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2021 Has Felt Like One Big Peak Season: A Global Shipping Market Update

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Air Cargo, Archives, Global Logistics, Global Shippers 101, Global Trade Daily, Ocean Carriers

2021 Has Felt Like One Big Peak Season: A Global Shipping Market Update

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For global freight shippers, managing disruption comes with the job. But the challenges of the last year have truly been out of the ordinary. Supply chain disruptions that consist of port and terminal congestion, shipping delays due to high cargo volumes, lack of labor due to Covid-19 and limited space have caused a myriad of challenges for shippers.

For many, it has felt like one big, never-ending peak season, and they’re all asking when will things get better and what can they do in the interim, especially as we head into pre-holiday shipping.

Unfortunately, disruptions and delays likely won’t be ending soon. But there are best practices that all shippers can follow to navigate the pre-holiday rush. Let’s start with an update on the current air and ocean market situation as we head into fall.

Ocean Shipping

Ocean demand continues to exceed global capacity, with no sign of slowing down. This is compounded by port congestion, largely unreliable and inflexible schedules, and pandemic-driven labor challenges at major ports. But these issues aren’t a product of the pandemic alone.

In 2015, there were roughly 17 global ocean carriers. After mergers and consolidations, only 9 remain in 2021. Those 9 have been further consolidated into three alliances that control over 80% of the global containerized market. As a result, there are limited options for getting space on vessels and lower flexibility across vessel schedules due to the number of ships in rotation and the lack of available containers.

Globally, schedule reliability in ocean shipping is at the lowest we’ve ever seen. Right now, the reliability that a vessel carrying goods will arrive on time is roughly 40%. At this time last year, it was over 80%. While ocean carriers are trying to stay on track to destinations by skipping ports or enabling blank sailings, improving the schedule systematically in time, their methods are negatively impacting customers trying to transport products out of high-traffic areas such as Asia in a timely manner.

Air Shipping

Lower levels of passenger air travel over the past year have created congestion at air cargo terminals worldwide.

Pandemic-induced travel restrictions reduced commercial air capacity dramatically. Instead of having weekly passenger flights that move cargo volume to a wider network of airports in smaller quantities, most freight is now consolidated at larger terminals in bigger quantities via freighters or charter flights.

Terminals are then receiving increasingly large waves of freight, pushing demand to an all-time high over this past summer while also having to navigate labor shortages. Today, some of the larger terminals such as Chicago are seeing up to two-week delays in the recovery of cargo.

In addition, changes in export screening standards in the U.S. are also creating backlogs and congestion at terminals that are exacerbated by a lack of warehouse capacities. Carriers have been tasked with picking up more screening activities than usual because some shippers may not be partnering with the right forwarder who can take care of the screening for them.

This increased screening is also at odds with expedited terminal timelines, which currently give carriers as little as 12 hours to move freight that traditionally would have had a 48-hour takeoff window. If problems are encountered during screening or transportation to the terminal that slow the timeline, congestion will follow.

What Now?

No one solution is going to bring an end to the challenges of today’s market. But there are a few proven best practices shippers can use to better navigate the current challenges:

Maintain a flexible approach and be open to different options

To stay on top of this market, global shippers must commit to maintaining a flexible approach toward moving their freight. Remaining open to new and different options, such as less-than-container-load (LCL) ocean shipping, different routings or air charters when needed, as well as on-the-spot troubleshooting, can significantly improve shipping outcomes.

For example, for one C.H. Robinson customer moving PPE (personal protective equipment), Thomas Scientific, air charters were a fast-shipping option that offered a great deal of flexibility for last-minute demand shifts during the pandemic. The team worked with airlines to charter passenger planes with the seats removed for cargo flights, which offered a creative alternative to crowded cargo flights and other shipping options.

Seek support from providers who can use information to your advantage

When needed, shippers should consider partnering with a logistics provider that can give data-driven market insights to drive smarter solutions for their business. Sometimes shippers aren’t aware of all their options and need quick help figuring out how to circumvent disruptions to keep current and future orders on track. We’ve seen these solutions play out with our global experts and technology platform, Navisphere, by providing shippers with the aggregated data and analysis they need to determine which ports or terminals to avoid and the right tactics to overcome unique challenges.

Closely collaborate and communicate with supply chain partners

In a market as challenging as this one, close collaboration and frequent communication with supply chain experts are critical. For example, we’ve seen shippers overcome a variety of new challenges this year because they allowed daily cross-functional meetings with our team and theirs. To develop robust solutions, both teams need to truly understand all aspects of shipping challenges and what a company is trying to achieve.

Final Thoughts

Shipping disruptions likely won’t be ending soon. It has taken the industry about a year to get to this point, so it’s safe to say that it may take just as long for things to revert to normal levels or to adjust to the higher demand. Shippers have had to become increasingly nimble and informed to create success throughout this past year, and they must commit to staying flexible and seeking alternative solutions to continue overcoming obstacles.

_________________________________________________________

Mike Short was named president of global freight forwarding in May 2015. Short started in the global forwarding industry in 1997 and joined C.H. Robinson through the acquisition of Phoenix International in 2012. Prior to being named President, Mike served as Vice President, Global Forwarding – North America. Prior to joining C.H. Robinson, Short held a number of roles at Phoenix International, including Regional Manager, Sales Manager, and General Manager of the St. Louis office. He graduated from the University of Missouri in 1993 with a Bachelor of Arts in Business.

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Archives, Global Logistics, Global Trade Daily, Ocean Ports

CONTAINER PORTS AND COLD STORAGE SPECIALISTS TEAM UP FOR SUPPLY CHAIN SUCCESS

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Life as we know it would not be possible without cold chains. 

By transporting food, pharmaceuticals, and other products from where they are grown or extracted, through the manufacturing process, out to shops and food outlets and, ultimately, onto the end consumer, the cold chain facilitates our existence. 

Unlike goods that can be transported at an ambient temperature range, managing the cold chain is an altogether more specific undertaking that relies on highly specialist skills, technology, facilities, and vehicles. At each stage of a product’s journey, which can involve multiple stakeholders taking responsibility for individual legs, it must be kept at a precise temperate or risk becoming unsafe for consumption. 

Indeed, spoiled food in particular is a major contributor to our global waste problem, which is widely viewed as a climate change catastrophe. 

Staggeringly, the world’s population is estimated to waste one third of all the food it produces. Not only does this put into shameful context the problem of malnourishment seen in the poorest parts of the world, but it also has a massive environmental implication because of unnecessary and inefficient land use.  

However, it is important to consider that in the developing world, food wastage is more a consequence of a lack of robust cold chains as opposed to human wastefulness and consumer habits. In Southern and Southeast Asia, around half of all food waste occurs at storage and distribution stages after harvest and production. In Europe, the figure is closer to 20 percent.

Efficient cold chains–which themselves carry a not insignificant environmental footprint due to energy, diesel and refrigerant gas requirements–are therefore essential to cutting food waste, reducing global hunger and keeping economies and societies supplied with essential goods. 

Indeed, cold chains have been in the spotlight more than usual in recent months thanks to the COVID-19 vaccination rollout occurring across the world. 

Vaccines require an extremely well-monitored transportation and storage environment from the moment they come off the production line to the time they are administered into a patient. If temperatures are too high or too low, the vaccine is in danger of losing its potency which, once lost, cannot be restored. 

The World Health Organization (WHO) sets strict performance standards for storage and transport equipment such as fridges, freezers, cold rooms and cold boxes, while stock management procedures are also subject to WHO guidelines that vary from vaccine to vaccine. 

In the U.S., mature cold chains are playing a fundamental role in delivering COVID-19 vaccinations to populations all over the country, helping them to reach vaccination centers in various environments, from urban epicenters to remote rural communities. 

The U.S. Food & Drug Administration (FDA) has approved several coronavirus vaccines produced by different pharmaceutical companies, among them shots made by Pfizer, Moderna and Janssen. Each requires a different storage temperate, adding an extra layer of complexity to the cold-chain operations responsible for distributing them across the States. 

It is no minor undertaking, reflected by the fact that the worldwide cold chain market was valued at $233.8 billion in 2020, a figure which is predicted to reach more than $340 billion by 2025, driven by a compound annual growth rate of 7.8 percent. Other estimates suggest the global cold chain industry could be worth as much as $447 billion by this time.

The role of reefer ports

North America’s cold chain market reached a value of $88.5 billion in 2019 and is expected to grow to over $142 billion by 2025.

Underpinning this activity is a network of reefer ports operating up and down the East and West coasts, as well as inland. These are critical transit hubs of varying sizes which house specialist facilities for the storage and onward transportation of cold goods.

In South Carolina, the Charleston Harbor Deepening Project is on its way to making the Port of Charleston home of the deepest harbor in the world. 

Set to add an additional seven feet, the new 52-foot depth will enable operator South Carolina Ports Authority (SC Ports) to welcome enormous post-Panamax vessels to its facilities, a move which will only serve to attract more supply chain players, including those with cold chain operations. 

With more life science and consumer goods activity on the horizon, SC Ports has expanded its refrigerated capacity to handle an influx of cold and frozen cargo for a variety of customers. Since 2010, the port operator’s refrigerated cargo business has increased by more than 80 percent for all loaded containers.

Meanwhile, global refrigerated warehousing giant Lineage Logistics, operator of more than 300 sites around the world, has expanded its 180,000-square-foot facility at Palmetto Commerce Park in northern Charleston. A $34 million investment, it underlines the firm’s commitment to building the region’s status as a critical cold chain hub. 

Unveiling the project in September 2020, Greg Lehmkuhl, Lineage Logistics president and CEO, commented: “Charleston has it all–first-rate infrastructure, great access, a top ranked port and a skilled workforce.

“South Carolina’s numerous business advantages, in addition to the booming market, have helped Lineage to better service our export and import customers, as well as our domestic shipping partners. We are thrilled to expand our existing operations in what we believe is the right location at the right time.”

While Charleston represents one of the largest-scale reefer zones in the country, other areas too are making important strides which are adding to their cold chain appeal. Here, we round up developments at two more ports, starting in the Gulf of Mexico at Port Manatee. 

Bearing fruit in Florida 

Located at the entrance to Tampa Bay, Port Manatee is the closest U.S. deep water seaport to the expanded Panama Canal, with 10 40-foot-draft berths serving container, bulk, breakbulk, heavy lift, project and general cargo customers. 

It generates more than $3.9 billion in annual economic impact while helping to sustain more than 27,000 direct and indirect jobs. 

In the fiscal year ended September 2020, an all-time high of 88,466 TEUs of containerized cargo crossed Port Manatee’s docks, a marked rise of more than 50 percent on the preceding 12-month period and a whopping 230 percent more than 2018 fiscal year volume. Meanwhile, a $8.3 million project which will nearly double the size of its 10-acre dockside container yard is moving toward mid-2021 completion. 

Another key recent development means that Port Manatee is now receiving imports of Central American fruit via the newest energy-efficient refrigerated container ships of long-time port tenant Fresh Del Monte Produce. 

The vessels, of which there are six, have a full cargo capacity of 1,276 TEUs and are fitted with 634 plugs for 40-foot-long high-cube refrigerated containers, or reefers. 

Announcing the development, Carlos Buqueras, executive director of Port Manatee, said: “The new Del Monte vessels represent the latest development in the advancement of Port Manatee as Central and Southwest Florida’s preferred gateway for global commerce. 

“Fruits arriving on these ships further add to the record volumes of containerized cargo crossing Port Manatee docks and underscore the importance of key infrastructure enhancements.”

Del Monte has been a loyal customer since 1989, and will take advantage of the new-generation cold chain ships to bring large volumes of fruit to U.S. shores, including bananas, pineapples and avocados.  

From bananas to blueberries 

Switching over to the western side of America, at the Port of Hueneme, a major new development looks set to provide lucrative savings to companies relying on the Southern California facility’s cold-chain services. 

The port moves $10.85 billion in goods each year and consistently ranks among the top 10 U.S. ports for automobiles and fresh produce, with its operations supporting the surrounding community by catalyzing $1.7 billion of economic activity every year. 

Known as “The Banana Port of the West Coast,” the Port of Hueneme could soon also stand as the most attractive destination for companies exporting and importing blueberries to and from the States. It has housed specialist reefer facilities for many years, but recent upgrades mean it can offer complete treatment of blueberry shipments on-port. 

This new pilot service is the first of its kind on the West Coast and promises to reduce the cost of transporting blueberries, eliminate many tons of greenhouse gases and support local Californian and Peruvian growers.

The new service will begin as a one-year pilot program and will eliminate more than 2.2 million vehicle miles traveled across America. The blueberries will be imported from Peru’s Callao and Paita Ports via the Port of Hueneme, instead of being trucked from the East Coast. This reduction in road mileage will consequently cut air emissions by 3,660 tons of carbon dioxide and 11.56 tons of nitrous oxide during the course of the pilot.

Commenting on the launch of the project, Jess J. Ramirez, president of the Oxnard Harbor District Board that oversees the port, said: “This new opportunity is not only a game changer for our blueberry partners, but also will help reduce air emissions across the U.S. and spur local job creation, a win-win-win.” 

It is pioneering initiatives such as this that will enable cold chain capability and capacity across the U.S. to grow. 

As the nation, and world, responds to a plethora of immediate and long-term crises such as the coronavirus pandemic and growing food waste mountains, cold chains and their associated seaport nodes will only increase their prominence. 

And with the global cold chain market set grow at an annual rate of almost 8 percent over the course of the next four years, ports which continue to invest in reefer facilities look set to cash in. 

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Archives, Global Trade Daily, Ocean Ports

HONG KONG DRIVES TO CAPTURE THE COLD-CHAIN MARKET

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In Hong Kong, where many U.S. businesses send shipments to and receive goods from, a new drive to maximize cold chain opportunities is being realized and embraced.

By leveraging Hong Kong’s unique location to support fruit businesses tapping into the growing mainland Chinese market, fresh produce worth more than US$3 billion is arriving at Hong Kong Seaport Alliance (HKSPA) terminals annually.

Through the deployment of more than 7,800 reefer points, twice the capacity of other terminals in southern China, HKSPA expedites every container of fruit through its facilities to enable the freshest delivery to market. 

American companies shipping fresh fruit produce to the region should bear Hong Kong’s port facilities in mind, especially given Chinese demand for fruit imports is predicted to grow by 55 percent come 2025.

Further adding to Hong Kong’s appeal, HKSPA claims consignees can collect shipments immediately after discharge and be on their way within 15 minutes. Simple, convenient, and fast customs procedures mean Shenzhen is an hour away, while one of the world’s largest fruit-consuming epicenters, Guangzhou’s Jiangnan Wholesale Fruit and Vegetable Market, is just four hours by road.

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Archives, Global Trade Daily, Ocean Ports

Why Do Global Shipping Costs Continue to Skyrocket?

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Global shipping costs are reaching rarely seen levels, putting strain on logistics teams and product purchasers alike. Here’s a closer look at some of the reasons for this phenomenon.

Worsening Container Delays Create Bidding Wars

Port backups were among the issues of the early days of the COVID-19 pandemic. Unfortunately, they persist now, limiting the number of containers each port can efficiently accommodate. Relatedly, the shipping customers outpace the available space in each container. That problem makes prices rise so high that some entities lose out because they cannot afford to pay them.

Port Backups Cause Headaches

Some port backups are so severe that ships arrive unable to dock. That’s an ongoing situation at Washington State ports in Tacoma and Seattle. U.S. Coast Guard representatives helped redirect some vessels as they waited days or weeks to unload. Some ended up in unusual locations, such as off the Puget Sound. The offloading delays also cause a container shortage that affects new freight.

HMM, South Korea’s top national container carrier, recently reported severe vessel berthing congestion at most of its port calls, as well as related yard and gate issues. Other providers reported similar disruptions. However, the affected parties disagree about what’s to blame. The carriers often assert that ports are not sufficiently well-managed, which causes the delays. But port managers respond that carriers have not met their berthing window requirements.

Bids Can Reach the Tens of Thousands of Dollars

In any case, these slowdowns have made it exceptionally challenging to keep goods moving. Desperation makes some parties engage in bidding wars.

Philip Damas, head of the supply chain advisors practice at Drewry, a maritime research consultancy, explained, “Everyone is spending much longer on round trips. Containers are sitting on the water for much longer periods of time, containers are waiting at ports for much longer. Productivity in container shipping is deteriorating. Every failure is effectively creating ripple effects. It’s a vicious cycle.”

He continued by clarifying that freight indexes that track the changes in shipping costs usually gather the associated spot booking prices that get offered about a week before a ship departs. However, some ocean carriers offer available slots in shorter timeframes once the vessels are already at terminals. By then, there are plenty of customers eager to get goods on board at the last minute.

“Now everything is overbooked,” Damas said. “Shippers are desperate to book tomorrow. It’s more a bidding war than it is a traditional tariff, and this bidding war is accelerating. Some of these $23,000, $24,000 prices include the inland distribution cost, and that can easily add far more to the final cost.”

A combination of factors means many shippers decide there’s no choice but to pay those high prices. One longstanding issue is that carriers have cut capacity on major routes. Plus, the container shortage caused by backups escalates the problem. Shippers often realize they have to pay higher prices or leave the overseas markets.

Increased Demand From Customers Exacerbates the Issue

Company leaders usually appreciate when their products are in high demand, but the matter becomes more complicated when shipping costs are so high. In such cases, it’s necessary to either invest massive amounts of money to alleviate the shipping struggles or face lengthy delays that could upset customers.

For example, Amazon manages its own logistics system with extraordinary efficiency. However, that decision means building huge distribution centers as close as possible to the people who place orders. The company even began purchasing jets in early 2021 to exert more control over its air shipping options. However, most other brands don’t have such gigantic resources. Plus, the strategy may not pay off forever.

In the second quarter of 2020, Amazon showed a 68% increase in money spent on shipping. The e-commerce giant has yet to raise shipping costs for consumers, but other brands have already taken that approach. The rise in global shipping costs could even cause long-term stock shortages.

A Luggage Brand Goes to Great Lengths to Receive Goods

In one case, a global luggage company usually receives 11 container deliveries annually by August. That scheduling gets the goods to the merchant in time for the holidays. But, this year, it has only received three of the 11 so far, and not without significant expense.

The company normally pays $2,500 per 40-foot container. But representatives got an offer from an entity promising to get the container onto a ship in Thailand for $15,000. However, people at the company had to first get the goods to the vessel from Myanmar — a challenge in itself due to a trucking shortage affecting Asia. The brand eventually secured the necessary trucking assistance for $3,000.

In the end, the brand paid $18,000 to have its goods shipped. This example shows how much the global shipping crisis can quickly eat into profits. Another downside is that the container’s goods had a $30,000 value, so sending them cost more than half that amount.

The company reported that consumer demand was up, which is usually a positive thing. It’s probably in large part because of how people are starting to travel for pleasure more with the air travel industry beginning to recover and offer more routes.

Fewer Overall Affordable and Available Transport Options

A lack of choices to move goods also contributes to soaring global shipping costs. Some parties may get their products shipped by train and air when possible, but capacity limits exist there, too. The rush to get goods shipped causes a crunch that requires scrambling for any available slots offered via any kind of transit. Plus, air shipments are much costlier than those sent by sea, with some estimates saying that method is at least five times more expensive.

Severe weather can wreak havoc, too. In July 2021, a typhoon hit China and closed the country’s air, sea, and rail hubs. Earlier in the year, snowstorms forced some rail freight operators to temporarily cease running some routes. These challenges mean some customers decide they must cope with the tremendous shipping costs because there aren’t many other viable options.

Some brands are also trying to cope with delays within the supply chain by making up time at other points. One way to do that is with drones. Supermarket chain Tesco carried out a trial where some customers in Ireland received grocery orders only 200 seconds after the goods departed the store property.

In another instance, DHL partnered with a cargo drone company. The agreement involves using and managing several thousand drones to give customers same-day deliveries. Drone deliveries are not yet widespread options. However, they could become more popular, particularly as shipping professionals look for feasible ways to cut costs while keeping customers happy.

No Short-Term Price Easing

Analysts believe the global shipping costs will not return to more manageable levels during 2021. There are certainly not any quick fixes to the problem. Thus, the parties affected by it must decide on the most appropriate ways to deal with it, even if that means accepting astronomical prices or restructuring supply chains to avoid long-distance shipments as much as possible.

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Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry.

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Archives, Departments, Dispatches, Global Trade Daily

MERRY CHRISTMAS IN JULY, FROM SEKO LOGISTICS

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SEKO Logistics, which began in 1976 as a single-office operation in Chicago and now has a global reputation for innovation and first-class logistics services, has a special season’s greetings for the supply-chain industry: Get your shipments in order now for the peak Christmas holiday shopping season.

The Grinch causing this disruption: COVID-19, whose “lingering effects . . . meant that the Port of Los Angeles and Long Beach were hugely congested earlier this year by the surge of importing, and it’s only going to get worse before it gets better,” according to a SEKO release. 

Compared to previous years, shipments need to be booked up to eight weeks earlier than usual, according to Akhil Nair, SEKO’s VP Global Carrier Management & Ocean Strategy APAC. “The current global ocean freight supply chain is facing huge issues, none of which seem to be going away any time soon, and definitely not before Christmas,” Nair maintains.

“Based on what we are seeing, the current port-to-port lead times are being impacted by two major factors. One, origin–shippers are unable to get equipment or space to get their cargo out in time. And two, destination–the port congestion is having a severe impact on schedule reliability. This is resulting in further delays–up to 20 days on major export trades from Asia.” 

Bah, humbug!

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Archives, Global Trade Daily, Imports/Exports

Israel: Transport Costs and Customs Duty – It’s On You

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In the past year, sea freight prices have risen sharply, an increase that has not been remembered for many years.

Thus, according to various publications, about a year ago, renting a container for sea transportation from China to Israel, costs about $2,000, and today, the same transportation costs about $15,000.

According to publications, the reasons for this significant increase are due to the COVID-19 crisis, global shortages of ships, declining competition in the field, and containers of contagious demand. In addition, there is a “Made of Israel” reason, due to the congestion at ports in Israel, there are ships that prefer not to dock in Israel, and the number of ships that can dock in Israel is even smaller[1].

Apart from the increase in transportation costs, which is expected to lead to a wave of price increases in the sale of products in Israel, there is another parameter that is slightly pushed to the margins. That is the increase in the value of goods for customs purposes, due to rising transportation prices. This increase in prices leads to further collection of customs duties, purchase tax, and import taxes, due to the increase in value.

As I will present in this review, in my opinion – Israeli law already allows the state to facilitate importers at this point – and similar other facilitations have been made in the past. All that is required is the flexibility and activation of goodwill on the part of the state when interpreting the law.

How is the value of the goods determined for customs and import taxes in the State of Israel?

Section 132 (a) of the Israeli Customs Ordinance [new version], stipulates that the value of the transaction is: “the price paid or to be paid for the goods, when sold for export to Israel … plus the expenses and amounts specified in section 133 …”.

Section 133 of the Ordinance, which refers to “assists” to the transaction price for customs purposes, enumerates a large number of examples, one of which, relevant to its case, relates to transportation costs, and subscribes to section 133 (a)(5)(a) of the Ordinance, which relates to:

“The following costs involved in bringing the goods to the port of import or place of import – (a) The cost of transporting the goods to the port of import or place of import, excluding such costs incurred due to special circumstances beyond the control of the importer and the Director determining not to include them in the transaction; This includes types of goods, types of transportation and other services”.

And subsection 133 (a)(5)(c) – “The cost of insurance“.

That is, if we try to compare this to the terms of sale of Incoterms, it seems that the State of Israel has determined that the customs duty will be levied on the value of CIF (cost, insurance & freight), i.e. the value of the goods including transport and insurance.

How is the value determined for customs, worldwide?

It should be noted that there is no uniform rule in this matter.

Most countries in the world are members of the World Trade Organization (WTO) and the World Customs Organization (WCO), and by virtue of their membership, have signed an international agreement on the valuation of goods for customs purposes[2].

The agreement sets out a number of rules regarding the way goods are valued for customs purposes, but it does not stipulate any binding rules regarding transportation.

There are countries where the value on which the customs duty is imposed is FOB (free on board), that is, without the sea transport, and there are countries where the value on which the customs duty is imposed is CIF, including the transport.

For comparison, in the United States, a different method is used than in the State of Israel, and in the United States, customs duties are imposed on the value without sea transportation. Thus, the corresponding section in American law to section 132 of the Customs Ordinance in Israel, which deals with the “transaction price”, states in US law that[3]:

“The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States ..”

As for transportation costs, American law goes on to state that the value to customs will not include them:

“(3) The transaction value of imported merchandise does not include any of the following if identified separately from the price actually paid or payable and from any cost or other item referred to in paragraph (1): (A) Any reasonable cost or charge that is incurred for—

 (ii) the transportation of the merchandise after such importation. “

Hence, it seems that in the US, an increase in freight rates does not increase the value of the goods for customs purposes.

In Israel, on the other hand, any increase in freight also embodies the increase in value to customs, and, accordingly, increases the customs burden imposed on the importer.

That is, if we assume for the purpose of the example, that a spare part for a car is subject to a purchase tax of about 20% of the value to customs, then any increase of $1,000 in transportation prices embodies an additional purchase tax of 200$ by the State of Israel. Since this is an indirect tax, it will, by its very nature, ultimately be passed on to the entire public, in the form of rising prices.

 How has the State of Israel dealt with such similar situations in the past?

Price increases in the field of transportation can be caused by a wide variety of reasons. Among other things, wars, closures, sanctions, strikes, and a host of other reasons may increase transportation prices.

In this regard, section 133 (a)(5) of the Customs Ordinance stipulates that in exceptional situations, the director of customs may not include in the value of customs certain transportation costs. The law calls them:

“such costs incurred due to special circumstances over which the importer has no control and the manager has determined that they should not be included in the value of the transaction”

These are, in fact, transportation costs that are a kind of “force majeure” that the importer did not have the ability to prevent.

It should be noted that the Customs Authority exercised this authority, and sometimes exempted transport costs, due to certain circumstances.

On April 24th, 2006, Customs ruled that transportation costs due to the Second Lebanon War would not be included in the customs entry:

“In accordance with my authority under section 133 (a) (5) (a) of the Customs Ordinance, I stipulate that war levies and additional transportation costs incurred by importers due to the security incidents in the north of the country, should not be included in the value of the transaction for the purpose of calculating the import taxes. It is clarified that these are additional transportation, unloading and loading costs listed in the cargo account that were caused due to the security incidents.”

On June 6th, 2008, the Customs ruled that the container demurrage fee beyond the agreed, will not be included in the customs entry:

“..The demurrage fee in the importing country, which is charged for the use of the container beyond the agreed period between the ship’s agent and the importer, will not be included for import taxes.”

On September 7th, 2008, Customs exempted certain transportation costs in respect of strikes from being included in the customs entry, stating:

“In accordance with my authority under section 133 (a) (5) (a) of the Customs Ordinance, I provide that additional transportation costs incurred by importers due to sanctions in the ports of Israel, will not be considered for the transaction value for the purpose of calculating import taxes. It is clarified that these are additional transportation, unloading and loading costs listed in the cargo account, which were caused due to the sanctions and the importer has no control over them. The importer must prove the existence of such additional costs.”

Can the state of Israel also help in the current situation?

According to the publications, the Israeli Chamber of Commerce recently appealed to the director of customs to exercise his authority, and set a type of ceiling on which customs would be imposed, even if in practice transport costs are currently more expensive, and this application was denied by customs[4].

Customs stated that this was a request to reduce the actual cost of transport – something that is not possible, noting that when it came to a request to reduce additions to the value of transport, such as vessels that declared “end of journey” in Cyprus and refrained from entering Israel due to the COVID-19 crisis. Customs further stated that it has not been proven that the increase in transportation prices is due to the COVID-19 or an unforeseen situation, therefore no reduction can be made under the exception in section 133 (a)(5) of the Customs Ordinance, and even claimed that if the State of Israel accepts the claim, this will be a breach of the International Agreement on the Valuation of Goods

**So the question is basically: can in the present case, transportation costs raised by tens or hundreds of percent, due to global COVID-19 crisis, shortage of ships, heavy loads in Israeli ports, shortage of containers, constitute “special circumstances beyond the importer’s control”?

** With all due respect, in my opinion, this point deserves further thought and discussion**

In my opinion, if the Second Lebanon War is an unforeseen event over which the importer has no control, as well as sanctions or strikes, then the interpretation of the law could be a little more flexible, and determined that a global COVID-19 crisis, shortage of ships, containers, To be considered as special circumstances over which the importer has no control.

In this regard, I would like to bring to the readers’ attention a ruling given in the Israeli court on another issue, but it was stated in it, in relation to the Corona crisis, that it is certainly an unexpected event[5]:

“It is hard to believe that the reasonable person could or should have expected the full far-reaching consequences of the Corona epidemic, including on the economy and commercial life, in Israel and around the world. We are dealing with an unparalleled epidemic which has no precedent in the last hundred years (at least since the Spanish Flu epidemic which caused many deaths around the world between the years 1918 – 1920)”.

** These right things, can and should be applied, in my opinion – also in the field of international trade and customs valuation.

Does anyone in the Customs Authority believe that the simple, lone importer, even if it is a wealthy business company, has any control over the changes in world freight rates? Could any importer have anticipated the corona crisis?

**In the end, if my opinion will be adopted, the legal solution is to relieve the importers of the customs duty imposed on the transport that has become more expensive – it already exists. The “invention of the wheel” is not required here.

Now only goodwill is required, and little flexibility in interpreting the law.

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[1] https://www.ynet.co.il/economy/article/rJrNcwAcd

[2] Customs Valuation Agreement (Implementation of Article VII of the GATT) https://www.wto.org/english/res_e/publications_e/ai17_e/cusval_e.htm

[3] Tariff act of 1930, 19. U.S.C. §1401 a(b)(1),(3)

[4] https://www.chamber.org.il/foreigntrade/1109/1111/116962/

[5] Hdlt (Tel-Aviv) 26076-02-20 Adv. Israel Bachar vs. comfortability systems (2007) Ltd. (July 8th, 2020);

ship
Archives, Global Logistics, Global Trade Daily, Ocean Carriers, Ocean Ports

The Future of Ship Systems to be Smarter with Ship Bridge Simulators

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The maritime industry is not new to the simulation technique and has, in reality, been using this technique in automation as well as numerous other applications. The rising implementation of advanced technologies & automation in the maritime sector has surged the need for ship bridge simulators. The Asia-pacific region has rising passenger traffic and massive import & export businesses; as a result, the region is likely to be in major need of marine systems equipped with ship bridge simulators.

The maritime sector is transiting toward autonomy by enabling assistance in navigation and decision support systems using simulations. At some point in time, if two autonomous vessels crafted by different producers come across each other, how will these vessels communicate? How intricate will the navigation be? Will the ships discuss intricate navigational maneuvers? Will the two autonomous systems be able to communicate in a proper way? Simulation or formulating mathematical models to impersonator trustworthy real-world effects can offer numerous solutions to these questions.

The marine industry is not new to the simulation technique and has, in reality, been using this technique in automation as well as numerous other applications. For example, simulation is used for coaching squads for new vessels before these vessels delivered for crane management and towing in seaports to check loopholes in ship systems and other purposes. For years, simulators are extensively used in training and certification mainly in the Maritime Education and Training (MET). They are used in numerous areas of the marine sector including cargo handling, crane operations, system control, offshore operation training on ships, bridge operations, and towing & anchor handling. Such a wide range of applications of simulators has propelled their demand in recent years. A report by Research Dive reveals that the global ship bridge simulator market growth is expected to skyrocket and the market is anticipated to garner significant revenue in the upcoming years.

Alexander Ozersky, the Deputy Director-Intellectual Systems at Wärtsilä Voyage Solutions, believes that simulation is a technique that permits to do mistakes without triggering any severe outcomes in the real world. A vessel can need nearly ten years to develop or redesign its system. However, by making use of simulation techniques one is able to do it more quickly, more safely, and at a reasonable price. This is why a simulation-based method was used to attest to the functionality of COLREGS (Convention on the International Regulations for Preventing Collisions at Sea) in Wärtsilä Navi-Harbour vessel traffic management system with ClassNK, a global leader in ship classification.

Panorama of the Ship Bridge Simulator Market:

There is a tremendous need for skilled ship operators or watch captains on a vessel for directing navigation, map plotting, weather monitoring, fire management, observation, search, and operation rehearsals. Also, there has been significant development in war systems and technologies; for example, electronic as well as network-centric wars use ship bridge simulators for testing systems. In addition, the rising implementation of advanced technologies & automation in the marine sector has surged the need for ship bridge simulators. Moreover, strict rules issued by maritime lawmakers for proficient coaching of electronic war workforces have propelled the demand for ship bridge simulators in recent years. All these factors portray that the global ship bridge simulator market is accelerating at a rapid pace and is expected to reach significant heights in the coming years.

In the past few years, ship makers have observed that the virtual reality simulation is considerably more proficient than conventional marine simulator training. In virtual simulation devices, a helmet is used that shows a video and is assimilated with sound effects and simulation sensor systems. With these sensors, the virtual simulation helmet can detect activities of the user’s extremities. The incorporation of such advanced technologies is opening doors to lavishing opportunities for market growth.

The Asia-pacific region has rising passenger traffic and massive import & export businesses. As a result, the region is likely to be in major need of marine systems and hence, be a major revenue contributor for the market growth. On the other hand, the North American region is projected to stand at a second position in terms of growth in the ship bridge simulator market. This is majorly owing to the stringent regulations issued by the governments in the region for upholding standard security. The LAMEA region is foreseen to witness continuous growth due to the evolving marine trades in these regions.

The Lookout of the Market during the COVID-19 Pandemic

The COVID-19 pandemic has struck the maritime industry with various unprecedented challenges that hampered its supply chain and compelled quicker implementation of digital technologies in numerous areas of maritime operations, including the area of MET. As the virus was capable to multiply at a rapid pace with person-to-person interaction, several processes that need the physical presence of working personnel have been either postponed or limited for averting human mobility, as a protection measures against the COVID-19 virus. The termination of physical training programs, lockdown, and travel restrictions have triggered several difficulties for seafarers to obtain or uphold their certificates of proficiency. As the MET industry is also experiencing various challenges in ensuring the endurance of the MET activities, and in coping and adapting to the restrictions imposed during the COVID-19 pandemic, the ship bridge simulator market growth is expected to decline to a certain extent until the pandemic relaxes.

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Aishwarya Korgaonkar holds a bachelor’s degree in Information Technology from the esteemed Mumbai University. Being creative and artistic, she leaped into the field of digital marketing and content writing. Her love for words makes her write creative and spellbinding content that adds colors to the world.

Yantian
Archives, Global Logistics, Global Trade Daily, Ocean Ports

Yantian Port Congestion: How Can Shippers Navigate Another Major Supply Chain Disruption?

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While the global logistics industry has not been a stranger to disruption this past year, the congestion at the Port of Yantian in China is starting to impact the market at an exceptionally high level. At the current pace, it’s going to be even more disruptive than the Suez Canal blockage this spring and the ongoing congestion at the Port of Long Beach/LA over the past year. This is due to the magnitude of the trade lanes and exports the port touches. Unlike the Suez Canal incident or other recent port issues, which have impacted a more limited number of regions and trade lanes, the Port of Yantian is a major export hub for multiple large markets like Europe, North America, Latin America and Oceania.

This disruption also came on top of an already brittle logistics system which is currently grappling with several unprecedented challenges, including equipment shortages and decreased schedule reliability, to name a few. Right now, the reliability that the vessel carrying your goods or expected to pick up your goods will show up on time is roughly 5%. At this time last year, it was around 80%+. And, as ocean carriers introduce more blank sailings or skip ports to start improving the reliability percentage, that means the freight that was skipped is now added to the backlog of containers that will flow into the next vessel.

It’s likely we won’t see a large shift in congestion until the demand levels out.  And while this market does not lend itself to a silver-bullet solution, there are things shippers can do to keep their supply chain afloat:

1. Be open to hyper flexibility

While flexibility is important any time global logistics are involved, the phrase ‘now more than ever’ holds true here. Currently, delays at the Port of Yantian are ranging from 10-15 days, which is a large jump from the 2-7 day delays we experienced just few weeks back.

Switching between ports, modes, and trade lanes has been an active strategy to avoid these delays, but shippers can’t rely on only adjusting once or twice since other shippers are also making these shifts as they compete for limited space. A good example of how this plays out is in the case of congestion at the Port of Oakland. Over the last few months, as the delays at the LA port were mounting, carriers started diverting sailings to Oakland. The result? Oakland is now also severely congested and suffering from the same unpredictability.

Fact remains, ocean carriers are deploying the most capacity on the U.S. west coast (USWC) routing, and as complexities in the interior of the U.S. continue to be exacerbated (i.e. lack of chassis and rail congestions), carriers continue to limit options for containers moving inland. Shippers need to continue to be flexible in enabling containers terminating on the USWC and leveraging transloading and trucking inland options.

When considering flexibility across modes, keep in mind air may be the solution for a few shipments, but it’s not a feasible option to shift all your ocean freight to air. Instead, exploring a mix of modes, like LCL + air, may offer a more realistic opportunity for your company in a more cost-competitive way. Having the right partner with a global suite of service and technology offerings coupled with scale and a strong inland network, is going to make the difference for supply chains in the market.

2. Prepare for ultra-prioritization

Prepare to make tough decisions on what freight is most important to move. This can be especially difficult for companies importing seasonal items, like patio furniture or pools since their selling window is limited.

With today’s demand, most shippers would classify all their freight as a top priority but shipping it all at once may not be realistic. It’s important to sit down and have those conversations now so when the opportunity presents itself for portions of your freight to move, like in an LCL shipment, you’re ready to make the call.

3. Don’t dismiss historical data

I’ve been in the business 20 years and never seen anything like this in a global magnitude, impacting almost all core trades. However, a unique situation does not mean historical data no longer lends itself to helping us find solutions.

The market will improve, and things will get better. However, these issues tend to be cyclical as we look at the data. We need to build resiliency around supply chain and continue to have options to navigate. While some of these events are hard to predict and plan, there are things that you can do, such as diversifying distribution center locations, sourcing, etc.

Final Thoughts

Until the high demand subsides, the above points will be crucial moving forward. C.H. Robinson has always been focused on working alongside our customers to help them succeed – and that’s no less true during times of incomparable volatility. It’s important to keep an open line of communication and to be open to creative solutions. As we work through this together, I encourage you to keep tabs on our data-driven market insights page and reach out to your representative.

Nium
Archives, Global Trade Daily, News

Nium Announces Launch of Global Digitized Payment Solution for Maritime Companies

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Nium recently announced the launch of its maritime payment solution, focusing on digitized payment options for shipping companies, management, seafarers, and their families. According to information released by the leading global payments platform, the payment solution – known as the Nium Pay app, utilizes the company’s global license network to successfully integrate the technology stack for real-time payroll disbursements, vendor payments, eWallet services, and remittances.

Bernhard Schulte Shipmanagement (BSM), integrated maritime service leader, is the first to use Nium’s maritime payment solution for their Spend Management Process. The solution includes the launch of BSM branded multi-currency Visa debit cards and eWallet services for their seafarer population. This also includes a supplementary Visa card available for the seafarer’s families.

“Technology development in the shipping industry is accelerating as shipping companies and their seafarers seek modern ways of moving money,” said Gitesh Athavale, Head of Sales, South East Asia and Hong Kong. “Our maritime payments solution provides an efficient and cost-saving way for shipping company management to digitalize payments, including disbursing payroll and making vendor payments. Their seafarers benefit from a convenient and modern way to send and receive money simply or spend it on board – all through the convenience of one simple app.”

The Nium Pay app allows shipping companies to disburse salary payouts directly to seafarers’ virtual visa card accounts. Crew members can directly access their wages from anywhere in the world while at sea or inland, send money overseas, process card to card transfers, shop online, and use their Nium Virtual Cards with mobile wallets onboard through the Nium Payment Application.

“It is important to us that our crew and their families are well taken care of, especially during these uncertain times when our crews are not allowed to go ashore and cannot physically remit funds back home,” shared BSM Finance Manager, Dennis Moehlmann. “Now with this new digital payment solution from Nium, no matter which part of the world our crews are at in that moment, funds can be transferred in an instant and their families will receive the transferred money immediately on their supplementary card or their home account. This is the peace of mind we want to give to our crew.”

Through this application, Nium approaches traditional payment issues for maritime companies by combining its “Pay In” and “Pay Out” capabilities. This enables shipping companies to:

-Reduce or even eliminate the use of cash on ships through QR payments

-Launch branded e-wallets with Card Payments, Remittance, Multi Currency functionality and Travel Insurance services

-Apply exclusive rates for inter and intra company cross-border payments (fund transfers can be done regardless of Internet connectivity)

-Comply with payroll and delivery and international banking regulations, including Philippines’ Overseas Employment Administration (POEA) ruling regarding seafarer payments

-Easily track remittance payments

-Send payments in real-time

Additionally, Pay-Outs are currently being offered to more than 100 countries, of which, 65+ in real-time, available to bank accounts, Visa/UnionPay cards, and AliPay wallets.

cruise
Archives, Global Logistics, Ocean Ports

PORTS WITH PASSENGER LINER OPERATIONS LOOK FOR WAYS TO REOPEN SAFELY AND QUICKLY

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The U.S. Centers for Disease Control and Prevention (CDC) issued a Framework for Conditional Sailing Order in October 2020 that remains in effect until Nov. 1, 2021. The framework was established to allow cruise lines to resume activity after being shut down for a year by the global pandemic. The order applies to passenger operations on cruise ships with the capacity to carry at least 250 passengers in waters subject to U.S. jurisdiction. 

Although the CDC says it would prefer if people didn’t cruise at all, this action has been more aggressive than in Canada, which has announced its cruise season has been canceled for the second straight year in 2021. The ban extends until Feb. 22, 2022.

“Returning to passenger cruising is a phased approach, and our current focus is on the protection of crew and working with cruise lines to implement the initial phase requirements of testing all crew and developing onboard laboratory capacity,” said Jason McDonald, CDC media spokesman, in an email.

“Future orders and technical instructions will address additional activities to help cruise lines prepare for and return to passenger operations in a manner that mitigates COVID-19 risk among passengers and crew members, including simulated voyages, certification for conditional sailing and restricted voyages,” he added.

The new technical instructions will give cruise ports and terminals direction in providing further protocols and programs to help protect passengers, crews and port employees when cruising resumes.

However, ports and terminals have not been sitting idly by since the pandemic struck North America more than a year ago. Ports in the U.S. have been following the CDC’s lead and developing protocols and programs to reduce the COVID-19 risk.

The Florida Ports Council, which provides leadership for the state’s 14 deep-water seaports, has been working diligently with its membership on pandemic response. 

“While maintaining a state of readiness for cruising to resume, our ports are diligently protecting workers through enhanced sanitation procedures, personal protective equipment and mitigation response, including capital infrastructure retrofitting equipment, improved HVAC (heating, ventilation and air conditioning) filters and hands-free building access,” said Doug Wheeler, the council’s president & CEO.

One major impact of the pandemic has been the devastating financial loss to the entire cruise industry. The council is also working to address this issue.

“We continue to work with our fellow U.S. seaport associations to press for emergency relief for U.S. seaports, including cruise ports,” said Wheeler. “Unfortunately, seaports have been left out of prior emergency relief legislation. The good news is that Congress created the Maritime Transportation System Emergency Relief Program last year. Unfortunately, it was not funded within the omnibus bill passed by Congress at the end of the year. We are hopeful that funding for the program will be included in this next relief package.”

On the Great Lakes, Port Milwaukee has, since April 2020, been proactively addressing the pandemic through various means, says Jazmine Jurkiewicz, the port’s Trade Development Representative. 

“Port Milwaukee has continued to make preparations for the 2021 cruising season and beyond,” Jurkiewicz said. “All regulations imposed by the CDC and Department of Transportation have been closely monitored and adhered to. While not a regulating body in the United States, Transport Canada is also a major factor in the cruising industry for the Great Lakes and has been closely monitored as well.”

Port Milwaukee has also purchased a new mobile X-ray trailer to reduce the physical interaction between passengers and security teams clearing luggage. It is expected to be delivered in July. Jurkiewicz said the port is also “continuing collaboration and coordination with the Milwaukee Cruise Collaborative members to distribute information effectively to local tourism organizations.”

At the municipal government level, the city of Milwaukee Health Department has performed detailed evaluations to examine the exposure risk at the port and all recommendations have been followed.

On the West Coast, the Port of San Diego, California’s third-largest cruise gateway to the Mexican Riviera and other major southern destinations, has made pandemic response a big part of its daily routine.

“We will be working with local health officials, cruise line officials and other authorities to put the needed infrastructure in place to resume operations when the time comes,” said Adam Deaton, the port’s Senior Trade account executive.

“One possible plan is to open a 9,000-square-foot area of the B Street Cruise Ship Terminal that would enlarge it to better respect and manage social distancing,” 

Deaton continued: “We expect, through the CDC framework process, to reopen cruise and guidelines. We anticipate those guidelines will include extra cleaning and disinfection protocols, face covering requirements, social distancing protocols, staggered and scheduled cruise passenger check-ins, plexiglass use to provide safety barriers between passengers and terminal workers, availability of hand sanitizer and handwashing, temperature checks and more.”

He added that all inbound vessels must notify the U.S. Coast Guard and Customs and Border Protection 14 days ahead of their scheduled arrival in San Diego, even if no one on board is exhibiting symptoms and, of course, to notify the two agencies immediately if anyone aboard a vessel is exhibiting symptoms of communicable diseases such as COVID-19.

At the Port of Galveston, where cruise operations provide 65 percent of annual port revenues, the response has been in a serious and rapid fashion.

“We’ve been working with the cruise industry and others for the safe, sustainable return of cruising in 2021,” says Rodger Rees, port director and CEO, Galveston Wharves. “We’ve invested more than $73,000 in health and safety enhancements at our two cruise terminals in preparation for cruise activity ramping up,” 

Galveston, the fourth most popular cruise port in North America, immediately began, along with cruise and shipping lines, to monitor daily life at Galveston Wharves.

Early in the pandemic, Galveston Wharves hosted a multi-agency tabletop exercise to review and coordinate planning, responses and communications among the local, state and federal entities that would respond if the coronavirus impacted the Galveston maritime industry.

That initial meeting laid the groundwork for a longer and continuous planning process for ports and terminals. 

With the possibility of some cruise lines restarting their business, cruise lines and ports are exploring more robust screening protocols, expanded cleaning and sanitation practices and comprehensive shipboard prevention, surveillance and response measures.

Galveston Wharves is planning a number of changes in its two cruise terminals, including touchless bathroom fixtures, plexiglass shields in customer service areas and enhanced air handling systems plus various other health and safety concepts are being explored.

In 2019, the cruise industry had a $1.6 billion economic impact in Texas, making it extremely vital to the Lone Star State.

Port Tampa Bay’s response to COVID-19 was, like others, swift.

“We responded immediately and swiftly to the pandemic,” said Paul Anderson, Port Tampa Bay’s president & CEO. “Prior to the CDC’s no-sail order, we had already begun disinfecting our cruise terminals and increasing daily cleaning efforts.” 

The port says it will follow the guidance of the CDC and individual cruise lines on whether they will require COVID-19 tests for passengers.

In addition, Anderson said, “Port Tampa Bay has taken extra precautions to keep our cruise terminals clean and disinfected and we sanitize them with an EPA-approved chemical to prevent the spread of COVID-19 every 30 days. We will continue to take this precaution when cruises resume.”

Port Tampa Bay is “working closely with our cruise line partners to follow the updated CDC guidelines for the conditional sailing order and we are prepared to welcome them back when they are ready,” Anderson added.