The first set of exclusions from the third tranche of $200 billion in Section 301 tariffs on goods from China have been announced by the U.S. Trade Representative and published in the Federal Register.
These exclusions are in effect retroactively from September 24, 2018 — the date the third tranche went into effect — and will remain in effect until August 7, 2020 (one year after their publication date).
Special product descriptions have been prepared for each of the excluded goods. To take advantage of these exclusions, goods must satisfy the full description below.
Be sure that your teams are made aware of these exclusions so you can take full advantage of them.
Exclusion requests may still be submitted through September 30, 2019. As stated in the June 24 announcement of the exclusion process, requests must address the following scenarios:
If more exclusions are granted, they will be announced on a periodic basis. Watch for news of those announcements here.
The USTR has posted the more than 5,000 products included in List 4 of the Section 301 China tariffs. These products will be subject to an additional tariff of 10%. Certain products that appeared on the proposed list on May 17, 2019 have been removed and will not face an additional tariff of 10%.
The complete list has been broken into two sub-lists. Click the links below to see each list.
There will be a process for requesting exclusions, but that process has not been announced at this time.
Jaguar Freight is committed to keeping you informed. Contact us here.
As companies impacted by U.S. tariffs on shipments from China scramble to find reliable and tariff-friendly countries of origin, shifting sourcing to Vietnam has emerged as the most popular solution.
In the first quarter of 2019, as trade was diverted to other countries, China suffered a 13.9 percent drop in exports to the United States. The biggest beneficiary of this trade diversion was Vietnam, which enjoyed a 40.2 percent increase in exports to the U.S.
But as more shipments that used to come from China now emanate from Vietnam, there are three reasons to pause before shifting your sourcing to Vietnam.
The U.S. has already started taking steps to reverse its substantial trade deficit with Vietnam, and more may be on the way. Consider these points:
In June, in response to a Fox Business News question on whether he wanted to impose tariffs on Vietnam, President Trump called Vietnam, “almost the single worst abuser of everybody”.
The next action could be the imposition of tariffs on a broad range of goods from Vietnam, an action that could wipe out the benefits of shifting sourcing to Vietnam. The executive director for Southeast Asia at the US Chamber of Commerce warns that, “There is a real possibility that this administration could slap tariffs on Vietnam.”
Vietnam is a rapidly-growing nation with an inexpensive labor supply, stable government and business-friendly environment, but its infrastructure is not mature or sophisticated. Already, Vietnam’s ports, airports and roads are straining to keep up with demand as companies fleeing China set up shop in Vietnam. And the rise in demand shows no signs of abating.
More than 1,720 projects were granted investment licenses in the first half of 2019, a 26 percent spike over the previous year.
Meanwhile, the World Bank ranks Vietnam’s logistics network 39th in the world (13 places behind China). A Ho Chi Minh City metro rail project has suffered major delays and cost overruns. As the need for infrastructure improvements grows, the government hopes that foreign direct investment will ease the crunch.
A healthy supply chain relies on a healthy infrastructure. Vietnam’s may be nearing the breaking point.
Four of the five top container ports in the world are located in China. Combined, they handled just under 118 million TEU in 2018.
The top two ports in Vietnam (the only ones to make the worldshipping.org Top 50 list) combined to handle less than 10 million TEU in 2018.
If the current boom continues, Vietnam will need to expand its ports or face a capacity crunch.
Shifting your sourcing might be a good idea, but it also might be too soon to make that move. With such rapid growth and a trade war in progress, circumstances are bound to change. At this point, taking a pause to see what’s next might be your best option.
This is a developing story. Stay tuned for updates. If you’d like to discuss your particular circumstances with us, contact Jaguar Freight today.
Trust cannot be purchased, for it is not for sale. Trust in a business relationship is an intangible value, inherently earned. But what about supply chains? It seems like the question needn’t be asked, but do we place blind trust in supply chains?
Trust is playing a bigger role than ever, and more vital, role in supply chain decision making. With the intervention of sophisticated technologies that enable us to track shipments down to the second, do we still view supply chain management as a statistical endeavor, or on the inverse, is the technology leading us towards more relationship-focused supply chain management?
How do we calculate trust?
It doesn’t appear in ledger sheets, or the bottom line, or the profit margins, yet it is an aspect that we cannot go without. Interpersonal relationships are at the heart here at Jaguar Freight Services, so we can’t help but wonder: Do you trust your supply chain?
A recent study conducted by Penn State University found that “trust” reduces opportunistic behavior only when both sides have similar levels of trust. However, a buyer or supplier with a higher level of trust than its counterpart is more likely to be perceived as being more opportunistic, not less opportunistic.”
Opportunism in Supply Chains
When speaking of opportunism in the supply chain, we can derive it means placing value in bid offers, making different offers to suppliers based on your relationship with them, artificially driven pricing, and so on – all factors that play a crucial role when considering the bottom line. So that is where the line tends to get blurry between trust in an established or new relationship, and the security of finding the best deal to maximize profits. In a world driven by technological statistics and analytics, we find relationships cannot be replaced, furthermore emphasizing the importance of having a good team on your side.
As of April 2017, the new ocean shipping alliances are fully merged and operational, and they represent a stunning ~80% of global container trade, and an even more impressive 90% of container capacity on major trade routes. Last month we looked at how these mergers have and are affecting competition in the contemporary shipping industry in our article titled Competition & Carrier Alliances. This month we want to take a look at how these 3 alliances that comprise most of the industry are structured, and what their trade routes are.
What are the new Ocean Carrier Alliances?
CMA CGM, COSCO, OOCL, APL and Evergreen (APL is now owned by CMA CGM)
NYK Group, MOL, “K” Line, Hapag Lloyd, UASC and Yang Ming (UASC has merged with Hapag Lloyd)
Maersk Line and MSC, with HMM and Hamburg Sud (Hamburg Sud is now owned by Maersk Line).
Major Shipping Trade Routes
The Trans-Pacific trade route is the largest trade route in the world by volume. It is the route between the Far East and North America, mainly dominated by containers hitting US West Coast ports.
The Asia-Europe trade route is between Asia and Europe (most going to Western Europe) with the majority of vessels going through the Suez Canal.
The Trans-Atlantic trade route is the route between Europe and North America, mainly between Europe and the US East Coast.
The main trade lane that is highly affected by this change and the main reason for the new alliances is the North America-Asia a.k.a. “East-West” trade lane between the Far East and North America which will represent 96% of East-West trade.
Ocean Alliance will have 13 weekly services between Asia and the US West Coast, 7 weekly services between Asia and US East Coast and 3 Trans-Atlantic services.
The Alliance will have 16 weekly services for the Trans-Pacific trade and 7 weekly services for the Trans-Atlantic trade.
2M Alliance, which has a slot agreement with Hyundai Merchant Marine, will have 16 weekly services.
We’ll be covering the changes throughout the year, so stay tuned to our blog, or subscribe to our newsletter at the bottom of this page. Always a step ahead, our team of Freight Architects has deep and current knowledge of international supply chain management. To learn more about how we can assist your company and ensure you have excellence in your supply chain, visit our services page.
Changes are on the horizon for the shipping industry, and as with all change, some of it is good, and some of it is not so good. In January, we anticipated alliance consolidation to be a common theme throughout the year. Now less than six months into the year, the major alliances have formed, sacrificing competition as an opportunity cost for tighter efficiency across the industry.
Three Alliances, One Industry
The recent consolidation trend has narrowed down the shipping alliances, which were once many, to a mere three. This month we saw the formation of three major alliances. They are:
These three alliances represent 77.2% of global container capacity and 96% of all East-West trades. While this isn’t a monopoly, the rising concern is that the formation of three mega alliances has halted competition, leaving the consumer with virtually no options except the alliance-issued standard.
A Suffocating Competitive Landscape
Competition is what drives businesses to be better; to provide better products, better customer service, better options, and overall set the bar high for other businesses to enter. What happens when competition is no longer at the forefront? B2B markets will bear the brunt of diminishing competition; particularly when it comes to having options, therefore cutting off the ability to negotiate a better deal. Less competition in shipping isn’t good news for exporters who currently benefit from low freight rates.
Restructuring for the Future
Without doubt, there is concern among the shipping community and forwarders that the new mega alliances are inevitably creating disruption to global supply chains. The obvious problem is the lack of options that limited competition provides, but a more subtle, equally as important, problem is the absence of the customer from the discussion. The alliances left the customer out of the equation – and that’s where the new market structure can fail us. When we remove the customer out of the equation, we lose sight of value and customer service.
We’ll be covering the changes throughout the year, so stay tuned to our blog, or subscribe to our newsletter at the bottom of this page. Always a step ahead, our team of Freight Architects has deep and current knowledge of international supply chain management. To learn more about how we can assist your company and ensure you have excellence in your supply chain, visit our services tab.
Last month US antitrust investigators raided the biannual Box Club meeting in San Francisco, handing subpoenas to the CEOs of major container lines. US Antitrust regulations are taking a more prominent role in an era of consolidation, big shipping alliances, and a new government administration.
Investigations, not allegations
Maersk Line, and Mediterranean Shipping Co. are among the many companies who received subpoenas, which do not set any allegations against the company itself. All CEOs are cooperating with the investigations – but why the investigations at all? With consolidation being the main theme this year, the Department of Justice is taking particular interest in preventing the carrier alliances from setting fixed rate guidelines. Carriers retained limited antitrust immunity in the last major revision of US shipping law: the Ocean Shipping Reform Act (OSRA) of 1998. Before the OSRA, carriers jointly set rates through conferences, and shippers and carriers were prohibited from negotiating confidential contracts with each other. The DOJ is trying to prevent rate-fixing.
A history of price fixing
Antitrust investigators are having a difficult time laying down tighter regulations again, mostly due to the fact that the industry lacks discipline when it comes to discussing price fixing, as they’ve been operating under antitrust immunity for years. The investigation comes at a time where alliances are setting standard rates, in an attempt to control the wild fluctuation of shipping rates. Over capacity at ports, on ships, and throughout the industry has caused rates to drop below profitable margins, spurring bankruptcies, like Hanjin, and consolidations like the three new alliances — THE, Ocean, and 2M. Historically, antitrust immunity allowed the industry to operate under protection from unfair competition; now the lack of competition as it relates to antitrust immunity is raising alarms, spearheading the DOJ’s investigation.
At this point, the investigation is still underway, stay close to our blog for upcoming updates, or subscribe to our newsletter at the bottom of the page. Always a step ahead, our team of Freight Architects can assist your company and ensure you have excellence in your supply chain, visit our services tab.
Maritime regulators voted to toss the rule requiring container lines to report amendments to service contracts before they go into effect. It’s part of a broader effort by the US Federal Maritime Commission to save beneficial cargo owners, carriers, and non-vessel operating common carriers time and money by simplification of the filing process.
The First of Many Regulatory Rollbacks?
The review of existing rules at the Federal Maritime Commission began under the Obama administration, and continue to be put into motion with the Trump administration. This current regulatory rollback is the first of many planned changes aimed at reducing superfluous and expensive regulations plaguing the logistics industry.
Right and left leaning officials alike are welcoming the regulatory rollbacks, as a means of easing the burdens associated with international shipments and filing amendments with the commission. Nearly 600k service contract amendments were filed last year, and all had to be filed before they went into effect; now shippers have an additional 30 days after they go into effect to file. This change is the first revision to freight forwarding (NVOCC) service arrangements since 2005.
Proceeding with Caution
The same voices that encourage soft deregulation are cautioning against deregulation in other areas, such as possible changes to the infrastructure of service contracts themselves. One thing that is certain is that the NVOCC community cannot agree on the fundamental core of NVOCC regulations. Making too hasty decisions to change things on a larger scale can disrupt the industry much more than anticipated.
Identifying Outdated Rules
Acting FMC Chairman, Michael Khouri stated: “I am committed to continuing to identify rules that are outdated, or impede the efficient operation of business, and eliminating them whenever possible.” We can expect to see continued efforts to review outdated rules and regulations moving forward.
Our team of logistics specialists has deep and current knowledge of international supply chain management. To learn more about how we can assist your company and ensure you have excellence in your supply chain, visit our services tab.
2017 marks an unprecedented time for vessels, ocean carriers, and ports; the industry is consolidating to accommodate greater economies of scale. What we’d like to ask is this: what happened to value? In an age where anything from taxi rides to dinner can be summoned from a device in our hands, why isn’t this innovative mentality prevalent in the shipping industry?
One Word: Cost
Well, more specifically, economies of scale. We’re living in historically significant times – on the brink of discovering widely-accepted alternative fuel methods, self-driving cars, custom supply innovations – yet, the shipping industry cannot get off the “bigger is better” wagon. There’s reason behind this, and it boils down to cost. Rates dropped to a historic low, growth is sluggish, and bankruptcies are common core. As a result, shippers have pulled back the reins on virtually all facets of shipping aside from cost. Value is no longer a priority, cost efficiency is king.
To Scale or Not to Scale, That is the Question
Currently ocean carriers and ports alike focus on available capacity and rock-bottom rates. Unfortunately, added value has taken a backseat during these cost-austere times. The current landscape is far too competitive to take any action on the value creation argument, but looking forward the industry is inevitably going to see a demand for better service, niche ports, and more flexibility. This leads the industry to question its own motives for focusing on economies of scale.
Smaller, Faster, Smarter
Congestion, at all levels, is a main concern for logistics professionals. The shift to cost-effective economies of scale has led to local congestion, stress on resources, and overall compromised equipment – which amplifies the challenges to local port communities and the environment. According to a July, 2015 report released by the Federal Maritime Commission (FMC) “…the elimination of congestion is today’s most critical and relevant trade-related issue.”
The market is shifting; demand for smaller, faster, smarter delivery models are on the rise. Scale has replaced service, ironic for an industry prized for its highly complex service-oriented roots. The elimination of product and service options has created a black hole of value – industry professionals are starting to ask: ‘where’s the value?’ Herein lies the solution, rid the system of unsustainable growth patterns, stop trying to be everything to everyone, and divert a large portion of traffic to well-equipped niche-specific ports and routes.
The industry will be healthier, and value-added, given the opportunity to diversify market share for smaller, smarter, efficient ports and vessels. Performance and value will overtake perceived economies of scale, once demand for value rises again.
Dedicated to keeping abreast of our rapidly changing industry, our team at Jaguar Freight Services is here to help you every step of the way. Get in contact with us today to explore more supply chain solutions.
More often than not, transporting commodities internationally includes traveling through oceanic routes on container freighters. Third party logistics providers, freight forwarders, and brokers alike are all too familiar with the levies imposed on the long voyages of international trade.
Understanding ocean freight rates and the ways and means of its applicability is important because if a shipper undertakes to transport goods without proper knowledge, this could have a huge impact on the landed cost of their goods.
We aim to demystify the intricacies behind ocean freight rates. At Jaguar, we value transparency every step of the way. We’ve rounded up 5 main factors that affect ocean freight rates:
Bunker Fluctuations: Bunker fuel is a considerable cost for crude tanker companies. Closely related to the cost of oil, there is a direct relationship with the cost of oil and the cost of bunker fuel and therefore the ultimate cost of freight. When oil prices rise and fall within international markets, there is a direct impact on freight rates. The volatility of oil prices is correlated to fluctuating international ocean freight costs.
Seasons: For many goods, especially reefer cargo, seasons plays a large role in the cost of transportation. Some goods become more expensive to ship during high seasons, due to demand and supply changes. Inclement weather can cause many smaller ships to be docked, decreasing supply while demand increases, spiking shipping fees.
Fees and Service Charges: Terminal fees are charged both at the embarking point, and the intended destination. During Hanjin’s bankruptcy, many of their ships were stuck out at sea due to the inability of the company to pay the terminal fees. Services charges can be any extra charge levied by port authorities.
Currency Fluctuations: The U.S. dollar is the common denomination used for international transactions, however, the currency exchange rates fluctuate on a daily basis. This fluctuation can be a basis of fluctuating ocean freight rates.
Container Capacity: Shipping containers are designed to operate at maximum capacity. Should the container not reach optimum capacity, ‘economies of scale’ come into play, wherein the shipper becomes responsible for the cost of the empty part of the container although the quantity of actual goods shipped is less than what fits in the container. It is therefore vital to get as close to 100% container utilization as possible.
Ocean shipping is a complex operation, often requiring established business relationships with parties on both ends of the shipping and receiving spectrums. Our team of logistics specialists has deep and current knowledge of international supply chain management. Get in contact with us today to explore more supply chain solutions.
In January, the Trump administration announced they are considering a 20% tax on imports, starting with Mexico, that would help finance the building of a border wall between the US and Mexico. This inevitably sparked a flurry of conversation among economists and in logistics circles. International trade laws greatly affect logistics across all channels.
Mexico is currently the U.S.’ third largest partner in the trade of goods, and serves as a prime example of the implications of new taxes imposed on imports. William Gale, co-director of the Tax Policy Center, says “the irony of putting a tariff on Mexican goods is that, to the extent it raises consumer prices in the U.S., consumers will be paying for the wall, not Mexican producers.’’ Mexico is also the U.S.’ second-biggest provider of agricultural products, with imports of $21 billion in 2015; a 20% tax will increase the risk of inflation on essential goods sold within the U.S.
Tom Stenzel, President and CEO of the United Fresh Produce Association said: “Consider the impact on American consumers of a 20% hike in the cost of foods such as bananas, mangoes and other products that we simply cannot grow in the United States. Consider also what other countries would do to block U.S. exports in retaliation.” Aside from the risk of inflation, there is the risk of retaliation from U.S. trader partners. Should Mexico retaliate the imposed taxes, the U.S. would surely suffer in terms of increasing the trade deficit, as Mexico is the third largest importer of U.S. goods.
Ethan Harris, chief US economist at Bank of America Merrill Lynch said: “Imposing tariffs, border adjustment taxes, or other protectionist measures will only reduce gross trade flows, without necessarily reducing the US deficit because trade deficits are related to the intertemporal consumption decision of a country rather than to trade agreements.” The repercussions are clear, imposing a tax on our neighbor will inevitably create a chaotic trade imbalance on U.S. soil, and internationally.
Our team of logistics specialists has deep and current knowledge of international supply chain management. To learn more about how we can assist your company and ensure you have excellence in your supply chain, visit our website.