Ocean and air freight rates and trends; trucking and customs news for the week of May 22, 2019.
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Hari Raya Holiday Season May Cause May and June Delays
The Muslim holiday will likely cause shipping delays in Indonesia, Malaysia, Singapore, and other observing countries as those celebrating take time away from work. Your operations team will keep you informed of any delays to your shipments.
Weight Restrictions on Panama Canal Shipments
The Panama Canal restricts the draft (how deep the hull goes into the water) of vessels based on the amount of water available in Gatun Lake, which varies based on rainfall, amount of vessels and other factors. Ships must be lighter to meet the draft requirement, so they need to carry less cargo/ballast/fuel or offload cargo to the Panama Canal Railway.
The Panama Canal Authority has postponed the further reduction to allowable vessel draft for the Neopanamax locks and Panamax locks from May 28, 2019 to June 12, 2019 due to increased rainfall. The long drought has cut capacity through the canal by almost one-fifth and boosted rates for shipments headed to the U.S. East Coast.
Port of New York and New Jersey Prepared for More Cargo
As container ship sizes grow, the Port of New York and New Jersey says it’s prepared to handle the additional cargo. The port can currently handle up to nine ultra-large container ships at one time, significantly more than the Port of Savannah, which will be able to handle six of a similar size by 2024. According to Freightwaves, “the ability to handle more, larger ships makes New York-New Jersey the first port of call for up to 75% of vessels bound for the U.S. East Coast."
Impact of New IMO ECA Regulations
The International Maritime Organization (IMO) has mandated under new Emission Control Area regulations that by 2020, all merchant vessels must reduce their sulfur emissions from 3.5% to 0.5%.
Whether they install scrubbers, build new vessels, or use higher-quality fuel, carriers will need to make significant changes to comply with the new regulations, and those changes will come at a cost to shippers. Freight rates may climb between now and 2020 as a result.
For an in-depth look at the regulation and how to prepare, read our blog post: IMO 2020: What Shippers Need to Know Now
Jet Airways Declared Bankrupt
A Dutch court has declared Jet Airways bankrupt, although it is unclear whether Indian law will recognize the decision. Other air carriers are snapping up the suspended airline’s trade routes. Air India is set to benefit the most from the decision, as the carrier was given first foreign flying rights.
*Air Market Sees Small Uptick *
March air cargo volumes were 0.1% higher than last year, marking the first month of growth after four months of no or negative volume change. But trade tensions are creating an uncertain landscape, and according to the International Air Transport Association (IATA),”it would be premature to suggest that the uptick represents a change in the trend growth rate without first seeing signs of confirmation in coming months.”
International Roadcheck Coming June 4-6, 2019
The Commercial Vehicle Safety Alliance’s (CVSA) International Roadcheck will take place June 4-6th, 2019. International Roadcheck is an annual three-day event in which CVSA inspectors examine as many trucks as possible, looking for anything that doesn’t meet their safety standards for motor carriers, vehicles or drivers.
International Roadcheck may lead to delays and/or increased costs, for a few reasons:
FMCSA Asking for Public Comments on Lower Driving Age
The Federal Motor Carrier Safety Administration (FMCSA) is asking for public comment on training, qualification and safety concerns regarding a pilot program that would allow 18-20 year-olds to drive commercial motor vehicles in interstate commerce. The program would create more jobs in the industry and address the nationwide truck driver shortage. So far 75% of received comments are against the program.
JB Hunt Receives NVOCC License
JB Hunt received its NVOCC license from the Federal Maritime Commission (FMC), formally entering the business of freight forwarding. The industry is still speculating on what JB Hunt will do with the license, but they may “develop more fully-fledged transpacific freight forwarding services for its domestic customers.”
U.S., Canada and Mexico Section 232 Tariffs and Trade Agreement Update
On Sunday, May 19th, President Trump made a presidential proclamation that the U.S. would remove the steel and aluminum tariffs on goods coming from Canada and Mexico. Once the Section 232 tariffs were lifted, Canada removed their tariffs in a joint statement with the U.S, as did Mexico in another joint statement. Canada and Mexico are dropping their dispute cases with the World Trade Organization (WTO) in light of the recent developments. Now that the tariffs have been lifted, the chance that the United States-Mexico-Canada Agreement (USMCA) will be ratified in Canada and Mexico has increased exponentially.
U.S. Officially Removes Turkey From GSP
In a presidential proclamation, the U.S. officially removed Turkey from the beneficiary countries under the Generalized System of Preferences (GSP), 60 days after the original notice was posted. In a second presidential proclamation, the president reduced the Section 232 tariffs that had been imposed on Turkey for steel and aluminum from 50% to 25%, beginning on May 21st.
U.S. Sanctions on Huawei Exports
President Trump implemented export restrictions on the Chinese telecom company Huawei and its 68 affiliates in an executive order last week. The order declared a national emergency citing the threat of foreign adversaries using U.S. Information and Communications Technology (ICT) for economic and industrial espionage.
For a roundup of tariff-related news and the latest on the new fourth tranche, read our Tariff Insider.
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