The U.S. and Korean Trade Agreement Initiative

The U.S. Senate Foreign Relations Committee Chairman, John Kerry (D-MA), and a Ranking Member of the committee, Dick Lugar (R-IN), called for the timely resolution of outstanding issues related to the U.S.-South Korean trade agreement.  In a committee meeting in May, senators Kerry and Lugar argued that it is in the best economic and strategic interest of the United States to strengthen ties with it’s allies. 

“The United States should work with South Korea to resolve legitimate concerns and quickly approve the U.S.-Korea Free Trade Agreement.  This step could be a significant part of the President’s goal of doubling U.S. exports over the next five years to create well-paying American jobs,” said Chairman Kerry.  “South Korea ranks among our very closest allies and partners. When Seoul hosts the G-20 meeting this November, I hope the United States can point to substantial progress on KORUS as part of a broader U.S. engagement with the Asia-Pacific region.”

Lugar adds “Improving trade is critical to meeting our economic and diplomatic challenges around the globe. South Korea is an important country and economy. Approval of this agreement will lead to greater opportunities”. Senator Lugar has been a long-time advocate of the US-Korea Free Trade Agreement.

Europe’s Version of the “10+2” Rule Poses Questions for Shippers

The European Union’s (EU) Import Control System (ICS) is mandating that shipment information as in the “10+2 Rule” be communicated to Customs in advance of a shipment.  This process is shaking up import compliance in a scenario familiar to U.S. consignees.  Similar to the “U.S. Importer Security Filing 10+2 Rule”, the ICS aims to deliver critical data to authorities before a shipment reaches the EU to better assess risks.

The EU regulation becomes effective Jan 1, 2011 and will place the burden of compliance on carriers.  Importers and exporters will have to provide the timely and accurate information or face having their shipments to be delayed.  Not surprisingly, shippers and transporters are voicing their concerns about how the information will be gathered, how the ICS will be financed, and how this effort will be launched across 27 European countries.

Shipping Could Face Greatest Short-term Spill Impact

The biggest short-term economic impact from the Gulf Coast oil spill could be a disruption of U.S. commerce through the Gulf shipping channel.  Reports say a full shutdown of shipping lanes is unlikely, but significant delays could develop if cargo ships must have oil washed off their hulls before moving upriver.

This disruption could also have broader transportation flow effects by affecting the barge, container, and tanker traffic in the Mississippi Delta and on the Mississippi River. If traffic is affected for any extended period of time, then the prices of all types of commodities could rise.

Some of the ripple effects of disruptions in and out of the Port of New Orleans on freight networks could be the diversion of some cargoes, such as export grain, to other destinations.

For instance, it could push more Midwest farm shipments off barges and onto trains headed for West Coast ports, or onto ocean ships at Great Lakes ports that move into the Atlantic Ocean through the St. Lawrence Seaway.

Aside from possible effects on the supply chain, the spill can hurt the Gulf region’s fishing and tourism industries, depressing both direct and indirect incomes from that activity.

The impact on overall U.S. commerce was hoped to be small if responders could contain the spill quickly enough.  However the impact on local industries was feared to be large.  Fishing in the Gulf is already hurt from a 10-day ban. Gulf fishing generates annual dockside sales of $660 million, employs about 27,000 people in Louisiana alone and is second in size only to Alaska’s fishing industry. If the closure lasts long enough, it could raise fish and shrimp prices nationwide.

As it turns out, both local and national economics will be significantly affected.

Higher transportation costs of using alternative shipping lanes and ports could also price the loads out of the world market, delaying shipments until conditions improve. Authorities are anxious to keep the operational for Gulf shipping to maintain vital U.S. exports and imports.  The Lower Mississippi River ports export over 50 million metric tones of corn, soybeans and wheat each year, which is more than 55 percent of all U.S. grains inspected for shipment.

CA Port Rules are Likely to Increase Container Drayage Costs and Create Capacity Crunch

Under the San Pedro Bay Clean Air Action Plan, two California ports (Los Angeles and Long Beach) adopted new rules that will have a significant affect on container drayage capacity and rates for containers moving through those ports.   The costs may even triple with the new rules!

The new plan permits only concessionaires that are licensed by the ports and who are operating clean trucks to enter the terminals without having to pay a new truck impact gate fee. It further bans 2008, trucks older than 1988 from entering either port.

The Los Angeles rules go even further to ban the use of owner-operators at the port which may force more than 16,000 independent truckers to give up their trucks and become employees of the few larger trucking. It also imposes on the 1,300 drayage companies to only use employee drivers, which may force these small drayage carriers out of business.

Three agencies (the Transportation Intermediaries Association and the National Industrial Transportation League, and the American Trucking Association) have all filed opposition to the new rules. ATA is also challenging these new rules in federal court.

The new rules will cause a significant shortage of drayage capacity at these ports and a significant increase in rates while the remaining companies exercise their new-found market leverage.

Volcano Fallout Hits the Shipping Industry and Affects Prices!

The passenger airline business isn’t the only industry feeling the heat from the volcano eruption in Iceland. The shipping industry also finds itself caught in the ash cloud, and desperately looking for solutions.  Beyond the solutions that were needed to solve the immediate congestion of transporting cargo, the next issue is steep air cargo rate hikes. 

With European airspace re-opened, the capacity for cargo is sparse, thus causing the airlines to charge premium rates for all new shipments that are three times the standard shipment rates.  We had already seen higher standard rates prior to the volcanic eruption in Iceland but this increase was centered more on exports shipments out of Asia because of the short supply of air and ocean capacity.  

To cope with the recession, airlines and ocean lines reduced capacity to cut costs.  As freight volumes have increased the shortage of ocean capacity has driven many shippers to transport their goods via air, further stressing air cargo capacity.  In Europe, even before this current volcanic event, again capacity was reduced as airlines reduced flights to save costs. 

Even after airspace has been re-opened, we expect capacity to remain in short supply due to the huge backlog of freight and passenger priority on passenger flights, and therefore increased prices.

Carrier Costs Increase as do Shipper Costs!

The poor economy has driven thousands of carriers out of business over the past 18 months.  At the same time shipments nationwide declined.  With the lack of demand for trucking, not many shippers noticed that lack of supply in available carriers. 

Now that the economy is sputtering back to life with more of a demand for shipments, the lack of supply in carriers is suddenly noticeable by the shippers.  This lack of supply is having two effects: slower transports and rapidly inflating prices.    

In the past few weeks, the pricing power of the carriers has translated into prices rising as much as 30% in some instances.  This is especially true in difficult transportation regions of the country (Northeast, Florida, Texas, etc).  The market is changing very quickly right now, to where a quote this week might be much higher by next week!

100% of Air Cargo Screening is Still Two Years Away!

The US Department of Homeland Security’s timeline for screening international air cargo arriving on passenger flights will likely take longer than initially forecasted.  The acting director of the TSA, Gail Rossides informed the House of Homeland Security Appropriations Subcommittee that it will be feasible for all domestic air cargo to be screened by the intended August 3^rd deadline. 

However, it is estimated that only 65% of international air cargo will be screened by the deadline.  It is likely that it will take two years for before 100% of the international cargo is being screened.  The new estimate is based on the current volume of imports  (1.5 tons annually from 97 countries).  The majority of imports (85%) come from 20 countries.

The TSA has advised the US Congress on at least 2 occasions that the deadline could not be met for internationally screenings. Warren Miller, head of the Air Cargo International Programs Branch of the TSA, shared this news recently at the airfreight security conference in Frankfurt, Germany.

The TSA has learned from its work on securing intra-US airfreight shipments that the focus should be on the supply chain, and not just solely on screening.  A long-term and layered approach based on risk targeting will be needed, but this concept has not even reached a pilot stage yet. 

As Miller says, while there is no single answer for screening, we do need to increase security without impeding the flow of commerce.  One obvious point is that precedents for risk management would be easier to implement in all-cargo freighter aircraft, rather than using the “bellyhold” cargo area of passenger flights.

Emergency Revenue Charge (ERC)on ocean shipments from Asia to the US!

As part of a revenue recovery plan on the transportation trade, steamship lines have implemented an Emergency Revenue Charge (ERC).  This price hike on shipments is due in large part to off-set the decline in import volumes.  It is uncertain exactly how long this additional fee will be in effective.  As of now, the expected time period is from Jan 15th, 2010 to April 30th, 2010.  Then the already published TSA - General Rate Increase (GRI) program will be activated on May 1st, 2010.

The increase quantum will be as follows:

       +USD 320 per 20’ all types

       +USD 400 per 40’ all types

       +USD 450 per 40’ HC all types

       +USD 505 per 45’ HC all types

“Taking this step now is a milestone in the necessary recovery program expected by all operators on this major East / West trade lane. The implementation of this rate restoration on the Transpacific trade will enable us to maintain an optimal fleet deployment for the benefit of Asian and US exporters and importers ; this is the first stage towards a financial breakeven needed by the liner shipping industry on this route” explains Jean-Philippe Thénoz, Vice President North America Lines, CMA CGM Group.

These price increases are paid by the Third Party Logistic providers, and then that economic burden will likely need to be passed along to the end customer.  If you see this sharp rise in your shipping costs, it is not the “middle guy” making more profit, but rather a need for him to not lose revenue and go out of business.

The brand new “ISF 10 + 2 Rule” and its importance to you!

Is your business directly importing cargo on an ocean container into the United States?  If so, are you adequately prepared to abide by the new safety regulations and avoid the costly fines? 

Or, if you outsource your imports to a third party (“freight forwarder”), are you sure they will meet the criteria of the new rule?  If they don’t, you, the consignee, are the one who is liable for those hefty fines, not the contracted freight forwarder!

Effective on January 26, 2010 any business that imports products and doesn’t strictly follow the new “ISF 10 + 2 Rule” will be faced with a $5,000 fine per violation. 

This brand new rule is the “Importer Security Filing and Additional Carrier Requirements Rule” and is often referred to as the “ISF 10 + 2 Rule”.  This rule is being enforced in an effort to:

• enhance the importer’s sphere of accountability back to the point of stuffing (origin)
• enhance cargo targeting prior to the loading at the foreign port, and
• result in fewer exams for low risk shipments

The responsibility of the ISF importer, or consignee, for the “Importer Security Filing” is to provide the “10″ data elements component of the rule.  The responsibility of the steamship line is to provide the “Additional Carrier Requirements” which corresponds to the “+2″ portion of the rule.

The 10 data elements of the importer or consignee are to provide proof of: seller, buyer, importer, consignee, manufacturer, ship to party, country of origin, harmonized tariff schedule (HTS) number, container stuffing location, and consolidator. The 2 data elements of the steamship line are to produce: the vessel stow plan and the container status messages.

The rule has been a goal of Customs and Border Patrol for many years, as an effort to push supply chain security efforts back from our borders to the point of origin (or “stuffing”). The proposed rule was published back in January of 2008, with the final rule published in November of that same year. The effective date of the rule was this last January, 2009.  The full enforcement of the rule is happening later this month on January 26^th.
Unitrans Worldwide, Inc. employees are experts at this new rule and can conduct this mandatory government filing on your behalf to keep your company in compliance and save you possible hefty fines.

Export Growth Boosts Economic Recovery

Exports surged to the highest level in nearly a year!  This surge of 2.5 percent in exports, allowed the 32.9 billion dollar trade deficit for October to fall by 7.6 percent below the September deficit of 35.7 billion.

The Associated Press today announced that “The U.S. trade deficit unexpectedly narrowed in October” and that “growing exports, boosted by a weaker dollar, are expected to boost demand for American manufactured goods in coming months and provide important strength to the overall economic recovery.”

They report that in the first 10 months of this year, the deficit is at an annual rate of $364.8 billion. That is about half the gap for the whole year in 2008.  The stock market in turn rose after the improved deficit was reported.  In mid-day trading, the Dow Jones industrial average was up about 81 points, for an increase of 0.8 percent.

However to temper that good news, the narrower trade deficit reflects the impact of the recession, which cut consumer demand for domestic and foreign goods.

Next Page »