FTZ’ine March 2021
March 2, 2021
FTZ’ine May 2021
May 3, 2021
DC Is Blooming – No Fooling
The Cherry Blossoms of Spring are always a welcome distraction in your Nation’s Capital. Though access is highly restricted this year, early risers can still get a chance to enjoy this special rite that punctuates the end to winter. News on the economy has also been warmer and folks have even started to talk about a glut in the supply of . . . vaccine. That makes a return to normal seem more like a “when” question than an “if” question.
The pending return to favorite activities has had an impact on trade. A continued backlog at west coast ports means delays for east-bound merchandise. East coast ports are about to get swamped with the arrival of ships that had been delayed by the Suez Canal blockage. And even if your international supply chain doesn’t depend on merchandise from Asia, you have likely been impacted by the accompanying driver and equipment shortages. Hopefully, those shipping problems won’t stymie an otherwise rosy outlook for the US economy.
China remains a major concern for U.S. importers, and the first meeting between the Chinese government and the Biden Administration only reaffirmed how long the road to normal trading relations might be. Alaska in March is no place to look for Cherry Blossoms.
Top Story: West Coast Port Delays Ripple Through US Supply Chains
The ports of LA and Long Beach have been swamped by container imports for the last several months. Both ports are dealing with record-breaking volume at the same time as COVID-19 related staff outages.
In San Pedro Bay, the entrance to LA/LB, 46 cargo ships were waiting to enter the facilities as of March 8. The Chinese New Year holiday slowdown did little to ease the problem and international trade across the country is now feeling the broadening impact.
February was yet another month of double-digit growth in US imports from Asia which raises the possibility that the backlog will not be cleared before peak season begins in August. This has created a scramble for drivers, chassis, and air freight.
Around 800 of the International Longshore and Warehouse Union’s 15,000 members have been out of work due to Covid, according to union data. ONE CEO Jeremy Nixon said at the beginning of March that it may take up to four months before container shipping returns to regular schedules in the US after the COVID-19 demand surge.
Some importers are trying to make up time on their east-bound shipments by diverting from rail to team trucks for the long drive. This has created additional demand for drivers and container chassis. Thus the impact of the port congestion is far broader than just cargo through LA/LB.
The problem has some companies forgoing maritime shipping for airfreight to get popular or seasonal items to store shelves on time.
Air rates had been dropping in recent months, according to online international freight marketplace Freightos, but that may change if passenger flights do not increase soon to supplement air capacity.
Canyon Bicycles USA Transportation Manager Kim Peterson said the company is shipping most of its inventory via water, but added that its most popular bikes are being shipped by air to meet a demand surge.
Air is faster, and we need to meet the demand of our customers,” Peterson said. “While I could pay an additional $1,000 to $2,000 to get my product in (an ocean) container at the head of the line in China, it doesn’t matter because the cargo then sits in the LA congestion.”
Shipping by ocean took 20 to 30 days before the pandemic, Peterson said. Now it’s about 60 to 75 days while airfreight takes three to five days.
“We see those industries who need expedited shipping being pushed into the air versus the ‘hurry up and wait’ on the ocean front,” said Matt Castle, vice president of airfreight products and services at C.H. Robinson.
Recreation vehicles and parts that used to ship by ocean have shifted to airfreight, he said. “One of the things I never thought we would see being moved by air was vacuum cleaners. It’s a hot item now with so many people at home.”
Some of the congestion at U.S. ports is expected to ease as more longshore workers get vaccinated against the coronavirus. Just 5% of longshore workers have received vaccinations so far, Port of Los Angeles executive director Gene Seroka said. He added that the port is lobbying “all levels of government” for more vaccines to help ease congestion.
With a solution to the problem likely months away, carriers have started to reconfigure lanes to try and circumnavigate LA/LB.
On 12 February, the port of Oakland welcomed the first vessel on CMA CGM’s new Golden Gate Bridge service, a weekly transpacific run from Shanghai and Yantian to Oakland and on to Seattle. This offers transit times of 17 and 12 days, respectively from the Chinese origin points.
In mid-March, Wan Hai will double its transpacific strings to four. One new service will run from Kaohsiung over Yantian, Shanghai and Ningbo to Seattle and Oakland, without touching southern California.
Tech Tip
On January 13, 2021, U.S. Customs issued CSMS #45523296 announcing changes in the ACE Entry Summary Business Rules and Process Document. This update included a change in Section 18, related to Foreign-Trade Zone summaries.
The process rules now state that an FTZ Entry Summary Type 06 will not be accepted if:
- The entry summary contains HTS numbers, including but not limited to, HTS number/Zone Status/Country of Origin combinations which were not present on the corresponding CBP-authorized Cargo Release Weekly Entry submission
- It does not include the reported quantity and value by HTS Line as specified above
Does your weekly estimate include unique lines for each HTS, Zone Status, and Country of Origin combination? Perhaps due to the 999 line limit on the entry, your estimate has not included Country of Origin and/or Status in the calculation of unique lines and instead, you are reporting value and quantity only for each HTS entered for consumption from your zone. If you are unsure, now is a good time to check.
It is unclear if CBP has system validations in place to systemically reject summaries based on these criteria. So, each zone operator must verify that their estimates are conforming to this guidance. If you have questions or need help with this new requirement, contact us at Info@iscm.co to learn how ISCM can help.
Will Mega Ships Lead To More Mega Shipping Problems?
On Monday, Evergreen Line’s Ever Given, the 20,000+ TEU container ship that ran aground in the Suez Canal was finally freed. Shortly after the bow became lodged in mud, currents swung the stern across the canal, completely blocking the vital shipping lane. Egypt's initial efforts to pull the ship free using tugboats yielded little progress, and salvage firms hired to assist needed 6 days to dislodge the vessel.
The canal is the shortcut between Asia and Europe that cuts 12 days by eliminating the need to circumnavigate the African continent. American Shipper estimated that 31% of voyages from Asia to U.S. east coast ports route through the canal. So the east coast is likely to experience a one-week lull, and then a flood of overdue ships looking to unload.
According to Wikipedia, Ever Given is longer than the Empire State Building and tied for 13th place on the list of the world’s largest containerized shipping vessels.
The 224,000-ton ship was on its way from China to the Dutch port of Rotterdam when it became stuck near the southern end of the canal. As container ships grow larger, it is easy to imagine accidents such as this could become more prevalent without careful planning.
EU/US Suspend Airbus Tariffs During Negotiations
In March the EU and U.S. agreed to a 4-month suspension of tariffs related to the Airbus dispute. The suspension allows both sides to focus on resolving the long-running dispute, and forestalls additional tariffs on $7.5 billion of EU exports to the U.S. including tractors, wine and cheese. Similarly, EU tariffs will be suspended on some $4 billion worth of U.S. exports into the EU.
UK merchandise that was admitted into an FTZ before March 4, 2021 should be in PF status and will remain subject to the additional duties according to CSMS #46561075. EU merchandise that is admitted into an FTZ after March 11, 2021 may be admitted in any status according to CSMS #46590066. The messages are different and it appears that UK duties will still be collected upon FTZ withdrawal but EU duties will not.
The US said the step marked a "fresh start" to US-EU trade relations.
European Commission Executive Vice-President and Trade Commissioner Valdis Dombrovskis said: “This is a significant step forward. It marks a reset in our relationship with our biggest and economically most important partner. Removing these tariffs is a win-win for both sides, at a time when the pandemic is hurting our workers and our economies. This suspension will help restore confidence and trust, and therefore give us the space to come to a comprehensive and long-lasting negotiated solution. A positive EU-U.S. trade relationship is important not only to the two sides but to global trade at large.”
In December, the UK said it would voluntarily suspend its tariffs on US goods. The Prime Minister's office said at the time that they hoped their measures would kickstart compromise talks.
The dispute between the US and EU over the aircraft subsidies goes back nearly two decades.
CP – KCS Merger Could Alter Land Border Crossing Dynamics
The international trade community is watching warily after Canadian Pacific Railway Ltd. announced its $29B plan to merge with Kansas City Southern Railway to create the first U.S.-Mexico-Canada rail network.
The move has the possibility to speed USMCA traffic or strain already overloaded rail networks.
Officials from both Class I railroads said their respective boards of directors have given unanimous approval for the deal, which could take a year to complete.
Of the five major freight railroads in the U.S., Kansas City Southern is the smallest, but it is the only carrier with operations in Mexico, running north-south through Texas and to its namesake city.
The new operation will be called Canadian Pacific Kansas City.
IHS Markit Transportation Economist Paul Bingham said “With the USMCA, there is reason to believe trade will continue to grow,” he said. “Where I believe it will have the most effect is actually the auto industry, with the increased domestic content rules that went into place last July. The majority of the additional vehicle manufacturing will likely be in Mexico, medium to long term. The CP will be in a position to carry some of those finished vehicles northbound and the auto parts southbound.”
The combined network is expected to operate approximately 20,000 miles of rail, employ close to 20,000 workers and generate total revenue of about $8.7 billion based on 2020 results.
Keith Creel, CEO of Canadian Pacific said in a statement the combination would provide a transportation solution for manufacturers seeking to bring factories back to North America after the pandemic exposed risks of relying on overseas supply chains.
Industry consolidation in the 1980s and 1990s led to a field consisting of only seven Class I railroads. Regulators may be wary of additional consolidation. So too is the trade which can struggle mightily with rail and rail ramp capacity during peak periods.
Temperature in Alaska Was, Well, Frosty
The selection of an icy venue turned out to parallel the latest discussions between the world's two largest economies.
With stern expressions, U.S. Secretary of State Antony Blinken, national security adviser Jake Sullivan, Chinese Politburo member Yang Jiechi and Foreign Minister Wang Yi met for the first time last month. They proceeded to trade hand grenades right from their opening statements at the Anchorage, Alaska meeting site.
The American side will "discuss our deep concerns with actions by China, including in Xinjiang, Hong Kong, Taiwan, cyber attacks on the United States, economic coercion of our allies," Blinken said.
"Each of these actions threaten the rules-based order that maintains global stability," he said.
Yang, in turn, slammed the U.S. for using its "military force and financial hegemony to carry out long-arm jurisdiction and suppress other countries."
The discussions gave no indication that the trade battles between the two superpowers would subside anytime soon.
Senior American diplomats accused China of threatening world stability and Chinese officials flagged America as a human rights hypocrite due to its mistreatment of Black citizens. “It abuses so-called notions of national security to obstruct normal trade exchanges, and incite some countries to attack China," Yang said in a speech that lasted over 10 minutes, which was later relayed in English by an interpreter.
Blinken said the U.S. will not stop holding China accountable for its actions in places like Hong Kong, where Beijing has cracked down on democracy; its economic coercion of other countries; or what U.S. officials allege is a genocidal campaign against Uighur Muslims in China’s Xinjiang region.
Yang, meanwhile, warned the United States to back off and accused it of hypocrisy. He said the United States uses its financial and military might to bully other countries. He also said America had its own long history of human rights problems and foolish actions abroad.
“We do not believe in invading through the use of force, or to topple other regimes through various means, or to massacre the people of other countries, because all of those would only cause turmoil and instability in this world,” Yang said.
It was an unusually undiplomatic sparring match, especially for a meeting called to take stock of the US-China relationship under a new American administration.
On a more positive note, Mr. Yang was quoted by Chinese media as saying that "serious difficulties in China-US relations in the past should not continue".
FTZ Board Activity
- Phillips 66 Company submitted an application for the expansion and modification of subzone 149C in Freeport, Texas. MORE
- The Bridgeport Port Authority submitted an application to reorganize FTZ 76 under the alternative site framework in Bridgeport, Connecticut. MORE
- IPR Pharmaceuticals, Inc. submitted a notification of proposed production activity for additional pharmaceutical products and components within FTZ 7 in Mayaguez, Puerto Rico. MORE
- Lockheed Martin Corporation submitted a notification of proposed production activity for additional components of satellites and other spacecraft within FTZ 123G in Littleton, Colorado. MORE
- Cleveland Cuyahoga County Port Authority submitted an application for the expansion of subzone 40I in Eastlake, Ohio. MORE
- AstraZeneca Pharmaceuticals LP submitted a notification of proposed production activity for additional pharmaceutical products and components within FTZ 99D in Newark, Delaware. MORE
- AstraZeneca Pharmaceuticals LP submitted a notification of proposed production activity for additional pharmaceutical products and components within FTZ 177A in Mount Vernon, Indiana. MORE
- Zoetis Services, LLC submitted a notification of proposed production activity for pharmaceutical products within FTZ 59D in Lincoln, Nebraska. MORE
- Greater Mississippi Foreign-Trade Zone, Inc. submitted an application to reorganize and expand the service area of FTZ 158 under the alternative site framework in Vicksburg and Jackson, Mississippi. MORE
- CMC Steel Fabricators, Inc. received approval to operate its facility in Mesa, Arizona as Subzone 221B. MORE
- Pepperl+Fuchs, Inc. submitted an application for subzone status for its facilities within FTZ 84 in Katy, Texas. MORE
- Liebel-Flarsheim Company, LLC submitted a notification of proposed production activity for diagnostic imaging contrast media within FTZ 93 in Raleigh, North Carolina. MORE
- Merck & Co., Inc. submitted a notification of proposed production activity for additional pharmaceutical products and components within FTZ 185C in Elkton, Virginia. MORE
- All Ways Pacific LLC submitted an application for subzone status for its facilities within FTZ 44 in Dayton, New Jersey. MORE
- M.M.O. Companies, Inc. submitted a notification of proposed production activity for disassembly of firearms and ammunition within FTZ 31E in Mascoutah and Edwardsville, Illinois. MORE
- Baxter Healthcare Corporation received approval to operate its facility in Byhalia, Mississippi as Subzone 262E. MORE
- Ricoh Electronics, Inc. received authorization of limited production activity for toner products, thermal paper, and thermal film within FTZ 26 in Lawrenceville and Buford, Georgia subject to a five-year time limit on authorization for Ricoh to admit its “titanium dioxide mixture” input in nonprivileged foreign status. MORE
- Merck & Co., Inc. submitted a notification of proposed production activity for additional pharmaceutical products and components within FTZ 24B in Riverside, Pennsylvania. MORE
- Coating Place, Inc. received approval to operate its facility in Verona, Wisconsin as Subzone 266B. MORE
- Gulfstream Aerospace Corporation received authorization of production activity for disassembly of aircraft within FTZ 168 in Dallas, Texas. MORE
- Piramal Critical Care, Inc. submitted an application for subzone status for its facilities within FTZ 44 in Linden, New Jersey. MORE
DC Is Blooming – No Fooling;
The Cherry Blossoms of Spring are always a welcome distraction in your Nation’s Capital. Though access is highly restricted this year, early risers can still get a chance to enjoy this special rite that punctuates the end to winter. News on the economy has also been warmer and folks have even started to talk about a glut in the supply of . . . vaccine. That makes a return to normal seem more like a “when” question than an “if” question.
The pending return to favorite activities has had an impact on trade. A continued backlog at west coast ports means delays for east bound merchandise. East coast ports are about to get swamped with the arrival of ships that had been delayed by the Suez Canal blockage. And even if your international supply chain doesn’t depend on merchandise from Asia, you have likely been impacted by the accompanying driver and equipment shortages. Hopefully those shipping problems won’t stymie an otherwise rosy outlook for the US economy. China remains a major concern for U.S. importers, and the first meeting between the Chinese government and the Biden Administration only reaffirmed how long the road to normal trading relations might be. Alaska in March is no place to look for Cherry Blossoms.