Sea Level Rising & Ocean Rates with It.

ocean freight rates rising

After months of rising in the ocean freight rate market, prices are starting to reflect the astronomical costs associated with the surges. With costs 547% higher than the seasonal average for the last five years and the caveat that we are not yet even in peak season, concerned suppliers expect 80% of all retail products to spike in price as the season unfolds. While it isn’t just the ocean rates driving up prices, the extremes are definitely the focus among issues happening to impact retail sales as we move into peak season. 

Congestion, disruption, containerships on fire, container stack collapses due to weather, record imports, fleets shut down or grounded due to weather issues, and the explosion of e-commerce during a time almost all cargo space was reserved for PPE has left us in an overwhelming logistics market. Nobody, no experts, no CEOs, no laypeople, nobody knows where this roller coaster of pricing and frankly, craziness, is going to stop or land and what the new normal will be for logistics plans for retail after the crush of 2021 ends. Many will claim to have insight, but it’s best-guess scenarios if not wild speculation. 

We at Edward J. Zarach & Associates have decades of experience and we freely admit the end is wide open for more disruption, a killer app style revamp of modern shipping and logistics, or more likely, enhanced regulations from investigations into the pricing methods of carriers. Our industry is going to collapse under pressure if the current issues persist. 

What we’re seeing with rising prices on retail goods has the potential to reset prices to meet the new costs associated with shipping by ocean freight; the idea that the prices will come down once shipping costs reduce is dependent on the retailers to do the right thing after carriers do the right thing and we see prices come down – unlikely at best. There’s no more difficult fight for consumers than to see prices go down after they’ve risen so much, especially if those consumers eagerly paid higher prices early on in the sales period. 

The most important tool in the current situation is preparation and flexibility as you work with your Zarach representative to find a solution to suit your cargo needs. We have options and ideas to work with every shipper and ensure we choose the right trucking, rail, air, and ocean freight rate options for your timetable. We’re going to develop new strategies to ensure we help you rein in prices and schedules to keep you ahead of the curve!

Container Disruption is Breaking the Bank

Container Disruption continues to drain shippers.

Container disruption in the trans-Pacific market has spread out to hit Asia / Europe, Asia / Mediterranean, and Asia to USEC driving rates up so high that if the numbers weren’t confirmed nobody would believe them. Last year a forty-foot container from Asia to the US west coast was in the $2,000 range and now that cost is nearing $15,000 in some cases. The only good thing to say about that is that it’s not quite reached ten times as much, yet. 

Analysts are calling the situation “a free-for_all” and calling the freight market “broken” as rates continue to soar, the dependability of vessels drops to catastrophic delays, and the air freight market starts to take up the emergency cargo. The chance of getting a space, at any rate, keeping that space, finding equipment, getting it delivered, loaded and returned, put onto a vessel that departs and arrives where it is supposed to be is almost impossible even without the added nightmare of transshipments options. 

In response to this situation, carriers have made the decision to blank sailings between Asia and Europe to try and let the ports catch up on the backlog of cargo waiting for service. While we aren’t sure how fewer vessels will improve the lack of vessel space and container disruption, it’s not bad news for the ports themselves. As we discussed earlier this year, many ships were stuck at anchor in San Pedro Bay, waiting for a berth and in Europe a flood of ships that had been delayed during the Suez Canal blockage was mostly destined for the same ports, hardily burdening the infrastructure. A break isn’t the worst decision, but it does feel like the firefighters just sat down on the curb for a cup of coffee while your house continues to burn behind them. 

As much as we jest to keep from sounding too morose, the ocean freight market is a madhouse and much like everyone else involved in shipping by container, your representatives at Edward J. Zarach & Associates are advocating hard for your cargo with our partners. We’re leaning on our carrier connections to navigate what’s happening and try to protect our clients as fully as possible. Unfortunately, this is a systemic issue that won’t abate before the summer and we’ll need your patience and flexibility to push through. Don’t dismiss the importance of calling us to talk about adjusting your logistics plan to ensure your supply chain is protected during this situation. We have options and we’d like to share them with you. 

Cargo Challenges Created post Crack

cargo challenges arise post cracks in bridge

A crack in the Hernando DeSoto bridge over I-40 in Memphis has brought cargo challenges as travel both over and under to a halt as the Tennessee Department of Transportation inspects the danger and plans repairs. More than 700 barges are stuck in the river, pending the ability to cross safely under the forty-eight-year-old bridge. Discovered in one of the steel supports underneath the crack runs the length of the bridge.

In 2020, the forty-eight-year-old bridge carried an average of 35,000 vehicles per day across the Mississippi River -more than 10,000 of which were trucks.

With the ocean and air markets being shaken by rising rates and falling capacity, a river and road delay is the last disaster forwarders want to see. These cargo challenges are dreadfully reminiscent of the Suez Canal blockage that captivated the world last month when the Ever Given was stuck in the canal at a narrow point. That stoppage cost shippers weeks of supply chain trouble, further upset the container and equipment imbalances and will cost the insurance company a $600 million dollar fee by the Egyptian government.

Officials from TDOT don’t have an expected timetable for fixing and reopening the bridge but many think the bridge will be repaired over the weekend and next week, keeping the impact to transportation as minimal as possible. Southeastern ports can expect to catch the overflow from the delays as many southern ports, including the Port of New Orleans, handles traffic over a period of time. 

If you have barge-bound cargo that is stuck waiting for the bridge to reopen, Edward J. Zarach & Associates has expedited cargo options to cover you during the interim. We can move critical amounts of cargo by air to make sure your inventory is covered through the delays coming from the bridge closure. Reach out to your representative today to see how we can help!

Finding Zen in the Chaos of Congestion

The Port of Los Angeles is drowning in congestion under a tidal wave of imports that has relentlessly battered the dockworkers and port employees since the start of the year. While the high point of over forty waiting vessels has been halved in recent weeks there is still no end in sight. After a record-setting March throughput, where the port handled almost a million containers, port officials are describing the situation as a “once-in-a-lifetime-event” with enough TEUs to stretch from Los Angeles to New York and halfway back if they were set end to end. 

With container statistics up more than 100% in almost every measurable metric, the port is working to try and make some sense of the barrage of imports. 

  • Loaded inbound containers totaled 490,115 TEUs, up 122% year on year.
  • Outbound empty containers totaled 344,585 TEUs, up 219% year on year.
  • Complete LA port handling totaled 957,599 TEUs, up 113% year on year. 

The total vessels waiting in the bay for berth are slowly coming down from a height of congestion of 40 on February 1st, down to a more reasonable mid-twenties figure that’s still causing challenges for waiting times, truck driver turn schedules, and rail wait times, all of which are over a week, contributing to the delays getting cargo out of the West Coast and into the nation. 

One of the biggest challenges facing ocean shippers is battling the space allotted to empty containers while trying to get loaded exports onto vessels. As equipment imbalances plague shippers, vessels are loaded with three times as many empty containers as loaded ones. Because time, cost, and transit are much more involved with reloading a container with exports, some carriers are just pulling empties back to the boats to return to China where they don’t have to be unloaded, reloaded, and returned and can instead be immediately loaded with exports and sent back to the US, where demand is still outstanding. 

Timing, flexibility, and patience are required by everyone involved if you’re involved in logistics. Our Edward J. Zarach & Associates team is working day and night to ensure equipment is available, loading times and schedules are met and delays, fines, and issues are kept to a minimum. By giving us as much advance notice as possible for the equipment you need and being flexible about which ports we choose we can avoid the largest congestion hiccups and utilize nearby options to keep your cargo on schedule. We have solutions for you; reach out to your Zarach representative today to see how we can help you!

Section 232 Deadline Decision Drops

One of the hallmarks of the previous administration from the moment they took office was to review America’s trading practices and agreements with our allies as well as our adversaries. Investigations by the USTR fell into one of two categories – Section 232 or Section 301. Many of the investigations found violative actions and led to the imposition of additional duties.

Beginning in June 2018, duties were imposed on specified steel and aluminum products pursuant to Section 232 of the Trade Expansion Act. It included products from countries around the world, including our closest neighbors.

In January 2020, Presidential Proclamation 9980 went further, expanding the steel and aluminum tariffs to what were considered derivative products, including steel or aluminum body stampings for motor vehicles and tractors, produced in specific countries.  

PrimeSource Building Products challenged these additional duties and in a case decided by a three-judge panel at the Court of International Trade, prevailed against the government. The Court sided with the plaintiff, “Because the President issued Proclamation 9980 after the congressionally-delegated authority to adjust imports of the  products addressed in that proclamation had expired, Proclamation 9980 was action outside of delegated authority.”

Essentially, PrimeSource brought the action because it was outside the time limit prescribed in Section 232 and the Court agreed.

PrimeSource’s unliquidated entries will be liquidated without these 25% and 10% Section 232 duties and already liquidated entries will be reliquidated with a refund, plus interest.

The government has yet to announce if they will appeal this decision, but companies whose imports were affected by this Proclamation and CIT decision in favor of PrimeSource and believe they are within their legal right to relief should contact our office for a review of entries and, if eligible, discuss a way forward on seeking refunds.`

Keeping Calm & Carrying on through Congestion

KCCO - Congestion

Cargo congestion continues to plague shippers, importers, and every other party involved in logistics. At the height of an unprecedented disruption on the US west coast, where anchored vessels waiting in the San Pedro Bay numbered forty, rail costs from California inland were higher than dedicated truck service for the first time, ever. Though now that number has been halved there is still a bottleneck and backlog with no breaks in schedules to use to catch up on the cargo. Despite the progress, there’s still a week of waiting time between arrival and service for vessels. 

Sadly, the congestion isn’t limited to just the west coast ocean ports; a domino effect of congestion is hitting every transportation mode as trucks, rail, air, and even delivery vans are suffering from a scarcity of capacity and an overabundance of demand. On the east coast, the closure of a major storage facility left containers with no place to wait and drivers more bogged down with returning empty containers to meet the imbalance of equipment. 

The situation has gotten so out of hand that lawmakers have written to the FMC to investigate the actions of ocean carriers, shipping companies, and port authorities to determine where the damage can be mitigated. With no Chinese Lunar New Year closures, ports in the US didn’t have the blanked sailing weeks to catch up with the backlog of cargo from the holiday. What was earlier this year best described as a “dumpster fire” has morphed into a full-blown burning landfill being hit by a hurricane in the middle of an earthquake. That’s actually not hyperbole, storms and weather conditions have also contributed to this problem by tying up cargo and trucks in Texas which dramatically decreased the meager capacity available in the south. 

Is there any good news? 

No. At the moment the recovery of the whole supply chain happens in fits and starts. The ports have caught up on the backlog of ships, that’s good news. But they’re not caught up enough that any blip in the weather or other modes that impact their schedule won’t immediately cause another compounded issue to further exacerbate the situation. 

Trying though it might be, nobody and no situation can demolish the logistics industry and despite futile attempts to turn from a global market by isolationists and pandemics, there’s nowhere to go but up as people continue shopping online for their goods and having them delivered. Will we have to wait longer? Maybe, but professionals in our industry have been warning that the idea of two-day guaranteed shipping for free wouldn’t last the decade. 

Logistics has become a behemoth growing at an unsustainable pace to meet demand. Changes are going to be necessary. Alterations from the top of the governments to the expectations of consumers are going to be coming up fast because the world can’t grind to a halt. We tried that last year to shut down for pandemic preparations. Expectations were completely wrong that shipping would decrease and blanked sailings would make up for the lack of demand. A missed prediction on that level shows that the beast has outgrown its cage and new, innovative ways to carry cargo need to be attempted. It’s time to be bold, honest, and a little more focused on how our international economy can work in harmony with the values we hold in our homes.

Now is not the time to be navigating the congestion waters, or the air, road, and rail, of logistics alone. These are extreme situations but they’re why we train and learn and work until we’re experts at handling disruptions so our clients have the benefit of experience advocating for them. This is the time to trust Edward J. Zarach and Associates with your logistics plan. Our carrier relationships are solid, our knowledge is exemplary and our commitment to helping our clients has never been more important than it is during this time. We’re thinking ahead and finding creative solutions each day and we won’t stop until the last piece is delivered. Find out how you can have a reliable, professional, logistics expert on your team and call your Zarach representative today!

US/EU Turn Down Tariff Tit-for-Tat

Dialing Down the Heat

The much-discussed US / EU dispute over tariff resulting from illegal subsidies granted to Boeing / Airbus (respectively) are on a four-month hiatus so the trade representatives from each can work to find a mutually beneficial solution while de-escalating the tit-for-tat tariff issues of the past few years. Both the US and EU believe they can find a balanced settlement in this issue which will help them focus their attention on trade issues with countries like China. Though not a part of the EU any longer, Britain and the US are also calling off the tariffs they’ve set in place although the investigations were centered on Britain as part of the EU and Brexit negotiations questioned if Britain should still be allowed to levy tariffs if they were no longer part of the European block of countries. 

When the WTO determined last year that both parties carried fault in the dispute, the idea that tariffs would be canceled out was dashed by the previous administration as they asked for both tariffs and repayment of the subsidies but offered little to accommodate the EU. The US was allowed $7.5 billion in tariffs against EU products, which included French wine, Spanish olives, and Scotch whisky. The EU then turned around a year later and hit the US with $4 billion in tariffs on tractors, fruit & nuts, and aircraft parts. 

This relaxation of tariffs and a mutual agreement could bring an end to the 17-year long trade dispute between the parties.  Britain and the United States hoped to cross the finish line before the Trade Promotion Authority granted to the U.S. federal government by Congress expires in July, but in order to reach that deadline, details would need to be ironed out in April.

Errors and omissions that importers make are often more costly and complicated than the early research necessary to remain in compliance. If you’re navigating the tariffs that are between the US and EU or China or other PGA rules, your Edward J. Zarach & Associates representative should be your closest confidant. We’re staffed with industry experts who uniquely understand the complexities of importing and exporting the goods named in this dispute and others to ensure you don’t have surprises later as more trade negotiations take shape in the new administration. Contact us today for a discussion on how we can protect you and your cargo during the changing coming this year!

Congestion & Winter Whiplash

Congestion & Winter Storms Slow Cargo Flow

The intense weather conditions and storms across the United States are compounding the wild delays and disruptions in a difficult time. For the last year, we’ve talked a lot about how congestion, equipment scarcity, and poor planning would continue to upset ocean cargo, truck, and rail shipments, and warehouse space via the U.S. West Coast. The logistics industry has been awash in updates and alerts from intermodal ramps, coastal ports, and carriers that delays will continue, but no dates for relief have been sent in those updates. 

Some expect the congestion to fade by the end of summer but if weather issues, including wildfires expected in California this summer, it could last into fall. If you remember from last year, that’s the exact season when we can start preparing for the worst of hurricane season in the gulf areas. Weather pattern changes are causing exponentially more issues than just the pandemic and personnel troubles we saw coming last March. 

The gulf states, midwest, Pacific northwest, and other isolated areas are under extreme weather advisements as storms and record temperatures wreak havoc on the shipping industry as manpower drops to 50% in some ports due to distancing requirements of the pandemic. Anchorage time in the Los Angeles / Long Beach port area is 3 weeks and climbing, 62 vessels are waiting for berth space, and even ports on the East Coast are suffering delays from closures and weather issues in February. 

We’ve mentioned before that the only cure for this situation is planning, flexibility, and attention to detail. Cargo is being rerouted from clogged ports to secondary locations, mostly up to Seattle and Vancouver from Southern California. Planning ahead and coordinating between air and ocean cargo, using less critical ocean points can help Edward J. Zarach & Associates keep your cargo moving during these trying times. 

CBP Annual Report: Record WROs

WROs placed on China

Customs and Border Protection has released a list of frequently asked questions regarding the Withhold Release Orders (WROs) applicable for cotton and tomato products coming from the Xinjiang region. Because importers are required to know if forced labor was used at any point in the process, we recommend a supply chain inspection to make sure none of the products being imported have forced labor goods incorporated in the supply chain. These actions were detailed in the CBP Trade and Travel Report FY2020.

In the Trade and Travel Report, CBP states that there are forty-four active WROs and seven active findings. Thirteen of the new orders are from FY2020, a record for WROs in a single year. These WROs represent cargo with an estimated value of $50 million, up from $1.4 million in 2019. Apart from the products which originated in China, other WROs come from goods in Malaysia and Malawi. WROs can also be issued at the ports of entry on good if the information exists that reasonably but not conclusively indicates they were made with forced labor

The Uyghurs are recognized as native to the Xinjiang Uyghur Autonomous Region in Northwest China. They are considered to be one of China’s 55 officially recognized ethnic minorities. A mostly Muslim population in the north-western region of Xinjiang China, who have been detained into what the Chinese state defines as re-education camps where they’re being used as forced labor and many women are undergoing forced sterilization. China has categorically denied the forced labor and claims these re-education camps are necessary to root out Islamic extremists and fight terrorism. 

One issue that arises from the area is that it produces approximately 55% of the world’s cotton and is strategically located as a gateway between Asia and Europe. If you’re concerned that your cargo might be applicable to the WROs, contact your Edward J. Zarach & Associates representative to discuss your supply chain options for making small, incremental changes to keep your imports in compliance

Chinese Lunar New Year celebrations begin!

As we move forward into 2021, we’re almost ready to celebrate Chinese Lunar New Year in the year of the ox. With the celebration, every year, we witness a huge number of blanked sailings and factory closures while citizens are given time off from February 12 – February 28 the start of Lantern Festival. This year, we expect fewer closures and blanked sailings as the world struggles to keep up with a booming logistics market and equipment scarcity that imbalances trade on several shores.

Chinese Lunar New Year is the celebration of the first new moon of the lunar calendar and includes fireworks, parades, red envelopes full of money and a break from chores and cleaning. It’s a time when everyone takes time off work to celebrate a bright, shining future. The Chinese Zodiac calendar is based on the legend of the Jade Emperor, who would have a dinner for the animals to be recognized. The ox arrived second, becoming the second year in a 12 year cycle.

As the legend goes, the ox was expected to be first, but the rat hitched a ride after the cat took a nap and just as the ox was going to cross the finish line first, the rat jumped down, becoming number one. During this holiday, there are a number of auspicious and lucky designations:

Lucky Colors: Red, Orange and Pink during the Spring Festival. White, green and yellow during the year.

Lucky numbers: 1, 4

Lucky Directions: North and South

Lucky Flower: Tulips and Peach Blossoms

People born in the year of the ox are hardworking, diligent, thoughtful and a little stubborn. Years of the ox include successes from hard work and a little struggle with communications but not with sincerity. Small vacations to recharge will help invigorate this year as we find renewed passion for finishing projects and recommitting to hard work.

If you’d like to learn more about the Chinese calendar, holiday or zodiac, leave us a note and let us know what you learned! Happy New Year from your friends at Zarach!