News

ByJaguar Freight

Ocean Freight: Let’s Talk About the Elephant in the Room

In this week’s global freight updates, we’re bringing readers an ocean freight-heavy report that provides views and news on the current situation, including spikes in rolled cargo, record-level imports, a potential ocean freight rate cap, a challenging shipping container market, and more.

Right now, it’s hard for shippers to even get cargo onto ships. 75 percent of the 20 transshipment ports Ocean Insights surveyed experienced an increase in rates of rolled cargo in December, with an overall 37 percent MoM increase as well. According to Sea-Intelligence, blanked sailings are anticipated to make up between 13 and 11 percent of overall capacity in the third and fourth week of this month, respectively. Carriers are making efforts to add vessels to their networks, however, as a way to combat these issues, so capacity is projected to rise by 21 percent and 34 percent YoY for those same weeks.

According to a recent JOC article, U.S. imports from Asia reached an all-time December high, indicating that the surge in container volumes that’s been overwhelming U.S. ports since June shows no signs of slowing in the near future.

With 1.626 million TEU on the books last month, we’re seeing a 29.9 percent YoY increase in container volumes between December 2020 and December 2019. This also marks the third-highest monthly volume of 2020, which totaled 16.6 million TEU overall. Because of the strong demand for PPE, medical supplies, and e-commerce merchandise, intermodal traffic and port congestion were also a lot more intense in the eastbound trans-Pacific than they normally would be for this time of year.

As for the regulatory measures that are being taken, China’s Ministry of Commerce and the U.S. Federal Maritime Commission are both keeping a close eye on FAK market conditions. There’s even been talk that the former may be looking to start enforcing some antitrust measures to help control container shipping’s excessive rates and equipment shortages.

This help could not come any sooner though because there are essentially no TEUs available to anyone unless they’re willing to pay three times the typical going rate just to get their goods out of the ports of Los Angeles and Long Beach. And those who refuse to pay FEU prices for TEU containers are just getting rolled over and over until air freight becomes their only option, while the number of empties returning to China is up 55 percent YoY. With global demand significantly outpacing equipment availability, added surcharges are only serving to kick shippers and their logistics service partners while they’re down.

To learn more about these ongoing problems and the other top stories of this week, check out the following article highlights:

ByJaguar Freight

A big shoutout from the JOC!

In a field where competition is killer and you’re up against advancing e-commerce platforms and various tech startups, the key to surviving lies in investing in new forms of automation.

According to JOC’s Senior Technology Editor, Eric Johnson,

“Individual forwarders and non-vessel-operating common carriers (NVOs) are tackling the mandate to be more technologically proficient head-on … New York-based Jaguar Freight is using a mix of in-house-developed systems and off-the-shelf software to build a framework that helps it attract and retain customers.”

Not only are we happy to receive this shoutout, but we’re also excited to see how far the industry has come as a whole in its embrace of digitization.

Shoutouts aside, here’s what else we’ve found that’s noteworthy this week:

As we encounter cargo-ship charters equating to $350,000 per day, saving on shipping costs is now arguably more important than ever, so it’s no wonder companies are hopping on board the tech train. Not to mention the fact that supply chain risks seem to be amplifying as ocean carrier networks grow smaller and smaller.

With global container capacity and port congestion the most prominent issues facing the ocean shipping industry, one initiative that will theoretically ease some of them for Europe – the Silk Road – is seeing some success. But, it’s not without its own challenges.

And European-based exporters are getting the worst of things between the tight conditions in Asia lanes and Brexit continues to cause problems for the region. With increasing equipment imbalance surcharges, added security checks, complex documentation, and new taxes, the costs of transporting U.K. goods are at an all-time high. According to Bloomberg, the additional fees that are being placed on “flight trucks” can reach up to 3,000 pounds.

To learn more, check out our article highlights below, and click the last link to view some important dates you should keep in mind for upcoming key trade events in 2021.

ByJaguar Freight

Global Freight Updates Delivered To You!

With short-term freight snags, limitations against EU regulators, U.K. lockdowns, an avg. of 30 vessels at anchor waiting at the Ports of LA/ Long Beach all last week, increasing supply chain debt, decreasing blanked sailings, and a tight air cargo market 2021 is already off to a rocky start for supply chain all over the globe.

It’s been over a week since public officials finalized the Brexit trade deal otherwise known as the European Union-United Kingdom Trade and Cooperation Agreement. Because of the last-minute nature of the deal, many European manufacturers (especially those in the automotive sector) were given very little notice to adapt their processes to the deal’s lengthier documentation requirements. As border delays continue to get out of hand, the U.K. remains the only country to offer a 6-month grace period. 

Unfortunately, the European Commission is pretty limited when it comes to what it can do right now. These limitations are also affecting the organization’s ability to respond to the complaints shippers are lodging against carriers who are violating their shipping contracts. And demand for goods like exercise equipment shows no sign of slowing amid Europe’s recent coronavirus lockdowns and the unprecedented lack of blanked sailings for the Chinese New Year, which is only pushing up shipping rates.

Speaking of high rates, epic delays are continuing for the Ports of LA/Long Beach. And the premiums paid by importers in the Asia/ U.S. trades are unprecedented. From JOC.com:

Spot rates in Asia-North America trade are about $4,000 per FEU to the West Coast and $5,000 per FEU to the East Coast, although carriers and freight forwarders say importers are paying as much as $6,000 per FEU to the West Coast and $8,000 per FEU to the East Coast when the cost of premium equipment and space guarantees are added to the base freight rate.

Shipping demand and rates aren’t the only things in the industry that are spiking, however. According to Bloomberg, bad supply chain loans equating to 25.5 billion euros, or $31.3 billion, are on the rise due to the European Banking Authority cracking down on lenders in the region. Since larger companies typically pay their bills late, the new standard stating that receivables booked on a firm’s balance sheet will be considered past due after 30 days poses a pretty big problem for many businesses.

On a more positive note, what has been a pretty tight market for air freight seems to be finally improving as various airline carriers continue to add more capacity to their fleets. To learn more, check out our article highlights below:

ByJaguar Freight

Global Freight Updates Delivered To You!

In the first Weekly Roar of what’s going to be a great new year:

The EU continues to wheel-and-deal, wariness remains for some persistent global supply chain roadblocks, blockchain continues its uphill fight for relevancy, why rail is cool again, and the obligatory international doom and gloom (with a little positive thrown in.)

It’s 2021, so let’s go!

With Brexit checked off the to-do list (sort of), the European Union has struck a trade deal with China. There is a lot of opposition to it, however, both internally within Europe and from the U.S. Notable is that China edged out the U.S. as the EU’s largest trading partner with $590B in two-way trade in 2020 based on the latest figures.

The pandemic is easily the top news story impacting supply chains in 2020, and will continue to be in 2021. But, other issues and opportunities exist as well. A tough global economic outlook, as well as political unrest in many regions mean this year will be anything but easy. But, new technologies, such as 5G, seem poised to start fulfilling their promise.

Speaking of technology and potential… for the first time in a while, there’s been mention of blockchain in the news. It’s not good news, unfortunately, especially for those holding out hope a blockchain-related technology would find its place in the supply chain. A long-standing concern for many tradeable tokens has been if the U.S. Securities and Exchange Commission would flex its muscle, and it’s recently done so with one of the more well-known shipping related offerings. It appears that for the time being, blockchain will continue facing the criticism of being a solution in search of a problem – at least as it relates to shipping.

The underappreciated workhorses of global supply chains are the railroads. And in the U.S., rail is seeing a resurgence, thanks in large part to the growth of e-commerce.

And finally, as much as we want to just make it go away, the rate, congestion, and capacity challenges remain around much of the world. We’ve got JOC’s 2021 outlook for the air cargo marketplace with a little bit of positive news from some California ports.

For more details on all of these topics, see the articles below. And, Happy New Year!

Last Call for those who haven’t received it, we’d like to offer you our 2021 desktop calendar:  Claim your 2021 Jaguar desk calendar – click here

ByJaguar Freight

Global Freight Updates Delivered To You!

This week’s global freight updates mark the last critical events of this year as we start to officially countdown to 2021. With a Brexit deal done, relief for hundreds of stranded truck drivers, ocean freight madness, soaring airfreight rates, unpredictable freight costs, strong container spot rates, and megamax boxships we’ve got a lot in store for you.

The big news in Europe is a draft EU-UK Trade and Cooperation Agreement is in place with 0 tariffs and quotas on goods shipped (a.k.a the Good.)

And it appears freight madness like this is only going to spill over into 2021, according to The Loadstar’s recent supply chain radar analysis. While many believe that the pandemic-induced disruptions of 2020 have completely altered the industry as we knew it, some anticipate a swift recovery for maritime trade in 2021 in the form of 4.8% growth. One question that’s on everyone’s mind though is: How will the current elevated spot rates end up affecting next year’s contract service negotiations? 

For those who haven’t received it, we’d like to offer you our 2021 desktop calendar:  Claim your 2021 Jaguar desk calendar – click here

 

 

As for the airfreight sector, rates from China to the U.S. have reached $8.02 per kilogram, spiking 58% (a.k.a the Bad) over the last couple of months despite the fact that demand was down by more than 6% YoY in October. With the release of the new COVID-19 vaccine, some expect air cargo demand to increase by 2% YoY, which could potentially raise rates even more over the next six months.

 

 

After a new variation of COVID-19 was discovered in the U.K., other nations began closing their borders to the country, at one point leaving more than 1,500 trucks (a.k.a. the Ugly) stuck in empty ports and airports across Britain. Depending on travel restrictions, some fear the strict coronavirus precautions could produce major supply chain disruptions and even lead to food shortages throughout Europe. There appeared to be some improvement in the situation in the past few days, fortunately, but a backlog persists.

To wrap up the last freight updates of the year, we’ll end on Hapag-Lloyd’s $1B investment in six massive LNG container vessels that individually hold 23,500+ TEU container capacity. The carrier will receive these eco-friendly, modernized ships as early as April 2021 and plans to use them to gain a competitive advantage on Europe-Far East routes.

On that note, we hope you enjoyed our Weekly Roars, check out the article highlights below to read more. Happy Holidays!

ByJaguar Freight

Global Freight Updates Delivered To You!

 

EU carbon charges, UK port congestion, surging container freight rates, a whirlwind peak season, the South African Airways lockout, and the new U.S. Transportation Secretary, oh my! We’ve got a lot to unpack in this week’s global freight updates.

 

But first – We’d like to offer you our 2021 desktop calendar – kindly let us know where we can send it and it’ll be on its way!   Claim your 2021 Jaguar desk calendar – click here

 

Let’s dive in by starting with the European Commission’s plans to make big changes in the shipping carbon market.

As of right now, the Commission remains undecided on whether or not it will include international trips in its ambitious emissions trading scheme plans. Many in the sector, however, are protesting what they believe to be an overreach on the Commission’s part to regulate the industry as it works toward its goal to reduce net emissions by at least 55% over the next 9 years.

Next up, we’ve got the port chaos that’s currently wreaking havoc on UK supply chains for 45% of manufacturers. With the severe strain caused by the impact of leading issues like COVID-19 and Brexit, the nation’s factories are reporting steep rises in lead times and stockpiled goods. 

The UK certainly isn’t the only one struggling to overcome massive transportation complications though. Countries around the world are scrambling to manage the distribution of the new coronavirus vaccine alongside the huge spikes in e-commerce imports primarily from China. And the U.S.-China trade war is only making matters worse.

Some ocean shipping lines have even refused to transport U.S. exports in an effort to prioritize taking back empty containers to China. Not to mention the fact that spot rates are continuing to soar everywhere, especially for Asia-North Europe lanes receiving quotes up to $5,000 per TEU.

And airfreight doesn’t have it any easier either. For instance, after declaring bankruptcy and then being forced to ground many flights last year, South African Airways recently put a temporary lockout into effect against 383 pilots due to reluctance over the airline’s new employment terms.

Last, but not least, U.S. President-elect Joe Biden has officially nominated Pete Buttigieg, former mayor of South Bend, Indiana, to lead the country’s Transportation Department. To learn more, check out the following article highlights:

ByJaguar Freight

Global Freight Updates Delivered To You!

As we prepare to say good riddance to 2020 and leap into 2021, there are still no dull moments for many parts of the shipping industry. Year-end, peak season, Brexit, and the impact of the pandemic are all (hopefully) coming to a head. We’ll know if this means calmer seas in 2021 soon enough.

In this week’s global freight updates, we’ve got record-level spot rates, port chaos, a commodities slump, thousands of stranded seafarers, outrageous air freight prices, and rising market tension. 

According to Sea-Intelligence Maritime Analysis, 2021 base contract rates for Asia-Europe shippers are expected to increase by 23 percent as a result of a surge in spot rates. With freight prices sitting at $2,091 per TEU, unwavering demand, and severe capacity contraints, the tension between shippers and carriers is only growing.

These conditions paired with the impending end of Brexit recently forced Honda to shut down its entire UK plant because of the country’s overwhelming amount of bottlenecks and transportation delays. Britain isn’t the only country experiencing some major setbacks, however. Africa’s exports to China have fallen by 23.6 percent YoY due to COVID-19’s impact on the nation’s economy and a drop in commodity prices.

Because of travel restrictions, the cornavirus has also left roughly 400,000 shipping and transportation workers stranded on ships for over a year and a half. While agencies like the U.N.’s International Labour Organization are working tirelessly to get these people home, crew changes ultimately can’t happen without additional support from countries around the world.

Ocean container shipping isn’t the only sector that’s facing some serious coronavirus-related issues though. As shippers race to secure air freight capacity for medical equipment like dry ice to transport the new vaccines, some airlines are quoting up to 20 times more than the average going rate for this time of year. Despite all of these struggles, one thing that’s for sure is that there’s never a dull moment in this business.

Check out the article highlights below to learn more:

ByJaguar Freight

Global Freight Updates Delivered To You!

Worried about recent cyber-attacks? Can’t find containers? Concerned over the Panama Canal’s congestion? Frustrated with rate increases and carrier service? Want to learn more about canceled flights to LA? Dreading the post-Brexit logistics nightmare? Don’t worry. We’ve got the inside info to help you better understand the most pressing issues the shipping industry is facing right now, and there’s no shortage of them!

To start off, here are some ocean container stats we believe are pretty telling for the Port of Long Beach’s 2020 operations provided by Cathy Roberson, President of Logistics Trends & Insights LLC:

“For the July-September period, loaded inbound TEUs to the Port of Long Beach increased 22.6% YoY.

According to USA Trade Online data, some of the biggest YoY gains in terms of volumes (Kg) for Asian import commodities, based on harmonized 2-digit codes, to the Port of Long Beach were:

Miscellaneous chemical products up 404.4%
Tobacco up 368.9%
Wadding, felt, specialty yarn, twine, ropes up 247.8%
Food industry residues and waste 279.5%
Arms & ammunition, parts and accessories 207.2%”

Next up, we’ve got Acronis’ new in-depth review on the risk of cyber threats in the supply chain, which includes detailed analytics on ransomware spikes, 2021 cybersecurity trends, key takeaways, and more. This report makes it clear that ransomware attacks will increase, especially against remote employees; however, traditional solutions won’t be able to provide sufficient protection against advancing malware tactics.

And, the struggle to find containers continues. From the article we’ve included below: “All carriers report severe shortages of the popular 40ft high-cubes (HCs) at their depots, and there has also been a run on 40ft standard boxes – even 20ft containers are sometimes showing as unavailable.”

Not only do we have to deal with rising threats to data security and a container shortage, but we’ve also been facing some pretty major transit delays in the Panama Canal as COVID strikes again and shippers without reservations fight for limited capacity. Adding to that, rates and surcharges on trades from Shanghai to the U.S. West Coast, Australia, West Africa, the East Coast of South America, and Singapore are at all-time highs while carrier service levels have fallen to all-time lows.

And COVID isn’t only impacting ocean freight. According to Loadstar, Air China and China Southern have canceled all flights to LA until Dec. 10 because of the city’s recent coronavirus outbreak, with expectations of other airlines following suit. Last, but not least, we’ll end on the U.K.’s fear of Brexit’s potential to create a domino effect of severe supply chain bottlenecks across the country’s ports and highways. All in all, the industry appears to be right on track to reach its boiling point, but with insight like this on your side, you’ll have a much better chance of preparing your company to take on these challenges.

Check out the article highlights below to learn more:

ByJaguar Freight

Global Freight Updates Delivered To You!

Whether you’re interested in ocean freight rates, the race to return empties, cargo rollover ratios, the state of airfreight, international trade deals, or Brexit’s role in logistics (and really, who isn’t?) we’ve got it all.

 

Here are this week’s highlights of the most influential events that are shaking up the shipping industry:

 

It looks like ocean freight rates are finally settling down, according to the CEO of Maersk, Soren Skou.

 

“Global supply chains had quite a lot of bottlenecks and they have driven up prices,” he said in a Bloomberg Television interview on Wednesday, describing the whiplash effect of a steep decline in seaborne cargo in the second quarter followed by a sharp rebound.

 

This news offers a lot of hope for the many shippers on the other side of the pricing equation that have been dealing with unusually high costs for this time of year, especially on trans-Pacific lanes. While rates appear to be evening out, container volumes are only piling up at the Port of New York and New Jersey.

As trucking demand continues to increase, drivers are having to spend at least three hours just to return an empty container to a different terminal. The sheer amount of congestion at major U.S. ports is causing drivers to run out of time before they’ve even had a chance to touch an import load, resulting in detention charges that are spinning wildly out of control. The increases in cargo rollovers over the month of October serve as further proof that ocean container capacity has simply reached its limit.

Airfreight hasn’t had much luck escaping the whiplash that is 2020 either. Earlier in March when airlines were grounding passenger planes due to a shocking drop in revenue, the sector experienced a 44 percent YoY decrease in cargo capacity. Then came the scramble to transport PPE as quickly as possible, which produced a shift from typical passenger planes to cargo-only flights.

To sum up, with concerns surrounding the ability of supply chains to effectively manage Brexit and the recent formation of the world’s largest trade pact, it’s safe to say that 2020 is not quite done leaving its mark.

 

If you want to learn more, check out the links below:

ByJaguar Freight

Global Freight Updates Delivered to You!

In this week’s international freight updates, we’re covering everything from the shortage of shipping containers, to the transition from ocean to air and rail, to research on supply chain risk management, to El Paso’s new role in trade, to the concerns surrounding COVID vaccine distribution, to efforts to limit detention and demurrage at key U.S. ports. Well, that was a mouthful. There’s clearly a lot going on, so let’s get to it.

Here’s our timely take on the most important issues that are currently affecting the day-to-day lives of logistics professionals everywhere around the globe:

We’re sure you’re already aware of the major container capacity crunch that’s going on in the ocean freight marketplace. While demand remains strong and volumes soar, shippers are pleading with authorities to help them as carriers focus on backhaul empties and rates on less popular lanes climb. Thanks to Chinese regulators discouraging any further rate increases, however, prices on China-U.S. lanes have continued to stay relatively untouched for over two months.

These equipment shortages are even impacting China-Europe rail capacity due to those who are jumping ship as a result of canceled sailings and rising air freight rates. According to JOC, “Rail demand is being driven by shippers balking at the sky-high air freight rates on Asia-Europe with most of the long-haul passenger fleet — source of half the available capacity on the route — still grounded. And unexpectedly high and ongoing peak season demand on the ocean trades is limiting Asia-Europe container shipping space.” Let’s also not forget about the significant disruptions many, especially those managing pharmaceuticals, will face once companies start distributing COVID-19 vaccines.

With their complex cold chain storage and transportation requirements, industry leaders are striving to proactively improve shipping visibility and efficiency by developing strategies that will address critical logistics gaps and stressors. Even if you aren’t directly dealing with these pharma problems, it’s probably a good idea to start reevaluating your shipping reliability and risk management based on the findings of a recent report on manufacturing costs in a post-pandemic world.

A topic every shipper hates is detention and demurrage and it turns out some shippers have finally decided enough is enough. A coalition has gotten the attention of the FMC and the situation at several U.S. ports is being investigated.

Last, but certainly not least, El Paso well-positioned as a key trade portal between the U.S. and Mexico. With a focus on improving logistics infrastructure, many large industry players are making big investments in the area. There is a lot going on at the border.

Want to go straight to the source? We understand. Check out the article highlights below:

ByJaguar Freight

Global Freight Updates Delivered to You!

Hello! This is the news and information you can use to get your Monday off to a strong start and have a great week.

What’s happening NOW:

From the Transpacific container crunch, to an inventory ratio roller coaster, to allegations of ignored U.S. exports, to the release of a zero-emission shipping blueprint, there’s A LOT going on.

Here are the highlights in the news that could be impacting your international shipping operation.

As Chinese exports and consumer demand in the U.S. continue to surge, the resulting lack of capacity has doubled the cost of leasing and purchasing new containers. With longer waits, added equipment fees, and some major port congestion, managing this year’s peak season will be no easy feat. When you factor in the FMC’s reports of U.S. shippers claiming that carriers are prioritizing container returns over their exports in order to profit off of high rates, it appears the market is left with a pretty serious imbalance.

The airfreight market is showing consistent improvement after a challenging early part of the year. Volume is down for September according to the latest figures available from the IATA.

Retail inventories haven’t had much luck with stability, either. According to the U.S. Census Bureau, the total business inventory-to-sales ratio recently reached a new low after hitting a record-high earlier this year in April, leaving retailers struggling to streamline their inventory flow in the wake of the coronavirus. Given these pandemic-induced struggles, many are wary of what’s in store for shipping as we head into 2021.

Despite a call for caution, more than 120 shipping giants are working towards decarbonizing the industry, while the impending U.S. Maritime Administrator nominee offers a similar opportunity for reducing global shipping’s carbon emissions. Such environmental initiatives help provide a brief glimmer of hope amid all of the chaotic disruption the industry is currently facing.

With a COVID-19 vaccine likely on the horizon, the massive work now begins for the global supply chain to get it distributed. It’ll perhaps be the biggest, most important, and difficult GLOBAL supply chain challenge, ever!

Here’s a more in-depth breakdown of this week’s curated content:

ByNick Hammons

6 Ways Supply Chain Stability Is at the Mercy of the Coronavirus

Just when supply chain instability caused by the trade war with China seemed to be easing, the coronavirus struck, crippling businesses and causing concern for people around the world.

  • According to Britain’s MRC Centre for Global Infectious Disease Analysis, one percent of those who contract the virus will die from it
  • After one of their China employees came down with the virus, Singapore’s largest bank evacuated hundreds of staff
  • The US State Department has given Hong Kong consular staff the option to leave, though most are expected to stay

Soon, the hardest times of the trade wars might seem like the good old days. Here are six ways the coronavirus impacts supply chains today and will continue to do so for an unspecified time.

  1. Internal Disarray | There are factories and shipping facilities that that have been closed by local government that the Chinese Communist Party (CCP) insists be opened. Factories that remain closed even though they could be open may strike us as wasteful, but what if those facilities are potential hotbeds of disease? Who is going to win these battles, governments or the party? No one knows.
  2. Reports of Factory Openings Can’t Be Trusted | Your factory may tell you that they will reopen on a given date, only to tell you on that date that they are still not open and won’t be for another week. As noted in #1, factories are at the mercy of local governments and the CCP as to when they can open. There are rumors that some factories will not open until March. Some analysts have advanced the theory that picking opening dates that are advantageous to its stock market is more important to China than facility safety.
  3. Open Doesn’t Mean Operating at Full Speed | As CBS reported on February 10, two of Apple’s Foxconn factories have reopened, but only about 10% of their workforce has returned to work. These facilities are responsible for most iPhone production. A substantial percentage of Chinese workers are migrants who may be caught up in travel restrictions. Until factories actually open, they have no idea how many workers will show up to work. If a company with the economic power and influence of Foxconn can have its productivity stifled, just think how difficult reopening is for smaller factories.
  4. Chinese Factories Often Rely on Foreign Suppliers | Even if a factory is open and its entire workforce reports to work, it can’t make goods if the parts it needs are held up due to shipping constraints. Just as airlines have stopped flying to China, shipping lines have stopped going there as well. Plus, there are major workforce shortages on the docks and an inability to move goods inland via truck, train or plane. Even with much less traffic to handle, China’s ports can’t keep up due to the lack of workers.
  5. Factories in Other Asian Nations Rely on Chinese Suppliers | This is the flip side of #4. In recent years many manufacturers have moved their factories out of China to reduce costs and keep their goods tariff free. But if the factory has moved to Vietnam or another country in Asia, it’s almost surely reliant on parts and supplies they receive from China. That means their factory is subject to most of the supply-chain problems Chinese factories cope with.
    • In Vietnam, 50 percent of component parts in goods manufactured there are sourced from China. In additions to the problems in China, the government of Vietnam is blocking imports from China to block importation of the virus.
    • According to the Washington Post, garment manufacturers in Cambodia get 60 percent of their raw materials from China. Reduced production has manufacturers considering layoffs.
    • A Hyundai plant in Korea suspended operations because it was receiving no parts from China.
  6. Problems Won’t End When the Virus Does | If the coronavirus ends tomorrow, your Chinese factories will still feel the economic impact of having been shut down for weeks. Add to that all of the pre-virus problems that started to emanate from China as relationships with factories and suppliers changed due to the trade war and many manufacturing operations being moved out of China. For many American companies, relationships with Chinese companies were already starting to suffer. The coronavirus has only intensified the problem.

Final Thoughts

Navigating the logistical twists and turns of the coronavirus is a major challenge, and will remain so for some time. Trade with China in particular and Asia in general is a major part of Jaguar Freight’s business. You can be sure that we will stay on top of the coronavirus situation.

For manufacturers looking for a new, more stable source of goods, take a look at our article, Mexico: An Increasingly Attractive Option for Sourcing US-Bound Goods.

To learn more about how Jaguar Freight can help you through these troubling times, contact us today.

ByNick Hammons

Incoterms® 2020 Takes Effect: Your Questions Answered

Incoterms® 2020 went into effect on January 1, 2020. Here are answers to many common questions, including what changes have been made in the newest version of Incoterms®.

What are Incoterms®?

Incoterms® are 11 predefined rules, or terms, published by the International Chamber of Commerce (ICC) to reduce uncertainties and ambiguities in contracts for international trade. Use of an Incoterm® three-digit code in a contract removes the need to write out the full text of that rule.

As described on the ICC website, “The Incoterms® rules are the world’s essential terms of trade for the sale of goods. Whether you are filing a purchase order, packaging and labelling a shipment for freight transport, or preparing a certificate of origin at a port, the Incoterms® rules are there to guide you. The Incoterms® rules provide specific guidance to individuals participating in the import and export of global trade on a daily basis.”

What Do Incoterms® Cover?

In a sales contract, Incoterms® delineate the primary obligations and responsibilities of the buyer and the seller, including:

  • When delivery takes place
  • When risk is transferred from seller to buyer
  • Export and import clearance and insurance
  • How any other costs that pertain to the delivery of the goods are divided

What Do Incoterms® Not Cover?

A complete contract cannot be written with the use of Incoterms® alone. Important elements of a contract that Incoterms® do not cover include:

  • Price of the goods
  • Title transfer
  • Payment obligations and terms in detail
  • Vessel requirements
  • Unforeseeable circumstances that prevent either party from completing the contract (force majeure)
  • Termination
  • Trade restrictions
  • Compliance issues
  • Jurisdiction-specific laws and regulations

How Are Incoterms® Created?

Incoterms® have been a project of the ICC since 1936. For each revision the ICC assembles an international panel to work out the specific terms. Incoterms® 2020 is the fourth revision in the last 30 years. Each of those revisions have been published in the first year of a new decade: 1990, 2000, 2010 and 2020. Incoterms® 2020 marks the first time that authors from China and Australia were included on the panel. Other Incoterms® 2020 authors are from the United States and the European Union.

Are Incoterms® Laws?

No, Incoterms® rules are not laws. Parties to a contract may agree to use Incoterms® as a convenient way to make sure they understand the specific details of a contract without having to write out those details. However, the parties may decide to not use Incoterms® and fully customize their contract instead.

What Are the 11 Terms of Incoterms® 2020?

Here’s a general overview of the 11 rules of Incoterms® 2020. Each rule includes sections and subsections. For detailed versions of the rules, see the answer to “How Do We Get a Complete Copy of Incoterms® 2020?” below.

These seven terms are for any mode of transport:

  1. CIP/Carriage & Insurance Paid To | The seller delivers the goods to the carrier or the buyer’s appointed agent and pays for international carriage and insurance.
  2. CPT/Carriage Paid To | The seller delivers the goods to the carrier or buyer-appointed agent and pays for international carriage.
  3. DAP/Delivery At Place | The seller delivers the goods by making them available to the buy at a named place.
  4. DDP/Delivered Duty Paid | The seller delivers the goods by placing them at the buyer’s disposal, already cleared for import with duties paid and ready to be unloaded at a named place.
  5. DPU/Delivered at Place Unloaded | The seller delivers the goods by unloading them at a named place.
  6. EXW/ExWorks | The seller makes the goods available to the buyer at the seller’s premises. At that point the buyer is fully responsible for the cost and risk.
  7. FCA/Free Carrier | The seller delivers the goods (or pays to have them delivered) to the carrier or agent named by the buyer. The seller accepts the risk and cost of loading the goods on the means of conveyance provided by the carrier. Once the carrier is in possession of the shipment, responsibility is transferred to the buyer.

These four terms are for ocean and inland waterway transport only:

  1. CFR/Cost & Freight | The seller pays for the costs and freight of the goods to a named destination and delivers when the goods are on board a vessel nominated by the buyer.
  2. CIF/Cost, Insurance & Freight | The seller pays for the costs, freight and insurance to a named destination and delivers when the goods are on board a vessel nominated by the buyer.
  3. FAS/Free Alongside Ship | The seller delivers the goods by placing them alongside a vessel nominated by the buyer.
  4. FOB/Free on Board | Once the goods are on board a vessel nominated by the buyer, they are considered delivered by the seller. At that point they become the responsibility of the buyer. Until then, the seller is responsible for delivering the goods, loading them onto the ship and all costs of duties including the terminal handling charge.

What Significant Changes Have Been Made in Incoterms® 2020?

Several significant changes from Incoterms® 2010 have been made in Incoterms® 2020, including:

  • DAT (Delivery at Terminal) has been renamed DPU (Delivered at Place Unloaded) for 2020. The reason for the change is that goods frequently need to be delivered directly to a factory or warehouse rather than to a terminal.
  • FCA (Free Carrier) has been updated to fix what was a common problem with transactions involving letters of credit. Banks often require the seller to present a Bill of Lading with an On-Board notation so the bank could recognize that the transaction was complete before making payment on the letter of credit. Incoterms 2010 did not provide for the option of an On-Board notation; Incoterms 2020 does.
  • The level of insurance required for CIP (Carriage & Insurance Paid To) has been raised, while the requirement for CiF (Cost, Insurance & Freight) remains the same. The difference in requirements is because CIF is far less likely to cover goods with a high value per unit. In both cases, the seller is responsible for the cost of insurance.
  • Unlike Incoterms 2010, Incoterms 2020 recognizes that sellers might deliver goods using their own vehicles (DIY seller) without the involvement of a third party to make the delivery for them.
  • Security has become a greater concern since 2010, and Incoterms 2020 recognizes the heightened security requirements now in effect. Incoterms 2020 rules detail those requirements when discussing buyer/seller responsibilities for each trade item.

Is Incoterms® 2020 Now the Only Version that Can Be Used?

No, Incoterms® 2020 is not the only version of the rules that can be used. In fact, any previous edition can be cited in a contract simply by stating the year of that version. For example, the rule for Cost, Insurance & Freight (CIF) has changed for 2020. If the parties to the agreement wanted to use the rules from 2010, that rule would be cited in the contract as CIF 2010. If the contract were to state CIF with no year following it, then CIF 2020 would apply, as it is now the default rule. To avoid confusion, it is best to always state the version year for each Incoterms® rule in the contract.

How Do We Get a Complete Copy of Incoterms® 2020?

Any business that engages in international trade on a regular basis would be well-advised to become familiar with the details of the Incoterms® 2020 rules and to keep a copy of the complete rules on hand for reference. Here are two ways to get the complete rules. Please note that Jaguar Freight does NOT receive a commission for sales of Incoterms® 2020.

If you’re paying in euros, you can purchase a copy of Incoterms® 2020 as a book or eBook directly from the International Chamber of Commerce.

If you’re paying in US dollars, Incoterms® 2020 is available in paperback on Amazon.com.

What Should We Do If We Aren’t Sure We Understand Certain Rules?

Jaguar Freight is always here to help. If there are Incoterms® 2020 rules or rule changes that you find confusing. don’t hesitate to contact your Jaguar Freight agent at (516) 600-0170 or send us a message.

ByNick Hammons

10 Essential Year-End Trade Stories You May Have Missed

At the hectic ending of one year and the beginning of another, it’s easy to miss items you would have paid attention to at any other time of year. Jaguar Freight has put together this overview of 10 items that may have escaped your attention. It’s a good read that will help get you caught up in a hurry.

1.  Full Senate Approval Is Last Step for USMCA

The United States-Mexico-Canada Agreement, the replacement for NAFTA, was passed by the Senate Finance Committee on January 7 and awaits passage in the full Senate. After being ratified by Canada and Mexico, the original version of the trade pact was held up in the House of Representatives as Democrats negotiated to secure higher labor and environmental standards. The House passed the bill with negotiated changes last month and sent it on to the Senate.

Source: CNBC

2.  Europe Leads Descent Into Worldwide Export Recession

The heady high-export days of 2018 gave way to three consecutive declining quarters of export activity for all regions, including Asia, Americas, Europe, and Middle East & Africa (MEA), statistically putting the world in an export recession. The downturn was led by Europe, which had enjoyed the greatest export growth in Q1 and Q2 of 2018. The global decline in exports accelerated throughout 2019, reaching a low point in Q4. Looking ahead, the US trade deficit with the EU could trigger a new trade war in 2020.

Source: Panjiva

3.  Trade Volume Expected to Grow in 2020

IHS Markits forecasts that world trade volume will grow by 2.7 percent in 2020. This follows increases of only 0.6 percent in 2018 and 0.3 percent in 2019. IHS Markits acknowledges that their forecast is vulnerable to several key factors, including:

  • Lower growth in the US and Canada
  • Unpredictability of US trade policies
  • Impending presidential impeachment and upcoming election
  • Outcome of US-China trade negotiations
  • Brexit

Source: IHS Markits

4.  Trade War Leaves Scars

Bilateral trade between the US and China fell 15.2 percent over the 12-month period ending November 30, 2019. Comparing that period with the previous 12 months, US exports to China dropped 21.6 percent, while China exports to the US fell only 2.2 percent. Some analysts believe the new trade agreement announced between the two countries will strongly favor the US, but the deals of Phase 1 purchase commitments have not been completed.

Source: Panjiva

5.  Experts Disagree on Trade War’s Biggest Loser

Foreign Affairs asked a large pool of trade experts whether they agreed or disagreed with the following statement: “The trade war has hurt the United States more than it has hurt China.”

Here’s how they responses broke down:

  • Strongly Agree – 5
  • Agree – 13
  • Neutral – 9
  • Disagree – 12
  • Strongly Disagree – 4

Obviously, there is no clear consensus on the question of who the trade war’s biggest loser is. Click the link below to see who responded and read their thoughts on the matter.

Source: Foreign Affairs

6.  British Industry Starts Pullback From EU

Boris Johnson’s recent landslide victory is a clear sign that a final Brexit agreement may be near. British industrial firms aren’t waiting to update their supply chains. Over the 12 months prior to October 31, 2019, the proportion of intermediate industrial supplies and equipment sourced from Europe declined from 51.6 percent in 2015 to 48.5 percent in 2016 to 45.9 in 2019. This number is almost certain to decline substantially over the next 12 months.

Source: Panjiva

7.  Continued Slow Growth Forecast for 2020

Due to a slower recovery in trade and investment, the World Bank lowered its global growth forecasts for 2019 and 2020. Calling out 2019 as the weakest economic expansion since the global great recession of a decade ago and citing continued vulnerability to trade volatility and geopolitical tensions, the World Bank reduced forecasted growth for both years by 0.2 percent in its Global Economic Prospects report. The growth forecast is now 2.4 percent for 2019 and 2.5 percent for 2020.

Source: World Bank

8.  US Trade Deficit Reduced but Not Eliminated

Trade deficits are the Trump administration’s favorite way of measuring the fairness of trade relationships. So, it’s notable that the trade war with China reduced that year-to-year trade deficit by 10.2 percent. Also notable is that the current deficit is still 6.4 percent higher than it was in 2016. The second-largest contributor to the trade deficit is the EU, where the deficit has grown by 22.4 percent since 2016, including a 6.4 percent rise in the past 12 months. According to the Financial Times, the US Trade Representative is focusing on the deficit with the EU.

Source: Panjiva

9.  Three Factors Could Prove Problematic for Positive Growth Outlook

The International Monetary Fund is predicting a strong rebound in 2020, with global growth expected to reach 3.4 percent. Though less aggressive, the World Bank is also forecasting healthy growth figures. These predictions could be in trouble if any of three potentially problematic factors come into play:

  • Trade wars
  • Slowing of the economy in China
  • Global debt.

Follow the link below for an in-depth look from Foreign Policy.

Source: Foreign Policy

10.  Businesses Getting Used to Trade Volatility

While trade volatility is never preferred to certainty, businesses seem to be getting used to the uncertainty of today’s trade policies. At least that’s what the conference call monitoring data shows. Since October 31, the proportion of calls that included mention of tariffs or Brexit dropped to 20.9 percent, the lowest since Q2 2018.

Source: Panjiva

Whether you were already aware of all 10 of these items (if so, go to the head of the class) or every one of them was new to you, Jaguar Freight wants to assure you that we stay on top of everything in the world of global shipping. Whenever you need our insight or help with a specific shipment, reach out to your Jaguar Freight contact at (516) 600-0170, or send us a message.

ByNick Hammons

4 Factors Impacting Maritime Shipping’s Slow Switch to Low Sulfur Fuels

A 2016 report by Finland estimated that failure to reduce sulfur oxide emissions from ships would contribute to more than 570,000 additional premature deaths worldwide between 2020-2025. The International Maritime Organization (IMO) decided to take action. The result was IMO 2020, which sharply reduces acceptable sulfur content from a maximum of 3.5 percent to 0.5 percent.

Even though the IMO 2020 rule takes effect on January 1, 2020, ship owners have not been quick to switch over. Here’s why.

1)    Dropping cost of high-sulfur fuel oil (HSFO)

With HSFO ceasing to be a fuel option for most ships (those without scrubbers, see below) on January 1, 2020, suppliers are doing everything they can to sell it. Even with supplies falling fast, prices remain very low. In some areas the price of HSFO has dropped by as much as 30 percent, making it a much cheaper alternative to compliant fuels.

It looks like many ship owners will continue to use HSFO until supply dries up completely or the year ends, whichever comes first. As Stephen Jew, director of global refining and marketing at IHS Markit said in an interview with JOC, “There’s no incentive for carriers to burn it yet. They’re waiting for the very last minute.”

2)    Dependable track record of motor gasoil (MGO)

The easiest and most conservative course of action for ship owners will be to switch to MGO, the equivalent of heating oil. Low-sulfur MGO is already in use in designated emission control areas, where the sulfur content standard is currently 0.10 percent. That requirement will not change under IMO 2020, though new areas may be designated as emission control areas.

The quandary for ship owners is that the low-sulfur fuels now in production are priced significantly less than MGO. But they have no experience with these fuels. They have to decide whether to go with the lower-priced fuel or the one they know they can depend on.

3)    Questions about very low sulfur fuel oil (VLSFO)

There has been very little demand for VLSFO to date. With the exception of some parts of Taiwan and in small emission control area zones in China, there is virtually no market for VLSFO. As explained above, there is no demand VLSFO today because of the extremely low cost of HSFO. But ship owners also have questions about VLSO.

No one doubts that ships will run on VLSFO, that has already been proved. But what will be the short- and long-term effects on the ships themselves? Will there be an impact on maintenance requirements? Will it cause parts to break down that are not affected by long-relied-on fuels like MGO and HFSO?

As the head of one freight shipping executive put it, “It would not be acceptable to have even one ship drifting powerless at the mercy of the ocean.”

4)    Use of scrubbers

The one way that ships will be able to continue to use HSFO will be if they are equipped with exhaust gas cleaning systems (EGCS) known as scrubbers. By removing sulfur oxide from the ship’s engine and boiler gases to a point equivalent to the reduced sulfur limit, scrubbers comply with IMO 2020.

However, scrubbers use a lot of water, which needs to be discharged as wastewater after use. IMO guidelines for wastewater discharge, last updated in 2015, are currently under review. A change in the guidelines could result in unanticipated costs for ship owners using scrubbers. Also, some ports have already banned wastewater discharge.

IHS Markit estimates the number of ships fitted for scrubbers will reach 2,600-2,700 in 2020.

It’s important to note that ships powered by liquid natural gas or biofuels will not be affected by IMO 2020. An increase in the use of LNG to power ships is anticipated.

Expect cost increases

Whether ship owners choose to install scrubbers or change fuels, the additional costs to the container shipping industry are expected to be in the $10 billion to $15 billion range. Naturally, a portion these cost increases (if not all) will be passed on to shippers.

At this point it looks like we are in for an adjustment period until a new “normal” is established. As things change, Jaguar Freight will keep you informed.

If you have questions or concerns about how IMO 2020 will affect your shipments, don’t hesitate to call your Jaguar Freight agent at (516) 600-0170 or  send us a message.

ByNick Hammons

EU Large Civil Aircraft Final Product List

Note 1: This list of products subject to additional duties is provided for information purposes only. The definitive product coverage will be determined by amendments to the HTSUS that USTR will publish in an upcoming Federal Register notice. The effective date of the additional duties is October 18, 2019.

Note 2: As specified below, in certain cases, the product description defines and limits the scope of the additional duties. Otherwise, and unless explicitly stated to the contrary, the product descriptions are provided for informational purposes only, and do not limit the scope of the additional duties. In the product descriptions, the abbreviation “nesoi” means “not elsewhere specified or included”. Any questions regarding the scope of a particular HTS statistical reporting number should be referred to U.S. Customs and Border Protection.

Download Section 301 Investigation – EU Large Civil Aircraft Final Product List

If you’re interested in learning how Jaguar Freight can help you navigate the scope of additional import duties, contact us today.

ByNick Hammons

Mexico: An Increasingly Attractive Option for Sourcing US-Bound Goods

According to the Office of the United States Trade Representative, at $611 billion, Mexico was the third-largest trade partner of the U.S. in 2018. Only China ($737.1 billion) and Canada ($714 billion) ranked higher.

In 2019, the intersection of three circumstances points to the likelihood that trade with Mexico will increase significantly in the coming years. Those three circumstances are:

  1.  The ongoing trade war with China showing no signs of abating
  2.  Repercussions of the US-China trade war in Southeast Asia
  3.  A new trade deal with Mexico and Canada on the horizon

Fallout of the US-China Trade War

The U.S.-China trade war continues with no end in sight. The U.S. recently postponed new tariffs on many consumer goods from China (including cell phones, laptop computers and toys) until after the start of the Christmas shopping season. But that postponement followed quickly on the heels of the U.S. labeling China a currency manipulator, opening a new front on what had been exclusively a trade war.

Fred Bergsten, director emeritus of the Peterson Institute for International Economics said this of the action. “The trade war has now become a currency war, and the Chinese are undoubtedly going to take further action.”

Many manufacturers and suppliers have already relocated or considered moving their China operations to Vietnam, but that has prompted outcries from the Trump administration that Vietnam is an unfair trade partner. The U.S. has not ruled out tariffs on shipments sourced from Vietnam, which some observers seem as likely.

The only thing clear in the current situation is that China and Southeast Asia are becoming less stable and less inviting sources of goods and supplies as the short and long-term costs of doing business remain uncertain.

Replacing NAFTA With USMCA Promises Stability

On November 30, 2018, the United States, Mexico and Canada signed the USMCA trade agreement. Negotiations had begun in 2017 to create a new trade deal that would replace the North American Free Trade Agreement (NAFTA), which had governed trade between the three North American countries for 24 years.

The agreement has been ratified in Mexico and Canada, but not in the United States. Democrats in the House of Representatives refuse to ratify the agreement until changes are made in the areas of labor, environment, pharmaceuticals and enforcement. Objections of this type are not unusual, and have been handled in the past in several ways.

NAFTA was not ratified until two side agreements were added: the North American Agreement on Labor Cooperation and the North American Agreement on Environmental Cooperation.

The United States-Korea Free Trade Agreement (KORUS FTA) was signed in 2007, but congressional objections to treatment governing bilateral trade of automobiles and U.S. Beef Exports delayed ratification. After several years (and a change in U.S. presidential administrations), the U.S. and Korea renegotiated the agreement to the mutual satisfaction of all stakeholders. When the agreement went into effect on March 15, 2012, it became the first free trade agreement between the United States and a major Asian economic power. It was also the largest trade deal since NAFTA.

These precedents indicate it is highly likely that the USMCA will be revised as necessary and ratified by all three nations. Given the way trade in all three countries has benefitted from NAFTA, it’s clear that the stakes are too high for there not to be an agreement.

One recent incident that points out just how desirous Mexico is of continuing free trade with the United States occurred when President Trump threatened to levy tariffs on Mexican shipments unless Mexico did more to stem the flow of illegal migration to the United States. Mexico responded immediately, meeting with U.S. representatives and outlining new steps they would take to help reduce the number of migrants entering the U.S. outside legal channels. As a result of Mexico’s cooperation, the U.S. rescinded its tariff threat.

Once the USMCA is in effect, it promises to bring another generation of stability and cost certainty to U.S.-Mexico trade relations, something that cannot be said of U.S. trade with Asian nations today.

The timing is perfect. As was published in the Journal of Commerce last year, “(Mexico’s) $1 trillion economy now has developed businesses and capital that can meet rising emerging market demand for its goods, both in the Americas and in other world regions.”

Having a Partner You Can Depend On

If you haven’t been sourcing goods and supplies from Mexico, getting started can be daunting, especially since shipping from Mexico has historically been associated with poor service and delays.
Fortunately, in Jaguar Freight you have a friend in the business that has successfully and seamlessly managed freight on the Mexico-USA trade lane for years.

In Mexico, as throughout the world, we’ve built our reputation on providing supply-chain leadership in the form of first-class logistic services. To that end, we’ve developed our own, proprietary, supply chain software solutions — such as the CyberChain™ software suite — and marry them with logistic experts in ocean, air, and truck freight to deliver excellence to our clients.

As our client, you have a personal point of contact assigned to you, so you always have one consistent voice to rely on no matter where you’re shipping.

Three Things You Should Do Now

  1.  Make sure your representatives in Washington know you support USMCA
  2.  Watch for ratification of USMCA in the US
  3.  Contact Jaguar Freight to discuss how we can meet your needs in Mexico

Given the turbulence of today’s trade environment, all importers should feel reassured to see Mexico poised to become an even more prominent — and stable — source of goods and supplies.

If you’re interested in learning how Jaguar Freight can help you with shipments from Mexico, contact us today.

ByNick Hammons

US Trade Representative Lists Exclusions and Additions to China Tariffs

Exclusions — Third Tranche

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.

  1. Container units of plastics, each comprising a tub and lid therefore, configured or fitted for the conveyance, packing, or dispensing of wet wipes (described in statistical reporting number 3923.10.9000)
  2. Injection molded polypropylene plastic caps or lids each weighing not over 24 grams designed for dispensing wet wipes (described in statistical reporting number 3923.50.0000)
  3. Kayak paddles, double ended, with shafts of aluminum and blades of fiberglass reinforced nylon (described in statistical reporting number 3926.90.3000)
  4. High tenacity polyester yarn not over 600 decitex (described in statistical reporting number 5402.20.3010)
  5. Nonwovens weighing more than 25 g/m2 but not more than 70 g/m2 in rolls, not impregnated coated or covered (described in statistical reporting number 5603.92.0090)
  6. Pet cages of steel (described in statistical reporting number 7323.99.9080)
  7. Carts, not mechanically propelled, each with three or four wheels, of the kind used for household shopping (described in statistical reporting number 8716.80.5090)
  8. Truck trailer skirt brackets, other than parts of general use of Section XV (described in statistical reporting number 8716.90.5060)
  9. Inflatable boats, other than kayaks and canoes, with over 20 gauge polyvinyl chloride (PVC), each valued at $500 or less and weighing not over 52 kg (described in statistical reporting number 8903.10.0060)
  10. Inflatable kayaks and canoes, with over 20 gauge polyvinyl chloride (PVC), each valued at $500 or less and weighing not over 22 kg (described in statistical reporting number 8903.10.0060)

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:

  • Whether the particular product is available only from China and specifically whether the particular product and/or a comparable product is available from sources in the United States and/or third countries.
  • Whether the imposition of additional duties on the particular product would cause severe economic harm to the requestor or other U.S. interests.
  • Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.

If more exclusions are granted, they will be announced on a periodic basis. Watch for news of those announcements here.

Additions — Fourth Tranche

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.

List 4A (Effective September 1, 2019)

List 4B (Effective December 15, 2019)

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.

ByNick Hammons

3 Reasons to Pause Before You Shift Sourcing from China to Vietnam

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.

1. Vietnam could be next on the tariff hit list

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:

  • Vietnam was added to the Treasury Department’s list of possible currency manipulators in May, which could result in the application of financial penalties
  • In early July, the Commerce Department imposed duties of more than 400 percent on steel imported from Vietnam
  • On July 29th, U.S. Trade Representative Robert Lightizer wrote to the Senate Finance Committee, stating that, “The United States has been clear with Vietnam that it has to take action to reduce the unsustainable trade deficit”

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.”

2. Vietnam’s infrastructure poses challenges

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.

3. Capacity of Vietnam’s ports is limited

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.

The bottom line

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.

ByNick Hammons

Do You Trust Your Supply Chain?

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.

 

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 page for more.

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