FTZ’ine August 2023
July 31, 2023
FTZ’ine October 2023
October 2, 2023
Summer Heat Wilts Trade
August is vacation month here in DC. Congress adjourned at the end of July and promptly left town; the Senate will resume normal business after Labor Day; the House a week later. That made it easy for August weather to have a larger impact on trade than policy changes in your Nation's Capital.
Hurricanes on both coasts impacted U.S. ports while a drought in Panama hampers ships travelling between them.
Commerce Secretary Gina Raimondo is the latest Biden Administration official to travel to China. She offered trade as a way for the two countries to start working through their differences. They agreed to keep talking at least.
Yesterday, the Department of Commerce Department released its estimate that the U.S. trade deficit in goods widened 2.6% to $91.2 billion in July. It appears a slowing global economy will not provide any growth for the U.S.
Soft container volumes generally, and rapidly rising capacity have put container rates into a dive after the huge spike FTZs and other importers were faced with just last year.
Top Story: Secretary Raimondo’s Turn
Secretary of Commerce Gina Raimondo has just returned to DC after a trip to China in an effort to mend ties. She is the fourth senior official from President Biden’s administration to visit China this year, following Secretary of State Antony Blinken, Special Envoy for Climate Change John Kerry and Treasury Secretary Janet Yellen.
While there were no major breakthroughs, the United States and China did agree to hold regular conversations about commercial issues and restrictions on access to advanced technology.
“I think it’s a very good sign that we agreed to concrete dialogue, and I would say, more than just kind of nebulous commitments to continue to talk, this is an official channel,” Secretary Raimondo said in an interview after four hours of negotiations with China’s Commerce Minister, Wang Wentao.
She said two separate dialogues would be established. One would be a working group that included private business representatives and would focus on commercial issues. The other would be a governmental information exchange on U.S. enforcement of its export controls.
Economists fear China may be heading for deflation, even as the rest of the world worries about inflation. The Chinese economy grew just 0.8 percent in the second quarter, compared with the previous three months, hurt by weak consumer spending, high youth unemployment and a downturn in real estate. It is therefore plausible that China will be willing to address American trade concerns in an effort to lift purchases of goods from China, including a reduction in the Section 301 additional tariffs on merchandise from China that many FTZs struggle with.
The meetings did not resolve the American business community’s concerns about China’s recent actions against Intel and Micron Technology, two semiconductor companies in the United States. The Chinese government has scuttled a large acquisition planned by Intel and has blocked some sales in China by Micron.
Tourism was another focus of the Secretary’s trip. According to the U.S. Travel Association, China was the largest source of overseas travelers to the U.S. in 2019 and outbound travel this year from China to the U.S. has only recovered to 30% of the levels seen in 2019.
Tech Tip: OHBOL Goes Back To The Drawing Board
U.S. Customs and Border Protection (CBP) has postponed the implementation of Ocean House Bill of Lading (OHBOL) Release before, but now the trade is wondering if the whole project has been scrapped.
CBP announced in CSMS # 57419172 that they are again delaying the launch date for OHBOL. They are also taking the step to remove current functionality for OHBOL from their test environment (CERT) on September 6th.
This raises the possibility that the solution CBP had been working to release ocean cargo at the house bill level may not be viable, or that significant flaws were found during testing. Many FTZ users and operators had invested time and energy to rewrite interfaces and procedures to meet the new requirements. From this message it appears some, if not all of that investment has been wasted.
The CSMS message says that a new date for implementation will be announced at a later date.
If you have specific questions or comments about Ocean House Bill of Lading functionality, ask us at Info@iscm.co.
A Different Hilary Impacts U.S. Trade
FTZ supply chains were relieved to avoid serious damage after extreme weather swept through Southern California. Category 4 Hurricane Hilary landed on Mexico’s Baja California peninsula, showering ports across SoCal with record-breaking rainfall.
After losing some strength, Tropical Storm Hilary reached the U.S. on August 20th, though the Port of Los Angeles reported no damage. It was the first named storm of any kind to ever hit the region according to CBS News.
Ship and container terminal movements are now back to normal, but rail service in the region was impacted for a time due to water and mud on the tracks.
It took several days to work through the backlog of trains once service was restored.
The Port of Long Beach similarly reported no damage or disruptions to port operations. The Ports relocated vessels to anchorage points offshore in advance of Hilary’s landfall.
According to CBS News, Hilary flooded several areas, triggering rock and mud slides. Some desert and mountain areas saw more than half the yearly average level of rain due to the storm, and tens of thousands of Southern Californians suffered power outages.
Panama Canal Backlog Worsens as Drought Continues
On the other end of the rainfall spectrum is Panama. U.S. foreign-trade zones that rely on the Panama Canal have seen delivery times stretch just as we enter peak season. This is due to an extended drought that is impacting water levels needed to operate the locks of the canal.
The number of daily transits through the canal has been capped at 32 by the Panama Canal Authority (ACP) in a bid to conserve water and manage saltwater intrusion into Gatún Lake, one of the three locks that make up the canal. Fresh water in the lake powers the canal, and is also the water source for over 50% of the country’s population.
More than 200 ships are stuck on both sides of the canal. Some ships have been backed up for more than three weeks. Panama is set to lose $200M in revenue from the restrictions.
The now hundreds of ships lying in wait are mainly bulk cargo and gas carriers.
An average trip across the canal is 8 to 10 hours by ship. Danish carrier Maersk is the largest single user, CBS reported.
Gatún Lake is 26 meters above sea level, and gravity from this height difference is what raises and lowers ships in each set of locks.
In 1880 the French Universal Company of the Interoceanic Canal of Panama began work to construct the canal. That effort was abandoned nine years later.
The United States began its work on the canal in 1904. Since it’s 1914 inauguration, 1.1 million voyages have transited from ocean to ocean.
Canada Lands Another EV Plant
A joint venture between Ford, EcoProBM and SK On will build a factory to manufacture Electric Vehicles (EV) battery components. In Canada. Across the street from the $1B General Motors battery components plant announced two months ago.
Ford unveiled plans for the $900M cathode manufacturing plant in Canada together with its two South Korean partners. The new facility has already broken ground and will be located in Bécancour, midway between Montreal and Québec City in the province of Québec.
The factory, which will mark Ford's first investment in Québec, is expected to begin production in the first half of 2026.
Construction has already begun on the 3 million square-feet site, which will include a six-floor building that will house approximately 345 new jobs in Québec.
Slowing Demand Puts Ocean Carriers In Unfamiliar Territory
Ocean carriers have begun to cancel sailings in response to falling demand for container freight. This is due in part to retailers holding high volumes of excess stock, especially in the apparel and electronics industries. Growing TEU capacity is also an issue.
MSC, the world’s largest container company, canceled last week’s voyage of the 1,200 foot long MSC Deila from Asia to northern Europe due to “slowing demand” on the route, it said on its website.
The 14,000 TEU vessel also had its sailing canceled the week before.
“Carriers will be doing … ‘capacity management,’ which means laying up ships,” said Sanne Manders, president of ocean and air at freight broker Flexport, speaking to CNBC by video call. “If you fly to Singapore, you’ll see all these ships outside the port … A lot of ships are parked there waiting till there are better yields,” he added.
The blank sailings come as large shipping companies’ latest earnings plunged. Last month, CMA CGM said earnings for the second quarter were down 73% to $2.6 billion compared to the same time last year, while Hapag-Lloyd’s first-half was down to $3.8 billion from $10.9 billion for the same period in 2022.
Maersk reported a sharp fall in its second-quarter profit of $2.91 billion, well below the record $10.3 billion for the same quarter in 2022.
“Looking at the next couple of months, there’s still a lot of capacity going to be added specifically on the ocean side,” Manders said. “And that will keep rates ... severely under pressure,” he told CNBC.
Indeed, shipping companies ordered record numbers of vessels after the Covid-19 pandemic brought them “enormous” amounts of excess cash, according to investment firm Bernstein in a research note published last month. “The addition of hundreds of thousands of TEUs by the biggest shipping lines will likely keep rates from sustained expansion in the near to medium-term,” Bernstein’s analysts said.
FTZ Staff Activity
- FTZ Board Staff processed a Minor Boundary Modification (S-138-2023) in FTZ 94 on behalf of Jamco International Inc., Laredo, TX on July 27, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-139-2023) in FTZ 94 on behalf of BA Forwarding Co., Inc., Laredo, TX on July 27, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-140-2023) in FTZ 125G on behalf of Jayco, Inc., Middlebury, IN on July 31, 2023
- FTZ Board Staff processed a Termination (S-141-2023) in FTZ 191A on behalf of Michaels Stores Procurement Company, Inc., Lancaster, CA on August 1, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-142-2023) in FTZ 38 on behalf of Teijin Carbon Fibers, Inc., Greenwood, SC on August 3, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-143-2023) in FTZ 26W on behalf of Flip Electronics, LLC, Alpharetta, GA on August 3, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-144-2023) in FTZ 298 on behalf of Cinch Warehousing, Inc., Arvada, CO on August 4, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-145-2023) in FTZ 32 on behalf of Carbel, LLC, Medley, FL on August 7, 2023
- FTZ Board Staff processed a Termination (S-146-2023) in FTZ 283 on behalf of R&S Solutions, Jackson, TN on August 7, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-147-2023) in FTZ 22 on behalf of Weida Freight System, Inc., Itasca, IL on August 7, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-148-2023) in FTZ 75U on behalf of JA Solar AZ, LLC, Phoenix, AZ on August 7, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-149-2023) in FTZ 70Z on behalf of Warrior Sports, Inc., Shelby Township, MI on August 8, 2023
- FTZ Board Staff processed a Termination (S-150-2023) in FTZ 38 on behalf of Borgers USA, Duncan, SC on August 8, 2023
- FTZ Board Staff processed a Termination (S-151-2023) in FTZ 18I on behalf of Bloom Energy Corporation, San Jose, CA on August 8, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-152-2023) in FTZ 38A on behalf of BMW Manufacturing Co., LLC, Spartanburg, SC on August 10, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-153-2023) in FTZ 50 on behalf of Kai Harbor Express, LLC, Rancho Dominguez, CA on August 16, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-154-2023) in FTZ 244 on behalf of UNIS, LLC, Riverside, CA on August 17, 2023
- FTZ Board Staff processed a Subzone Application (S-155-2023) in FTZ 29 on behalf of BlueOval SK, LLC, Glendale, KY
- FTZ Board Staff processed a Minor Boundary Modification (S-156-2023) in FTZ 207F on behalf of LEGO Manufacturing Richmond, Inc., Colonial Heights, VA on August 21, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-157-2023) in FTZ 32 on behalf of JCC International Distributors LLC dba Clar Company, Miami, FL on August 21, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-158-2023) in FTZ 32 on behalf of NYC of America LLC, Hialeah, FL on August 21, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-159-2023) in FTZ 50 on behalf of VF Oudoor LLC, Ontario, CA on August 21, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-160-2023) in FTZ 36 on behalf of Suderman Contracting Stevedores dba Metro Ports, Galveston, TX on August 22, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-161-2023) in FTZ 32 on behalf of A.M.L.L. Corporation dba Pena Foods, Hialeah Gardens, FL on August 22, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-162-2023) in FTZ 214 on behalf of Frontier Scientific Solutions, LLC, Wilmington, NC on August 23, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-163-2023) in FTZ 50 on behalf of Pacific Pharmaceuticals, LLC, Rancho Cucamonga, CA on August 23, 2023
Foreign-Trade Zone Board Activity
- Jos. H Lowenstein & Sons, Inc. received authorization of production activity for dyestuff chemicals for hair, fur and, leather within Foreign-Trade Zone 1E in Brooklyn, NY. MORE
- Flextronics America, LLC submitted a notification of proposed production activity for automatic data processing machines in Foreign-Trade Zone 183C in Austin, Texas. MORE
- FMC Agricultural Caribe Industries, Ltd. received authorization of production activity for agricultural chemicals within Foreign-Trade Zone 7E in Manati, Puerto Rico. MORE
- Jayco, Inc. received authorization of production activity for motorhomes within Foreign-Trade Zone 125 in Middlebury, Indiana. MORE
- AbbVie Ltd. received authorization of production activity for additional components of pharmaceutical products within Foreign-Trade Zone 7I in Barceloneta, Puerto Rico. MORE
- GSM Engineered Fabrics, LLC received authorization of production activity for industrial belts with a restriction that rolls of woven plastic polyester belt material and rolls of spiral polyphenylene sulfide plastic belt material be admitted in privileged foreign status within Foreign-Trade Zone 204 in Kingsport, Tennessee. MORE
- Vallourec Star, LP submitted a notification of proposed production activity for semi-finished steel casings within Foreign-Trade Zone 164A in Muskogee, Oklahoma. MORE
- Millipore Corporation submitted a notification of proposed production activity for beverage filtration and purification devices within Foreign-Trade Zone 81D in Jaffrey, New Hampshire. MORE
- BlueOval SK LLC submitted an application to operate their facilities as a Subzone of Foreign-Trade Zone 29 in Glendale, Kentucky. MORE
- LL Flooring Services, LLC received approval to operate their Sandston, Virginia facilities as Subzone 20G within Foreign-Trade Zone 20. MORE
- AbbVie Ltd. received authorization of production activity for additional components of pharmaceutical products within Foreign-Trade Zone 7I in Barceloneta, Puerto Rico. MORE
Summer Heat Wilts Trade:
August is vacation month here in DC. Congress adjourned at the end of July and promptly left town; the Senate will resume normal business after Labor Day; the House a week later. That made it easy for August weather to have a larger impact on trade than policy changes in your Nation’s Capital.
Hurricanes on both coasts impacted U.S. ports while a drought in Panama hampers ships travelling between them.
Commerce Secretary Gina Raimondo is the latest Biden Administration official to travel to China. She offered trade as a way for the two countries to start working through their differences. They agreed to keep talking at least.
Yesterday, the Department of Commerce Department released its estimate that the U.S. trade deficit in goods widened 2.6% to $91.2 billion in July. It appears a slowing global economy will not provide any growth for the U.S.
Soft container volumes generally, and rapidly rising capacity have put container rates into a dive after the huge spike FTZs and other importers were faced with just last year.