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PSA Singapore Boosts Capabilities to Tackle Global Supply Chain Disruptions

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PSA Singapore Boosts Capabilities to Tackle Global Supply Chain Disruptions

PSA Singapore (PSA), a major global transshipment hub, has significantly enhanced its operations to manage increased activity and mitigate the impact of global supply chain disruptions since early 2024. This effort includes reinforcing its frontline capacity, commissioning new berths at Tuas Port, and reactivating berths and yard space at Keppel Terminal. As a result, the average wait time at the port has recently been reduced to two days or less. Despite ongoing disruptions, including the Red Sea situation, supply chain demand and impacts remain volatile. PSA is committed to supporting its customers through these uncertain times.

Read also: PSA Singapore opens Tuas Port

Since the start of 2024, PSA has faced strong berth demand and off-schedule vessel arrivals, leading to high concentrations of vessels on certain days and increased waiting times, despite utilizing all available berths. Larger call sizes have required vessels to stay longer, with extended transshipment container dwell times. This situation has been caused by factors such as the Red Sea crisis, which has indirectly reduced global shipping capacity, congestion at upstream and downstream ports, and shipping lines skipping ports to recover their schedules, resulting in significant changes in vessel arrival patterns and call sizes.

Ong Kim Pong, Group CEO of PSA International, stated, “As our flagship project, PSA Singapore is dedicated to meeting the challenges of ongoing volatility and aligning our port’s development and handling capacity with our customers’ needs. The Red Sea crisis has significantly disrupted global shipping and trade, and we expect this challenging situation to persist, potentially extending port congestion from Asia to Europe. PSA is building partnerships with customers and stakeholders through Node-to-Network initiatives to better coordinate between ports and enhance overall network efficiency. We are also expanding our port networks and ecosystems to grow our global presence and enhance cargo flows. By leveraging our facilities, supply chain capabilities, and our people, we remain committed to collaborating with our customers to address their unique needs in this changing global landscape.”

Singapore’s port has seen about 90% of container vessels arriving off-schedule, compared to an average of 77% in 2023. Additionally, vessel port stays at PSA have increased by 22% compared to the same period last year due to higher demand and container re-handling, where some containers are unloaded and reloaded based on discharge port, weight, and vessel stability.

Container re-handling on mega vessels berthed at PSA has increased by 8% in the first half of 2024 compared to the previous year, due to high vessel utilization caused by the Red Sea situation. This situation has led to extended vessel port stays, affecting the berthing time for incoming vessels, even as PSA maintains productivity.

Nevertheless, PSA’s proactive efforts and close communication with shipping lines and stakeholders have mitigated the impact of these disruptions. The PSA Singapore Management team has worked closely with unions, receiving strong support from the Maritime and Port Authority and Ministry of Transport of Singapore, ensuring a seamless port ecosystem.

PSA will continue to help shipping lines navigate service disruptions and optimize their network configurations, reducing berth waiting times and mitigating other impacts of ongoing disruptions, including vessel call diversions from congested ports in the region.

PSA moved 7% more container volumes in the first half of 2024 compared to the same period last year. Amid ongoing market volatility, PSA remains committed to long-term strategies, including enhancing capacity and capabilities through automation and smart technologies.

In addition to reactivating berths and yard space at Keppel Terminal, PSA’s Tuas Port currently operates nine berths and will add two more by the end of this year. Looking ahead, PSA plans to further expand Tuas Port and continue hiring frontline workers across all terminals, having already hired nearly 1,500 frontline workers in 2024 to boost operational capabilities.

Amid global supply chain disruptions, PSA has supported beneficial cargo owners and logistics service providers with value-added services to enhance supply chain visibility and expedite handling, mitigating the impact of delayed shipments. Initiatives such as priority discharge, expedited delivery, and fast connection management help stakeholders tailor solutions to their specific needs.

Despite the challenges, PSA remains dedicated to collaborating with all stakeholders, including government authorities, to enhance service excellence, reliability, and efficiency as operations scale up in the future.

“The congestion that we see today across many ports in the region is likely to be temporary. Singapore port operators are looking to mitigate the situation, which was unexpected and created by an extensive change in shipping routes due to the Red Sea crisis.  Singapore remains an important node to assist the liners in managing the supply chain disruptions.  Our Ports Performance database is showing shorter waiting times in June as compared to May.” – Mr Chris Rogers, Head of Supply Chain Research, S&P Global Market Intelligence

global trade EMS

Dynamic EMS Navigates Geopolitical Turbulence to Strengthen Global Electronics Supply Chain

Dynamic EMS, a prominent Electronics Manufacturing Service (EMS) provider, has emphasized the significant impact of recent geopolitical events on the global electronics supply chain, highlighting the challenges and opportunities these events present for British EMS companies.

Geopolitical instability, including trade disputes, sanctions, and regional conflicts, has dramatically altered the global electronics manufacturing landscape. British EMS firms like Dynamic EMS have had to rapidly and strategically reassess their supply chain operations to ensure the reliability and continuity of high-quality electronic components and assemblies.

John Dignan, Managing Director at Dynamic EMS, stated, “The past few years have been marked by unprecedented changes in the geopolitical climate. From tariffs and trade barriers due to the U.S.-China trade war to disruptions caused by the COVID-19 pandemic and Brexit, each event has profoundly impacted how we source, manufacture, and distribute electronic products.”

Dynamic EMS has identified several key areas affected by these geopolitical shifts:

Sourcing and Procurement

Supply chain disruptions have led Dynamic EMS to diversify its supplier base, increasing reliance on local and regional suppliers to mitigate future risks.

Cost Management

Rising tariffs and regulatory compliance costs have necessitated sophisticated cost management strategies, ensuring competitive pricing without compromising quality.

Regulatory Compliance

Brexit introduced new trade regulations between the UK and EU, requiring Dynamic EMS to adapt its operations to meet new standards and maintain critical market access.

Innovation and Adaptability

In response to rapidly changing global conditions, Dynamic EMS has accelerated investments in innovative manufacturing technologies and flexible production techniques, enhancing operational efficiency and market responsiveness.

A significant global response to these geopolitical challenges is the increased investment in semiconductor manufacturing capacities, particularly in the United States. Driven by national security concerns and a desire to reduce dependency on Asian supply chains, billions of dollars have been invested by semiconductor companies and the U.S. government. “These strategic investments in semiconductor infrastructure not only reshape the global electronics manufacturing landscape but also create new opportunities for collaboration and partnership for British companies like Dynamic EMS,” added Mr. Dignan.

Dynamic EMS remains committed to maintaining the highest production quality and customer service standards despite the turbulent global landscape. The company’s proactive approach to managing geopolitical risks underscores its dedication to operational excellence and customer satisfaction.

In conclusion, Dynamic EMS continues to closely monitor global events, ready to adapt and evolve to meet both the challenges and opportunities ahead. As the electronics manufacturing sector faces ongoing uncertainty, Dynamic EMS’s robust strategies and forward-looking leadership ensure it remains at the industry’s forefront, delivering reliable and innovative solutions to its clients worldwide.

global trade rates freight import

Ocean Freight Container Rates Soar Amid Global Supply Chain Disruptions

Ocean freight container shipping spot rates are set to surpass levels seen during the peak of the Red Sea crisis, reaching heights not witnessed since the Covid-19 pandemic, according to the latest data released by Xeneta.

Read also: Freight Rates Are Ballooning to Pandemic Highs 

Peter Sand, Xeneta’s Chief Analyst, remarked, “The market has experienced rapid and dramatic increases in May, with further growth in spot rates expected. On June 1, we anticipate spot rates reaching levels unseen since 2022, when the pandemic severely disrupted ocean freight supply chains.”

Rapid Rate Increases

Spot rates have been climbing swiftly across various trade routes:

  • Far East to US West Coast: Rates are projected to hit $5,170 per FEU on June 1, surpassing the Red Sea crisis peak of $4,820 from February 1. This marks a 57% increase in May, the highest in 640 days.
  • Far East to US East Coast**: Rates are expected to reach $6,250 per FEU, nearing the Red Sea crisis peak of $6,260, reflecting a 50% increase since April 29.
  • Far East to North Europe**: Rates are forecasted to rise to $5,280 per FEU on June 1, up from $4,839 on February 16, marking a 63% increase since April 29.
  • Far East to Mediterranean**: Rates are anticipated to exceed the Red Sea crisis peak, reaching $6,175 per FEU, a 46% increase in May and the highest in 610 days.

Contributing Factors

Xeneta’s data highlights several factors driving the spike in spot rates, including ongoing Red Sea conflict, port congestion, and shippers frontloading imports ahead of the traditional Q3 peak season. Sand explained, “Businesses are shipping goods earlier to protect supply chains, contributing to market uncertainty. The situation is more nuanced now than during the Red Sea crisis.”

Efforts by ocean freight carriers to mitigate disruptions, such as increasing transshipments and re-aligning capacity, have led to severe port congestion and unintended consequences, exacerbating the rate increases.

Challenges and Optimism

While the spot rate hikes spell trouble for shippers, Sand offers a glimmer of hope. “The growth rate of spot rates in June is not as rapid as in May, hinting at a potential easing of the situation. However, carriers continue to prioritize high-paying shippers, causing issues for those with lower rates on long-term contracts.”

Freight forwarders face new surcharges and premium service pushes, leading to higher costs passed on to shippers. “The situation may worsen before it improves,” Sand warned, noting that carriers will likely continue pushing for higher rates.

In conclusion, the ocean freight container shipping industry faces significant challenges with escalating spot rates, driven by global supply chain disruptions. While there is some hope for stabilization, shippers must brace for potential further increases and ongoing uncertainty.

global trade supply chain

Resiliency, Wherever You Can Get It: Uncertainty In Global Supply Chains Is Going To Stay

Citi has launched its latest Global Perspectives & Solutions (Citi GPS) report titled “Supply Chain Finance: Uncertainty in Global Supply Chains Is Going to Stay.” Its findings indicate that in an environment of stabilizing trade flows and cooling goods demand, disruption remains top of mind for businesses reliant on global supply chains.

Read also: Geopolitics, not Economics, is Front and Center for Global Supply Chains

The report, which follows 2021’s report titled “The Complicated Road Back to ‘Normal,’” draws insight from Citi Research’s propriety Global Supply Chain Pressure Index, trade flows and survey responses from multinational corporations and their suppliers globally.

As Citi’s premier thought-leadership product, Citi GPS is designed to help readers navigate the most demanding challenges and greatest opportunities of the 21st century. Citi accesses the best elements of a global conversation with senior Citi senior professionals, academics and corporate leaders to anticipate themes and trends in today’s fast-changing and interconnected world.

The Citi Global Supply Chain Pressure Index, outlined in the report, continued to ease on the back of a slowdown in global consumer’s demand for goods. Core goods inflation is expected to alleviate as heightened supply chain pressure has been a key driver of price pressure. The report cautions that while the decrease in demand is an important driver of loosening supply chain pressures, these developments are also a sign of mounting recessionary risks across countries and globally.

Citi Treasury and Trade Solutions (TTS) enables clients’ success by providing an integrated suite of innovative and tailored cash management and trade finance services to multinational corporations, financial institutions and public sector organizations across the globe. Based on the foundation of the industry’s largest proprietary network with banking licenses in over 90 countries and globally integrated technology platforms, TTS continues to lead the way in offering one of the industry’s most comprehensive range of digitally enabled treasury, trade and liquidity management solutions.

By analyzing the $4 trillion of average daily payment flow that TTS processes, the report finds that flows have largely stabilized after multiple disruptions in 2021 and early 2022. It is against this backdrop of stabilization, that Natural Resources and Clean Energy Transition (NRCET) trade flows grew 65% through the first three quarters of 2023 as energy prices soared globally.

“The pandemic and then the war in Ukraine demonstrated the fragility of supply chains. Many companies and customers experienced the pain of those disruptions and are now looking for resiliency wherever they can get it. While reshoring and nearshoring may seem like the next steps, buyers and suppliers alike indicate that the higher priority is resiliency or redundancy deeper into the supply chain,” notes Jane Fraser, CEO of Citi in her forward to the report. 

Citi and its research partner surveyed 2,327 global corporates for its Supplier & Large Corporate Survey as part of this report. This survey garnered powerful insights into the challenges facing companies large and small around the world, from which five themes emerged:

  • Rising prices and rising interest rates have had impact as corporates take steps to boost financial supply chain resilience
  • Corporates and their suppliers want to strengthen relationships and broaden their supplier base to mitigate further disruption
  • Pandemic disruption has given way to geopolitical tension as the primary threat to supply chain funding stability
  • Despite economic headwinds, respondents remain optimistic about the prospect for export growth
  • ESG remains an area of focus, but lack of clarity has impeded meaningful progress.

Chris Cox, global head of Trade and Working Capital Solutions at Citi said: “Given the impact from global events businesses have re-evaluated supply chain strategies. Notably, resiliency and continuity are taking center stage on sourcing through the production cycle. Another developing trend is the shift from ‘Just in time’ to ‘Just in case.’ Buyers are now building-in more resilience by purchasing earlier and holding more inventory. As a result, financing the end-to-end supply chain remains top priority.”

He continued: “How this trend plays out long term remains to be seen. Buyers, however, are focused on ensuring their suppliers have access to better and stable working capital solutions. Businesses are also accelerating the digitalization of supply chains. Digitalization enables ease of monitoring and management throughout the chain, enabling the robustness for any future disruptions.”

The digital copy of the report is available at tinyurl.com/ms64jvbt

Citi is a preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in its home market of the United States. Citi does business in more than 160 countries and jurisdictions, providing corporations, governments, investors, institutions and individuals with a broad range of financial products and services. 

Additional information may be found at citigroup.com X: @Citi; YouTube: youtube.com/citi; Blog: blog.citgroup.com; Facebook: facebook.com/citi; and LinkedIn: linkedin.com/company/citi.  

 

tradebeyond global trade supply chain

Geopolitics, not Economics, is Front and Center for Global Supply Chains

Supply chain managers, long accustomed to weighing economic risks, are now confronted with geopolitical risks that are upending traditional sourcing and transportation decision-making. For the past three to four decades, companies have focused on finding reliable partners at the lowest cost. The natural destination was China, but the looming specter of higher tariffs coupled with a potential war over Taiwan is leading firms to alternative destinations. 

Read also: Supply Chain: Challenges and Key Solutions 

Factories in countries like Poland or Romania come with higher labor costs but minimal geopolitical hurdles. The shift away from China and other single country or region suppliers began to take shape during the Covid pandemic. Factory shutdowns, transportation delays, and rising shipping costs unnerved suppliers and further incentivized the search for new providers. In addition to international tensions with Russia and Iran, supply chains are squeezed with fewer and fewer options. 

The Houthi attacks on shipping vessels have slowed in recent months, but many containerships are still being re-routed around southern Africa’s Cape of Good Hope. If shipping through the Red Sea and the Suez Canal remains limited, elevated transportation costs will remain higher for longer. Emergent trade wars between the US, the European Union, and China are affecting markets worldwide as barriers to cheap Chinese imports, from construction equipment and steel to solar panels and electric vehicles, are growing.

China recently instructed the nation’s largest telecom carriers to phase out the incorporation of foreign chips into their networks over the coming two years. This tit-for-tat trade spat would affect major US chip makers such as Advanced Micro Devices and Intel. Last year, China contributed 15% to Advanced Micro Devices’ revenue, and while local Chinese chips are still considered inferior, they are slowly gaining ground, similar to electric vehicles.

Lastly, US and some EU compliance and regulations are also driving supply chain contingency plans. Volkswagen made the news earlier this year when its shipment of Lamborghini, Bentley, Audi, and Porsche vehicles was detained at US ports. Blacklisted suppliers from China’s Xinjiang region, where reports of Uyghur forced labor is occurring in the manufacturing of magnetic components used in high-end automobiles, were behind the detention. The compliance obstacle course expands by the day, placing supply chain managers in an unenvious position to monitor the ever-evolving maze of regulations.     

From a procurement perspective, disentanglement from China and Russia, especially with metals such as copper, nickel, aluminum, and similar rare-earth metals, is daunting. Russia is a leading supplier of the former, and China has the critical components that go into the manufacturing of US semiconductors. One area of agreement between President Biden and former President Trump is tariffs on vital Chinese imports. Tariffs will further complicate supply chains and likely lead to a continued restructuring of sourcing and transportation for years to come. 

global trade shortage chain supply rose disruption identity

Navigating the Global Supply Chain: Opportunities and Challenges for Middle Market Companies

Amidst the interconnected web of global commerce, middle market companies are strategically leveraging international supply chains to enhance competitiveness, despite encountering both advantages and obstacles along the way.

A newly released research report, a collaborative effort between the National Center for the Middle Market (NCMM) and the Center for International Business Education and Research (CIBER) at The Ohio State University Max M. Fisher College of Business, sheds light on the evolving landscape of global supply chain engagement among middle market firms.

Surveying 406 supply chain leaders from the middle market segment, the report unveils a robust presence of companies participating as buyers or sellers in global markets. Notably, 60% of respondents identified revenue growth as the top benefit for international sellers, while 72% of purchasers emphasized cost savings as the primary advantage of engaging in international supply chains.

The research also underscores the trend of expansion into new international markets, with one in five middle market companies venturing into foreign territories in 2023. Anticipating further growth, 45% of sellers and 37% of purchasers express intentions to expand their international supply chain footprint in 2024.

However, the journey into international supply chains is not without its challenges. Longer lead times emerged as a top concern for purchasers, while sellers grapple with quality control issues. Mitigating risks remains paramount, with insurance and diversified supplier bases being key strategies adopted by sellers and purchasers, respectively.

Despite these challenges, confidence in international supply chains remains high among middle market companies. Yet, a critical hurdle highlighted by the research is the shortage of domestic talent equipped with international supply chain expertise, emphasizing the need for language proficiency, cross-cultural awareness, and international competence among employees.

Professor Michael Knemeyer, a logistics expert and co-author of the report, emphasizes the necessity of investing in human capital to ensure the optimal functioning of international networks. Collaboration between academia and industry, as exemplified by the partnership between NCMM and Fisher’s CIBER, plays a pivotal role in addressing these challenges and promoting international business understanding and competitiveness.

The joint research underscores the significance of fostering a robust global supply chain ecosystem within the middle market segment, highlighting opportunities for growth and the imperative of overcoming operational hurdles to thrive in the interconnected global marketplace.

The research report can be found at http://www.middlemarketcenter.org.

FreightWeekSTL global trade

FreightWeekSTL 2024: Unveiling Innovations and Trends Shaping Global Supply Chains

The St. Louis Regional Freightway is gearing up for the 7th annual FreightWeekSTL, scheduled from May 13 to 17, 2024. This week-long event promises a dynamic blend of virtual and in-person activities, including a riverboat tour and engaging discussions, all centered around the latest innovations and trends impacting freight movement. With a focus on highlighting the pivotal role of the St. Louis region in advancing major infrastructure projects and supporting the global supply chain, FreightWeekSTL is set to provide invaluable insights for industry professionals.

Mary Lamie, Executive Vice President of Multimodal Enterprises for Bi-State Development, expressed excitement about hosting FreightWeekSTL once again. The event aims to address challenges, showcase innovations, and underscore investments influencing the global supply chain. Lamie emphasizes the significance of the St. Louis region in bolstering freight movement and fortifying the logistics and manufacturing sectors.

While the majority of conference activities will be conducted virtually, there are opportunities for in-person interaction. Participants can join a riverboat tour on the Mississippi River to explore critical elements of the region’s multimodal freight network. The Freight Summit Luncheon will feature discussions on Infrastructure Investment as an Economic Driver, along with the unveiling of the 2025 Priority Projects List. The event will conclude with a Tailgate Happy Hour prior to a thrilling MLS soccer game.

A series of virtual panel sessions will delve into various topics, including technological innovations, supply chain visibility, collaboration, and trends impacting agriculture and the barge industry. Notable speakers such as Rob Cook from Sheer Logistics and Ken Eriksen from Polaris Analytics & Consulting will share insights and expertise on navigating the evolving landscape of freight movement.

Additionally, FreightWeekSTL will highlight workforce opportunities within the logistics and manufacturing sectors, showcasing ongoing collaborations aimed at nurturing talent in the St. Louis region. The event will also unveil the latest Industrial Real Estate Market Report, emphasizing the region’s industrial strength and global connectivity.

With an exciting lineup of activities and discussions, FreightWeekSTL 2024 promises to be an enriching experience for industry professionals, whether attending in-person or virtually.

To learn more about FreightWeekSTL and to register for any of this year’s sessions, visit https://freightweekstl.thefreightway.com.

supply chain

Geopolitical Risk & Global Supply Chains

Retail in the United States is a 7 trillion-dollar industry that employs millions of Americans, and it is supported by a complex web of global supply chains. While necessary and advantageous to the competitiveness of the industry, this worldwide supply chain network makes geopolitical issues more likely to increase risk and cause disruptions.

Many large U.S. retailers have stores in other countries, but virtually all companies source materials from around the world to bring the best merchandise to consumers. Managing massive global networks requires a complex risk breakdown structure to account for the uncertain state of geopolitics, tariffs and climate events in the world today. Strategies to assess risk vary from retailer to retailer but there are common elements.

  • Diversified sourcing portfolio: Diversification helps spread risk exposure as retailers seek to mitigate the risks or challenges with a particular country. Geopolitical issues, U.S. policy priorities, and trade disputes have significant implications for retailers’ sourcing decisions.  For example, tensions in the U.S.-China relationship, coupled with increased U.S. import taxes on Chinese goods have created conditions that have accelerated many companies’ already-ongoing diversification initiatives. Large retailers may source from as many as 40 countries; much like a stock portfolio, diversification helps spread the risk.
  • Responsive supply chains and logistics: The crisis in the Red Sea is the latest example of a distant regional issue that has immediate and significant impacts on global commerce.  The last Suez Canal disruption in 2021—caused by a single ship that ran aground in the canal—cost the global economy $10 billion a day in lost productivity. Savvy retailers have built supply chains that are responsive to localized flare-ups, e.g., labor disputes, and they adapt and reroute to ensure that merchandise still gets to retail stores and American consumers on time.  Today, while container ships are avoiding the Red Sea, retailers are mitigating impacts in a variety of ways, including by diverting to trans-Pacific trade lanes, utilizing the constrained Panama Canal, and opting for air freight.
  • Collaboration with partners: Lean global supply chains require close partnership with both suppliers as well as logistics service providers. This is a critical element of a responsive supply chain. For example, the increasing turmoil in the Red Sea continues to cause delays that may add ten to fourteen days to the transit time. This disruption has compelled retailers to work closely with vendors to accelerate production timelines and it also demands a collaborative relationship with carrier partners, to ensure retailers can reroute and shift volumes to mitigate disruption.

An increasingly volatile world requires that retailers build—and continually evolve— their supply chain risk structure. Retailers will be exploring geopolitical risks and global supply chains at this month’s RILA LINK Retail Supply Chain Conference, with core content focused on issues retailers need to prepare for, and what leading retailers are doing now to ensure their supply chains are resilient and ready to overcome current and future supply chain constraints. Join us at www.rila.org/LINK

company

Reducing Costs In The Global Supply Chain: The Drawback Program For Exporters/Importers

Companies engaged in global trade can apply for access to the drawback program administered by U.S. Customs and Border Protection (CBP). This program provides a refund on duties and taxes that were previously imported and have now been exported. 

Usage of the drawback program is a tool companies can use to reduce operating costs. The program may be used for goods that are unused, rejected or manufactured. 

The drawback program has several key factors that provide leverage to eligible companies. 

THE PROCESS

The process to submit a drawback claim and collect a duty refund is an evidence-based undertaking. Companies must have the required import, export and inventory documentation to support the drawback claim.

The drawback applicant prepares a detailed sample to CBP including lot numbers or product stock keeping units (SKUs) to tie the product to the import and export transaction. This presentation is submitted to CBP electronically using approved software. 

Documentation specifically supporting the drawback claim will include bills of lading, commercial invoices, packing lists and 7501 entry forms for the inbound portion. 

Documentation supporting the outbound piece will include the commercial invoice and bill of lading. Exports to Canada and Mexico will also require data elements from the Canadian B3 and the Mexican pedimento (CBP 7501 equivalents). 

RETRO ADVANTAGE

Drawback claims may be filed for up to five years from the import date. When this occurs, it can be a windfall for a company resulting in a sizeable check when the retroactive drawback claims are paid. 

It is key to appreciate that it takes some digging (excavating) through documents, receipts and recordkeeping systems to obtain historical data.

In the event a company determines it does not have complete documentation to support the claim, they will find themselves requesting this documentation from their customs brokers, freight forwarders, carriers and third-party providers. 

Therefore, it is incumbent upon a company to ensure they are maintaining accurate and required documents as part of their import/export recordkeeping process. This may also require working internally with the finance and information technology (IT) department to obtain the necessary details required.

NOT THE “IMPORTER OR EXPORTER”

A company may submit a drawback claim for goods on which they may not have been the importer of record or the actual exporter. This can be a bit tricky to manage. 

For the import side, the company would need to be able to collect evidence that the domestic purchase price included duties and taxes and an ability to support that claim from the supplier. The CBP7501 data elements would also be required to submit the drawback claim. The actual importer of record may be reluctant to provide this level of detail. The assistance of a third party to broker and address this challenge can be beneficial.

Where the drawback claimant is not the exporter, the company will need to obtain an export waiver from the actual exporter. Additionally, the supporting documentation will be required to provide the export data elements. 

This process is doable and over the years, we have helped companies successfully meet this challenge. However, we would be remiss not to mention it requires a substantial amount of coordination and collaboration with sellers and buyers (vendors and customers). 

Service providers with robust technology platforms can also be helpful in providing the necessary data.

FORMS OF DRAWBACK

In weighing a company’s eligibility for drawback, it is important to understand the different types of drawbacks. The most common types are:

  • Unused Merchandise 
  • Manufactured Merchandise
  • Rejected Merchandise
  • Destruction

There are other types of drawbacks that are specialized and focus on specific industries and business models.  

DRAWBACK CHALLENGES

The challenges faced in coordinating drawback claims may include management support, cross organizational support, IT support, data collection and data integration. These challenges can be resolved through an organized and responsible management process, utilization of professional support and being both diligent and patient through the process.

To manage these challenges successfully, over the past 20 years we have developed a four-step process:

  1. Assessment
  2. Financial Model
  3. Operational Model
  4. Application

The process begins with an intellectual assessment of your company’s likelihood (or not) to benefit from a drawback program. The financial model creates the costs and the gains associated with a drawback claim to assure a responsible and realistic return on investment. 

ADDITIONAL FACTORS

The drawback process has been somewhat simplified by the ability to submit a combined application. This application will include a waiver of the notice of intent to export for past exports, a waiver of notice of intent for future exports, and a request for accelerated payment of the drawback claim by CBP. 

NEXT STEPS

Should you decide you are interested in a drawback, options for additional information and next steps include accessing the websites of both CBP and Blue Tiger. 

Drawback | U.S. Customs and Border Protection (cbp.gov) 

Management Consulting | Blue Tiger International (bluetigerintl.com)

We recommend first assessing the opportunity and benefits of committing to drawback to decide the need to move forward. Once that decision has been made, create a financial model addressing costs and time required to manage a drawback program to determine the return on investment and justify the decision to move forward.

Should the ROI be sufficient to move ahead, you need to assess what operational changes will be needed to collect the necessary data on imports and exports to create an accurate and detailed drawback claim.

Consider aligning your company’s technology with the required data elements or work with a drawback intermediary who will act as an interface on your behalf. These companies typically charge a fee of 5% to 25% of monies collected, paid on a contingent basis. The amount is determined by the degree of difficulty in making the specific drawback program function as required by CBP.

The use of a consultant or drawback intermediary is a potentially good option as they will smooth out the process and expedite the ability to avoid delays, address challenges and, most importantly, help expedite payment of your drawback claim.

Author Bio

Thomas A. Cook is a seasoned global supply chain professional, author of more than 20 books on global trade and managing director of Blue Tiger International. He can be reached at tomcook@bluetigerintl.com or (516) 359-6232. 

2024 supply chain

Global Supply Chains Head into an Uncertain 2024 

It’s been a grueling couple of years for global supply chains. Covid granted challenges previously unimaginable, and geopolitical disruptions are poised to be equally demanding over the coming months, if not the year. Swings in demand will test the planning of freight and logistics companies as will the redrawing of trade maps that had existed for the working life of most employees. 

One of the biggest wins for many CEOs post-Covid was their ability to clear inventory. This was welcome news to shareholders as companies were grasping for reliable demand models during the roller-coaster pandemic years. The inventory-to-sales ratio has remained steady at 1.30 since May 2023 and firms welcomed an additional win with a 3.1% holiday sales bump compared to 2022. All this suggests that the “just-in-case” hoarding strategy of the pandemic years is over and retailers are easing back into a “just-in-time” strategy. 

The trucking industry was rattled in 2023, marred by bankruptcies and layoffs. If demand picks up a recovery in freight rates is possible for 2024, yet overall freight flows are tied to some very vulnerable international entanglements. Another interesting wrinkle for 2024 is the shift away from China. Importers have made noticeable inroads with countries like Mexico, Vietnam, and India as alternative suppliers. In 2023 Mexico eclipsed China as the number one US trading partner and logistics and freight companies reported heavy-duty tractor orders from Mexico up 150% in November of 2023 compared to the same month a year prior.

The Disruptors 

The wars in the Middle East and Ukraine continue to disrupt the flow of everyday consumer goods including oil and grain. The Mexican border is also a point of concern with a migrant surge that has required the US Customs and Border Protection to address via periodic truck and rail closings. 

Houthi rebel attacks from Yemen are compromising the Suez Canal, while the Panama Canal suffers from a lack of rainfall. The latter has reduced the quantity of vessels through the canal, a vital trade corridor between the East Coast of the US and Asia. 

Finally, shipments to US East Coast and Gulf Coast ports languished during the final months of 2023. This was a boon for West Coast ports resulting in double-digit gains over the previous year. The maritime industry is keeping a close watch on a potential dockworkers strike at the East and Gulf Coast ports unless a new labor agreement can be resolved before September of this year.