There has been lots of talk lately of a COVID-19 vaccine that could hit the market in the next...
Worldwide container shortages – October 22, 2020
Global container shortages plague shippers worldwide as cargo surges into the U.S. from Asia. While we at TOC have been able to mitigate these issues and provide equipment in recent weeks, the problems aren’t short-term hiccups. Despite our strong carrier relationships, we expect the shortages to last until the end of November 2020 as carriers play catch up with cargo that was rolled due to blanked sailings and to make room for PPE shipments during the summer.
As retailers work to restock languishing shelves, massive shortages of equipment in Shanghai and Ningbo cause shippers to miss bookings because no boxes can be found for loading even if vessel space is available. This is not an issue specific to a single carrier or trade lane; instead, it ripples across the supply chain and impacts equipment scarcity in the United States. Massive congestion on the west coast causes delays as containers face a bottleneck getting out and back with turn times up 21% this month.
The problem extends to China as well, where we have been informed of the following key conditions which are further exacerbating the problem.
- Owing to the predominantly eastbound flow of cargo from China, carriers have opted for smaller, more frequent vessels. This means an increased number of calls by vessels carrying fewer containers, occupying and congesting valuable berthing space.
- The option to manufacture an additional supply of containers isn’t available to shippers seeking to put more equipment into the trade. According to a story in FreightWaves, container manufacturers are sold out through February of next year.
- These two factors, coupled with record trade deficits which show the increasing imbalance, are causing routine delays of 3-4 days with some running, on average, 7-10 days. Delays are now so commonplace that lines are unwilling to provide letters to this effect which could be passed along to shippers as evidence of the problems.
2020 seems to be the year of coining terms to describe what is happening in the market. With this in mind, some are positing that we’ve moved past “the perfect storm” to now “shipageddon.”
TOC has contracts with multiple carriers, the goal of which is to offer multiple service options to our clients including port pairs, sailing schedules and transit times. The messaging we are receiving from our three largest partner companies and groups is identical, which gives credibility and underscores that it is not anecdotal or a problem for one, but instead is a challenge for all.
We strongly encourage everyone to request equipment as far in advance as possible to give us enough time to try and procure it. Being flexible with sizes and configurations, loading times, or routings may help us find a solution that still suits your supply chain. We wrote recently about diversions and the ability to terminate or redirect a shipment in transit if it becomes critical. While not readily available and easy to accomplish for all shipments, shippers would be well served to have an understanding of the overall costs involved in this or even plan for shipments of air freight to fill potential stock or inventory vacancies for the most critical of items.
Market Advisory – Friday, September 18th filing deadline for importers of goods on Lists 3 and 4 to protect rights to potential full refunds of 301 duties.
A case brought before the Court of International Trade by a vinyl tile supplier has created an opportunity for importers to potentially recover all Section 301 duties paid on goods subject to lists 3 and 4.
The suit names the Office of the United States Trade Representative and Customs and Border Protection as defendants. The crux of the legal challenge is that Section 301 of the Tariff Act allows for action to be taken only in the 12 months following the finding by USTR and then, only for the reasons cited. In this case, it is the violation of intellectual property rights by Chinese exporters.
Subsequent lists—specifically lists 3 and 4 as cited in the suit—were imposed in response to retaliatory duties which were not part of the original 301 finding and, as such, should be invalidated and duties refunded.
As this requires the suit to be brought before the Court of International Trade, we encourage importers to immediately contact their Customs counsel to determine if filing a suit is in their best interest and to move quickly with the deadline just four short days away.
If your company does not have counsel of record, please contact Colin Ellis at TOC and he can provide you with a short list of recommended attorneys.
Update on Trucking Capacity – September 3, 2020
Trucking capacity is doing two things right now that every shipper should be aware of and planning for during the balance of 2020.
First, capacity is rapidly shrinking. As more and more consumers are homebound and businesses are either shuttering or operating with remote workforces, the need—and opportunity—for single truckloads moving from business to business has been replaced by smaller quantities delivering to more locations. Because of this, many traditional lanes of truckloads of single-shipper cargo are taken out of inventory and are replaced by truckloads of small packages being injected into local post offices and integrator facilities.
This decline in capacity means an increasing demand for a scarce number of trucks. This brings us to the second thing: getting loads covered and moved is increasing in price.
A just-published story in FreightWaves tells the tale succinctly and brings the facts and figures to back up what we’re seeing in the market.
With trucking prices at a 19-month high and capacity at a 22-month low, domestic trucking appears to be roaring back from the pandemic slump. Now the third such signal in a long line of industry markers that show recovery has begun. Intermodal rates and congestion, ocean equipment and box rates, and now trucking capacity and prices are all experiencing the low-supply/high-price swing as more people turn to e-commerce than ever before. Even warehousing space is quickly evaporating as brick and mortar stores see a pivot to online buying with homebound consumers and workers.
Confirming this is a report in the JOC (paywall, subscription required) identifying retailers working feverishly to rectify the stock-outs they experienced in the second quarter. To quote the article, “A number of retailers reported lower inventory levels during their latest quarterly earnings. Best Buy, Dick’s Sporting Goods, and Nordstrom, for example, noted inventory balances were 21 percent, 12 percent and 25 percent lower, respectively, than the year-ago period.”
The increase in imports through the Southern California gateway jumped 33.8% in July from the prior month whereas the total increase of US imports was only 0.9% month-on-month. This says that importers are looking at the fastest way to replenish, and via Southern California is quicker than all-water to the East Coast.
Initial pandemic forecasts warned us that transportation would drop and require capacity reductions, but this never came to fruition. Instead, without entertainment, travel, and social gatherings, people spent time shopping online and ordering direct from stores, requiring final-mile services that were at a premium due to PPE shipments taking precedence.
We’re thrilled to see signs of economic recovery despite the pricing pinch we feel. This traffic jam of cargo is far from self-regulating in the near term. Accurate planning, flexible and efficient routings, and clearly communicated changes and updates will be vital to managing the cost increases and finding space in choked lanes. TOC Logistics is standing by with options and ideas to work out alternative plans and patters to mitigate the expense and delays that come with such a tight market.
Update on TransPac Rates – August 24, 2020
Ocean container rates from Asia to the U.S. West Coast have more than doubled since March, topping $3500 in the spot market this week. Ocean rates have been on a meteoric rise because of a perfect storm of global factors centering around the COVID-19 pandemic. Equipment scarcity, blanked sailings, reinvigorated PPE shipments, and people stuck at home online shopping instead of going out for entertainment are outpacing the space available on ships. Even the charter market is on fire. Rates have been climbing by $1000 a day for the last two weeks.
Rates for the east coast are also up by one-third since March, with only ocean cargo from Europe to the east coast showing a decline of around 2%. The rate surge has provoked China’s Ministry of Transport to open an inquiry into the cause behind it. Cosco, Maersk, MSC, CMA CGM, Hapag Lloyd, and Evergreen are being questioned as to why the rates are climbing even though the blanked sailings have mostly been reintroduced and capacity isn’t an issue. It stands to reason the initial climb happened because blanked sailings reduced supply as people expected demand to drop with social distancing and quarantine protocols. That demand drop never really materialized in a significant way.
One initial issue that has extended through the pandemic is the trouble matching the equipment available to the locations in need. Because sailings were blanked, equipment couldn’t move out of ports to get to destinations, be emptied, and turned to carry new cargo. Equipment stacked up, chassis included, and caused significant disruption.
We also heard many early stories of massive PPE shipments traveling by air on cargo planes or in belly and passenger space on “phreighters.” At this point, shippers have more likely chosen to start moving these large shipments by ocean to save shipping costs because there’s less critical demand for urgent arrivals. The increase in PPE shipments and the online shopping spike are creating a transportation boom for ocean freight right now, which became problematic when capacity was reduced on an incorrect forecast.
If we look back at the news from late March, there was chatter about container contract rates showing their first pricing decline that prompted some to speculate a recession was on the horizon. That’s an important reminder to keep in mind right now. Spot rates might be astronomical, but contract rates, as the name implies, are contractually agreed to and locked in, general rate increases notwithstanding. Unfortunately, we’re now seeing that even those rates aren’t bulletproof in this situation. The movement in the market has been so steep that even contracted lanes are requiring hefty peak season surcharges and guaranteed service upgrades to ensure timely delivery.
Putting it plainly, this is a situation when almost everyone can do everything right and still be impacted by market forces and missed forecasts. TOC contracts rates to protect against pendulum swings of uncertainty. Our goal is to insulate our customers to the best of our ability against market fluctuations, but at this point, even the best-laid plans were incapable of protecting everyone from these adjustments.
But we’re not out of the fight yet. Through unparalleled ocean disruption, we’re still in your corner working with our carriers to secure the best value, schedule, and routing possible to guide you through this. Reach out to your TOC representative to discuss the ways we can assist you with your trans-Pacific ocean cargo.
Guaranteed ocean freight? Yes, but at a price – August 19, 2020
In an era of blanked sailings, congested ports and unreliable intermodal schedules, buyers are looking to TOC and our carriers for a way to provide day-definite confirmed stability to their supply chains.
The reliable movement of a container on schedule requires a combination of factors including:
- On-time vessel arrival and departure from the port of loading
- Not rolling the container
- On-time vessel arrival and availability or intermodal transfer upon arrival
- On-time departure by intermodal train (if selected)
- Unloading from train and made available for pickup, either wheeled or grounded, at the named inland rail depot
“On-time shipping” doesn’t seem difficult when seen through the prism of an overnight letter or small package moving through an integrator or an LTL or FTL shipment moving within the United States. Add foreign countries, thousands of miles of ocean to traverse and ports, terminals, longshoremen, rails and equipment availability and the likelihood narrows considerably.
With this in mind, a number of our carrier partners have introduced a guaranteed ocean freight service for full container-loads. What does this mean?
This means that we have the opportunity to work with a carrier who, for a premium, will prioritize equipment availability and release, protect and confirm space on board the vessel, establish the container as a priority for discharge and chassis availability and, if moving inland as part of an intermodal move, secure space on a daily intermodal train departure from the port of arrival.
If the container fails to meet the service level demanded when the cargo is booked, there is a money-back guarantee that refunds the additional premium.
If your first reaction is, “Sign my container up,” you aren’t alone. These priority services are often limited to a maximum number of containers per sailing and are also limited to both certain service strings, container sizes, origins and destinations, both port and inland.
According to reporting data from CargoSmart, carriers make these demands at a time when the vessels themselves are running at only 68.4% on-time, which is a nearly 10% increase from the first quarter of this year. Coupled with blank sailings and roll risks which aren’t even factored into that on-time performance figure and the real impact is even worse.
It’s a captive market. If a company’s supply chain involves sourcing from overseas, it’s unavoidable exposure. Even the best performing global carrier was on time only 71.6%. Planning a JIT inventory fine tuned to a few days with the largest leg reliant on such average performance will lead to unnecessary air expedite costs and unwanted heat from the C-suite.
If the data above bears anything out, it’s that we’re in agreement with our customers whose reaction to carriers demanding a premium at a time of already record-high rates on some trade lanes is largely negative.
It quantifies how they treat cargo generally. If there are shipments for which “general” isn’t good enough and on-time is the new normal or considered “expedited,” then speak with your TOC representative to determine if these guaranteed offerings are an option. If budgets cannot sustain the additional expense, we recommend building extra safety stock into inventory to account for these factors.
For LCL cargo, TOC already works with select carriers for our consolidation boxes. We have focused our efforts on ensuring close-outs at origin that maximize production schedules while prioritizing time in transit and port routings to get cargo to the deconsolidation point and to final destination as quickly as possible.
If LCL is what you need, don’t worry—your TOC representative can provide you with our consolidation schedules, too.
Standard, expedited or guaranteed, TOC offers ocean freight solutions for a wide variety of shipment needs.
Air freight waiting time and ground handlers – August 12, 2020
For freight forwarders and customs brokers like TOC, we work diligently in the current environment to move cargo as swiftly through supply chains as possible. What is in our control is the selection of carriers, whether ground, sea or air, based on their schedules, performance, transit time and overall reliability.
We also are reliant upon not just the asset-owners who operate the planes, boats and trucks, but the handlers of that cargo when goods cease their international journey and either arrive at their final destination or, in the case of ocean freight, arrive at a port and are transferred to a railroad for inland movement.
Air freight is particularly high visibility because of not just the usual premium on a per kilo basis it adds to the landed cost of an imported product, but increasingly so as rates are far higher because of demand for space for PPE inbound from Asia and the lack of aircraft operating on the transatlantic which would normally offer copious amounts of belly space and city pairings to choose from.
Instead, we rely on a patchwork of scheduled freighter operations, ad hoc charters operated by private entities and “phreighters” – passenger aircraft owned by US and European carriers which carry cargo not only below deck but which have either been converted to provide main deck space in the passenger compartment or being piled on seats and in overhead bins.
When these flights arrive in the United States, they are usually not handled by the airline because the airlines got out of the self-handling business a number of years ago and instead rely on third-party ground handlers. These handlers provide more flexibility in the workforce to scale up and down based on demand and by handling for multiple airlines can maximize the buildings and operations.
If there is one consistent factor with ground handlers it is sadly their inconsistency. While exports happen smoothly because of the demand of having cargo loaded and planeside to leave the country at a prescribed time, import cargo languishes in availability for a number of different reasons.
There have been a number of stories of late surrounding the poor performance of ground handlers and just last week it came to light that one of the nation’s largest third-party handlers received a letter from Congress asking them to explain why, despite receiving payroll loans and grants, they laid off or terminated in excess of 2,800 employees.
The layoffs are at the core of the congestion issue. When an inbound aircraft shows up laden with close to 100 tons of cargo, it takes a while to unload and make that cargo available. But TOC, on behalf of our customers, is paying the airline for the service of not just flying the cargo to the US, but also making it available within 8 – 12 hours after arrival.
Today, we face the situation where some handlers are delayed – and when they do finally make it available, we have very little time to recover before they start charging storage.
The handler’s customers are airlines. The airline’s customers are the actual shippers, whose interests TOC represents. Our teams are constantly working with both the handlers and our airline representatives to do their job of making cargo available. It creates a challenge for us because we cannot book trucks in advance since we cannot give them a time when cargo will be made available. Instead, we lose time awaiting availability before we can dispatch.
It is, theoretically, the equivalent of ordering a meal from a restaurant for takeout and waiting around for hours or days and having to persistently call them and ask when it will be ready. We don’t want to get a call that the dinner we ordered for Monday will be ready by breakfast Wednesday, but that’s where the industry is right now.
Until there is sufficient economic or market pressure that the overall ground handling product is improved, we will add the variable of “recovery time” in our quotations to clients. It does our reputation – and your supply chain – a disservice to be quoted a 2 – 4 day transit when it stretches into a 5th or 6th day for recovery.
Impacts and Challenges of USMCA – July 24, 2020
The USMCA has been implemented for twenty-four days, and it hasn’t been as difficult a crossover as many expected. However, it is early in the implementation process. How these changes in procedure will affect the long term remains to be seen. While there are many updates and changes, TOC has been paying close attention to the issues facing our clients during this roll-out time.
The biggest issue we have found is that customers are confused by the format and source of USMCA certification, since there is no single prescribed form for USMCA like there was for NAFTA. Instead, now there are 9 required data elements that can be presented in any format, including on the commercial invoice itself. Also, it is important to reiterate that TOC cannot issue USMCA certification. Legally, it must come from the supplier, exporter, or importer. In most cases, the importer will need to work with their supplier to get the certification. Description of the 9 data elements can be found on 5-A-1, sixteenth page.
While a lack of USMCA certification won’t delay cargo or keep it from being released, it may mean importers are subject to fees unnecessarily. If USMCA is not provided at the time of entry, the importer may file a Post-importation claim at a later date (up to 12 months later). However, unlike NAFTA, MPF will not be refunded on a post-importation USMCA claim. If you don’t have the certification upfront, you will lose the MPF.
Tips and tricks:
- Have the documents ready before a truck is even loaded. If you have a truck en route to the border and you don’t know who has the USMCA certification, it’s probably already too late.
- Do your research! Don’t assume your products qualify for USMCA just because they qualified for NAFTA, especially if you are certifying they qualify. There are a lot of small but crucial changes in the origin rules. We can help customers determine eligibility, but again, this should be done as early as possible, not when the truck is at the border.
- Enforce record-keeping. Anyone certifying the USCMA may be subject to CBP Audit for origin verification. Thus the certifier should have all the necessary backup documents (such as certifications from other suppliers) in case of an audit.
- Get familiar with USMCA resources, such as:
- USMCA agreement
- CBP Webpage
- USMCA implementation Instructions
- General Note 11 of the U.S. HTSUS
- Federal Register
Now more than ever, with the increase in complexity to the certification process introduced by the USMCA, it is imperative to ensure that all your documentation is in order, ruthlessly scrutinized for any outstanding errors, and completed as quickly as workflows allow. Mistakes can be costly in the long run when you least need them to appear. If you need assistance developing a process to determine your product’s eligibility, contact your TOC representative today.
Blanked sailings in Q3 to pose space challenges from key Asian destinations – June 10, 2020
The announcement by carriers working to strategically match estimated volumes with scheduled sailings was stark—an estimated 75 blanked sailings are planned so far for the third quarter.
A “blanked sailing” refers to a planned hole in a carrier’s service string.
Steamship lines operate in alliances where they each contribute vessels to operate a fixed day-of-the-week sailing that calls ports in a service called a “string.”
By blanking the sailings, carriers do two things. First, they eliminate a service option, meaning that a preferred carrier, routing and transit time that an importer or exporter relies on needs to be substituted for another. Second, by removing capacity, they directly impact the available supply and indirectly hope to align the available capacity with what they hope are the rates that the market will pay.
Steamship lines and their networks and routings are often a lot like airlines serving smaller, regional airports. Sometimes there may only be a flight or two a day and the choices are limited. In some cases, maybe the only flights are to and from a larger hub to connect.
TOC, on behalf of our shippers, sometimes faces the same challenge when it comes to selecting a carrier because maybe only one carrier or alliance has the service that is required. Depending upon the demands of the cargo, we have to evaluate which carriers offer the shortest transit time, few or no transshipments and the frequency of sailings in the event one is missed because of a roll or blanked sailing.
The fewer the competitors—and the fewer the sailings—the more carriers feel the pricing power rests with them and not shippers. This puts everyone at a disadvantage when trying to negotiate.
Mike Klage, our Solutions Director, has highlighted several key origin points in Asia that are of concern.
“The Chinese ports of Shanghai, Ningbo and Yantian are going to be heavily affected, as well as the Korean port of Busan and German port of Bremerhaven. This is why as a Non-Vessel Owning Common Carrier (NVOCC), we have chosen to contract with multiple carriers and alliances.”
“What increases the challenges for us and for shippers is when blanked sailings are not confined to a single alliance but are made across all carriers and alliances. This reduces the available supply equally, not leaving additional capacity with one or another group of carriers.”
The decline in available frequencies is apparent in the statistics reported by ports themselves. Los Angeles reported a decline of 6.45% from April 2019 to April 2020, and saw 28 fewer calls to the port from vessels. Long Beach reported a 17.3% decline year-on-year from April 2019 and the entire San Pedro port complex saw 61 cancelled sailings in the first quarter and another 48 are expected through the end of this month.
To mitigate the impacts of these blanked sailings, TOC continues to take proactive steps with our customers and carriers, and we ask for your help in this endeavor.
- Much like there are multiple routes to a destination by road, so too are we presenting multiple options to our clients. Certainly for port-to-port moves we are limited, but many inland destinations can be serviced via alternate routings through the Pacific Northwest or Canadian West Coast.
- Share your forecasting at the earliest possible opportunity for us to protect space within our weekly allocated volumes with our carrier partners.
- When and where, identify cargo that must be prioritized. If the regularly scheduled carrier, sailing or allocation are not available, offer alternative solution—one of which could be space on a higher-priced carrier operating on the same trade lane to ensure movement.
2020 continues to a year in which we are working with the data we have collected and with forecasting that is fluid to make the best possible choices and recommendations for our customers. Your TOC team stands ready to remain advocates for your supply chain.
Market advisory update – China coronavirus – February 3, 2020
- Beijing Municipality
- Chongqing Municipality
- Shanghai Municipality
- Tianjin Municipality
- Anhui Province
- Fujian Province
- Guangdong Province
- Guizhou Province
- Hebei Province
- Henan Province
- Heilongjiang Province
- Hunan Province
- Inner Mongolia
- Jiangsu Province
- Jiangxi Province
- Jilin Province
- Liaoning Province
- Shandong Province
- Shaanxi Province
- Shanxi Province
- Sichuan Province
- Yunnan Province
- Zhejiang Province
- (excluding Wenzhou)
Market advisory update – China coronavirus – January 30, 2020
In our last advisory, we detailed how Beijing has made the determination to officially extend the Lunar New Year through February 2nd while allowing individual provinces to determine whether or not to extend it further or take additional measures. Shanghai, for instance, extended the holiday closures through February 9th and are checking and recording the temperatures of drivers and passengers of arriving vehicles.
As of Wednesday, January 29th, we have learned that Tianjin, Dalian, Qingdao, Xiamen will resume work on February 3rd and Suzhou, Nanjing, Chongqing, Wuhan, Ningbo, Guangzhou and Shenzhen offices will resume work on February 10th
Over the past several days, the measures being taken both within China and by external countries and companies are demonstrating the steps that are being taken to prevent a further spread of the coronavirus.
We must strongly counsel our clients that the information we are receiving is fluid and changing in response to global monitoring of the potential spread and exposure to Chinese and foreign nationals who are within China or have traveled beyond its borders.
- British Airways has suspended all flights to and from mainland China.
- United Airlines has cut some flights beginning February 1st for just over a week amid significantly decreased demand and would not rule out further action.
- American Airlines announced the suspension of flights between Los Angeles and Shanghai (PVG) and Beijing from February 9th through March 27th due to “the significant decline in demand for travel to and from China.”
As far as ocean carriers go, Danish carrier Maersk has a page on their site which they recommend bookmarking that on January 29th advised the following:
“All Maersk operations including Terminal, Warehousing, Depots, Offices and other facilities except Wuhan continue to operate uninterrupted as per usual. Load/Discharge moves at Wuhan port have been suspended until further notice and our customer service teams are currently following up on shipment status with respective customers and discussing alternative transport plans.”
Port, airports, rail and China customs are still operating as per normal in this holiday period , except Wuhan which remains largely locked down. Congestion is expected due to the limited number of trailers available.
TOC Logistics continues to strongly encourage companies to communicate with their suppliers who will have the most current information on working hours and travel restrictions, if any. The significant decrease in flights coupled with the ongoing monitoring for the spread of the virus could potentially impact hand-carry services when factories re-open based on their province of origin.
We will continue to update via market advisories as new information is received, assessed and the impact on supply chains is clearly articulated.
China extends Chinese New Year holiday to curb spread of coronavirus – January 27, 2020
The Chinese government announced today that nationwide the Lunar New Year Holiday has been extended until February 2nd making the first available working day February 3rd.
While this is an announcement from the Beijing leadership, they gave provincial (state) governments the discretion to extend and modify the proclamation, as needed.
Shanghai province, for instance, today announced an extension of the holiday until February 9th. Per a Reuters article shared with us by our Hong Kong partner but not available in English, the primary focus of the Chinese government’s efforts are on ensuring the availability of utilities, medical supplies and the operation of health care services.
For cargo, vehicle movements are being impacted as all conveyances traveling on intercity highways and roadways into Shanghai must stop for inspection and a health check of the driver and any passengers until further notice. The information is also being recorded and body temperatures of vehicle occupants measured.
As this announcement was just made today, it is too early to determine what the planned impact will be on customs, airlines, carriers, port operations and everyone involved in the supply chain for both air and sea cargo. What we do know is that given Shanghai’s status as an arrival and departure gateway for so much air and sea cargo, there will inevitably be delays as factories re-open following holiday closures.
China recognizes how highly contagious and dangerous this virus is. The goal of the government during this health emergency is to keep the virus from spreading, which means reducing large gatherings of people where transmission from human to human is a risk. Understandably, factories that employ hundreds or thousands of people in close quarters is one vector the government is trying to close off to prevent transmission.
We strongly encourage our customers to speak with their factories directly because they will have access to the most current information impacting their workforces.
TOC will continue to monitor news country-wide in China as well as whatever provincial or local steps are taken that would impact manufacturing and shipping. Please continue to reach out to your primary TOC points of contact as we will be communicating information throughout all levels of the company.
Rail congestion delays impacting inbound trains from Los Angeles – December 10, 2019
We wanted to relay the news that customers’ cargo coming to inland destinations from Los Angeles is being adversely impacted by rail delays with the Burlington Northern Santa Fe (BNSF) and the Union Pacific (UP).
There is tremendous congestion, owing in part to a push of peak season containers that were trying to arrive a) ahead of Christmas, b) before lines made changes for the new IMO 2020 fuel requirement and c) before the still-intended imposition of duties on the last tranche of Chinese imports begins on December 15th. Similar to last year’s front-loading of imports to beat the tariffs, US importers are feeling the same worry, given the ups and downs in the press of the negotiations between the US and Chinese delegations.
Railroads are also responsible for maintaining a balance of equipment that brings railcars carrying loaded imports back to the ports with a mix of empty containers for repositioning and loaded export containers. If their forecasting is poor, or there is weather delaying the unfettered movement of their trains, these can have a cascading effect on the ability of shippers to move their cargo to and from ports of arrival and departure on a timely basis.
James Napolitano, Vice President Transportation for one of our partners STG Logistics, points all the way back to a BSNF derailment east of Flagstaff, Arizona, in mid-October that closed a major artery connecting Los Angeles and Chicago.
“It has been sort of a perfect storm situation with the rail ever since the major rail derailment in Arizona,” Napolitano shares. “This happened during peak transportation season and really has been a struggle to get back on pace since this event.”
The business of moving containers inland from the West Coast is a tricky one for railroads and a number of factors impact their on-time performance which can lead to delays and added transit time that is outside of our control.
For shippers of full container loads, or FCL, when a vessel arrives at the port of discharge, there are, on average, 9,000 – 12,000 containers to be removed from the vessel. Some remain in the city where the vessel called (like Los Angeles, Seattle or New York) while others move inland on one of a handful of remaining railroads.
Many of these terminals now have on-dock rail, meaning the container is taken off the vessel and either built directly on a rail car to move the container, or is taken a short distance by a truck on the pier to where the container is placed on the rail car.
For shippers of less than container loads, the containers which have the cargo for multiple shippers is taken to a warehouse for devanning and segregation. This means that the container was filled with cargo that was coming to Los Angeles where it was then taken out of the container, sorted and put in another container or truck to be moved, still by rail, to an inland destination.
Those containers are taking to a staging area for the railroad off the pier, but still to be part of an intermodal train which is filled with international ocean containers and truck containers and trailers.
At TOC, we understand that vagaries in transit times pose risks to our customers’ JIT supply chain demands. We are working with all of our transportation partners to minimize these delays wherever and whenever possible and strongly advise that if there is a shipment in transit that you anticipate will become mission-critical for delivery that you notify us as early as possible so we can work to discuss what options are available for a mid-shipment intervention or diversion.
CBP FEE CHANGES, UPCOMING CHINA SECTION 301 DUTY CHANGES. – October 4, 2019
TOC Logistics International would like to provide the following update regarding China Section 301 Duty Changes:
As determined by the Consolidated Omnibus Budget Reconciliation Act (COBRA), U.S. Customs and Border Protection (CBP) have updated the amounts for merchandise processing fees (MPF) to reflect cost inflation as determined by the Fixing America’s Surface Transportation Act (FAST Act), which was signed in 2015 to require annual review of fees to maintain equilibrium with inflation.
This annual review is set to take effect at the start of the fiscal year which, for the U.S. government, was October 1, 2019.
The updated information about the COBRA fees was announced in the Federal Register on August 2, 2019.
Important changes to note are:
- Merchandise processing fee (MPF) minimums and maximums are now increased from $26.22 and $508.70 to $26.79 and $519.79, respectively.
- There is no change to the MPF ad valorem rate of 0.3464%.
- The informal entry fee will go from $2.10 to $2.14
- There are other fees for truck, rail, vessel and aircraft arrivals which can be read in the Federal Register notice.
China 301 duties slated to increase by 5% on October 15th.
Last month, the President delayed the planned October 1st increase in Section 301 duties for lists 1, 2 and 3 for goods from China as a gesture of good will towards China’s 70th anniversary celebration of the founding of the People’s Republic of China, as well as in observation of the annual Golden Days holidays.
Next week, delegations from the United States and China are expected to be back at the negotiating table, but until we have a published announcement from the government, the planned duty increase from 25% to 30% will move ahead on October 15th.
On September 20th and on October 2nd there were a number of exception lists published on the USTR’s website. Clicking on the hyperlinked bullets below will lead you to the USTR’s page for the list. Please scroll to the bottom of the pages to see the updates to the respective lists.
- List one updates – Published September 20th and October 2nd.
- List two updates – Published September 20th and October 2nd.
- List three update – Published September 20th.
As always, thank you for allowing TOC Logistics to serve you.
HOLIDAY IMPACTS ON CHINESE GOODS – September 3, 2019
TOC Logistics International would like to provide the following update regarding Chinese-origin products:
Upcoming National Chinese holidays may delay the shipment of goods. Typically, the Mid-Autumn Festival that takes place in September does not affect A/F and O/F shipments. However, pickup over this holiday is subject to shippers allowing for cargo to be available for pickup.
Please continue to read below for the dates and specific impact of each upcoming holiday.
Hong Kong Statutory Holiday
- Mid-Autumn Festival – September 14 (Saturday)
- National Holiday – October 1 (Tuesday)
Hong Kong offices will be closed on both days. A/F operations will be on duty to process shipments. O/F shipments will not be affected, since they are prepared in advance. Rate requests may incur a one day delay due to festivities.
Mainland China Statutory Holiday
- Mid-Autumn Festival – September 13 (Friday)
- National Holiday – October 1-7 (Tuesday through Monday)
Guangzhou and Shanghai offices will be closed during this holiday. Skeleton crews are scheduled to process shipments booked prior to each holiday. Rate requests may incur a delay due to festivities and reduced staffing.
Information on Holiday Delays
Based on trends from previous years, 2-3 weeks prior to the National Holiday is considered to be peak season. A/F rates may increase as frequently as four times per week. Although it may be tempting to shop around for cheaper rates, by the time lower rates are found, the space is likely to be gone and rates may have increased several times over. Additionally, available space will be pushed to a later shipping date. For this reason, it is advised to book shipments as early as possible.
During the National Holiday, pick up and delivery to terminals may still be arranged for A/F, FCL, and LCL shipments that are booked at least one week prior to the beginning of the National Holiday. This is subject to suppliers/shippers allowing for cargo to be available for pickup.
If a shipment flags a customs inspection, it will be inspected after the holiday and once the proper information and documentation is sent from the supplier.
Blank sailing by carrier, FCL, and LCL cutoffs have yet to be announced. In the past, the delivery cutoff for these shipments was 3-4 working days prior to September 30th.
Warehouses will operate as usual for stuffing and container delivery to terminals, for releases booked and picked up prior to the holidays. This is subject to sailing during the holiday dates. If the shipment flags a custom inspection, it will be inspected after the holiday and once the proper information and documentation is sent from the supplier.
US Exports to China
Imports to China will be handled on a case-by-case basis. TOC advises advance conversations prior to booking or releasing shipments for export to China during the holiday dates.
TOC Logistics will report more information about these holidays as it becomes available.
As always, thank you for allowing TOC Logistics to serve you.
PRESIDENT TRUMP DECIDES ON A 5% INCREASE ON ALL SECTION 301 DUTIES FOR CHINESE-ORIGIN PRODUCTS – August 26, 2019
TOC LOGISTICS INTERNATIONAL INC. would like to provide the following update regarding Chinese-origin products:
On Friday morning August 23rd, news broke that the Beijing decided to impose an additional 5% – 10% duty on approximately $75 billion in US exports to China. The news couldn’t have been worse for companies in the automotive and seafood sectors. US manufactured autos and auto parts, beginning December 15th, would be subject to an additional 25% – up from the 5% now in place. Seafood exporters face a 10% increase that takes effect on September 1st – from 25% to 35% in just under a week.
The President took to Twitter to simultaneously express his displeasure and outrage, advising that he would have a response by the afternoon. After meeting through the day with Treasury Secretary Mnuchin, chief economist Peter Navarro and USTR Robert Lighthizer, late in the day he broke the news which was shortly thereafter matched by language on the USTR’s website.
In summary, here is the action that is proposed and, we surmise, will be published in the Federal Register this week:
- Lists 1, 2 and 3 comprising $250 billion in imports and were already subject to additional Section 301 duties of 25%. Those three lists are increasing by 5% from the current rate of duty of 25% and on October 1st will be 30%.
- List 4, which was supposed to be subject to an additional 10% beginning September 1st per the President’s August 1st tweet was split into lists 4A and 4B in an announcement by the USTR mid-month with effective dates of September 1st and December 15th. List 4 has been increased by 5% from the current 10% to now 15%, still with the same effective dates of 9/1 and 12/15.
We are left to ponder the next steps by both the US and China. Both countries have domestic issues at home which are delaying or hampering their efforts to find a solution. For the US, a slowing economy and the 2020 election are leading to political decisions that are designed first and foremost to bolster the President’s popularity as the elections draw nearer. For China, the 70th anniversary of the People’s Republic comes in October and the continuing demonstrations in Hong Kong also weigh on their policy decisions.
While the short- and long-term prognostication business has proven to be nigh-impossible as this saga continues, we are comfortable in offering the following guidance to US importers and exporters.
For importers – the issue of Customs bond sufficiency in the wake of increasingly larger Section 301 duty deposits weighs heavily. Examine your supply chain and HTS numbers to identify goods of Chinese origin and assume it will get worse before it gets better. Determine if an increase to your bond amount is needed on your terms, versus on CBP’s terms.
For exporters – the continuing increase in duties to products of US origin entering China, coupled with the potential EU retribution in the Airbus dispute give a reason to diversify global client bases. We encourage exporters to visit export.gov for resources and help identifying markets. TOC stands ready with our network of airlines, ocean lines and overseas partners to ensure your US-made goods get to those markets where they will face fewer tariff and non-tariff barriers to entry.
Thank you for allowing TOC Logistics to serve you.
TRANS-PAC CARRIER QUESTIONABLE PERFORMANCE AND DELAYS LIKELY TO CONTINUE – June 11, 2019
TOC LOGISTICS INTERNATIONAL INC. would like to provide the following update regarding Trans-Pac delays:
The recent implementation of 25 percent tariffs on Chinese-made goods by the Trump administration have the potential to cause imports to drop this peak season, possibly by double digits. However, this decrease in volume does not mean that freight rates in the eastbound Trans-Pac will drop, as carriers will likely manage capacity by scheduling “blank sailings” or cancelling sailings in order to keep demand high and prices high.
This means that current delays in the eastbound Trans-Pac, caused by poor performance, congestion, and bad weather, will likely continue or worsen. When carriers choose to schedule “blank sailings” there will be more delays to the supply chain transit times. Many carriers, in the past, have responded to the fluctuating US import volumes by adding blank sailings when bookings are low, and adding in extra loaders during surge periods. However, adding extra loaders increases capacity and the ocean carriers are not likely to give up the leverage they’ve earned over the last year and risk having the spot market pricing drop and reduce or eliminate their margins.
While many importers are moving quickly to reserve space in Foreign Trade Zones, the already-limited FTZ space in the country could be at full-capacity in short order. FTZ activity in certain areas has reportedly tripled over the last nine months, meaning this option is not a fail-safe.
TOC Logistics strongly suggests that Buyers, Planners and Logistics personnel make all necessary preparations to review lead times, consider extending lead times, and prepare for a season of possible continued delays.
Thank you for allowing TOC Logistics to serve you.
INCREASED TARIFF ON EXPORTS FROM MEXICO – May 31, 2019
TOC LOGISTICS INTERNATIONAL INC. would like to provide the following update regarding Mexico exports:
The White House announced May 30th that unless Mexico takes immediate steps to stop illegal immigration into the US, a 5% tariff will apply to all products exported from Mexico beginning June 10th. This tariff will increase by 5% each following month, to a maximum of 25% on October 1st, unless Mexico “substantially stops” the flow of migrants at the southern border. These tariffs will supersede any duty free treatment currently provided under NAFTA. US Customs and Border Protection has not yet announced specific implementation measures, but we will follow up when this occurs.
Thank you for allowing TOC Logistics to serve you.
TRUMP THREATENS TO RAISE TARIFF ON CHINESE IMPORTS BY 15% TO 25% – May 15, 2019
As an update to the previous advisory regarding Chinese import tariffs, please be aware of the following updates:
- Chinese items previously subject to 10% Section 301 duties will now be subject to 25% duty if exported on or after May 10 and entered before June 1.
- 25% duty will apply to these items if entered on or after June 1, regardless of export date. Link to customs announcement on this increase here.
- The United States Trade Representative has published a 4th list of tariff numbers for which it is proposing duties of up to 25%. This list covers nearly all Chinese products not already subject to additional duties. The USTR will hold a hearing on June 17th, after which any tariff numbers and duty rates will be known.
Thank you for allowing TOC Logistics to serve you.
TRUMP THREATENS TO RAISE TARIFF ON CHINESE IMPORTS BY 15% TO 25% – May 6, 2019
TOC LOGISTICS INTERNATIONAL INC. would like to provide the following update regarding Chinese imports:
On Sunday, President Trump tweeted two statements that threatened to increase the 10% tariff on $200 billion in Chinese imports to 25%. The president indicated that this new rate may be in effect as of Friday, May 10. Additionally, the president announced his intentions to impose a similar 25% tariff on all imports from China that were not previously included in the 10% tariff bracket.
It is imperative that importers begin evaluating different methods to reduce the effect of these possible tariffs before they potentially take effect on Friday, May 10. However, discussions will be held with Chinese delegates later this week that may alter or negate these tariff increases. Still, until policies are made clear, we recommend that importers operate as if the 25% tariff is guaranteed, and that they seek out alternative options.
President Trump’s statements are as follows:
“For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”
Thank you for allowing TOC Logistics to serve you.
OCEAN MARKET UPDATE – April 25, 2019
TOC LOGISTICS INTERNATIONAL INC. would like to provide the following ocean market update regarding the European Low Water situation:
While the Low Water conditions from 2018, previously advised in November 2018, improved over the Christmas and New Year season, the actual winter/spring 2019 rain and snowfall in Europe was far below normal, thus causing the Low Water situation to again impact European Supply Chains, presently.
Low Water conditions cause barges, that normally shuttle containers from inland to ocean ports, to reduce vessel capacity in order to raise or reduce the draft levels of the vessels so as not to “ground” themselves on the riverbeds. The busiest ocean ports that receive these river barge moves are primarily Hamburg, Antwerp and Rotterdam; therefore EU export containers risk experiencing significant congestion pileups along the inland waterways because fewer containers are boarding the river barges, AND EU import containers start piling up at the sea ports for the same reason.
This puts a strain on the truck and chassis market in Europe, where exporters and importers attempt to divert containers via ground and rail, in a market that already has the trucking community in Europe operating at greater than 100% capacity.
TOC Logistics has just received notification from vessel carriers of the implementation of Low Water Surcharges, effective April 24, 2019. Unfortunately, TOC cannot provide a “price list” for the surcharges because the vessel carriers do not universally apply the charges using universal methods. Plus, Low Water surcharges are applied variably based on the recorded water levels on any given week.
Please accept this as official notice to TOC Logistics customers, that Low Water surcharges, as a pass-through line item, may begin showing up on our invoices at any time; and diversions and diversion costs (truck/rail/transloads) may be required to minimize delays and keep supply chains flowing.
Please communicate closely and often with your account manager(s) and/or assigned operations representative to maintain awareness of how the Low Water conditions are affecting your supply chain and what arrangements need to be made to reduce the impact to your business, financially.
Thank you for allowing TOC Logistics to serve you.
OCEAN MARKET UPDATE – March 18, 2019
TOC LOGISTICS INTERNATIONAL INC. would like to provide the following ocean market update regarding European Export Congestion and Empty Container situation:
Summarizing previous market updates, the following conditions have caused severe congestion and container shortages over the past 6-8 months
- Exploding volume of EU exports
- Low capacity on current vessel strings between Europe and North America
- Low water conditions on rivers/canals causing backup of containers throughout Europe and congesting alternative routes to the sea ports
- 2018 Christmas/New Year holiday schedules with blank sailings
Continuing into 2019, the Chinese New Year schedule and lack of sailings between China and Europe has further reduced the availability of empty containers within Europe. The normal flow would allow incoming loaded containers to be delivered and the empties to be positioned at the ports for export customers. Due to the reduced sailing schedules from Chinese New Year, fewer containers are arriving in Europe that can be turned and made available as empties.
Added to the above conditions that have already caused congestion that has not been resolved, as of this writing, there are no available empty containers at any of the sea ports in Northern Europe, except to VIP customers of the steamship lines. These must be recovered from inland CY’s wherever they are available at higher costs.
Fortunately, TOC Logistics is a VIP customer, but our empty containers are being made available to us at non-traditional locations. It is currently undetermined if the lack of available empties will soon affect VIP clients as well.
Vessels from Europe to North America are already over-booked and vessels are full all the way to the end of April.
Vessel on-time performance has been abysmal for months, and published schedules are not accurate. Vessel operators, rather than focusing on reducing congestion, are instead focused on getting their vessels back “on schedule.” Their decisions to focus on getting back on schedule means they are “sliding” delayed departures to the next “scheduled” departure, essentially causing a blank sailing and further exacerbating the congestion.
TOC Logistics strongly suggests that Buyers, Planners and Logistics personnel make all necessary preparations to review lead times, consider extending lead times, and prepare for a season of unplanned spend that extends beyond Easter 2019.
OCEAN MARKET UPDATE – January 30, 2019
Transparency, Optimization, Collaboration
TOC LOGISTICS INTERNATIONAL INC. would like to provide the following supplemental ocean market update regarding U.S. port congestion:
We are re-publishing the Ocean Market Update from January 10, 2019, as it is still extremely relevant; and as referenced in that update, we believed the USEC ports would be in a similar situation. This is now evidenced by one of TOC’s core carrier’s announcement here attached. The USEC port delays due to congestion and holiday workforce shortages are now a published reality rather than speculation. The idea that New York port(s) may take 4-6 weeks to clear rail backlogs is frightening and is causing serious financial consequences. Please pay special attention to the AIRFREIGHT comments in the original update, as this pertains to the global airfreight market coming into North America.
Adding insult to injury, back-to-back winter storms have crippled some infrastructure in the midst of volume piling up due to the aforementioned coast port issues.
Chicago rail schedules for this week show multiple cancellations inbound and outbound. See the JOC article posted within the last 24 hours regarding Chicago/Midwest congestion and delays.
Force Majeure announcements are likely to start very soon, putting the entire logistics supply chain on notice of extreme financial burdens to maintain flows. TOC LOGISTICS is prepared to work with our customers to manage alternative flows and modes to keep supply chains open; however, we must officially note that we cannot offer any guarantees of service performance being caused by, or that are affected by, the market and weather conditions everyone is experiencing.
Please connect with your Operations Representative and/or Account Manager to review your in-transit supply chain and begin making necessary preparations for minimizing the effects of this frustrating time.
As always, thank you for allowing TOC LOGISTICS INTERNATIONAL INC to serve you.
OCEAN MARKET UPDATE – January 10, 2019
Transparency, Optimization, Collaboration
TOC LOGISTICS INTERNATIONAL INC. would like to provide the following ocean market update regarding US PORT CONGESTION at the start of the new year:
The congestion created by the well-known push to get ahead of US Customs Tariffs at the end of 2018 has been further exacerbated by the 2018 Christmas and New Year holiday season.
For instance, US West Coast Port LA/LGB congestion is creating serious transit delays and additional detention/demurrage fees for the following reasons:
- Christmas and New Year’s Days were “no-work” days
- Christmas Eve and New Year’s Eve were both half-work days
- Tenured, or veteran longshoremen, take vacation days during the two weeks of the holidays; requiring an increase in less experienced part-time workers, which slows down any scheduled operations
- LA/LGB Port terminals are all running at full capacity (80%+ utilization), which is causing:
- Empty containers to be stored in non-designated storage areas
- Terminals to refuse to accept empty containers; meaning dray drivers attempting to drop empties and pick up loaded containers at the port are being turned away
- Not being able to make dual, or roundtrip, runs into and out of the port effectively cuts the driver capacity in half
- Reduction of available appointments to recover loaded import containers increases the number of days a container sits in the port; collecting storage fees
- Lastly, a chassis shortage is created because empties needing to be returned to the port are being refused at the port, so empties sit on chassis that cannot be used for loaded containers; and loaded containers are sitting on chassis at shippers’ doors and in yards unable to be delivered into the port
- The traditional heavy push to ship ahead of Chinese New Year (February 4-10, 2019) will likely pile on to the above situation.
Volumes into the US East Coast Ports are also staying at full capacity, and similar conditions as described above are easily foreseeable in the coming weeks.
For supply chains that are affected by these conditions, TOC Logistics expects to receive an increase in AIR FREIGHT requests; as will all of our competitors, thus creating a market condition where space will be competed for at very high-rate levels. We suggest that any air freight requirements be filtered through the following expectations:
- Standard Air Service: space available only (potentially experiencing transit times of 10-20 days)
- Priority Air Service: Booked 1 week in advance (likely still 5-7 day transit times)
As the C in TOC stands for COLLABORATION, we highly recommend that our customers take a close look at their current in-transit product and reach out to their respective operations representative or account manager to review what parts/product could be affected and work on contingent plans to launch if a critical situation arises.
US WEST AND EAST COAST PORT CONGESTION UPDATE – November 5, 2018
TOC LOGISTICS INTERNATIONAL INC. offers this update to the ocean market at US West and East Coast ports:
TOC Logistics has been advised by our contract carriers at LA/LGB and New Jersey ports of severe congestion occurring over the last few weeks and expected to continue and worsen leading up to January 1, 2019 when the next round of full tariff applications on China imports is implemented.
Dray carriers in LA/LGB are experiencing 8 hour wait times, causing them to only be able to perform one container turn per day/shift. Dray carriers are starting to explore increased wait time rates and bonuses to retain drivers and avoid losing them to other jobs.
Dray carriers in New Jersey have reported consistent 2-mile long lines entering the port for drops and pickups. While they haven’t addressed what the time factor is that this creates, we believe the wait times to be similar here as well.
TOC Logistics needs to prepare our customers, with this announcement, of the possible economic effect and likely service delays we are all going to experience leading up to January 1, 2019.
Actual rate increases or surcharges are not published by anyone as of this writing; however, our customers may be assured that TOC Logistics will make such announcements immediately when that happens.
As always, we greatly appreciate the privilege of serving you.
URGENT OCEAN MARKET UDPATE – October 31, 2018
TOC LOGISTICS INTERNATIONAL INC. here offers an ocean market update with information on the concerning water levels in the German inland waterways and rivers. Because of an extremely long and dry summer, with a lack of rain in the past six months, the water levels in the rivers fell to historic lows. Pictures showing the low water levels are below.
Low Water Surcharges
As a result of the low water level, the barge (inland vessels) can only load 15%-20% of their capacity, in an effort to avoid running aground; meaning 80-85% of the containers assigned to barge/inland waterway routings are sitting at inland waterway ports and not moving anywhere.
- Impact: 50% of all containers leave the ports of Antwerp & Rotterdam by barge. These containers are now searching for new routes. Because of this, the capacity of the road carriers, as well as the rail carriers are overwhelmed. Finding available trucks or railcars will be extremely difficult, and all rates (truck drays, FTL’s and rail moves) are skyrocketing.
Congestions in Antwerp & Rotterdam
Because of the low water on the German inland waterways, the ocean carriers are having trouble getting import freight, coming from Asia, out of the terminals in Rotterdam & Antwerp. The terminals are over 100% capacity and are overloaded. Terminals are moving slowly and extra time is being taken because containers are being buried under the continued onslaught of arriving containers, and making it difficult to find and maneuver containers to truck or rail terminals for delivery or transfer. It is taking 2x-3x longer to load trucks and trains. Because of this, there will be extreme congestions in the ports of Rotterdam & Antwerp.
- Impact: Rates for alternate transportation, like truck and rail, will be rising because of the congestions in the port of Rotterdam & Antwerp.
Empty Container Supply
Due to the low water situation and the congestion in the ports of Rotterdam & Antwerp, the supply of empty containers at inland CY’s (container yards) is critical. The primary reason for this is that loaded containers are now stuck in the ports. With carriers not being able to get containers to their recipients, this means they are not being unloaded, and empties are not being positioned at the inland CY’s and made available for exports. Shipping empty containers to the inland CY’s is not happening because all available truck/railcar capacity is focused on getting full-containers out of the seaports. Empty containers may only become available from the seaports, and not inland CYs very soon.
With the potential for only obtaining empty containers from seaports, and the reduced capacity and availability of trucks/drivers to recover them, the costs for ocean exports from the European Union to North America is likely to spike in the coming days until such time as the rainy season starts and the rivers fill back up.
TOC Logistics International Inc will be publishing an emergency congestion surcharge, in line with the announcements by steamship lines and trucking companies, within the next few days. These charges will ONLY apply if applied to TOC by EU carriers; and will likely be ad hoc, or situational, in nature. We do not expect this to be an across the board rate hike, but only as it happens. Meaning, it might apply one week, but not the next.
We have no other choice but to warn of a semi-Force Majeure situation loosely related to weather.
Emergency Congestion Surcharges will be provided to the financial stakeholders at our clients within the next few days; but, again, will only apply situationally and not across the board or continuously.
Please do not hesitate to reach out to our team with any questions.
Thank you for allowing TOC Logistics International Inc. to serve you.
OCEAN MARKET UPDATE – PIER PASS 2.0 IMPLEMENTATION: November 19, 2018
TOC LOGISTICS INTERNATIONAL INC. here offers an ocean market update pertaining to new PierPass Peak/Off-Peak container surcharges and terminal operations:
A flat TMF (Traffic Mitigation Fee), per TEU (Twenty Foot Equivalent Unit) is being imposed on all import containers during BOTH traditional peak and off-peak periods at the LA/LGB west coast ports/terminals, effective November 19, 2018.
The previous TMF per TEU during PEAK times (day shift) of $72.09 will be reduced to $31.52 per TEU ($63.04 for 40’ containers) and will now be applicable to ALL import containers during both PEAK and OFF-PEAK (day and evening shifts). Appointment requirements will not change, however will expand to more terminals.
There is no change to the types of containers being assessed the TMF; the following items, however, will continue to be exempt:
- Empty containers
- Rail intermodal containers
- Transshipped containers (cargo that arrives at the Port of Los Angeles or Long Beach on one vessel and leaves on a second vessel without entering U.S. commerce)
- Domestic cargo
- Bare chassis
All ocean importers will now be experiencing the TMF regardless of when containers are pulled from the terminals.
For more detailed information directly from PierPass, please see the links here for FAQ’s from the original April 2018 announcement October 2018 announcement and official Pier Pass press release:
As always, we thank you for the pleasure of serving you.
US CUSTOMS FEES INCREASE: October 1, 2018
TOC LOGISTICS INTERNATIONAL INC. would like to offer this US Customs fee application update:
Merchandise Processing Fee (MPF):
MPF is a statutory fee assessed by Customs on most US Customs entries.
October 1, 2018, the Merchandise Processing Fee will increase; applied to the following entry types:
- Minimum MPF for formal entries will increase from $25.67 per entry to $26.22 per entry.
- Maximum MPF for formal entries will increase from $497.99 per entry to $508.70 per entry.
- Minimum MPF for informal entries will increase from $2.05 to $2.10 per entry.
The MPF rate of 0.3464% does not change. For additional details see: https://csms.cbp.gov/viewmssg.asp?Recid=23668
TOC Logistics is happy to support your efforts to realize and document the impact of this increase. Do not hesitate to contact TOC’s Customs Brokerage Department.
Thank you for allowing TOC Logistics to serve you.
TRANSPACIFIC OCEAN MARKET UPDATE: September 20, 2018
We have been informed by our carriers that the congestion and overbooking situation in Asia for the TransPac Eastbound lanes is going to get much worse over the next month, at least.
TOC has had reports from our carriers that several strings are so overbooked that there will likely be some double rolls occurring , meaning an automatic roll of at least 2 vessels. This is an extreme measure that is very rarely necessary.
What are the factors that have led to such actions?
There are a number of factors impacting this:
- Back-to-back typhoons in Asia
- Severe draft restrictions out of Shanghai; (meaning only shallow draft vessels are getting berth spots)
- Using multiple terminals in Shanghai. Carriers being forced to switch between different berth locations due to ongoing construction. It’s difficult to move the cargo from one terminal to the next when vessels keep calling different berthing locations.
- Extremely high volumes out of Korea and North China.
- All this added to the previous congestion caused by early and high-volume bookings from manufacturers and buyers trying to get goods onto US soil prior to tariffs being implemented.
We urge you, our customers, to immediately engage your planners, buyers, suppliers and TOC service representative(s) to put a contingency plan in place to deal with these imminent disruptions to all our supply chains.
Thank you for allowing TOC Logistics International Inc. to serve you.
OCEAN MARKET ANNOUNCEMENT – August 2, 2018
- Currently, the ocean “spot rate” market is running $1,500-2,000.00 HIGHER than most contracted rates.
- Vessel operators, in collusion with the “alliance members” have been systematically reducing available capacity on the TP routes for many months; including using “blank” sailing strategies and even suspending or outright eliminating entire strings, permanently. 7%+ of the TransPacific capacity has been removed from service in the last 60 days.
- This is causing significant “roll” risk to the NVOCC’s and BCO’s alike.
- Alliances and vessel operators are subjectively reducing contracted allocations, in order to open up capacity to the “spot rate” market where they are achieving higher than contracted rates.
- BCO’s (Beneficial Cargo Owners) & NVOCC’s (Non-Vessel Operating Common Carriers/Forwarders) who have not fully utilized their allocations in any given month are having their allocations reduced or removed to accommodate the higher margin “spot rate” market.
- Allocations for contracted rates are NOT being increased for anyone right now.
- GRI’s and PSS have been announced early and anyone not accepting them are at risk of being rolled for the higher margin “spot rate” containers.
- The new China Import tariffs that are set to apply over the next two months are also causing huge increases in container volumes for importers increasing their PO release numbers to hurry the product into the US before the tariffs hit.
OCEAN MARKET ANNOUNCEMENT – MAY 31, 2018
TOC Logistics International Inc. offers the following ocean market announcement:
In light of significant fuel cost increases, the top ocean carriers of the world are announcing Emergency Bunker Surcharges. This is in addition to any normal quarterly fluctuations. TOC traditionally maintains ocean rates to be inclusive of standard Bunker Adjustment Factor (BAF), however this surcharge is an emergency surcharge implemented outside of normal contractual terms.
We do not yet know if these surcharges will be implemented in full, if they will be able to be mitigated, or waived entirely. Much depends on the trajectory of the oil price over the next 3 weeks, but the carriers are very aggressive to recoup losses so it is safe to assume some level of Emergency Bunker will be implemented.
As of this message, primary TOC carriers have announced following:
CMA – July 1 2018 effective date. $55/TEU (press release attached)
MSC – June 21 2018 effective date. $100/TEU (official notice attached)
Hapag – No official announcement however one is expected at similar levels in the coming days.
In accordance with FMC regulations, TOC is providing its customers with 30 days’ notice of implementation of an Emergency Bunker Surcharge of $100/TEU effective July 1, 2018, for all FCL shipments to or from United States and Mexico.
We will negotiate this charge with our carriers, and implementation will be a pass through cost of whatever the final amounts are.
The final Emergency Bunker Fee amount will be communicated to each client once mitigation conversations are completed and further reflected in the updated client Negotiated Rate Agreements (NRA’s) which will be provided prior to July 1, 2018.
We thank you for allowing TOC Logistics to serve you.
OCEAN MARKET UPDATE – May 24, 2018
TOC LOGISTICS INTERNATIONAL INC offers the following ocean market update:
The National Coordination Committee for the six port workers federations in INDIA has called for a nationwide, one-day, strike on May 28, 2018. Followed immediately by an indefinite strike beginning May 30, 2018.
Worker demands have gone unattended by the Ministry of Shipping and attempts of resolution between the competing entities have proven unsuccessful.
The following major ports in India are expected to be affected:
- Jawaharlal Nehru Port (Nhava Sheva)
- Mumbai Port
- Chennai Port
- Tuticorin Port
- Kolkata Port
- Cochin Port
- Vishakhapatnam Port
- New Mangalore Port
- Mormugao Port
- Paradip Port
- Kandla Port
- Ennore Port
- Port Blair Port
TOC strongly encourages our customers to take immediate action to review your supplier release schedules and seek counsel with your operations agent or Account Manager to explore alternative modes of bringing your product in or out of INDIA.
U.S. TRUCKING AND CONTAINER DRAYAGE MARKET UPDATE – MARCH 12, 2018
The US Trucking capacity and pricing struggle continues; affected modes beyond traditional trucking are intermodal, and container drayage.
The previous updates from February 5, 2018 and February 23, 2018 (below) are still valid and offer a realistic progression of the situation leading up to today’s update.
The latest tactic taken by vessel operators, whether they are handling “door” moves or not, is to boost their revenues by reevaluating accessorial charge application.
As of this writing, 2 vessel carriers have announced a reduction of free time at origin loading, or destination unloading from 2 hours down to 1 hour; and an increase from $75.00/hr up to $125.00/hr. TOC must adjust our application of free/wait time for all moves controlled by vessel operators to the same.
This is added to our announcement from February 23rd, advising that all vessel operators are now charging demurrage without exception.
This article from the Journal of Commerce, while lengthy, is the best commentary on the spread of the US Trucking industry situation and the modes being affected, so far. The scariest statement in this article is the estimate that 50% of the container dray drivers in the US are looking to convert to long-haul, over-the-road, jobs; further exacerbating the already traumatic situation at the container ports.
Please remember that in today’s market, long validity rate contracts DO NOT guarantee capacity. Spot quoting to obtain capacity is at its highest level ever, in our opinion. The inland and ocean port dray situation is not better, and pundits claim will not level out until sometime in 2019.
We urge you, our customer, to stay in close contact with your Account Manager and/or Operations Specialist, to all be on the same page about your hot shipments/releases and the associated additional costs to meet your delivery or production expectations. TOC’s procurement efforts are non-stop and we will provide the best cost and capacity availability possible, to meet your service demands.
US TRUCKING AND DRAYAGE MARKET UPDATE – FEBRUARY 23, 2018
TOC LOGISTICS INTERNATIONAL INC offers this supplemental market update from our previous notice of under capacity and shortage of drivers in the US Trucking and Drayage Market;
The snowball effect resulting from the following current conditions, has reached critical mass:
- Heavy gate congestion
- A chronic lack of truck power (reduction of available drivers due to eLog enforcement)
- A near zero availability of chassis’ at major ports and inland CY’s
- Bunching of inbound trains ( including trains being held indefinitely at switching yards, due to no space to receive them at the next stop )
- Lack of available railcars for ocean containers at inland ports
- Increased container volumes, both import and export
- Heavy snowfall and loss of yard storage
Vessel operators are now claiming FORCE MAJEUR in major ports and refusing to provide origin/destination “door” moves, leaving the NVOCC, Forwarders and, yes, even the BCO’s, to fend for themselves to get containers either delivered to the port or delivered to the end customer.
Vessel operators who have not claimed FORCE MAJEUR, have announced a line item increase to contracts of at least $300 per container to continue managing “door” moves under their existing contracts.
Further, because of the lack of availability of equipment, “dwell times” ( the number of days it takes for a container to be pulled from the port ) have risen, nationally, to 7-10 days; this is particularly important to understand because there are TWO surcharges at risk of being applied with this increased dwell time:
- Free days at the port hover around 5 days nationally; thus an extended dwell time causes port storage to kick in;
- Demurrage ( the number of days the container is away from the port before being returned ) has an industry standard of only 2-3 days, thus the extended dwell times and lack of actual equipment for either the delivery or empty return is now triggering per day demurrage charges.
Regarding demurrage charges, until now, these charges could be waived or greatly reduced so as not to affect the supply chain spend to volume customers; but now, in order to manage the increased costs of the current under-capacity market, vessel operators are applying demurrage without exception.
TOC Logistics International Inc must officially announce here that all demurrage charges by the vessel operators, NOT caused by negligence of TOC Logistics, will be passed on to our clients via a demurrage line item charge on invoices generated AFTER March 15, 2018. Since these demurrage charges are unable to be forecasted, TOC Logistics recognizes the need to increase our attention to each client’s container reality and make every effort to provide advance warnings of additional charges; but we must state that this will not be a perfect solution or outcome and we will make appropriate notices as we are made aware.
The supply chain conditions today are not just challenging, but truly critical, and surviving this will be very expensive for ALL of us. Please endeavor to stay closely engaged with your TOC Account Manager and/or Operations Representative to collaborate together on maintaining as smooth a supply chain as humanly possible.
TRUCK CAPACITY UPDATE – FEBRUARY 5, 2018
TOC Logistics International, Inc. regrets to inform that the truck capacity situation in the United States is creating a severe problem to the supply chain community.
Our team received a letter from the 3rd largest vessel operator stating, “The US trucking industry is facing a growing shortage of qualified drivers in both the international and domestic markets. The shortage is having a dramatic effect on our ability to deliver freight in a timely and effective manner.” The vessel operator is experiencing a significant increase in service delays as a direct result of the current trucking situation in the United States.
This letter that we received in evidence of what the rest of the vessel operators and the NVOCC industry is facing.
This same vessel operator that sent us the above letter had also reached out to our team asking if we could handle dray moves for containers that were not TOC’s. This is proof that the situation is not just affecting long-haul FTL providers, but also port dray carriers. While there are many factors at play, the eLog regulations are playing a huge role.
The new US eLog requirements, which were enforced beginning December 18, 2017, have truly caused capacity reduction. In regards to the container dray carriers, the simple facts are:
- Before December 18, 2017, dray drivers could handle up to five “turns” per day using manipulative log practices.
- Since December 18, 2017, dray drivers who stick to strict hours of operation (11 hours per day), can now only do a maximum of three turns per day (based on average of 3 hours per turn).
- Without reducing the number of drivers or equipment, the above results in a 40% reduction in capacity.
- For longer dray runs, if a driver could previously do 2 turns per day, he might only now be able to do one. This alone will significantly drive up the price of the jobs, as it represents a 50% pay cut to the dray company/driver that must somehow be recouped.
Some of the impacts to NVOCC operations are:
- A last-minute lack of drivers available to bring “empties” to a loading site
- Lack of drivers available to deliver containers to ports to meet cut-offs
- Drivers cancelling on one job in order to take a higher-paying job
TOC Logistics is committed to finding and having alternative options in place in order to keep our programs running on-time. However, should the capacity situation become a regular detriment to operations at current rate levels, all supply chain users must be prepared for expected rate increases.
Also, please note this article which details the troubles that some of the largest companies in the U.S. are facing when it comes to keeping their supply chains going, some of which includes paying DOUBLE the contracted rates for certain critical lanes.
The impact for 2018 supply chains is not yet fully realized or understood, but costs are sure to increase rather than stay static. Contracting long-rate validities does not guarantee capacity, which means “out of gauge” services will become more prevalent in order to keep supply chains moving.
We offer this market update for your information and benefit.