Congestion Loops Ports in Delays

A surge of imports at the ports of Los Angeles and Long Beach causes congestion and delays as record import volumes have the ports trying to operate at 105% capacity to keep up. Usually running at 80-85%, the port relies on buffer seasons between busy times to play catch up, but that relief has been absent since the summer.

Medical shipments, restocking, blanked sailings, and the coming holiday cargo have created a perfect storm of issues for import cargo bottlenecked as it tries to travel into the nation. This triple or quadruple peak season is that much more work with the same space, same crew, and same acreage yet reduced storage capacity as warehouses are still full from blanked sailing rolls early on in 2020. The delays cause a struggle down the entire supply chain as truck turn-times are up more than 21%, and containers are sitting upwards of 3.25 days, which is more than half a day longer than in July.

The high export demand in Asia causes cargo rollovers as transshipments aren’t finding space on incoming vessels as the surge of holiday exports soak up any extra space. With that much laid over cargo, any additional vessel spots are quickly taken, complicating the awaiting cargo at further ports. The higher the demand for more freight from Asian ports, the larger the overflow of containers waiting will grow.

The best way to deal with this level of import congestion is to keep reliable communications with your forwarder. We at Edward J. Zarach & Associates have built strong relationships with carriers over the years so we can weather these tumultuous situations with minimal disruption. Giving us advance notice of your equipment needs, loading availability, and being flexible with your routings are the best ways we can avoid delays and costly diversions for your cargo.

Agency & Regulatory Updates

A great deal of agency and regulatory news has been circulated since September as more deadlines appear and pass with new compliance standards attached. Most crucial, this year, as an even-numbered year, requires food facilities that are certified by the FDA to renew their registration at some point from October 1st through December 31st. If you’re stressed about your FDA registration, your Edward J. Zarach & Associates representative has you covered. We can advise and assist so that you can easily prepare to renew before the end of the year.    

Another important update comes to us via NOAA Fisheries who announced a new importers list, SIMP   (Seafood Import Monitoring Program) Compliant Importers List as a further tracing program for aquaculture regarding thirteen species that are most vulnerable to fraud, requiring importers to keep strict records and reports. The SIMP Compliant Importers list has no inclusion costs for importers and allows for less frequent audits for importers with a solid compliance record. If you’d like to be included on this list, your Zarach representative can assist you with the application. If your compliance record needs improvement, we can offer an audit and advisement on how to improve your processes to remain in compliance and achieve placement on this list.

Further seafood and compliance news come from the FDA’s final determination that the Netherlands and Spain have a system of food safety control methods for raw bivalve mollusks and shellfish that meets the U.S. standards of sanitation and will allow importation into the US from those locations if they’re listed on the Interstate Certified Shellfish Shippers List.

Customs has published a new regulatory rule in regards to steel licenses.  CSMS# 44205882 states that starting on October 13 the steel license platform now requires applicants to provide information about the country of melt and pour on all standard licenses from all countries.

Because compliance news comes out fast and furious, we think it’s critical that our audience is kept up to date on the most important issues that impact your business. Not every update is pertinent to each client, but if you have concerns about remaining compliance on a single issue or if you need guidance to update your business, Edward J. Zarach & Associates can work with you to customize a plan of solutions to fit your situation and budget.

Rates and congestion cloud peak season

Rates, capacity, and equipment are coming together in a perfect storm for shippers leading into the holiday season. Since the shutdown for Chinese Lunar New Year, it’s been an uphill struggle to get international logistics back running at the same speed. While equipment imbalances escalated due to blanked sailings, grounded passenger flights reduced belly capacity and forced more cargo to ship via ocean, taking up more containers, and so on until rates soared and transit times slogged. These issues have had a domino effect on the entire logistics network impacting trucking and rail alongside ocean and air shipments.

Current spot rates for ocean containers from Asia to the U.S. are running from $4,000 to the west coast and $5,000 to the east coast. Rail rates east from the west coast are up by $1500, with excess cargo rates looming at $3500 over the regular price. For the first time, truck rates are cheaper than rail on eastbound travel from the west coast. Cross-border trucking is also climbing in cost as the U.S. border with Mexico sees unprecedented delays and traffic re-routings through residential areas as the car manufacturer shipments fire back up after halting at the beginning of the pandemic.

When the pandemic hit, capacity was taken out of the market under the assumption that demand would drop but with nothing else to do, internet shopping became everyone’s favorite hobby. Once store shelves were stripped, the race to restock was on, and the reduction in capacity was felt around the planet. Rates are so out of control that the FMC and China have threatened to step in and investigate unless the graduated rate increases are removed, and sailings restored to normal. Maersk has already dropped its rate increases, and others should follow along soon.

It’s times like this that we learn the price of a volatile market. Preparation, communication, and anticipation are the only way to mitigate the current issues. During this, we depend on our relationships with carriers, contract rates and services, and broad knowledge of the best routes, alternative options, and alternatives to the alternates just in case. With a long-established industry expert in your corner to communicate changes and you can take advantage of your opportunities in times like these. Your representative at Edward J. Zarach & Associates is uniquely talented at helping you navigate the particulars of this market.   

Paid 301 China duties on Lists 3 or 4a?

File with the CIT by September 18th to protect your rights to a full refund.

A recent lawsuit brought against the Office of the US Trade Representative and Customs and Border Protection by a vinyl tile supplier seeks a refund of all Section 301 duties paid on Lists 3 and 4a.

The crux of the suit claims that the List 3 and 4a tariffs were retaliatory in nature and not remedies to unfair trade practices – a requirement of the Section 301 trade remedies. Though initially set to counter China’s intellectual property theft, further tariffs, including List 3 and 4 were not part of the USTR’s original finding and came about only after China applied tariffs against the US as trade tensions escalated.

If you are an importer and have paid duties on Section 301 goods from List 3 or 4a, you may be entitled to a complete refund, but the deadline to file with the Court of International Trade is only 72 hours away and must be done by Friday, September 18th.

Edward J. Zarach & Associates recommends you contact your Customs attorney immediately for advice and counsel. If you do not have designated counsel, we are happy to provide you with several recommendations.

Revised EU Section 301s

We’ve spent a lot of time during the last year discussing US trade remedies, especially where China is concerned. It’s a unique situation where people not impacted by logistics careers start to understand more about international trade because our industry has been in the news so frequently. Effective September 1, 2020, the USTR has released an updated list of goods subjected to Section 301 tariff remedies against the EU (15% for aircraft parts and 25% for everything else ), an action related to the WTO’s Airbus dispute resolution.

The list revises earlier dutied products, removing those from Greece and UK and replacing them with the same value of goods from France and Germany after a comment period was opened up in July to allow discussion on the trade remedies initially proposed. From that comment period, a few updates have happened.

From JDSupra the updates are as follows:

  • Removed from list:
    • 0406.90.99 – Cheeses & subst. for cheese (incl. mixt.), nesoi, w/o cows milk, w/butterfat over 0.5 percent by wt, not subject to GN15 – Products of Greece.
    • 1905.31.00 – Sweet biscuits – Products of United Kingdom
  • Added to the list:
    • 1905.31.00 – Sweet biscuits – Products of Germany
    • 2007.99.05 Lingonberry and raspberry jams – Products of France or Germany
    • 2007.99.10 Strawberry jam – Products of France or Germany
    • 2007.99.15 Currant and other berry jams, nesoi – Products of France or Germany
    • 2007.99.20 Apricot jam – Products of France or Germany
    • 2007.99.25 Cherry jam – Products of France or Germany
    • 2007.99.35 Peach jam – Products of France or Germany
    • 2007.99.60 Strawberry pastes and purees, being cooked preparations – Products of France or Germany

As we’ve discussed in the past, it’s important to remember that these are the only tariffs in this action against the EU, but may see a retaliatory tariff application from the EU on the US as a similar case of illegal subsidies with regard to Boeing is still pending at the WTO. Because these current duties are in response to the EU offering similar subsidies to Airbus, there’s no reason to think the WTO won’t be consistent in allowing the same retaliation against the US when the Boeing case is settled. It’s important to note, there will likely be retaliation because the US came out quick and strong once the Airbus decision was reached.

If you’re working to import goods marked for Section 301 tariffs from the EU or need to investigate your supply chain for alternative products or just want to see what options you have to import your cargo, you can trust the professionals at Edward J. Zarach & Associates. Reach out to your representative today to make a comprehensive cargo plan!

Hong Kong and COVID stall US China review

USTR clarifies Section 301 duties

Originally, the U.S. and China Phase One trade agreement was going to be reviewed at the six-month mark, which came and went on Saturday, August 15th, though President Trump has publicly commented that he’s satisfied with the movement of the deal. There is no detailed explanation for why the review didn’t happen. Some offer terms that this would give China more time to meet their purchase requirements of agricultural and energy products; issues with which were compounded as the world slowed down to stop the global pandemic of Coronavirus.

Should the review have happened as scheduled, the deal would not look as good as it might look given time for China to catch up on purchases they’re required to make under the agreement. More time allows them more spending and sets the negotiation in a more positive light, as currently, it doesn’t appear China is complying as they only completed 25% of the purchases to which they’d committed. Giving them extra time and reviewing later may set this in a better light and give both sides more confidence to go forward with continued agreements in the negotiation. It should also be said, that a more successful deal will be better received by the U.S. and could have more of an impact during the U.S. election.

The delay also allows the Chinese time to discuss unrelated trade measures being actioned against Chinese tech companies as U.S. executive orders have banned some transactions.

Last night, another executive order (Executive Order 13936) was recorded to confirm, “Special Administrative Region of Hong Kong (Hong Kong) is no longer sufficiently autonomous to justify differential treatment in relation to the People’s Republic of China (PRC or China) under the particular United States laws and provisions thereof set out in this order.” 

In addition to the EO, the U.S. Customs and Border Protection recently declared effective September 25, imported goods which were produced in Hong Kong must now be marked to indicate China is the country of origin. This also means that goods produced in Hong Kong will be subjected to Section 301 tariffs that impact Chinese exports. Information regarding the new country of origin rules is covered in 19 USC 1304 and can be found here.   

The relationship between the U.S. and China is the most critical in global trade at the moment when everyone is watching to see where we all go from here. Your representatives at Edward J. Zarach & Associates have a unique understanding regarding the fast-moving changes between our nations. We know it’s difficult to work in an environment in flux, but our expertise can help you plan and navigate the period between now and the review. If you have import cargo from China and want to make sure your supply chain is protected from a rapidly changing environment, reach out to us and let us help you stay competitive regardless of the political side.

USTR imposing 25% tariff on French cosmetics, etc.

The USTR has decided to impose a 25% tariff on imports from France as retaliation on the Digital Services Taxes that many EU nations are implementing against technology companies like Google, Facebook, and Amazon. Though the companies aren’t located in France, because they serve the population of France, the nation is implementing a 3% tax on their services. The U.S. has threatened to escalate the tariffs if the DSTs go into effect and for a while, early in 2020, both parties were holding off on the tariffs in favor of negotiation; sadly, that negotiation fell apart when U.S. Treasury Sec. Steve Mnuchin suspended international tax negotiations.

After an investigation by the USTR, it was determined that the DST discriminated against U.S. companies because it’s both retroactive and implemented on revenue and not income. Because of this determination, the USTR recommended up to a 100% tax on a list of products worth $2.4 billion; only 25% taxes were added on $1.3 billion with wine and cheeses left off the list. The current tariffs include cosmetics, soap, and handbags, but aren’t going into effect until January 1, 2021, so parties have a 180 negotiation period to work towards a mutually beneficial solution.

It bears repeating that beyond this issue with French imports the USTR is also investigating nine other E.U. nations that are considering adding Digital Services Taxes to their trade program, but products and levels of retaliation haven’t been released, so this will be a developing story that we will touch on more in the coming months to keep you updated and informed on the negotiations.

Below, you can find a full list of the 21 HTS numbers that are impacted by these tariffs, so you can investigate your cargo and determine if the products you import are implicated. If you have questions or comments and want to work to find new suppliers, new trade lanes, or just be ready to send comments on these products if the USTR opens a discussion, we encourage you to reach out to your Edward J. Zarach representative for more information and guidance.

Impacted HTS Numbers:

  • 3304.10.00 (lip makeup preparations)
  • 3304.20.00 (eye makeup preparations)
  • 3304.30.00  (manicure or pedicure preparations)
  • 3304.91.00 (beauty or makeup powders, whether or not compressed)
  • 3304.99.50 (beauty or makeup preparations and preparations for the care of the skin, excluding medicaments but including sunscreen or sun tan preparations, not elsewhere specified or included)
  • 3401.11.10 (castile soap in the form of bars, cakes, or molded pieces or shapes)
  • 3401.11.50 (soap, not elsewhere specified or included; organic surface-active products used as soap, in bars, cakes, pieces, soap-impregnated paper, wadding, felt, for toilet use)
  • 3401.19.00 (soap; organic surface-active products used as soap, in bars, cakes, pieces; soap-impregnated paper, wadding, felt, not for toilet use)
  • 3401.20.00 (soap, not in the form of bars, cakes, molded pieces, or shapes)
  • 3401.30.10 (organic surface-active products for washing skin, in liquid or cream, containing any aromatic/mod aromatic surface-active agent, put up for retail)
  • 3401.30.50 (organic surface-active products and preparations for washing the skin, in liquid or cream form, put up for retail sale, not elsewhere specified or included)
  • 4202.21.30 (handbags, with or without shoulder strap or without handle, with outer surface of reptile leather)
  • 4202.21.60 (handbags, with or without shoulder strap or without handle, with outer surface of leather, composition or patent leather, not elsewhere specified or included, not over $20 each)
  • 4202.21.90 (handbags, with or without shoulder strap or without handle, with outer surface of leather, composition or patent leather, not elsewhere specified or included, over $20 each)
  • 4202.22.15 (handbags, with or without shoulder straps or without handle, with outer surface of sheeting of plastics)
  • 4202.22.40 (handbags with or without shoulder strap or without handle, with outer surface of textile materials, wholly or in part of braid, not elsewhere specified or included)
  • 4202.22.45 (handbags with or without shoulder strap or without handle, with outer surface of cotton, not of pile or tufted construction or braid)
  • 4202.22.60 (handbags with or without shoulder strap or without handle, outer surface of vegetable fibers, excluding cotton, not of pile or tufted construction or braid)
  • 4202.22.70 (handbags with or without shoulder strap or without handle, with outer surface containing 85 percent or more of silk, not braided)
  • 4202.22.81 (handbags with or without shoulder strap or without handle, with outer surface of manmade fiber materials)
  • 4202.22.89 (handbags with or without shoulder strap or without handle, with outer surface of textile materials, not elsewhere specified or included)

USTR allows comments on Section 301 duties on European Union

The United States Trade Representative (USTR) is requesting comments on further Section 301 duties against the EU under the WTO Airbus decision, which cleared the way for $7.5 billion in retaliatory tariffs because the EU illegally granted Airbus subsidies. Currently, the USTR is reviewing the tariffs on three different groups of products to determine if the tariffs should be continued and/or increased; if the tariffs should be added to products that were initially considered but weren’t added; and new products that are being considered for duties under this action. Comments are due before July 26, 2020, via the online portal.

In October 2019, the US first imposed the Section 301 tariffs against EU products such as airplanes and aircraft, agriculture, and cheese. The new items being looked at include wines, pork products, and olives; some of which were initially suggested but not taxed in the first set of Section 301s. The full text of the USTR notice on the review with comprehensive data on the items being considered can be found here.

The curious issue with the retaliatory tariffs is that there is a parallel case before the WTO regarding the U.S. giving the same sort of illegal subsidies to Boeing, which expected a decision this summer but has been put off due to COVID-19. It should be clear while we discuss these tariffs, we’re looking forward to a similar response from the EU when the WTO Boeing decision is finalized. The situation has been going back and forth between the US and EU since 2004, when The US and EU filed WTO complaints against each other for unfair subsidies. Reuters has a great timeline overview of the escalation and decisions in this case; find it here.

Because this is an on-going situation, we’ll continue to monitor this story as more information becomes available. We encourage leaving comments via the online portal if you’re products are being impacted by these tariffs, or if you have other issues you’d like to have considered. If you have questions regarding this action or would like to look into how this impacts your business, contact your Edward J. Zarach & Associates representative today.

Zarach’s XLERATE is your solution!

As news of the third quarter blanked sailings continues to come in and we hear more information about air capacity tightening with rates climbing, your team at Edward J. Zarach & Associates has a possible solution for your cargo needs in our XLERATE LCL import service. XLERATE offers an express CFS to CFS service from China with a fixed-day arrival that allows you to control your final mile delivery while offering an expedited and reliable LCL ocean service with a simplified rate format. We have the fastest transit time in the market for ocean freight to Los Angeles with expedited transfers to bonded warehouse locations across the United States.

Blanked sailings are intentionally skipped port stops to decrease the supply of space and bolster rates in ocean freight to maintain levels necessary to continue to operate. With demand lower after the COVID-19 outbreak and consumer spending reductions from shut downs, ocean freight is being blanked by many major carriers based on the forecasted demand in the third quarter. This practice causes delays for cargo that is headed to a destination that’s been blanked and prevents repositioning of empty containers where equipment is scarce.

Our LCL import XLERATE service offers an expedited service, faster than standard ocean, cheaper than air freight, with a price* that includes:

  • Ocean Freight from Origin Port to Los Angeles
  • Pier Pass, Chassis, Clean Truck , Chassis Split
  • All Los Angeles Warehouse/ CFS Fees
  • In Bond (IT) Fees
  • All express trucking rate including fuel surcharge from Los Angeles to destination city
  • All Destination Warehouse/CFS charges 
  • Includes cost of pallet for cargo loaded lose in Shanghai.
  • Destination CFS charges included

Our XLERATE service includes nine destinations in the USA from Shenzhen, Guangzhou, Xiamen, Qingdao, or Shanghai:

  • Los Angeles
  • Dallas
  • Memphis
  • Houston
  • Chicago
  • Atlanta
  • Newark
  • Orlando               
  • Tampa
  • Miami

If you’re looking for the best, fastest service for LCL import cargo, you can discuss the rates and options Edward J. Zarach & Associates has in our XLERATE service by contacting your representative or emailing insidesales@intlfreight.net.

* Rate per kilo excludes: Customs Entry, Import Duty, HMF, MPF or other charges payable to US Customs, Delivery from destination city warehouse to final delivery address & Insurance

Out with the old NAFTA, in with the new USMCA

The USMCA will be effective on July 1st and CBP has finally issued instructions for implementation to help guide importers on the updated rules. USCBP will also be offering a help center to offer guidance, clarification, and documentation for those in need to facilitate the smooth implementation of the treaty, which we outlined last month in our blog. Below, you can find the updates that will most likely impact our clients, but it’s by no means comprehensive.

Businesses may be impacted by the changes and will need to review company policies, standard operating procedures, documentation, and make corrections and updates as applicable to become current with the new USMCA requirements.  Keep in mind that updates to the documentation requirements and the rules of origin changes, there may be company policies and procedures that need to be brought current to encapsulate the new rules on required documentation that must be available for reporting.  Considering the importance of these changes and updates, we heartily recommend thorough training for staff and management.

Updated de minimis thresholds:

  • USA – $800 USD
  • Canada – $150 CAD for customs and $40 CAD for taxes
  • Mexico – $117 USD for customs and $50 USD for taxes

Sunset Clause

  • The full term on the USMCA will be 16 years.
  • After 6 years USMCA can be renegotiated, canceled or readopted

Automobiles

Enhanced Regional Value Content for

Total car – 75%

  • Core parts – 75%
  • Principal parts – 70%
  • Complementary parts – 65%

Labor requiring $16 per hour average pay

  • Automobiles – 40%
  • Light Trucks – 45%

Certificate of origin rules

  • formal certification document  isn’t required to come from Importers
  • Commercial invoices are valid documentation of the certificate of origin
  • Documentation can be created by either importers, exporters, or producers of the

Finally, importers should closely monitor for new guidance from your friends at Edward J. Zarach & Associates.  The process of passing and implementing USMCA has proved to be ever-changing, and further updates and clarification are likely to be necessary so you should reach out to us with your questions and concerns.