwarder, international courier, or delivery company though, you need to make sure you have compared them with another provider. You cannot pick the first company listed on the Internet and be guaranteed impeccable service.

So how do you compare international shipping companies and ensure that you are making the right choice?

1) Get Multiple Quotes

The proper way to start is to first get multiple quotes from companies that are listed as top results on Google search. Believe it or not, the most visited and rated companies will be good ones to consider – usually, with the longest experience in the industry and often the best freight rates.

Working with an experienced company is important. For example, Universal Cargo Management has been a trusted freight forwarder for over 28 years. You don’t want someone who just has a phone and internet connection and thinks they can make money by booking import and export shipments for people.

In order to get a good freight rate quote, you need to provide accurate information to experienced shipping companies about your shipment.

Describe the goods you need delivered and be precise about: material, size, cost, weight, desirable speed of delivery, and any extra details that might be important for the delivery.

In order to compare quotes from international shipping companies, you need to make sure you will first be given precise freight rate quotes.

Next, start comparing the providers based on the following essential criteria for this industry.

2) Compare Specialization

To ensure that you are only comparing shipping companies that you could benefit from, pick the ones that have proven track records of expertise and extensive training in shipping the type of product you want shipped.

It’s essential to hire a like-minded freight forwarder or shipping company that already knows the basics and the requirements for your goods. If you need to ship goods that are unusual in shape or volume, make sure you discuss this detail openly with the provider and pick the best type of transport.

For example, one of the many industries that Universal Cargo Management has an incredibly large shipping history in is furniture imports and we specialize in container shipping.

3) Service Comprehensiveness

It’s important to be able to transfer all the responsibility and the work to the freight forwarder or shipping provider – that is the whole idea of outsourcing international shipping.

The company takes care of your goods, arranges customs clearance, provides the insurance, and the facilities for storage.

Make sure the companies you are considering provide comprehensive shipping service.

Universal Cargo Management’s services, for example, include the following:

4) Delivery Times

When shipping goods abroad, one of the leading factors is timeliness. Time is money and a company that does not understand that cannot be the right one for your job.

Prefer shorter delivery terms – that’s the easiest way to keep your clients and ensure their satisfaction.

Remember, air freight is generally faster than ocean freight and where you are shipping to and from affects delivery times as well as the shipping routes you prefer. But an experienced freight forwarder will be able to get your shipment rolling faster than a company lacking the necessary shipping experience.

Compare the international shipping companies based on this criteria and the quotes they’ve given you and choose the best courier or freight forwarder.

This was a guest blog

written by

Grace Bailey representing Fulham Removals

Click me

Click on the Guest Blog image above to email Raymond Rau if you would like Universal Cargo Management to publish an original blog from you.

Click Here for Free Freight Rate Pricing

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5 Hints for How to Choose an International Shipping Company https://www.universalcargo.com/5-hints-for-how-to-choose-an-international-shipping-company/ https://www.universalcargo.com/5-hints-for-how-to-choose-an-international-shipping-company/#comments Tue, 14 May 2013 21:00:37 +0000 https://www.universalcargo.com/?p=7554 By Grace Bailey Professional cargo moving offered by international shipping companies offers great opportunities to move pretty much anything. From vehicles to entire households, containers can be used for a great many purposes. But how does one choose the right shipping company, considering the plethora of choices on the international market? This article aims to […]

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By Grace Bailey

How to Choose International Shipping Company

Professional cargo moving offered by international shipping companies offers great opportunities to move pretty much anything. From vehicles to entire households, containers can be used for a great many purposes.

But how does one choose the right shipping company, considering the plethora of choices on the international market?

This article aims to help you in that choice.

1) Know Exactly What You’re Moving

If you plan on moving to a distant country, you will naturally want to take all your personal belongings with you. This will be doubly so if you plan on moving there permanently, so you will likely want to move your vehicle with you. There are many ways one can approach that as companies offer a wide variety of choices when it comes to moving those along, damage-free and intact. Consider what you need moved carefully, so you’ll be able to provide relevant information to your chosen company.

 2) Research Shipping Companies

Do some research on your chosen company. There are many websites online which offer relevant information about the professionalism of a given company based on the reviews of customers. Their overall rating and the information provided by these websites will allow you to piece together a decent picture of what the company is all about. Using that information will allow you to make a better choice when it comes down to it, focusing on companies known for their positive qualities and professionalism.

 3) Consider Shipping Container Options

Check out the type of container shipping your chosen company offers. While there is a variety of choices in most cases, you will still need to be aware of what you have available, based on your personal needs. There are dry cargo containers for a more uniform approach to shipping and refrigerated containers for a more specialized, sensitive cargo such as perishables and food. Containers come in different sizes, from 20 to 45 feet. Open top containers for example are best for goods capable of withstanding the elements of the environment. These come in sizes of 20 to 40 feet, so keep that in mind. Tank shipping containers are 20 feet long, allowing safe transportation of liquids of all kinds, from oil and gasoline to other choices.

 4) Get Freight Rate Quotes

Check out the prices. Naturally, affordability is one of the most important factors when it comes to international shipping. You need to ensure the company you have chosen won’t charge you for anything not listed on the contract. You can find deals on container services that give you a good edge over any other choices if you do your research right. You don’t have to spend too much on this if you are careful in what you do – ask for free quotes from your target companies and they will gladly provide you with such. Tell them about deals offered by other companies and in many cases they will reciprocate, allowing you a chance to explore a wider market.

 5) Make Sure Your Freight Forwarder/Shipping Company is Knowledgeable 

Check their knowledge of shipping protocols. While there are many ports around the world, specific rules and regulations based on regions of operation are always in effect. In the cargo world knowledge of proper custom duty and its underlying shipping protocols is vital to running a successful business. Make sure you are aware of them first, then check back with them. It may require an effort on your part, but that way you’ll know how things are done and you’ll be better prepared for future moves and shipping.

 

This was a guest blog

written by

Grace Bailey representing Man and Van UK Removal Services.

Click me
 

Click on the Guest Blog image above to email Raymond Rau if you would like Universal Cargo Management to publish an original blog from you.

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Iron Man 3 & Top 9 Movie Scenes Featuring Ports & Shipping Containers (w/ videos) https://www.universalcargo.com/iron-man-3-top-9-movie-scenes-featuring-ports-shipping-containers-w-videos/ https://www.universalcargo.com/iron-man-3-top-9-movie-scenes-featuring-ports-shipping-containers-w-videos/#comments Tue, 07 May 2013 22:59:37 +0000 https://www.universalcargo.com/?p=7358 Iron Man 3 just came out and perhaps you’re wondering why that’s the opening of a blog on a freight forwarder’s site. What caught our attention is the movie spent some weeks shooting at the Port of Wilmington. As can be gleened from their website, the Port of Wilmington “is a full-service deepwater port and […]

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Iron Man 3 just came out and perhaps you’re wondering why that’s the opening of a blog on a freight forwarder’s site.

What caught our attention is the movie spent some weeks shooting at the Port of Wilmington. As can be gleened from their website, the Port of Wilmington “is a full-service deepwater port and marine terminal handling about 400 vessels annually with an annual import/export cargo tonnage of more than 5 million tons.”

And yes, we’ll import or export for you through that port. But I’m digressing.

Watching Iron Man 3 and seeing the big climactic finish of the movie happen at the port (don’t worry, I’m not going to spoil the movie for you), it made me think of how ports and shipping containers are appearing more and more in movies.

Being something of a cinephile, I decided to compile a list of the top 9 port or shipping container scenes in film.

Yeah, top 9, so what? You wanted 10, make your own list!

So I’m starting at number 9 and working my way down:

9) Double Impact – Van Damme Bolo Yeung Fight

Just barely making the list is Jean-Claude Van Damme’s Double Impact. Surrounded by old school shipping crates, Van Damme and Bolo Yeung have their big, climactic fight scene. It’s exactly what you’d expect from a classic Van Damme movie: Jean-Claude doing a lot of kicking, especially of the round house variety, and then everything blows up.

I’m pretty sure this fight scene was shot in a soundstage rather than at an actual port or warehouse. Like I said, it barely made the list; however, with the explosion we get an exterior shot of Van Damme diving into the water, shipping containers behind him, to avoid needing to be shipped off in a box himself.

This Youtube video gives the movie in a nutshell, including the port scene that got it onto this list.

YouTube Video

8) Step Up Revolution – We Are the Mob

I’ve never been one for dance movies, but this moment had to make the list as it is the climactic dance scene of the movie in which shipping containers take center stage. Or perhaps better said, the shipping containers are the center stage.

Dancers are doing their thing through, between, and on the shipping containers. Yes, there is some corniness here (was there not with Van Damme?), but there’s also a great deal of impressive and creative dancing.

YouTube Video

7) Eraser – One Hand Shipping Container Hang

Did you think Jean-Claude Van Damme could make this list without Arnold Schwarzenegger making an overshadowing appearance?

Unlike Double Impact’s scene, this one had no trouble making the list. In the midst of gunfire and exposions, Schwarzenegger’s character, John “The Eraser” Kruger jumps, grabs a craned shipping container, and does a one hand hang from it.

There’s a clip inside this youtube video trailer for the movie.

YouTube Video

6) I, Robot – Countless Cargo Containers

To avoid being a spoiler, I won’t go into much detail here as it’s the ending scene of the movie. There’s a huge storage space with countless cargo containers.

Thinking it’s possible that you really want to watch this movie but just haven’t gotten to it during the last 9 years, I won’t tell you who’s looking out at the cargo containers or what’s in them.

This isn’t a scene shot at a port and what you see is probably completely a CG effect. For those reasons, I was going to bump it from the list; however, using countless cargo containers (fake as they may be) this scene raises issues of existential philosophy for the audience to consider and gives a nice touch of poignancy to the end of the film.

Here’s a trailer pulled from Youtube.

YouTube Video

5) Lethal Weapon 2 – Watch Out for that Shipping Container!

This scene is a little on the violent side. Like the first scene on this list, we have a fighting scene with lots of kicking. On the brighter side, Lethal Weapon 2 is a better movie than Double Impact and instead of old school shipping crates, we have actual shipping containers.

A couple shipping containers create a backdrop, but the real shipping container featured in this is the one that’s actually used to take out the bad guy.

If you watch the following Youtube clip, be prepared for a touch violence:

YouTube Video

4) Batman Begins – Batman’s First Appearance

After it seemed George Clooney and Joel Schumacher killed Batman’s movie franchise, the only way to get Batman movies going again was to start over. That’s exactly what Christopher Nolan did with his highly successful takes on the classic superhero.

High on the list of port or shipping container scenes comes the scene where we first see Batman in action in Batman Begins.

In this scene, shipping containers on Gotham’s port at night create dark corridors and hallways of sorts for Batman to pick off a gang of goons one by one. It’s the perfect setting for a Batman who uses stealth, fear, the occasional tool from his Batbelt, and, of course, a bit of brute force as weapons.

The scene is masterfully suspenseful and absolutely features shipping containers at the port.

Here’s the clip from Youtube:

YouTube Video

3) The Naked Gun: From the Files of Police Squad! – Not Really O.J.’s Worst Day

Before going to jail for stealing his own stuff, before being tried for the murder of his wife, before leading the slowest car chase to ever capture the country’s attention, O.J. Simpson was a successful actor.

Well, that may be saying too much.

He was a successful football player and very funny in the Naked Gun movies.

The only scene from a comedy to make this list is O.J.’s big scene at the beginning of the orginal Naked Gun movie.

There are no shipping containers. It’s just O.J. slipping onto a boat and then having every bad thing happen to him that the movie’s writers could think of until he falls out into the water.

The scene makes it this high on the list because, for me at least, it is one of the most memorable movie moments of all time. 25 years after seeing it, I can still clearly picture the scene in my mind and get a chuckle. Yes, it’s slapstick, silly, perhaps immature, but sometimes it’s okay to go there.

As I started thinking about compiling this list, this was the very first scene that came to mind.

It got such a high rank for the scenes ability to leave a lasting impression.

Here’s the clip pulled from Youtube:

YouTube Video

2) The A-Team – Plan Comes Together at the Port of Los Angeles

All the way at number 2 is the A-Team. This is a seriously action packed movie that had a field day with shipping containers at the Port of Los Angeles.

In the final shootout, they actually did a variation of the old 3 cups and ball trick with giant shipping containers on cranes.

The movie itself received mixed reviews; but, if you enjoy action movies, I can’t see you being disappointed with the A-Team. And if you want to see shipping containers prominently featured in a movie, you don’t need to look any further.

I couldn’t give you the big scene at the port, but here’s the trailer from Youtube:

YouTube Video

Finally, comes the number one. And perhaps you guessed it. It’s the movie that inspired this blog.

Iron Man 3 – Climax Shot at the Port of Wilmington

Don’t worry, I won’t spoil Iron Man 3 for you.

I will say that the big, final showdown of the movie was shot at the Port of Wilmington over the course of a few weeks and it has everything you’d want it to have.

There’s action, explosions, big fights, perhaps a quip or two from Robert Downey Jr., and what you want most… shipping containers.

The cast and crew had to go through federal clearances in order to be able to enter and exit the port for the shooting. A special entrance was given just for those working on the film. But the port and the filmmakers worked together to make sure the shooting did not disrupt the operations at the port of Wilmington.

You can check out this little article from WECT 6 for more on the filming at the port.

I won’t say more about what happens in the movie at the port, but I do recommend going to the theatres for this one.

YouTube Video

Tell us what you think. Do you agree with this list? Have adjustments on rankings? Are there movies that should be on here which aren’t? Share in the comments section below.

Click Here for Free Freight Rate Pricing

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Megalomania: Who Really Benefits from the Megaship Craze? https://www.universalcargo.com/megalomania-who-really-benefits-from-the-megaship-craze/ https://www.universalcargo.com/megalomania-who-really-benefits-from-the-megaship-craze/#respond Tue, 02 Apr 2013 17:53:37 +0000 https://www.universalcargo.com/?p=7482 Megalomania (me-gə-lō-ˈmā-nē-ə, -nyə) n., 1: a mania for great or grandiose performance[1] There is a craze right now in the international shipping industry. A craze for megaships; behemoths of the oceans; great, metal leviathans that can carry thousands of shipping containers across the ocean from port to port. For years, construction has been underway on […]

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Megalomania (me-gə-lō-ˈmā-nē-ə, -nyə) n., 1: a mania for great or grandiose performance[1]

megashipThere is a craze right now in the international shipping industry. A craze for megaships; behemoths of the oceans; great, metal leviathans that can carry thousands of shipping containers across the ocean from port to port.

For years, construction has been underway on huge megaships that are now reaching the point of being put to sea.

In 2009, Discovery Channel released a Mega Builders reality TV episode that visited a relatively small shipyard in Odense, Denmark that was constructing a huge megaship for Maersk. 3,000 laborers worked hard, cutting thick steal plates into hundreds of thousands of smaller pieces they then welded together into giant blocks for the ship. These ship pieces weighed hundreds of tons and required goliath cranes to lift and assemble on the ship.

A 114,000 horsepower strong engine that was five decks high and longer than a tennis court was then installed on the big ship in that little shipyard in Odense under the watchful eyes of the foreman, the engine’s engineers, and the hardworking shipbuilders.

Almost exactly a year ago, the megaship Fabiola shattered size records for the Ports of Los Angeles and Long Beach when it arrived. It was described as “just 30 feet shorter than the Empire State Building is tall, as wide as a 10-lane freeway and big enough to carry the contents of eight 1-million-square-foot warehouses.”

Even with a capacity of 12,500 cargo containers, the Fabiola is still dwarfed by the Triple E class of containerships Maersk is scheduled to debut in 2014, which have a capacity of 18,000 TEU.

It’s hard to grasp the actual enormity of these megaships. Take a football stadium, add a basketball court, now throw in a hockey arena, and it could all fit comfortably below deck on a triple E is how Maersk likes to describe their leviathans.

Evergreen Container ShipLast April, we posted a blog about how Evergreen, one of the last holdouts of the world’s top 20 lines from ordering megaships, jumped on the megaship bandwagon.

Hey, these ships are supposed to be bigger and better, right? Higher efficiency, more economical, better for the environment… Megaships are here to provide the international shipping industry with great, even grandiose, performance. And the industry is obsessed with them. It’s in a state of Megalomania.

But then there’s that second definition of megalomania.

Megalomania (me-gə-lō-ˈmā-nē-ə, -nyə) n., 2: a delusional mental disorder that is marked by feelings of personal omnipotence and grandeur

I’m not trying to suggest that Maersk and the rest of the carriers coming out with megaships are megalomaniacs or have some kind of mental disorder or God-complex; however, there are some who claim megaships do not benefit anything but the egos of the companies owning the largest ships in the world.

The more I read on megaships, the more I find many are questioning the wisdom of this megaship fad.

In his SupplyChainBrain article, The Era of the Megaship: Is Bigger Really Better?, Robert J. Bowman says, “At what point does big become too big? We might already have reached it.”[2]

In another article in SupplyChainBrain Bowman raises the question of who benefits from megaships. His answer to this this question seems to be no one, really. [3]

The article outlined the potential problems with megaships and how they could hurt different players in the import/export industry. Pretty much everyone made the list from carriers to most shippers, to dockworkers, and it would seem, even freight forwarders like yours truly, Universal Cargo Management.

Bowman makes many good points. Is the international shipping industry getting carried away with the megalomania of megaships?

Carriers say the efficiency of these megaships will create cost savings and enable them to give shippers better rates.

The most likely scenario of lower freight rates to shippers I see is megaships replacing smaller ships creating overcapacity issues and causing carriers to scramble to fill all that TEU space.

2011 saw overcapacity and lower freight rates. Carriers lost billions and the next year imposed freight rate increase after freight rate increase. So the savings to shippers only lasted so long. If overcapacity with megaships pushes rates down again, there is likely to be a similar pattern.

Import and export growth does not seem to match the growth of capacity megaships create.
With the great upfront costs of building these megaships, it will take years of excellent, strategic utilization of their new megaships for the carriers to recoup.

Was it wisdom that inspired carriers to start creating megaships when most of the world’s ports are not even able to handle ships of this magnitude? Perhaps there was a strategic misstep there, but that question brings me to a clear answer to Bowman’s question of who will benefit from megaships mania.

It’s hard to say whether the carriers are correct that both they and shippers will benefit from the onset of megaships or if Bowman is correct that neither one will, but someone will benefit.

The ports that are able to handle megaships will benefit.

Ports like the Ports of Los Angeles and Long Beach, which have the water depth for a megaship to dock and the infrastructure to handle the high volume of containers megaships carry, will have a competitive edge over ports that do not.

It will take years for other ports to not just dredge their harbors to enable megaships to dock but create the infrastructure to handle the cargo loads.

Yet, here there is potential for another place of benefit. As ports do the work of preparing their ports for bigger ships like Panama Canal is doing with its expansion, hopefully financed by independent investors in the face of struggling government budgets such as the U.S. sequestration situation, there is great potential for the creation of jobs and boosts to local economies.

Yes, there are some who will benefit from megaships, but their ultimate effect on the international shipping industry will have to be seen with time.

As megaships create waves in the importing and exporting of goods, Universal Cargo Management will be here to help you navigate the waters.

Click Here for Free Freight Rate Pricing

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UCM Plays Role in Shipping History! https://www.universalcargo.com/ucm-plays-role-in-shipping-history/ https://www.universalcargo.com/ucm-plays-role-in-shipping-history/#respond Thu, 28 Mar 2013 22:27:23 +0000 https://www.universalcargo.com/?p=7566 Universal Cargo Management received a gift Monday for being part of shipping history. Representatives from Mitsui O.S.K Lines—better known as MOL, one of the biggest shipping companies in the world—stopped by our Los Angeles Corporate Headquarters in Culver City and gave us the model ship pictured on the right. With more than 800 vessels they […]

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Universal Cargo Management received a gift Monday for being part of shipping history.

MOL Ship Presented to UCMRepresentatives from Mitsui O.S.K Lines—better known as MOL, one of the biggest shipping companies in the world—stopped by our Los Angeles Corporate Headquarters in Culver City and gave us the model ship pictured on the right.

With more than 800 vessels they operate, MOL ships containerized cargo all over the world; however, there is a particular region from which MOL has not been able to ship containers to the US.

In MOL’s 129 years of history, December 24, 2012 was a big day.

On Christmas Eve, the first 40’ high cube container from Yangon to Norfolk, Virginia was handled by Myanmar MOL Limited with Universal Cargo Management acting as the freight forwarder on the shipment.

Perhaps you know Myanmar better as Burma.

Yangon is the former capital Burma (Myanmar). Though no longer the capital, it is still the country’s largest city and holds huge commercial importance.

US sanctions were put into place in July of 2003, stopping Burma from exporting to the US.  President Barack Obama visited Burma in November of 2012 and promised an easing of the sanctions in recognition of the reform efforts made by the government of Myanmar.

The sanctions banning imports from Myanmar to the US were originally enacted because of myriad violations of human rights perpetrated by the military junta, which had seized power in Myanmar.

Offenses included the “use of child soldiers, drug trafficking, human trafficking, money laundering, failure to protect religious freedoms, violations of worker’s rights” and more according to the CRS Report for Congress.[1]

The sanctions prohibited many different activities. The sanctions included “visa bans, restrictions on financial services, prohibitions of Burmese imported goods, a ban on new investments in Burma, and constraints on U.S. assistance to Burma.”[2]

It was changes in Myanmar’s ruling government that moved Obama to visit there during his tour of the Pacific after his re-election.

During his very brief (6 hour!) visit, President Obama addressed the positive changes made by the government of Myanmar in its treatment of its citizens, but also pointed out that further reforms are still needed.  Despite his criticisms, Obama pledged to ease US sanctions against Burma in recognition of the progress already made.[3]

This personal visit was the culmination of a series of diplomatic negotiations.

-In August, Obama addressed Congress and was allowed to waive further sanction provisions, presumably in preparation for his visit to Myanmar.

-In September, Secretary of State Clinton confirmed the easing of US sanctions, especially economic ones (i.e. the ban on imports from Myanmar to the US). She did this at a meeting in New York at the UN with Thein Sein, the leader of Myanmar, again as a pledge of good faith at the reforms instituted under Sein’s leadership.[4]

In a newsletter, MOL cited “the Myanmar government’s ongoing reform efforts that had seen the release of hundreds of political prisoners, the removal of pre-publication censorship requirements for the press, and the enacting of labor laws to permit the formation of labor unions…. efforts to join the Extractive Industries Transparency Initiative…. a cease-fire agreement… with 10 armed ethnic groups…. and steps towards democratization with a parliamentary by-election “ as reasons for the ban to be lifted.

Historically, Myanmar has never been a huge exporter to the US, their trade products to the US restricted to hardwood, gems, and clothing.[5]  But that will likely change now that the sanctions are easing. This first shipment consisting of furniture may presage a broadening of products for export as well as warmer economic relations between the US and Myanmar.

The Myanmar branch of MOL is proud to have made the first Burmese export to the US with the delivery of furniture packed in a 40 ft. high cube container and UCM acting as the freight forwarder.

MOL Model ShipImpressed with UCM’s work, MOL presented Universal Cargo Management with the model of one of their cargo ships, which displayed in our headquarters will remind us of this historic occasion.

The cargo we handled together from Yangon to Norfolk was the very first (of many, hopefully) out of Myanmar bound for US consumers carried and marks the end of an almost 10 year ban on imports to the US from Myanmar.

Yangon is also known as Rangoon, which literally means “end of strife”.

May the region truly see an end of strife. At the very least, this piece of international shipping is a step in that direction.

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What Sequestration Means to Importers and 3 Ways to Beat Cargo Delays https://www.universalcargo.com/what-sequestration-means-to-importers-and-3-ways-to-beat-cargo-delays/ https://www.universalcargo.com/what-sequestration-means-to-importers-and-3-ways-to-beat-cargo-delays/#respond Tue, 26 Mar 2013 17:57:33 +0000 https://www.universalcargo.com/?p=7604 Sequestration… For months and months we’ve been hearing this word. Sequestration, sequestration… It’s coming, it’s on the way, it’s impact will be huge… Now sequestration is here presenting a serious impact for international shippers in the form of delays, especially on imported cargo. But there are 3 things you can do to alleviate the delays […]

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Sequestration… For months and months we’ve been hearing this word. Sequestration, sequestration… It’s coming, it’s on the way, it’s impact will be huge…

Now sequestration is here presenting a serious impact for international shippers in the form of delays, especially on imported cargo. But there are 3 things you can do to alleviate the delays that this blog will cover.

To briefly cover what sequestration actually is, I turn to Dr. Paul M. Johnson’s Glossary of Political Economy Terms:

If the dozen or so appropriation bills passed separately by Congress provide for total government spending in excess of the limits Congress earlier laid down for itself in the annual Budget Resolution, and if Congress cannot agree on ways to cut back the total (or does not pass a new, higher Budget Resolution), then an “automatic” form of spending cutback takes place. This automatic spending cut is what is called “sequestration.”

In the past, Congress has kept raising the Budget Resolution, allowing large deficit increases and the country to go deeper and deeper into debt in order to avoid huge budget cuts that would negatively impact un-exempted government programs or departments’ abilities to operate.

Not this year.

The U.S. Customs and Border Patrol (CBP) is one of the many places seeing budget cuts and having to adjust the way they operate.

All of your imports have to go through the CBP’s customs clearance before you, as the shipper or importer, can receive your cargo.

On March 2nd, CBP released a document called U.S. Customs and Border Protection Cargo Priorities under Sequestration that stated “given the magnitude of the reductions, we currently estimate that there may potentially be delays up to several hours at land border crossings, passenger processing times may increase by about 50 percent, and there may be up to an additional five days added to cargo inspections at ocean ports of entry.”

Five days added to cargo inspections at ocean ports of entry?!

Yes, they said you could be experiencing five day delays in getting your cargo inspected and through customs clearance. Delays are minimal here in March as furloughs are being rolled out, but delays will increase in April and onward.

But wait.

There is a silver lining if you continue reading the CBP document: “Once furloughs commence, there may be more risk-based adjustments made regarding other inspections, with less impact to trusted travelers and trusted traders.”

Less impact to trusted traders! Who’s that? How can I be in that group? I want less impact on my imports.

Here are 3 ways to help you beat cargo delays on your U.S. imports.

1. Be C-TPAT Validated

C-TPATC-TPAT stands for Customs-Trade Partnership Against Terrorism and is a voluntary government-business initiative that builds cooperative relationships that strengthen and improve overall international supply chain and U.S. border security.

C-TPAT secure supply chainCBP gives preferential treatment to their C-TPAT partners. C-TPAT members are in the trusted traders group mentioned above and receive benefits such as being less likely to receive examinations and given “front of the line” privileges when examined.

Universal Cargo Management (UCM) is C-TPAT validated.

Shipping through UCM affords your cargo C-TPAT treatment, but it is still a good idea to get C-TPAT validated yourself as a shipper/importer. All parties being C-TPAT validated looks best to the government.

2. Pre-File Entries

This is all about getting your paperwork in early. For those of you shipping with UCM, this means returning the paperwork we give you as quickly as possible. With reduced hours from CBP, when we’re able to pre-file your entries it will help ensure CBP will have adequate time to get through it before your import arrives and avoid potential delays.

3. Double Check for Accuracy

We can’t stress enough how important it is for packing lists and import documents to be complete and accurate.

As your freight forwarder, we handle most of the paperwork for your imports (and exports), but there are still some things that you as the shipper need to fill out. When filling out forms, do a double check for accuracy and that you’ve fully completed everything.

Don’t be afraid to ask us any questions you have; that’s what we’re here for.

The last thing you want is for clerical delays to keep you from receiving your cargo imports in a timely manner.

Click Here for Free Freight Rate Pricing

C-TPAT logo/supply chain pictures above courtesy of the C-TPAT website.

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What is Customs Clearance? https://www.universalcargo.com/what-is-customs-clearance/ https://www.universalcargo.com/what-is-customs-clearance/#comments Wed, 20 Mar 2013 22:38:56 +0000 https://www.universalcargo.com/?p=7331 The post What is Customs Clearance? appeared first on Universal Cargo.

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What is customs clearance?

InvestorWords.com defines customs clearance as:

noun

  1. the act of passing goods through customs so that they can enter or leave the country
  2. a document given by customs to a shipper to show that customs duty has been paid and the goods can be shipped

While basically correct, that definition is deceivingly simple.

Management Study Guide provides information that gives one a better idea of what customs clearance entails:

Customs clearance work involves preparation and submission of documentations required to facilitate export or imports into the country, representing client during customs examination, assessment, payment of duty and co taking delivery of cargo from customs after clearance along with documents.

Some of the documents involved in customs clearance are :

1. Exports Documentation: Purchase order from Buyer, Sales Invoice, Packing List, Shipping bill, Bill of Lading or air way bill, Certificate of Origin and any other specific documentation as specified by the buyer, or as required by financial institutions or LC terms or as per importing country regulations.

2. Imports Documentation: Purchase Order from Buyer, Sales Invoice of supplier, Bill of Entry, Bill of Lading or Air way bill, Packing List, Certificate of Origin, and any other specific documentation required by the buyer, or financial institution or the importing country regulation.

Of course, Management Study Guide doesn’t get into the intricacies of customs clearance. The above is still just skimming the surface.

B2B Customs Clearance? Click Here For A Free Quote

Every port in every country around the world puts your cargo through a customs clearance process.

Shipping Containers at PortWhat’s more, the rules, regulations, and laws are a bit different from country to country, sometimes from port to port within a country, making someone who specializes in customs clearance very important to a shipper exporting and importing goods.

These specialists are called customs brokers and the work they do is called customs brokerage or sometimes customs broking.

Having the wrong person handle your customs brokerage can be very problematic. Shipping containers are warehoused as they go through customs clearance. Warehousing and storage fees can add up quickly. If there is a problem with your customs brokerage and your customs clearance does not happen smoothly, your shipping costs could go up by hundreds to thousands of dollars.

On top of these costs, the delay in getting your shipping containers released to you because of customs clearance problems could cost your business more money because the arrival of your shipment is delayed.

Your freight forwarder should also be able to handle your customs clearance, but you can choose to handle it separately with your own customs broker.

When choosing a freight forwarder, you want a company with the experience to handle your customs clearance well and who knows what to do should any issues arise.

For these reasons, going with the cheapest freight forwarder you can find to handle your international shipping can turn out to be much more expensive than hiring a freight forwarder with a little higher quote but who has much more experience in the business.

There are other things you can do to help ensure your shipping containers make it through customs smoothly.

Here are 2 ways you can help make the customs clearance process smooth for your shipment.

1. Properly Load Your Shipping Container

Shipping Container Loading
One of the biggest things you can do is make sure your shipping container is properly loaded.

Ultimately, as the shipper, you are responsible for the loading of your shipping containers. You can do so as you see fit; however, if shipping containers are not properly loaded, you could cause red flags to go off at customs.

Improper loading may lead to extensive examinations and even searches of your international shipments. You don’t need the delays and costs that are associated with this.

Household and personal effects shippers should pay special attention to this as such shippers tend to have less experience with international shipping and container loading than business importers and exporters.

To help in this area, Universal Cargo Management has a Container Loading Guidelines page on our site.

2. Provide Complete and Accurate Information to Your Customs Broker/Freight Forwarder

There is a great deal of paperwork involved in international shipping. The complications of shipping cargo from one country to another is why freight forwarders like UCM exist.

We have the experience and knowledge of smoothly shipping cargo from one country to another so you, the shipper, don’t have to worry about all the details, regulations, and hassles and can focus on your business.

Still, there is a certain amount of paperwork you will need to provide to your freight forwarder.

Being accurate and thorough with your paperwork is important. This includes business information, inventories or itemized lists of shipments, and value of cargo.

This information affects the duties and custom fees at the ports, helps assess the risk of your cargo shipment, and more.

The last thing you want is for customs to find your shipping manifest is inacurate and think you’re trying to sneak something past them.

What you do want is a low risk assessment of your cargo shipment at customs.

Most of the paperwork of your international shipping will be handled by us, your freight forwarder and with over 25 years of experience, Universal Cargo Management is prepared to handle your customs along with any problems that may arise; but, accuracy on your part will help us keep your international shipping smooth from beginning to end.

Always, we’ll be here to walk you through any questions you have when it comes to international shipping, paperwork, and customs clearance.

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Is the International Shipping Industry Dirty? https://www.universalcargo.com/is-the-international-shipping-industry-dirty/ https://www.universalcargo.com/is-the-international-shipping-industry-dirty/#respond Thu, 14 Mar 2013 21:57:28 +0000 https://www.universalcargo.com/?p=7558 In a classic stand-up bit, Chris Rock says, “I love rap music, but I’m tired of defending it.” He went on to divulge his love for the musical genre but his inability to defend lyrics like “to the window, to the wall, till the…” Well, you know the rest. (If you don’t know it, you […]

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In a classic stand-up bit, Chris Rock says, “I love rap music, but I’m tired of defending it.” He went on to divulge his love for the musical genre but his inability to defend lyrics like “to the window, to the wall, till the…” Well, you know the rest. (If you don’t know it, you can check out the lyrics to “Get Low” by Lil Jon and East Side Boyz. Suffice it to say it wouldn’t be appropriate to print the lyrics here.)

Chris Rock’s position is one I imagine we often find ourselves in – loving/buying/enjoying/doing something but having trouble defending it or feeling guilty for its impact. Example: giving babies lemonade. They discover it tastes great, they smile and gesture for more, and so you spoon more of the sweet-sour concoction into their little expectant baby-bird mouths. But you know you shouldn’t. “It’s home-made lemonade,” you tell yourself, “I know exactly how much refined white sugar my baby is eating!” And the justifications continue.

cute kitten public domainAn example for the non-parents out there: downloading Justin Bieber music. “I shouldn’t like this,” you tell yourself. “This kid doesn’t know a thing about real love or real music!” But you do buy it. And you download it onto your iPod (at least my wife does and I hope she has some remorse for it). Perhaps I should have gone with a fast food example here, but maybe you love Justin Bieber or kitten videos or Twilight films or reading Hitler biographies… Whatever it is it’s your thing, but it is draining to have to defend that love.

Usually I don’t.

Sometimes I blog about “green” shipping as there have been many new practices, policies, and technological advances to reduce the environmental impact of international shipping over the last several years.

So, when you work in the international shipping industry, perhaps for a freight forwarder like Universal Cargo Management, and you are grateful for the income they provide you and feel a certain pride of being part of an industry that’s hugely beneficial to the economy, you don’t want to feel like you have to defend that industry. Not current international shipping practices and certainly not international shipping for all time.

International shipping is like most industries in that an increased awareness about the need to protect the environment and the impact the industry has had on it has lead to change and innovation to be more green and eco-friendly.

I was watching a video from a United Nations Conference on Climate Change in which a scientist made the statement that the international shipping industry is “dirty”. She didn’t mean it’s riddled with corruption. She went on to clarify that international shipping is responsible for a lot of pollution, especially pollution that contributes to global warming.[1]

There it was, that feeling after I give my baby lemonade. But the international shipping industry still takes a great deal of criticism when it comes to the topic of being green or eco-friendly.

Cargo ShipDespite what I’d like to think, I cannot call myself an unbiased reporter. After all, I work for a freight forwarding company in the international shipping industry and I’m a blogger not a reporter.

But I do care about the environment in the sense that I recycle and remember to bring my own bags to the grocery store 50% of the time and don’t want to die of the mini-ice age depicted in several disaster films I’ve seen. So I don’t exactly like to hear that the international shipping industry, the industry I work in, is a “dirty” business in the sense that it’s such a major contributor of environmental pollutants.

As I mentioned above, I have written about measures the international shipping industry has taken to significantly reduce its contribution to pollution, so writing about a scientist calling the international shipping industry dirty may come as a surprise. You’d think I’d be writing about the International Maritime Association’s work to continuously improve the international shipping industry’s environmental impact.

Well, you’re right.

The scientist calling the international shipping industry “dirty” caused me to go into research mode. The first thing I discovered was that she (the scientist) was not actually credited as a scientist but rather a representative of Oxfam, an international humanitarian organization dedicated to helping the impoverished.

Still, who was I going to trust about the international shipping industry, the Oxfam rep or the International Maritime Organization’s website? My first inclination was to trust the Oxfam rep. As an outside observer of the international shipping industry who cares about the environment, she might be less biased.

My next thought was to check out who’s behind the International Maritime Organization. It turns out they are an international organization dedicated to “Safe, secure and efficient shipping on clean oceans.”[2] They care about the environment too according to their website. And they care about international shipping.

I read some reassuring facts and viewed some equally reassuring charts about the improvements in international shipping. I looked further and found the International Chamber of Shipping describing how the shipping industry is the “least environmentally damaging form of commercial transport.”[3] There is certainly more to say on this subject on both sides; however, it is clear that international shipping is not the scapegoat it might appear to be.

What’s crazy is 90% of all commercial goods spend time on ships. An industry that big and that important cannot simply be “good” or “bad”; instead, its impact is necessarily as complex as it is powerful. It would take more than a blog to cover all sides of the issue, but I have resolved to educate myself further about the benefits of the global shipping industry along with its criticisms and how we can reduce its environmental impact.

Anyone with me? Are you tired of defending international shipping? Do you want to see a healthy balance of the benefits and issues involved in international shipping? Let us know your thoughts in the comments section below and we’ll continue to delve into these issues in future blogs.

 

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[1] http://videos.huffingtonpost.com/entertainment/oxfam-at-cop17-how-to-change-international-shipping-517351386

[2] http://www.imo.org/About/Pages/FAQs.aspx

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3 Reasons Panama Canal Expansion Won’t Divert Imports from West to East Coast https://www.universalcargo.com/3-reasons-panama-canal-expansion-wont-divert-imports-from-west-to-east-coast/ https://www.universalcargo.com/3-reasons-panama-canal-expansion-wont-divert-imports-from-west-to-east-coast/#respond Tue, 12 Mar 2013 20:43:28 +0000 https://www.universalcargo.com/?p=7433 Is there a danger to the Southern California ports of Long Beach and Los Angeles? Some are speculating there is a danger in the form of the Panama Canal Expansion that is currently underway. We haven’t posted for a while on the Panama Canal Expansion, but as its completion—expected toward the end of next year […]

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Cargo ShiptIs there a danger to the Southern California ports of Long Beach and Los Angeles?

Some are speculating there is a danger in the form of the Panama Canal Expansion that is currently underway.

We haven’t posted for a while on the Panama Canal Expansion, but as its completion—expected toward the end of next year or early the year after—draws closer, more and more speculation is happening on how it will affect the import traffic at the Ports of Long Beach and Los Angeles.

For background on the Panama Canal Expansion, you can read our previous blogs on the topic:

The Panama Canal & International Shipping Traffic

China to Rival Panama Canal with Colombian Rail for Ocean Freight

Speculation has been rising that a significant percentage of the imports that enter North America through the West Coast and specifically Southern California will be diverted to East and Gulf Coast ports. Not surprisingly, much of this speculation comes from East and Gulf Coast Ports themselves.

By now we’re all used to reading “Made in China” on the products we see on the shelves in stores. The dominant import entrance of goods from Asia is through the Ports of Long Beach and Los Angeles. In fact, nearly 40% of U.S. imports go through the Ports of Long Beach and Los Angeles.

If the speculation is correct and a significant percentage of imports move from these West Coast ports in Southern California, there would be serious consequences for the local economy.

However, in a white paper posted on SupplyChainBrain.com, Weber Logistics strongly disagrees with this speculation.

They supply 3 strong arguments for Southern California remaining “the gateway to North America for Asian shippers”.

1. Longer Shipping Times Would Increase Supply Chain Costs

The meat behind Weber Logistics’ first point is that shipping through the Panama Canal would take up to two weeks longer than shipping to L.A. from Asia.

This added time would cause stores to need to carry larger inventories and cost up to 30% more in those inventory-carrying costs.

Shipping faster to the closer ports to Asia saves time and money. Businesses tend to like that. No one says we need to increase our overhead costs so our profit is better. Because of this, shippers are likely to continue importing from China and other Asian locations through West Coast ports.

2. Ports of Long Beach/Los Angeles are Further Developed than East Coast Ports

The Ports of Long Beach/Los Angeles simply offer more than East Coast ports including:

  • Depth capable of handling the popular new “megaships” or “super vessels” carriers are putting on the ocean
  • Infrastructure to handle the giant amount of volume of imported goods from Asia to the U.S.
  • Effective pollution reduction measures

Ooh, was that just a list within a list? Bad form. But it doesn’t change the fact that the Ports of Long Beach and Los Angeles are way ahead of East and Gulf Coast Ports, including the Port of New York, Port of Savannah, Port of Tampa, Port of Norfolk, and Port of Baltimore in all three of these important ways.

Being ahead in these ways gives Southern California a serious competitive edge for importing and provides yet another reason shippers will keep importing and exporting cargo through the Ports of Long Beach and Los Angeles.

In fact, it will take years for East and Gulf Coast ports to catch up in these areas.

3. Switching from Importing through SoCal to Importing through the East and Gulf Coasts Involves Risk

Risk assessment is a large part of making business decisions. Switching from shipping through the Ports of Long Beach and Los Angeles to a port on the East or Gulf Coast is a risk.

It’s not simply a risk because it’s a change, but change is certainly worth bringing up.

Changing ports could mean changing a large number of logistics partners from carriers to truckers to rail, changing shipping lanes, needing new warehousing, and more.

If you ship with Universal Cargo Management, we handle imports through the West, East, and Gulf Coasts so you wouldn’t need to worry about changing logistic partners.

However, Weber Logistics does bring up other risks in their white paper like how smooth will the new canal operations be and cost changes caused by fees and rising fuel costs.

In the end, the speculation coming from the East Coast Ports that they will get a significant percentage of the imports coming to the U.S. from Asia through the Ports of Long Beach and Los Angeles seems like it might just be a little biased and hopeful.

Then again, Weber Logistics focuses on West Coast logistics for West Coast clients. So maybe there’s a little bias and hopefulness in their white paper. However, their arguments are strong and do seem both fair and accurate. I find myself agreeing with their final assessment that “The Ports of LA and Long Beach will continue to be North America’s freight gateway long after the Canal expansion is completed.”

What are your thoughts on how the Panama Canal Expansion will affect importing and exporting? Share your thoughts in the comments section below.

As always, for free freight rate pricing for your international shipping, wether through the West, East, or Gulf Coast, contact us.

Free Freight Rate Pricing

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Pack Up Santa, We’re Shipping Thru the North Pole! https://www.universalcargo.com/pack-up-santa-were-shipping-thru-the-north-pole/ https://www.universalcargo.com/pack-up-santa-were-shipping-thru-the-north-pole/#respond Thu, 07 Mar 2013 19:33:47 +0000 https://www.universalcargo.com/?p=7577 Could your ocean freight cargo be shipped directly across the North Pole? According to an article in the Proceedings of the National Academy of Sciences of the United States of America (PNAS) by Laurence C. Smith and Scott R. Stephenson, the answer is yes. Yes, your cargo could be shipped directly across the North Pole. […]

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Poor Santa Public DomainCould your ocean freight cargo be shipped directly across the North Pole?

According to an article in the Proceedings of the National Academy of Sciences of the United States of America (PNAS) by Laurence C. Smith and Scott R. Stephenson, the answer is yes. Yes, your cargo could be shipped directly across the North Pole.

Their article, “New Trans-Arctic shipping routes navigable by midcentury”, uses seven climate model projections of future ice reductions and analysis of two vessel classes to assess potential changes in peak season Arctic shipping routes.

Decreasing late-summer sea ice extent in the Arctic is where Smith and Stephenson’s article begins. “Since 1979, satellite mapping has revealed an overall trend of decreasing late-summer sea ice extent in the Arctic, with the six lowest years on record occurring since 2006.”

Decreasing ice has caused many to speculate about the possibility of shorter shipping routes through the Arctic Ocean emerging. The Arctic ice extent isn’t low enough yet for a major distance saving route right across the North Pole, but Santa might want to start looking for a new base of operation, as it appears the day is on the way.

According to Smith and Stephenson, by mid-century open-water vessels will be able to complete September trans-Arctic voyages along the Northern Sea Route (NSR) with increased frequency and over a larger geographic area. “Put simply,” Smith and Stephenson say about the years 2040-2059, “by midcentury, September sea ice conditions have changed [they’re speaking in terms of model projections] sufficiently in the NWP [Northwest Passage] such that trans-Arctic shipping to/from North America can commonly capitalize on the ~30% geographic distance savings that this route offers over the NSR.”

30% geographic distance savings? Santa better start packing! At least he has a few decades to prepare for the ships invading his workshop. Of course, the melting ice has his workshop at risk of sinking before the ships show up anyway.

Back to the real world, there are other factors that could impede trans-Arctic shipping through the NWP such as “dearth of services and infrastructure, high insurance and escort fees, unknown competitive response of the Suez and Panama Canals, poor charts, and other socioeconomic considerations” listed by Smith and Stephenson, but “sea ice currently represents the single greatest obstacle to trans-Arctic shipping.”

The maps below from the PNAS article show potential routes for Polar Class 6 and open-water vessels crossing the Arctic Ocean between the North Atlantic (Rotterdam, The Netherlands and St. John’s, Newfoundland) and the Pacific (Bering Strait).arctic shipping PNAS maps

Before we go thanking Global Warming and jump into shipping through that coveted Northwest Passage, there are many issues that arise from the potential of new shipping lanes through the Arctic.

Smith and Stephenson bring up search and rescue. Arctic waters would certainly present dangers to seafarers shipping goods. What search and rescue capabilities could be put together for the event of ships going down in the Arctic?

Smith and Stephenson also bring up heightened urgency this would create for a mandatory International Maritime Organization (IMO) and regulatory framework for environmental protections and vessel safety standards.

Many more questions and issues will arise as the region becomes more traversable. The economic benefits that new Arctic shipping lanes would produce is likely to create political squabbles between nations. What about tourism to the North Pole? People may be willing to pay top dollar to see the fabled home of Santa Claus.

For now, international shipping remains the same. We’re not adding North Pole services to what we do as a freight forwarder, but the day will come when this could have a serious impact on how your cargo is moved.

As always, we’re ready to help you with your importing and exporting needs. Contact us now for free freight rate pricing.

Free Freight Rate Pricing

 

Source: http://www.pnas.org/content/early/2013/02/27/1214212110.full.pdf+html?sid=93d4426d-4cc0-40f7-9afa-6738c2862def

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Titanic II: Rising from the Depths https://www.universalcargo.com/titanic-ii-rising-from-the-depths/ https://www.universalcargo.com/titanic-ii-rising-from-the-depths/#respond Thu, 28 Feb 2013 20:56:09 +0000 https://www.universalcargo.com/?p=7516 Titanic II–coming in 2016. Sounds like a bad movie sequel, right? But it’s not. It’s real life. In 1912, the Titanic was something of a modern marvel. At 882 feet and 9 inches in length, carrying 2,223 people and tons of cargo, the Titanic was a behemoth on the sea. “It is unsinkable. God Himself couldn’t sink […]

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Titanic PicTitanic II–coming in 2016. Sounds like a bad movie sequel, right? But it’s not. It’s real life.

In 1912, the Titanic was something of a modern marvel. At 882 feet and 9 inches in length, carrying 2,223 people and tons of cargo, the Titanic was a behemoth on the sea.

“It is unsinkable. God Himself couldn’t sink this ship…”

This famous “quote”, which may or may not have actually been said about the Titanic before it embarked on its ill-fated maiden voyage across the ocean, encapsulated the attitude surrounding the famous ship.

We all know how the story ends. No, I’m not talking about Leonardo DiCaprio saying, “Never let go, Rose,” and then sinking into the ocean when Kate Winslet pries his hand from hers. I’m talking about nearly 70 percent of the actual passengers and crew of the Titanic dying because of a lack of lifeboats and not even filling the ones they had to capacity.

The new Titanic shouldn’t have this mindset.

New Titanic?

It’s been just over 100 years now since the Titanic sunk in the Atlantic Ocean. Why not build a new one?

At least, billionaire Clive Palmer thinks that. He unveiled his blue prints for the Titanic II which is planned to set sail from Southhampton, England to New York in 2016.

Palmer wants to capture the grandness of the original Titanic. The Titanic II will have the grand staircase, gym, squash court, Turkish baths, swimming pool… all like the original Titanic.

But apparently, Palmer wants the passengers to have an authentic feeling like they’ve gone back in time and boarded the original Titanic. He’ll accomplish this in 3 ways:

  1. There will be period costumes for the passengers to wear.
  2. First class won’t be allowed to mix with lower classes.
  3. They’ll steer the ship into an ice burg, sinking it in the Atlantic.

Okay, I made up the third one, but that’s what would really make it feel authentic.

Just in case such a horrible incident occurs, this Titanic will have enough lifeboats for everyone onboard.

Titanic 1912Launching a Titanic II is controversial, but it’s making a splash. Titanic II was trending for a couple days on Twitter. It is, after all, perfect fodder for comedians like Ellen DeGeneres who tweeted:

“A billionaire is trying to make Titanic II. I think I’ll buy my ticket for the second ride.”

Many tweets were like that of Twitter user praks @p_r_a_k_s who tweeted:

“Replica of Titanic being built and named Titanic II! Not sure if many ppl would like to sail on it !!!”

You’d think praks would be right, but apparently Palmer has received offers as high as $1million to be on the maiden voyage of the Titanic II.

People are fascinated by the Titanic. Hollywood cashed in on it and Palmer probably will too. But there are many who think building a second Titanic is just tempting fate and a bad idea.

Whatever happens with the Titanic II, you don’t have to worry about UCM shipping your cargo on it. At least not until its second trip, taking a cue from Ellen.

Generally, we think of the Titanic as more of a cruise line type of ship if we were to categorize it. That certainly seems to be the focus of the Titanic II. However, the Titanic did carry a great deal of cargo.

Working for a freight forwarder with the word cargo even in our name, I thought it appropriate to share an interesting list of some of the cargo that was on the Titanic which I found online.[1]

  • 3,364 bags of mail onboard, and between 700 and 800 parcels. (The RMS in RMS Titanic stood for “Royal Mail Steamship.”)
  • One Marmalade Machine
  • Five grand pianos
  • 30 cases of golf clubs and tennis rackets bound for the A.G. Spalding Co.
  • 40 tons of potatoes
  • 50 cases of toothpaste
  • Four cases of opium
  • 75,000 pounds of fresh meat and 11,000 pounds of fish
  • 800 pounds of tea and 2,200 pounds of coffee
  • 20,000 bottles of beer and 1,500 bottles of wine
  • 16,000 lemons and 36,000 oranges
  • 2.75 tons of tomatoes
  • One Renault 35-horsepower automobile
  • Eight dogs and one cat. Two of the dogs survived.

What are your thoughts on the Titanic II? Share them in the comments below.

If you have cargo you need imported or exported, on ships with much better track records than the Titanic, we’re here to help you with your international shipping needs.

Free Freight Rate Pricing

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ILA Strike Watch Fallout: Master Contract Details https://www.universalcargo.com/ila-strike-watch-fallout-master-contract-details/ https://www.universalcargo.com/ila-strike-watch-fallout-master-contract-details/#respond Thu, 21 Feb 2013 22:12:56 +0000 https://www.universalcargo.com/?p=7747 Last week, the International Longshoremen’s Association (ILA) released details about the tentative agreement between them and the United States Maritime Alliance, Ltd. (USMX). After our feverish 2012/2013 ILA Strike Watch, we thought you might like to know the fallout of negotiations. Truth be told, it’s premature to say all is concluded. The announcement on February […]

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ILA Strike CancelledLast week, the International Longshoremen’s Association (ILA) released details about the tentative agreement between them and the United States Maritime Alliance, Ltd. (USMX).

After our feverish 2012/2013 ILA Strike Watch, we thought you might like to know the fallout of negotiations.

Truth be told, it’s premature to say all is concluded. The announcement on February 1st that a tentative agreement had been reached brought a sigh of relief across the international shipping community and the country in general as a potential strike would cost the economy billions. Still, the word “tentative” dangles in the air.

Before the agreement officially brings security to the operations of the ports it has to be ratified by the local unions. On top of this, the local ILA unions have to negotiate issues specific to local ports across the East and Gulf Coasts.

What if they fail to reach agreements at these ports? Specifically in New York and New Jersey where negotiations have been especially tense?

No one really seems to know the exact answers to those questions. Everyone is working on the assumption that local agreements will be made and the Master Contract will be ratified.

HandshakeIn the meantime, ports continue to operate as local negotiations forge forward.

Now we do know many key points of the new (tentative) Master Contract agreed upon between the ILA and USMX reps who were in negotiation as the ILA released details about it last week.

Below are some key points the ILA shared about the new Master Contract with some comments from us.

• The new Master Contract will expire on September 30, 2018.

This should give us 5 years before you need to worry about another ILA Strike Watch on the East and Gulf Coasts.

• The new Master Contract will not take effect until all local bargaining is concluded.

• There will be a $1.00 per hour wage increase on October 1, 2014; another $1.00 increase on October 1, 2016 and another $1.00 increase on October 1, 2017.

This takes the $32 per hour base of experienced dockworkers to $35 per hour.

• New employees will start at $20.00 per hour.

• The wage progression formula, which was in the Master Contract extension, has been shortened from 9 years to 6 years.

This means that new employees, starting at $20 per hour, will be able to reach that $35 per hour number in 6 years. Of course, at that point, the Master Contract will have expired and new negotiations will have in theory taken place that could very well increase that experienced dockworkers wage.

• There will be a minimum coastwise guarantee of $211 million in container royalty for each year of the contract.

Container royalties was a major issue of contention between the ILA and USMX over the course of negotiations. Reportedly, USMX wanted to faze container royalties out while the ILA was unwilling to bend on the issue of royalties. This adds significant income increase to ILA members. When agreement was finally made in this area, seemingly very much in ILA’s favor, negotiations moved much faster toward completion.

• In addition, up to $14 million of administrative expenses will also be covered.

• All container royalty over these amounts will be evenly split between USMX and ILA.

Perhaps this is the concession given to the USMX in this matter.

• The local fringe benefit contribution will increase by $1.00 per hour.

• New language has been negotiated to protect those who have been displaced due to new technology and automation.

Job security in the midst of automation and new technology has been an ongoing concern for the ILA. The strike that happened on the West Coast by the Office Clerical Unit (OCU) workers in late November/early December of last year was largely over this issue of automation and new technology threatening to displace workers.

You can go to the ILA’s website to see the complete list they posted about the Master Contract.

As East and Gulf Ports are operating smoothly, we’re standing by handle your freight forwarding through them.

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ILA Strike Watch 2013: Strike Averted, But There’s Work to be Done! https://www.universalcargo.com/ila-strike-watch-2013-strike-averted-but-theres-work-to-be-done/ https://www.universalcargo.com/ila-strike-watch-2013-strike-averted-but-theres-work-to-be-done/#respond Tue, 05 Feb 2013 22:48:42 +0000 https://www.universalcargo.com/?p=7533 The International Longshoremen’s Association (ILA) Strike that was scheduled for Wednesday has been averted. Late Friday night, a tentative agreement between the ILA and the United States Maritime Alliance (USMX) was announced that would prevent port stoppages all along the East and Gulf Coast ports of the U.S. This is not only great news for […]

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ILA Strike Watch

The International Longshoremen’s Association (ILA) Strike that was scheduled for Wednesday has been averted.

Late Friday night, a tentative agreement between the ILA and the United States Maritime Alliance (USMX) was announced that would prevent port stoppages all along the East and Gulf Coast ports of the U.S.

This is not only great news for retailers depending on imports for their inventories, businesses that export via the East and Gulf Coasts, and people whose jobs are directly dependent on the ports, but for the U.S. economy as a whole.

Many estimates put the cost of such a strike at $1 billion a day to the U.S. economy. Such a blow to the economy would be devastating.

Reaching a new master contract for the East and Gulf Coast ports between the ILA and USMX has been a long process.

Originally, the previous contract was set to expire at the end of September. An extension pushed the expiration and a possible strike back to the end of December and then another pushed it to this upcoming Wednesday, February 6th.

Talks breaking down between the ILA and USMX, as the parties held strong opposing views in the negotiations, caused the need for the Federal Mediation and Conciliation Service (FMCS) to step in and assist in the negotiation process.

FMCS Director George H. Cohen was pleased to announce the agreement between the ILA and USMX, but did note that there is still work to be done.

“The tentative agreement is subject to the ratification procedures of both parties and, as well, to agreements being achieved in a number of local union negotiations. Those local negotiations are ongoing and will continue without interruption to any port operation,” said Cohen in his news release on Friday.[1]

The details of the tentative contract have not been made public at this time, but it is a new 6-year master contract which covers more than 14,500 dockworkers who handle the loading and unloading of containerized goods at ports from Maine all the way down to Texas.

The National Retailers Federation (NRF), who supplied one of the loudest voices of concern over the possible strike and urged President Obama to step in to ensure an import and export hindering strike would not take place, is breathing a sigh of relief.

The Hill reported NRF President Matthew Shay had the following to say in a statement, “The retail industry, which supports one in every four U.S. jobs, is pleased to hear that the ILA and USMX have reached a tentative, long-term master contract.” But the NRF is not totally relaxed yet. Shay continued, ”We urge the parties to quickly complete any outstanding negotiations, including local negotiations at each of the individual 14 ports, and quickly ratify the new labor agreement.”

Ultimately, Shay’s sentiments, as reported by The Hill, were positive: “[I]f the tentative agreement holds, the new labor contract will bring much-needed certainty and predictability to the supply chain for retailers, manufacturers, farmers and other industries that rely on the ports to move the nation’s commerce and trade.

The new port labor contract, which covers container operations [at] each of the 14 East and Gulf Coast ports, from Maine to Texas, will help make these major ports more competitive and efficient”[2]

The ports of New York and New Jersey seem to be the ones where the most work needs to be done in reaching the end of this long period of negotiation between the ILA and USMX.

NJ.com reports, “Jim McNamara, a spokesman for the ILA, said agreements are still needed between the New York Shipping Association, which represents employers at the Port of New York and New Jersey, and a dozen ILA locals representing 3,250 union dockworkers in the Bi-State region.”[3]

American Shipper said, “Work rules in the ILA-NYSA [New York Shipping Association] contract have been among the most contentious issues in the negotiations.”[4]

While there is some cautiousness to be taken with local negotiations and ratifications of the master contract, shippers can be confident to import and export through East and Gulf Coast ports.

Through this process, we at Universal Cargo Management have prepared to make sure your cargo containers, whether imported or exported, reach their destinations no matter the port situation.

The relief of the ILA strike being averted will not cause us to relax when it comes to customer service. As a friend to your business, we’re dedicated to making your international shipping as smooth as possible.

Click here for a FREE FREIGHT RATE QUOTE.

UCM's ILA Strike Watch


[1] http://usmxlaborupdates.com/static/uploads/general-images/ILA-USMX_Statement-2-1-13.pdf

[2] http://thehill.com/blogs/transportation-report/shipping-and-cargo/280705-east-coast-ports-reach-labor-agreement-with-dockworkers

[4] http://www.americanshipper.com/Main/News/NEWSFLASH_ILA_USMX_reach_tentative_agreement_on_6y_52752.aspx

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Violence in Egypt Threatens Freight Shipments Thru Suez Canal https://www.universalcargo.com/violence-in-egypt-threatens-freight-shipments-thru-suez-canal/ https://www.universalcargo.com/violence-in-egypt-threatens-freight-shipments-thru-suez-canal/#respond Thu, 31 Jan 2013 22:39:50 +0000 https://www.universalcargo.com/?p=7531 Egypt and Upheaval: What’s happening and what it means for import/export traffic through the Suez Canal. An article posted two days ago (Jan 29th) in the Telegraph described Egypt as a nation on the verge of “collapse”.[1] The details of the political situation indicate hard times ahead for citizens of Egypt and an uncertain future […]

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Egypt and Upheaval: What’s happening and what it means for import/export traffic through the Suez Canal.

Suez Canal Map Public DomainAn article posted two days ago (Jan 29th) in the Telegraph described Egypt as a nation on the verge of “collapse”.[1]

The details of the political situation indicate hard times ahead for citizens of Egypt and an uncertain future for those importing and exporting goods via the Suez Canal.[2]

In the past week, three Suez Canal cities have endured the worst of the violence in Egypt, along with uprisings in Cairo. Because of this, the army has been dispatched to those cities in order to maintain security, imposing military law as an emergency measure.[3]

The problem is, liberal Egyptians fear this is a prelude to establishing permanent military rule under President Mohammed Morsi.

As Morsi struggles to gain control, rioters and armed vigilantes seethe and the nation seems to be spiraling downward.

Armed insurgents invaded the foyer of the Semiramis Intercontinental Hotel in Cairo, firing their weapons. When the police failed to respond, the threatened staff resorted to “using Twitter to appeal for help”.[4]

The conflict in Egypt is part of a larger movement in the Maghreb and in the Middle East, the so-called “Arab Spring”, which began 2 years ago.[5] This movement within various nations has been characterized by the sort of violence we are seeing in Egypt with similar goals/effects, i.e. the toppling of entrenched authority.

The ousting of these leaders has often been followed by political turmoil as new leaders seek to establish equilibrium under still-shaky provisional governments. These nations, long held under dictatorships, struggle to quickly hammer out better, more responsive systems of government.

The prime example of this is Egypt. Ex-president of Egypt, Hosni Mubarak stepped down from his presidency in February 2011 in the midst of a storm of protest against his heavy-handed rule. But the scramble to fill the power vacuum has left the new Egyptian government to rein in radical fringe factions using the dubious weapon of the military.[6]

Since Mubarak himself used violence and the threat of violence as a pretext for keeping Egypt in a state of “emergency” for 30 long years,[7] it is easy to see why many Egyptians do not trust the use of military force, even as an ostensibly temporary cure for the violence breaking out in the streets.

The violence has international repercussions, especially as the Suez Canal runs right through eastern Egypt, between the mainland and the Sinai Peninsula. The Suez is a conduit for millions of tons of freight shipped between Europe, Africa, and the Far East.

It is natural to wonder how the political turmoil in Egypt will affect global economics as key port cities along this narrow corridor are threatened.

Suez Canal Cargo ShipThree cities, Port Said, Ismailia, and Suez, have seen so much violence that President Morsi has declared martial law within them. Violence in Port Said left 40 dead. Death-tolls in the other cities were undetermined.

In order to protect personnel, ISS (Inchcape Shipping Services, the main maritime service provider there) recommends that no one embark/disembark in these cities from ships navigating the canal. [8]

ISS also “suspended all husbandry services at all Egyptian ports including crew changes and transfers, Cash to Master, and shipments delivery as road transportation is currently deemed unsafe”.

Despite all this, import/export continues, with vessels proceeding safely through the canal only because of the security provided by the military.

While Egyptian officials are eager to reassure carrier companies that the Suez Canal is safe for import/export traffic, it is clear that the unrest is straining Egypt’s new government, putting its authority to the test. If peace is not restored, it seems likely that not only will Egyptian citizens suffer even more violence, but the flow of international commerce through the canal will also be interrupted.

UCM exports and imports goods around the world. For a free freight rate quote, click here.

 

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ILA Strike Watch 2013: 1 Week Till Strike Deadline https://www.universalcargo.com/ila-strike-watch-2013-1-week-till-strike-deadline/ https://www.universalcargo.com/ila-strike-watch-2013-1-week-till-strike-deadline/#respond Tue, 29 Jan 2013 20:49:07 +0000 https://www.universalcargo.com/?p=7494 The potential ILA strike of approximately 14,500 dockworkers at U.S. East and Gulf ports is a week away. At the threat of an event that would cause major disruptions to the supply chain in the U.S. and cost our nation’s economy a billion dollars a day, there are questions to be asked. What is the […]

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ILA Strike Watch

The potential ILA strike of approximately 14,500 dockworkers at U.S. East and Gulf ports is a week away. At the threat of an event that would cause major disruptions to the supply chain in the U.S. and cost our nation’s economy a billion dollars a day, there are questions to be asked.

What is the status of the negotiations between the ILA and USMX? Does the strike seem likely?

With the February 6th deadline of reaching an agreement drawing so close, the media is suspiciously quiet when it comes to news about the negotiations. Maybe it is a simple problem of a lack of news to report on the subject.

The ILA and USMX have been quite tight-lipped about the negotiations of late. So too, has been the Federal Mediation and Conciliation Service (FMCS).

The last real update released by any of the parties involved was on January 17th from FMCS stating, “The United States Maritime Alliance and the International Longshoremen’s Association conducted negotiations during the three day period January 15-17, 2013. In these negotiations the parties made progress and have agreed that the negotiations will continue under our auspices.”[1]

USMX shared the FMCS announcement on their Labor Updates Page the same day with nothing more to add.

Certainly, you can’t blame the parties for not commenting “due to the sensitivity of these negotiations” as FMCS Director George H. Cohen put it in that January 17th news release. However, the silence does leave everyone waiting and wondering how things are going.

During this long, dragged out negotiation period, talks between ILA and USMX have had a tendency to break down and end abruptly. When that happened in December, the strike looked eminent. There were no plans to meet before the then strike date of December 30th; but at nearly the last minute, ILA and USMX agreed to extend the master contract to February 6th so negotiations could continue before a strike shut down ports.

As the February 6th date is now approaching, the sense of urgency, perhaps even of panic, from retailers and businesses that directly depend on the East and Gulf Coast ports that was present last time does not seem to be present. Still, it is not as though no one is preparing for the possibility of a strike. Many retailers have increased their inventory in case the supply chain is disrupted.

CNBC reported:

The impact of a potential strike has already been seen in economic data, according to shipping experts. The latest January 2013 import volumes showed a projected 2.3 percent increase over the same period in 2012. Experts say the increase is a sign retailers are concerned about the outcome of the negotiations, so they’re increasing inventory to prepare for a shutdown of nearly half of the country’s major ports.[2]

Still, there is a difference in the tone of retailers preparing for the possibility of a strike and the urgent letters to President Obama urging him to prevent a strike that were sent as the planned December strike date approached.

It could be that after months of strike threats, we’ve grown numb to the idea of a strike. Maybe because the strike has already been postponed a couple times, we expect that to happen again if a contract resolution is not reached. Possibly, the potential strike has become old news so reporting on it has gone down, putting it less on people’s minds.

Ultimately, I think the real change as we approach the proposed strike date is that we have satisfactory—even if not totally complete—answers to the questions of the status of negotiations and the likelihood of a strike.

The latest updates that have been made on negotiations have been positive and while we’ve tried to remain optimistic about the situation no matter how dire it looked here at Universal Cargo Management (although always preparing to take care of your import and export needs even in the worst case scenario), we have reason to believe the strike is not likely to happen.

For more info on why the ILA Strike is unlikely, click here.

For a free freight rate quote, click here.

UCM's ILA Strike Watch

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80% of Chinese Owned Shipping Companies in the Red! https://www.universalcargo.com/80-of-chinese-owned-shipping-companies-in-the-red/ https://www.universalcargo.com/80-of-chinese-owned-shipping-companies-in-the-red/#respond Fri, 25 Jan 2013 00:23:48 +0000 https://www.universalcargo.com/?p=7595 or the alternate title: Why it sucks to be a Chinese (or any –ese) shipping company right now and what can be done about it: Hellenic News just published an amazingly brief article[1] (Wow! Can I get away with postings that short, boss? No? Hangs head slowly) that simply stated how 80% of Chinese-owned cargo […]

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or the alternate title:

Why it sucks to be a Chinese (or any –ese) shipping company right now and what can be done about it:

Hellenic News just published an amazingly brief article[1] (Wow! Can I get away with postings that short, boss? No? Hangs head slowly) that simply stated how 80% of Chinese-owned cargo companies are in the red.

This is even worse than the stats this time last year, when a dismal 70% of domestic shipping companies were in the red. That is four out of five, people. FOUR OUT OF FIVE! The forecast for this year is even worse.[2]

cargo shipNow this subject is as depressing as–well, I would use a word that rhymes with well or some other four letter word but to avoid offending any readers, I’ll just say it’s really depressing. I couldn’t help wondering why ship owners in the international shipping business are having such problems. As someone who is not completely foreign to therapy, and perhaps could use a lot of it, the bottom line always seems to be becoming aware of the problem is the first step to finding a solution.

I started doing some research about WHY the international shipping industry is so hard on ship owners currently. And I found stuff. A LOT OF STUFF. A lot of technical, boring, economical, complicated kinda stuff. And I thought, Man! I wish there was some article that summed it up for the layperson.

Then I thought this is how I can serve humanity and meet my blog quota for the week all in one neat little package! I will be that sucker who digests the tough stuff for you and serves it all nice and pureed for easy digestion just like I do with carrots for my 9-month-old. He has no teeth–he needs it pureed.

Of course, you have teeth, intellectually speaking, and do not need the pureed version. But hey, you are short on time so here goes.

Why it sucks to be a Chinese (or any –ese) shipping company right now

Global shipping is often described as “cyclical” by industry pundits. Cyclical here meaning there are long, slow trends toward an increase in traffic (and thus profit) followed by a lull in demand and a subsequent dip in profits for ship owners. The last nadir in the cycle hit during the 1980s.

(Can I use the word “nadir” in a blog claiming to be the pureed version for the layperson? I could have just said something like low point. No wait, you’re not the layperson, just the person short on time. Nadir it is.)

The nadir was followed by an upswing in the market, especially as China and other developing nations increased their GDP and exceeded their own production rates for raw materials like coal and iron. This led to a massive flow of goods being imported to China to fuel this growth. [3]

But when production leveled off in China, and elsewhere, investors who had purchased and commissioned ships at the height of the market were suddenly losing money. The market was flooded with more ships than were needed to move freight to and fro.

Prices for international import and export plummeted while fuel costs for keeping the vessels steaming along rose dramatically, increasing the cost of operation.[4] The end result was that many shipping companies were operating their vessels at below cost just to try to stay afloat financially.

Then the global economic depression (depression, recession–tomāto, tomăto) hit in 2008-2009, making a bad situation even worse. Many of the ships were purchased or commissioned on credit from a few powerful banks. Shipping industry bank debt used to mean foreclosure for those caught in the downturn end of the cycle.

Recently though, banks have been working with shipping companies to weather the storm of depressed economy as well as refraining from making new loans to would-be ship owners.

What can be done about it

Finally, the pro: It is a moment ripe for wealthy investors to purchase various types of import/export vessels at even or below cost.[5]  Those who have already invested in shipping should be patient and do all they can to wait out this most recent economic downturn (If things are cyclical, what goes down must come up).

Why stick with such a volatile investment? Because overall, international shipping is a solid investment. In fact, international shipping is essential. Up to 90% of world trade is shipped overseas via the shipping industry’s global fleet. The world economy needs the maritime import/export industry.  And now could be just the time to invest.

Either that or now is the time to get a free freight rate quote for your international shipping. UCM, a thriving freight forwarding company in the international shipping industry with 25+ years of experience, is always ready to help you with that.

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ILA Strike Watch 2013: Choke-Holds, Labor and Technology https://www.universalcargo.com/ila-strike-watch-2013-choke-holds-labor-and-technology/ https://www.universalcargo.com/ila-strike-watch-2013-choke-holds-labor-and-technology/#respond Thu, 17 Jan 2013 21:51:29 +0000 https://www.universalcargo.com/?p=7497 I read an article about the threatened ILA Strike and it rang a few bells for me. Bell #1: The term “choke-hold”. In an article in the Observer (9/25/12) David Jaffee, a sociologist at the University of North Florida, was quoted explaining the ILA’s economic power thus, “They’re strategically located in the choke-hold position. This […]

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ILA Strike Watch

I read an article about the threatened ILA Strike and it rang a few bells for me.

Bell #1: The term “choke-hold”.

In an article in the Observer (9/25/12) David Jaffee, a sociologist at the University of North Florida, was quoted explaining the ILA’s economic power thus, “They’re strategically located in the choke-hold position. This is the last stronghold of union power in the U.S., or in the supply chain at least.”[1] Bear with me…

Once I worked at a terrible job. Actually, it wasn’t that terrible; I was just overworked and underpaid. After doing some reconnaissance about the wages being paid to some folks with comparable responsibility in comparable businesses I resolved to advocate for myself and procure a fair wage.

I made an appointment with my employer, determining to discuss the issue and ask for a raise. I decided that if I was refused I would give my 2 weeks notice. It was my first time negotiating with my employer and I was nervous but not as nervous as I might have been because of one fact. I was the ONLY employee at this very small company at this time. I was in a position of power, a great bargaining spot. I was needed and there was no ready replacement for me.

Despite my strong bargaining position – what some might even call a choke-hold – I had legitimate concerns about my wages. Just because someone can command a wage increase doesn’t necessarily mean they are greedy and grasping. I certainly wasn’t. I had been underpaid for months and I wanted fair compensation.

This experience keeps me from jumping to conclusions about the ILA’s proposed strike. Saying they have a “choke-hold” on our economy may be true but it can be a little misleading. Just because they have the power to affect the economy profoundly doesn’t mean they have no legitimate complaints about their financial compensation.

What makes their power so scary is that it doesn’t just affect a company they work for, but the entire U.S. economy with the ability to obstruct the country’s imports and exports. That adds weight to their actions and, if we’ve learned anything from Spider-Man’s Uncle Ben, it also adds greater responsibility.

Bell #2: Technology’s toll on jobs.

The potential ILA strike brings up another, bigger issue – the effect of automation on employment. This issue has been raised since the Industrial Revolution, with the invention of the textile mills. Weavers feared the new technology would make their skills obsolete. They asked “Will these new looms cost us our jobs?”. [2]

The answer is more complex than it might seem at first. Certainly those early textile machines displaced some weavers and deprived them of their original occupation. But the argument goes that the increase in production achieved by automation created more new jobs elsewhere simultaneous to displacing weavers making cloth by hand on a loom.

The key is for those displaced workers to retrain, to develop another more relevant skill, in order to take advantage of the jobs created elsewhere by the increase in productivity achieved by automation. When that happens then there can be a net gain in productivity, and thus jobs, brought on by technological innovation. [3]

But this retraining does not always happen in practice and that is what the dockworkers are really struggling with and will struggle with. The future of transport technology is here. There are sophisticated ports like Rotterdam which are fully automated.

The author of the Observer article described this port like this, “a ship-to-shore crane lifting containers onto railroad cars, smaller cranes at the end of the line lofting containers onto stacks. The entire operation seemed to be run by a handful of computer operators in a glass-enclosed tower.”[4]

These fully automated docks are markedly more efficient than ports with less technology and more raw human labor. These ports are cheaper to send your import/export goods to. These ports are even safer to work at. They are the future of transportation technology.

These ports also scare traditional dockworkers because they clearly will displace many of them from their jobs. ILA president Harold Daggett is said to have remarked (upon seeing the fully automated port at Rotterdam with its tower of technological terror) “If I had a hand grenade, I would have threw it up there. It was terrible. I was sick.”[5]

This technology is scary because it will inevitably make many longshoreman jobs obsolete. And the reality is that, while increased productivity will likely create jobs elsewhere to offset this loss, your average dockworker is unlikely to retrain and get the job created by the increased productivity of the new technology. It is more likely that he or she will be let go, set adrift unemployed with a set of archaic skills and few job prospects.

I would be worried too. If the people really want to solve the problem of the longshoreman choke-hold on transportation it starts with acknowledging the job displacement that will inevitably happen.

The answer is to face it, and offer one of two things: retraining to current dockworkers or attractive retirement packages. The next step is to replace those workers with automation. This would ensure the gradual phase-out of longshoremen positions, while not abandoning ILA members to bleak re-employment prospects. Then and only then will the ILA be able to bargain from a place of security, instead of knee-jerk fear over becoming obsolete.

The rest of the ILA/USMX conflict is just bargaining to improve wages, good for workers in the short-term but these things will not change the root of their job security problem.  Only education can really do that.

Perhaps you have insight or thoughts into this problem. If so, comment below. Feel free to comment on any aspect of the strike.

ILA Strike Watch

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Word of Wisdom: Running to Tarshish https://www.universalcargo.com/word-of-wisdom-running-to-tarshish/ https://www.universalcargo.com/word-of-wisdom-running-to-tarshish/#respond Sat, 05 Jan 2013 11:40:00 +0000 https://www.universalcargo.com/word-of-wisdom-running-to-tarshish/ תַּרְשִׁישׁ – Tarshish We’ve all heard big fish stories. Perhaps you’ve even told one or two. Growing up in Michigan, surrounded by lakes, I heard many big fish stories as a child. “The fish was this big!” the fisherman would say. And each time he’d tell the story, the fish would be bigger. Tarshish and […]

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תַּרְשִׁישׁ – Tarshish

We’ve all heard big fish stories. Perhaps you’ve even told one or two. Growing up in Michigan, surrounded by lakes, I heard many big fish stories as a child. “The fish was this big!” the fisherman would say. And each time he’d tell the story, the fish would be bigger.

Tarshish and the Story of Jonah

Word of Wisdom scrollThe biggest fish story of all time is that of a fish so large it swallowed a man whole. The man spent three days alive in the belly of the fish and then it vomited him up onto dry land.

That fish story, of course, is the story of Jonah. Often, it is referred to as “Jonah and the Whale” since it’s hard to imagine a fish big enough to swallow a man whole unless that fish was actually a whale.

Fish stories are usually fabrications or at least exaggerations, but this blog is not to discuss whether or not the story of Jonah and the Whale is true. It is to look at a word of wisdom found in this Biblical tale.

That word of wisdom is Tarshish.

In the story, Jonah is told by God to go to a city called Nineveh. Instead of going to Nineveh like he is supposed to, Jonah runs and jumps onto a ship heading for Tarshish.

According to Strong’s Exhaustive Concordance of the Bible, Tirtsah (teer-tsaw’) is the transliteration of the Hebrew word/place name that is read as Tarshish in the book of Jonah.

Tirtsah was a place, but the word also has a meaning. It means delightsomeness. Its root is the Hebrew word transliterated as ratsah (raw-tsaw’) which means to be pleased with; specifically, to satisfy a debt:–(be) accept(-able), accomplish, set affection, approve, consent with, delight (self), enjoy, (be, have a) favour(-able), like, observe, pardon, (be, have, take) please(-ure), reconcile self.

Okay, stay with me; I’m done with definitions. Back to the story and how Tarshish becomes a word of wisdom for us to think about.

Jonah is on a ship heading for Tarshish when a terrible storm hits. The mariners are freaking out. Not only are they in danger of losing the goods they’re shipping, but they’re thinking they’re going to lose their lives.

Jonah tells them that the storm is upon them because of him. They ask who he is and what his occupation is and Jonah has an interesting answer.

“I am a Hebrew; and I fear the Lord, the God of heaven, who made the sea and the dry land,” says Jonah.

I’m getting to the point here. Jonah says his job is to fear or revere God. However, Jonah is in the very process of running away from God, disobeying God.

Instead of doing his job, Jonah is trying to skip ahead to a place of delightsomeness. He’s trying to go to a place of accomplishment without accomplishing his task, a place of satisfied debt without paying his debt, and a place of pleasure without doing his work. He’s trying to go to Tarshish without going to Nineveh.

Jonah and the Fish – Modern Technology Analogy

Modern technology has made it so we often expect instant gratification. We want what we want and we want it now.

Many of us graduate college or even high school and think we should immediately get a house like our parents have in a nice neighborhood like they live in. Then we go into debt over our heads to get it instead of working hard for years to get to that point like our parents did.

Many of us expect to jump right into a great, high-paying job right out of school instead of starting at an entry-level job and working our way up to better positions.

Many of us want incredible marriages and happy families but don’t realize the work it takes to build strong relationships. Then our marriages fall apart when we haven’t put the work into them and we blame it on marrying the wrong person.

fish

Almost everyone dreams of the delightsomeness of having it all right away without having to work for it. We’re trying to run to Tarshish, skipping the part where we have to work for it. Skipping the part where we go through Nineveh.

That’s the draw of things like get-rich schemes and gambling. There’s no bank account of cash from that Nigerian prince emailing you. These things are all big fish stories.

Before you’re swallowed up by one of these big fish, take a word of wisdom from Jonah. You can’t go to Tarshish before going through Nineveh. We can’t have all the things we want without working hard for them.

As always, UCM is here to work hard for you. Click here for a free freight rate quote.


Source: Shipping

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ILA Strike Watch 2013: East Coast & Gulf Ports Strike Looks Unlikely https://www.universalcargo.com/ila-strike-watch-2013-east-coast-gulf-ports-strike-looks-unlikely/ https://www.universalcargo.com/ila-strike-watch-2013-east-coast-gulf-ports-strike-looks-unlikely/#respond Wed, 02 Jan 2013 18:03:49 +0000 https://www.universalcargo.com/?p=7380 The negotiations are not over yet, but many businesses are letting out a sigh of relief over the tense situation caused by threats of an ILA strike at East Coast and Gulf ports that would have seriously repercussions for the U.S. economy. It seemed a very strong possibility that 2013 was going to start with […]

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The negotiations are not over yet, but many businesses are letting out a sigh of relief over the tense situation caused by threats of an ILA strike at East Coast and Gulf ports that would have seriously repercussions for the U.S. economy.

It seemed a very strong possibility that 2013 was going to start with picket signs and important U.S. ports shutting down, hurting the international business of importing and exporting goods in this country.

Now, the strike is beginning to look unlikely.

Neither the ILA or the USMX are discussing details of their talks; however, George H. Cohen of the Federal Mediation and Conciliation Service (FMCS) released a statement on Friday that gives reason for everyone to believe a strike will not happen.

The biggest news of the press release was that the strike that was on the verge of beginning had been postponed. The press release stated the strike had been pushed back 30 days to January 28th. It was later updated that the postponement is to February 6th.

The strike had been postponed before. As the past revised dates drew near, there was much apprehension that the strike would take place and the still recovering U.S. economy would take a blow.

Why should it be different this time?

Is it like the boy who called wolf? Had the ILA threatened the strike too many times and had it pushed back so much that no one will take the next date seriously? No. I don’t believe that is the case.

Is the ILA not serious about striking? No. They seem very serious and as was proved by the OCU strike on the West Coast, an ILA strike could happen quickly and be very costly to the USMX and the country’s economy.

So why does it now seem so unlikely that the strike will happen? Two words: Container Royalties.

Container royalties has been a major sticking point in negotiations between the ILA and the USMX. Container royalty payments have created supplemental income for the ILA. Shipping companies have been seeking to reduce and possibly even get rid of container royalty payments while the ILA seemed to be inflexible when it comes to adjusting these payments.

This very container royalties issue caused the ILA and USMX to leave the negotiation table time and again.

But according to Cohen’s FMCS press release, “The container royalty payment issue has been agreed upon in principle by the parties, subject to achieving an overall collective bargaining agreement.”[1]

Cohen also said this in the statement regarding the time between now and the revised strike date, “during which time the parties shall negotiate all remaining outstanding Master Agreement issues, including those relating to New York and New Jersey.”[2]

That statement certainly sounds declarative that the negotiations will be successfully completed before the strike occurs. Cohen used a little more careful language later, “While some significant issues remain in contention, I am cautiously optimistic that they can be resolved in the upcoming 30-day extension period.”[3]

Certainly, Cohen’s message in the press release was one of optimism meant to, at the very least, calm the gloom and doom fears of businesses that would be majorly hurt by an ILA strike.

So what was the agreement made concerning the royalty payment issue? “Given that negotiations will be continuing and consistent with the Agency’s commitment of confidentiality to the parties, FMCS shall not disclose the substance of the container royalty payment agreement,” Cohen said.[4]

However, according to an In These Times article by Bruce Vail, “a federal mediator reported that a critical sticking point had been resolved in favor of the union.”[5]

This would seem the likely outcome as the ILA was so firmly standing their ground on this issue.

Of course, just because there is reason to believe the strike will not happen at this point, that is not to say the strike cannot happen.

As always, we here at Universal Cargo Management will be vigilant and keep you informed on news the possible ILA strike situation.

We’re also always ready to give you a free freight rate quote on the goods you need to import or export for your your business.

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ILA Strike Watch 2012: Christmas Brings Hope of Strike Free New Year https://www.universalcargo.com/ila-strike-watch-2012-christmas-brings-hope-of-strike-free-new-year/ https://www.universalcargo.com/ila-strike-watch-2012-christmas-brings-hope-of-strike-free-new-year/#respond Tue, 25 Dec 2012 00:09:11 +0000 https://www.universalcargo.com/?p=7541 The ILA and USMX will be meeting again before the contract ends and an ILA strike shuts down East Coast and Gulf ports. Merry Christmas! Well, it’s not as good of a Christmas gift as the ILA and USMX coming to an agreement before a strike deals another blow to the U.S. economy. However, it […]

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ILA Strike Watch

The ILA and USMX will be meeting again before the contract ends and an ILA strike shuts down East Coast and Gulf ports. Merry Christmas!

Well, it’s not as good of a Christmas gift as the ILA and USMX coming to an agreement before a strike deals another blow to the U.S. economy.

However, it is a necessary step in the right direction.

On Christmas Eve, the Federal Mediation and Conciliation Service (FMCS) released the following brief statement:

WASHINGTON, D.C. — “FMCS Director George Cohen has called a meeting of the ILA and the Maritime Alliance in advance of the December 29th expiration of the contract extension. The parties have agreed to attend. Due to the sensitive nature of the negotiations FMCS will have no additional comment at this time.”[1]

It is fitting with the spirit of Christmas that Christmas should bring hope to an extremely bad situation.

USMX was making last ditch efforts to get ILA to turn back to a commitment toward negotiating before a labor strike would occur. This effort included putting a spotlight on the consequences the strike would have on union members, not just the U.S. economy and supply chain related jobs.

Not only would any disruption have serious consequences for the nation’s still-recovering economy, but it would also jeopardize the financial well-being of the ILA’s 14,500 members, who would lose nearly $5 million in wages and benefits for each day they’re out of work or a total of $150 million in lost compensation in just a month.

At the Port of New York and New Jersey, which employs more ILA members than any of the 13 other East and Gulf Coast ports, the union’s 3,250 members would lose $7.5 million a week in wages alone.

A strike at the port, the largest on the East Coast, could also put at risk the nearly 171,000 jobs directly related to New York and New Jersey port operations.

At Hampton Roads in Virginia, a one-month shutdown would cost ILA workers more than $10 million in lost wages and benefits.

At the Savannah and Brunswick ports in Georgia, a shutdown of union operations would result in an estimated $2.3 million a week in lost wages and benefits for ILA members.

But there was little hope to go with USMX’s urging of the ILA to turn back to the negotiating table before striking.

Harold J. Daggett, ILA president, sent the following in a letter addressed to the ILA Local Unions Covered by the Master Contract on December 19th:

Unfortunately, Master Contract nengotiations are not progressing well and it is expected that there will be a coastwide strike beginning at 12:01 A.M. on Sunday, December 30, 2012. It is imperative that all ILA local unions begin immediately to prepare for a strike. There follows a list of items that should be reviewed and implemented:

  1. Establish a strike committee which shall be responsible for assigning and scheduling picket duty and acting as a clearinghouse for all matters relating to struck work.
  2. All picket signs shall use only language approved by the ILA General Cousel’s office. Approved language for picket signs shall be provided by the International.
  3. There shall be no violence on any ILA picket line.
  4. Orders to handle containerize cargo shall not be honored.
  5. Orders to handle perishable commodities (fresh with a limited shelf life, not frozen) shall be honored.
  6. Orders to handle containerized military cargo (not household goods) shall be honored.
  7. Orders to handle passenger ships shall be honored.
  8. Orders to handle non-containerized cargo and automobiles shall be honored.
  9. Those failing to abide by strike rules or International directives shall be subject to discipline under the ILA Constitution.

Any questions that may arise are to be referred to the International for response.

Going along with the last negotiation try breaking down, no more negotiation meetings scheduled, and the above letter from Daggett telling the ILA to prepare to strike, carriers have been preparing for the strike as well.

The way the carriers prepared was by ceasing to take shipment orders through the U.S. East Coast and Gulf ports and by implementing Port Congestion Surcharges.

In a customer advisory, CMA CGM issued the following:

We anticipate that that the ILA labor action will immediately result in port congestion along the East and Gulf Coasts. Accordingly, all cargo scheduled to arrive or depart any U.S. East or Gulf Coast port on or after December 30, 2012, will be assessed a Port Congestion Surcharge as follows:

$800/D20

$1000/D40

$1100/H40

$1266/H45

$1600/H53

The surcharge shall remain in effect until the labor action has ceased and all resulting port congestion has been cleared. Notice of cessation of the surcharge will be issued for each port or port range as congestion clears.

Maersk included the following in a customer advisory letter:

All customers with IMPORT cargo arriving prior to the 29th of December are encouraged to pick-up cargo as soon as possible. Please also ensure the expedient return of your empty containers and chassis.

All customers with EXPORT cargo moving to an US East/Gulf coast port should be aware that once the cargo is gated in and a disruption occurs the cargo will likely sit at the terminal until the disruption is over.

REEFER Customers with import/export cargo on terminal at the time of a disruption can expect that, to the best of our ability their cargo to be continually monitored throughout a disruption, as no customers will have access to picking up cargo. For REEFER customers with export cargo moving to an East/Gulf coast terminal CSX rail will stop accepting reefer cargo as of December 23, 2012.

For cargo delivered to the terminal, gated–in, with knowledge of the strike will be at risk due to our limited ability to service this cargo. Shippers should be aware and consider this risk and exposure prior to cargo delivery.

If there is a disruption our ability to access equipment at the terminals will be limited. Therefore, please be advised that all Maersk Line bookings will continue to be accepted; however they will be subject to equipment availability.

Hapag-Lloyd released a customer info document on December 20th confirming their plans in light of the impending strike that included the following:

Question: Is Hapag-Lloyd charging a congestion surcharge?

Answer: Hapag-Lloyd has implemented a congestion surcharge. Please refer to our customer letter of November 8th 2012 which is available in our website along with all previous customer letters,

http://www.hapag-lloyd.com/en/news/surcharges.html

Please also find the applicable tariff verbiage below:

RURE-001 rule 056.1.3

Congestion Surcharge to and from USA

It is recognized that a strike, lockout, work stoppage, work slowdown or other labor-related disruption to operations at any U.S. port (collectively, “labor unrest”) will cause congestion. Accordingly, notwithstanding any other provision of this tariff, in the event of labor unrest, Hapag-Lloyd will implement a Congestion Surcharge effective December 1, 2012, applicable as follows:

For all import cargo received by the Carrier or its agent after the effective date of this rule and scheduled to arrive at any U.S. location, via U.S., Canada or Mexico ports on or after December 1, 2012. (This charge shall be payable on a freight collect basis, although if agreed by Carrier and Shipper, it may be paid on a prepaid basis.)

(Congestion Surcharge Destination) (CGD)

For all export cargo received by the Carrier or its agent after the effective date of this rule at any U.S. location, whether shipped via U.S., Canada or Mexico ports. (Congestion Surcharge Origin) (CGO)

Subject to those rights and remedies available under Carriers Bill of Lading, other rules contained in this tariff or otherwise, all shipments as noted above shall be subject to a congestion charge in the amount of:

USD 800 / 20′

USD 1000 / 40′

USD 1125 / 40′ HC

USD 1266 / 45′ HC


In the event no labor unrest occurs, this charge shall not be applicable. Once labor unrest has occurred, this charge shall continue to be assessed until such time as Carrier provides notice in this tariff that the impact of the labor unrest on its operations and those of any affected port(s) has ended.

Those are responses from just three carriers that move import and export goods through East Coast and Gulf ports, but it’s enough to get a good idea of how all the carriers are reacting to the strike that seemed inevitable two days ago.

But today is Christmas. Hopefully, you are enjoying it with your family and friends without the storm cloud of an economically damaging strike looming over your head.

However, if you do feel the shadow of that cloud creeping over your Christmas scene, remember there is a new ray of hope. USMX and ILA are resuming negotiations under the mediation of the FMCS.

The New Year has a chance of being strike free even yet.

UCM's ILA Strike Watch

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ILA Strike Watch 2012: Hot News – Negotiations Stop, Strike to Start! https://www.universalcargo.com/ila-strike-watch-2012-hot-news-negotiations-stop-strike-to-start/ https://www.universalcargo.com/ila-strike-watch-2012-hot-news-negotiations-stop-strike-to-start/#respond Wed, 19 Dec 2012 19:24:46 +0000 https://www.universalcargo.com/?p=7574 A labor strike that will shut down U.S. East Coast and Gulf ports a little more than a week from now seems unstoppable. Negotiations have once again broken down between the ILA and the USMX. Nothing seems to be scheduled for the two parties to meet back at the negotiation tables before ILA is scheduled […]

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ILA Strike Watch

A labor strike that will shut down U.S. East Coast and Gulf ports a little more than a week from now seems unstoppable.

Negotiations have once again broken down between the ILA and the USMX. Nothing seems to be scheduled for the two parties to meet back at the negotiation tables before ILA is scheduled to strike, not merely shutting down ports but handing a blow to the U.S. economy.

American Shipper broke the news shortly after it happened that talks “broke off abruptly” yesterday afternoon.[1]

The Federal Mediation and Conciliation Service (FMCS) tried to get another short contract extension between USMX and ILA in order to keep the parties at the negotiating table. USMX agreed but the ILA did not, according to the former’s labor updates website.

However, American Shipper reported that ILA’s executive vice president, Bennie Holland, said ILA was “willing to extend the contract to Feb. 1 and keep talking if management would be willing to take the container royalty cap off the table…”[2]

USMX’s desire to have a container royalty cap has been a major sticking point in the negotiations.

ILA would already have been on strike if the FMCS had not been successful in getting the two parties to agree to a contract extension through December 29th.

But back to that American Shipper report and Holland said because USMX refused to accept ILA’s demand of taking the royalty cap off the table, “right now unless we hear back from them we [ILA] will be on strike on Dec. 29”

USMX senior vice president and chief operating officer Dave Adam said, according to American Shipper, “’employers are willing to continue to bargain in good faith,’ but that the union had put terms on the extension that were unacceptable.”[3]

It seems kind of like a case of “he said, she said” as far as who left the negotiation table, not willing to extend the current contract. However, if the USMX is willing to keep negotiating with the contract as is while trying to figure out a new one and the ILA is only willing to extend and keep negotiating if USMX drops a major item they’re negotiating for, USMX seems the most committed to working out a deal without the event of a strike.

Then again, off course they would be. That is the point of a strike. It is a tool of organized labor to use against their employer(s) in an attempt to gain leverage. It’s just in this case, the strike becomes a tool against not just ILA’s employer, but the international shipping industry and the U.S. economy as a whole.

Now carriers are implementing “Congestion Surcharges” on cargo going to U.S. destinations, even if the cargo is imported through Canada or Mexico with the mess the strike will cause.

Because the strike is so close and so likely, it looks like carriers may stop taking export bookings through the East Coast and Gulf ports as early as today.

There is no single contingency plan for working around massive port closures due to the ILA strike. Universal Cargo Management will be working with shippers on the best solutions that fit import and export needs.

These solutions may include utilizing shipping by air freight, air and sea combo shipping, rerouting through West Coast ports, and more.

Be ready, this ILA strike is not likely to only cause problems for import and export shipments that would go through East Coast and Gulf ports. Other ports are likely to see delays due to congestion and possibly even due to labor striking on the West Coast in solidarity with the East Coast labor.

We’re ready to help you with your international shipping needs and committed to providing you with the best possible options for your imports and exports no matter what the situation. Contact us about your cargo today.

ILA Strike Watch

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ILA Strike Watch 2012: Ports Could Shutdown in 11 Days https://www.universalcargo.com/ila-strike-watch-2012-ports-could-shutdown-in-11-days/ https://www.universalcargo.com/ila-strike-watch-2012-ports-could-shutdown-in-11-days/#respond Tue, 18 Dec 2012 23:45:09 +0000 https://www.universalcargo.com/?p=7571 We are 11 days away from another possible blow to the U.S. economy. The International Longshoremen’s Association (ILA) have reached the end of their contract with the United States Maritime Alliance (USMX) and are prepared to close down the east coast and gulf ports with a strike. Originally, this strike was scheduled to start back […]

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ILA Strike Watch

We are 11 days away from another possible blow to the U.S. economy.

The International Longshoremen’s Association (ILA) have reached the end of their contract with the United States Maritime Alliance (USMX) and are prepared to close down the east coast and gulf ports with a strike.

Originally, this strike was scheduled to start back in October, but thanks to the work of the Federal Mediation & Conciliator Service (FMCS), the contract was extended until December 29th. This allowed the economy not to take a hit going into the fiscally important Christmas and holiday season.

ILA President Dennis Daggett has been given authority by the union to call for a strike if a new agreement has not been reached by December 29th. That schedules the strike to start on December 30th.

This would effectively stop imports and exports from moving through the ports all along the east coast of the nation.

We just saw an 8 day strike by the International Longshore and Warehouse Union Local 63 Office Clerical Unit (“OCU”) on the west coast of the nation that shut down terminals at the ports of Los Angeles and Long Beach.

Estimates put the impact of that strike at $8 billion.

This threatened east coast strike is far more sweeping and could hit the economy even harder.

ILA and USMX resumed talks just over a week ago in Delray Beach, FL. So far, no word has come of resolution.

On the 14th, USMX posted the following on their website:

Members of the USMX Bargaining Committee met with ILA Wage Scale Delegates on December 10, 2012, and presented a comprehensive proposal for a new contract. Although the proposal was quickly rejected by the Wage Scale delegates and a strike vote was taken, other small committees met during the week. At one of the small committee meetings, the ILA presented a counterproposal, which was taken under advisement by USMX. While several issues were discussed, no agreements were reached.

A major sticking point in the negotiations is container royalty payments.

The day after talks resumed, ILA Local 1588 put the following up on their website about the contract USMX offered and the negotiations:

USMX Proposes a 6 year contract with only a $2 wage increase within the 6 years.

Put a cap on current Container Royalty (supplemental wages) and end your Container Royalty in 25 years. All new longshoremen will not be eligible to receive any royalties. USMX is also looking to eliminate all blow systems and implement a shift system. This means when you are not on the terminal you will not get paid.  No matter how many years you have in the industry or have left in the industry you will only get a Container Royalty (supplemental wage) check for the next 25 years then it will be a thing of the past. After the entire Wage Scale delegation (200 plus members) denied USMX’s proposal for cuts USMX walked out.

President Daggett asked the ILA’s 200-member wage scale committee for a strike authorization after he delivered a speech accusing United States Maritime Alliance of trying to reverse gains the ILA has made in previous contracts. The roll call vote in favor of the strike authorization was unanimous. We are still in the process of negotiating and the days are numbered so brace yourself for a hell of a ride. Remember that Local 1588 set a budget for one hundred thousand dollars to send pickets where ever our cargo is diverted to. We have the federal mediators in Del Ray Florida [sic.] with us and continue to try and make progress.

President Harold Daggett of the ILA is refusing to settle for less then [sic!] what is due, what is ours by right, what is ours by the sweat of our labor and effort.

I.L.A. WILL CONTINUE TO STAND STRONG!!!!!

We have your back President Daggett!!!

If other factions of the ILA are planning to spend similar money on the strike that the Local 1588 is, the ILA is poised to spend hundreds of thousands of dollars on a strike that could cost our country’s economy billions.

It’s a scary prospect. A strike would hurt businesses throughout the country, cost people jobs dependent upon the flow of the supply chain, and hurt our nation as a whole.

In 2002, a strike occurred that forced President George W. Bush to use the Taft-Hartley Act to end. Many are hoping President Obama will act before the strike begins and the Taft-Hartley Act becomes necessary.

Yesterday, the National Retail Federation (NRF) sent a letter to President Obama urging him to do something before this strike happens and the nation experiences another disaster. A press release on their website included this:

“A strike of any kind at ports along the East and Gulf Coast could prove devastating for the U.S. economy,” NRF President and CEO Matthew Shay wrote to the president. “We call upon you to use all means necessary, including Taft-Hartley, to keep the two sides at the negotiating table and head off a coast-wide strike.”[1]

Here at Universal Cargo Management, we’re hopeful that the parties will reach an agreement amicably and no strike will happen.

However, we are committed to helping shippers take care of their import and export needs no matter what happens.

We are ready to handle your logistics needs and challenges whether that means diverting your shipments or expediting our truckers to get to your shipping containers earlier.

We know the timely and safe delivery of your goods is vital to your company and we’ll do everything possible to make sure your business’ import and export needs are met no matter what the strike picture looks like.

We’ll keep watching the strokes made on that picture and keep you updated with our ILA Strike Watch. In the meantime, let us know any concerns or questions you have about your international shipping needs.

ILA Strike Watch

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5 Most Common Needs from a Freight Forwarder (w/ videos) https://www.universalcargo.com/5-most-common-needs-from-a-freight-forwarder-w-videos/ https://www.universalcargo.com/5-most-common-needs-from-a-freight-forwarder-w-videos/#respond Thu, 13 Dec 2012 20:21:53 +0000 https://www.universalcargo.com/?p=7511 Commonly asked questions are, “What is a freight forwarder and why do I need one?” Freight forwarding is a service used by companies that deal in international or multi-national import and export. While the freight forwarder doesn’t actually move the freight itself, it acts as an intermediary between the client and various transportation services. Sending […]

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Commonly asked questions are, “What is a freight forwarder and why do I need one?”

Freight forwarding is a service used by companies that deal in international or multi-national import and export. While the freight forwarder doesn’t actually move the freight itself, it acts as an intermediary between the client and various transportation services.

Sending products from one international destination to another can involve a multitude of carriers, requirements, and legalities. A freight forwarding service handles the considerable logistics of this task for the client, relieving what would otherwise be a formidable burden.

Click here to see more on this as well as answers to other FAQs, click here.

Obviously, companies that import and export goods have specific needs for a freight forwarder, but the following are the 5 most commone needs from a freight forwarder.

  1. Reliable Service:

    Knowing you can sleep at night while your freight is in your Freight Forwarder’s hands is priceless. This allows you to spend your time actually running your business.

  2. Communication:

    When unforeseen challenges occur, it is important that your Freight Forwarder keeps you informed proactively, instead of you having to chase them down.

  3. Competitive Rates:

    As the market changes constantly, it is important that your Freight Forwarder keeps you competitive.

  4. One Stop Shop:

    It is always easier when the logistics services are covered by one company instead of having to deal with several companies to complete the supply chain.

  5. Good Working Relationships:

    It is always better when you are working with a person that knows your needs and treats you like a VIP.

Having been a trusted freight forwarder for over 25 years, Universal Cargo Management is proud to say that we know how to meet these needs for our customers.

Below are a couple videos our CEO, Devin Burke shot while talking to some of UCM’s customers while visiting at the High Point Market Furniture Trade Show. The furniture industry is just one of many industries Universal Cargo Management handles freight forwarding for.

To see more about how UCM takes care of customer needs, check out our Testimonials Page by clicking here.

YouTube Video

YouTube Video

Get a free freight rate quote and see how UCM can take care of your freight forwarding needs by clicking here.

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Agreement Ends Strike & Import/Export Operations Resume https://www.universalcargo.com/agreement-ends-strike-import-export-operations-resume/ https://www.universalcargo.com/agreement-ends-strike-import-export-operations-resume/#respond Thu, 06 Dec 2012 21:48:17 +0000 https://www.universalcargo.com/?p=7743 All terminals of the ports of Los Angeles and Long Beach are open as of 7am Wednesday morning. The OCU (International Longshore and Warehouse Union Local 63 Office Clerical Unit) strike that crippled the ports of Los Angeles and Long Beach went into an 8th day on Tuesday with no end in sight. Then it […]

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ILA Strike Watch

All terminals of the ports of Los Angeles and Long Beach are open as of 7am Wednesday morning.

The OCU (International Longshore and Warehouse Union Local 63 Office Clerical Unit) strike that crippled the ports of Los Angeles and Long Beach went into an 8th day on Tuesday with no end in sight. Then it seemed to suddenly be over.

L.A. Mayor Villaraigosa announced an agreement had been made late Tuesday night between the harbor employers and the OCU. The mayor put pressure on the two parties to accept federal mediation.[1]

It was 2002 the last time a strike similar to this happened. That one lasted 10 days before the president used emergency power to end it. There was no sign that Obama was going to do something similar during this strike that was costing the economy an estimated billion dollars a day and logistical nightmares. People were beginning to expect this strike to go well beyond 10 days.

However, the pressure from Mayor Villaraigosa and the approach of federal mediators put extra urgency into the negotiations between the nation’s highest paid clerks and the terminal operators employing them.

Villaraigosa went back to the bargaining table around a half hour before the federal mediation team, who joined a little before 9pm. Close to 10pm, there was a tentative agreement on a new contract between the OCU and terminal operators.[2]

Upon reaching an agreement, the Harbor Employers Association released a statement that included the following:

“The harbor employers are grateful for the efforts of the elected and community leaders who assisted the parties in reaching an agreement.  Thousands of workers who had been left without work will now be able to return to their jobs and keep cargo moving in the harbor community.

The Ports of Los Angeles and Long Beach are a critical economic gateway for the nation.  The harbor employers look forward to resuming operations to help the ports grow and maintain their vital role in the economic welfare of the community, region, and nation.”[3]

OCU President John Fageaux said, “There’s going to be a backup, but my people are very eager to get back to work. We’re going to make our best effort to take care of the ships that are out there as quickly as possible.”[4]

Everyone will have to work very hard to catch up from the 8 day strike that caused ships to be docked, rerouted, cargo backed up, and the supply chain severely disrupted.

But hopefully, the tension that has been building for the last couple years in the OCU is now relieved.

OCU members had been working without a contract since 2010. The new contract will take them to 2016.

Apparently, the language of the contract was made acceptable to the OCU in terms of potential new technology and outsourcing while the employers made some gain in staffing control.

Gazettes reports, “The deal includes wage and pension increases for the OCU members, an acknowledgement that technology can continue to be implemented that elevates customer service and operators will get some flexibility in hiring decisions for fulltime and temporary workers, [Harbor Employers Association spokesman Steve] Getzug said.”

All that’s left is for the OCU to completely ratify the agreement, but that is expected to happen smoothly during the next week or so.[5]

Now that cargo imports and exports can start getting back to normal at the ports of Los Angeles and Long Beach, attention shifts over to the ILA strike watch on the East Coast where the Longshoremen are scheduled to strike in less than a month from now.

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ILA Strike Watch: Closures List in L.A./Long Beach Ports from OCU Strike! https://www.universalcargo.com/ila-strike-watch-closures-list-in-l-a-long-beach-ports-from-ocu-strike/ https://www.universalcargo.com/ila-strike-watch-closures-list-in-l-a-long-beach-ports-from-ocu-strike/#respond Fri, 30 Nov 2012 17:00:29 +0000 https://www.universalcargo.com/?p=7453 Here’s the situation. The International Longshore and Warehouse Union Local 63 Office Clerical Unit (OCU) are on strike. The strike is having a severe impact on the flow of cargo being imported and exported through the ports of Los Angeles and Long Beach as well as jobs. 40% of the nation’s imports come in through […]

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Here’s the situation. The International Longshore and Warehouse Union Local 63 Office Clerical Unit (OCU) are on strike.

The strike is having a severe impact on the flow of cargo being imported and exported through the ports of Los Angeles and Long Beach as well as jobs.

40% of the nation’s imports come in through the Los Angeles and Long Beach ports, so this strike is not only hurting the community around the port but of the whole nation.

The employers have made offer and renewed offers to the OCU and are reaching out through mediation, trying to resume talks that have been broken off.

So far, there has been sign from OCU that they are willing end the strike and negotiate.

In a statement from negotiating teams representing employers at the ports of Los Angeles and Long Beach, they say:

“The OCU’s unreasonable demands and unwillingness to meet with a mediator continue to hold the harbor – and national – economy hostage for the sake of their own self-interest.  That is simply irresponsible.”

At this point, I have to agree.

OCU employees are the highest paid clerical workers in America, with annual compensation packages of approximately $165,000 per year. I don’t make a quarter of what they do.

“In an effort to resolve this dispute, the harbor employers have offered to enter into mediation on numerous occasions throughout the last two and one-half years, as recently as this week.  However, the OCU rejected the offer and put up pickets instead.  These uncompromising and disruptive tactics run counter to the best interests of the Los Angeles region and the nation,” according to the statement mentioned above.

Here’s a look at what the terminals currently look like:
Port of Long Beach Terminals CLOSED:

Pier T = TTI (Hanjin terminal) – Lines served: Hanjin/KLine/Cosco/Yang Ming/NYK/Hapag/OOCL/CMA-CGM/MSC

Pier G = ITS (KLine terminal) – Lines served: Hanjin/KLine/Cosco/Yang Ming/JAS Service

Pier F = LBCT (OOCL terminal) – Lines served: OOCL/NYK/Hapag

Port of Long Beach Terminals OPEN:

Pier J = PCT ( Cosco Terminal operated by SSA) – Lines served: Cosco/Hanjin/KLine/Yang Ming/CMA-CGM/Zim

Pier A = SSAT (MSC & Zim main terminal operated by SSA) – Lines served: MSC/Zim

Pier C = SSAT (Matson terminal operated by SSA) – Lines served: Matson

 

Port of Los Angeles Terminals CLOSED:

Berth 100 = WBCT (China Shipping terminal) – Lines served: China Shipping/Hanjin/KLine/Cosco/Yang Ming/Evergreen/Zim

Berth 121-131 = YMCT (Yang Ming terminal) – Lines served: Yang Ming/Hanjin/KLine/Cosco/China Shipping/Evergreen/Zim

Berth 212-225 = YTI (NYK terminal) – Lines served: NYK/OOCL/Hapag

Berth 226-236 = Evergreen (Evergreen terminal) – Lines served: Evergreen/China Shipping/Zim

Berth 302-305 = GGS (APL terminal) – Lines served: APL/HMM/MOL/Hapag/Evergreen

Berth 401-404 = APM (Maersk terminal) – Lines served: Maersk/Horizon/Hapag/OOCL/SAF/NYK/MSC/CMA-CGM/US Lines

Berth 405-406 = CUT (Hyundai terminal) – Lines served: APL/HMM/MOL

 

Port of Los Angeles Terminals CLOSED:

Berth 135-139 = Trapac (MOL terminal) – Lines served: MOL/APL/HMM/Hamburg Sud

 

Source: http://www.harboremployers.com/web/news/press/details/?LOS-ANGELES-LONG-BEACH-WATERFRONT-LABOR-NEGOTIATIONS-UPDATE-61

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Hurricane Sandy Inspires Shipping Containers as Emergency Housing https://www.universalcargo.com/hurricane-sandy-inspires-shipping-containers-as-emergency-housing/ https://www.universalcargo.com/hurricane-sandy-inspires-shipping-containers-as-emergency-housing/#respond Thu, 29 Nov 2012 18:10:26 +0000 https://www.universalcargo.com/?p=7381 It turns out shipping containers – those modular miracles of international commerce – are suited to more than just safely storing ocean freight cargo. You may have heard of the trend of re-vamping old shipping containers, cleverly converting them into all kinds of coolness. But now they could provide disaster relief in the wake of […]

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Shipping Containers 1It turns out shipping containers – those modular miracles of international commerce – are suited to more than just safely storing ocean freight cargo.

You may have heard of the trend of re-vamping old shipping containers, cleverly converting them into all kinds of coolness. But now they could provide disaster relief in the wake of Hurricane Sandy.

The previously unfashionable hulks of corrugated steel have been known to moonlight as modern homes and chic coffee shops, more-and-less successful sculptures, and trendy hotels. If you are into that, then check out this website:

http://webecoist.momtastic.com/2009/04/05/15-awesome-ways-to-reuse-shipping-containers/

This is all very cool given shipping containers’ short lives and prevalence. Shipping containers are only in circulation for about 5 years as freight hauling pods before they are retired to sit and rust in shipyards.

Engineers are taking recycling to a whole ‘nother level by carving up abandoned containers, often furnishing the insides, and breathing second life into these otherwise ugly shells.

But as far as practical application goes, the shipping container reincarnations seemed out-of-reach, a novelty only the rich could afford and the eco-groovy would care about. No longer.

Recent events like Hurricanes Katrina and Sandy have provided the impetus to make the dream of the practical shipping container domicile one giant leap closer to reality – like New York Mayor Bloomberg using them in his disaster housing plan.

Recently the Observer published an article about preparations by New York City administrators to instead of loading shipping containers with goods, use them as temporary emergency housing units after future disasters.[1] After sponsoring a contest for designs for just such provisional housing – called What If NYC – the converted shipping container was declared the winner.

The shipping containers are hardly recognizable as such from the inside, having been (dare I say) rather lavishly furnished.

The pictures[2] of the prototype are lovely and show surprisingly spacious rooms filled with light. They have a somewhat larger than ship’s cabin feel about them but the same efficient use of space I associate with nautical design.

The example unit is described thus, “On one end would be the bedroom, with a bed, dresser, nightstands, probably a lamp or two. On the other end is the living-dining room, with couch, table, maybe an easy chair, and a small kitchen complete with pots, pans, china and flatware. In between is the bathroom, stocked with clean towels, soap, toothbrushes, even toothpaste.”

Hurricane Sandy Home DestructionThe idea is that the temporary domiciles would be equipped with all the basics so someone who just watched their home get demolished by a storm like Sandy could walk into a clean, safe space to take a shower and cook a meal and slowly put their life back together.

The container homes are made to run either on or off the power grid (with the help of generators) and even have their own septic systems to process human waste. The prototype provides 450 square-feet of living space within a 40-foot long by 8 foot wide shipping container. Designers project that they will cost between $50,000 and $80,000 for each module.

More than just functional, the designers went above and beyond, considering the aesthetics of the space and including decorative details like prints of Picasso on the bathroom walls. Windows and doors are built into both ends of the unit, both for safety (multiple exits are required by the fire department) and for light.

One of the people interviewed, David Burney, commissioner of the Department of Design and Construction, summed it up saying, “It’s nicer than my apartment”.

The shipping container-as-emergency-housing is especially suited to providing shelter to urban dwellers after natural disasters like Hurricane Sandy for two big reasons. They are compact and stackable. Plans exist for emergency apartment blocks composed of shipping container modules stacked four containers high, and as many as 12 containers wide. Four of these blocks assembled around a courtyard-like space in the center would create a ready-made apartment complex.

All things considered, the plans seem pretty smart and efficient. The cost seems high to me, but I won’t get into the budget of FEMA and don’t think those who have lost their homes will be complaining that too much was spent on providing them with a temporary domicile. In fact, I am not sure they would be able to pry me from one even after the disaster had passed, because for me (as for Mr. Burney) these shipping container temporary homes are nicer than my apartment.

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Gold, Frankincense, and Coffee? Top Ten Import/Export Goods w/ Pics https://www.universalcargo.com/gold-frankincense-and-coffee-top-ten-import-export-goods-w-pics/ https://www.universalcargo.com/gold-frankincense-and-coffee-top-ten-import-export-goods-w-pics/#respond Tue, 27 Nov 2012 00:04:36 +0000 https://www.universalcargo.com/?p=7450 “And low, wise men came from the East, bearing gifts of gold, frankincense and coffee.”  Ok, ok, the wise men did not bring gifts of coffee to the Newborn King. They brought gifts that were highly valued commodities in the 1st Century – gold, frankincense, and myrrh![1] (Coffee hadn’t really caught on yet as an […]

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“And low, wise men came from the East, bearing gifts of gold, frankincense and coffee.”  Ok, ok, the wise men did not bring gifts of coffee to the Newborn King. They brought gifts that were highly valued commodities in the 1st Century – gold, frankincense, and myrrh![1] (Coffee hadn’t really caught on yet as an international beverage.)[2]

With Christmas drawing nigh, I began to think about those first gifts and how we today perceive the highly valued commodities of 1st Century Palestine: gold, frankincense, and myrrh.

The first one, gold, has staying power. We all know about gold, think of it as valuable, and most of us own something made of (or to be honest, thinly coated with) gold. Look into this gift ideas generator to select and buy the best ones at any special occasion.

What about the other two, frankincense and myrrh? Yeah, not so much. When was the last time you stopped by the store to pick up some aromatic resins?

While at first glance gold seems to be the only gift of the three we can relate to, upon further reflection there is one other important connection between the gifts of the Magi and the gifts we are likely to tuck under the Christmas tree this year. Are you ready?

Gold, frankincense, and myrrh were not native to Palestine.[3] They were brought there, traded, most likely over long distances. Most of the Christmas gifts we purchase are also not produced near where we live. In fact, it’s a good chance that they will be made from products that originate far from home.

This is because we live in a world of global commerce, the roots of which lay in the ancient trade routes connecting the various empires of the past. The Roman Empire for example developed sophisticated trade relationships with suppliers in the Near and Far East.[4]

Painstakingly transported over sea and over land, trade commodities like purple dye made from murex snails, silks and spices were imported from east to west to satisfy the appetites of Imperial Rome and her colonies across the Mediterranean basin.[5]

Today commodities also tend to flow east-to-west but from even further afield. China and other nations on the Pacific Rim are the source of much of what is imported to the western hemisphere today.

All this reflection on ancient trade goods led me to the question: Which products are being traded the most today?

So below is a “top ten” list of the most internationally traded goods plying the high seas today. [6]

If you’re an international shipper, perhaps you’ll see something on this list that you import or export.

If you’re thinking of going into international business, you may be thinking that this list is a good place to start in deciding the products you should import or export. However, I would suggest choosing a product you are passionate about rather than a good that is highly traded for starting your import/export business.

For more on becoming a successful international shipper, click here.

Some of the top commodities on this list will not surprise you, but some may.

10. Cotton

Cotton

9. Wheat

Wheat

8. Corn

Corn

7. Sugar

Sugar

6. Silver

Silver

5. Brent Oil

Brent Oil

4. Gold

Gold

3. Natural Gas

Natural Gas

2. Coffee

Coffee

1. Crude Oil

Oil Pump


[1] Matthew 2:11

[2] Pomeranz and Topik, “The World That Trade Created”, 2006, p. 81.  Pomeranz notes that coffee as a beverage really was invented around 1400 in the city of Mokka on the Arabian Peninsula and took off in the 1500s throughout the Near East.

[3] Freedman, “Out of the East”, p. 89. Frankincense is native to the mountains of what is today Yemen while myrrh is found in rocky soil in the Horn of Africa as well as the Arabian Peninsula.  Gold too was mined further east, in the Arabian Peninsula and Northern Africa.

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ILA Strike Watch 2012: Overview of Strikes on Both Coasts https://www.universalcargo.com/ila-strike-watch-2012-overview-of-strikes-on-both-coasts/ https://www.universalcargo.com/ila-strike-watch-2012-overview-of-strikes-on-both-coasts/#respond Thu, 22 Nov 2012 20:28:51 +0000 https://www.universalcargo.com/?p=7430 Strikes are looming at US ports on both coasts this winter season. These could have a serious impact on your imports and exports if you’re shipping ocean freight. This blog will explain the Portland Oregon port strike first then provide an update on the New York/New Jersey port strike. Portland-area Strikes Portland, Oregon is a […]

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Strikes are looming at US ports on both coasts this winter season. These could have a serious impact on your imports and exports if you’re shipping ocean freight. This blog will explain the Portland Oregon port strike first then provide an update on the New York/New Jersey port strike.

Portland-area Strikes

Portland, Oregon is a lovely city about 75 miles from the Pacific Coast known for its evergreen forests, rainy weather, and liberal leanings. Today though, the threat of strike is putting the west coast port on the map. Not just one but two groups of dock workers are prepared to strike, potentially choking import/export activities at no less than seven Portland-area terminals.

Port authorities will soon contact shipping lines and inform them of the potential strikes, allowing the carriers to decide whether or not to risk scheduling cargo docking during the potential strike or to divert their cargo to alternative ports, increasing costs and delivery times.  Millions of dollars would be lost if the strike does go into effect and there is the chance that some shipping container lines may abandon Portland area ports entirely.[1]

Security Officers Strike

port securityAfter months of dispute between labor and port authorities, representatives of the International Longshore and Warehouse Union have announced a potential strike to begin on Nov. 25th, less than a week from now.[2]  The workers actually threatening to strike are 25 security officers, members of the Local 28.

Because of union solidarity however, other members who work at the port unloading cargo and performing other essential tasks would be unlikely to cross the picket line if their fellow union members decide to strike. This would set up a chain reaction at terminals 2, 4, and 6 in Portland, suspending port activities dependent upon union labor.

Union representatives left the negotiating table on Friday after a final effort to come to a compromise with port authorities failed. The threatened strike is likely to divert cargo from Portland to other west coast ports to avoid delays that would cost those involved millions of dollars in revenue should no negotiation be settled on.

Strike over Grain Handlers Contract

export grainSimultaneously, longshoreman and Pacific Northwest Grain Handlers Association have failed to resolve their negotiations, resulting in an ultimatum from the grain merchants. Their “last, best and final offer”[3] was made to longshoremen representatives on Friday, Nov. 16th. If the offer is not accepted by ILA union reps, grain elevator owners have already asserted they would employ substitute non-union labor in order to maintain their supply schedules.[4]

Such a strike would hit the US economy right in the bread basket. Northwest ports are the prime conduit for the nation’s grain export. Fully one quarter of the grain grown in the US is exported via Northwestern ports.  This year was marked by poor grain harvest, which has driven up grain prices and made negotiations more strategic.

A representative for the Longshoremen, Leal Sundet, accused the grain handlers association of taking advantage of a rough harvest year, “In light of a low-yielding harvest and corresponding high bushel prices,” Sundet wrote, “the profitable multinational grain merchants are using the circumstances to undermine a mature 80-year contract with longshoremen that’s made the Northwest one of the most productive grain export regions in the world.”

Though the negotiations have been conducted since August, it appears the two parties are far from a compromise. Federal mediators were dispatched to aid in the talks but to no effect so far.

New York/New Jersey Strike Update

Talks will soon resume between the ILA and NY/NJ port authorities. Contract negotiations between the two parties have been scheduled for early December.[5] Union negotiators are holding firm on their demands despite pressure to compromise, especially to allow a cap on container royalties.[6]  Three days of meetings have been scheduled in Delray Beach, Florida. These talks will be extended if it looks like an acceptable contract can be negotiated at that time.[7]

 



[7] http://www.ilaunion.org/news_Wage_Scale_Negotiating.html

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ILA Strike Watch: Daggett Speaks & No Resolution Seems Eminent https://www.universalcargo.com/ila-strike-watch-daggett-speaks-no-resolution-seems-eminent/ https://www.universalcargo.com/ila-strike-watch-daggett-speaks-no-resolution-seems-eminent/#respond Tue, 20 Nov 2012 20:27:30 +0000 https://www.universalcargo.com/?p=7491 The International Longshoremen’s Association (ILA) has been quiet about negotiations over the last many weeks, but the news broke across the internet that ILA President Harold Daggett has spoken up about ILA’s stance in negotiations with the U.S. Maritime Alliance (USMX). The Journal of Commerce (JOC) is headlining with ILA’s Daggett Draws Line on Bonuses. […]

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describe the image

The International Longshoremen’s Association (ILA) has been quiet about negotiations over the last many weeks, but the news broke across the internet that ILA President Harold Daggett has spoken up about ILA’s stance in negotiations with the U.S. Maritime Alliance (USMX).

The Journal of Commerce (JOC) is headlining with ILA’s Daggett Draws Line on Bonuses.

American Shipper is highlighting that the union is in a position with its negotiators having said they “would not budge” when it comes to opposing USMX on eliminating 8-hour guarantee and overtime provisions.[1]

But the real focus in the American Shipper article is on Daggett’s hard stance, fighting container royalty caps.

American Shipper quotes Daggett as saying USMX “want to grab more money away from the ILA and its members by placing a cap on container royalty.”[2]

While Daggett sees the royalty caps as a way for USMX to take money from the ILA, Carl Horowitz sees the proposed royalty caps as a provision seeking to reduce port corruption in his article where he writes about ILA connections to organized crime and a select few ILA jobs that are extremely high paying for “no/low-work, no/low-show positions.”[3]

I think almost everyone is in agreement that the average dockworker is very hard working and deserving to be fairly compensated.

The problem at the negotiating table is where is the balance between fair pay and compensation that is not feasible for USMX. Employees should be treated and compensated fairly, but it defeats the purpose to pay more than a business can afford for them.

Conservative reporter Michelle Malkin sees the strike as something that will “tip the economy back into recession over productivity and efficiency rules changes[4]

Perhaps that is sensationalizing it a bit, but the U.S. economy is in a delicate recovery period and a strike by about 14,500 union workers at 14 ports would certainly be problematic.

describe the imageComing off all the setbacks from Hurricane Sandy that the east coast and its ports suffered, the strike is poised to compound a bad situation.

Thinking about the importance of the east coast ports to the economy especially during the economically crucial time of the holidays, the ILA graciously postponed their strike date to December 30th.

I think many overlook, don’t realize, or forget what a big thing it is that the ILA did by setting aside their frustrations for the good of the country in postponing their strike until the end of the year instead of hitting the picket lines in October when its impact would be felt the strongest.

Most hoped when the strike was postponed that with all that extra time, negotiations would be worked out, an agreement reached, and the strike would be altogether cancelled.

Now, as Daggett breaks the silence and we hear words like “would not budge” and “lines drawn” that optimism is being chipped at.

Compromises will have to be made on both sides for this issue to be resolved. That is, after all, how negotiations work. The question is will both sides make compromises acceptable enough to the other in time to stop the strike and allow imports and exports to ship smoothly.

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Texas Hold’em Fights Human Trafficking & Sex Slavery https://www.universalcargo.com/texas-holdem-fights-human-trafficking-sex-slavery/ https://www.universalcargo.com/texas-holdem-fights-human-trafficking-sex-slavery/#respond Thu, 15 Nov 2012 22:14:53 +0000 https://www.universalcargo.com/?p=7616 No, not all Texas Hold’em poker games fight human trafficking and sex slavery. But on Saturday, Universal Cargo Management’s CEO Devin Burke, Managing Director Kamy Eliassi, and Account Executive Carlos Perla were in a Texas Hold’em tournament that was. The buy in was only $40; but, because it was a fundraiser in the fight against human […]

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No, not all Texas Hold’em poker games fight human trafficking and sex slavery.

But on Saturday, Universal Cargo Management’s CEO Devin Burke, Managing Director Kamy Eliassi, and Account Executive Carlos Perla were in a Texas Hold’em tournament that was. The buy in was only $40; but, because it was a fundraiser in the fight against human trafficking, the stakes were high.

iEmpathize Poker TournamentIt was the first annual Poker Tournament/Silent Auction fundraising event held by iEmpathize.

iEmpathize is a child advocacy and media movement that creates and collaborates with grassroots solutions impacting vulnerable and victimized children of human trafficking. They wrestle out strategies in the field and creatively inspire people to empathize and engage.

If you read our blog or have checked out our Mission Page, you know Universal Cargo Management supports organizations like iEmpathize and Zoe International that fight human trafficking and the sex slavery it produces where the victims are so often vulnerable children.

We like that iEmpathize uses creativity and fun events to engage people in this serious issue.

The Texas Hold’em Event was certainly fun and especially fun for Kamy, who won the whole tournament. That’s right, Universal Cargo Management’s own Managing Director was the grand prize winning poker player of the night!

Devin Kamy Carlos iEmpathize Poker TournamentWe won’t embarrass Kamy by describing his child-like grin or how “foolishly happy” he was, as his coworkers put it. But we will post the picture you see on the right. Is that a sideways baseball cap, Kamy?

As the tournament winner, Kamy received an iPad 2 and everyone who played got door prizes; however, the real winners of the night are the children who will be impacted iEmpathize.

All the proceeds of the night go to iEmpathize’s Southern CA projects where they are impacting vulnerable and victimized children from the child sex slavery industry.

Often, we think of sex slavery and human trafficking as a problem far away in other countries, but it is happening right here in Southern California and all over the United States.

Check out this video from iEmphasize in which a survivor of human trafficking and sex slavery shares her story.

We encourage you to get involved in the fight against human trafficking and sex slavery. You can go to iEmpathize.org and find things you can do or donate to those actively fighting.

iEmpathize is a 501(c)3 and all gifts are tax deductible.

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Could Sailing Ships Come Back in the International Shipping Industry? https://www.universalcargo.com/could-sailing-ships-come-back-in-the-international-shipping-industry/ https://www.universalcargo.com/could-sailing-ships-come-back-in-the-international-shipping-industry/#respond Tue, 13 Nov 2012 21:37:38 +0000 https://www.universalcargo.com/?p=7523 I have long been impressed by the accomplishments of the old-fashioned sailing ships. I have even blogged about sailing ships in international shipping. Here. They raced to deliver goods at competitive speeds. They moved cargo from one side of the world to another. Sailing ships were THE fastest, best way to move anything – be […]

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I have long been impressed by the accomplishments of the old-fashioned sailing ships. I have even blogged about sailing ships in international shipping. Here. They raced to deliver goods at competitive speeds. They moved cargo from one side of the world to another. Sailing ships were THE fastest, best way to move anything – be it people or goods – for thousands of years.

What can I say? I am a fan. Then steam power was invented and later fossil fuel burning engines were applied to the shipping industry. The expertise needed to coax speed and efficiency out of canvas, rigging, and masts was replaced by concerns about fuel storage and efficiency. The great age of sail ended and cargo ships developed into low-lying hulks, bereft of grace and no longer powered by that mercurial but inexhaustible form of energy, the wind.

I know I know, I am romanticizing the golden age of sail. People got stuck for weeks, right, when capricious winds failed to materialize? Wind was just too unreliable an energy source. You couldn’t bank on it. Burning fossil fuels was “progress” and canvas couldn’t compete, otherwise it would have.

Cargo Sail ShipBut now, while we as a global community search for ways to lessen our impact on the planet, especially by reducing fossil fuel emissions, wind-power is attractive again. Scientists and engineers want to re-apply this low-impact technology to the problems of the international shipping industry.

In the world of international shipping, there are some serious current concerns. Big ones. Like how will we meet ever increasing clean-burning fuel legislation requirements? How can we reduce our operating costs? How can we use less fuel without sacrificing efficient shipping times?

One of the solutions offered is a return to using wind power to transport cargo internationally, reports the New Yorker. Nautical engineers have been tinkering with using sails to power commercial ships since at the 1980s.[1] The Carib Alba for example, a 3,500 ton merchant vessel, uses an “auxiliary wind propulsion” system.[2]According to their website, the Carib Alba design has proved cost effective and therefore “economically viable”.[3]
Recently however, other wind-powered commercial ship designs are being tested through the construction of prototypes. At least one of these prototype vessels, the B9, combines sails with a bio-gas engine to power the ship.[4] The result is an interesting hybrid of wind and bio fuel capable of powering a cargo ship on the high seas.

The B9 is intended to operate without fossil fuels. Its massive sails are 180 feet tall and affixed to 3 masts designed to make the 3,000 ton cargo carrier they are attached to economically viable as a fossil fuel–free commercial carrier on “certain trading routes”.

Herein lies the real challenge – to design a ship that is economical to operate and that includes sails as an integral feature.  None of the latest ship designs are solely wind powered – instead wind power is used to supplement other forms of propulsion.

Engineers admit that reintroducing sail power isn’t appropriate for the largest commercial ships, but is viable for smaller craft. Ships in the 3,000-10,000 ton range could benefit from reintroducing sail-power, and ships of this size make up one fifth of the global commercial fleet.

The sails themselves are perhaps the most re-designed feature of all. One Japanese prototype featured massive aluminum and plastic sails attached to 164 feet masts. The sail themselves “are hollow” and are “designed to telescope into one another in rough weather.” [5] Such technology doesn’t sound pretty but sure sounds interesting!

The New York Times article points out an important fact, that while fuel costs account for the majority of shipping costs, cargo ship owners don’t pay for fuel – charterers do. This means that ship owners do not have the biggest incentive to invest in alternative energy sources for cargo ships.

This dynamic has produced a relatively “conservative” stance by ship owners when it comes to innovations in fuel efficiency. Fuel costs are related, but not directly, to ship purchase and commission decisions.

It seems that the return-to-sail is still in the experimental stages but considering the incentive – free renewable energy – it seems worth it in the long run to invest in trying to make it work.

What do you think? Can wind power be applied to commercial cargo vessels in an economically viable way? Comment below.

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Hurricane Sandy Aftermath: NY/NJ Ports Shipping Amidst Wreckage https://www.universalcargo.com/hurricane-sandy-aftermath-ny-nj-ports-shipping-amidst-wreckage/ https://www.universalcargo.com/hurricane-sandy-aftermath-ny-nj-ports-shipping-amidst-wreckage/#respond Thu, 08 Nov 2012 20:57:43 +0000 https://www.universalcargo.com/?p=7468 The fingerprint of Hurricane Sandy is still to be seen on the North East Coast. Storm damages and loss of life cast a shadow on the election day festivities as residents affected by Sandy made the extra efforts required to cast their ballots and play their part in selecting our nation’s leader for the next […]

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The fingerprint of Hurricane Sandy is still to be seen on the North East Coast. Storm damages and loss of life cast a shadow on the election day festivities as residents affected by Sandy made the extra efforts required to cast their ballots and play their part in selecting our nation’s leader for the next four years. [1]

Hurricane Sandy RecoveryFurther complicating matters is a second storm front poised to blast a northeast coast still reeling from Sandy. With New York and New Jersey having barely regained their balance from Sandy, a violent northeaster is bringing more rain, wind, and even snow, threatening to undo the initial progress made in relief efforts.[2]

Power outages are yet again threatening residents of New Jersey and Long Island, many of whom only just regained power a few days ago.

Traffic snarls and more storm-driven debris further complicated life for coastal residents. For many the psychological damage of Sandy is making it harder to weather this latest storm.[3]

While different boroughs of NY and NJ were recovering to varying degrees, several key New York and New Jersey commercial ports have been re-opened. Port Elizabeth Terminal was the first to resume operations on November 4th, followed by Port Newark Container Terminal and the Global Terminal in Jersey City early on November 5th at 7am. [4]

This commencement comes after NY and NJ area ports have been shut down for almost a week, since the afternoon of October 29th.  Most recently, the Port Authority of New York and New Jersey has announced that those ports are operating at “full speed”.[5]

Longshoremen, strike still looming, were also putting in full shifts to help ameliorate the backlog of cargo accumulated during Hurricane Sandy’s visit. This schedule was adopted despite November 6th, Election Day, traditionally being a holiday for dockworkers.[6]

The major hindrances to returning to business as usual were unreliable electricity and an acute shortage of fuel in the NY/NJ area. An article in the Huffington Post reported that “less than 40%”[7] of the gas stations in New York, Long Island, and New Jersey are operational as of November 2nd.

As a result, functioning gas stations were mobbed and tensions high as patrons formed long lines, attempting to fill up cars and trucks at the drastically reduced number of working stations. Police had to be on hand to handle unruly motorists attempting to ‘cut’ in line.[8]

Tankers carrying much-needed fuel were finally able to enter the New York Harbor on Thursday, Nov. 1st. One tanker carrying 2 million barrels of gasoline arrived at 2 am on the Nov. 1st but storm damage prevented the swift distribution of its cargo.

Various government agencies including the Coast Guard are working hard to get needed supplies to hard-hit areas. In order to do so, port authorities chose to “expedite vessel traffic into local terminals, especially tankers carrying gasoline”.[9]

New York’s governor Cuomo even “lifted tax and registration requirements” temporarily on tankers entering New York Harbor and the US Government suspended legislation known as the Jones Act which bans foreign vessels from moving fuel between US ports.[10]

All this has enabled key ports to resume operation, working hard to make–up for lost time Sandy inflicted upon them and get import and export cargo shipping efficiently on the east coast again.

 

 


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Hurricane Sandy Update: New Jersey and New York Ports https://www.universalcargo.com/hurricane-sandy-update-new-jersey-and-new-york-ports/ https://www.universalcargo.com/hurricane-sandy-update-new-jersey-and-new-york-ports/#respond Thu, 01 Nov 2012 20:32:36 +0000 https://www.universalcargo.com/?p=7611 Hurricane Sandy has petered out, but the destruction left in her wake is massive. New York and New Jersey have both sustained extensive damage but in different ways. In New York, the city’s infrastructure has been especially hard hit with the Holland and Brooklyn Battery Tunnels flooded. Mass transit received an especially heavy blow when […]

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Hurricane Sandy has petered out, but the destruction left in her wake is massive. New York and New Jersey have both sustained extensive damage but in different ways.

In New York, the city’s infrastructure has been especially hard hit with the Holland and Brooklyn Battery Tunnels flooded. Mass transit received an especially heavy blow when the subway system was swamped with floodwaters.[1] Authorities are not sure how long it may take to clear out the flooding, let alone repair all the damage.

Internet connections were compromised and even back-up generators failed.[2] Parts of the city are still without water and power as of this writing, Wednesday night, Halloween. However, life is flickering back (just like the street lamps) in Manhattan and Brooklyn.

Hurricane Sandy Washed Up BoatThe New York Stock exchange opened its doors for business again after being closed for two days.  Some airports were able to resume limited arrival and departure flights. And the-show-must-go-on mentality was in evidence as Broadway theatres scheduled matinees and nighttime performances.

Unlike New York, life is nowhere near getting back to normal for many residents of New Jersey. The destruction in New York seems to have hit businesses and the financial district as well as high-rise homes. In New Jersey the worst damage was to seaside neighborhoods.

On the shores where Hurricane Sandy first made landfall, beach front residences were hit hard and many people are now homeless or their homes have sustained such damage that they are forced to take shelter elsewhere.

The National Guard has been dispatched to provide food and shelter to storm victims.  Fires burned which firemen were unable to fight because of flooding.[3]  Historic boardwalks and islands were especially devastated by the pounding waves and vessels were tossed ashore, sometimes ending up in backyards or slammed into homes.[4]

In the commercial sector, New York and New Jersey ports have sustained major damage and it is unsure when they will resume operating.[5]  Power outages are also hindering reopening the ports. Even were they to open, extensive damage to the surface transport infrastructure hinders commerce. Roads, trains, and subways are choked with debris and standing water.  It will likely be several days before the damage is repaired and business as usual may resume.[6]

Some shipping containers were displaced by the storm and are floating free in the floodwaters as well as in the channel.  Authorities are anticipating water damage to the contents of these containers. Hopefully, their shippers purchased cargo insurance.

There is the chance that some shipping containers have been submerged. The channel is being searched by the Coast Guard for underwater obstructions before it is declared clear. Only after the channel is declared safe can import and export commerce resume in these key northeastern ports.[7]

As a result of the disarray at the hard-hit New York and New Jersey ports, cargo ships bound for NY/NJ ports are being redirected to other locations such as Norfolk. Many other harbors on the Atlantic coast have recovered from lesser storm damage and have reopened, such as ports at Virginia and Baltimore, and are providing alternate docking sites to ships stranded at sea, unable to berth at NJ and NY ports.

Roads have been the quickest surface transport infrastructure to be restored, but many roads to hard hit areas are closed to all but emergency traffic. Several bridges, such as the Tappan Zee, which were closed in anticipation of Hurricane Sandy’s arrival, have recently been re-opened and essential goods are starting to make it to where they are most needed. [8]  Transport of commercial goods will begin next but not until the need for relief supplies has been ameliorated.

What can we do to best assist those in need at this time? What can you do to prepare now for natural disasters common to the area you live in? Respond in our comments section below.

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Hurricane Sandy Halting EC Shipping Ports Won’t Hurt the Economy? https://www.universalcargo.com/hurricane-sandy-halting-ec-shipping-ports-wont-hurt-the-economy/ https://www.universalcargo.com/hurricane-sandy-halting-ec-shipping-ports-wont-hurt-the-economy/#respond Tue, 30 Oct 2012 23:06:33 +0000 https://www.universalcargo.com/?p=7589 On an average day, New Jersey and New York harbor have some of the busiest ports, importing and exporting goods on the Eastern seaboard; but, this Monday morning, Oct. 29th, was different. The marine terminals weren’t busy with dockworkers bustling to unload shipping containers from laden cargo ships. Hurricane Sandy arrived and port authorities took […]

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On an average day, New Jersey and New York harbor have some of the busiest ports, importing and exporting goods on the Eastern seaboard; but, this Monday morning, Oct. 29th, was different.Hurricane Sandy NASA Earth Observatory

The marine terminals weren’t busy with dockworkers bustling to unload shipping containers from laden cargo ships. Hurricane Sandy arrived and port authorities took the wise precaution of evacuating New Jersey ports by Monday afternoon.

At the time of this writing, Hurricane Sandy has already made landfall on the north east coast around New Jersey and is working its inexorable way further north and inland poised to wreak havoc on one of the most densely populated regions in the US.  The storm hit the southern Jersey shore around 8 pm East Coast time but storm conditions have been affecting the coast for several days already.

Having had warning about the storm has enabled authorities to ameliorate the danger to life and limb caused by Hurricane Sandy. But what about the economic impact of what has been dubbed the “Frankenstorm”?  Several articles have already been published discussing the effect Hurricane Sandy will have on the economy in general, giving us clues as to how Sandy may affect international shipping in the US specifically.

A recent Chicago Tribune article assures us that the long-term effect of Sandy on the economy should be neutral on a national scale. This is because the cost of rebuilding and repairing the damage of the storm should pump money back into the economy roughly equal to that lost. The authors point to Hurricane Katrina as an example of this sort of equalization as the recovery efforts balanced out the cost of the damages to infrastructure.[1] (The loss of life and the psychological toll caused by Katrina are, of course, a different story).

A USA Today article noted that some businesses even prosper from the storm on account of residents making storm-preparation purchases.[2]  But what about the more localized damage such a storm can cause, especially to East Coast ports and those in the international shipping business?

Reuters reported that some ports will be shut “indefinitely” but it also noted that the economic impact “probably won’t be large.”[3]  Stranded cargo is unlikely to sustain damage but delivery will be delayed, with some companies estimating it will take at least an extra 72 hours for goods to arrive.

Freight forwarders are scrambling to reroute their shipments to avoid ports affected by the storm.[4] Overland transport from seaports is likely to be slowed down for days as storm damage blocks roads. Relief efforts will focus on getting essential food and medical supplies to hurricane victims rather than clearing roads for commercial transport. [5] Also many bridges and roads in New York are already closed to truck transport for fear of the damage wind could do to such vehicles and will remain closed to freight transport until the storm has passed.[6]

Air transport too is likely to suffer setbacks as air traffic grinds to a halt in many East Coast locations, stranding goods and passengers alike until Sandy passes.

It seems to me that economists’ positive predictions (like this one by Peter Morici[7]) about the long term recovery and even benefits that come from weathering a storm with the destructive force of Hurricane Sandy are flawed. Such a view may work on the broad scale, if you are a state or federal government.  But it really ignores the potential devastation to an individual who loses their home or the revenue loss of several million dollars a day for carriers and freight forwarders due to ports being closed and goods not delivered on time.

How has Hurricane Sandy affected you personally? Do the reassurances about long-view economic stimulus generated by storms like Sandy ring true?  Let us know in the comments section below.

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New Technology for Affordable Green Eco-Friendly Ocean Shipping https://www.universalcargo.com/new-technology-for-affordable-green-eco-friendly-ocean-shipping/ https://www.universalcargo.com/new-technology-for-affordable-green-eco-friendly-ocean-shipping/#respond Tue, 23 Oct 2012 22:43:13 +0000 https://www.universalcargo.com/?p=7570 An important collaboration is afoot that is likely to have significant impact on the international shipping industry. Researchers at the Viterbi School of Engineering at the University of Southern California (USC) teamed up with the Tai Chong Cheang (TCC) Institute for Emissions Reduction in Marine Diesel Engines in Hong Kong. With TCC funding, USC engineers […]

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An important collaboration is afoot that is likely to have significant impact on the international shipping industry. Researchers at the Viterbi School of Engineering at the University of Southern California (USC) teamed up with the Tai Chong Cheang (TCC) Institute for Emissions Reduction in Marine Diesel Engines in Hong Kong. With TCC funding, USC engineers have developed a “potentially game changing”[1] innovation which enables greater efficiency in marine diesel combustion using a transient plasma ignition system.

cargo shipsTraditional marine diesel engines burn bunker fuel at 35%-40% efficiency.[2]Applying the transient plasma ignition (TPI) system increases fuel efficiency (by how much is yet to be determined), saving shipping companies money by reducing fuel costs and helping them meet increasingly rigorous international emissions-reducing standards.

I am not going to try to explain how TPI works but if you want to puzzle it out see the article footnoted below.  TPI technology has already been successfully applied to automotive and aerospace engines with positive results.[3]  Applying it to marine diesel engines is a next step with big “real world” applications.

USC engineers announced their promising research in transient plasma back in May of 2012 at the China Maritime premier trade show in Hong Kong.  The news was exciting for the world of maritime trade, especially as the USC engineers are one of the few groups working on a practical solution to the issues raised by the international import/export industry. “USC’s is the only serious effort that is actually working on the problem to make the fuel burn better,” said Captain Vinay Patwardhan, TCC’s director of Group Operations Development and General Manager.[4]

Overseas freight forwarding is the number one method for moving trade goods, and it also accounts for a significant portion of the total amount of greenhouse gas-emitted into the atmosphere. Most carriers are powered by low-speed, low-efficiency engines which run on fossil fuels.  As the international community applies greater and greater pressure to the shipping industry to do business in an environmentally sustainable way, the challenge stands to find ways to make shipping less damaging for the environment without prohibitively costly innovations.

This is where TPI really shines. The systems needed to operate TPI technology are relatively inexpensive and can be installed in existing engines without the need for major retrofittings. This offers “a potentially low-cost and lightweight technology that could be back-fitted into existing engines, and profoundly influence the design of future generations of more efficient engines.”[5]

Now TCC and the Viterbi engineers have entered the 3rd phase of their research project, which will move from successful tests under laboratory conditions to attempting to recreate those successes in a full-scale working marine diesel engine.  If they are able to increase fuel efficiency and reduce greenhouse gas emissions in real engines at an affordable price then it seems the international shipping business is ready to implement it.

Shipping companies know how much is at stake. The world wide economic slump hit the shipping industry particularly hard. Overcapacity has plagued carrier companies and still presents a challenge to freight forwarders, especially the smaller companies.  Environmental standards are consistently increasing as international organizations as well as individual nations have instituted rules and regulations requiring greater environmental responsibility by industry players.

“We really need to get transient plasma ignition technology to the world’s merchant fleets as fast as possible,” said Kenneth Koo, TCC Group Chairman. “The survival of trans-oceanic shipping that enables the global exchange of goods and raw materials depends upon it, and as a social responsibility, we need to also do our part to minimize the impact of shipping on the environment.”

Since it looks like our use of fossil fuels isn’t going to go away any time soon, it makes sense to squeeze greater efficiency out of these fuels, giving other engineering teams time to develop alternative energy technologies that are both practical and affordable.

With my wife being a UCLA Bruin, I may get in trouble for inserting this here; but, go Trojans!

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Is China Cheating in the International Trade Market? https://www.universalcargo.com/is-china-cheating-in-the-international-trade-market/ https://www.universalcargo.com/is-china-cheating-in-the-international-trade-market/#respond Tue, 16 Oct 2012 20:16:56 +0000 https://www.universalcargo.com/?p=7427 With the imminent presidential economic debates, there is no way that US trade relations with international import/export powerhouse China would not become a big topic. Presidential candidate Mitt Romney is pulling no punches with his statements on the subject. Romney called China a “cheater” and pledged to make China “play fair”.  With our presidential election […]

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US China Flags

With the imminent presidential economic debates, there is no way that US trade relations with international import/export powerhouse China would not become a big topic. Presidential candidate Mitt Romney is pulling no punches with his statements on the subject. Romney called China a “cheater” and pledged to make China “play fair”. 

With our presidential election coming up in November, presidential candidate Mitt Romney and his running mate Paul Ryan have been stirring up some controversy about international trade, accusing the Chinese government of manipulating their currency in order to give China an edge in international trade to the disadvantage of US corporations and consumers.

The accusation was made from the platform by Romney and Ryan when the two were on the campaign trail last Saturday, October 13th in Ohio. Romney went on to criticize President Obama for failing to properly address the issue. If elected, Romney pledged he would “get trade to be fair” between China and the US.

Obama spokesperson Danny Kanner countered Romney’s accusation of Obama being soft on China with some accusations of his own.  When it comes to currency and trade policies, Kanner asserted that Romney “talks tough” but, “as a corporate buyout specialist, he [Romney] invested in companies that were pioneers in outsourcing to low-wage countries like China. That’s not a candidate who would be tough on China as president.”

Rewind four years and you find a presidential candidate named Barack Obama making similar statements to Romney’s. In fact, it was even in October of 2008, that now President Obama said China’s current trade surplus is “directly related to its manipulation of its currency’s value.” He promised to “beef up US enforcement efforts against unfair trade practices.”[1]

As president, Obama has been much more diplomatic with his approach to China. However, he has filed the occasional case against China with the World Trade Organization (WTO), including one just in September of 2012 alleging China unfairly subsidizes. Romney calls that case “too little, too late” and “a last-minute political attempt to act on an issue that has long hurt the American economy.”

It’s hard to imagine President Obama’s timing on this WTO action so close to the election was by accident. As the election continues to heat up on the topic of China and international trade, it will probably be a chip that President Obama can play to point out he has not forgotten his promise to “beef up US enforcement efforts against unfair trade practices.”

While our candidates were swapping accusations, officials at the Chinese Central Bank defended themselves and re-asserted that it is mainly the market (and not the Chinese government) which determines the value of their currency. [2] This announcement came on October 14th following Romney’s statements.

Mr. Zhou Xiaochuan, governor of the People’s Bank of China said that “China’s central bank refrained from intervening in the market in the last year”, and noted that the “exchange rate stayed around 6.3 renminbis per dollar.” He continued, “The rate, the spot rate and future rate, determined by the market supply and demand, basically are very close to the equilibrium rate”.[3]

According to a recent New York Times article, there’s nothing new about US government officials voicing suspicions that China has artificially kept the renminbi undervalued in order to make exports “relatively less expensive in overseas markets.”

Even if China had engaged in this sort of manipulation in the past, some analysts wonder if it really would have a hugely negative affect on the international import/export business? While many have decried the apparent advantage any currency manipulation might give to China, some recent studies suggest otherwise.

One analyst says that the effect would “depend critically on how traded goods and services are priced” and warns that “the real effects of China’s policies are potentially quite complex, are not readily translated into trade-policy equivalents”. [4]

Another publication states that the effects of alleged Chinese currency manipulation are exaggerated, and that “in the long run currency devaluations will not alter export volumes.” [5]

These issues certainly are more complex than politicians usually make it seem during election years, but if you’re an international shipper importing or exporting goods from and to China, these issues affect your business.

What are your thoughts on the international trade situation, accusations of currency manipulation against China, and the role the government should take in these issues. Comment below.

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Green Eco-Friendly Ships Pay Off in International Shipping https://www.universalcargo.com/green-eco-friendly-ships-pay-off-in-international-shipping/ https://www.universalcargo.com/green-eco-friendly-ships-pay-off-in-international-shipping/#respond Tue, 09 Oct 2012 23:06:47 +0000 https://www.universalcargo.com/?p=7393 One of the world’s prominent charterers – Cargill – announced that it will only be hiring “eco” ships with greater fuel efficiency according to a recent Hellenic Shipping article.[1] This is the result of significant improvements in various shipping practices to reduce their impact on the environment. The good news is that lowering international shipping’s […]

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Green Money Cargo Ship resized 600

One of the world’s prominent charterers – Cargill – announced that it will only be hiring “eco” ships with greater fuel efficiency according to a recent Hellenic Shipping article.[1] This is the result of significant improvements in various shipping practices to reduce their impact on the environment. The good news is that lowering international shipping’s impact on the environment is not just good for the planet, it is good for your wallet!

When “green” initiatives were first introduced to the shipping industry it was unclear whether or not running an environmentally low-impact vessel would be fiscally viable. In an industry that is known for the high-cost investment of capital required, the question was, “Is being green worth the cost?”  The answer, it seems is, “Yes!”

The primary investment for shippers who want to go green is in the ships themselves.  Lowering the environmental impact of international shipping can be achieved in two ways: by using only new ships built to “green” specifications or by using older ships that have been retrofitted to reduce their environmental footprint.[2]

Investors need to decide which of these two options best fits their needs (and their budgets) in a particularly dire economic climate where companies seeking to offload a glut of cargo ships have made the acquisition of older, less efficient ships temptingly cheap.

Taking the long view of the shipping industry, however, has proven that greener, more efficient ships will result in huge savings in the long run. The primary way green ships (new or retrofitted) reduce their operation costs is by their greater fuel efficiency. Less fuel needed for long trans-oceanic voyages over many years of operation can result in tens of thousands of dollars saved in fuel costs.

“Eco” ships are constructed to make better use of the fossil fuels that modern cargo ship’s engines run on, but this is by no means the only way shipping is becoming greener. Besides greater fuel efficiency, “improvement often stems from a combination of better hydrodynamics/hull form, economic low-speed main engines, bigger and more efficient propellers, slow steaming design points, and energy-saving appliances”.[3]

All these modifications together are making “Eco” cargo ships worth the higher initial investment as valuable and calculable savings are made over the long haul. The result is a greener international shipping industry and lower costs for consumers and import/export businessmen as the reduced fuel prices result in lower shipping costs.

While many “green” initiatives are expounded, not all can back-up their claims to being truly earth-friendly. We have all heard the debate about whether using paper bags really saves energy or reduces waste compared to plastic bags. Other eco-friendly solutions seem impractical, keeping “green” innovations from actually impacting the market in any significant way.

Fuel efficiency, however, is practical, legitimately “green”, and fiscally advantageous. Even ship owners who aren’t making eco-friendly technology a priority are motivated to invest in these more efficient ships because of the savings they provide.

It seems clear that being environmentally conscious is something consumers care about. Eco-friendly import/export shipping is, therefore, something carriers and charter companies need to be concerned about too. The reputation of the shipping industry because of disasters like the Exxon-Valdez oil spill or the Rena oil spill off the coast of New Zealand means we in the industry have a lot of ground to make up.  Thank goodness in this case being green also means saving money.

Click here to check out more blogs about green eco-friendly shipping from Universal Cargo Management.



[1] Hellenic Shipping News Fuel-efficient ships gaining market share as owners realize the potential they offer 10/6/12 http://www.hellenicshippingnews.com/News.aspx?ElementId=bf6e8181-9e42-485a-ae41-7709606aae33

[2] Hellenic Shipping News Fuel-efficient ships gaining market share as owners realize the potential they offer 10/6/12 http://www.hellenicshippingnews.com/News.aspx?ElementId=bf6e8181-9e42-485a-ae41-7709606aae33

[3] Hellenic Shipping News Fuel-efficient ships gaining market share as owners realize the potential they offer 10/6/12 http://www.hellenicshippingnews.com/News.aspx?ElementId=bf6e8181-9e42-485a-ae41-7709606aae33

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UCM’s Secret to Golf Success: Micah Burke Interview https://www.universalcargo.com/ucms-secret-to-golf-success-micah-burke-interview/ https://www.universalcargo.com/ucms-secret-to-golf-success-micah-burke-interview/#respond Thu, 04 Oct 2012 22:23:31 +0000 https://www.universalcargo.com/?p=7565 Universal Cargo Management is involved with a number of charitable organizations. Since UCM CEO, Devin Burke also loves golf, it is not unusual for UCM to show up with a team to charity golf tournaments. Often, the UCM team wins such tournaments. The secret to UCM’s charity golf tournament success? We’re pretty sure it isn’t […]

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Micah Burke International Shipping Pro GolferUniversal Cargo Management is involved with a number of charitable organizations. Since UCM CEO, Devin Burke also loves golf, it is not unusual for UCM to show up with a team to charity golf tournaments. Often, the UCM team wins such tournaments.

The secret to UCM’s charity golf tournament success? We’re pretty sure it isn’t Devin’s golf swing. Of course, I would never knock my boss’ game; however, having a team member on those UCM golf teams who is a professional golfer probably the real secret to UCM’s golf success.

Micah Burke, son of Devin Burke and UCM President, Shirley Burke, is a professional golfer that tends to be on the team representing UCM at charity golf events.

We caught up with Micah to find out about his professional golf, his career, and being on the golf course with Devin…

Question:  Why did you get into professional golfing?

Micah: I got into professional golf because I felt I had the potential to become a great golfer out of college. I began to consider golf as a career path around my junior year of college when I won my first collegiate event. One of the major reasons why I continued into the professional arena out of college was to see how good I could become. I had the opportunity to really focus on improving every aspect of my game and that opportunity was something I had to take advantage of.

Question: How did you get started?

Micah: I got started by playing weekend golf with my dad and his friends at a public 9-hole course in Venice, CA. At first, I basically played because my older brother and dad played. When I was in high school, my friend had mentioned to me that I would be able to get out of school earlier if I take Golf as my last period so I decided to take advantage of that. Gradually, I became better and better and my high school coach told me that if I work hard enough, I could possibly get a scholarship in college. I was able to do that with a lot of hard work and before you knew it, I had a full scholarship to Cal State San Bernardino.

Question: Let’s say I’m an aspiring golfer–which I’m not–do you have any suggestions for me on turning pro?

Micah: My advice for someone turning pro is simple. Never stop having fun at this game. When the golf score is represented by dollar signs, golfers tend to lose sight of what golf is. Don’t let professional golf create unnecessary pressure for yourself.

Question: How come you didn’t work for your parents at UCM?

Micah: I didn’t work for my parents because I had the opportunity out of college to turn professional.

Question:  What work have you done for UCM in the past?

Micah: The work that I have done for UCM is primarily advertisement on my golf attire. During many tournaments around the US and overseas, I would wear golf shirts that displayed the UCM logo. I also make appearances representing UCM in various charity and fundraiser tournaments.

Question: Do you think it’s cheating when you represent UCM in charity golf tournaments they join?

Micah: I don’t think it’s cheating representing UCM in charity tournaments because tournaments like that are not necessarily competitive like professional golf tournaments. Charity/fundraiser events have a purpose to either raise awareness or funds for a particular cause and that should be the main focus. I also feel like if I bring success to the UCM team in a tournament, then that would bring attention to UCM.

Question: When you golf a tournament with your dad, is Devin an asset to your team or should he stick to international shipping?

Micah: Dad’s golf game is always suspect at best, but so far we are undefeated when he is part of the UCM team. “Don’t fix it if it ain’t broke.”

Question: Who gave you your golf talents, your dad—Universal Cargo Management CEO, Devin Burke or your mom—UCM President, Shirley Burke?

Micah: My golf talents will definitely have to be accredited to my father. My mom couldn’t hit a golf ball out of her shadow.

Question: What’s the biggest prize you ever won?

Micah: The biggest check I ever made golfing was for $15,000.00

Question: Who are your sponsors?

Micah: My main sponsor for the past 3 years was a private sponsor […] We played many rounds of golf together and we were able to develop a friendship in that time. Finding a sponsor is quite difficult in professional golf, but I was extremely fortunate to have a friend […] that believed in my success in professional golf.

Question: Can you help me work on my swing?

Micah: I’m always willing to help people out with their golf swing. I guess it’s one of my duties as an employee of UCM.

Question: When can we expect to see you in a green jacket?

Micah: Expect me in the green jacket when the next Masters comes around.

Question: Tell us the story of the worst round of gold you ever played.

Micah: Can’t tell you a story of the worst round of golf I’ve ever played because I don’t remember them. A selective memory is a key component of a great golfer.

Question: Do you prefer Happy Gilmore or Tin Cup?

Micah: Happy Gilmore for sure. Too many good scenes from that movie.

Question: If you were to import golf clubs from, let’s say China, what company would you use for your importing needs?

Micah: I’d give UCM first dibs on the shipment, but they better give me a good rate! Just kidding… UCM all the way!

Thank you, Micah, for taking the time to answer a few questions for us.

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ILA Strike Watch 2012: ILA Strike Postponed to 12/30 [BREAKING NEWS] https://www.universalcargo.com/ila-strike-watch-2012-ila-strike-postponed-to-1230-breaking-news/ https://www.universalcargo.com/ila-strike-watch-2012-ila-strike-postponed-to-1230-breaking-news/#respond Thu, 20 Sep 2012 17:43:07 +0000 https://www.universalcargo.com/?p=7377 ILA Strike Watch 2012 The Federal Mediation & Concillaitor Service (FMCS) Director George H. Cohen has just announced that “…the parties have agreed to extend the collective bargaining agreement due to expire on September 30, 2012 for ninety (90) day period, i.e. through December 29, 2012..” The United States Maritime Alliance (USMX) and the International […]

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ILA Strike Watch 2012

The Federal Mediation & Concillaitor Service (FMCS) Director George H. Cohen has just announced that “…the parties have agreed to extend the collective bargaining agreement due to expire on September 30, 2012 for ninety (90) day period, i.e. through December 29, 2012..”

The United States Maritime Alliance (USMX) and the International Longshoremen’s Association (ILA) labor negotiations today, while not finalizing, are a substantial move in the right direction.

All parties agreed that this is “for the good of the country”.

That means the looming ILA Strike on October 1st has been postponed until December 30th.

Click Here to read the full News Release

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ILA Strike Watch 2012: Does the ILA Need Public Relations Help? https://www.universalcargo.com/ila-strike-watch-2012-does-the-ila-need-public-relations-help/ https://www.universalcargo.com/ila-strike-watch-2012-does-the-ila-need-public-relations-help/#respond Tue, 18 Sep 2012 16:57:26 +0000 https://www.universalcargo.com/?p=7452 ILA Strike Watch 2012 The possible ILA strike has brought some interesting issues to the surface: union vs. big business, innovation vs. job security, and ethical responsibility in the midst of economic crisis.  A strike would certainly cause problems for the international shipping industry, at the very least for those who import or export through […]

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ILA Strike Watch 2012

The possible ILA strike has brought some interesting issues to the surface: union vs. big business, innovation vs. job security, and ethical responsibility in the midst of economic crisis.  A strike would certainly cause problems for the international shipping industry, at the very least for those who import or export through the US east coast. As I have researched the ILA conflict, there seems to be a subtle bias against the dockworkers union. Yet one has to wonder if the ILA really is the “problem” in this conflict.

News articles and industry blogs seem to present the ILA as being stubborn, backwards, and selfish. It appears that the union simultaneously provides members with inflated wages and protects otherwise obsolete jobs from the threat of automation. Port operators come off as being reasonable, merely requesting long over-due changes such as reducing excessive over-time pay and making alterations to inefficient and expensive work practices.

This all seemed so reasonable I found myself thinking, “Yeah, why do they get paid so much?” But after ruminating on the potential strike, I began to recall the history of unionization in the US and questioned my initial buy-in to the selfish, un-progressive union member stereotype.

Working on the docks of ports, handling the import and export cargo loading an unloading is demanding and can even be dangerous work.

labor union historyHistorically, unions were formed to prevent workers from being exploited through unfair wages, exhausting work schedules, and dangerous working conditions. Historically, it was the employees who needed protecting from their powerful employers, and the way they achieved this was by collective bargaining, i.e. unionization.  Historically, it has been employers who have usually needed to be curbed, whether through federal intervention or assertive organized labor.

Is that need of protecting the employees from the employers (at least in the international shipping industry’s ports) history?

I find in the current case of the ILA workers, the roles seem reversed with the union apparently taking advantage of their power to strike to refuse to make much needed changes.

Genuine abuses of power cannot be condoned, but the power almost always resides in the employer and not in employees – that is why unions exist, to level the playing field. It is the workers who are usually the more vulnerable party. The push and pull of business dictates that corporations will always try to increase their profit margins and that workers will always seek better wages. Yet in my own experience, it is the employee who makes the most sacrifices. Your average employee will take a pay cut and stay at their job because lower wages are better than being unemployed.

I don’t know which is truly the case with the ILA/USMX conflict. I don’t know whether the proposed changes to workers’ pay, etc. are fair or if the union really is abusing their collective power to demand unsustainable wages and job security.

Statements by USMX representatives have articulated the specific problems with the current system and made solid arguments justifying the proposed changes.  They claim that they are being driven out of business by the current system. I find their platform convincing, despite a general sympathy drawn from organized labor.

In response to the proposed changes, the ILA has asserted that the current policies are non-negotiable and that even suggesting these changes is unprecedented and inappropriate.  I have yet to read any specific defense of the current contract conditions by an ILA representative. They come off very weak by arguing that the changes are unprecedented. [1] That is, in fact, exactly what the USMX is claiming, that these practices have crept in over the years, have never been addressed, and need badly to be updated in order for their ports to remain competitive.

On top of this, ILA president Harold Dagget doesn’t come off that well on the ILA website. It seems almost as though he is against technology, fighting automation to protect jobs that technology would otherwise eliminate. Of course, protecting ILA jobs is exactly what he was elected to do. We can hardly be surprised if he does so tenaciously. Who wants to go the way of the US auto industry?

The weakest part of the debate within the media is how Dagget and other ILA reps have not defended themselves against the accusations of unfair and archaic practices. I want to believe that the ILA members are hardworking men and women who earn every penny of their wages and are willing to negotiate the delicate balance of technological advances while looking out for their long term job security. But there is nothing on the web to show that this is the case. The ILA webpage contains vague protestations of outrage but doesn’t even address the issues specifically, let alone intelligently.

In short, there are a lot of unanswered questions about what would be a fair and reasonable agenda for negotiations. But the longer the ILA acts as if they don’t need to address the criticisms raised by USMX, the more likely it seems those critiques are accurate.

I sincerely hope they aren’t, but Daggett and other ILA reps would do well to not just claim they are being mistreated by USMX and maligned by the media, but to use the media to articulate their own agenda. The longer they refrain from doing so the stronger the impression that their wages and work practices can’t be justified and that their detractors are right to demand changes.

Perhaps they need a good PR person.

What are your thoughts on the ILA/USMX conflict and possible strike? Leave a comment below.

BREAKING NEWS – ILA Strike Postponed – Click Here for Full Story

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ILA Strike & Freight Rates: East Vs. West Coast Minus B.I.G. & Tupac https://www.universalcargo.com/ila-strike-freight-rates-east-vs-west-coast-minus-b-i-g-tupac/ https://www.universalcargo.com/ila-strike-freight-rates-east-vs-west-coast-minus-b-i-g-tupac/#respond Thu, 13 Sep 2012 21:55:03 +0000 https://www.universalcargo.com/?p=7557 BREAKING NEWS – ILA Strike Postponed – Click Here for Full Story ILA Strike Watch 2012 East Coast vs. West Coast – sounds like something to do with the Notorius B.I.G. and Tupac, right? Hip-hop, mixed tapes, and getting shot to death in front of Circus-Circus? Well, there is less music (and a whole lot […]

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BREAKING NEWS – ILA Strike Postponed – Click Here for Full Story

ILA Strike Watch 2012

ILA Strike

Notorious B.I.G. and Tupac

East Coast vs. West Coast – sounds like something to do with the Notorius B.I.G. and Tupac, right? Hip-hop, mixed tapes, and getting shot to death in front of Circus-Circus? Well, there is less music (and a whole lot less bling) but still some tough times ahead for those caught in the midst of this rivalry.

In the international import/export business, the choice between shipping ocean freight to the East Coast or the West Coast could have a major impact on an international shipper’s bottom line. The tough news this week is reserved for East Coast routes while West Coast routes are coming out ahead–at least for the moment.

The most recent drama is due to the threatened International Longshoremen’s Association (ILA) strike, which would funnel more business to West Coast ports as those in the import/export business avoid East Coast ports where the dock workers are poised to suspend their essential job of loading and unloading massive amounts of cargo stored in shipping containers to and from cargo vessels.

If the ILA does strike on this scale (which it hasn’t done in over 30 years), it could mean significant fiscal losses to ports up and down the East Coast of the US. This would be on top of an already weak recovery from the global economic slump, which hit ocean freight carriers particularly hard. There is a glimmer of hope though of avoiding a strike as new talks are being scheduled for the week of Sept. 17th in an attempt to head off a strike.

These renewed talks (after ILA representatives abruptly left the negotiating table last month when US Maritime Alliance representatives proposed significant changes to policies affecting dockworkers pay) are the result of Federal mediators encouraging the two parties to return to the negotiating table.[1]

That’s right, this strike has so much potential to harm the US economy that the Federal government has stepped in to try to help resolve the issues before the present contract expires on August 30th.

What this means for those in the import/export business is that carriers are rerouting to West Coast port destinations, and as a result are running with high utilization levels, 90 – 100%! Some even are experiencing rollover.

Strike Sign Public Domain ImageThis is all a far cry from the economic blows in freight rates experienced recently worldwide as overcapacity drove freight rates so low as to threaten many carrier lines’ viability.

This increase must be a relief to many international shipping companies and represents a chance to recoup some of their losses, but as it is only happening at the expense of East Coast destinations, carriers are not the real winners in this shift. It is west coast port authorities and operators who will truly benefit from a dockworkers strike on the East Coast.

On the flip side, ports on the eastern seaboard experienced weaker loading factors, from the lower 80 – low 90% of ships’ capacities being filled because many shippers have already begun to divert their shipments to the West Coast or postponed their cargo shipments until after October, waiting to see if the ILA does indeed strike before committing their business to East Coast destinations.

This trend will not end until after the deadline for the re-negotiation of the master contract has passed, i.e. early October. By then a decision will likely be made to strike or not to strike. Until then, carriers can take advantage of increased demand to West Coast ports and shippers can expect complications at East Coast ports as port operators rush to make up for the uncertainty by attempting to move as much cargo as possible before the October 1st deadline.

Along similar lines, freight rate trends have been affected by the threat of the strike as well. In an effort to attract shippers and shore up sagging demand, carriers have lowered their rates to East Coast ports. Since these ports are already suffering from lower demand (their greater distance from key ports in the far east making shipping to them more expensive) any threat of further losses is frightening.

The biggest problem with this trend is that lowering freight rates is unlikely to result in more cargo, but very likely to lower overall revenues and worsen carriers’ already weak financial situation.

The good news is that in the long run, just as we see West Coast capacity improving and steadying, we can expect the same from the East Coast after the strike or the threat of strike is over.

BREAKING NEWS – ILA Strike Postponed – Click Here for Full Story



[1] The Associated Press, Thursday, Sep. 6, 2012, “New talks on tap as East Coast port strike looms”.

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ILA Strike Watch 2012: What can We Learn from the 1962 ILA Strike? https://www.universalcargo.com/ila-strike-watch-2012-what-can-we-learn-from-the-1962-ila-strike/ https://www.universalcargo.com/ila-strike-watch-2012-what-can-we-learn-from-the-1962-ila-strike/#respond Wed, 12 Sep 2012 17:45:26 +0000 https://www.universalcargo.com/?p=7378 ILA Strike Watch 2012 If we look to the past we can learn many things.  Most specifically, we can learn what is causing theInternational Longshoremen’s Association (ILA) to threaten strike here in 2012. Back in the 1960’s the ILA fought to have their contracts ammended to include wording to protect workers from losing their jobs […]

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ILA Strike Watch 2012

If we look to the past we can learn many things.  Most specifically, we can learn what is causing theInternational Longshoremen’s Association (ILA) to threaten strike here in 2012.

Back in the 1960’s the ILA fought to have their contracts ammended to include wording to protect workers from losing their jobs to “automated machines”.

In 1962, International Longshoremen’s Association (ILA) went on strike.

Here’s an excerpt form the below video of news coverage of the 1962 ILA Strike:

“…A ghostly stillness embalms The World’s busiest port as 75,000 Longshoremen strike New York’s waterfront and all other Sea Ports on the Atlantic and Gulf Coast.  Over 70 vessels lie idle with unloaded cargoes here with dozens of others similiarly tied up beside piers from Boston to Houston…As goods pile up railroads place an embargo on deliveries to the struck cities less the storing facilities become hopeless choked.  The Hartley Act was invoked..”

What can we learn from this past 1962 ILA Strike?

  1. Once the ILA Strike takes place, cargoes will remain unloaded and vessels will lie idle.
  2. Railroads may begin denying cargoes to the struck cities (i.e. New York, Boston, Houston, etc…) when the ILA Strike begins.
  3. President Obama may enact “The Hartley Act

What does these learnings show us about the pending 2012 ILA Strike? 

  1. Any cargoes on water now that will arrive on or after the ILA Strike day, tentatively set as October 1st, 2012, will not be unloaded and thus, not delivered.
  2. Any cargoes being routed through the West Coast to the East Coast may not make it all the way to the Port Cities who are on strike.  Or any new cargoes trying to be routed with this method via rail may be denied.
  3. If “The Hartley Act” is put into affect by President Obama, much like when JFK enacted it in 1962, then the strike will be suspended and ended under the thought that it is detrimental to American Commerce.

Please comment below and let us know your answer!
Taking into consideration of what you know about the current 2012 ILA Strike, what you now know about the past 1962 ILA Strike, and what you know about the current President, Barack Obama, what do you think will happen come October 1st?
Please comment below and let us know your answer!

AMERICAN DOCK STRIKE aka STRIKE TIES UP MAJOR US PORTS


Click to Watch Video

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Ghana Pres. Works for Day When Pirates Arrgh No Import Export Problem https://www.universalcargo.com/ghana-pres-works-for-day-when-pirates-arrgh-no-import-export-problem/ https://www.universalcargo.com/ghana-pres-works-for-day-when-pirates-arrgh-no-import-export-problem/#respond Mon, 10 Sep 2012 22:29:43 +0000 https://www.universalcargo.com/?p=7567 One factor hindering ocean freight international shipping to and from Africa is piracy. Could Ghana’s new president help give African import and export business new life by fighting piracy? When I was a kid pirates held a certain caché, specifically the caché of swashbuckling rebels refusing to bow to the tyranny of daily life (kind of […]

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One factor hindering ocean freight international shipping to and from Africa is piracy. Could Ghana’s new president help give African import and export business new life by fighting piracy?

When I was a kid pirates held a certain caché, specifically the caché of swashbuckling rebels refusing to bow to the tyranny of daily life (kind of like Robin Hood). Pirates were “romantic”, though I would not have used that word. I would have said they were “cool” probably. This was because my entire knowledge of them was based on films I had seen.

The bungling, comic Pirates of Penzance sang and danced their way in and out of danger, always taking pity on orphans they encountered. The character of pirate Long John Silver in Disney’s film adaptation of Robert Louis Stevenson’s Treasure Island “arrgh”ed his way into my teacher’s heart. Yes, she showed us the film instead of having us read the book. His Somerset accent was THE pirate accent to end all pirate accents! His seemingly fierce demeanor alternated with his charming mischievousness as he revealed his compassion for young Jim. Goonies’ One-eyed Willy was ruthless too, in his way, but kind to kids. These pirate guys were fun AND cool! (We will just ignore the swarthy semi-racist depiction of pirates in Disney’s Swiss Family Robinson who were much less charming!)

Johnny Depp Pirate Public DomainThen, of course, there was the conversion of one of the best rides at Disneyland – Pirates of the Caribbean– into a full-length film starring no less than Johnny Depp as the clever, funny, and lovable Captain Jack Sparrow. Pirates were BACK and they were cooler than ever. So cool that I elected to read and write a research paper about them for a class I took called Terrorism in college. No, I wasn’t learning how to be a terrorist. Yes, that joke got old fast.

In my research, a salacious book about pirate homosexuality caught my attention. Maybe Johnny Depp read the book too and it contributed to the flamboyant flare he gave Captain Jack Sparrow. However, it’s more likely the story that Keith Richards inspired Depp’s portrayal of the character is true. Still, after reading the book piracy wasn’t so romantic, but it was still just as interesting.

The next natural step in looking into piracy was to consider modern piracy, and here the romance gone completely. Pirates were scary, emaciated, desperate men in open boats with automatic weapons mounted to their prows, stealing bulk goods, cargo containers, and holding crews for ransom from hulking ocean freighters. Where were the sails? The gold? The swords? The swashbuckling? Disney promised me swashbuckling!

Modern piracy has no romance for Ghana’s President John Dramani Mahama. He has been working toward finalizing a pact with the leaders of neighboring nations to reduce piracy against international cargo shipping in the Gulf of Guinea, treacherous waters known as a haunt of pirates off the coast of West Africa.

Mahama hopes thus to promote nautical safety and to encourage international export in West Africa.[1] This is a real need, as Africa is the continent least frequented by international shipping companies, with the highest import costs, and lowest freight volume ports[2]. Piracy is one of the contributing factors to this deficit. The discovery of oil deposits offshore[3] have put Ghana on the map as far as import and export oil business goes and it is in the nation’s best interests to suppress piracy in the area.

Mahama was sworn in as president in July after the death of much-loved President Atta Mills. One of the new president’s aims is to improve nautical safety for Ghana and her neighbors in the Gulf of Guinea. This will be accomplished by the use of recently acquired patrol ships and vessel tracking devices. Mahama has generously placed these tools at the disposal not just of his own countrymen, but those of his neighboring nations as well. Such breadth of vision and generosity is impressive in a part of the world where governments are often unstable at best, corrupt and exploitative at worst.

It’s early to have a full impression of new president Mahama, but I am disposed to be impressed at the spirit of co-operation he has promoted thus far along West Africa’s coast. If he continues as he has begun he is likely to increase the stability and prosperity of his nation. With valuable natural resources like oil, and stable leaders, Ghana is poised to expand its role in the international import and export global economy, making Ghana and the West African coast a friendlier place for ocean freight.

Maybe America could take a lesson in international relations from the nation of Ghana and its new president. When was the last time you heard about a politician lending an airplane or warehouse to the Mexican government in an effort to help stop crime?



[1] Myjoyonline.com, Ghana commits to fighting piracy in the Gulf of Guinea, Sept 9, 2012

[2] Fortune, The Shipping News, by Anne Vandermay, May 21, 2012

[3] Huffington Post, John Mahama, Ghana VP, sworn in hours after president’s death, 7/24/12

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A Longshoreman Strike Threatens to Affect International Shipping https://www.universalcargo.com/a-longshoreman-strike-threatens-to-affect-international-shipping/ https://www.universalcargo.com/a-longshoreman-strike-threatens-to-affect-international-shipping/#respond Thu, 06 Sep 2012 22:27:38 +0000 https://www.universalcargo.com/?p=7351 ILA Strike Watch 2012 The International Longshoreman Association (ILA) has threatened to strike after the expiration of their current contract at the end of September with the U.S. Maritime Alliance (USMX). Talks broke down on August 22ndand negotiations on a new master contract have ceased since the introduction of certain items to the table, especially […]

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ILA Strike Watch 2012

strike sign public domain

The International Longshoreman Association (ILA) has threatened to strike after the expiration of their current contract at the end of September with the U.S. Maritime Alliance (USMX).

Talks broke down on August 22ndand negotiations on a new master contract have ceased since the introduction of certain items to the table, especially proposed changes in work hours and overtime pay for Longshoremen on the East Coast.

Ocean freight imports (exports as well), especially from China and the Far East to the US East Coast, are at risk of being seriously affected. A strike could have an impact on ocean freight rates and international shipping times.

What caused the threat of a strike that could have serious impact on US East Coast imports and exports?

ILA representatives accused USMX of “gutting wages and benefits” with the new proposals for the contract. Representatives of the ILA also resented the alleged “take it or leave it“ attitude of USMX, which refused to continue negotiations unless these controversial items were added to the contract renegotiation table.

The Maritime Alliance wants to overhaul what it calls “inefficiencies” and “archaic work rules and manning practices… and overtime pay practices that result in millions of dollars being paid for time not worked,” said James Capo, chairman and CEO of USMX.USMX countered that they were willing to make significant concessions on issues raised by the ILA and were disappointed that their own items for negotiation were immediately rejected by ILA representatives.

These issues, Capo further claimed, are driving up prices at East Coast ports, which in turn are causing serious economic losses as carriers use other, less expensive ports to complete their international transactions. Without competitive pricing at their ports, USMX claims, they risk becoming obsolete in the long term.

The members of the ILA responded to these proposed changes by leaving the negotiating table and immediately discussing the possibility of a strike and preparations for such action.

Port authorities, getting wind of this development, responded by making their own plans in case the negotiation stale-mate does turn into a full-blown strike if USMX remains inflexible about the alterations to overtime pay and wages-per-hour for the Longshoremen.

The ports certainly have much to lose from the effects a potential strike could have on the imports and exports via the US East Coast. International shippers could take their imports and exports through alternative ports, costing the East Coast ports serious money from loss of importing and exporting revenue

The Virginia Port Authority (VPA) was one of the first East Coast ports to take strike threats seriously and create a plan of action to minimize economic losses should the strike take place. Leaders at VPA have made plans to move as much cargo as possible before the September negotiation deadline in anticipation of an ILA strike.

Some carriers, especially those doing business between China (and other Far East locations) and the East Coast, may have no choice but to weather the strike. The swiftest carriers complete the journey in over three weeks and that means those carriers currently en route to East Coast ports could arrive at ports in the midst of the strike, where vital Longshoremen services are suspended. Rerouting shipments to alternative ports on the West Coast, Canada, and Mexico would cost carriers more time and money.

Longshoremen WorkingHistorically, the ILA has not been quick to strike. In fact, the last time a coast-wide strike was implemented was in 1977. Port authorities and others familiar with the ILA are taking the strike threat seriously, making preparations and otherwise indicating that they do not believe the ILA are bluffing.

A Longshoreman strike seems therefore likely and those in the international shipping business should take note and take action before the September 30thdeadline.

For continued reading on the possible ILA strike, see the below American Shipper links.

Frozen labor talks continue between ILA, USMX

Potential ILA strike: Worried now?

 

For freight rates on your imports or exports, contact Universal Cargo Management now.

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Ocean Freight 101: The How, Where, What of International Shipping https://www.universalcargo.com/ocean-freight-101-the-how-where-what-of-international-shipping/ https://www.universalcargo.com/ocean-freight-101-the-how-where-what-of-international-shipping/#respond Thu, 30 Aug 2012 22:32:30 +0000 https://www.universalcargo.com/?p=7352 Though things change and change fast in the international shipping business, you can have a firm grasp on shipping basics. Below is a clear, current, and concise understanding of the how, where, and what of ocean freight international shipping. Here are the questions we’ll cover: How do things get shipped internationally? Where is the most […]

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Though things change and change fast in the international shipping business, you can have a firm grasp on shipping basics. Below is a clear, current, and concise understanding of the how, where, and what of ocean freight international shipping.

Here are the questions we’ll cover:

  • How do things get shipped internationally?

  • Where is the most international shipping taking place?

  • What is the current economic state of international shipping?

Think of this as international shipping 101 with an emphasis on how things look now after the semi-recent international economic down slump.

1. How do things get shipped internationally?

First, we deal with the “how”. How do things get shipped internationally? This brings us to one of the most important terms in the business, the basic unit of global economy, the TEU: twenty-foot equivalent unit.

Image: Emre Dogan | Public Domain

Cargo Container VesselContainer shipping is the most common “how” of international shipping. Your import or export goods are packed into a shipping container, loaded onto a carrier ship, and brought through customs at your destination country.

Your average shipping container used to enclose twenty feet. Now, like many things in the international shipping industry, the average is bigger, in this case, two times bigger. The new average sized shipping container is approximately 40 feet long.

You’ll often see it written as FEU or sometimes 2 TEUs.

Just because FEU has taken over as the most popular shipping container size does not mean 20 foot containers are not still used.

Get a rate quote now for shipping a 20′ container or 40′ container from Universal Cargo Management’s knowledgeable staff.

Some of the latest shipping containers can even float (in case they are lost overboard) and have built in technology that allows their owners to identify where they are and what is within them at all times.

Recent advances in ship design have resulted in ships with even larger carrying capacities. It means more shipping containers on a voyage than was ever possible in the past.

Next year, Maersk (the biggest international shipping company in the world) will launch its much-talked about (and blogged-about) EEE class ship. At 1,312 ft. it is longer than previous ships by a few feet, but what really distinguishes the EEE class ship is its design wizardry that enables the ship to carry 2,500 more containers (18,000 total) than the largest ships on the seas today.

With increasingly automated ports in many developed nations making the loading and unloading of shipping containers swifter and thus more profitable, shipping internationally has never been more efficient.

2. Where is the most international shipping taking place?

Next, we look at the where. Where do all these ships of cargo containers go and what routes do they take to get there? Specifically, where is the most international shipping taking place?

China to the West Coast of the US is the most trafficked sea route. Export from Asian cities accounts for 43% of all maritime trade. The Northwest and Northeast passages, now open during summer months thanks to climate changes, offer shorter (and therefore faster and cheaper) northern routes to and from Asian ports.

Universal Cargo Management imports and exports throughout the world. However, exports and imports to and from China are consistently our most numerous and frequent.

Get a rate quote now on shipping to or from China.

3. What is the current economic state of international shipping?

Finally, what is the state of the economics of international shipping? There is both good and bad here.

A marked increase in over-seas trade has been the trend for many years, aided by technological advancements such as some of the things mentioned above.

Overall volume was up 6.2% in 2011. But such increases had an unexpected backlash for the companies who operate the cargo vessels. Carriers added ships, often larger ships, to their active fleets and added more shipping routes they operated.

All these additions created overcapacity–more ship space for shipping containers than cargo that was being shipped internationally.

So called “rate wars” caused by overcapacity triggered steep declines in shipping rates and consequentially major financial losses for international container ship operators.  The major players in overseas shipping like Maersk, MSC, and CMA CGM Group are only very slowly recovering.

Port operators continued to make neat profits despite the economic hit taken by ship operators, but businesses that buy and sell international goods are the real winners.

Significant decrease in the cost of shipping in recent years, even despite the freight rate increases the carriers have worked hard at putting into place here in 2012, means the real winners are those who make their money by buying and selling imported goods.

It costs just $6.80 to ship 100 lbs. of coffee for example, and only $0.80 to move a barrel of oil. These numbers relate to big companies shipping in bulk. But still, these lowered costs mean it is generally a good time to be in the business of international trade.

Universal Cargo Management, as a friend to your company, is here to help you succeed in international trade. Read our blogs for the latest in international shipping information and contact us for free freight rates for your imports and exports around the world.

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Freight News: Are Asylum Seekers Adding Piracy Danger to Cargo Ships? https://www.universalcargo.com/freight-news-are-asylum-seekers-adding-piracy-danger-to-cargo-ships/ https://www.universalcargo.com/freight-news-are-asylum-seekers-adding-piracy-danger-to-cargo-ships/#respond Tue, 28 Aug 2012 22:41:32 +0000 https://www.universalcargo.com/?p=7569 Piracy is a major international shipping problem. Asylum seekers may be adding to the dangers for cargo ship crews that are helping shippers import and export goods. Read Universal Cargo blog on modern piracy. A recent article from Defence Professionals reports on how ship-owners must shoulder enormous costs for ship security. The article included the International Maritime […]

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Piracy is a major international shipping problem. Asylum seekers may be adding to the dangers for cargo ship crews that are helping shippers import and export goods.

Read Universal Cargo blog on modern piracy.

A recent article from Defence Professionals reports on how ship-owners must shoulder enormous costs for ship security. The article included the International Maritime Bureau’s finding that by the end of July this year, there had been 189 pirate attacks and 20 of them ended up with the attacked ship being seized.International Shipping Pirates

Protecting themselves from such attacks is extremely costly for carriers. Changing routes is one measure. Another is adding security measures for shipping cargo through dangerous waters.

Waters around the Gulf of Aden off the Somalian coast are the most dangerous for cargo ships and their crews when it comes to pirates. When successful in capturing a ship, pirates will often hold the crew for ransom and, of course, steal cargo to profit from the import/export goods that were on board.

According to the Defence Professionals article, German containership operator Hamburg Süd spends 100,000 EUR on organisational and technical security for every round trip that goes through the waters off the Somali coast.

In the international shipping industry where carriers are struggling to make a profit, and suffering major losses, dangerous waters from piracy are extremely difficult to endure.

Now it seems asylum seekers traveling through Asia and then by boat for Australia could be adding to the dangers for cargo ships and their crews.

The Associated Press reported a group of asylum seekers intimidated a carrier ship into changing its course and delivering them to Australia. No doubt this was a costly diversion; but surely, an awful experience for the captain and his crew as well.

The Parsifal, shipping cars to Singapore, responded to an alert put out from Australian authorities about a distress call that was put out from a boat of close to 70 men who were trying to get to Christmas Island, seeking asylum.

The Parsifal responded to the situation as it was obligated to do by maritime law, but the men they rescued were not satisfied to go to Singapore where the Parsifal was headed. What happened hasn’t been made exactly clear, but the captain was concerned enough for the safety of his crew to change course and head for Australia’s Christmas Island.

Intimidating the car carrier into changing course could easily be construed as an act of piracy and some are arguing that the asylum seekers be charged with piracy over it.

The issue becomes whether it is dangerous for cargo ships to pick up asylum seekers who are distressed at sea. Maritime law requires ships to do so, but could it become a major safety risk in making carriers more vulnerable to piracy?

On the other hand, it’s inhumane to leave people struggling in the sea to fend for themselves and possibly drown. One of the men on the boat of asylum seekers in this story from the Associated Press drown before the rescue was made by the Parsifal.

Adding to the issue is the recent controversial legislation passed in Australia. The new legislation allows asylum seekers who arrive by boat to be shipped offshore for processing. No time limits or guarantees were put into place to protect asylum seekers from being detained offshore for years or even a lifetime.

According to a Daily News article, this year has seen an influx of asylum seekers boating to Australia from Afghanistan, Sri Lanka, Iran, and Iraq coming in through Asia. It’s a dangerous journey that has cost hundreds of people their lives over the last decade.

With the new legislation, desperate people could be looking for new destinations via the sea. This could increase the places at sea seeing desperate travelers. Cargo ships picking up people in desperate situations, could lead to dangerous situations but are legally and perhaps morally obligated to do so.

The issue becomes complicated quickly. What are your thoughts?

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Freight News: China Shipping Breakthrough Could Lower Freight Rates https://www.universalcargo.com/freight-news-china-shipping-breakthrough-could-lower-freight-rates/ https://www.universalcargo.com/freight-news-china-shipping-breakthrough-could-lower-freight-rates/#respond Mon, 20 Aug 2012 22:06:57 +0000 https://www.universalcargo.com/?p=7586 Recently the first Chinese merchant vessel reached the Atlantic from the Pacific via the North East Passage. This is a major international shipping breakthrough for China and could result in lower freight rates. The North East Passage is a dangerous trading lane to say the least. The route requires a cargo ship be equipped to […]

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Recently the first Chinese merchant vessel reached the Atlantic from the Pacific via the North East Passage. This is a major international shipping breakthrough for China and could result in lower freight rates.

China Ship Snow DragonThe North East Passage is a dangerous trading lane to say the least. The route requires a cargo ship be equipped to break up thick Arctic ice–quite the challenge. AFP reported that China met that challenge and traversed the North East Passage.

The Chinese tanker named Xuelong (Snow Dragon) made the voyage from the coast of China north through Arctic seas to its destination in the cold northern waters off Iceland.

The Snow Dragon is really more of a research vessel than a cargo vessel, but it brings China’s international shipping within striking distance of offering exports from the country a much shorter, alternative route.

The Snow Dragon is China’s only ice breaker according to the AFP. But there will be more to come, especially, as the article says, since the Chinese “found the passage relatively easy.” It could have a strong effect on ocean freight rates from China or at least on their ocean freight profit as shipping distances are significantly shortened

Since ancient times Europeans have been engaged in trade with the Far East.  The silks and spices available only in Asia were eagerly sought by western Europeans. Initially, it was the overland route called the ‘silk road’, a long and dangerous route overland from the Far East to the Eastern Mediterranean, which provided access to the wealth of the east for markets in the west.  Easterners generally controlled the trade, and the commodities flowed from east to west.

As western nations in the Middle Ages improved their shipbuilding techniques, western merchants sought a more active role in the east-west trade. Instead of waiting for eastern merchants to transport expensive goods over laborious and dangerous over-land routes, European mariners began experimenting with alternate sea routes to Asia. This meant sailing around Cape Horn and across the Indian Ocean all the way to the coast of China and the islands of Indonesia.  However, this long sea route also harbored dangers and took many months to complete, especially during monsoon season when the Indian Ocean was impassable.

As early as the 1500s, European explorers sought long and hard for an alternative route. They wanted a route that would shorten the ocean freight trip between Asia and Western Europe. The North East Passage allowed merchant cargo vessels just that. It was a shorter, swifter route by allowing ships to head north from China, hugging the Kamchatka peninsula, continuing along the icy Siberian coast, and eventually making their way to northern European shores.

Explorers worked on completing the voyage from both ends, Russian explorers working their way between Siberia and Asia, while nautical adventurers from northern European nations like Denmark, Norway, and England struggled through the ice from the West.

It wasn’t until 1878 that the Vega finally made the complete passage from west to east.

Polar ice has made the route difficult to traverse but with the combination of icebreaker vessels and climatic changes that reduced the Arctic ice, it has become easier for cargo ships to utilize the northern route.

Despite the cold and dangerous icebergs in the waters of the North East Passage, the route is worth the higher insurance for one big reason. It is 40% shorter than the alternative southern route from China, around South East Asia, up the Red Sea and through the Suez Canal, through the Mediterranean Sea, the Straits of Gibralter, and on to the northern European coast.

This incredible drop in distance has finally induced China’s international shipping into the North East Passage.

The savings brought China into the Arctic waters with the Xuelong vessel. It is the first, but won’t be alone by 2014 according to the AFP article. More ships equipped to deal with thick Arctic ice will launch from the coasts of China and have a significant impact upon international shipping rates.

Call 866-826-2276 now for shipping freight rates from China!

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Freight History: Corporate Espionage in Early Modern China https://www.universalcargo.com/freight-history-corporate-espionage-in-early-modern-china/ https://www.universalcargo.com/freight-history-corporate-espionage-in-early-modern-china/#comments Thu, 16 Aug 2012 22:50:29 +0000 https://www.universalcargo.com/?p=7389 Tea from China was introduced in Britain as early as the 1600s. It eventually became the national beverage of the British yet they were totally dependent upon foreign tea imports, specifically tea from China to assuage their caffeine addiction. Many of us can relate. My wife drinks tea every morning. If she doesn’t, she gets […]

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Tea from China was introduced in Britain as early as the 1600s. It eventually became the national beverage of the British yet they were totally dependent upon foreign tea imports, specifically tea from China to assuage their caffeine addiction.

Chinese TeaMany of us can relate.

My wife drinks tea every morning. If she doesn’t, she gets a nasty, sharp caffeine withdrawal headache by 1pm. Tea is relatively cheap for us and in plentiful supply, though getting the good stuff (like Assam from Harrods) is a bit pricey and comparatively harder to find in the US than in Great Britain.

China is still a leading cultivator, consumer, and exporter of tea today. India is second in tea production and consumption, followed by Kenya and Sri Lanka. Historically however, the Chinese originally had the monopoly on tea cultivation, production, and export.

British merchant vessels were heavily involved in the import of tea to their homeland, racing other sleek British ships back to Britain from the coast of China. They raced to be the first to dock and sell the first tea of the new season in British markets.  Investors and sailors risked much to get their cargo back to Britain first so as to command the highest prices on the light but valuable import.

Read our blog on international shipping and the great tea race of 1866.

Very sensibly, the British started looking for a way to control tea production for themselves. It chaffed them to be at the mercy of the Chinese tea merchants.  They wanted to establish planting and processing tea in their Indian colonies. But to enable successful cultivation and production of the tea leaves they would need a spy, someone who could crack the ancient code of tea preparation. The process was not that intuitive and the Chinese were not about to give away their secrets of tea-leaf preparation.

In 1848, several serious investors from the British East India Company hired a Scot, aptly named Fortune, to spy out the Chinese tea production industry. He was commissioned to investigate every aspect of the product, from cultivation techniques to drying, curing, and fermentation.  They needed to know the details of tea production in order to recreate the Chinese tea plantations and productions on their land holdings in India and break their dependence upon Chinese export of tea.

You might think that making tea is not that complicated–boil water, add dry leaves of plant, steep 4 minutes, and enjoy–but it turns out there is a lot more to it than that. The ancient tea-preparation process involved picking the tea leaves and drying them for no more than a few hours in the sun. The dry leathery leaves were then “cooked”, that is heated in vast pans until the leaves soften and released some of their inner juices. Then the leaves were rolled out on tables to bring their essential oils to the surface and further soften the leaves. Then they are dried again and sorted.

Fortune, disguised in Mandarin robes, made his way through a tea factory, carefully asking questions through an interpreter and taking notes that enabled his employers to recreate the factory in their colonies on the sub-continent.

This single act of corporate espionage was one of the major factors contributing to the establishment of the great shipping corporation, the British East India Company. It also broke the Chinese monopoly on tea import and export to the west.

Smithsonian has a great online article about the British East India Company, Fortune, and the stealing of trade secrets from China called The Great British Tea Heist.

Today, China still produces much of the tea shipped world wide, but tea is an international commodity, being produced and consumed on a large scale in over a dozen countries.

Of course, China produces many products that are shipped internationally for distribution and sale around the world. Universal Cargo Management is here to help you import any product you sell that is made in China.

Click Here for Free Freight Rate Pricing

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Freight News: International Shipping From Asia Directly to East Coast https://www.universalcargo.com/freight-news-international-shipping-from-asia-directly-to-east-coast/ https://www.universalcargo.com/freight-news-international-shipping-from-asia-directly-to-east-coast/#respond Tue, 14 Aug 2012 23:09:00 +0000 https://www.universalcargo.com/?p=7590 Earlier this month, Jacksonville Port Authority (JAXPORT) announced its first regular liner call from Evergreen. Evergreen is one of the world’s largest carriers with over 180 ships by capacity of approximately 650,000 TEU (about Evergreen). According to the press release from JAXPORT, Evergreen’s cargo ship, The Ever Unique made its call at the TraPac Container Terminal […]

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Earlier this month, Jacksonville Port Authority (JAXPORT) announced its first regular liner call from Evergreen.

Evergreen linerEvergreen is one of the world’s largest carriers with over 180 ships by capacity of approximately 650,000 TEU (about Evergreen).

According to the press release from JAXPORT, Evergreen’s cargo ship, The Ever Unique made its call at the TraPac Container Terminal at Dames Point of JAXPORT. The Ever Unique has a capacity of more than 5,300 TEU (twenty-foot equivalent containers).

The Ever Unique is the first cargo ship to call at JAXPORT from a new regular service that is jointly operated by Evergreen and MOL of Japan a.k.a. Mitsui O.S.K. Lines, Ltd.

The press release says this “new service expedites the movement of cargo directly from major ports in Asia… to Jacksonville and other key destinations on the U.S. East Coast.”

The major Asia ports the JAXPORT press release mentions are Vietnam, South China, and Singapore; however, the service is not limited to those ports. The service is accomplishing this ocean freight feat by taking the ships in the service through the Suez Canal.

There are 10 ships in rotation for this service. Nine of the ships are provided by MOL and the tenth is provided by Evergreen, according to the JAXPORT press release. Each of the ships has a capacity range of 4,500 to 5,600 TEU.

For international shippers, this opens up another option for importing goods from Asia to the U.S. It is also the exact kind of thing that has caused ports like the Port of Long Beach to push incentive programs to induce shippers to import their goods through them.

This service through JAXPORT is just one of the newest pieces in the port wars between the various West Coast and East Coast ports that are battling for bigger pieces of the pie in the discretional intermodal cargo market of imports to the U.S.

Discretional intermodal cargo is cargo where international shippers decide what port they ship through because the cargo is not going to a port city or area. The competition for this kind of cargo is intense.

The Suez Canal, allowing this new service for imports from Asia to the U.S. East Coast, is not the only canal that will affect the competition.

The expansion plan of the Panama Canal is supposed to be complete within a few years and double its capacity. This expansion should give international shippers the ability to choose East Coast or West Coast for certain imports without the lengthy and often expensive delays that regularly occur at the Panama Canal.

Freight rates and service are top factors for shippers making ocean cargo decisions. You can expect to see ports pushing incentives to attract discretional intermodal cargo.

Get a rate quote now for your imports or exports.

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Freight News: Cargo Ships Ramming Blue Whales in Sri Lanka (w/ video) https://www.universalcargo.com/freight-news-cargo-ships-ramming-blue-whales-in-sri-lanka-w-video/ https://www.universalcargo.com/freight-news-cargo-ships-ramming-blue-whales-in-sri-lanka-w-video/#respond Wed, 08 Aug 2012 23:58:44 +0000 https://www.universalcargo.com/?p=7449 Imagine you’re shipping your ocean freight cargo and the carrier vessel transporting your goods crashes into a giant blue whale. This is becoming a common occurrence off the coast of Sri Lanka. The blue whale is the largest creature ever known to live on earth. That includes the monstrous dinosaurs that once roamed the planet. […]

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Imagine you’re shipping your ocean freight cargo and the carrier vessel transporting your goods crashes into a giant blue whale. This is becoming a common occurrence off the coast of Sri Lanka.

Blue WhaleThe blue whale is the largest creature ever known to live on earth. That includes the monstrous dinosaurs that once roamed the planet.

Little is known about these giant, endangered creatures; however, one thing that is known is many blue whales have made the waters off the southern coast of Sri Lanka their home. While blue whales are known to migrate over large distances, the ones off the coast of Sri Lanka appear to stay there year round.

Also in those waters, only 15 miles off Sri Lanka’s southern coast, is one of the busiest shipping lanes in the world.

It’s not hard to imagine that where one of the world’s largest whale populations and busiest routes for cargo carriers meet, the two are colliding. While this certainly presents dangers to cargo vessels, their crews, and shippers’ ocean freight, it is the whales that seem to be on the losing end.

A recent New York Times article describes the sight of a dead, 60-foot-long blue whale that was discovered by whale watchers. “The body was swelling rapidly, and suckerfish swarmed across its skin. Even more unsettling was the condition of its tail, which had been nearly severed from the body.”

Another grisly image from the article describes a blue whale “found draped over the bow of a container vessel in the harbor in the capital, Colombo…”

20 whale carcasses were seen last year around the island according to the New York Times article and that could be just the tip of the iceberg. The article goes on to say, “Because blue whales often sink soon after they are struck, most such deaths go unrecorded, and Dr. Calambokidis says the true number ‘could be 10 or 20 times’ the number seen.”

What is being done about this problem? Reading an article on ColomboPage: Sri Lanka Internet Newspaper, it would appear not much.

Moving the shipping lane farther out to sea could help prevent many cargo carriers from colliding with whales, but according to the ColomboPage article, “Sri Lanka Minister of Fisheries Rajitha Senaratne says that the international shipping route off Sri Lanka’s southern coast will not be shifted.”

Sri Lanka’s concern with moving the shipping lane farther out to sea, according to the article, is that it would negatively affect the commercial value of Sri Lanka’s newly built Hambantota harbor.

At the same time, Sri Lanka government is trying to increase tourism, using whale watching as a major draw according the New York Times article mentioned above. The whale watching boats could be driving the whales into the shipping lanes in increasing numbers.

There are no regulations set in place like we have here in the U.S. for keeping a distance from the whales off the coast of Sri Lanka.

But something is being done. Marine biologist Asha de Vos is leading a charge of researching and protecting the blue whales off the coast of Sri Lanka. Hopefully, her work will continue to gain more support which will in the end be good for both the blue whale population off the coast Sri Lanka, Sri Lanka itself, and for the shippers transporting their ocean freight cargo across the shipping lane there.

Take some time to check out Asha de Vos’ blog.

The New York Times has this great video about marine biologist, Asha de Vos studying and trying to save these giant creatures in the waters off Sri Lanka.

And remember, if you have cargo to ship internationally, Universal Cargo Management is always ready to give you a free freight rate quote. We also offer marine shipping insurance to protect you in case your cargo’s carrier vessel hits a blue whale and the cargo is damaged.

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What’s Going On With Ocean Freight Prices? https://www.universalcargo.com/whats-going-on-with-ocean-freight-prices/ https://www.universalcargo.com/whats-going-on-with-ocean-freight-prices/#respond Wed, 01 Aug 2012 22:50:49 +0000 https://www.universalcargo.com/?p=7355 International shipping freight rates are always volatile. There are many factors that contribute the volatile nature of freight rates causing them to rise and fall like a cargo container roller coaster. Of course, the most basic of factors that have the greatest impact on ocean freight rates are supply and demand. International shipping is not […]

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International shipping freight rates are always volatile.

There are many factors that contribute the volatile nature of freight rates causing them to rise and fall like a cargo container roller coaster. Of course, the most basic of factors that have the greatest impact on ocean freight rates are supply and demand.

International shipping is not such a different industry than all other businesses that it defies the basic business principles of supply and demand. However, in 2012, it seems like that is exactly what’s happening.Ocean Freight Rates

Associate Editor Bill Mongelluzzo of the Journal of Commerce (JOC) recently wrote an article titledOcean Carriers Flex Their Pricing Power. The article opens with, “Trade growth is dragging and capacity is increasing. So why are shippers paying so much more?”

2012 has seen freight rate increase after freight rate increase.

Universal Cargo Management, as a friend to your business, utilizes this blog to keep you informed on developments in the freight rate market. Because this year has seen so many freight rate increases, we’ve had several blogs about 2012 freight rate increases. They include:

But why have freight rates so thoroughly been rising in 2012 when as the JOC article says, “Trade growth is dragging and capacity is increasing”? Wouldn’t the laws of supply and demand be causing the opposite?

In 2011, we saw a fairly similar type of supply and demand market, but Universal Cargo Management blogs were informing our readers about decreasing freight rates with articles like:

How could 2011 and 2012 look so different when there are such similar supply and demand factors?

Maybe freight rates simply alternate between rising and falling each year and that’s why 2012 sees freight rate increases while 2011 saw freight rate decreases during similar types of years when it comes to supply and demand. 2010 was a year that saw freight rate increases from China to the U.S. after all.

No. That would be a short-sighted, shallow, and incorrect conclusion to draw.

Falling freight rates of 2011 were great for shippers, but disastrous for carriers. Carriers lost billions and had to make a move to avoid another year of impossible losses to handle.

Enter the Transpacific Stabilization Agreement. The big carriers in the international shipping game got together and agreed on a series of General Rate Increases (GRI’s).

What has been impressive is the carriers’ ability to stick to rate increases. It takes a level of discipline that the carriers have seen unable to maintain in years past. Often, they’ve undercut each other, competing for bigger slices of the international shipping market pie and trying to push their less stable competitors out of business.

At the same time, the carriers have had to manage their capacity more carefully than last year. The JOC article says, “Carriers… are attempting to prop up freight rates through short-term measures that manage capacity, or at least create a perception in the market that space will tighten as the autumn peak shipping season approaches. This includes canceling selected voyages.”

Overcapacity in 2011 was the big thing that really pushed ocean freight prices so low. While more megaships keep hitting the water, carriers have been keeping their shipping lanes from getting too overloaded with cargo container space. This, like initiating and sticking to GRI’s, has taken a level of discipline from the carriers that they often do not manage to pull off.

Helping carriers maintain GRI’s is that their big customers don’t have to pay the rate increases.

This is where most shippers really feel the freight rate increases. BCO’s that have contracts directly with the carriers have clauses in their contracts that protect them from rate increases. NVO’s, who work as go-betweens for importers/exporters and carriers, have to take the increasing rates from the carriers to the shippers.

So in August, as the carriers say they will be bringing yet another freight rate increase, the gap between what the big companies like Walmart pay for their imports from Asia and what the small to mid-sized shippers pay for their imports from Asia will get wider. Again.

August’s increases from the carriers are targeting $500 per 40-foot container to the West Coast, $700 to all other U.S. destinations, and $1,000+ for refrigerated imports.

As a shipper, this all may sound like bad news. Will freight rates just climb and climb and climb? Remember, the level of discipline the carriers have maintained this year has been uncharacteristic. Sooner or later, it is likely one or two will break. On top of that, most of their measures to maintain increased rates are inherently short-term. And the laws of supply and demand can only be circumvented for so long.

Once something gives, the dominoes could easily start falling for big decreases in freight rates. The international shipping market has not lost its volatility and those freight rate changes do go both ways.

In the meantime, business must carry on. You can

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Freight History: China and International Shipping https://www.universalcargo.com/freight-history-china-and-international-shipping/ https://www.universalcargo.com/freight-history-china-and-international-shipping/#respond Tue, 31 Jul 2012 22:37:37 +0000 https://www.universalcargo.com/?p=7530 China is a world leader in international shipping. Today China is one of the greatest import-export powers in the world, regularly shipping goods to ports around the world. Chinese businesspeople are rightly considered shrewd exporters, supplying popular supplies to receptive markets worldwide. Is China a latecomer on the international market? We generally think of China […]

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China is a world leader in international shipping.

Today China is one of the greatest import-export powers in the world, regularly shipping goods to ports around the world. Chinese businesspeople are rightly considered shrewd exporters, supplying popular supplies to receptive markets worldwide.

China Sea Shipping

Is China a latecomer on the international market?

We generally think of China as a latecomer on the international shipping scene, especially when compared with European nations that were aggressively sea-faring during the 1600-1800s such as Britain, Portugal, and Spain.

However, much earlier–during the 1300-1400s, before the “Golden Age of Sail”, China was a leader in exploration, shipbuilding, and international shipping.

Ming Dynasty and international shipping.

The ruling emperors of the Ming dynasty actively supported innovations in sea-faring by commissioning huge vessels called “treasure ships” to ply the waters far from their homeland.

These treasure ships ventured south down the coast of mainland China, to the trading ports of south-east Asia and beyond as far as India. They were engaged in exploration as well as mercantilism. To accommodate these long voyages and cargoes of trade goods, the ships were of enormous size – 7,800 tons! That is three times bigger than the largest ships British shipyards were turning out before the 1800s.

These treasure ships were juggernauts of the sea!

Monsoon winds used for China shipping.

Huge trees as masts were required for these juggernaut ships, which moved exclusively under sail and were cleverly piloted by mariners who knew how to take advantage of the seasonal winds of the monsoon.

By riding those winds into far away destinations, Chinese mariners were able to collect trade goods that were transported from places even further east. The next monsoon season, the same winds could blow a mariner and his ship back the way they came, their holds full of import cargo such as frankincense and rugs that they gained in exchange for the products they exported, such as silk.

The ships could haul back a variety of trade goods and, as a natural consequence of their combination of colonialism and commercialism, increased China’s international influence.

Chinese international shipping shifts with the Qing dynasty.

This booming international trade and cultural exchange through these big, well equipped treasure ships faded when the Ming dynasty fell and gave way to a new dynasty, the Qing. Qing dynasty emperors were typically more interested in consolidating and administering their interior assets than expanding their knowledge and power over the sea.

The Qing put their money elsewhere and without the funding of the Chinese government, the fleet of treasure ships and their mission to expand Chinese trade networks and cultural influence fell into disrepair.

Chinese imports and exports continue privately.

It was left to private Chinese businesspeople to fill in the gaps left in international shipping along the southern coast of Asia. While it was the government funding of these impressive treasure ships which began China’s foray into international shipping and commerce, China’s international shipping continued through humble private merchant sailors making their way through dangerous monsoon winds as far as they dared.

Today, private Chinese citizens continue in this tradition of independently seeking new markets for their products and importing the best of what the world has to offer. Of course, the Chinese government has a large hand in the nation’s international shipping.

Universal Cargo Management helps people import from and export to China every day.

Click Here for Free Freight Rate Pricing

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How the Brew Came to You: International Shipping and Coffee https://www.universalcargo.com/how-the-brew-came-to-you-international-shipping-and-coffee/ https://www.universalcargo.com/how-the-brew-came-to-you-international-shipping-and-coffee/#respond Wed, 25 Jul 2012 17:20:11 +0000 https://www.universalcargo.com/?p=7406 It’s a popular legend. An Ethiopian shepherd boy notices the antics of his sheep after they graze among the fruit of the plant coffea arabica. But there’s more to the story. My wife, historian Melissa Vineyard enlightened me on how this initially obscure crop made its way from small-scale artisanal production to being the second […]

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It’s a popular legend. An Ethiopian shepherd boy notices the antics of his sheep after they graze among the fruit of the plant coffea arabica. But there’s more to the story. My wife, historian Melissa Vineyard enlightened me on how this initially obscure crop made its way from small-scale artisanal production to being the second most traded commodity in the world and the role international shipping played in that.

loved import coffee beansWhen and how coffee leapt from Ethiopia across the Red Sea to the Arabian peninsula is not exactly known, but historians have traced the first commercial cultivation of coffee beans in the relatively dry, terraced gardens of Yemen on the southern coast of the Arabian peninsula.

Yemeni farmers grew the crop and took their harvest to trading centers along the coast, such as the city of Mokka–no, not just some chocolate coffee drink!–where the beans were shipped all over the Muslim world.

Coffee was first embraced in the Muslim world by Sufi mystics who used the drink to help them keep awake during meditation and the beverage spread throughout the Middle East and Northern Africa in both sacred and secular circles.

Muslims were the first to exploit the social drinking of coffee. Coffee houses represented one of the few legitimate public spaces for men to mingle since alcohol was taboo and restaurants were rare in the ancient and medieval Middle East.

Although raised in the U.S., the #1 coffee-consuming nation in the world, my wife shunned coffee herself until spending a year in the Middle East. Melissa steeled herself to gulp down the obligatory after-dinner coffee out of sheer politeness to her hosts, the beautiful, hospitable Druze neighbors living in the mountains of Northern Israel. To her surprise and delight, the dark, rich, sweet Turkish style coffee Melissa was served in potent little cups was nothing like the thin, bitter stuff slopped out by the waitresses at Denny’s.

Melissa was hooked and would take her new coffee habit home with her.

But how did this elixir get from ancient Asiatic shores and eventually to Melissa’s small coastal California town? International shipping!

Merchants shipped the coffee bean via small crafts north through the Red Sea and then by caravan overland to the shores of the eastern Mediterranean, further north to the Anatolian peninsula (modern Turkey), east to Northern Africa and throughout the Ottoman empire. Venetians, ever intrepid sea merchants, bought the beans from Arab traders in Eastern Mediterranean ports and shipped the beans in the cargo holds of their merchant vessels back to Venice and thence distributed coffee to the rest of Europe. Coffee’s cache was enhanced by Ottoman ambassadors serving the aristocrats of Europe elegant cups of Turkish style coffee just like the sultan enjoyed.

However, coffee was initially slow to catch on because of its high price. Grown in small batches and shipped internationally at great expense, it was out of reach for the masses. It wasn’t until coffee was grown as an alternative cash crop on the Caribbean island of Haiti that a cheaper, more abundant source of coffee beans was available.

The intense exchange of slaves and agricultural products like sugar and rum between the Caribbean and North and South America made coffee affordable for the many and not just the privileged few. Soon coffee, cheaper than tea imported from India via English merchants, became the stimulant of choice for North Americans. The tradition continues to this day.

cup of imported joeIn short, the history of how the bean got from the slopes of East Africa to the new-washed shores of California is the extremely high volumes of ocean freight cargo and the much-lowered costs gained through slave labor of centuries past international shipping.

Next time you enjoy a cup of coffee, you can inform others of the role international shipping, supply and demand, and sadly, cheap (i.e. slave) labor were involved in the rise of java as an international beverage and an outstanding American favorite.

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International Shipping & The Great Tea Race of 1866 https://www.universalcargo.com/international-shipping-the-great-tea-race-of-1866/ https://www.universalcargo.com/international-shipping-the-great-tea-race-of-1866/#comments Mon, 23 Jul 2012 23:39:33 +0000 https://www.universalcargo.com/?p=7479 Modern Vs. Old-School International Shipping While we may think that modern international shipping is profoundly different from old-school under-sail shipping, a brief look at the history of the golden age of sail may tell a different story. The power of supply and demand as well as the ingenuity and skill of mariners of the past […]

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Modern Vs. Old-School International Shipping

While we may think that modern international shipping is profoundly different from old-school under-sail shipping, a brief look at the history of the golden age of sail may tell a different story.

The power of supply and demand as well as the ingenuity and skill of mariners of the past meant that some cargo crossed the seas remarkably fast, and the economics of transoceanic commercial voyages are very familiar to modern international shipping companies like Universal Cargo Management.

The Great Tea Race of 1866

Cargo Sail ShipI recently read an article entitled The Great Tea Race of 1866 in the online version of Smithsonian Magazine.  The article details how key conditions conspired to make it profitable for elite cargo vessels (multi-masted trans-oceanic clipper ships) to race across the sea from Hong Kong to England.

First, there needed to be sufficient incentive to make racing the hazardous sea lanes from the far east to the isle of Britain worth the risk. In the late 1800s the incentive was a marked increase in profit margins for the first ships to arrive in the new season carrying one particular cargo: tea.

Tea was just the right import – the season’s first harvest was in demand enough to make it worth it (10% premium on the first load of tea cargo to make it to port!) to race the cargo home.

Also, tea was light enough to enable the ships to travel fast.  Many heavier, bulkier cargos would have slowed the travel time from Hong Kong to Britain considerably.  All these factors combined to create an economy that supported fierce competition to bring in the season’s first shipment of tea.

The demand for tea was also the catalyst for technological advancement in shipbuilding. Shipwrights labored to develop hulls that were more hydrodynamic and sails that would take advantage of every puff of wind. It was all to the end of increasing the speed of commercial trans-oceanic voyages, especially the delivery of tea.

Cargo Vessel Designs and Profit

These advancements in ship design set the stage for epic competitions between shipping companies, each one developing and racing their fastest clippers across the ocean in an attempt to arrive first and claim the highest prices for their precious cargo.

Investors who had shelled out 15,000 BP to build these super-fast ships could recoup as much as 3,000 BP in the ships’ first cargo voyage.  With such high profit potential, many were willing to invest in top ship designs and pay to have them captained by a few elite mariners. These captains worked relentlessly throughout the voyage to maximize their vessel’s speeds.

International Shipping Today

Modern carriers may be more likely to use slow steaming than race to a port finish line, but today’s competitive international shipping industry isn’t so different. Profit margins are tight and the ability to bring valuable cargo swiftly but safely into port still has its rewards.

At Universal Cargo Management, we love that we get to continue in the great tradition of transoceanic shipping. We might not be designing faster cargo vessels, but our 25+ years of experience and service as a freight forwarder could help you be profitable with your ocean freight.

Click Here for Free Freight Rate Pricing

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Cute Kitten Stowaway Clings to Life in Ocean Freight Container https://www.universalcargo.com/cute-kitten-stowaway-clings-to-life-in-ocean-freight-container/ https://www.universalcargo.com/cute-kitten-stowaway-clings-to-life-in-ocean-freight-container/#respond Mon, 16 Jul 2012 16:29:19 +0000 https://www.universalcargo.com/?p=8226 Imagine importing a cargo container of goods from China and opening it to find a kitten inside who’s clinging to life. That’s exactly what happened to a Compton business according to an article on Pet Patch of Cerritos-Artesia Patch. Somehow, the small kitten managed to sneak into the freight container, apparently, while it was being loaded in Shanghai, China. […]

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Imagine importing a cargo container of goods from China and opening it to find a kitten inside who’s clinging to life.

Shipping Container Stowaway KittenThat’s exactly what happened to a Compton business according to an article on Pet Patch of Cerritos-Artesia Patch.

Somehow, the small kitten managed to sneak into the freight container, apparently, while it was being loaded in Shanghai, China.

No one must have noticed and the cute, little, orange and white kitten was sealed inside the shipping container.

What’s incredible about this story is that the kitten survived the nearly 2,700 mile ocean voyage from China to the United States with no food or water.

The Compton business whose freight container the kitten stowed away on called the County of Los Angeles Department of Animal Care and Control (DACC).

The DACC wasted no time in showing up to care for the kitten.

As of July 12th, when the Pet Patch article was published, this Domestic Short Haired kitten was in guarded condition at Carson Animal Care Center’s medical unit.

Because it entered the United States from another country, the kitten had to be put into quarantine and carefully monitored from there.

The article quoted DACC Director, Marcia Mayeda as saying the kitten “ate a good meal last night and slept soundly.” The article went on to say, “DACC veterinary staff reported that the kitten woke up this morning ‘bright, alert, and responsive.'”

They named the kitten Ni Hao. It means “hello” in Chinese.

If you’d like to say hello to the kitten and are interested in adopting little Ni Hao, you can e-mail carson@animalcare.lacounty.gov or call (310) 527-5146.

Cerritos-Artesia Patch provides comprehensive local coverage of Cerritos and Artesia, CA. They feature news and events, business listings, discussions, announcements, photos, and videos.

The Pet Patch column features local adoptable pets, pet tricks, tips, and information from a local animal professional.

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Predictions by Boeing Cause Us to Revisit Air Cargo Vs. Ocean Freight https://www.universalcargo.com/predictions-by-boeing-cause-us-to-revisit-air-cargo-vs-ocean-freight/ https://www.universalcargo.com/predictions-by-boeing-cause-us-to-revisit-air-cargo-vs-ocean-freight/#respond Thu, 12 Jul 2012 22:00:40 +0000 https://www.universalcargo.com/?p=7559 Boeing, the largest exporter in the U.S. by value, predicts the world’s fleet of aircraft will double in the next 20 years according to a recent Air Cargo World article. Despite saying “the demand for freighters will remain sluggish” during that time, freighters are forecast to nearly double to 3,200 by 2031. Yet, this freighter […]

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Boeing, the largest exporter in the U.S. by value, predicts the world’s fleet of aircraft will double in the next 20 years according to a recent Air Cargo World article.

freighter planeDespite saying “the demand for freighters will remain sluggish” during that time, freighters are forecast to nearly double to 3,200 by 2031. Yet, this freighter increase is smaller than Boeing had previously predicted.

Most of the aircraft demand is for passenger-planes instead of freighters. Boeing says, according to the Air Cargo World article, that there is a demand for 34,000 new planes over the next 20 years.

That puts freighters at less than 5% of the demand for planes.

Does this mean the air cargo business is not doing well? The Air Cargo World article’s headline, “Passenger forecast up, cargo down, says Boeing” might have you think that. Perhaps the battle between shipping air freight versus sea shipping is being won by the ocean carriers.

However, according to the International Transport Forum’s 2011 global trade and transport statistics brief, in 2010, air cargo had completely recovered from the financial crisis of 2008 while ocean freight was still 5-15% below crisis numbers.

In 2011, air freight saw decline, but according to the 2012 global trade and transport statistics brief from the International Transport Forum, freight transport by air still looks better than ocean freight when compared to pre-crisis levels.

External trade by sea in the US and EU-27 is stagnant below pre-crisis levels while external trade by air is at pre-crisis numbers according to indications from the 2011 global freight data.

ocean freighterNumbers are not slumping all across the board and not all wins go to the air cargo side. Ocean freight has seen strong growth in U.S. exports to BRICS (Brazil, Russia, India, China, and South Africa), up 68% from pre-crisis levels according to the International Transport Forum.

Perhaps Boeing’s seeing a demand for about twice as many air freighters by 2031, even though it is down from what they previously thought, is a good indication for the air cargo business. It does sound good compared to the overcapacity issues carriers have seen on the ocean freight side. Of course, ocean carriers’ demand for more ships to put in the water coinciding with a global recession was a big factor in that overcapacity problem.

Could the delivery of new planes meet with similar misfortune?

There’s no way to say exactly how the global economy will perform over the next 20 years. I prefer an optimistic outlook. Neither air freight nor ocean freight is going away. When you have cargo to export or import, you simply need to choose the one, air or ocean, that is best for you. The competition rages on.

In the meantime, you can always get an air freight quote or ocean freight quote from Universal Cargo Management.

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What Does It All Mean? International Shipping & Logistics Glossary https://www.universalcargo.com/what-does-it-all-mean-international-shipping-logistics-glossary/ https://www.universalcargo.com/what-does-it-all-mean-international-shipping-logistics-glossary/#respond Tue, 10 Jul 2012 22:46:00 +0000 https://www.universalcargo.com/?p=7354 Ever find yourself asking the question, “What does it all mean?” I’m not talking about the philosophical or spiritual questions searching for the meaning of life. I’m talking about all the acronyms, abbreviations, and jumble of letters in everything you read about international shipping. NVOCC, FCL, LCL, FOB, TEU, FEU… What does it all mean? […]

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Ever find yourself asking the question, “What does it all mean?”

business woman overwhelmedI’m not talking about the philosophical or spiritual questions searching for the meaning of life. I’m talking about all the acronyms, abbreviations, and jumble of letters in everything you read about international shipping.

NVOCC, FCL, LCL, FOB, TEU, FEU… What does it all mean?

Perhaps you’re new to the world of international shipping. Maybe you’ve actually been importing or exporting for a while but just gloss over the terms you don’t know or get lost in articles and conversations about international shipping.

You’re not alone. Many even feel overwhelmed by all the different terms in the international shipping industry.

Universal Cargo Management, as a friend to your business, is here to help.

Whether you ship air cargo or ocean freight, we want to help you be educated about the international shipping industry so you can be confident and successful when it comes to your imports and exports.

There are many resources we offer to international shippers. Perhaps one of the most useful resources is aLogistics Glossary page here on our website.

business woman happy in knowledgeOn this page you’ll find the answers to your question, “What does it all mean?” Supposing, of course, you’re referring to those international shipping terms and not the spiritual and philosophical questions about the meaning of life.

We can talk about the meaning of life later–once your cargo is securely shipped to the port of your choice around the world.

You can also feel free to relax if you’re not an expert on international shipping. You have your areas of expertise in the products and industry in which you work. With over 25 years of experience as a trusted freight forwarder, Universal Cargo Management has you covered when it comes to international shipping. That’s our area of expertise. We’ll walk you through the process whether you’re importing from China or moving to the UK.

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Freight Philanthropy: CAST Out Human Trafficking & Sex Slavery https://www.universalcargo.com/freight-philanthropy-cast-out-human-trafficking-sex-slavery/ https://www.universalcargo.com/freight-philanthropy-cast-out-human-trafficking-sex-slavery/#respond Thu, 28 Jun 2012 20:53:31 +0000 https://www.universalcargo.com/?p=7515 “Despite more than a dozen international conventions banning slavery in the past 150 years, there are more slaves today than at any point in human history.” – Time Magazine Often when we think of slavery, we think of the past. Ancient Egypt, a mighty civilization that built wondrous structures like the pyramids using the backs […]

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“Despite more than a dozen international conventions banning slavery in the past 150 years, there are more slaves today than at any point in human history.” —Time Magazine

Slavery--Hands TiedOften when we think of slavery, we think of the past. Ancient Egypt, a mighty civilization that built wondrous structures like the pyramids using the backs of slaves might spring to mind. Perhaps the closer history of slavery here in the U.S., people being shipped in from Africa to be sold in the New World is where your mind goes.

But slavery has long been abolished in the U.S., right? And we certainly don’t live in ancient Egypt. Surely, slavery is an issue of the past or if still today, just in other undeveloped countries. Wrong.

Human trafficking is happening world wide. Much of it targets women and children, forcing them into sex slavery and forced labor. But human trafficking strikes men as well and it is not something just happening in countries far away from us.

The CIA estimates 15,000 to 17,500 men, women, and children are trafficked into the U.S. annually.

“I think the awful irony,” Universal Cargo Management President, Shirley Burke said, “is that we are referred to as ‘The Land of the Free’ and there is slavery happening in our very own neighborhoods.”

But there are organizations fighting human trafficking. One of them being the Coalition to Abolish Slavery & Trafficking or CAST.

Shirley was on hand at the recent CAST Gala Event (see photos here), which was well attended by over 300 people joined together by a common passion to see human trafficking and slavery abolished.

It was a night to raise awareness about human trafficking, a night to raise money to fight human trafficking, and a night to honor those who have shown extraordinary leadership in protecting and empowering survivors of modern day slavery.

“I was especially impressed with the story of how a young filipina woman was ‘rescued’ by a special branch of the FBI and then helped by CAST to begin her new life of freedom,” Shirley said of the night.

The fight to give more enslaved people stories of freedom and end human trafficking needs your help. You can get involved and make a difference. To see ways you can help, visit CAST’s What You Can Do webpages.

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5 Reasons You Need Cargo Insurance for Your Import or Export Goods https://www.universalcargo.com/5-reasons-you-need-cargo-insurance-for-your-import-or-export-goods/ https://www.universalcargo.com/5-reasons-you-need-cargo-insurance-for-your-import-or-export-goods/#comments Thu, 21 Jun 2012 18:22:17 +0000 https://www.universalcargo.com/?p=7344 Businesses make money by selling products. If your business imports or exports its products, you’re investing in your company every time you ship cargo. It’s surprising how many businesses don’t protect that investment with cargo insurance and pay heavily for it in the end. Whether importing or exporting, using air freight or ocean freight for […]

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Businesses make money by selling products. If your business imports or exports its products, you’re investing in your company every time you ship cargo. It’s surprising how many businesses don’t protect that investment with cargo insurance and pay heavily for it in the end.

Whether importing or exporting, using air freight or ocean freight for your international shipping, marine cargo insurance covers loss and/or damage of cargo while it is in transit between the points of origin and final destination.

Many try to save a little money up front by not insuring their cargo, but here’s just five of the many reasons why that’s a bad idea.

1 – Reduce exposure to financial loss.

If you’re an exporter who has not been paid for the goods at the time of shipment, or an importer who has paid for all or part of the goods prior to receiving them, you run the risk of suffering a financial loss if the goods are lost or damaged during transit.

2 – General Average – Expedite the release of your cargo.

You may be required to post a bond and/or cash deposit in order to obtain release of your cargo following a general average – even though there was no loss or damage to your goods. By purchasing insurance, your insurance company assumes the responsibility and expedites the release of your cargo. General Average is an internationally accepted principle where if certain types of accidents occur to the vessel, all parties share in the loss equally.

3 – Contractual Requirement

Your sales contract may obligate you to provide ocean cargo insurance to protect the buyer’s interest or their bank’s interest. This is especially true when selling goods CIP or CIF. Failure to do so cannot only subject you to financial loss if there is loss or damage to the goods, but non-compliance with the terms of your contract with the buyer can lead to loss of sales and legal problems.

4 – Coverage for limited carrier liability

The carriers, by law, are not responsible for many common causes of loss that occur in transit (for example, acts of God, general average, etc.). And, even if they are liable, carriers’ liability in the event of a loss is limited – either by contract in the bill of lading or by law. In most cases, you will only recover cents on the dollar from the carrier.

5 – Have more control over insuring terms

Relying on the buyer’s or seller’s insurance may be a viable option, but you must be satisfied that the insurance has in fact been purchased and that the insuring terms, valuation, and limits provided by each insurer on each shipment are adequate to meet your needs. And, if there is a claim dealing with a foreign insurance company, perhaps in a different language, it can be time consuming and frustrating. If there’s a claims issue, you’re often dealing with courts in a foreign country.

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Top 10 Export Goods to China with Pics! https://www.universalcargo.com/top-10-export-goods-to-china-with-pics/ https://www.universalcargo.com/top-10-export-goods-to-china-with-pics/#comments Mon, 28 May 2012 17:46:31 +0000 https://www.universalcargo.com/?p=7368 A week ago, Universal Cargo Management shared a blog counting down the top ten import products from China. As many of our customers are importers from China and there are many interested in becoming importers from China, it was a popular blog. Of course, we realize that not everyone in the international shipping business is […]

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A week ago, Universal Cargo Management shared a blog counting down the top ten import products from China.

As many of our customers are importers from China and there are many interested in becoming importers from China, it was a popular blog.

Of course, we realize that not everyone in the international shipping business is an importer. Many of our customers are exporters. It only seems right to follow up the top ten imports from China with a blog counting down the top ten export goods to China.

For you exporters out there, or those who are simply curious, here are the top ten exports from the U.S. to China.

The source of this list is the U.S.-China Bunsiness Council, counting what the U.S. exported to China in 2011.

#10 – Organic chemicals

organic chemicals exported to China

#9 – Copper and articles thereofcopper exported to China

#8 – Pulp and paperboardpaperboard exported to China

#7 – Plastics and articles thereofplastic exported to China

#6 – Optics and medical equipmentmedical supplies exported to China

#5 – Aircraft and spacecraftAircraft China Export

#4 – Vehicles, excluding railWoman pumping gas in car

#3 – Electrical machinery and equipmentelectrical machinery exported to China

#2 – Oil seeds and oleaginous fruitsoil seeds & oleaginous fruit exported to China

#1 – Power generation equipmentpower generation equipment exported to China

To get a rate quote for your exports to China, or anywhere else in the world, click here!

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High Point Market Furniture Trade Show Spring 2012 (April 26 – 28) https://www.universalcargo.com/high-point-market-furniture-trade-show-spring-2012-april-26-28/ https://www.universalcargo.com/high-point-market-furniture-trade-show-spring-2012-april-26-28/#respond Fri, 11 May 2012 20:16:23 +0000 https://www.universalcargo.com/?p=7489 As I have been attending this show now for over 20 years, I have seen a lot of High’s at High Point and a lot of Lows.  Mostly lows in the past 5 years.  This was due to the “economy” as everybody likes to point to. However, through the years as I have visited several […]

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YouTube Video


As I have been attending this show now for over 20 years, I have seen a lot of High’s at High Point and a lot of Lows.  Mostly lows in the past 5 years.  This was due to the “economy” as everybody likes to point to. However, through the years as I have visited several of our customers who use our logistics service for their import from all over Asia, I have seen a lot of innovation, great marketing skills, and just general toughness to brave it through this tough market we have all been through.  This is especially true for Furniture which was down due to the poor housing sector.This High Point Market Spring Show, I believe was one of the most upbeat and positive markets I have seen in quite a while.  I visited several companies who said this Show was their best attended High Point Market and the best in terms of orders they have seen in a few years.  Although it was not really a bustling crowd out there, there was a lot of buyers, and that is what counts.I did also see certain types of exhibitors, mostly those in the gift and décor industry not do as well, and even a few over in SAMS (Suites of Market Square) Building said that it was their worst show.  But, I do know this is largely because it is farther from most buildings and this building generally doesn’t get the traffic that IHFC and others get.

One thing that really jumped out at me, especially in the SAMS building and others, was that I have never seen so many exhibitors before that had the “Made in the USA” sign in front.  It is quite remarkable that so much Furniture manufacturing is coming back to North Carolina.

Lets hope the momentum carriers from this show into the summer and falls seasons.

You can check out our webpage dedicated strictly to High Point Market.

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Idle Ship Capacity Falls–Will Freight Rates Fall Too? https://www.universalcargo.com/idle-ship-capacity-falls-will-freight-rates-fall-too/ https://www.universalcargo.com/idle-ship-capacity-falls-will-freight-rates-fall-too/#respond Wed, 09 May 2012 18:23:39 +0000 https://www.universalcargo.com/?p=7505 Alphaliner tells us idle ships are hitting the water! The summer peak season is on the way and carriers are getting ready for it by reactivating ships from the idled fleet. Carriers have succeeded in increasing freight rates in 2012. According to Alphaliner, there has been “a 38% gain in average freight rates on the […]

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Alphaliner tells us idle ships are hitting the water!

The summer peak season is on the way and carriers are getting ready for it by reactivating ships from the idled fleet.

Carriers have succeeded in increasing freight rates in 2012. According to Alphaliner, there has been “a 38% gain in average freight rates on the CCFI since January.” But remember the recent blog we posted about the possibility of decreasing freight rates?

The name of the game recently has been capacity.

Overcapacity brought low freight rates in 2011. Too low for carriers. They lost money in the billions.

Reactivating the idled fleet too much, too fast could cause freight rates to tumble again. That would be a stumble backward carriers can’t afford who need the increases of freight rates in order to have profitability.

Alphaliner says the idle containership fleet dropped to 620,000 teu at the end of April from 913,000 teu in mid-March. Furthermore, they inform us that the idle containership fleet is expected to drop under 350,000 teu by July.

Of course, the idle containership fleet being low does not necessarily mean low freight rates.

Alphaliner points out that “the containership fleet has enjoyed close to full employment prior to 2009.”

Just like in all business, what matters are the supply and demand proportions when it comes to affecting price.

Container Vessels LoadingReturning ships to active duty on the seas comes along with added services for the summer peak season. That certainly makes shrinking the idled fleet seem quite reasonable. You’d expect more ships on the sea. I wouldn’t expect to see carriers allowing freight rates to drop soon.

But they’re volatile waters that ocean freight rates sail in. Many factors affect prices for international shipping of containerized cargo. No one knows exactly what freight rates will do.

What we do know, thanks to Alphaliner, is that the idle fleet has fallen from 5.8% capacity of the total fleet out there to 3.9% of total fleet capacity and that number is expected to continue to drop.

Will demand rise fast enough to meet that? Can carriers maintain their freight rate increases if it does not? These are just two of the many, many questions to which we are yet to see the answers.

In the meantime, keep importing and exporting and Universal Cargo Management will get you the best freight rates we can.

Alphaliner is an information platform for shipping professionals.

Universal Cargo Management in a freight forwarder with over 25 years experience serving international shippers like you

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Proper Container Loading Practices and Container Packing Guidelines https://www.universalcargo.com/proper-container-loading-practices-and-container-packing-guidelines/ https://www.universalcargo.com/proper-container-loading-practices-and-container-packing-guidelines/#respond Thu, 26 Apr 2012 18:59:10 +0000 https://www.universalcargo.com/?p=7424 Universal Cargo Management’s mission statement is: To enrich the lives of those within our company as well as those we do business with. This mission statement has lead UCM to a commitment of going beyond the duties of a freight forwarder and providing all sorts of resources for international shippers. With over 25+ years of experience […]

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Universal Cargo Management’s mission statement is: To enrich the lives of those within our company as well as those we do business with.

This mission statement has lead UCM to a commitment of going beyond the duties of a freight forwarder and providing all sorts of resources for international shippers.

With over 25+ years of experience as a freight forwarder, our knowledge and expertise in importing and exporting could save you a great deal of time and money.

Among the resources we provide, Universal Cargo Management has a Container Loading Guidelines Page to help those who are new at containerized shipping.

As the shipper, you are responsible for the loading of your shipping container. While you have the freedom to load as you see fit, improper loading could cause damage to the goods you’re importing or exporting, slow downs at customs, and ultimately wastes your time and money.

Container LoadingThe Container Loading Page focuses on 3 key factors to consider when loading a container:

  1. Weight Distribution
  2. Space Utilization
  3. Cargo Variation & Compatibility

The information on the Container Loading and Packing Guidelines Page is practical, straightforward, and designed to help you avoid losses of time and money described above.

You can see how easy it is to read and get an understanding of proper container loading from the below sample of the Weight Distribution section of the page.

1. Weight Distribution – The weight of your cargo should be evenly spread over the entire area of the container’s floor.

If the weight of your cargo is densely concentrated, distribute its weight with bedding.

You may not exceed the maximum mass/weight capacity of a container (Payload) with the cargo you load into it.

Rating – Tare = Payload

The page also contains a glossary to help with the details and definitions of terms like rating, tare, and payload.

To continue reading and learn about Space Utilization and Cargo Variation & Compatibility, click here.

For a free freight rate quote, click here.

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Holy Freight Rates, Batman–Trans-Pacific Spot Rates Jump 20%! https://www.universalcargo.com/holy-freight-rates-batman-trans-pacific-spot-rates-jump-20/ https://www.universalcargo.com/holy-freight-rates-batman-trans-pacific-spot-rates-jump-20/#respond Mon, 23 Apr 2012 23:50:59 +0000 https://www.universalcargo.com/?p=7537 by Jared Vineyard Coming off a year with losses in the billions, carriers have been working hard at increasing freight rates this year. The Drewry Container Rate Benchmark indicates success as it measured a freight rate increase of 19.9% over the course of a week from Hong Kong to Los Angeles. This jump of about 20% […]

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by Jared Vineyard

Container Costs Up

Coming off a year with losses in the billions, carriers have been working hard at increasing freight rates this year. The Drewry Container Rate Benchmark indicates success as it measured a freight rate increase of 19.9% over the course of a week from Hong Kong to Los Angeles.

This jump of about 20% is right on the heels of the most recent General Rate Increase (GRI) from carriers desperate to return container freight rates to profitable levels.

“The index hit a low of close to $1,400 per-FEU in early January. Since then, the rate surged to around $1,800 per FEU and has stayed above $1,770 per FEU each week into March,” according to a recent article from Journal of Commerce.

The year began with a GRI from carriers to help raise those numbers and two more have hit just since the above quoted article was published.

Both March 15th and April 15th saw a GRI imposed on eastbound Pacific containerized ocean shipping.

The major trans-Pacific shipping lines have come together in the Transpacific Stabilization Agreement, allowing them to plan and synchronize GRIs like the March and April ones that raised frieght rates per FEU by $300 and $400 respectively.

Batman & RobinSome international shippers think this is like the 1960’s Batman movie where all the villains teamed up in an evil conspiracy. Holy carrier collusion, Batman–freight rates are out of control!

However, carriers really shouldn’t be thought of as the bad guys when it comes to international shipping. Carriers provide services that allow importers and exporters to do international business.

These freight rate increases are not all bad news. Riddle me this: How can freight rate increases actually be good for international shippers? Read our blog on that topic.

For a free freight rate quote, click here.

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Could a Trend of Decreasing Freight Rates Be Approaching? https://www.universalcargo.com/could-a-trend-of-decreasing-freight-rates-be-approaching/ https://www.universalcargo.com/could-a-trend-of-decreasing-freight-rates-be-approaching/#respond Mon, 16 Apr 2012 18:19:48 +0000 https://www.universalcargo.com/?p=7416 If you’re an international shipper, freight rates are important to you. How much you pay to import and export your goods is a big factor for your bottom line. 2011 was a great year for international shippers, especially those importing to the U.S. from China. Overcapacity pushed ocean freight rates down. Many were able to […]

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If you’re an international shipper, freight rates are important to you. How much you pay to import and export your goods is a big factor for your bottom line.

Money Ship2011 was a great year for international shippers, especially those importing to the U.S. from China. Overcapacity pushed ocean freight rates down. Many were able to take advantage of the trend to increase profits as they worked in international business.

While these lower freight rates were great for international shippers, they weren’t good for carriers. The low freight rates of 2011 caused huge losses for carriers.

Here in 2012, carriers have been imposing general rate increases along with other freight rate hikes to turn things around. The strategies of the carriers to increase ocean freight rates have been effective. Freight rates on importing and exporting shipping containers have been going up.

International shippers who have been in the game long can’t be surprised by the lower freight rate trend turning in the opposite direction. Ocean freight rates are volatile, commonly increasing and decreasing.

Yet for carriers, getting freight rate trends moving in an upward direction is important for simply returning their industry and businesses to profitability.

But can carriers maintain their trend of increasing freight rates?

There are experts saying no.

A short Journal of Commerce (JOC) article by Mike King focuses on head of Asia shipping research for Macquarie Capital Securities, Janet Lewis’ opinion that carriers’ own actions are the biggest risk for keeping them from maintaining freight rate recovery.

What is that behavior?

cargo ship at portFailure to maintain good capacity management. Overcapacity was the biggest factor in seeing dropping freight rates in 2011. In any business when supply exceeds demand, prices drop. If carriers can’t keep control of capacity, freight rates will inevitably drop.

Idled ships being brought back into the shipping lanes is a threat to carriers ability to maintain freight rates that will give them profitability. In 2010, carriers docked ships and managed to recover from a period of lower freight rates than they could afford.

But Janet Lewis doesn’t seem to think the carriers are using that kind of discipline to effectively maintain their freight rate recovery. The JOC article says:

“in contrast to the rate recovery of 2010, when some 12 percent of the fleet was laid up, at present most idled vessels are not in cold lay-up but instead fully crewed and positioned to return to the fleet when carriers add new strings for the spring-summer season.”

On top of that, carriers have been ordering and introducing mega-ships that far exceed the capacity of any container ships in history.

Does all this mean freight rates will be dropping soon?

Janet Lewis believes whether or not freight rates will reach a height that returns carriers to profitability depends on the upcoming actions of the carriers.

Ocean freight rates are affected by many factors. Oil bunkers, economies of developed and developing countries, and shipping industry labor are a few that can have an affect. But capacity is absolutely one of the biggest factors.

Carriers certainly seem poised to add capacity through mega ships, reintroducing idled ships, and adding new services to the ocean trade routes. While I expect to see the upward trends continue for a little while, I wouldn’t be surprised by a turnaround to lowering freight rates.

Get a freight rate quote now by clicking here!

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Carriers Attempt Revenue Grab on Transpacific Imports & Exports https://www.universalcargo.com/carriers-attempt-revenue-grab-on-transpacific-imports-exports/ https://www.universalcargo.com/carriers-attempt-revenue-grab-on-transpacific-imports-exports/#respond Wed, 04 Apr 2012 21:33:45 +0000 https://www.universalcargo.com/?p=7622 The transpacific carrier market is in transition and many in the industry are trying to determine how best to profit by marginal economic growth in US markets. This marginal growth (up 5% from this time last year) means more shippers looking for more carriers than last year. The fear is that carrier lines will not […]

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The transpacific carrier market is in transition and many in the industry are trying to determine how best to profit by marginal economic growth in US markets.

This marginal growth (up 5% from this time last year) means more shippers looking for more carriers than last year. The fear is that carrier lines will not be able to “resist the temptation” to increase cargo ships to transpacific ports beyond the market demand and set the carrier industry up for flooding the market, and thus driving down freight rates.

Freight rates are already at very low levels. One leader in the industry described them as being at “an almost intolerable point.” That leader is Brian Conrad, executive administrator of the Transpacific Stabilization Agreement.

Conrad goes on to argue that carriers simply must raise their freight rates, that they cannot stay in business at the cut-rates they have previously offered to transpacific shippers. Because costs have increased, carriers must increase their shipping rates to stay viable.

Cargo Vessel Leaving PortThe fear is that a few desperate carriers will offer below market rates, driving down the shipping rates throughout the industry. In order to counter this potential threat to carriers, transpacific lines have collectively announced rate hikes to take effect in March and May.

If the carriers are able to hold to these rate increases collectively it will mean a few key things for shippers:

A)  steep increases in costs for shippers

B)  reduction in transpacific shipping capacity to keep from flooding the market and provide further price-control to carriers

Overall it seems the changes in the industry favor the carriers, if they are able to maintain solidarity in pricing. A few issues remain for carriers this year however. The question of the effect of mega-ships able to transport significantly bigger cargo loads has been raised.

However, the influx of significant numbers of mega-ships to transpaciifc trade is likely not in the immediate future.

Yes, the Port of Long Beach did welcome in the MSC mega-ship, Fabiola (with Universal Cargo Management cargo onboard); but generally speaking, the ports of the transpacific trade routes are not prepared for mega-ships yet.

Raised is the possibility that mega-ships will be deployed by carriers to other sea-shipping routes and carriers will send their smaller vessels to transpacific shipping-ways instead and run the risk of flooding the still fragile US-Asia shipping market in an attempt to recoup their losses from previous years.

Whether considering mega-ships, import and export demand, economy growth, etc, the theme for carriers is clear: freight rates, freight rates, freight rates.

The American Shipper article by Eric Johnson that served as the main source for this blog, opened with, “Try as the liner shipping industry might to portray a situation that rates aren’t the only factor in service contract negotiations, the reality is clear: the transpacific trade is preoccupied with rates.”

That full article can be read at Brilliant Globe Logistics.

Carriers have to bring freight rates up to survive after the billions of dollars lost in falling freight rates last year.

Shippers should counter rate increases with demands for better transpacific import and export service like increased reliability for on-time deliveries, for example.

Get a freight rate quote from Universal Cargo Management with over 25 years experience providing excellent service as a freight forwarder.

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Mega Cargo Container Ships Vs. Major Ports of Call https://www.universalcargo.com/mega-cargo-container-ships-vs-major-ports-of-call/ https://www.universalcargo.com/mega-cargo-container-ships-vs-major-ports-of-call/#respond Mon, 26 Mar 2012 17:17:27 +0000 https://www.universalcargo.com/?p=7405 Carriers have been ordering a new breed of cargo container ships that are finally beingintroduced to the world. At the risk of sounding like a B-horror flick like Mega Shark Vs. Giant Octopus, mega ships are hee-eere.   The problem is many ports can’t handle these new giant ships. Ports are working on making their […]

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Mega Cargo Container Ship FabiolaCarriers have been ordering a new breed of cargo container ships that are finally being
introduced to the world. At the risk of sounding like a B-horror flick like Mega Shark Vs. Giant Octopus, mega ships are hee-eere.

 

The problem is many ports can’t handle these new giant ships.

Ports are working on making their harbors deep enough and equipment able to handle mega ships. Yet even thePanama Canal’s expansion project is a ways off from being ready for the giant cargo container ships on the way.

But that’s not a problem for the Port of Long Beach.                           Photo: Wally Skalij, Los Angeles Times

Mega cargo container ship, The Fabiola made its arrival to the Americas through the Port of Long Beach earlier this month, shattering previous size records held at the ports of Los Angeles and Long Beach.

The ports of Los Angeles and Long Beach are getting a competitive edge with most ports in the Americas currently unable to handle ships the size of The Fabiola.

To give you a reference point for just how big this mega ship is, a recent LA Times article on The Fabiola’s arrival described its size as “just 30 feet shorter than the Empire State Building is tall, as wide as a 10-lane freeway and big enough to carry the contents of eight 1-million-square-foot warehouses.”

The Fabiola can carry as many as 12,500 cargo containers. Universal Cargo Management got to share a little piece of this record breaking moment by having cargo onboard during The Fabiola’s arrival.

Rick Spilman’s The Old Salt Blog reminds us, however, that this is only a small moment in ship size history as The Fabiola is not nearly the largest in the new generation of mega ships hitting the water.

“As large as the MSC Fabiola may be, she is slightly smaller than the Maersk E Class container ships, which each can carry up to 14,770 TEU. Maersk also has under construction in Korea a fleet of 20 “Triple E” class container ships for devilvery by 2014 which will each have a capacity of 18,000 TEU.”

Thanks for bursting our bubble, Rick.

Universal Cargo Management is still excited to have had cargo on the Fabiola and looks forward to helping you international shippers get your cargo onboard these even larger ships hitting the ocean import and export scene.

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7 Tips For Your Business From Jesus Christ Part 1 https://www.universalcargo.com/7-tips-for-your-business-from-jesus-christ-part-1/ https://www.universalcargo.com/7-tips-for-your-business-from-jesus-christ-part-1/#comments Thu, 15 Mar 2012 17:22:09 +0000 https://www.universalcargo.com/?p=7367 No, Jesus of Nazareth is not a guest blogger for Universal Cargo Management, but much can be learned from the life of Jesus that could be applied to your business. “I must be about my father’s business,” Jesus famously says in the book of Luke. And business thrived. Jesus was highly sought after in his […]

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No, Jesus of Nazareth is not a guest blogger for Universal Cargo Management, but much can be learned from the life of Jesus that could be applied to your business.

dreamstime xs 22216687“I must be about my father’s business,” Jesus famously says in the book of Luke. And business thrived. Jesus was highly sought after in his day. His reputation spread from city to city. Even 2,000 years after walking the earth, Jesus is a household name internationally.

Whether you’re a Christian or not, Jesus’ success cannot be denied. So if yours is a big, international business importing and exporting cargo around the world or a small local business, take a moment to consider the way Jesus did things. His success could lend to yours.

For the sake of this blog, we’ll refer to Jesus’ life in terms more relatable to business. For example, we’ll call Jesus’ ministry His “business” and His disciples His “team” or “employees”.

1. Jesus prepared for “business”.

Success in business takes strategy, planning, preparation.

Jesus spent time preparing for business. The Luke quote above where Jesus says, “I must be about my father’s business” comes from a story before Jesus started his business. His parents were looking for Jesus and finally found him in a temple among “industry leaders”, asking and answering questions, preparing for business.

Especially for people with entrepreneurial spirits, there’s the temptation to jump right in and get started without taking the time to really analyze, prepare, and develop the best possible business plan.

Jesus knew the “industry literature” backward and forward before going into business and had a clear plan and objective that He was able to share and lead His “team” by.

Before you launch your next business venture, take the time to really prepare. This way, you’re setting yourself up for success.

Jesus in Suit2. Jesus made sacrifices to fulfill his vision and make his “business” successful.

Your business starts with you. Making it successful takes time, hard work, and personal sacrifice. No one understands personal sacrifice more than Jesus, but I’m not just talking about the ultimate sacrifice Jesus made of dying on a cross here.

There are sacrifices to be made in Tip 1 above, preparing for business, but the sacrificing doesn’t stop in the preparation.

Jesus made sacrifices after starting His business. “…the Son of Man has nowhere to lay His head.” He went from town to town, city to city, growing his business. Jesus sacrificed having a nice home in Nazareth for the good of his business.

I’m not saying you should be homeless if you want to succeed in business. But instead of spending all of what you earn on yourself, you may want to reinvest capital back into your business to help it grow.

3. Jesus deligated, sending his disciples out to do tasks.

You can’t do everything. To stick with the Jesus theme, let’s say you’re a carpenter. If you’re handling the details of importing wood from around the world, advertising, making sales to customers, shipping products to those customers, and so on, you’re going to burn out. On top of that, you’re limiting the growth of your business.

Jesus gave His team tasks rather than doing everything Himself. Sometimes the tasks were small like going into town and bringing back a donkey. Sometimes the tasks were much bigger, sending team members into towns to prepare the place for Jesus’ coming.

With His team taking on different tasks of the business, Jesus was able to focus on the things that best deserved His attention.

Imagine the time you’ll be able to spend building great furniture if you have an employee working with a freight forwarder to take care of the importing of the wood and the exporting of your products instead of handling all that yourself.

4. Jesus trained people to do His work when He was gone.

Jesus really invested in His team. He hand picked disciples and personally trained them for His business. Jesus then did not need to be present for business to carry on.

In fact, it was Jesus’ team that spread Christianity throughout the world that still grows strong in the Christian church today.

For you micromanagers out there, this may be the biggest place you can focus on growing your business.

Empowering your team could be the biggest thing for expanding your business and giving it a legacy.

Jesus empowered His team members to perform miracles, preach, and further grow the team. It took serious time investing in them.

When you think about your team or employees, you may want to think of them as your greatest assets. Invest in them and see if it doesn’t yield strong results.

Tips in part 2 of this blog will include how Jesus fit inside His industry and what we can learn from His business about customer dealings in our own.

To be continued in 7 Tips For Your Business From Jesus Christ Part 2

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Yes, Size Matters, and Other Answers to FAQ Concerning Air Cargo https://www.universalcargo.com/yes-size-matters-and-other-answers-to-faq-concerning-air-cargo/ https://www.universalcargo.com/yes-size-matters-and-other-answers-to-faq-concerning-air-cargo/#respond Wed, 07 Mar 2012 18:09:35 +0000 https://www.universalcargo.com/?p=7371 As a friend to your business, Universal Cargo Management has helpful information all over our site for businesses that import or export and potential international shippers. With over 25 years as a trusted freight forwarder, we’ve heard all kinds of questions concerning ocean freight and air cargo shipping here at Universal Cargo Management. We especially […]

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As a friend to your business, Universal Cargo Management has helpful information all over our site for businesses that import or export and potential international shippers.

With over 25 years as a trusted freight forwarder, we’ve heard all kinds of questions concerning ocean freight and air cargo shipping here at Universal Cargo Management.

Air CargoWe especially hear many questions when it comes to air cargo. On our air cargo page of the Services section of Universal Cargo Management’s website, you can find answers to frequently asked questions.

Below, we’re sharing the answers to those frequently asked questions with all our blog readers. Perhaps this will help you prepare to import or export by air or decide between air cargo and ocean freight international shipping.

Air Cargo FAQ

Size & Weight

Q: Does size matter for air shipment?

A: Yes, air freight is based on both the actual weight and changeable weight of the cargo.

Q: How is changeable weight calculated?

A: There is a special formula.

Just give us all three dimensions and we will calculate the chargeable weight for you.

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Q: What is the maximum size or weight?

A: This varies depending on the airline so please ask us.

As a rule of thumb, maximum normal cargo dimensions: 120x80x60in.

As the weight and size increase so will the cost. If your cargo is oversized or requires special handling, ask us about special rates.

Pick up & Drop off

Q: Do you have warehouse where I can drop off the cargo?

A: Yes, we have receiving warehouse near all major airports.

Please let us know your cargo location and we will advise you the closest receiving warehouse.

Q: How and where can we pick up the cargo at destination?

A: We will provide you with the necessary paperwork for customs clearance. Once customs is done, you can go to the warehouse to pick up the cargo.

We also advise you to check with destination customs prior to shipment departs, just to make sure if there’s any special rule & regulation at destination for certain commodities.

Q: Do you have office at destination who can help us?

A: Yes, we have a lot of agents who we work with at different location.

Please check with us; they will be able to help you for any destination services.

Q: Can you handle door delivery at destination? Can you handle pick up from residential area?

A: Yes, please help to provide us your door address, and we will check the cost for you.

Charges

Q: What are some of the destination charges?

A: There may be airport fees, warehouse fees, custom clearance charges, duty/tax and door delivery charges.

Of course, if your cargo is chosen for custom exam at destination, please prepare to home charges and delays for getting the cargo.

Q: What’s the best way to save money on air freight?

A: Ship only the most important items and pack in as small of a box, crate or pallet as possible.

If you can route from/to a major hub (JFK, LUH, BJS) instead of a smaller airport, this may help to lower your freight rate.

Other

Q: Can I pack my items in suitcases, bags or plastic bins?

A: No, the airlines will reject any cargo that is not properly packed. Must be packed in a box, crate, or on a pallet. If there are any oversized items or cargo requiring special packing, please ask.

Q: What is typically transit time?

A: Airport to airport 3-5 days on average. Door to door varies depending on customs clearance, estimate 5-7 days.

Delays and/or changes to schedules can happen. Best way to make the cargo ship as quickly as possible is to make sure all paperwork is properly filed before hand, this eases the customs process.

Q: Are there types of cargo that cannot be shipped via air freight?

A: Yes, anything hazardous, flammable, dangerous, chemicals, computer batteries, live animals, perishable items, etc.

Q: What kind of paperwork will I need to fill out ahead of time?

A: We will send you some paperwork for you to fill out the basic information, Such as shipper and receiving party contact information.

Don’t worry, we will take care of all the export custom and paperwork for you.

For an air cargo rate quote, click here.

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5 Tips for a First Time International Shipper–Import or Export Well https://www.universalcargo.com/5-tips-for-a-first-time-international-shipper-import-or-export-well/ https://www.universalcargo.com/5-tips-for-a-first-time-international-shipper-import-or-export-well/#comments Wed, 29 Feb 2012 21:22:23 +0000 https://www.universalcargo.com/?p=7521 As a friend to your business, Universal Cargo Management not only wants to see you succeed, we want to help you succeed. There is a wide range of international shippers whom we help with importing and exporting needs from businesses that have been importing and exporting regularly for years to individuals importing or exporting for […]

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As a friend to your business, Universal Cargo Management not only wants to see you succeed, we want to help you succeed.

There is a wide range of international shippers whom we help with importing and exporting needs from businesses that have been importing and exporting regularly for years to individuals importing or exporting for the very first time.

Of course, we love our regular and faithful customers for whom we’ve been shipping goods internationally for years, but we want you first time shippers and one time shippers (like those doing an international household move) to know that you are valued by Universal Cargo Management as well and we are here to help your imports or exports to go smoothly.

Shipper with QuestionOften we are asked by first time shippers if we have any advice for them. With 25+ years in the international shipping industry, we absolutely have advice for you.

We answer this question on our website’s FAQ Overview page with the following 5 tips (although, extra information has been added here and there in this blog):

Tip #1

Save container transport cost by preparing to load your container in less than 2 hrs.

When the driver shows up to your site, the first 2 hours are included in your fees. We recommend staffing up and preparing in advance to load the container as quickly as possible to avoid overtime charges.

This tip is directed mainly at shippers exporting out of the U.S. through Universal Cargo Management using door service. If you are not using Universal Cargo Management as your freight forwarder, it is likely you will still have two hours to load the container trucked to you.

However, it is a good idea to ask the questions of whoever is helping you with your international shipping needs about how long you will have to load your container before you accrue extra fees on the trucking of your shipment.

Tip #2

Prepare Shipping Container Contents for Extremes

Containers are subject to extreme conditions. There are wild swings in temperature and humidity inside the container – they go through the Panama Canal and sometimes around the Cape. Containers are subjected to triple digit heat and humidity to sub-zero temperatures while in storage or in transport.

Tip #3

Carefully Declare ANY Organic Cargo

Plants, Edible Plants, Vegetables, and Fruit are all treated differently depending on the origin and destination of the shipment. If customs finds any undeclared organic cargo, they can quarantine your container and charge you daily holding fees.

Tip #4

Properly Insure Your Cargo

Plan for “attrition”. All of the contents don’t always make it all of the time.
There will be some “attrition” – containers get inspected, sometimes by unscrupulous dock/deck hands…this isn’t REALLY considered stealing, as the items in transit, technically are the property of the shipping company*. See our blog entry on securing, insuring and properly declaring your container contents to manage risk of inspection, suspicion, mistakes and “attrition”.

Tip #5

Understand that Freight Forwarding is both an art and a science.

Many companies and handlers are involved in moving your container, here are just a few possible examples: Trucking company(ies) outbound (your door to the port of origin or train yard), Crane Operations transferring container from truck to train, and train to ship. That’s just to get the container to the ship, then the reverse happens on the other side…it can be a REALLY rough ride, even in good weather.

Universal Cargo Management has been helping people maneuver in that storm for over 25 years so you can trust you’re in good hands to help your import or export to go as smoothly as possible.

For more answers to Frequently Asked Questions, go to our FAQ page in our Resources section. We encourage you to check it out if you’re preparing for your first importing/exporting experience or if international shipping has been part of your business for years.

To get a freight rate quote, click here.

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3 Tips for Growing Your Export Business https://www.universalcargo.com/3-tips-for-growing-your-export-business/ https://www.universalcargo.com/3-tips-for-growing-your-export-business/#respond Mon, 27 Feb 2012 17:53:09 +0000 https://www.universalcargo.com/?p=7410 “Export Growth to Slow in 2012” are the words that stand out in a recent Journal of Commerce article title. Perhaps that makes you slump a bit as an exporter; however, this year could be the biggest export year you’ve had yet. I’m a glass half full kind of guy. When I read that JOC Economist […]

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“Export Growth to Slow in 2012” are the words that stand out in a recent Journal of Commerce article title. Perhaps that makes you slump a bit as an exporter; however, this year could be the biggest export year you’ve had yet.

Containerized ShipmentsI’m a glass half full kind of guy. When I read that JOC Economist Mario O. Moreno predicted 2012 would only see a 3.8% increase in containerized exports verses the 5.8% increase containerized exports saw in 2011, my first thought was to Price is Right him. “I’ll say 3.81% growth in 2012, Bob.” In a year we’ll see who’s closest without going over.

Seriously, while Moreno’s newest prediction is not nearly as good as the 5.7% 2012 containerized export increase he predicted before, it is still growth. There’s no reason your export business couldn’t grow during this time.

As a friend to your business, Universal Cargo Management wants to help you succeed in your business practices of exporting around the world. On behalf of Universal Cargo Management, I present to you 3 tips for growing your export business.

Picture © Roza | Dreamstime.com

TIP #1: Relationships, Relationships, Relationships

Yes, I start with the obvious. We all know that business is built on relationships, but somehow it tends to get overlooked. You have to form relationships with people in the countries you wish to export to.

If you have none, it’s time to seek them out. Start with who you know that does business in China or other countries you’d like to do business in. They could be an excellent resource for making acquaintances in other countries and growing your export business.

Many are finding success with social media sites liked Linkedin for building relationships in other countries. But social media sites like Linkedin and Facebook tend to be blocked in China and some other countries. It’s much better to personally meet with potential distributors or clients to whom you want to export.

The U.S. Commercial Service (USCS) is another possible resource for finding such business connections around the world to help you grow your export business.

Don’t forget, it’s not only those you are exporting to that you should be building relationships with. It’s important to build strong relationships with your suppliers, your own employees, and those helping you with the logistics of your exporting business. That’s right, I’m talking about your freight forwarder. If you don’t have a freight forwarder you trust, Universal Cargo Management is ready to be a friend to your business and use our 25+ years of experience in importing and exporting to help you.

TIP #2: Consider the Culture

Learn as much as you can about the culture of the place you export to. A little knowledge can go a long way in building strong business relationships. Likewise, ignorance can hinder your export business growth while causing embarrassing situations and costing business relationships.

I remember a scene from an old episode of “Quantum Leap”–What, you think Scott Bakula has nothing to do with importing an exporting?–where a jealous and prejudice character convinces a Japanese girl that in the U.S. it is a great compliment to call people fat. You can imagine the picnic scene that followed. People get offended, the Japanese girl gets mortified, and it’s all because of a lack of good information (plus some deviance).

Find out what you can from others who know the cultures where you want to do business, people from those cultures, who successfully do business where you want to grow your export business, etc.

For example, Universal Cargo Management’s own CEO Devin Burke has done a great deal of business in China over the years. In the spirit of making UCM a friend to your business, he has provided content on this site specifically for doing business in China. That includes:

TIP #3: Consider Focusing Instead of Expanding

This is a tough one. It goes against the instincts of many business people. Expand, expand, expand! That’s how to grow a business. Sometimes, businesses expand right out of business. If you export to China, there’s nothing wrong with wanting to export to Australia, Korea, and Germany too. But as you spread your operations to those other countries, you may find it harder to provide the same great service you were giving your business partners in China.

Focusing in on how you can take care of your current customers better and how you can be more effective in a region to which you already export could be much more profitable than exporting to a new region.

Cut some of the extra things you do and focus on what you do best. You don’t need to add every product and service you can think of, just continue to pursue being the best at providing your customers with what you do. This focusing could result in expanding your client base in a particular region and make it much easier for you to export to other regions as well.

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What the Freight!?! Cargo Shipment Details Matter https://www.universalcargo.com/what-the-freight-cargo-shipment-details-matter/ https://www.universalcargo.com/what-the-freight-cargo-shipment-details-matter/#respond Tue, 14 Feb 2012 23:21:28 +0000 https://www.universalcargo.com/?p=7564 In international shipping, every detail matters. With over 25 years of experience as a freight forwarder, Universal Cargo Management will make sure your imports and exports, whether ocean freight or air cargo,  are taken care of down to the last detail. For a freight rate quote, click here.

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Harry Ocean Cargo ShipmentHarry Ocean Shipment Mix UpCargo Shipment Arrives in VegasCargo Shipment Arrives in Detroit

In international shipping, every detail matters.

With over 25 years of experience as a freight forwarder, Universal Cargo Management will make sure your imports and exports, whether ocean freight or air cargo,  are taken care of down to the last detail.

For a freight rate quote, click here.

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Is the Clean Truck Fee On Imports and Exports Thru L.A. Really Gone? https://www.universalcargo.com/is-the-clean-truck-fee-on-imports-and-exports-thru-l-a-really-gone/ https://www.universalcargo.com/is-the-clean-truck-fee-on-imports-and-exports-thru-l-a-really-gone/#respond Thu, 12 Jan 2012 23:34:27 +0000 https://www.universalcargo.com/?p=7363 With the end of 2011 came the end of the Clean Truck Fee for shippers importing and exporting through the ports of Los Angeles and Long Beach. Or did it? A previous Universal Cargo Management blog looked at how the removal of the fee could coincide with increased costs for shippers importing and exporting through […]

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Clean Speeding TruckWith the end of 2011 came the end of the Clean Truck Fee for shippers importing and exporting through the ports of Los Angeles and Long Beach. Or did it?

A previous Universal Cargo Management blog looked at how the removal of the fee could coincide with increased costs for shippers importing and exporting through the ports of Los Angeles and Long Beach because with the fee removal came banning trucks with an engine year of 2006 or older from terminals.

While the clean truck fee has stopped being assessed by the ports, such fees continue to come from draymen.

For laymen, draymen are truck drivers or companies who deliver shipping containers to and from ports.

Originally, a drayman was someone who drove a flatbed wagon called a dray which was pulledClidesdale by horse or mule for transporting goods. Logistics has changed through the years. The dray basically doesn’t exist anymore nor does horse-drawn deliveries.

However, some breweries still keep horses and a dray that they’ll pull out for parades, festivals, and unveilings. This quaint practice is spotlighted in popular Budweiser Superbowl commercials if you want an idealized and humorous image of the classic draymen.

Ocean freight shipping has changed over the years too; but, since transporting goods in ships over the seas is an old practice, it makes sense that it would hold on to old terms like draymen for those delivering containers to and from ports.

The Clean Truck Fee was part of an initiative to reduce pollution at the ports of Long Beach and Los Angeles. The initiative has been very successful in reducing pollution. A large part of pollution at the ports came from trucks so the regulations created for having “clean trucks” played an important role in decreasing L.A. port pollution.

Of course, the largest cost of the clean truck part of the initiative went to the draymen who had to buy new trucks.

We all know how business works; at least a portion of those costs to the draymen would be passed on to the shippers who hire them. Draymen began charging a clean truck fee of their own, although not necessarily always under that name, so they could cover the costs of buying new trucks.

Now the ports of Los Angeles and Long Beach have dropped their clean port fee, but the fee remains from the draymen to continue to recoup the costs of the new “clean trucks” purchased to lower fuel emissions and be in compliance with port policy.

The good news is the fees from the draymen are not new while the fees from the ports of Los Angeles and Long Beach have ended. So while carriers are making moves to increase ocean freight rates in 2012, there is a slight fee drop happening on the trucking side of the equation.

We should not see a new spike in trucking costs due to 2006 and older engined trucks no longer being allowed at the Los Angeles and Long Beach ports.

For a free ocean freight rate quote including trucking, click here.

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Carriers to Reverse Falling Ocean Freight Rates with New Year https://www.universalcargo.com/carriers-to-reverse-falling-ocean-freight-rates-with-new-year/ https://www.universalcargo.com/carriers-to-reverse-falling-ocean-freight-rates-with-new-year/#respond Thu, 29 Dec 2011 18:28:58 +0000 https://www.universalcargo.com/?p=7419 2011 was a good year in terms of ocean freight rates for shippers. Carriers have prepared to turn the 2012 freight rates in their favor. Recent Universal Cargo Management blogs highlighted overcapacity causing lower ocean freight rates and the 2011 trend of falling freight rates from China. While Maersk said they were poised to outlast their competitors in […]

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2011 was a good year in terms of ocean freight rates for shippers. Carriers have prepared to turn the 2012 freight rates in their favor.

Container Ship

Recent Universal Cargo Management blogs highlighted overcapacity causing lower ocean freight rates and the 2011 trend of falling freight rates from China.

While Maersk said they were poised to outlast their competitors in an overcapacity market, not them or any other carrier is willing to sit and do nothing as prices, and therefore profits, fall on the shipping of cargo containers.

With 2012, we’ll see increases in 20’ and 40’ dry containers, reefers, and more.

Carriers are jumping up prices as the new year hits with fees and/or surcharges.

The New Year’s present shippers get from Maersk is a General Rate Increase (GRI) effective on January 1st. This GRI will add hundreds of dollars to shipping containers from the Far East to the United States.

From Hapag-Lloyd, shippers get a Peak Season Surcharge (PSS) on shipping containers from East Asia to Canada and the United States. Hapag-Lloyd’s PSS runs in the hundreds of dollars and goes into effect January 1st, 2012 as Maersk’s GRI does.

It is not only these two big container shipping lines whose freight rates will be affected by GRI and PSS. All the carriers are launching 2012 with GRIs or PSSs. Some are even imposing both.

Carriers increasing prices as 2012 begins is absolutely no surprise.

We knew as we looked at the downward trend of freight rates in 2011 that those prices would start climbing again because of the volatile nature of the international shipping industry and that carriers would be working on strategies to turn freight rate trends back in their favor.

Don’t let these surcharges and rate increases turn your outlook for 2012 shipping to doom and gloom. GRI and PSS are not magical cures to the overcapacity problem carriers face. There are many factors that keep ocean freight rates volatile in the international shipping industry.

Freight rates will shift back and forth between increasing in favor of the carriers and decreasing in the favor of shippers.

For an ocean freight rate, click here now!

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U.S. Ports Made Less Competitive by Harbor Maintenance Tax https://www.universalcargo.com/us-ports-made-less-competitive-by-harbor-maintenance-tax/ https://www.universalcargo.com/us-ports-made-less-competitive-by-harbor-maintenance-tax/#respond Thu, 22 Dec 2011 22:31:51 +0000 https://www.universalcargo.com/?p=7528 The Federal Maritime Commission issued a Notice of Inquiry “to solicit the public’s views and information concerning factors that may cause or contribute to the shift of containerized cargo destined for U.S. inland points from U.S. to Canadian and Mexican seaports.” In other words, a cry for help was sounded. It seems elected government officials are […]

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The Federal Maritime Commission issued a Notice of Inquiry “to solicit the public’s views and information concerning factors that may cause or contribute to the shift of containerized cargo destined for U.S. inland points from U.S. to Canadian and Mexican seaports.”

In other words, a cry for help was sounded.

It seems elected government officials are concerned about the trend of more and more U.S. imports entering North America through ports in Canada and Mexico instead of ports in the United States.

It’s about time. They should be concerned.Money Dropping Into Water

U.S. ports have been losing their competitive edge. Why? Because of an ad valorem Harbor Maintenance Tax (HMT).

For those of you not down with Latin, ad valorem means according to value. A 0.04% HMT on the value of imported and exported cargo was introduced as part of the Comprehensive Water Resources Development Act of 1986. In 1990, Congress more than tripled the tax to 0.125% ad valorem.

The point of the HMT was to create a Harbor Maintenance Trust Fund (HMTF) to pay part of the maintenance and navigation channel improvement of the nation’s port system, including the very important dredging of the channels and rivers. Before 1986, the federal government was responsible for paying for all of this.

Ships to PortHealthy, competitive ports are extremely important to our nation’s economy.

The HMT was applied across the board to all the ports in the U.S. so they would remain competitive. But I guess the fact that these taxes or fees wouldn’t have to be paid on cargo entering through ports of our neighboring countries wasn’t considered.

To circumvent the HMT, cargo headed for the U.S. has come in through the ports of Mexico and Canada. Why pay more to import through U.S. ports?

According to a Jean C. Godwin speech given at the 31st Transportation Law Institute, “The HMT ultimately added hundreds of dollars to the cost of shipping a single container of high value cargo, and has caused traffic to be diverted to non-U.S. ports to avoid payment. The imposition of the HMT caused a rail-barge service on the Great Lakes to go out of business.”

Big deal. What’s a rail-barge service? Jobs, that’s what. And in the Great Lakes region! What’s the Great Lakes State? Michigan. The state’s economic woes are well known between Detroit’s reputation and the featuring of Flint in Michael Moore films. Aren’t the good people of Michigan sitting in hard enough times without losing more jobs from their region?

But of course, U.S. imports and exports affect every state in the country. As Godwin’s speech was given in 1998, how likely do you think it is the HMT has cost more people their jobs than just those working at that rail-barge service?

The U.S. economy has been crying for help for a while. Recession, home foreclosures, unemployment, and the like have citizens sick with anger and speaking out. It’s about time we hear government officials calling for help on what to do about our ports which are key to economic health.

This is not a time to allow U.S. ports to continue becoming less and less competitive.

In 1998, the Supreme Court ruled the HMT to be unconstitutional for exports. How much longer can this tax on imports be allowed to stay as is?

The HMT is hurting the competitiveness of our ports and instead of using the money in theHarbor Port HMTF to perform all the dredging that should be done to allow ships better, safer transits with fuller loads to make the U.S. more competitive in the global market, most of the money is being left in the fund as “excess” to make the federal deficit appear to be smaller than it actually is.

Responses to The Federal Maritime Commission’s Notice of Inquiry are due today. But there’s no time limit on sharing your views with the world by commenting below.

What do you think the result will be if U.S. ports continue this trend of becoming less competitive? What are ways we can increase competitiveness of U.S. ports and energize our economy?

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The Horror: Improper Container Loading Hurting Exporters & Importers https://www.universalcargo.com/the-horror-improper-container-loading-hurting-exporters-importers/ https://www.universalcargo.com/the-horror-improper-container-loading-hurting-exporters-importers/#respond Thu, 15 Dec 2011 20:34:44 +0000 https://www.universalcargo.com/?p=7550 Want to hear a container shipping horror story? Not the kind of horror story that involves a lunatic with a hook for a hand escaping from an asylum and his hook being found in your cargo. Scarier than that. It’s the kind of story that involves container searches and fees, damaged cargo, and thousands of dollars of […]

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HookWant to hear a container shipping horror story? Not the kind of horror story that involves a lunatic with a hook for a hand escaping from an asylum and his hook being found in your cargo. Scarier than that. It’s the kind of story that involves container searches and fees, damaged cargo, and thousands of dollars of loss.

It’s scary because it’s something that could happen to you. But it is avoidable.

Imagine you ship cargo to China or Australia. When your cargo is unloaded, it goes through a routine x-ray, but the results are not routine. Your shipping container of cargo is loaded on a truck and transported to a special holding area.

In the holding area, your cargo waits. Eventually, it is opened, revealing crushed and damaged goods. Then your cargo is unloaded from the shipping container and examined. None of this you asked for, none of it you wanted; however, you’re paying for all of it.

Improper loading of a shipping container can lead to exactly these kinds of problems.

Container LoadingAs the shipper, you are responsible for the loading of your cargo into its shipping container. The last thing Universal Cargo Management wants to see is our customers run into these kinds of problems.

To help you avoid them, we’ve added a Container Loading Guidelines page to our site.

Many of UCM’s customers are experienced shippers with years–even decades–of experience in international trade; but, on the other hand, UCM also has many customers who are new to importing and exporting.

Universal Cargo Management wants to make the process of shipping internationally as smooth as possible no matter what your experience is.

Perhaps you are doing a household move overseas. Universal Cargo Management helps many people ship household goods. Planning the loading of your shipping container or shipping containers is very important.

Don’t let your international shipping experience become a horror story because of improper loading of a shipping container.

If you have crazy shipping stories, please share them with us. Your story could help future shippers in their international exploits.

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Reefer Breakthrough To Make Ocean Freight Transport Greener https://www.universalcargo.com/reefer-breakthrough-to-make-ocean-freight-transport-greener/ https://www.universalcargo.com/reefer-breakthrough-to-make-ocean-freight-transport-greener/#respond Tue, 06 Dec 2011 22:48:31 +0000 https://www.universalcargo.com/?p=7438 This is not a blog to make international shippers excitedly bust out their Bob Marley records. In the world of ocean freight transport, reefers are refrigerated shipping containers. The last blog we posted about reefers was bad news. Reefer explosions had taken the lives of dock workers and a panic had hit the international shipping […]

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This is not a blog to make international shippers excitedly bust out their Bob Marley records. In the world of ocean freight transport, reefers are refrigerated shipping containers.

The last blog we posted about reefers was bad news. Reefer explosions had taken the lives ofReefer Containers dock workers and a panic had hit the international shipping world about reefer safety.

We’re happy to now see a good announcement in ocean freight news concerning reefers.

Demand has been increasing for the international shipping business to get greener and greener. It is no secret there is often criticism concerning the environmental impact from big companies in ocean and air freight transportation.

However, there are strides being made in the world of ocean and air cargo to go green. Among them is this good announcement concerning reefers.

A new reefer model is hitting the market that, according to an article from Food Logistics, “meets carrier and shipper demands for low energy consumption and greenhouse gas emissions while providing precise cooling performance for chilled and frozen cargoes.”

This new reefer unit is the LX10F. Does that seem hard to remember? Then instead, remember its brand name, Zestia.

The Zestia, when compared to reefer models already on the market, provides approximately a 45% energy savings.

Not only is the Zestia designed for energy savings, it has a backlit LCD monitor for easy use and, not to be redundant, monitoring.

The company releasing this breakthrough reefer container for ocean shipping is Daikin Reefer, part of Daikin Industries, Ltd. Daikin first entered the refrigerated container market in 1968 and the company has seen much success. Throughout the 1980’s, they became the leading manufacturer of container refrigeration equipment.

As there always seems to be a shortage of reefer containers, and there is especially one now with the recent reefer scare of containers that received repairs in Vietnam, success for Daikin with Zestia is quite likely.

Universal Cargo Management recognizes the needs many shippers have for refrigerated freight containers and are happy to help meet those needs.

Click here for a freight rate on your reefer import or export shipment.

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Reefers Affect Cargo Imports & Exports as Shipping Containers are Examined https://www.universalcargo.com/reefers-affect-cargo-imports-exports-as-shipping-containers-are-examined/ https://www.universalcargo.com/reefers-affect-cargo-imports-exports-as-shipping-containers-are-examined/#respond Tue, 15 Nov 2011 18:48:11 +0000 https://www.universalcargo.com/?p=7421 For those of you who excitedly began singing “Smoke Two Joints” by Sublime at the title of this blog, what you’re about to read is not about those kinds of reefers. In the world of international shipping, refrigerated shipping containers are referred to as “reefers”. That world has been shocked by a recent series of […]

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For those of you who excitedly began singing “Smoke Two Joints” by Sublime at the title of this blog, what you’re about to read is not about those kinds of reefers.

In the world of international shipping, refrigerated shipping containers are referred to as Caution Containers“reefers”. That world has been shocked by a recent series of reefer explosions, killing dockworkers in Brazil and Vietnam.

You read that correctly. Incidents of refrigerated containers exploding or catching fire have left two in Vietnam and one in Brazil dead.

According to the Huffington Post, there could be as many as 8,000 shipping containers in danger of exploding. It is believed the source of the problem is bad coolant put in reefer units that underwent repair and maintenance in Vietnam, specifically having been processed through Kat Lai.

All three incidents of exploding reefers were shipping containers being used by Maersk line. According to an article by IFW, “Maersk has removed all its 844 reefer containers that have been repaired in Vietnam.”

These incidents had all carriers, not just Maersk, scrambling to inspect their shipping containers and go through their paperwork to ensure their reefers are safe for the importing and exporting of goods that need to be kept at controlled temperatures.

West coast ports have undergone serious interruptions in operations and have even had days of closing terminals while adding safety procedures to avoid anymore possible incidents of injury or death.

Avalon Risk Mangement, a company that provides marine insurance, reported in a special edtion of their newsletter, The Quest that new safety procedures of U.S. west coast ports include “any refrigerated container transported through or originating in any Vietnamese port will be identified upon arrival in the United States. Any container from Kat Lai will be isolated for special handling.”

With a shortage of reefer containers already present in the international shipping business, this will not make it any easier for those who need to ship in refrigerated units.

However, before we worry how all this will affect the supply and demand of shipping containers, we should let these tragedies remind us how blessed we are to be able to safely go home to our families after a day’s work, especially with Thanksgiving coming up.

 

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Breathe in the Fresh Falling Freight Rates of Shipping from China https://www.universalcargo.com/breathe-in-the-fresh-falling-freight-rates-of-shipping-from-china/ https://www.universalcargo.com/breathe-in-the-fresh-falling-freight-rates-of-shipping-from-china/#respond Thu, 20 Oct 2011 23:53:16 +0000 https://www.universalcargo.com/?p=7538 Businesspeople who import from China can breathe easier than a year ago. No, this article is not about air pollution getting better in Asia. That’s still bad. It’s about freight rates and container shipping costs from China. The cost of shipping from China has been dramatically falling. While that may not be good for carriers, […]

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Businesspeople who import from China can breathe easier than a year ago. No, this article is not about air pollution getting better in Asia. That’s still bad. It’s about freight rates and container shipping costs from China. The cost of shipping from China has been dramatically falling. While that may not be good for carriers, it’s great for those of you who import goods from China.

A little over a year ago, Universal Cargo Management’s own CEO, Devin Burke posted a blog thatLast Year's 40' Price Increase could have knocked the wind out of anyone thinking of importing from China. It reported a 350% increase in freight rates and container shipping costs.

It’s not hard to imagine how this kind of cost increase would affect a business’ bottom line.

The graph on the left shows how much costs for importing 40′ containers from China to the U.S. increased last year.

40′ containers are just one example of the price increase trends of a year ago.

These price increase trends had businesspeople who import from China gasping for air.

Now those same businesspeople can take in a deep breath and let out a sigh of relief.

Freight rates for shipping from China have not only stopped going up, they have been falling.

This Year's 40' Price DecreaseThe graph on the right displays the change in rates for 40′ containers from last year to now and demonstrates the current trends of decrease in freight rates from China to the U.S.

While prices have not fallen as low as they were two years ago, as you can see from the graph, current pricing trends from China to the U.S. are the opposite of what they were a year ago.

Now is a great time to import from China to the U.S.

Of course, this news is not good for everyone. According to a Reuters article, China COSCO reported a larger than expected loss for the first half of the year and this loss was largely due to the downward trend in freight rates.

Don’t worry about those big carriers like COSCO. Carriers have ways of increasing prices such as docking fleets of cargo vessels to affect the industry’s proportions of supply verses demand. There’s no doubt they have strategies in line to change the current trends.

If you put the graphs of this year’s and last year’s trends side by side, it resembles a rollercoaster. That’s no surprise as freight rates tend to rise and dip in the highly volatile industry of international shipping.

Whatever future trends come, it is nice to take advantage of prices when they’re down. Like Grandpappy says, “Get while the gettin’s good!”

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Pirates on Today’s International Shipping Seas https://www.universalcargo.com/pirates-on-todays-international-shipping-seas/ https://www.universalcargo.com/pirates-on-todays-international-shipping-seas/#comments Tue, 13 Sep 2011 23:29:45 +0000 https://www.universalcargo.com/?p=7399 What pops into your head at the word “pirate”? For many, it’s Johnny Depp and Disney’s Pirates of the Caribbean movies. Usually, our pirate imagery goes back to the scalawags of centuries gone by, attacking ships with swords, cannonballs, and the occasional peg leg. Most think of piracy as a serious problem that was on […]

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What pops into your head at the word “pirate”? For many, it’s Johnny Depp and Disney’s Pirates of the Caribbean movies. Usually, our pirate imagery goes back to the scalawags of centuries gone by, attacking ships with swords, cannonballs, and the occasional peg leg.

Most think of piracy as a serious problem that was on the seas in the 1600’s, 1700’s, or 1800’s. What many of us don’t realize is that piracy is an increasing problem on the seas of today’s world.

Today’s pirates are more than just another reason to get marine insurance on your cargo shipments.

Pirates Approaching Container Ship“As long as there have been ships, there has been piracy,” said medieval historian, Melissa Vineyard. Today is no different. Of course, the look of piracy has changed. Automatic weapons replace swords. Rocket propelled grenades (RPGs) replace cannonballs. Prosthetics would replace peg legs, but I can’t say I’ve heard stories of pirates running around on prosthetic legs. What I have heard are some stats on piracy in today’s world.

Here are some figures on piracy acts reported to and published by the International Maritime Bureau (IMB) for the first six months of 2011:

266 pirate attacks on the world’s seas. Nearly a 75% increase from same period of previous year.

29 vessels hijacked.

495 crew members taken hostage.

13 kidnapped.

7 killed.

99 vessels boarded.

76 vessels fired upon.

Somalia has become the epicenter for pirate activity in today’s world. Certainly Somalia is not the only place pirates come from nor are the waters around Somalia the only ones in which ships are at risk of being victimized by piracy; however, over 60% of the attacks during the first six months of 2011 were committed by Somali pirates.

There is actually a vast area where Somali pirate attacks are happening. This area includes the Gulf of Aden, the southern Red Sea, off Yemen and Oman, the Arabian Sea, off Kenya and Tanzainia, off Seychelles and Madagascar, off Mozambique, in the Indian Ocean, and off the Indian west coast and Maldives west coast.

Somali pirates are not only stealing goods from ships, but taking crews for ransom.

According to the 2011 Q2 IMB Piracy Report, “As of 30 June 2011, the Somali pirates held 20 vessels for ransom with 398 crew members of different nationalities as hostages. In addition, these pirates are also holding 22 kidnapped crew members hostage.”

Piracy has a serious impact on the world of ocean freight international shipping. Pirates have been attacking all sorts of vessels, including general cargo, bulk carrier, RORO, and container ships.

The typical way pirates are attacking is by approaching a large ship in small motor or speedboats and firing upon or attempting to board the ship.

There is some good news. Even though the number of pirate attacks has been increasing, the proportion of successful attacks has decreased since last year. IMB’s report says this is due to “increased vessel hardening and effective naval intervention and disruption of Pirate Action Groups (PAGs).”

IMB goes on to say, “It is vital that this naval presence be sustained or increased.”

There is also a movement for ship owners and shipping lines to defend themselves. An article from Supply Chain Brain describes a “shift in the world’s attitude toward maritime piracy in recent months.”

Shipping lines and owners are turning to armed guards and bullet proof vests to protect their ships, crew, and cargo. While hiring specially trained men for protecting ships against pirates could save lives and millions of dollars in cargo loss and ransom payments, many countries won’t allow commercial ships to enter their water territories with men armed with automatic weapons onboard, even if they’re strictly for defensive purposes.

For years, ships have been encouraged not to fight back against piracy, but to attempt to outrun and outmaneuver pirates while calling in the authorities to come in and handle the pirates.

Do you think this is fair to ask of those in the dangerous world of international sea shipping? Lives and livelihoods are at stake.

But is fighting fire with fire better?

The video below that’s been floating around the web for about a year presumably shows Russian commandos handcuffing Somali pirates to their vessel and blowing it up. Be advised, the video contains graphic material.

YouTube Video

Is this kind of response to piracy acceptable?

Comment below on whether you think ships should be allowed to hire armed guards to protect their crew and cargo.

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4 Factors for Considering Air Freight vs. Ocean Freight https://www.universalcargo.com/4-factors-for-considering-air-freight-vs-ocean-freight/ https://www.universalcargo.com/4-factors-for-considering-air-freight-vs-ocean-freight/#comments Tue, 16 Aug 2011 22:28:33 +0000 https://www.universalcargo.com/?p=7329 The post 4 Factors for Considering Air Freight vs. Ocean Freight appeared first on Universal Cargo.

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In life and business, there are always choices to make. When it comes to international shipping, there are many choices. Of all these choices, the most basic is the decision of what kind of transport to use: air freight or ocean freight. Whether you’re a business that will be shipping overseas all the time or an individual moving to a new country, deciding whether to go with ocean freight or air freight is an important choice. There are four key factors you should consider when making this decision.

How to Determine If You Should Choose Air or Ocean Forwarding

In the end, you have to make your decision along two dimensions: Speed and Reliability vs. Cost and Environmental Impact. If you absolutely need to know your packages will get there safely and on time, no matter the cost, you are better off with air shipping. If you are more concerned with the impact of your shipping on the environment and with saving money, ocean shipping is a better choice for you.

   1. Cost

You probably don’t have to be told to consider the costs before an undertaking. As a business person, you consider the bottom line and as an individual, you have a budget. Naturally, you’re going to want to know which will cost you less, air freight or ocean freight. Typically, you will hear that shipping by ocean is cheaper than shipping by air. And typically, this is true; however, this is not necessarily Cargo Jet Planethe case.

To make the best decision, it helps to be educated about how carriers charge for international shipping. Airlines bill you by what is called a chargeable weight. Chargeable weight is calculated from a combination of the weight and size of a shipment. Sea carriers charge per container rates for shipping in standard containers (20’ and 40’ being the most common sizes). While weight can factor into the price from sea carriers, their charge tends to be based more on the size of a shipment. If you are shipping less than a container load, your price is often determined by cubic meter. With larger and heavier shipments, it is often much cheaper to ship by sea. As a shipment gets smaller, the margin between the prices gets smaller and sometimes air will even end up less expensive.

Shippers should note that there are destination charges to consider. Whether shipping by air or by sea, there will be customs and destination fees. While the actual shipment cost of sea freight is usually cheaper than the shipment cost of air freight, the warehousing fees at seaports are many times more expensive than those at airports.

   2. Speed

When it comes to speed, there is no question that air freight is usually much Cargo Shipfaster. Since time is money, this factor could more than make up for a higher cost of flying cargo. Many sea shipments can take around a month to arrive while an air shipment takes a day or two. For most business shipping, faster is better. When it comes to the individual moving a household, it is often good to have the extra time to prepare for the arrival of household goods in a new country. It should be noted that technology keeps moving forward in the international shipping world. Ships are getting faster. Canals have created shorter shipping routes. There are many ocean freight shipments crossing the oceans and being delivered in as few as 8 days.

   3. Reliability

Reliability is something we all look for in people, businesses, products, and services. How does ocean freight and air freight stack up against each other in this category? Air freight shipping has a much, much shorter history than ocean freight shipping, yet air freight tends to win the battle of reliability. Flights get delayed by weather and other factors, but airlines tend to be very on top of their schedules. Ocean carriers are notorious for being bad about this. It is not uncommon for ships to be off schedule. For many, a day or two here or there doesn’t hurt; however, for many businesses, a day or two could have serious cost effects. With airlines, there are usually daily flights back and forth between major cities around the world. Because of this, missing a flight doesn’t cause much of a delay for a cargo shipment. Ocean lines tend to have weekly schedules. Missing the cutoff at a seaport means a longer delay.

   4. Environmental Impact

Not everything is about the bottom line and convenience. While the social awareness of environmental issues can change the way the public looks at a company and affect its bottom line, we all have a responsibility of taking care of the planet on which we live. It would seem that ocean freight wins this category. CO2 emissions are much higher in air freight transport than ocean freight transport. This causes cargo shipping by air to have a much larger carbon fingerprint than cargo shipping by sea. However, considering oil spills and the water ecosystems affected by ocean freight, gives pause. Perhaps the jury is still out on this final factor.

Contact Universal Cargo for Commercial Air or Ocean Freight Forwarding

Fortunately, Universal Cargo Management can help you whether you need air freight forwarding or ocean freight forwarding. We have provided commercial freight forwarding both by sea and by air for decades. We can even help you decide which type of freight forwarding will be best for your business.

Whichever you choose, our trained experts will do everything possible to meet your needs when it comes to shipping your goods, whether that means speed, reliability, keeping costs down, or taking the most environmentally friendly route. We have a huge network of transportation professionals that allows us to find just the right shipping strategy for you.

On top of all that, we take care of all the complex logistics of shipping goods by air or by ocean, including knowing which documents you will need to present at customs and making sure they are prepared correctly, plus dealing with warehousing issues on either end of the shipping journey.

While you may have questions about air freight shipping vs. ocean freight shipping, when it comes to freight forwarding, there really is no question. Contact Universal Cargo Management for free freight rate pricing now.

Click Here for Free Freight Rate Pricing

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International Shipping and World Time Zones https://www.universalcargo.com/international-shipping-and-world-time-zones/ https://www.universalcargo.com/international-shipping-and-world-time-zones/#respond Wed, 10 Aug 2011 17:58:45 +0000 https://www.universalcargo.com/?p=7412 “We all know that time is money. We are less aware that time is a historical invention of businessmen.” – The World that Trade Created by Kenneth Pomeranz and Steven Topik. You don’t have to be in business to know the world is divided into time zones. I know, living in California, that if I […]

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“We all know that time is money. We are less aware that time is a historical invention of businessmen.” – The World that Trade Created by Kenneth Pomeranz and Steven Topik. You don’t have to be in business to know the world is dividedClocks into time zones. I know, living in California, that if I call my parents in Michigan it is 3 hours later for them than it is for me. Anyone in international business is aware of what time it is in the cities of other countries in which he or she is doing business. While there still are places in the world that don’t recognize standard time, we take it for granted that there is a “universal” time zone system. However, it was not always like this. Standard time zones have only been around for a relatively short amount of time. What brought them into existence? The business of cargo transportation.

It wasn’t until the end of the nineteenth century that standard time zones were established. Before that, every town set their own time according to the location of the sun. Measurements of time weren’t exact or synchronized from one town to the next. Two towns right next to each other could have very different times. It makes sense that things were this way. After all, it is natural for a man to consider himself the center of the universe while there is nothing natural about standard or universal time zones. The time being different in any given town only really became a major problem with the introduction of the railroad.

Growing rail companies in the 1840’s and 1850’s found themselves faced with a big problem. With every town having its own time, how could the rail stations keep a schedule that ensured trains pulling up to stations at the appropriate times? The idea of creating standard time zones to solve this problem seems simple enough to us now, but it was much more complicated at the time. Every town felt that their time was the proper time. Noon is when the sun is directly overhead in town. How could the rail companies convince towns to change their noon to when the sun was directly overhead in some other town? That would be like getting a town to Trainadmit inferiority to another. So how did the railroads convince the towns? They didn’t. Instead, the railroads made agreements among themselves to set clocks to certain times. No politics. No scientific analysis of what time it should be in different places. Time became a business decision. Towns eventually had to adjust their times to their rails.

The transition was not an easy one nor was it as smooth as it sounds. In the early transitions, train stations in hub cities could be quite chaotic as they would have different cool clocks for rails coming from different towns. According to Pomeranz and Topik, the Pittsburgh station had six clocks for six different rail times. Yet, the railroads managed to create standard railroad times. England was first, establishing a standard railroad time based on Greenwich time in 1842. The United States took much longer, as it had to connect literally hundreds of local time zones over expanding territory. It was in 1883 that the U.S. finally had a nationally standard railroad time. It would still be six years before the four time zones across the country would be established and nearly thirty years before standard time was legally recognized.

Eventually, most of the world came to accept standard time. It took years to work out—not because it was difficult to divide the world into time zones, but mainly because nationalism stood in the way. Many countries wanted their major city to be the one by which the world would set its clocks. The ultimate acceptance of the standard time zone we now have came because of the growth of European and North American powers between 1870 and 1914 and the importance of international shipping in a growing world economy. Now you can know when you participate in freight shipping, you’re taking part in an industry that changed the way the world looks at time.

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The Panama Canal & International Shipping Traffic https://www.universalcargo.com/the-panama-canal-international-shipping-traffic/ https://www.universalcargo.com/the-panama-canal-international-shipping-traffic/#respond Fri, 05 Aug 2011 20:07:06 +0000 https://www.universalcargo.com/?p=7508 Anyone who drives through densely populated areas knows the frustration of traffic jams. There are stretches of roads notorious for frustrating drivers and making perfectly punctual people late for their appointments. In Los Angeles, it’s the 405; New York has the Cross Bronx freeway; and the Dan Ryan Expressway in Chicago is anything but express. […]

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Anyone who drives through densely populated areas knows the frustration of traffic jams. There are stretches of roads notorious for frustrating drivers and making perfectly punctual people late for their appointments. In Los Angeles, it’s the 405; New York has the Cross Bronx freeway; and the Dan Ryan Expressway in Chicago is anything but express. As bad as it is to sit on one of these stretches of road and look out to see nothing but brake lights on lines of cars, there is a worse traffic jam to be in. Imagine being on the ocean and as far as the eye can see on a never ending horizon are fleets of ships—giant ships in uncountable numbers. All these ships are waiting to cross one relatively small strip of water. All the ships have a schedule and are loaded with valuable cargo. None will reach their final port of call on time. This is the scene all too often at the Panama Canal and the frustration of international shipping traffic.

For nearly 100 years, the Panama Canal has served as the major passageway between the Atlantic and Pacific Oceans for carrier ships. As world trade has increased over the last century, the Panama Canal has been pushed relentlessly toward its capacity. The Panama Canal is quite impressive in size; it allows ships 965 feet long, 106 feet wide, and 39.5 feet deep to cross thepanama[1] isthmus connecting North and South America. Since the opening of the canal, many ships of this maximum size, called Panamax, have been built. While these ships are massive—more than the length of 8 football fields combined including end-zones—ocean carriers think bigger. We now live in a post-Panamax world with megaships well beyond the size of anything the builders of the Panama Canal would have had in mind as they were building. With the increase in traffic from a booming world economy and the increase in size of ships, the only thing to do is expand the Panama Canal.

The expansion plan that is currently being implemented is supposed to double capacity of the canal by 2015. It will be great news for ocean carriers when this work is complete, allowing more cargo to pass through the canal efficiently. On the other hand, the construction will be nervously watched during the next four years. Who hasn’t experienced delays on the road because of construction? Routine maintenance causes backups at the canal that result in bidding wars ending in the hundreds of thousands of dollars to allow ships to skip ahead in line. Imagine the result of full shutdowns to the canal. You’ve probably taken at least one really bad detour on a trip, but imagine this: the detour around South America would be 7,872 miles long. Carriers already struggle with reliability of ship schedules and have rates that are notoriously volatile. As the expansion of the Panama Canal continues over the next four years, will we see increased unreliability and hiked prices? We’ll have to watch and see.

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China to Rival Panama Canal with Colombian Rail for Ocean Freight https://www.universalcargo.com/china-to-rival-panama-canal-with-colombian-rail-for-ocean-freight/ https://www.universalcargo.com/china-to-rival-panama-canal-with-colombian-rail-for-ocean-freight/#respond Tue, 02 Aug 2011 21:18:16 +0000 https://www.universalcargo.com/?p=7520 For nearly a century, the Panama Canal has created a monopoly for connecting ocean transport between the Atlantic and Pacific oceans. But now, China has proposed to build a rail in Colombia that could rival the Panama Canal, running across the isthmus that connects North and South America. This “dry canal”, as it is being […]

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For nearly a century, the Panama Canal has created a monopoly for connecting ocean transport between the Atlantic and Pacific oceans. But now, China has proposed to build a rail in Colombia that could rival the Panama Canal, running across the isthmus that connects North and South America. This “dry canal”, as it is being called, would connect the Atlantic coast port of Cartagena with the Pacific port of Buenaventura.

Colombia China[1]Can China do it? The proposed rail would be 136 miles long, cross 3 mountain ranges, go through dangerous and remote areas, and cost $7.5 billion dollars. Despite all this, it would seem China can do it. China has the resources and rail construction experience necessary to make this proposal a reality. Consider the line they built connecting Tibet to the rest of China over miles and miles of non-stop permafrost. China has also built rails or made deals to build rails in other countries like Angola, Algeria, South Africa, and Iran.

Will this “dry canal” really rival the Panama Canal? Many believe it will not. There is a rail option in Panama already for crossing the isthmus. The cost of unloading cargo—even of standard container sizes—from a ship at one port, loading it on the rail, unloading it from the rail, and loading it onto another ship at the port on the other side tends to be more costly than the canal tolls. Load capacity is not as great for a rail system as it is for ships crossing the Panama Canal, especially considering the expansion of the Panama Canal currently happening. Still, it seems unlikely that opening another route option from the Atlantic to the Pacific would not stir the waters.

Some argue that China has no intent of competing against the Panama Canal with their rail plans in Colombia. Perhaps China has no commercial intentions with the rail they are building. Perhaps the rail is solely meant for the ease of transporting large quantities of coal from the mines of Colombia to China. China is the number two trade partner of Colombia, behind the United States. No doubt with this rail, China will be in prime position to become Colombia’s number one trade partner and make their access to all of Latin America a little easier.

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Maersk Line and Instant Cargo Shipping Overseas https://www.universalcargo.com/maersk-line-and-instant-cargo-shipping-overseas/ https://www.universalcargo.com/maersk-line-and-instant-cargo-shipping-overseas/#respond Mon, 25 Jul 2011 23:28:35 +0000 https://www.universalcargo.com/?p=7476 “Instant” is the word of the day. We can instant message people; stream movies instantly; buy a new book online with only a click of the mouse, reading an e-copy right this instant; and even book a flight to another country in seconds. It seems that every industry has utilized technology to give consumers what […]

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Instant Shipping“Instant” is the word of the day. We can instant message people; stream movies instantly; buy a new book online with only a click of the mouse, reading an e-copy right this instant; and even book a flight to another country in seconds. It seems that every industry has utilized technology to give consumers what they want: instant service. That is, every industry except the cargo shipping industry. Certainly, the international nature of shipping cargo overseas makes it a more complicated industry than many; however, does that mean instant service is impossible? Elvind Kolding, CEO of the world’s largest container shipping line, doesn’t think so.

Kolding released a manifesto to the industry calling for a change in practices. Traditionally, the sea-based cargo shipping industry has been focused on battling over rates. There is no doubt that numbers matter when it comes to the importing and exporting customer. Yet, Kolding wants to put a greater focus on what the consumer really wants and needs. According to Kolding, Maersk Line has identified three areas that will meet the future demands of customers when focused on. These areas are top environmental performance, unmatchable reliability, and ease of business. Ease of business? Does this mean no more back and forth with bills of lading, paperwork, and all the hassles customers have to go through every time they import or export? Kolding certainly thinks technology can be utilized to make this process much easier. “What if placing a shipping order was as easy as buying an airline ticket,” he asks.

We’re sitting on the brink of change in the sea-shipping industry. Could Maersk Line use technology to shake up this industry as companies like Amazon and Netflix did to their own? Technology has not yet brought us teleportation technology to instantly transport cargo from country to country, but surely it has created the means to set up overseas delivery instantly.

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Got Marine Cargo Insurance? [What The Freight?!? – Issue 002] https://www.universalcargo.com/got-marine-cargo-insurance-what-the-freight-issue-002/ https://www.universalcargo.com/got-marine-cargo-insurance-what-the-freight-issue-002/#respond Thu, 09 Jun 2011 23:04:29 +0000 https://www.universalcargo.com/?p=7588 Join Harry Ocean as he neurotically navigates the wavy waters of cargo importing and exporting in “What the Freight?!?” In this issue, Harry Ocean speaks to Billy O’Lading about Marine Cargo Insurance for his most recent shipment… The Moral of the Story is to always purchase Marine Cargo Insurance.  For most goods, 1.5% of the value […]

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Join Harry Ocean as he neurotically navigates the wavy waters of cargo importing and exporting in “What the Freight?!?”

In this issue, Harry Ocean speaks to Billy O’Lading about Marine Cargo Insurance for his most recent shipment…

What the FreightMarine Cargo Insurance 1Marine Cargo Insurance 2Marine Cargo Insurance 3

The Moral of the Story is to always purchase Marine Cargo Insurance.  For most goods, 1.5% of the value can secure ALL RISK Coverage.  A few exceptions would be:

  • Automobiles
  • Ceramics, Chinaware, Glassware
  • Marble, Granite

Goods such as these have different surcharges or deductibles attached to them.

If you are considering purchasing Marine Cargo Insurance feel free to review our guide:

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OR More In Depth Information on Marine Cargo Insurance

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Need Container Shipping Rates? [What the Freight?!? – Issue 001] https://www.universalcargo.com/need-container-shipping-rates-what-the-freight-issue-001/ https://www.universalcargo.com/need-container-shipping-rates-what-the-freight-issue-001/#respond Wed, 25 May 2011 23:16:36 +0000 https://www.universalcargo.com/?p=7635 Join Harry Ocean as he neurotically navigates the wavy waters of cargo importing and exporting in “What the Freight?!?” In this issue, Harry Ocean gets container shipping rates for a very knowledgeable customer…     The Moral of the Story is to always be prepared ahead of time.  In order to insure the fastest service with […]

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Join Harry Ocean as he neurotically navigates the wavy waters of cargo importing and exporting in “What the Freight?!?”

In this issue, Harry Ocean gets container shipping rates for a very knowledgeable customer…

 

What the FreightNeed Container Shipping Rates 

The Moral of the Story is to always be prepared ahead of time.  In order to insure the fastest service with the most accurate rates have the following things ready:

  • Origin  (Where you are shipping from)
  • Destination  (Where you are shipping to)
  • Size  (The total weight and dimensions/volume of your shipment)
  • Commodity / Goods  (What you are shipping)
  • Shipment Date  (When you are shipping)

 

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FAQ: 5 Tips for First Time Shippers – Advice for a First Time Shipper https://www.universalcargo.com/faq-5-tips-for-first-time-shippers-advice-for-a-first-time-shipper/ https://www.universalcargo.com/faq-5-tips-for-first-time-shippers-advice-for-a-first-time-shipper/#respond Thu, 19 May 2011 20:48:14 +0000 https://www.universalcargo.com/?p=7551 Q: Any advice for a first time shipper? A: We have 5 tips for you. Save container transport cost by preparing to load your container in less less than 2 hrs. When the driver shows up to your site, the first 2 hours are included in your fees. We recommend staffing up and preparing in advance to load the container as quickly as possible to […]

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Q: Any advice for a first time shipper?

A: We have 5 tips for you.

  • Save container transport cost by preparing to load your container in less less than 2 hrs.

When the driver shows up to your site, the first 2 hours are included in your fees. We recommend staffing up and preparing in advance to load the container as quickly as possible to avoid overtime charges.

First Time Shipper

  • Prepare Shipping Container Contents for Extremes, Containers are subject to extreme conditions.

There are wild swings in temperature and humidity inside the container – they go through the Panama Canal and sometimes around the Cape. Containers are subjected to triple digit heat and humidity to sub-zero temperatures while in storage or in transport.

  • Carefully Declare ANY Organic Cargo.

Plants, Edible Plants, Vegetables and Fruit are all treated differently depending on the origin and destination of the shipment. If customs finds any undeclared organic cargo, they can quarantine your container and charge you daily holding fees.

  • Properly Insure Your Cargo.                                                         (Photo from BundleBox Blog)

Plan for “attrition”. All of the contents don’t always make it all of the time. There will be some “attrition” – containers get inspected, sometimes by unscrupulous dock/deck hands…this isn’t REALLY considered stealing, as the items in transit, technically are the property of the shipping company*.

  • Understand that Freight Forwarding is both an art and a science.

Many companies and handlers are involved in moving your container, here are just a few possible examples: Trucking company(ies) outbound (your door to the port of origin or train yard), Crane Operations transferring container from truck to train, and train to ship. That’s just to get the container to the ship, then the reverse happens on the other side…it’s a REALLY rough ride, even in good weather. Read our Blog about “What is a Freight Forwarder?”!

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FAQ: What is a Freight Forwarder? https://www.universalcargo.com/faq-what-is-a-freight-forwarder/ https://www.universalcargo.com/faq-what-is-a-freight-forwarder/#respond Tue, 17 May 2011 18:00:21 +0000 https://www.universalcargo.com/?p=7413 Q: What is a freight forwarder? A: Freight forwarding is a service used by companies that deal in international or multi-national import and export. While the freight forwarder doesn’t actually move the freight itself, it acts as an intermediary between the client and various transportation services. Sending products from one international destination to another can involve […]

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Q: What is a freight forwarder?What is a Freight Forwarder

A: Freight forwarding is a service used by companies that deal in international or multi-national import and export. While the freight forwarder doesn’t actually move the freight itself, it acts as an intermediary between the client and various transportation services.

Sending products from one international destination to another can involve a multitude of carriers, requirements and legalities. A freight forwarding service handles the considerable logistics of this task for the client, relieving what would otherwise be a formidable burden.

Freight forwarding services guarantee that products will get to the proper destination by an agreed upon date, and in good condition.

The freight forwarding service utilizes established relationships with carriers of all kinds, from air freighters and trucking companies, to rail freighters and ocean liners. Freight forwarding services negotiate the best possible price to move the product along the most economical route by working out various bids and choosing the one that best balances speed, cost and reliability.

A freight forwarding service generally provides one or more estimates to the client along with advisement, when necessary. Considerations that effect price will range from origin and destination to special requirements, such as refrigeration or, for example, transport of potentially hazardous materials.

Assuming the client accepts the forwarder’s bid, the freight is readied for shipping. The freight forwarding service then undertakes the responsibility of arranging the transport from point of origin to destination.

Advantages of Using a Freight Forwarder:

  • A Freight Forwarder handles ancillary services that are part of the international shipping business
    • Insurance
    • Customs Documentation
    • etc…
  • A Freight Forwarder provides to consolidators as well as individual shippers:
    • Non-Vessel Operating  Common Carrier documentation
    • Bills of Lading
    • Warehousing
    • Risk Assessment and Management
    • Methods of International Payment
    • etc…
  • A Freight Forwarder insists on personal communication and great customer service.

A good freight forwarding service can save the client untold time and potential headaches while providing reliable transportation of products at competitive rates. A freight forwarding service is an asset to almost any company dealing in international transportation of goods, and is especially helpful when in-house resources are not versed in international shipping procedures.

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My Company Newsletter – 7 HR Tips – Part 1 – 4 Signs Your Company May Be Dysfunctional https://www.universalcargo.com/my-company-newsletter-7-hr-tips-part-1-4-signs-your-company-may-be-dysfunctional/ https://www.universalcargo.com/my-company-newsletter-7-hr-tips-part-1-4-signs-your-company-may-be-dysfunctional/#respond Mon, 16 May 2011 23:19:14 +0000 https://www.universalcargo.com/?p=7636 UCM Newsletter                              Monday, May 16, 2011 We are excited to announce the launch of the new Devin’s 7’s with the release of our new video series 7 HR Tips to Managing Your Human Resources. This week starts off with Part 1 – 4 […]

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UCM Newsletter                              Monday, May 16, 2011
We are excited to announce the launch of the new Devin’s 7’s with the release of our new video series 7 HR Tips to Managing Your Human Resources.

This week starts off with Part 1 – 4 Signs Your Company May Be Dysfunctional.

YouTube Video

In the first part of this seven part series, Kamy Eliassi, Managing Diretor at UCM, leads a panel in a discussion to help pot the signs that your company may be going dysfunctional.

Kamy sits along with Devin Burke, CEO at UCM, and Scott Jette, CEO at Credo Consulting, and discusses low employee morale, high employee turnover, employees renting the customers, and leaders stifling the inititive of the workers

We hope you enjoy this series of Devin’s 7’s.  We aim to educate as well as entertain.  Feel free to subscribe to our YouTube Channel or interact with us all over the internet via our website, blog, or social media accounts.

Read the Newest Blogs

Japan Sets Guidelines for Radiation Measurements at Container Ports

Not only shipping containers and ships are being inspected for safe levels of radiation, but the atmosphere around the ports and seawaters are also being monitored. With these guidelines set in place, customers should now feel safer when exporting cargo from Japan.

China Shipping Companies Suffer Losses – Take Advantage and Save

China Shipping Companies (local inland logistic companies as well as ocean carriers) are all suffering losses so far in 2011 due to overcapacity and high fuel prices.

Stay Connected

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UPDATE on Japan Radiation Crisis: Vessels & Containers https://www.universalcargo.com/update-on-japan-radiation-crisis-vessels-containers/ https://www.universalcargo.com/update-on-japan-radiation-crisis-vessels-containers/#respond Fri, 01 Apr 2011 21:34:48 +0000 https://www.universalcargo.com/?p=7581 Below is a list of major shipping lines and other companies related to shipping with updated news and information concerning the radiation crisis in Japan. Please visit these sites to learn more about the effects and precautions to take while shipping during the crisis. US Customs & Borders Protection APL CMA CGM COSCO Hanjin Shipping […]

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      * Article     * Advanced  Title Article Body <p><img src="/Portals/57382/images/japan container-resized-600.jpg" border="0" alt="ports, containers, japan, radiation, vessels" class="alignCenter" style="display: block; margin-left: auto; margin-right: auto;" /></p> <p>Below is a list of major shipping lines and other companies related to shipping with updated news and information concerning the radiation crisis in Japan. Please visit these sites to learn more about the effects and precautions to take while shipping during the crisis.</p> <ul> <li><a title="US Customs & Borders Protection" href="http://www.cbp.gov/xp/cgov/newsroom/news_releases/national/03172011_6.xml" target="_self">US Customs & Borders Protection</a></li> <li><a title="APL" href="http://www.apl.com/advisory/" target="_self">APL</a></li> <li><a title="CMA CGM" href="http://www.cma-cgm.com/AboutUs/PressRoom/Press-Release_CMA-CGM-Press-release-Japan-28th-March-2011_10546.aspx" target="_self">CMA CGM</a></li> <li><a title="COSCO" href="http://www.coscon.com/news.screen?locale=en" target="_self">COSCO</a></li> <li><a title="Hanjin Shipping" href="http://www.hanjin.com/en/news/Japan_2011_0314.jsp?srv_id=ENG&id=Japan_2011_0314.jsp&backUrl=notice.jsp&curPage=1&blockSize=10" target="_self">Hanjin Shipping</a></li> <li><a title="Hapag-Lloyd news" href="http://www.hapag-lloyd.com/en/news/general_announcements.html" target="_self">Hapag-Lloyd news</a>; <a title="Hapag-Lloyd vessels" href="http://www.hapag-lloyd.com/en/news/japan_situation_update.html" target="_self">Hapag-Lloyd vessels</a></li> <li><a title="Hyundai" href="http://www.hmm21.com/cms/business/usa/information/news/index.jsp" target="_self">Hyundai</a></li> <li><a title="K-Line" href="http://www.kline.com/KAMCorpInfo/news/K-Line_News_Press_Releases.asp" target="_self">K-Line</a></li> <li><a title="Mitsui O.S.K Line (MOL)" href="http://www.molpower.com/htm/default.htm" target="_self">Mitsui O.S.K Line (MOL)</a></li> <li><a title="NYK Line" href="http://www2.nykline.com/help/whats_new.html" target="_self">NYK Line</a></li> <li><a title="OOCL" href="http://www.oocl.com/usa/eng/localinformation/localnews/2011/" target="_self">OOCL</a></li> </ul> <p>The following Japanese ports have been shut down and have suspended all services due to the effects of radiation:</p> <ul> <li><strong>Sendai</strong> in Miyagi prefecture</li> <li><strong>Ofunato</strong> in Iwate</li> <li><strong>Hachinohe</strong> in Aomori</li> <li><strong>Onahama</strong> in Fukushima</li> <li><strong>Kashima</strong> in Ibaraki</li> <li><strong>Hitachinaka</strong> in Ibaraki</li> </ul> <p><strong><a title="Tokoyo" href="http://www.tptc.co.jp/en////tabid/830/Default.aspx" target="_self">Tokoyo</a></strong> and <strong><a title="Yokohama" href="http://www.apmterminals.com/asia/yokohama/" target="_self">Yokohama</a></strong> terminals in Japan are functioning normally.</p> 										 	 				 	 Paragraph	 			 	 									 Saving in progress... Tags enter a comma-separated list of words describing your post Air Cargoair freightair pollutionAmericas MartArgentinaAtlantabail-outbankBill Dodsonbook reviewbusinessBusiness Practicescarbon calculationcarbon emissioncarbon emmisioncarbon footprintcargocargo shippingCEOCharityChileChinaChina export shippingchina freight ratesChina inside outChina Manufacturingcollective bargainingcomedyCONEXPO-CON/AGG and IFPE 2011containercontainer carrierscontainer portcontainer portscontainer shippingcontainer shortagecontainer transportcontainerscost effectiveCosta Ricacounterfeitcrisiscurrencydebtdevaluationdevaluedevalued currencyDevin Burkedutyeco-friendlyeconomicseconomyeconomy cargoeditorialegbert greeneggieeggie egbert greenEggie Egbert GreenenvironmentEpisode 1expansionexportexport tradingexporterexportsExportsfailurefair trade charterFDAfilm festivalFoodFreight Forwardfreight forwardersFreight Forwardingfuelfuel pricesfurniture marketGivingGlobal Economyglobal freightgoodsGreecegreenhomesHubSpot TipsimportImportimporterimportsIncotermsindigenous innovationinflationinternational container transportinternational shippingInternational ShippingIrelandJapanJones Actlow sulphur sulfur fuel oilmetalsmissilesmoneyMost Popularmoving overseasNVOCCObamaocean cargoocean freightocean shippingocean shipping linesoilPanamaPanama CanalPhilanthropypiratedportsPortugalradiationrare earthratesrecoverysea freightshiftshippingshipping containerslow steamingsolar powerSouth Americasovereignsovereign debt crisisSpainstock tipsStormsupplytarffstarifftaxesthe eggie filesThe Eggie Filestop shipping companiestradetrade showtradingTransportation SafetyU.S. Export ShippingUKUniversal Cargo ManagementUSvesselsVideosVietnamweak balance sheetWealthweaponswebisodewest coast shippingWorld Premiere Author&squot;s user name Start Date (Central Time): : Open the calendar popup. Meta Keywords This populates the HTML meta keywords tag. Meta Description This populates the HTML meta description tag. News on container shipping during the Japanese radiation crisis.

Below is a list of major shipping lines and other companies related to shipping with updated news and information concerning the radiation crisis in Japan. Please visit these sites to learn more about the effects and precautions to take while shipping during the crisis.

The following Japanese ports have been shut down and have suspended all services due to the effects of radiation:

  • Sendai in Miyagi prefecture
  • Ofunato in Iwate
  • Hachinohe in Aomori
  • Onahama in Fukushima
  • Kashima in Ibaraki
  • Hitachinaka in Ibaraki

Tokyo and Yokohama terminals in Japan are functioning normally.

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Furniture Market Upswing Resonates Great Ring for Freight Forwarders https://www.universalcargo.com/furniture-market-upswing-resonates-great-ring-for-freight-forwarders/ https://www.universalcargo.com/furniture-market-upswing-resonates-great-ring-for-freight-forwarders/#respond Fri, 25 Mar 2011 21:07:50 +0000 https://www.universalcargo.com/?p=7519 Furniture Market picking up? It is official, the January 2011 Las Vegas Market furniture trade show sent some positive signals within the Industry.  It’s a great family activity if you’re in Las Vegas with kids, as the attendance was up 25% from the last market and it was reported that 80% of the nation’s top 100 […]

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Furniture Market picking up?Furniture Market Helps Freight Forwarder

It is official, the January 2011 Las Vegas Market furniture trade show sent some positive signals within the Industry.  It’s a great family activity if you’re in Las Vegas with kids, as the attendance was up 25% from the last market and it was reported that 80% of the nation’s top 100 Retailers were in attendance.  International buyers were up 16% which is a good sign, as anytime a Furniture importer can export that is good for the all around economy.

There was also an increase of about 20% in exhibitors, which is heartbeat of any trade show.  Traffic and order writing was also up significantly enough to bring remarks from several exhibitors that finally there were serious buyers coming to Vegas.

So this should be a good sign for High Point Market coming up on April 2-7 which is a much larger show with usually the “serious” buyers.

Key Takeaway 

Key Takeaway – With the rise of Furniture Market trade show attendance and the increase in buyers, Furniture Manufacturers have some hope going into the coming High Point Market.

 

UCM Services many furniture companys in their import / export ventures.
If you are a furniture company looking for import / export help please
Request Rates

 

devin@universalcargo.com

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Requirements Loosen for NVOCCs in Cargo Shipping https://www.universalcargo.com/requirements-loosen-for-nvoccs-in-cargo-shipping/ https://www.universalcargo.com/requirements-loosen-for-nvoccs-in-cargo-shipping/#respond Tue, 22 Mar 2011 16:39:21 +0000 https://www.universalcargo.com/?p=7500 Hallelujah! NVOs finally don’t have to follow that ridiculouslycumbersome job of filing a tariff every time they secure a customer. As of April 18th, the Federal Maritime Commission (FMC) has issued a final ruling that removes the requirement for all licensed NVOCCs to publish a tariff for every rate they charge each shipment. There is, […]

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Hallelujah! NVOs finally don’t have to follow that ridiculouslyCargo Shippingcumbersome job of filing a tariff every time they secure a customer.

As of April 18th, the Federal Maritime Commission (FMC) has issued a final ruling that removes the requirement for all licensed NVOCCs to publish a tariff for every rate they charge each shipment.

There is, of course, certain conditions that these same NVOs continue to publish rules tariffs containing contractual terms and conditions governing shipments and providing those rules to the public. Thereby, ensuring that the rates they charge are agreed to and memorialized in writing by the date cargo is received for shipment.

They must also retain this documentation for 5 years and made available to the MC upon any such requests. Such NVOCCs will also be exempt from regulatory requirements regarding time volume rates, 30 days notice of tariff rate increases, carrier refunds, and adherence to published tariff rates.

This change should give owners of NVOCCs some bit of freed up time and expenses to concentrate on more productive matters, such as expanding their business.

cargo, shipping, requirements, tariff 

Key Takeaway– Changes made by the Federal Maritime Commission will no longer require NVOCCs to publish a tariff for every rate they charge each shipment. This will allow NVOCC businesses with more time to focus on other aspects of their company.

 

 

For a quick response to any questions that you may have about shipping cargo,

please contact us today.

email

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Book Review: China Inside Out by Bill Dodson https://www.universalcargo.com/book-review-china-inside-out-by-bill-dodson/ https://www.universalcargo.com/book-review-china-inside-out-by-bill-dodson/#respond Wed, 16 Mar 2011 20:05:02 +0000 https://www.universalcargo.com/?p=7458 This book deals with 10 trends shaping China and how it effects all of us. The Author, Bill Dodson, makes a very good case to back up his statement that these trends are irreversible, which is a pretty bold statement. Some of the trends discussed in this very current book (copyright ’11) cover the rise […]

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China Inside OutThis book deals with 10 trends shaping China and how it effects all of us. The Author, Bill Dodson, makes a very good case to back up his statement that these trends are irreversible, which is a pretty bold statement.

Some of the trends discussed in this very current book (copyright ’11) cover the rise of the new generation W (for web) where he provides startling stats such as a projected half a billion internet users in China this year. That’s almost double the population of America! Other stats include:  600,000 middle class in China right now, 70% of China’s drinking water is undrinkable, and, within the whole country, the agricultural land that is still unpolluted is only about the size of Texas and shrinking.

If you are anything of a Globally conscious person, or your business is in some way affected by China, you must read this book. It will not only be an eye opener to someone who currently does business in China, but will also provide valuable insight on how to forecast what to expect in the coming decade for your business. Even if your current business is not yet connected to this growing Global superpower, it will be.

Bill Dodson comes across as someone who has spent ample time doing business in China, studying the culture first hand, with obviously a keen eye on the fast ever changing society of capitalistic communists that are changing the way the world does business.

I personally believe China is the key to where the world is headed economically. I travel there at least once a year in my business, and sometimes even more. I have been going to Asia about every year since ’87. I have read numerous books on the culture of China and I have been studying Mandarin. However, I would rank this book among the top in real practical information that is helping me to better understand this culture in ways that I have never before been able to do firsthand. Ofcourse, when you travel to China on business you are focused on your task and trying to maximize your time management.  Going from airport to taxi, taxi to hotel, hotel to meetings, meetings to eating, eating to…..GOLF? Massages? Who has time to learn about the culture and study trends?

With that said, I do know one thing, I have learned so much from this book that I will no doubt be educating my good PENGYOU’s (friends) in China on my next visit.

My rating with 7 stars being best, I give this 5 ½ stars.

devin@universalcargo.com

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International Shipping: Westbound Cargo is Strong While Rates are Weak https://www.universalcargo.com/international-shipping-westbound-cargo-is-strong-while-rates-are-weak/ https://www.universalcargo.com/international-shipping-westbound-cargo-is-strong-while-rates-are-weak/#respond Tue, 15 Mar 2011 18:20:57 +0000 https://www.universalcargo.com/?p=7384 We are just coming out of the peak season, as that traditionally starts late fall through early spring. Last year, most carriers in the westbound export market to Asia implemented numerous rate increases. However, none have been successful with rate hikes this year. This is because of the large surplus of new vessels that have been […]

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We are just coming out of the peak season, as that traditionally starts late fall through early spring. Last year, most carriers in the westbound export market to Asia implemented numerous rate increases. However, none have been successful with rate hikes this year.

international shipping, cargo, ratesThis is because of the large surplus of new vessels that have been brought in during the recent months, primarily for the east bound trade.

Usually, the eastbound market trails off this time a year, which it indeed is. So the timing of the projected 287 new vessels coming in this year is really hurting the market with the cargo demand way down when compared to this time of last year’s levels on the Eastbound.

This time last year, there were about 600 vessels parked in Singapore coming back in the service. However, this year there are only about a 100 vessels left. Good thing import volumes still remained relatively strong throughout the winter months, which means the carriers kept all of their vessels in operation until now. This provided exporters with ample vessel capacity for their westbound cargo to Asia with Los Angeles having a surplus of both vessels and equipment. During this time last year, exporters were facing big problems getting space and equipment, especially in the Midwest.

Cargo such as grain, dry grain, which is a by-product of ethanol production used for animal feed, and DDG, which is a type of specialty grain, have been strong for exports from the Midwest this winter. It had previously been shipped primarily in containers due to the spike in bulk shipping costs in 2007-2008, but has drifted back to bulk as their prices have dropped dramatically. So carriers may start enticing back business very soon with lower container freight rates going westbound while they juggle much needed equipment back to China for eastbound cargo.

international shipping, cargo, ratesKey Takeaway- All in all, the westbound market remains strong with a lot of leverage for shippers to negotiate good freight rates going forward while the eastbound market is now as slow as it gets before the coming peak season giving much needed leverage to importers for this year’s coming contract rate negotiations in May.

 

 

Devin Burke
devin@universalcargo.com

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Shipping Container Shortage Problem 2011 https://www.universalcargo.com/shipping-container-shortage-problem-2011/ https://www.universalcargo.com/shipping-container-shortage-problem-2011/#respond Thu, 10 Mar 2011 22:52:51 +0000 https://www.universalcargo.com/?p=7356 Ocean carriers face a shortage of containers in the coming months as the demand for cargo exceeds the existing equipment capabilities of most or all Carriers.  I guess when they all ordered vessels a few years ago no one had the foresight to also order production of containers.  That is like buying an iPod, but […]

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Ocean carriers face a shortage of containers in the coming months as the demand for cargo exceeds the existing equipment capabilities of most or all Carriers.  I guess when they all ordered vessels a few years ago no one had the foresight to also order production of containers.  That is like buying an iPod, but never purchasing a set of earphones.Shipping Container

It is reported that the box to vessel capacity ratio will drop to 1.99 from 2.03 which is the lowest on record.  In the past 10 years worldwide container inventory only increased about 7%, while vessel production increased about 11%.

Although part of that reason was a huge stoppage of everything during the recent “great” recession, as Carriers refurbished or “cull” old boxes to save on cost, and will undoubtedly do the same this year. Another reason carriers stopped making new boxes is because several focused on specialty equipment and reefer boxes.

Right now the industry is looking at a total fleet growth of about 9% this year.  A total of 287 ships will be unveiled this year (1.42 million TEUS).

The markets that will be hit the hardest will be export markets in the U.S. and Europe as the equipment is needed in Asia.  So this will result in delays similar to that of space issues last year in the TP Trade.

No doubt Carriers will use this as a reason, albeit legitimate, to raise freight rates again as they all deal with the over capacity issue of vessels compared the demand in freight this year. Currently there is a lot of downward pressure on eastbound freight rates from Asia.  However, as we speak, most carriers are rushing production of new boxes, led my Maersk.

They have also basically put the brakes on the scrapping of old boxes.  Normally all carries combined scrap over 200,000 TEUS  worth of old containers every year.  Now there is expected over 700,000 TEUS worth of new equipment being built this year.

So the problem is primarily for this year, and will be felt most during the peak months between June and Sep.  The biggest problem for the carriers is the rising cost in this production, which they will find a way to pass on to the shippers no doubt.

Key Takeaway - Shipping Container Shortage

 

Key Takeaway – Buy stock in container manufacturing companies.  If you are a shipper, secure your relationships with people who can gurantee equipment this year, so you don’tend up like last year.

If you are looking for a reliable shipper with equipment certainty:

Request Rates

Devin Burke

devin@universalcargo.com

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Inflation: Margin Killer Affects Cargo and International Shipping Part II https://www.universalcargo.com/inflation-margin-killer-affects-cargo-and-international-shipping-part-ii/ https://www.universalcargo.com/inflation-margin-killer-affects-cargo-and-international-shipping-part-ii/#respond Tue, 08 Mar 2011 23:48:09 +0000 https://www.universalcargo.com/?p=7536 Inflation: Margin Killer Affects Cargo and International Shipping Part I Continuing to detail the effects of inflation on the American families who are the end client of those in the import/export international shipping business is becoming ever more important. These families are being squeezed as are we, but their situation speaks to our economic sustainability. […]

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Inflation: Margin Killer Affects Cargo and International Shipping Part I

cargo, international shipping, inflation, taxesContinuing to detail the effects of inflation on the American families who are the end client of those in the import/export international shipping business is becoming ever more important. These families are being squeezed as are we, but their situation speaks to our economic sustainability. The more financial pressure brought to bear on the families we serve, the more we need to find some way to bring relief and make a profit. It’s with this in mind that we look at inflation and the “tax man.”

Another insidious effect of inflation is “tax creep”.  This is where Americans’ salaries eventually have to respond to the rising prices. People demand and are granted cost of living increases, wage increases, etc. to try to keep up with escalating costs, soon to be “run-a-way costs.”  Though it might seem good to the individual, as increases in wages take effect as employers and the whole economy succumb to the need to “chase inflation,” it relieves pressure on family budgets in the short term, yet the long term effect can be devastating to their future.

As costs increase and wages follow the upward spiral, American families will soon find themselves in higher and higher tax brackets. This may come as a shock to some when tabulating federal and state tax obligations.  The entrance into a new tax bracket really puts a squeeze on family budget margins. So, in addition to costs escalation, families are now paying a greater percentage of their incomes to greater tax obligations.  It wasn’t that long ago that someone making $100,000 each year was considered upper class.  Now, if you live in one of the major metropolitan areas like Los Angeles or New York, making $100K a year is average, but the tax obligations are huge, comparatively speaking. Those making $250,000 are now considered to be rich. What, so a fireman and a teacher who have worked hard for 20 years in one of these metropolitan areas, so as to send their kids to college and save a little money for retirement, are “rich” and deserving to be called “filthy” and are undeserving? So the answer is that as a society we need to punish them by taking a larger percentage of what they earn. After all, “it’s their fair share”, right?  No.

All of society is hurt as we embark on a course that systematically destroys the value of the dollar, ushering in spiraling costs – instituting and institutionalizing “run-a-way inflation” (remember that term) that injures our end customer – the American individual and family.  Families that have the currency and wages they worked for yesterday and the money they saved has devalued, and what they are working for today subject to higher taxation by 5%, 7%, 8%, or 10%. This takes away the wage gains the family thought it received when the employer decided to cut his margins to give more to his ailing employees only to have that effort nullified in the end.

So as we look to fulfill and grow in our niche in life and in our place as those who contribute to the value of the lives of our clients, let us work to become more responsive to their life considerations: what they look for, spend on, what concerns them, what they think about, and how to best meet the needs they may have not yet discovered. Our goal is to be pro-active in the way we ship and transport goods; goods that so many lives rely on to survive and depend on for a livelihood.

cargo, international shipping, inflation, taxesKey Takeaway- We must  become a greater and more significant benefit to those we serve, who are getting “served up” in the world of diminished and eroding life returns – for those blanketed by the insidious effects of inflation – Hyperinflation- coming to a town near you.

To find out more about how we can help you transport your goods in the most efficient and ecnomically-friendly way, please don’t hesitate to contact us

Dave Stover

dave@universalcargo.com

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Inflation: Margin Killer Affects Cargo and International Shipping Part I https://www.universalcargo.com/inflation-margin-killer-affects-cargo-and-international-shipping-part-i/ https://www.universalcargo.com/inflation-margin-killer-affects-cargo-and-international-shipping-part-i/#respond Thu, 24 Feb 2011 22:07:39 +0000 https://www.universalcargo.com/?p=7614 The Problem While many are now speaking about the fact that inflation is coming, due to the radical fed policy of hyper quantitative easing, few are detailing what happens to the people of a nation bound by inflation. For those of us who are directly involved in the movement of cargo and international shipping, its […]

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The Problem

While many are now speaking about the fact that inflation is coming, due to the radical fed policy of hyper quantitative easing, few are detailing what happens to the people of a nation bound by inflation. For those of us who are directly involved in the movement of cargo and international shipping, its good to note outcomes for those we ultimately serve, our end client, the American family.

First, if someone were to tell you that an investment you make would be worth 10% less in 10 years than it is the day you acquired it, would you buy it? Chances are no. All the more, if you knew that the investment would descend in value even more quickly, like 20, 30 or 50% so that 100,000 USD would be worth only 50,000 USD ten years from now, you definitely wouldn’t.

But this is precisely the situation. This is what is happening to our currency by those placed in charge of the mechanisms instituted to manipulate currency outside the natural organic forces of economics. But the effects – what are they and are they a benefit?

The Effects

In short, inflation causes rising fuel prices which leads to more expensive everything else: heating & cooling your home, traveling to and from work, and food. As costs increase and as every one deals with these factors – businesses have to add these costs to their goods and services offered which makes a cumulative upward spiral of rising costs.

It’s no different for our industry; shipping and transportation costs are escalating, putting pressure on margins, which translates into less liquidity to invest in growth and what all governments want, new jobs.

However, the upward cost spiral also presses prices higher even without adding the fuel component to the equation. On their own, food items go up, precious and not so precious metals increase in price, the price of services, the price of education, even the price of breathing seems to go up. This, in essence, is what happens. The price of every aspect of life goes up.

The Solution?

Those of us in international shipping and cargo transport try to keep in mind that, those we serve, are in turn serving a population that is continuing to feel the squeeze of “lowered margins” in their personal lives and on their financial balance sheets (which most Americans don’t have). But whether they know it or not, Americans’ disposable income is going down even now.

However, those who tabulate the official view of the economy tell us that currently we don’t have enough inflation, thus Q E 3 (Quantitative Easing #3, money printing) is on the way . Thus, creating one of the largest “bubbles” in history. You thought the “real-estate bubble” correction in 2008 was tough and the “tech bubble” correction of 2000 brought hardship – just wait for what awaits. If the entire economy is in a “currency bubble” – what does that correction look like? Stayed tuned for this and more in Part II.

cargo, international shipping, inflation, fuel

Key Takeaway– Be prepared for the continuing increase in the cost of living and the changes that may take place in your community. While everything in our daily lives seems to increase, the friendly staff at Universal Cargo Management tries to keep in mind that everyone needs to save every chance they can. Therefore, we always seek to provide competitive and the most cost-efficient rates to our customers.

For inquires or a rate quote on your shipment, please contact us

Dave Stover

dave@universalcargo.com

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The Eggie Files Episode 1 Online & the Premiere was a success! https://www.universalcargo.com/the-eggie-files-episode-1-online-the-premiere-was-a-success/ https://www.universalcargo.com/the-eggie-files-episode-1-online-the-premiere-was-a-success/#respond Tue, 15 Feb 2011 20:50:57 +0000 https://www.universalcargo.com/?p=7552 Here’s episode 1 of that show I’m in!  Neat stuff.  Be sure to send it to your friends! I had a lot of fun at the premiere party over the weekend.  There are no pictures of me, but a lot of pics of a Susan 🙂 People told me this one bald guy looks like […]

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Here’s episode 1 of that show I’m in!  Neat stuff.  Be sure to send it to your friends!

I had a lot of fun at the premiere party over the weekend.  There are no pictures of me, but a lot of pics of a Susan 🙂

People told me this one bald guy looks like me, but I don’t believe them.  I mean come on, he’s bald!

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U.S. Export Shipping Affected by International Regulatory Changes https://www.universalcargo.com/us-export-shipping-affected-by-international-regulatory-changes/ https://www.universalcargo.com/us-export-shipping-affected-by-international-regulatory-changes/#respond Tue, 15 Feb 2011 19:31:49 +0000 https://www.universalcargo.com/?p=7576 The National Institute of Standards and Technology (NIST) noted that the World Trade Organization (WTO) has been notified by many countries of proposed regulatory changes that may affect U.S. exports of the following products that are listed. Costa Rica – pesticides Mexico – aircraft, engines, propellers and fittings Oman – food grade salt Peru – […]

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The National Institute of Standards and Technology (NIST) noted that the World Trade Organization (WTO) has been notified by many countries of proposed regulatory changes that may affect U.S. exports of the following products that are listed.U.S. Export Shipping

  • Costa Rica – pesticides
  • Mexico – aircraft, engines, propellers and fittings
  • Oman – food grade salt
  • Peru – pharmaceutical products, medicine
  • Singapore – food
  • United Arab Emirates – motor vehicles

For complete and more detailed information on the regulatory changes for the countries listed or for other countries please visithttp://gsi.nist.gov/global/index.cfm.

If you are a U.S. exporting business concerned about whether this directly affects your business, please contact us and we will be sure to take care of all of your concerns.

More blogs on international shipping:

Import and Export Affected by Sovereign Debt Crisis

International Shipping Affectd by New Food Safety Law

Hong Ho

hong@universalcargo.com

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China Export Shipping Affected by Rare Earth Deficiencies https://www.universalcargo.com/china-export-shipping-affected-by-rare-earth-deficiencies/ https://www.universalcargo.com/china-export-shipping-affected-by-rare-earth-deficiencies/#respond Thu, 10 Feb 2011 23:53:09 +0000 https://www.universalcargo.com/?p=7447 What is a rare earth metal? Group of 17 atomic elements on the periodic table that includes the 15 lanthanoids plus scandium and yttrium. Why are they rare? Not actually rare since they are found in abundance all around the world. Considered rare because there are not many areas where they can be mined effectively. […]

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What is a rare earth metal?

  • Group of 17 atomic elements on the periodic table that includes the 15 lanthanoids plus scandium and yttrium.

Why are they rare?

  • Not actually rare since they are found in abundance all around the world.
  • Considered rare because there are not many areas where they can be mined effectively.

Why are they so important?

  • Key elements to the advancement of technology all around the world.
  • Key components to cell phones, hybrid car batteries, wind turbines, solar devices and even high-tech military equipment.
  • Electric and hybrid cars currently contains more than twice as much rare earth metals than a standard car.

China Export ShippingAlthough rare earths are essential to many “green” technologies, they can create toxic waste once separated from their other elements. These essential elements are now being cut from the world’s main source.

China currently controls 97% of the world’s production of rare earth metals. In late 2010, China cut the metal exports by 70% putting Japan, Europe, and the U.S. in distress. Although China serves as the main source of the rare earth metals, studies show that China holds only about 37% of the world’s estimated reserves. Image below shows the rare earth deposits around the world.

China Export Shipping

What is the world to do now that China has cut down the supply of the rare earth metals?

Countries are now forced to let go of their dependence on China and turn to other countries as their source. It’s not surprising that there are other countries that have large quantities of these rare metals. China just became the world’s largest producer because those countries shut down their own mines due to labor cost and environmental issues.

With the growing demand for advancing technology, the cut on the metal exports from China could in turn disrupt the progress of many businesses. However, since many countries are searching for alternative sources within their own land and in other countries, the effect may not be as detrimental as predicted.

So remember, expand your company’s reach throughout the world. It will not suffice to import from or export to one region anymore.  At any time a region, like China, may change its role in the inernational economy and you do not want to be left without options.  If you need help expanding to new regions or would like to reevaluate your current shipping situation, please feel free to contact us.

Check out our other blogs on rare earth metals:

China Reduces Rare Earths Export Quotas

Hong Ho

hong@universalcargo.com

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International Container Transport by a Solar-Powered Ship? https://www.universalcargo.com/international-container-transport-by-a-solar-powered-ship/ https://www.universalcargo.com/international-container-transport-by-a-solar-powered-ship/#respond Tue, 08 Feb 2011 17:45:58 +0000 https://www.universalcargo.com/?p=7407 Another world record will be created…The world’s largest solar-powered ship, Turanor PlanetSolar, has arrived on the Galapagos Islands (Santa Cruz and Puerto Ayora) off the coast of Ecuador on January 30, 2011. One of the goals of expedition is to show us the use of plentiful supply of solar and demonstrate that “the economy and […]

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International Container Transport

Another world record will be created…The world’s largest solar-powered ship, Turanor PlanetSolar, has arrived on the Galapagos Islands (Santa Cruz and Puerto Ayora) off the coast of Ecuador on January 30, 2011.

One of the goals of expedition is to show us the use of plentiful supply of solar and demonstrate that “the economy and ecology can and must work together.” It’s another green technology deployment demonstrating how future energy (solar) applies on ocean transportation. If such a small size of catamaran (TÛRANOR) can be free of using yesterday’s energy (oil), it’s definitely possible for our container shipping vessels to become hybrid, which combine solar and/or wind and low-sulfur fuel so as to reduce 30% of the current world’s nitrogen-oxide emissions.

Below is the planned route for the trip:

International Container Transport

Click on the link below to view the current location of the trip.

http://www.planetsolar.org/be-part-of-it/follow-the-boat.html

Check Out Some of Our Other Green Posts:

Shipping Containers Go Green

Carbon Emission and Carbon Footprint Calculation

Brian Chan

brian@universalcargo.com

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International Shipping Affected by New Food Safety Law https://www.universalcargo.com/international-shipping-affected-by-new-food-safety-law/ https://www.universalcargo.com/international-shipping-affected-by-new-food-safety-law/#respond Wed, 02 Feb 2011 17:50:39 +0000 https://www.universalcargo.com/?p=7456 Right before the new year began, President Obama signed a piece of legislation that will ultimately change the way many food companies do business in the states and internationally. This is the first time in nearly 70 years that changes have been made to the food system. The FDA Food Safety Modernization Act of 2010 […]

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International ShippingRight before the new year began, President Obama signed a piece of legislation that will ultimately change the way many food companies do business in the states and internationally. This is the first time in nearly 70 years that changes have been made to the food system. The FDA Food Safety Modernization Act of 2010 will require all food business to establish food safety plans that are in accordance with the Hazard Analysis & Critical Control Points (HAACP) system and comply with certification standards. This new law will also allow for the FDA to have more authority to issue direct recalls and increases in the frequency of inspections.

How imported food products will be affected by this new law:

    • Importers must confirm the safety of foreign suppliers and imported food. Those importers who do not have means of verifying the safety of the food products will be prohibited from importing the food products.
    • The FDA has the authority to require certification of safety for high-risked imports. The FDA also has the right to deny entry of food products that lack certification or that are from a foreign country who has refused United States inspection.
  • Prior notices filed with the FDA for imported food products must include the name of any country that refused entry of the food.

In addition to these changes, the new law will add 4,000 new inspectors with expanded authority for inspecting records and food facilities. It will also give the FDA new enforcement powers that will facilitate the agency’s ability to shut down facilities that do not abide by the new law through detention and suspension of registration.

Due to the increased security and enforcement of the new laws, many companies who import goods from overseas may have to plan well ahead in order to prevent any major complications and to recieve their food products in time.  Remember to pick trust worthy shippers with plenty of experience.

For more information on the FDA Food Safety Modernization Act, please visit:http://www.fda.gov/NewsEvents/PublicHealthFocus/ucm237934.htm

 

Hong Ho

hong@universalcargo.com

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China Reduces Rare Earths Export Quotas for 2011 https://www.universalcargo.com/china-reduces-rare-earths-export-quotas-for-2011/ https://www.universalcargo.com/china-reduces-rare-earths-export-quotas-for-2011/#respond Mon, 03 Jan 2011 20:04:10 +0000 https://www.universalcargo.com/?p=7507 China has announced that it will cut down the amount rare earth metals that it will export during the first half of 2011. The cut is estimated to be more than 10%. This decision could in turn affect many businesses across the globe since the rare metals play an essential part of the production of […]

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export, china, rare earth metals, minerals, trade, company, reduceChina has announced that it will cut down the amount rare earth metals that it will export during the first half of 2011. The cut is estimated to be more than 10%. This decision could in turn affect many businesses across the globe since the rare metals play an essential part of the production of many high-tech products. China currently produces 97% of the world’s overall production of rare earths which are key components to devices such as cell phones, computer drives, and hybrid cars.

The projected numbers of rare metals that China will allocate to companies in the first half of the new year are lower than the numbers from the first half of the year in 2010. It is estimated that metal exports of 16,304 tons among 22 companies in the first half of 2010 will be cut down to 14,446 tons among 31 companies in the first half of 2011.

Many countries are shocked at China’s announcement and have been forced to search for alternative sources for the rare earth metals. Some companies such as Molycorp, Inc. in the United States and Thompson Creek Metals Company in Canada have gone as far as considering opening or reopening rare earth mines.

We are really unsure of the main reason that China has decided to do this. Some sources say that China has started to reduce their export quota over the years to cope with the increasing demand for the metals back at home. While others say that China is cutting down on the exports due to environmental concerns. Whatever the reason may be, many companies will be hugely affected by this reduction since China has been their major source for these metals.

Hong Ho

hong@universalcargo.com

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Mid-Year Report Shows Interesting Facts on Import Trade in 2010 https://www.universalcargo.com/mid-year-report-shows-interesting-facts-on-import-trade-in-2010/ https://www.universalcargo.com/mid-year-report-shows-interesting-facts-on-import-trade-in-2010/#respond Wed, 15 Dec 2010 22:25:25 +0000 https://www.universalcargo.com/?p=7619 The U.S. Customs and Border Protection’s Import Trade Trends Mid-Year Report for 2010 may show some evidence that the economy is taking a turn to the bright side. Signs of recovery: 13 million import entries were already filed to be imported into the U.S. by June. 27 million entries, totaling an import value of $1.8 […]

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The U.S. Customs and Border Protection’s Import Trade Trends Mid-Year Report for 2010 may show some evidence that the economy is taking a turn to the bright side.

Signs of recovery:

  • 13 million import entries were already filed to be imported into the U.S. by June.
  • 27 million entries, totaling an import value of $1.8 trillion, are expected to be filed by the end of 2010- a 6 % increase from 2009
  • Import volume and values of mid-year 2010 have increased to levels that were last seen in 2006.
  • Expected for these levels to further rise and reach levels of 2007 by the end of 2010.

Value of imports into the United states

percent of value by mode of transportationpercent of entries by mode of transportation

Other important findings:

  • China exceeded Canada as the U.S.’s top source of imports.

import value by country

  • 29% of imported goods are subjected to tariffs.
  • 8 million containers that are received at the nation’s ports can fill 300,000 football fields; only accounts for 25% of the trade volume that comes into the U.S.
  • $13 million in duties were collected to prevent imported goods from being sold at an unfairly low price and to level the field for American companies.

antidumping duties collected by country

  • Common target items Customs and Border Protection will screen and examine:

-Contaminated food

-Harmful and counterfeit goods

-Pharmaceuticals

-Personal hygiene products

-Cleaning agents

-Fake fragrances (more information in upcoming blog)

These highlights of the report show the recent changes in import trade over the past few months of 2010. There are signs that the economy is making a slight recovery; however, whether or not the economy can make a full recovery can only be seen in the reports of the upcoming years.

For more information on U.S. Customs and Border Protection’s Import Trade Trends Mid-Year Report of 2010, please visit http://www.cbp.gov/xp/cgov/trade/trade_programs/trade_trends/.

 

Hong Ho

hong@universalcargo.com

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Import / Export Effects on the Economy with a Deeper Savannah Port https://www.universalcargo.com/import-export-effects-on-the-economy-with-a-deeper-savannah-port/ https://www.universalcargo.com/import-export-effects-on-the-economy-with-a-deeper-savannah-port/#respond Wed, 08 Dec 2010 20:52:57 +0000 https://www.universalcargo.com/?p=7435 Global trade has been one of the major factors that have helped Georgia’s economy during the recent years of economic downfall. However, this recovery could stall if the port of Savannah is not deepened to handle larger container ships of the future. Since Savannah is Georgia’s main gateway to import and export trading, the plans […]

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Global trade has been one of the major factors that have helped Georgia’s economy during the recent years of economic downfall. However, this recovery could stall if the port of Savannah is not deepened to handle larger container ships of the future. Since Savannah is Georgia’s main gateway to import and export trading, the plans to deepen the Savannah River may be necessary if Georgia wants its economy to fully recover from the recession.

http://www.georgiaencyclopedia.org/nge/Multimedia.jsp?id=m-10308The Port of Savannah currently stands as the nation’s fourth largest container port and accounts for 129,000 full and part time jobs statewide and contributes $15.5 billion in personal income. Additionally, the port heavily contributes to the economy of Georgia’s capital, Atlanta. An estimated $8 billion in cargo from the Port of Savannah is transported across the 28-county metro Atlanta region during the last year. It is obvious that Savannah plays a crucial part in the state’s economy.

Deepening the Savannah River from what is now 42 feet to 48 feet would enable the Port of Savannah to handle the estimated 25% increase of East Coast shipments from the expansion of the Panama Canal, which is expected to finish in 2015. The project to deepen the river is estimated to cost Georgia and federal taxpayers approximately $551 million and expected to begin by 2012. In addition to the financial cost of this project, there are also concerns about the affect that it has on the environment. Environmentalists are worried that this project will harm the area’s drinking water and wild life such as endangered sturgeon and striped bass. Fear of decline in businesses has also surfaced in the port officials of South Carolina. They’re afraid that once Savannah deepens their port, they will soak up most of the East Coast competition.

Aside from all the concerns, this project will bring a large of amount of business that is needed for the recovery of Georgia’s economy. A deeper Savannah port is predicted to double the amount of cargo that it can handle by 2020. It is also expected to bring in $100 million to add to the economy. Although there are concerns of the negative effects of this project, the positive impacts that it could have on the cargo shipping industry outweighs the negative impacts. Not only will this project allow for more traffic into Savannah, it could potentially save Georgia from the economic decline that it has suffered over the years.

 

Hong Ho

hong@universalcargo.com

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Import and Export Affected by Sovereign Debt Crisis https://www.universalcargo.com/import-and-export-affected-by-sovereign-debt-crisis/ https://www.universalcargo.com/import-and-export-affected-by-sovereign-debt-crisis/#respond Mon, 06 Dec 2010 22:42:28 +0000 https://www.universalcargo.com/?p=7436 Greece had an issue spending too much money on salaries and austerity benefits. This pressed the country to the brink of Receivership. Not such a thing for Sovereigns- but all of Europe was shaken given the weak balance sheet of so many European Countries that are in not to dissimilar standing – so the EU […]

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Bankruptcy Risk affect shippingGreece had an issue spending too much money on salaries and austerity benefits. This pressed the country to the brink of Receivership. Not such a thing for Sovereigns- but all of Europe was shaken given the weak balance sheet of so many European Countries that are in not to dissimilar standing – so the EU organized a Loan package/Bail-out stemming the feared “Domino Affect”  threatened by the near Greek Tragedy.

Once the provisions were in place, labor unions carried on their strikes and riots weakening the tourism sector, one of the largest planks of their shaky economy, and source of tax revenue.  Smart – yes?

Fast forward 6 months. Ireland’s banks are all but insolvent. Why? Real-estate dropped in value so much last year that the balance sheets of homeowners and Banks alike were nearly wiped clean. People saw the weakness in the banks and began with drawing their deposits from those banks holding liabilities for assets – devalued real-estate – which brought them to now – an insolvent Banking System.

The true issue is how this affects the UK. The Brits have lost so much of their investment value made in Ireland – that with out an EU bail-out/loan deal for Ireland – this crisis puts pressure on the UK Banking System, even to the point potentially collapsing the banking system in the UK. The fear, that soon to fallow – the collapse of all of Europe’s banking system.

This sound somewhat failure?  A slightly different version of what happened in the US not long ago.

Portugal:  Next on the radar. Debt as fare as they can see due to over paying public employees (click over here to know what is the best iva advice to tackle this sitaution) – the country a victim of “Collective Bargaining” – Labor unions. Portugal real-estate has also dropped in value. Spain has heavy investments in Portugal, so there fate is dragging Spain down threatening to expose weak fundamentals on which the Spanish economy and Government now sits.  “Green” economy currently boasting 14-20% unemployment.  If Portugal does not receive needed help from the EU it too may pull down Spain and this too threatens all of the European Banking System.

Bankruptcy Risk for International Importers and Exporters

Why is this an issue?  As an importer/exporter the ramifications are multitudinous. But we will look at only one.

The US monetary policy is and has been over the last 2 years, to inflate our way out of our version of this type of crisis.  Pump untold Trillions into the economy by printing money wholesale out of thin air.  This drives inflation – devaluing our currency -making our products cheaper for other countries to buy.  This is just one aspect of devaluing a nations currency – and the hope of the Obama administration is that this will spur the US economy into higher levels of growth.

This may work up to a point. But, Europe, the world’s second largest market, has no money to buy our goods on the scale the administration is hoping for.  The IMF (International Monetary Fund) is so tied up with helping the EU that it limits “investment” resources for Africa.  So Africa will not be a huge boon to exporters looking for sustainable growth.

So the markets where US companies can focus, in large measure on exports, are going to be South America and China. Even though China is reeling under inflationary pressures, there are many goods that the Chinese love, exposing an insatiable appetite for those newly cherished things.

South America has pockets of growth that need goods and services imported in a much grandeur scale than they have ever needed previously.  This in part due to all the Americans now traveling to and even relocating in South America, particularly, Costa Rica, Panama, Chile, and Argentina.

So – one looking to export might consider probing those markets and asking: “What can I supply in those markets, cost effectively – right now?”

Given the trends, this question, and faithful follow-through you may never have to face you own “sovereign debt crisis”.

Dave Stover

dave@universalcargo.com

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Top Container Carriers of 2010 https://www.universalcargo.com/top-container-carriers-of-2010/ https://www.universalcargo.com/top-container-carriers-of-2010/#respond Thu, 02 Dec 2010 23:18:25 +0000 https://www.universalcargo.com/?p=7339 Mediterranean Shipping Company (MSC) rises above Maersk Line and serves as number 1 in export volumes in the U.S. On the other hand, the standing for the number 1 spot in the U.S. for import volumes still belongs to Maersk Line. Other top container carriers such as APL, Hanjin, and Hapag-Lloyd continue to grow in […]

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Mediterranean Shipping Company (MSC) rises above Maersk Line and serves as number 1 in export volumes in the U.S. On the other hand, the standing for the number 1 spot in the U.S. for import volumes still belongs to Maersk Line.

Other top container carriers such as APL, Hanjin, and Hapag-Lloyd continue to grow in their market shares that have lead them to higher rankings in 2010. Hainan PO Shipping, a fairly new carrier that operates mainly between China and Southern California, has joined the ranking of U.S. top container carriers as number 40.

Shipping Growth in 2010:

  • U.S. import and export volume carried by the top ocean carriers have increased a total of 12.2%
  • Total exports increased by 8%
  • Total imports increased by 15.3%
  • MSC’s export market share increased to 11.8%
  • Maersk Line import volumes increased by 6.5%
  • Top carriers moved 98.2% of U.S.’s 8.6 million TEUs of containerized exports
  • Top carriers moved 99% of 12.4 million TEUs of containerized imports

For more information on the ranking for U.S.’s top container carriers, please visithttp://www.joc.com/maritime/back-brink.

Compared to the ranking for the world’s top container carriers, Maersk Line still stands at number 1 with market share of 14.5% and total TEU capacity of over 2 million.

container, carriers, import, export, 2010

Below is a visual representation of the top ten container carriers of the world by TEU capacity. Again, in comparison to the other companies, Maersk Line remains in the lead with the largest TEU capacity.

container carries, shipping, imports, exports, 2010, Maersk, MSC

 

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2010 Incoterms Update, This One Goes To 11 https://www.universalcargo.com/2010-incoterms-update-this-one-goes-to-11/ https://www.universalcargo.com/2010-incoterms-update-this-one-goes-to-11/#respond Tue, 23 Nov 2010 17:19:48 +0000 https://www.universalcargo.com/?p=7366 In September, the International Chamber of Commerce (ICC) released its publication of Incoterms 2010.  Short for International Commercial Terms, Incoterms are a series of internationally recognized standardized trade terms published by the ICC.  These terms help to clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers. Incoterms also help […]

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IncoTerm 2010In September, the International Chamber of Commerce (ICC) released its publication of Incoterms 2010.  Short for International Commercial Terms, Incoterms are a series of internationally recognized standardized trade terms published by the ICC.  These terms help to clarifying the tasks, costs and risks involved in the delivery of goods from sellers to buyers. Incoterms also help to define the responsibilities of the buyer and sell and clearly define which party carries the risk during the exchange of goods.

The ICC regularly monitors the list of Incoterms and publishes updates every about every ten years to ensure that the terms accurately reflect current business practices. The previous list of terms was published in 2000 and this latest update will go into effect on Jan. 1, 2011.  Staying up to date on the current list of incoterms is important to avoid costly misunderstandings when entering into international trade contracts.

In case you haven’t learned the previous group of Incoterms, your in luck, one of the most noticeable changes is that the list of terms has been lowered to 11 from 13. The 2000 Incoterms DAF, DES, DEQ, and DDU  have been eliminated and have been replaced by two new terms, Delivered at Terminal (DAT) and Delivered at Place (DAP).

Additionally, instead grouping the terms into four classes, the 2010 Incoterms will be separated into 2 groups: those applicable to all modes of transport and those only applicable to sea and inland waterway transport.

Here is the list of 2010 Incoterms:

Incoterms 2010 applicable for all modes of transport:

  • EXW : ex works
  • FCA : free carrier
  • CPT : carriage paid to
  • CIP : carriage and insurance paid to
  • DDP : delivered duty paid
  • DAT : delivered at terminal – NEW!
  • DAP : delivered at place – NEW!

Incoterms 2010 only applicable for sea and inland waterway transport:

  • FAS : free alongside ship
  • FOB : free on board
  • CFR : cost and freight
  • CIF : cost, insurance and freight

Additional updates include new provisions related to cargo security. The previous list was released before 9/11 and the increased security messages placed on international trade since then. The 2010 Intoterms doesn’t outline specific measures that buyer and sellers must take in regards to security. Instead it speaks in broad terms about the need for all involved parties to clearly define responsibility. In a corollary to the new security provisions the Incoterms 2010 also stresses the importance of insurance and that buyers and sellers need to clearly define insurance issues in their contracts as well.

To find out all the details about the changes you can get a copy of the official Incoterms 2010 book which is available at www.iccincoterms2010.org. The ICC is also hosting a series of seminars in cities across the US discussing the incoterms and new provision in detail.

 

Carrie Brown

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Missle System Hidden Inside a Cargo Shipping Container https://www.universalcargo.com/missle-system-hidden-inside-a-cargo-shipping-container/ https://www.universalcargo.com/missle-system-hidden-inside-a-cargo-shipping-container/#respond Mon, 22 Nov 2010 22:45:48 +0000 https://www.universalcargo.com/?p=7626 A Russian weapons company, Morinformsistema-Agat, is marketing a cruise missile system that is hidden inside an ordinary 40’ cargo shipping container and can be launched from inside the container itself. The Club K Missile system is able to “fire four long range satellite-guided missiles from a ship, train or tractor-trailer.” It has the ability to […]

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http://img.ibtimes.com/www/data/images/full/2010/04/26/6974-club-k.jpgA Russian weapons company, Morinformsistema-Agat, is marketing a cruise missile system that is hidden inside an ordinary 40’ cargo shipping container and can be launched from inside the container itself. The Club K Missile system is able to “fire four long range satellite-guided missiles from a ship, train or tractor-trailer.” It has the ability to demolish an aircraft carrier as far as 200 miles away. Currently, the Club K Missile system is said to be marketed internationally only as a military weapon, but it is likely that they will be willing to sell to whomever is financially apt to purchase this $10 million weapon.

Concerns arise as WSBTV’s news anchor Justin Farmer further investigates and finds that officials at the Port of Savannah is unaware of this missile system. The Port of Savannah  is “United States’ fourth-largest container port” transporting over three million containers each year. Ideally, each container is monitored and scanned by U.S. Customs and Border Protection  at the Port of Savannah before moving inland. However, even with the latest x-ray technology, not 100% of all cargo is being scanned. While each truck is inspected for radiation before it leaves the port, it is possible that the Club K Missile contains conventional substances that may or may not trigger the detectors. The officials at the Port of Savannah concludes by ensuring that this new missile would not be overlooked during the inspection process and the systems that are employed at the port would most definitely detect such cargo passing through.

It is certainly a threat to our country if such massive weaponry can be hidden in a container that is meant to ship ordinary cargo. This disguise allows for a vast amount of ways in which the cruise missiles can be used. It can transform any ordinary 40’ cargo container into a missile boat and can easily destroy an aircraft carrier. Or it can be taken inland and be fired from within the nation’s defense system. This advanced missile system could potentially put the nation at risk. After various encounters with terrorism and how it has affected national security over the years, careful measures should be taken and strict regulations should be permanently enforced to ensure safety. If additional safety procedures are not taken to carefully scan and inspect all cargo entering the states, then our country will be in a great amount of danger in the future.

 

Hong Ho

hong@universalcargo.com

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Fair Winds Charter: Maersk & a Dozen Follow to Use Low-sulphur Fuel in Hong Kong https://www.universalcargo.com/fair-winds-charter-maersk-a-dozen-follow-to-use-low-sulphur-fuel-in-hong-kong/ https://www.universalcargo.com/fair-winds-charter-maersk-a-dozen-follow-to-use-low-sulphur-fuel-in-hong-kong/#respond Sun, 07 Nov 2010 21:42:26 +0000 https://www.universalcargo.com/?p=7471 Denmark-based AP Moeller-Maersk A/S, the world’s largest shipping company, takes a voluntary initiative to switch to low-sulphur fuel when at berth in Hong Kong, starting from this early September.<br Last month, a dozen more shipping companies (APL, Evergreen, CMA CGM, Hamburg Sud, Alianca, Hapag-Lloyd, Hanjin, Hyundai, MOL, NYK Line, OOCL, and Yang Ming) also agreed […]

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Kwai Chung Port resized 600

Denmark-based AP Moeller-Maersk A/S, the world’s largest shipping company, takes a voluntary initiative to switch to low-sulphur fuel when at berth in Hong Kong, starting from this early September.<br

Last month, a dozen more shipping companies (APL, Evergreen, CMA CGM, Hamburg Sud, Alianca, Hapag-Lloyd, Hanjin, Hyundai, MOL, NYK Line, OOCL, and Yang Ming) also agreed to join cleaner fuel campaign under Fair Wind Charter, which aims to:

  • “Switching to a fuel containing 0.50% sulphur content or less (“low sulphur fuel”) while at berth (at the terminal or at anchorage) in Hong Kong, to the maximum extent possible;”
  • “Undertaking this voluntary initiative between 1 January 2011 to 31 December 2012;”
  • “Collaborating within our sector and with the Hong Kong SAR and Guangdong Governments to introduce regulation on emissions from ships consistent with international standards.”

A Hong Kong TV station reports (below) how air pollution from vessels emission affects residents living near the ports and solutions to lower sulphur emission.

I believe engaging trade and protecting environment are indispensable under the fast-pace 21st century.

Without trade, our human living standard will regress.

Without decent living environment, we have no way to engage sustainable trading in the long run.

We, as earth citizens, are obligated to enjoy and protect our environment as we have only 1 planet earth.

Brian Chan

brian@universalcargo.com

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Shipping Container Shortage Pushing Up Prices https://www.universalcargo.com/shipping-container-shortage-pushing-up-prices/ https://www.universalcargo.com/shipping-container-shortage-pushing-up-prices/#respond Thu, 19 Aug 2010 22:20:53 +0000 https://www.universalcargo.com/?p=7349 Freight shipping volume has been picking up in 2010 and while that is great news for the world economy it has caused an unexpected shortage of containers. According to the July cover article in American Shipper, this shortage in shipping containers is being sited as one of the main causes for the rise in freight rates […]

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Freight shipping volume has been picking up in 2010 and while that is great news for the world economy it has caused an unexpected shortage of containers. According to the July cover article in American Shipper, this shortage in shipping containers is being sited as one of the main causes for the rise in freight rates and has led to difficulty in moving product to buyers. Many shippers have complained about signing contacts with shipping lines only to have rates rise the following week or to be denied space completely. The average price for a 20ft shipping container has grown from about $2,000 to $2,700.

One of the major reasons for the container shortage was the drop in production of new shipping containers in 2008 and 2009.  From 2004 through 2008, TEU supply grew by an average of 8% per year. Once the world recession hit, trade dropped dramatically and so did demand for shipping containers. There was a 95% reduction in shipping container production in 2008 and almost no containers were built in 2009. In response to the drop in demand many of the factories that build the containers, mostly based in China, were forced to shut down. Now with the increased demand for there is a reduced capacity for factories to produce new containers. Some estimate that it will be until 2011 before production will be able to catch up with demand.

While this shortage is bad for manufactures and ultimately consumers, container-leasing companies are appearing to benefit in the short run from this problem. Stocks of publicly traded container-leasing companies have reached 52-week highs this spring and summer. Additionally many leasing companies are taking the opportunity to increase their share of containers. Historically, liner carriers have owned about 55% of the world shipping containers with leasing companies owning the remained 45%. However, recently leasing companies have been responsible for 65-70% of the new container purchases. Leasing companies are also purchasing containers from the shipping lines who are in need of building up there cash reserve.

This shortage in shipping containers due to worldwide demand is a very good sigh of  economic expansion however many shipper are hoping that container product will soon catch up to demand.

Source: Boxed-Out, American Shipper

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Shipping Containers Go Green https://www.universalcargo.com/shipping-containers-go-green/ https://www.universalcargo.com/shipping-containers-go-green/#respond Wed, 28 Jul 2010 23:37:35 +0000 https://www.universalcargo.com/?p=7364 Worried about the environmental impact of your ocean shipping containers? An article in the June 2010 issue of America Shipper details a variety of companies that are taking on the challenge of finding ways to make ocean cargo shipping containers more eco-friendly without too much impact on shipping container cost. The international cargo shipping business […]

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Shipping ContainerWorried about the environmental impact of your ocean shipping containers? An article in the June 2010 issue of America Shipper details a variety of companies that are taking on the challenge of finding ways to make ocean cargo shipping containers more eco-friendly without too much impact on shipping container cost. The international cargo shipping business lives of thin profit margins and cost is a major factor for containers. Methods that being explored for the 20′ and 40′ containers include changing the wood used in the container floors, changing to a water-based exterior paints and switching to high tensile steel in box construction.

Shipping containers have traditionally used all wood flooring. In many cases this wood is harvested illegally in Asia. A reduction in illegal harvesting has resulted in greater demand and limited availability. Since 2007, IICL’s Flooring Working Group has been exploring different materials to use for the floor of the shipping containers that would not have as negative an impact as the wood. After a variety of tests with various materials the group found that a mixture of wood and steel was a good compromise. These new boxes are currently being tested and the IICL plans to review the results from the test in October. Initial results are looking  positive. Other groups including CMA CGM have been purchasing containers with bamboo flooring.

The solvent based paint used on most shipping containers is another factor that has a negative impact on the environment due to its adverse effects on the earth’s ozone layer. The challenge here is that most water-based paints require temperature and humidity controls for drying.  Container manufacturing is done mainly in China and manufactures there rely on the quick-drying heavy solvent-based paints which can dry within 24 hours.

Triton Container International together with Valspar have been working on developing low solvent, non-zinc, water-based paint that can be used for ocean containers. Additionally, Triton has also began testing 40 HQ containers made from high tensile steel.  These containers are 11 percent lighter than comparable steel containers in the market. Having lighter boxes will help to reduce the amount of fuel needed during transport.

Whether these new boxes take off or not depends largely on the container purchasers. However demand from shippers for more eco-friendly shipping containers could have a big impact. You can check out more aboutgreener shipping containers and shipping practices on the The Green Logistician.

Source: Greener Boxes, American Shipper

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Business Travel Language Tips for Asia https://www.universalcargo.com/business-travel-language-tips-for-asia/ https://www.universalcargo.com/business-travel-language-tips-for-asia/#respond Fri, 23 Jul 2010 21:16:07 +0000 https://www.universalcargo.com/?p=7748 Devin Burke, CEO of Universal Cargo Management, Inc. shares pragmatic advice on language and culture in this “how to” series for Business Travelers. More videos in this series can be found on the Learning Center page. Language Tips for Asia Lesson #1 Language Tips for Asia Lesson #2

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Devin Burke, CEO of Universal Cargo Management, Inc. shares pragmatic advice on language and culture in this “how to” series for Business Travelers. More videos in this series can be found on the Learning Center page.

Language Tips for Asia Lesson #1


Language Tips for Asia Lesson #2

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Shipping Container Imports to US Ports Up 16% in July https://www.universalcargo.com/shipping-container-imports-to-us-ports-up-16-in-july/ https://www.universalcargo.com/shipping-container-imports-to-us-ports-up-16-in-july/#respond Wed, 21 Jul 2010 20:13:44 +0000 https://www.universalcargo.com/?p=7461 Global Port tracker is predicting a 16% year-to-year rise in shipping container imports to the 10 busiest ports in the US. This comes after a 20% and 22% increase in year over year growth seen in May and June respectivly. Positive growth has been seen in each month since December 2009, which marked the end […]

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Global Port tracker is predicting a 16% year-to-year rise in shipping container imports to the 10 busiest ports in the US. This comes after a 20% and 22% increase in year over year growth seen in May and June respectivly. Positive growth has been seen in each month since December 2009, which marked the end of a 28-month streak of declines.

However, this positive trend isn’t expected to continue through fall. “The latest economic indicators are starting to look bleak, including consumer confidence, industrial production and employment numbers,” said Ben Hackett, founder of Hackett Associates, which produces the Global Port Tracker. “Sales will be slower in July and August; that much is certain. Inventories will rise, resulting in some sharp seasonal volume reductions.”

This table shows the Container Imports to the 10 busiest ports in the US for May 2010 and predictions for July through November. October, which is usually a high-volume month of the year as retailers stock up for the upcoming holidays, is only predicted to show a 3% increase from 2009 and November only a 4% increase.

Month  Container Imports (TEUs)
  % YOY Increase
  May-10   1.25 Million   20%
Jun-10   1.24 Million   22%
Jul-10   1.29 Million   16%
 Aug-10   1.26 Million   9%
 Sep-10   1.29 Million   13%
Oct-10   1.24 Million   4%
Nov-10   1.13 Million   3%

Global Port Tracker data covers the ports of Long Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Hampton Roads, Charleston and Savannah on the East Coast, and Houston on the Gulf Coast.

Source: Hellenic Shipping News

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Is it the end of the cheap made-in-China era? https://www.universalcargo.com/is-it-the-end-of-the-cheap-made-in-china-era/ https://www.universalcargo.com/is-it-the-end-of-the-cheap-made-in-china-era/#respond Fri, 09 Jul 2010 23:56:03 +0000 https://www.universalcargo.com/?p=7539 Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government in China is also pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology. In response, […]

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Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government in China is also pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology.

walmart bikes

In response, many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and some are even resuming production in the West. Some companies have moved production to other countries in the region such as Vietnam, Indonesia or Cambodia. However these countries lack the huge work force, infrastructure and markets China can offer, and most face the same labor issues as China.

These areas also lack the intricate supply chains and logistics systems that have helped make southern China an export manufacturing powerhouse.  For manufacturers still looking to boost sales inside China, shifting production to the inland areas where many migrant workers come from, and costs are lower, offers the most realistic alternative.

Check out the full article on Yahoo! News: Companies Brace for End of Cheap Made-in-China Era

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West Coast Shipping Container Volume Grew 14%! https://www.universalcargo.com/west-coast-shipping-container-volume-grew-14/ https://www.universalcargo.com/west-coast-shipping-container-volume-grew-14/#respond Fri, 09 Jul 2010 20:37:40 +0000 https://www.universalcargo.com/?p=7432 Container volume moving through West Coast ports increased 14 percent in the first five months of the year. Growth was relatively balanced between imports and exports and across the regional gateways Statistics published on the Web site of the Pacific Maritime Association also showed that, except for a slight dip in February, container volume increased […]

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Container volume moving through West Coast ports increased 14 percent in the first five months of the year. Growth was relatively balanced between imports and exports and across the regional gateways Statistics published on the Web site of the Pacific Maritime Association also showed that, except for a slight dip in February, container volume increased steadily from month to month.

The figures for the ports of Seattle, Tacoma, Portland, Oakland, Los Angeles and Long Beach are a good barometer of the U.S. container trade because West Coast ports account for roughly 50 percent of the nation’s container trade.

Containerized imports increased 14 percent during the first five months of the year, with April and May showing the largest increase in loaded inbound containers.

Exports were up 13 percent, with March being the busiest month of the year so far. Exports normally enter a seasonal lull in the summer months but rebound strongly in the fall along with the agricultural harvest.

Los Angeles-Long Beach led the coast with a 15 percent increase in total container volume. The Seattle-Tacoma gateway was up 13 percent.

Container volume through Oakland increased 9 percent through May. Unlike the Pacific Northwest and Southern California gateways, exports make up a larger percentage of Oakland’s volume than imports. Since U.S. exports last year did not drop as steeply as imports, Oakland’s total volume did not drop as much as the rest of the coast, and therefore its rebound this year was not as dramatic as in the other gateways.

Portland was the only gateway to record a drop in container volume. Portland’s container volume declined 17 percent compared to the first five months of 2009.
With the economy sending out mixed signals, ports anticipate slower growth in the second half of the year. Some industry analysts, however, continue to project double-digit growth for the year.

The shortage of vessel space appears to be easing as carriers have brought back most of the services they suspended during the winter months. Container availability, however, is still tight, especially in Asia.

Retailers are preparing for a healthy peak shipping season and exporters anticipate strong sales to Asia as the dollar remains weak against some of the currencies there.

Source: Hellenic Shipping News

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5 Tips for 1st Time Cargo and Container Shipping Exporters https://www.universalcargo.com/5-tips-for-1st-time-cargo-and-container-shipping-exporters/ https://www.universalcargo.com/5-tips-for-1st-time-cargo-and-container-shipping-exporters/#comments Tue, 08 Jun 2010 18:20:51 +0000 https://www.universalcargo.com/?p=7375 Tip #1: Save container transport cost by preparing to load your container in less less than 2 hrs. When the driver shows up to your site, the first 2 hours are included in your fees. We recommend staffing up and preparing in advance to load the container as quickly as possible to avoid overtime charges. […]

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Tip #1: Save container transport cost by preparing to load your container in less less than 2 hrs.

When the driver shows up to your site, the first 2 hours are included in your fees. We recommend staffing up and preparing in advance to load the container as quickly as possible to avoid overtime charges.

Tip #2: Prepare Shipping Container Contents for Extremes

Containers are subject to extreme conditions. There are wild swings in temperature and humidity inside the container – they go througth the Panama Canal and sometimes around the Cape. Containers are subjected to triple digit heat and humidity to sub-zero temperatures while in storage or in transport.

Tip #3: Carefully Declare ANY Organic Cargo

Plants, Edible Plants, Vegetables and Fruit are all treated differently depending on the origin and destination of the shipment. If customs finds any undeclared organic cargo, the can quarantine your container and charge you daily holding fees.

Tip #4: Properly Insure Your Cargo 

Plan for “attrition”. All of the contents don’t always make it all of the time.
There will be some “attrition” – containers get inspected, sometimes by unscrupulous dock/deck hands…this isn’t REALLY considered stealing, as the items in transit, technically are the property of the shipping company.

Tip #5: Understand that Freight Forwarding both an art and a science.

Many companies and handlers are involved in moving your container, here are just a few possible examples: Trucking company(ies) outbound (your door to the port of origin or train yard), Crane Operations transferring container from truck to train, and train to ship. that’s just to get the container to the ship, then the reverse happens on the other side…it’s a REALLY rough ride, even in good weather.

Why Universal Cargo Management, Inc.

By contracting with Universal Cargo Management, Inc. you directly benefit from the relationships and reputation for integrity that we have developed trusted relationships with our international shipping, air freight, ocean freight, and logistics service providers over the past 25-years. You benefit from our experience in keeping the freight forwarding process efficient an effective because we know the ropes as well, if not better than anyone.

Tips for Business Travel To Asia

YouTube Video

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Making sense of ocean freight and air freight rate fluctuations https://www.universalcargo.com/making-sense-of-ocean-freight-and-air-freight-rate-fluctuations/ https://www.universalcargo.com/making-sense-of-ocean-freight-and-air-freight-rate-fluctuations/#respond Fri, 04 Jun 2010 23:29:24 +0000 https://www.universalcargo.com/?p=7361 In trying to make sense of recent sea freight and air cargo rate fluctuations, we’ve gathered information from several sources and made the following observations:1) Rates are going up and staying up, not down2) Space will be an issue probably all year3) Expect “new” surchargesIN SHORT: We’re all paying for that great 12 months we […]

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In trying to make sense of recent sea freight and air cargo rate fluctuations, we’ve gathered information from several sources and made the following observations:1) Rates are going up and staying up, not down2) Space will be an issue probably all year3) Expect “new” surchargesIN SHORT: We’re all paying for that great 12 months we all had with the lowest freight rates in History between Oct ’08 through Sep ’09.

Here’s a rate chart showing what we’re seeing (as of 29-May-2010) at Universal Cargo Management, Inc.   

CARRIER EFFECTIVE DATE 2010 PSS Remark
APL 2010.8.1 320 400 450 505 from China to USA (except Puerto Rico and Virgin Islands)
CMA 2010.6.15 320 400 450 510 from Asia to USA/Canada (East & West Coast, IPI, MLB) – cargo receipt date at origin
Cosco 2010.6.15 320 400 450 506 from Far East and Indian Sub-Continent to USA/Canada
CSAV 2010.6.15 320 400 450   from Asia to USA
CSCL 2010.6.1 ~ 2010.11.30 320 400 450 505 from Far East, Middle East and Indian Subcontinent countries/areas to USA
EMC 2010.6.15 320 400 450 506 from Far East (except India)/S.Africa to USA/Canada
2010.6.15 360 450 506 570 from India to USA/Canada
Hapag 2010.6.28 320 400 450 510 from Asia and Indian Sub-Continent to USA/Canada, except India – date of cargo receipt at origin
2010.6.28 300 375 425 n/a from India to USA/Canada – date of cargo receipt at origin
Maersk 2010.6.15 320 400 450 510 from Far East Asia to USA/Canada (Transpacific Eastbound)
Matson 2010.6.16 320 400 450 506 Transpacific Eastbound (excluding Hawaii, Guam)
MOL (PSC) 2010.6.15 ~ 2011.3.31 400 500 565 635 from Asia to USA/Canada
MSC 2010.6.15 320 400 450   to USEC and US intermodal points via USEC
2010.6.15 400 500 563   to USWC and US intermodal points via USWC
OOCL 2010.6.15 ~ 2010.11.30 320 400 450 505 to USA/Canada – base on cargo receiving date
Wanhai 2010.6.15 ~ 2010.11.30 320 400 450 510 to USWC

 

BOTTOM LINE: At Universal Cargo Management, Inc., we advise our clients to make reservations early if possible and structure your contracts carefully making certain that all fees are clearly declared in order to prevent unpleasant surprises.

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