New Articles

The Fourth Industrial Revolution: Benefits and Challenges

The fourth industrial revoliiution is having an impact on deliveries of shipments of export cargo and import cargo in international trade.

The Fourth Industrial Revolution: Benefits and Challenges

Many of us learned about the Industrial Revolution back in high school. We had to memorize the names of a lot of inventors (Robert Fulton – was he the steamboat or the cotton gin?) and discuss the ramifications of factories taking precedence over farms, and how automation can simultaneously make life easier, and more challenging.

But much has changed since the 1800s, when water and steam power were first used to mechanize production. And it may surprise some to learn there were actually three industrial revolutions – and we’re now in the midst of a fourth.

Following the original that brought Fulton into our history books (and yes, if you guessed “steamboat” you were correct), the second was ushered in by the harnessing of electricity. The third, which began not that long ago, focused on information technology.

And the one some say we’re in now? It’s a revolution in which physical, digital and even biological technologies have been fused in a way that has transformed not only how we work but also how we live, play and communicate.

Everything is connected

The biggest difference between the current revolution and those that preceded it is how quickly its changes have been adopted on a global scale, and the impact they have had on every type of industry. Billions of people now have a phone in their pockets that provides instant conversation, negotiation, contract signing and transmission of funds with anyone anywhere in the world.

What does that mean for business and trade? It will take less time to do a lot of stuff, which is more efficient – and more efficient means more productive. It will cost less to send goods from one place to another, and for the sender and recipient to negotiate the deal. Logistics and global supply chains will both benefit as a result. And when the overall cost of trade drops, it opens up access to new participants and new markets, resulting in a rising tide of economic growth.

There isn’t a single aspect on the supply side that hasn’t been transformed, from research and development to marketing, sales and distribution. Many of these changes have been triggered by developments from the demand side, where more transparency and greater insight into consumer engagement have shaped the way products are made, sold and delivered.

Companies are being compelled to take a closer look at how they do business. Putting the customer first was always a good slogan but now it’s a necessity, as they have a world of goods to shop from and prices to compare instantly with the touch of a smartphone screen.

The downside

With this revolution, as in the past three, technology and automation now completes tasks that used to require a salaried employee.

In the long run, the employment market may shift toward better, safer jobs; but in the short term there will be fewer available positions between the executive boardroom and the minimum wage laborer.

That may be one reason why we saw the presidential election outcome that we did.

The only constant: change

There were likely people after each of the previous industrial revolutions that believed automation and technology has gone as far as it can go. But that’s probably not the case this time, given the rapidity with which new technology breakthroughs are occurring.

Just ten years ago we could not have envisioned the processing power and storage capacity of devices we now take for granted. 3-D printing and nanotechnology have segued from sci-fi to reality. Logistics companies are already looking into trucks that drive themselves. Heaven knows where artificial intelligence will one day take us—hopefully not into those dystopian futures so often portrayed in summertime movies.

The challenge, as it has been before, will be finding the right balance between human and technological resources. Our closer reliance on technology and the innovative ways in which it serves our business needs may, some fear, turn us into automatons—just one more wirelessly connected cog in the digital supply chain.

Moody's downgrades ratings for ocean carriers of shipments of export cargo and import cargo in international trade.

Maersk and NYK Receive Negative Credit Reevaluations

The Moody’s rating agency has issued downgrade reviews on two global shipping companies, casting more uncertainty on an industry already struggling with higher costs and declining profits.

The Danish business conglomerate A.P. Moller–Maersk recently announced that over the next 24 months it would split into two separate businesses, a transport and logistics division and an energy division. That triggered a review.

“We have placed the ratings of Maersk on review for downgrade because we believe that its business diversification will reduce significantly with the separation of its energy businesses which represented 62 percent of EBITDA as of the first half of 2016,” said Maria Maslovsky, a Moody’s vice president and senior analyst.

The review is not scheduled for completion until next month, but a downgrade of at least one notch in the company’s Baa1 issuer rating, Baa1 senior unsecured rating, and the (P)Baa1 medium-term note (MTN) program rating would not be unexpected. This may be contingent on the company’s future financial policy, the amount of debt Maersk allocates to the transport and logistics division, and any remaining ownership interests in the energy businesses.

Moody’s also rendered a harsh judgment on the Nippon Yusen Kaisha (NYK) announcement that it would be merging its container business with MOL and K Line. “The outlook is negative,” Moody’s concluded in a summary that downgraded the carrier from Baa3 from Baa2.

NYK’s most recent earnings statement listed a loss of $250 million. “The downgrade…reflects our view that low freight rates will keep NYK’s cash flow low and leverage high in the near to medium term,” said Mariko Semetko, a Moody’s vice president and senior analyst. “Consequently, the company’s earnings recovery has been and will likely remain much slower than Moody’s had previously anticipated.”

This may be a temporary setback, as the NYK merger will not be completed until April 1, 2018. “If the business integration leads to more discipline, the transaction could prove credit positive over time,” said Moody’s. Until then, the company’s high debt leverage and low earnings does not reflect well on one of the world’s largest shipping companies.

Repercussions

Ratings are critical, in their assessment of a company’s ability to meet its financial responsibilities. Companies forced to contend with a downgrade have little recourse, outside of attributing their struggles to industry-wide market condition challenges that have impacted every container carrier.

Kawasaki Kisen Kaisha (K Line), which also received a downgrade to Ba3 from Ba2, opted for an issuer rating withdrawal from Moody’s. K Line reported a fiscal year loss of $457 million, amidst persistent rumors of a forthcoming sale or bankruptcy.

“Although we have continued constructive discussions with Moody’s based on a cyclical nature of shipping industry, it was regretful that downgrade implementation has been taken,” K Line said in a statement. “Based on non-necessity of continuous rating obtainment from business (operation) perspective, today, we have withdrawn issuer rating from Moody’s.”

Improvements in infrastructure would benefit shipments of export cargo and import cargo in international trade.

The Trump Infrastructure Plan

“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.”

That was a quote from Donald J. Trump that was part of dozens of campaign speeches delivered in states that have long been concerned about crumbling roads and hazardous bridges.

Now that Trump has won the election, he faces the same challenge of every previous president—how to turn a promise into a plan that will actually succeed.

He starts with some advantages: a U.S. infrastructure bill would be the perfect foundation for the America-first philosophy that helped to win him the White House. And as a builder, it’s an issue where he brings real-world industry knowledge to the table, something his critics contend will not be the case when it comes to foreign policy and other areas.

Plus, there have been several infrastructure bills introduced by Democrats over the past eight years, so there would not be a philosophical objection to its intention from the minority in Congress, as there would with a wall at the border.

However, given the contentious nature of the presidential campaign, it’s difficult to envision a “honeymoon” period for the Trump presidency, though its presence may not be as crucial with the Republicans having majorities in both houses of Congress. Will the Democrats choose to obstruct, and risk getting tagged with the Party of No designation they attached to the GOP over the past eight years? Or will they work across the aisle to help a president they distrust (some would say despise) to make American roads, bridges and tunnels great again?

Whatever happens, it certainly won’t be boring.

The Plan

According to a Trump policy statement, the objective is to invest $1 trillion in infrastructure spending over the next 10 years. That includes not just the oft-cited roads and bridges but transportation, clean water, telecommunications, the electricity grid, and infrastructure related to national security.

The plan would be financed in a deficit-neutral way, by enlisting private companies to invest $167 billion of their own equity into projects, in exchange for a tax incentive equal to 82 percent of that investment. Those funds could then be leveraged to borrow more money on private financial markets, at a time when interest rates are historically low. They would also receive additional revenue from project beneficiaries—such as tolls on new roads.

The cost of the government tax credits would be recouped through the increased tax revenue generated from wages of those involved in the projects, and from taxes paid on the increased revenues of the companies doing the work.

Proponents claim that one advantage of relying on private enterprise is the ability to avoid the bureaucracy and red tape that result when government takes the point. With schedules and approvals streamlined, projects can be brought to fruition more efficiently. There would also be an emphasis placed on using American steel and other raw materials in the projects, providing a lift to domestic manufacturing.

The Challenges

Obviously this isn’t the first infrastructure bill that has been considered by Congress. Previous efforts stalled for different reasons. A $305 billion bill proposed by the Obama administration was shot down by Republicans. A $478 billion bill backed by Senator Bernie Sanders of Vermont, that would have been funded by closing corporate tax breaks that Sanders claimed allowed corporations to “stash money overseas” also met with resistance.

With these bills, as will likely happen with the next one, any delays or objections are likely to stem from funding, and how funds are allocated.

Critics, among them some economists, claim that tax revenues alone will not be enough to offset the costs associated with such an ambitious plan. Will some taxes have to be raised to generate additional funding? The last time a Republican president reneged on a promise of “no new taxes,” it didn’t end well.

Given the manner in which Trump has attacked opponents during the campaign, there have also been worries that the states that supported his candidacy will benefit more from his plan than those that voted against him. However, the president-elect’s meetings with former rivals and some of his harshest critics, from South Carolina Governor Nikki Haley to 2012 GOP presidential nominee Mitt Romney, suggest that there will not be that much carry-over from political grudges.

Perhaps the greatest bipartisan cause for concern is that, even if the $1 trillion investment is approved, it still won’t be enough. According to the American Society of Civil Engineers, there is currently a $3.6 trillion infrastructure investment gap.

And, while that first step toward improvement still awaits congressional approval and a presidential signature, the American Institute of Architects (AIA) is petitioning government to expand its view of what constitutes infrastructure to also include schools and libraries. “It’s not just the infrastructure that moves people and things,” said Andrew Goldberg, AIA’s managing director of government relations. “It’s also what happens once you get there.”

Carriers are handling more air shipments of export cargo and import cargo in international trade.

Will Political, Industry Changes Impact Air Freight Trends?

The September 2016 numbers are in for global air freight markets, and they have prompted cautious optimism.

According to the International Air Transport Association (IATA), demand (measured in freight ton kilometers), rose 6.1 percent over September of 2015—the fastest growth pace since the disruption caused by the U.S. West Coast seaports strike in February 2015. Freight capacity also increased, by 4.7 percent.

New export orders triggered the ascent, along with companies having to making alternate shipping plans after the collapse of the Hanjin marine shipping line.

Most global regions shared in the good news. Freight volumes rose 5.5 percent among Asia-Pacific airlines, boosted by order increases in China and Japan. The European market reported a 12.6 percent volume increase, with Germany leading the way in new export orders.

The numbers are also up among North American carriers (4.5 percent in freight volume) and in Africa (up 12.7 percent in freight demand increase over last year). The only exceptions to the trend were among Middle Eastern carriers, where demand slowed for the third consecutive month, and among Latin American airlines (where demand dropped 4.5 percent).

More help may be coming for the industry following the launch of the World Trade Outlook Indicator, launched by the G20 Trade Ministers. It’s an acknowledgement that air freight is a key driver of global trade, as well as an early signal of turning points in economic activity.

It is hoped that this will be a first step toward forging closer ties and more dialogue between the G20 leadership and government agencies with some authority over air cargo in the United States.

That topic was also taking up at last month’s U.S. Air Cargo Industry Affairs (USACIA) Summit in Washington D.C. The gathering promoted the economic value and strategic importance of air cargo as an enabler of economic prosperity, so it would be prioritized as such by government officials.

Of course, many of those government officials are about to change in a few months, and the impact that will have is anyone’s guess.

It wasn’t that long ago that the conclusion of the EU-Canada Free Trade Agreement carried a promise of more business that contrasted with the protectionist mood sweeping through several nations. “Governments everywhere should take note and move in the same direction,” said Alexandre de Juniac, IATA’s Director General and CEO.

And then Donald Trump pulled off a stunning upset in the presidential election. Over the past year he has excoriated U.S. trade deals, vowing to rip them up and start over. He is against TPP and would consider tariffs on imports that will impact a wide range of companies, as well as the air cargo and ocean carriers charged with moving goods from one place to another.

The numbers are still trending up. Come January? It’s anybody’s guess.

Merging Japanese container carriers will handle more shipments of export cargo and import cargo in international trade.

Why Are Three Japanese Shipping Companies Merging?

The wave of consolidation continues in the container carrier industry, as Japan’s Nippon Yusen, Mitsui O.S.K. Lines and Kawasaki Kisen Kaisha have combined liner operations in an effort to consolidate economic resources and improve efficiency.

In a released statement, the companies said that “by strengthening the global organization and enhancing the liner network, the new joint-venture company aims to provide higher quality and more competitive services in order to exceed our clients’ expectations”.

The merger now comprises the world’s sixth largest container shipping operation by capacity, with 256 container vessels and about seven percent of the world shipping market. It will begin operations in April 2018.

Why is this happening? The answer, as it so often is with any question related to business, is money. The three lines anticipate an annual savings of $1.1 billion through their newfound synergy. Since 2012, Nippon Yusen, Mitsui O.S.K. Lines and Kawasaki Kisen Kaisha have collectively lost $1.5 billion.

Beginning of a New Wave?

Analysts suggest that this merger is the first of a second wave of consolidation, given the continued lethargic state of the industry. Overcapacity and a struggling global economy has convinced carrier companies that there is safety in numbers—a lesson that may have been learned too late by those such as South Korea’s Hanjin.

Will companies such as OOCL, Yang Ming, Hamburg Sud, and Zim begin looking for partners? As the gap widens between the new, larger consolidated entities and the medium-sized firms struggling to hang on, further acquisitions may become inevitable.

But even if more mergers take place, the industry may still be facing tough times, at least according to a report issued by the Boston Consulting Group (BCG).

Following moderate growth from 2010-2014, the 2015 drop in demand resulted in overcapacity that paved the way for mergers such as that of China’s COSCO and CSCL, CMA CGM of France and APL parent Neptune Orient Lines, and THE Alliance.

By reshuffling the industry deck, BCG analysts now predict an uptick in container demand between 2.2 percent and 3.8 percent through the year 2020. However, the gap between global trade volumes and containership capacity may increase to between 8.2 percent percent and 13.8 percent during the same period.

“By the end of 2020, oversupply in vessel capacity will stand at two-million to 3.3 million TEUs—equivalent to some 90 to 150 or more Triple E class ultra-large container vessels,” the report reads. “The year 2016 seems ready to set a new record for a reduction in capacity: seven months of scrapping (January through July) affected roughly 300,000 TEUs, and the age of vessels at their scrapping—20 years—dropped to a two-decade low. However, it’s uncertain how much more reduction is to come. Industry players are in a race for lower slot costs to ensure competitive advantage. The bigger, newer, and more efficient the vessel, the lower the slot cost, which is why companies want to invest in larger vessels.”

As a result, the industry faces projected combined losses of $10 billion, with continued overcapacity making it difficult—if not impossible—for every line to turn a profit. Even worse, companies are left to wonder if this is merely a prolonged downward trend, or the new normal.

3PLs and shippers agree that big data is of increasing importance in managing shipments of export cargo and import cargo in international trade.

Big Data = Big Changes in Logistics, Transportation

One of the highlights of the annual Council of Supply Chain Management Professionals (CSCMP) conference is the unveiling of the new Third-Party Logistics Study. According to this year’s survey, released in late September at the organization’s Atlanta meeting, big data is going to play a bigger role moving forward among shippers and their logistics providers.

Among the findings: 98 percent of 3PLs and 93 percent of shippers believe data-driven decision-making is essential to supply chain activities; 86 percent of 3PLs and 81 percent of shippers expect analytics to become a core competency of supply chain organizations; 71 percent of 3PLs believe that big data improves process quality and performance.

Amid these glowing reviews there was one cautionary note: just 35 percent of shippers believe 3PLs could support their big data initiatives—down from 44 percent in 2014.

It’s not that anyone is against collecting data—both sides rely upon it. The issue stems from ongoing evaluation on how it can be optimally merged in a way that delivers the best results and the best value.

Playing Catch-Up

Where industries like marketing and manufacturing are already maximizing the use of big data and analytics, implementation has been slower in supply chain management.

Given all the factors that can impact this industry, from weather conditions to vehicle usage to automation, access to real-time information can be pivotal to improve efficiency.

Inventory management is already being transformed, thanks to automated alerts triggered to replenish stock levels when necessary. Forecasting data, compiled in part through links to cameras in warehouses, can anticipate when resupplies are necessary before the stock has a chance to run short.

Those curious as to how such obvious data applications will affect the industry, outside of making it more effectual, should ask themselves what happens to the employees now charged with the jobs that data can do better.

Structured and Unstructured Data

The most significant growth area will be in unstructured data, according to industry experts. It’s been slower to develop because it deals in fields that are less clearly defined.

For instance, structured data deals in hard numbers—how many products are in a warehouse, and how many have been ordered—that are stored in defined databases fields. Unstructured data delves into issues such as the impact of visibility of product brands and logos on store shelves, and how display space is allocated—and typically derive from non-database material such as text—which might appear on social media—or even audio and video.

While supply has traditionally been easier to measure than demand, supply chain forecasting analytics may be changing that as well. By tracking what people are saying about a product on Facebook and other social media platforms, it becomes easier to predict potential appeal.

The interest is there, the technology is there, and the enthusiasm for putting it all together is getting there. Chances are it won’t be long before traditional supply chain data monitoring will be joined with more predictive analytics solutions, providing a clearer picture into every aspect of operations.

Apps can make more efficient truck shipments of export cargo and import cargo in international trade.

Trucking: New Apps Streamline Freight Shipment Booking, Even Parking

Trucking is a big industry dominated by small players. Thousands of companies, each owning about three trucks, compete for business every day, requiring freight shippers and brokers to sometimes make hundreds of phone calls to find the transportation they need.

That’s not the most efficient system for moving ten billion tons of freight every year.

But now there is a better way. Or at least that’s the promise offered by entrepreneurs hoping to launch Uber-like mobile apps that deliver a faster and more efficient link between truckers and shippers.

Both Cargomatic, launched in 2014, and Convoy, which debuted one year later, promise to accelerate shipping by eliminating the broker-middleman. The apps rely on algorithms to link carriers with shippers, scheduling transportation at a competitive price based on such variables as weight, size, and distance traveled. Trucking companies are screened in advance based on reputation, quality of equipment, rates, and security. Once the connection is made and approved by both parties, the app also expedites billing and payment.

If it works, this system would eliminate a lot of paperwork, a lot of price negotiating, and a lot of extra costs incurred by using a truck broker, whose fees may be as much as 45 percent of the job for local shipments.

There are additional benefits as well: trucks are on the road less often when shipments are booked more efficiently. And when it’s easier to connect trucks with companies that need their services, there is less likelihood of some vehicles returning home with an empty container.

Competition and Consolidation

With nearly 70 percent of all U.S. freight being moved by truck, much of it on short notice, there is certainly a need for any solution that gets cargo where it needs to go in less time and at a lower cost.

In fact, the market is likely big enough for more than one such product. But we are still in the VHS-versus-Betamax phase of industry development, where multiple technologies are competing for dominance. Cargomatic launched in Los Angeles and has since rolled out to New York and San Francisco. Convoy is backed by investors like Salesforce.com CEO Marc Benioff. Seven other companies with similar solutions have raised more than $60 million.

Whichever players survive, their impact is likely to be one of consolidation in the trucking industry. Carriers competing for more business may begin merging from small companies to larger players with larger fleets.

Expediting Port Pick-ups

There is also help on the way for shipments originating from marine cargo terminals.

The Northwest Seaport Alliance recently unveiled two new mobile applications to speed the flow of containers through port facilities and along local freight corridors.

DrayQ offers truck drivers real-time information about wait times, so they can choose the best moment to enter a terminal without waiting in traffic. DrayLink connects the drayage community to dispatch, track and record container moves from pickup to delivery, by using Google Analytics and GPS data.

Both apps were created in partnership with the U.S. Department of Transportation’s Connected Vehicle Freight Advanced Traveler Information System (FRATIS) architecture and StrongPorts initiative. They are now available for free download for both iOS and Android smart phones and tablets.

And yes, there is now even an app that connects truck drivers to available parking spaces. Also available for iOS and Android, Park My Truck was developed by the truck stop industry, and lists spaces at more than 5,000 truck stops and rest areas.

Popular opposition to trade deals could reduce shipments of export cargo and import cargo in international trade.

The Great Debate: Trade vs. Protectionism

In less than two weeks Americans will go to the polls and vote for their next president. The choice is between a Republican candidate vowing to eviscerate unfair U.S. trade pacts, and a Democratic candidate who used to support global trade deals like the Trans-Pacific Partnership, but has altered her position after discovering how unpopular they are with the electorate.

Whatever happens in the election, the U.S perspective on trade may have fundamentally changed over the course of the past two years. A newfound inclination to consider more closely the domestic impact of any trade deal on manufacturing and jobs will place any future negotiations under additional scrutiny.

This trend toward nationalism is not limited to the United States, as demonstrated by Britain’s decision to leave the European Union. And nationalism, at least as articulated by Donald Trump and the UK’s Nigel Farage, is inextricably linked to some degree of protectionism.

Americanism, not globalism, will be our credo,” said Donald J. Trump, on the campaign stump.

Those opposed to such sentiments suggest that they are expressed not from economic concern but something more primal: an us-versus-them mentality that is often portrayed as prejudice. Racism accusations have dogged Trump almost from the moment he announced his candidacy. In Britain, the Brexit vote that shocked so many observers was attributed in part to anti-foreign sentiment.

Studies conducted by economists and political scientists have affirmed a link between nationalist sentiment and opposition to global markets—and sometimes the people who live in those global markets—especially when they move next door.

But such a characterization is too simplistic, and ignores other reasons for questioning the way some trade agreements are negotiated. President Obama discovered this back in April when he visited Germany in support of the Transatlantic Trade and Investment Partnership (TTIP). Thousands of demonstrators gathered to oppose the U.S.-European trade deal, fearing it would lower standards for products and consumer protection.

That message also resonates in places like Pennsylvania and Ohio, where steel mills that provided lifetime employment to thousands for decades are now shuttered, a victim of a world market now dominated by cheaper Chinese steel.

In 1999, conservative journalist and one-time presidential candidate Pat Buchanan described a $57 billion trade deficit as “a malignant tumor in the intestines of the U.S. economy.” Less than 20 years later that trade deficit has ballooned to more than $500 billion, with China alone accounting for $300 billion.

With American manufacturing already in critical condition, it’s easier to depict deals like the Trans-Pacific Partnership as the last nail in the coffin, especially when the playing field is already tilted against the home team. China’s reputation for unfair trade practices and currency manipulation would make even a mutually beneficial deal suspect.

Democrats point to the hypocrisy of such outrage from a billionaire businessman who has several Trump-branded products manufactured in China. But he’s just following the crowd, while campaigning for better laws and better deals.

In the meantime, companies like Carrier and Caterpillar are also headed overseas, and China’s middle class income growth has topped 70 percent in the past 20 years, while America’s has struggled to hit four percent.

Proponents of free trade insist that in the long run a global perspective is healthier, and that U.S. manufacturing may have to change to keep up with the competition, but it will never disappear. But now they face a broader coalition of opposition—from conservatives complaining about getting taken by bad deals, and liberals worried about the impact of globalization on third-world communities, where slave wages keep the economic engine running.

Whoever wins on November 8, there will be no victory to celebrate for globalism.

Companies, but not US companies are now involved in shipments of export cargo and import cargo in international trade to Iran.

Transportation/Logistics: Iran is Back Open for Business

When those 2016 Year in Review pieces start appearing, one of the news stories featured will be the resumption of business and commercial interests in Iran, after years of that nation being off-limits due to economic sanctions.

The demand for logistics solutions in particular is on the rise, and companies like DHL Freight are eager to fill the void. DHL recently installed two competence centers in Germany and Turkey for more efficient handling of exports to Iran. Truckloads destined for Tehran are being filled by a wide range of European companies, now that weekly departures for groupage shipments are available. German trade associations in particular are looking forward to an increase in bilateral trade, which will require a functional logistics network and stable trade lanes, both of which are in development.

Maersk Line is also reentering the Iran market after a five-year absence, despite the fact that one of its ships was fired on by Iran back in 2015. While passing through the straits of Hormuz en route to the United Arab Emirates, the Maersk Tigris was targeted with warning shots.

At a time when global container trade is down around the world, any new market sounds promising, even one that sometimes gets trigger-happy. Maersk’s Iran business will be managed by a team that oversees a cluster of countries,which also includes the United Arab Emirates, Oman, and Qatar. Access to the new market “will present significant growth opportunities,” said the cluster’s head of sales, Marcus Connolly.

Risk vs. Reward

Iran remains, by most estimates, the world’s largest state sponsor of terrorism. Even with the easing of sanctions following the controversial nuclear deal negotiated with the United States, a phalanx of trade rules and restrictions are still in place. It would be challenging for any business to navigate through this sea of regulations while avoiding fines and penalties for violation.

However, Iran is also the second largest country in the Middle East with a population of 80 million, and an estimated GDP of $435 billion, with expected growth of 5.8 percent to 6.7 percent in the next two years. The country is also positioned as a global trade gateway to the Commonwealth of Independent States, a market of more than 400 million.

So despite concerns over regulation and reputation, that opportunity explains the caravan of container carriers that started resuming service to Iran back in January. Mediterranean Shipping Co. has returned, as has CMA GGM. Panalpina began planning for a potential lifting of sanctions two years before it happened, and now offers regular air, ocean and road services to Iran. The Iranian port at Bandar Abbas now welcomes ships from Evergreen, Hyundai, OOCL, Hanjin, “K” Line, KMTC, X-Press, Yang Ming, and many more.

However, most of the primary sanctions applicable to U.S. individuals and companies have not been suspended and remain in full force and effect, contrary to the beliefs of those who thought they were wiped away by the Joint Comprehensive Plan of Action (JCPOA).

That pact, created by the U.S., the European Union, China, Russia, and the United Kingdom, lifted all nuclear-related secondary sanctions. But several activities are still prohibited, in response to Iran’s participation in terrorism and human rights abuses. This includes direct or indirect export or re-export of U.S. goods, technology or services, without separate authorization from the Office of Foreign Assets Control.

For other products, such as civil aircraft, a separate special license is required for American firms to do business with Iran. That restriction does not apply to EU-based businesses.

This is just one of many divergent policies and prohibitions related to different products and companies. Multinational corporations in particular will need to be aware of the gaps between sanctions and enforcement, based on which set of rules apply.

Making America Wait Again

With very few exceptions, U.S. citizens are still prohibited from doing business with Iran or the Iranian government. As freight forwarders and 3PLs throughout Europe and Asia plan for a surge of renewed energy exports and consumer goods imports, it’s non-business as usual for American business.

Given the dearth of capital investment in Iran dating back 30 years, there are also significant infrastructure building opportunities to support the expansion in global trade. So while companies like UK-based Seafast Logistics are forming joint ventures with Iranian logistics providers on container shipping, break bulk, project cargo, refrigerated goods, and air freight into and from all Iranian ports, U.S. logistics firms can only watch…and wait for something to change.

China's achievement of market economy status would mean more shipments of export cargo and import cargo in international trade.

Is China a Market Economy?

Earlier this month, the Congressional Executive Commission on China issued an annual report on U.S. trade relations with China, as it had done since 2001. But this year that report is garnering much more attention, for the role it will play in whether China is granted market economy status by the United States and other nations.

The verdict? Not one that will please the Chinese government. The CECC report lauded improvements in China’s legal system and the elimination of its one-child policy. But that was not nearly enough to offset concerns over the consolidation of Chinese Communist Party rule, continued human rights violations, allegations of theft of intellectual property, internet and global media censorship, and suppression of political dissent, usually with prison terms.

What Happens Next

By any objective assessment, China is nowhere near market economy status (MES). However, some WTO members have already granted MES to the nation through existing trade agreements. Ultimately, it will be up to each individual country to make its own determination.

The votes that really matter belong to the United States and the European Union.

Back on May 12 the European Parliament rejected MES for China, and EU governments will likely do the same.

A yes vote from the U.S. figures to be just as doubtful. The Department of Commerce and the International Trade Administration review six criteria for MES. These take into account everything from currency conversion and how worker wages are determined, to the extent of government control over the means of production and the allocation of resources. China lags far behind these standards.

What’s at Stake

Should China achieve market economy status, the nation would become an even more prominent player on the world stage.

But before that level playing field becomes a reality, it must demonstrate a willingness to play by the same rules as other market economies. That means the prices of its goods would be determined by supply and demand through free competition, and set by the country’s citizens and not its government. It also means China would have to stop subsidizing industries to be more competitive with trading partners.

So the outlook seems clear enough – as long as the Chinese government continues to control costs, prices, wages, production and currency value, market economy status should be a non-issue.

But here is where it gets murky.

On December 11, 2001, China became a World Trade Organization member and accepted a Protocol of Accession that required adherence to market economy principles. But additional language in the agreement, related to the expiration of one clause within the protocol, may provide a path to market economy status as of December 11, 2016. It all depends on how you parse the language.

Here is the Cliff’s Notes version: in the section of the protocol on anti-dumping investigations, China would be held to the same standard as every other market economy nation. But in Section 15, the following sentence appears: “In any event, (the provision on this standard) “shall expire 15 years after the date of accession”—that’s December 16.

Does that mean China becomes a market economy no matter what it has or has not done in other areas? Most legal experts don’t think so, but the debate is still underway.

On October 18, the European Commission proposed an “entire package” on how it fulfills the obligations in the accession protocol. Discussions will continue, with China pressing its case that it is entitled by right to Market Economy Status come December.