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SURVEY: RISK MANAGEMENT CONCERNS RISE AT PORTS AROUND THE WORLD

risk management

SURVEY: RISK MANAGEMENT CONCERNS RISE AT PORTS AROUND THE WORLD

The deadly spread of COVID-19, and the economic and trade disruption the pandemic has caused, is prompting port managers to examine new ways to improve risk management and digital processes.

Those are the conclusions in the latest biennial global ports survey conducted by Remy InfoSource, which was established in 2001 in the Netherlands to provide artificial intelligence diagnostic solutions to the high-tech and transportation industries. The lifecycle contract management specialist is now based on Australia.

The “2020 iSpec Ports Industry Survey” was undertaken during the height of worldwide economic lockdowns in the second quarter of 2020 and on behalf of iSpec, the world’s leading web and mobile-based software procurement solution for buyers of capital intensive outsourced projects such as ports.

The survey revealed that 51 percent of port executive respondents now identify risk management as the key area they would like to improve on in the future, up from 32 percent in the previous iteration of the iSpec Ports Industry Survey in 2018. That year, the top two areas for improvements noted by ports and terminal executives were shorter lead times and more standardization.

“I think it’s no surprise that in such an uncertain world the importance of risk management has increased dramatically,” says Pieter Boshoff, CEO of Remy InfoSource. “Disruption to supply chains has increased across the globe causing operational and investment uncertainty and, with social distancing rules, also changing the way we all conduct our business.

“Managing that risk has become a major challenge at ports, particularly when it comes to managing outsourced equipment tender and procurement projects that are often complex in nature and frequently involve multiple vendors.”

Port operators represented 71 percent of the respondents to the 2020 iSpec Ports Industry Survey, up from 58 percent in 2018. More than two thirds of respondents are responsible for the procurement of quay cranes, reach stackers and trailers.

Asked how the COVID-19 lockdown had affected the way ports were conducting business, 41 percent of global respondents said the pandemic had required a shift to more digital collaboration, 49 percent said more projects were now on hold, and 62 percent said they were now working from home more often.

The 2020 iSpec Ports Industry Survey also found that “quality” has become the leading reason for customer/supplier disputes. In the 2018 survey, “delays” was cited most often as the cause of customer/supplier disputes.

“No matter what the business, the spread of coronavirus has forced executives to find new ways of conducting business and for the most part this means turning to digital solutions,” Boshoff explained. “There is no doubt in my mind that this is a trend that will accelerate in the future. It is becoming abundantly clear that for many businesses there are benefits and efficiencies in the new online and outsourced methods they have developed during the pandemic. I think many of the work processes adopted during lockdowns, particularly around communication, will outlast the coronavirus crisis and become part of our normal way of working.”

ocean

An Ocean of Potential in the Blue Economy

The Blue Economy

The ocean has always been an essential part of life on this blue planet. Oceans cover over 70 percent of the Earth’s surface and contain 97 percent of the world’s water. We rely on its resources to sustain and improve our lives.

The World Bank created a definition for this “blue economy” that encompasses “sustainable use of ocean resources for economic growth, improved livelihoods and jobs, and ocean ecosystem health.”

Economic activities associated with the ocean include traditional sectors such as commercial fishing, coastal tourism and maritime transport to support global commerce. Increasingly, the ocean has been tapped for energy sources and generation of off-shore renewable energies like wind and tidal energy. Marine life is explored for applications to pharmaceuticals, desalination offers an opportunity to meet demand for freshwater, and the ocean can be used for carbon sequestration to mitigate climate impacts.

World Bank Definition of Blue Economy

Vital to Livelihoods and Growth

In one form or another, trade in ocean resources contributes between $3-6 trillion to global GDP, supporting the livelihoods of over 3 billion people on the planet.

Recognizing the importance of measuring the economic impact of the ocean, the Bureau of Economic Analysis (BEA) partnered with the National Oceanic and Atmospheric Association (NOAA) in 2019 to develop prototype statistics to measure the ocean’s contribution to the U.S. economy. From aquaculture to shipbuilding, offshore mining and power generation, marine-related activities contributed some $373 billion to U.S. GDP in 2018.

Tourism and recreation generated the most, bringing in just shy of $143 billion in wages, profits, and tax revenue for coastal communities in the U.S. in 2018. The new data also showed that between 2014 and 2018, the American blue economy grew faster than the overall U.S. economy.

SOURCE: U.S. Bureau of Economic Analysis

U.S. Ocean Economy

value added by activity in 2018 (millions of dollars)

Tourism and recreation – 38%

National defense and public administration – 33%

Living marine resources – 3%

Marine transportation – 1%

Offshore minerals and utilities – 15%

Deeper Dive into the Ocean Economy

Fisheries and Aquaculture

The ocean delivers a vital and primary source of protein in the diets of over 3 billion people. Marine fisheries employ over 200 million people either directly or indirectly. Expanded global availability of refrigerated storage and transportation has extended access to all kinds of fresh fish.

Overfishing, exacerbated by heavy government subsidies, has become a key concern, putting nearly 90 percent of the world’s fish stocks are at risk. Both the UN and the WTO have made removing these subsidies a priority to help protect vulnerable coastal communities who rely on fish for their own consumption and the local economy.

One-half of all fish we eat is farmed rather than captured. Aquaculture is the fastest growing food sector in the world. China produces a huge amount of the world’s farmed fish and is the top producer by value of carp, tilapia, catfish, shrimp, oysters and many other types. Norway leads in salmon, trout and smelt with Chile a close second.

Tourism

Tourism has long been vital to many coastal economies. Overall, tourism employs 1 out of every 11 people around the world. It is fast becoming one of the world’s biggest industries, making up 10 percent of global GDP. International tourism is an invisible export. Visitors spend money on transportation, housing and entertainment using income earned in their home country.

From scuba diving and surfing to cruises and all-inclusive beach resorts, coastal tourism comes in many flavors. It is particularly important for less-developed nations, as it creates jobs, promotes economic growth, and brings in money that is spent in local businesses like restaurants, shops, and tour services.

Tourism is the economic lifeblood of many Least Developed Countries and small island developing states such as those in the Caribbean and southeast Asia that collectively host 41 million visitors visit every year. These states are focused on delivering services to bring in more tourists while preserving the natural beauty and resources that attract visitors to their islands.

Shipping

Over 80 percent of goods traded internationally such as raw materials, food, consumer goods, and energy products were transported by sea in 2015. Despite reaching a record high of 11 billion tonnes shipped that year, world maritime trade growth decelerated to 2.7 percent in 2018, below the historical average of 3.0, reflecting a range of risks that intensified at the time including global trade tensions, protectionism, and the ‘Brexit’ decision.

Issues surrounding maritime transport are often intertwined with other global economic, environmental and political trends. Security conflicts occur over country ownership of key shipping routes and global discussions are active over the environmental impacts of fuel-guzzling container ships.

The world’s ports can often act as a weather vane for the economy as a whole. Dockworkers feel the effects of tariffs, disasters, and other trade policy changes before farmers, truckers, distributors and retailers do. Effects of the recent U.S.-China trade war and of the COVID-19 pandemic were experienced by dockers who saw the vast reductions in imports before the economic effects rippled throughout the economy.

As supply chains continue to shift and we watch for reshoring, the maritime transport sector may start to look different over the next few years, but will undoubtedly remain an essential part of the global economy.

Stats how we rely on the ocean

Preserving Our Oceans

Sustainability is a key aspect of the blue economy. Although there is an emphasis on environmental stewardship and protection in all parts of the, nowhere is this more apparent than when it comes to our oceans, a finite and critical resource.

Overfishing or pollution could deplete fish stocks and cause a severe food crisis. Environmental degradation caused by the tourism industry could ruin the economies of coastal communities. Waste and pollution from shipping could cause accumulated damage to our air and water.

According to Conservation International eight million metric tonnes of plastic is dumped into the ocean every year. At this rate, by 2050, plastic would outweigh fish in the ocean. Other concerns cited include the runoff of harmful nutrients from agriculture into the ocean, warming temperatures that are bleaching and destroying coral reefs, and even noise pollution from shipping that is killing creatures such as jellyfish.

International governmental cooperation and advances in technology can combat these problems. Conservation and sustainable use form one of the five pillars used by the United Nations Conference on Trade and Development (UNCTAD) as part of their Ocean’s Economy and Trade Strategy project. This effort aims to mitigate damage while maintaining the important economic benefits of the blue economy that supports billions of people.

It seems no aspect of economic life has been spared disruption from the COVID-19 pandemic, including many parts of the blue economy and related livelihoods. UNCTAD released a report to chart the waters of re-opening the blue economy to become more resilient post-pandemic. It proposes enhanced coordination and communication between fisheries and distributors to cut down on food waste, exercising restraint in sanitary protectionism, and closely monitoring shipping to prevent bottlenecks and delays. UNCTAD also suggests removing fishing subsidies to tackle wasteful overfishing; developing a “2.0 approach” to coastal tourism that showcases local sustainability efforts; and digitizing maritime trade procedures to achieve efficiencies and reduce CO2 emissions.

Untapped Potential

There is still a lot we don’t know about the world’s oceans, so embracing science and discovery will play an important role as we continue to draw on its precious resources and develop new markets. Untapped economic potential includes the capture of carbon, supporting the existence of a rich oceanic biodiversity, waste disposal, and the protection of coasts.

The blue economy is as diverse as its land-based counterpart – perhaps even more so. Sustainability will continue to be extremely important both for its own sake and for the preservation of the resources we rely on every day. With careful stewardship, the blue economy can continue to support billions of people and enrich all of our lives.

______________________________________________________________

Alice Calder received her MA in Applied Economics at GMU. Originally from the UK, where she received her BA in Philosophy and Political Economy from the University of Exeter, living and working internationally sparked her interest in trade issues as well as the intersection of economics and culture.

This article originally appeared on TradeVistas.org. Republished with permission.

vessels

Vessels for Life: Here are the Ships that Make Our Lives more Livable

It’s amazing how interconnected we are as a world—from delivering goods along the supply chain to your local grocery store to the social distancing that has helped to control what we’ll unlovingly refer to as “The Outbreak.” As much as it can be sometimes difficult to be connected, it is this interconnectedness that also allows us to subsist in our day-to-day lives. Toilet paper, cars, and even oil are goods that we can access thanks to the Svengali-esque magic—or organization, rather—of the global supply chain. One could say that it, in fact, makes the world go ‘round.

So today, we’d like to introduce some of the power players in this arena, the unsung voices that help us to have access to different goods each and every day. And these unsung voices are ships, the carriers that are key to our worldwide supply chains.

What follows are five major carriers and eight individual vessels that play an important role in shipping vehicles, cargo containers for manufacturers and other goods and equipment of all sizes that make our lives more livable each day.

MSC Gülsün (MSC)

The MSC Gülsün is a ship in the fleet of the Mediterranean Shipping Co. (MSC), a world leader in container shipping. The MSC Gülsün is the largest container ship in the world, with a max capacity of more than 23,000 TEUs. (Try that on for size!) It has more than 2,000 refrigerated containers; a hybrid exhaust gas cleaning system; a dual-tower firefighting system; 35 cabins; and double-hull protection.

The MSC Gülsün also has an eye for sustainability, increasing the efficiency of the CO2 emitted by 48 percent. With a hybrid exhaust gas cleaning system (EGCS), this ship is also self-cleaning. The vessel can carry 8 million solar panels, more than 47,500 cars, 223 million bananas, nearly 3 million washing machines and 386 million pairs of shoes, MSC boasts.

The ship was built in South Korea at Samsung Heavy Industries. The MSC Gülsün is 400 meters long and 60 meters wide. Despite its size, its engineering reduces resistance from the wind, which leads to lower fuel consumption.

Venus Leader (NYK Line)

The Venus Leader is a vehicle carrier with the Nippon Yusen Kaisha (NYK) Line, a global shipping and logistics company. The roll-on/roll-off (ro-ro) division of NYK is the largest worldwide. Built in 2010, the Venus Leader sails under the Japanese flag. It carries up to 15,301 t DWT (tanker deadweight tonnage). Her draught is 7.1 meters. The Venus Leader has a length of 186.03 meters and is 28.2 meters wide.

The NYK line has a fleet of 118, which carries more than 3.4 million cars each year. In addition to cars, the NYK ro-ro division also carries agricultural machinery, plant equipment and specialty cargos such as boilers, transformers and yachts. The company has sustainability goals. For instance, by 2050, it aims to have a zero-emissions ship, the NYK Super Eco Ship.

M/V Liberty (ARC)

The M/V Topeka was re-flagged to American registry and re-named the M/V Liberty on Jan. 31, 2017, to be consistent with the practice of owner American Roll-on Roll-Off Carrier (ARC) to name its ships after American values. M/V Liberty is now among the most capable and militarily-useful vessels in the U.S.-flag commercial fleet, able to carry tracked vehicles, helicopters, trucks, and other military and high and heavy project cargoes. The vessel is 199.99 meters long with a beam of 32.26 meters, a stern opening of 15.2 meters wide and 5.4 meters high, and a stern ramp rated for cargo up to 237 metric tons.

Vessels in the ARC fleet are known for their ramp access and system optimization, which helps with quick reconfiguration that allows for maximum lift capacity. That explains why, besides military cargo, ARC ships carry commercial breakbulk as well as agricultural and construction equipment for developing countries. Considering itself one of one part of its partners’ supply chains, ARC also works with the warehousing capabilities of other countries.

Actuaria, ACX Crystal, ACX Diamond (ONE)

The top three vessels with Ocean Network Express (ONE), based on TEUs, are the Actuaria, ACX Crystal and ACX Diamond. Built in 2009, the Actuaria holds up to 6,589 TEUs and flies under the Portugal flag. Built in 2008, the ACX Crystal carries up to 2,858 TEUs and flies the Panama flag. And built in 2008, the ACX Diamond can handle 2,858 TEUs and flies the flag of Singapore. They are but three of 225 vessels in ONE fleet that travels to more than 120 countries and can handle a total of more than 1.5 million TEUs.

The sixth-largest carrier worldwide as of January 2020, ONE operates under four core values: “Lean & Agile” to be a new definition of what a new reality can be; “Teamwork” that builds new value; “Best Practice” through the collaboration of its partners; and “Challenge” that takes strengths to face challenges without being afraid to fail.

Magleby Maersk and Munich Maersk (Maersk)

Two of the biggest ships of Maersk—the Denmark-based logistics giant—are the Munich Maersk and the Magleby Maersk. The Munich Maersk, which has a TEUs capacity of 19,630, was built in 2017 and sails under Denmark’s flag. It has a draught of 7.1 meters with an overall length of 399 meters and a 58.6-meter width.

The Magleby Maersk, which can handle up to18,270 TEUs, is 398 meters long, 33 meters deep and 73 meters high. Built in the Daewoo Shipbuilding and Marine Engineering shipyard, the ship is engineered with two low-revolution and two long-stroke engines. Each packs 9,785 horsepower. According to Vessel Tracking, Maersk operates 538 container ships, which can ship more than 3 million TEUs.

In short, these are a handful of ships that are making waves in transportation and logistics, playing a major role in moving the goods that keep us going each day. Onward!

maritime transport

UNCTAD AND IMO: REMOVE UNNECESSARY REGULATORY OBSTACLES TO MARITIME TRANSPORT DURING AND AFTER COVID-19

The world’s reliance on maritime transport makes it more important than ever to keep ships moving, ports open and cross-border trade flowing, and to support ship crew changeovers, the United Nations maritime and trade bodies said in a joint statement published on June 9.

UNCTAD and the International Maritime Organization (IMO) reiterated calls for governments to promote crew well-being by allowing crew changes and ensuring seafarers and other maritime personnel have access to documentation and travel options so they can return home safely.

Maritime transport depends on the 2 million seafarers who operate the world’s merchant ships, which carry more than 80 percent of global trade by volume, including most of the world’s food, energy, raw materials and manufactured goods. Crew changeovers are essential for the continuity of shipping in a safe and sustainable manner, but the process is currently hampered by travel restrictions due to the COVID-19 pandemic.

UNCTAD and IMO reaffirmed the urgent need for “key worker” designation for seafarers, marine personnel, fishing vessel personnel, offshore energy sector personnel and service personnel at ports. Governments and relevant national and local authorities must recognize that these workers provide essential services, regardless of their nationality, and should thus exempt them from travel restrictions when in their jurisdiction, the organizations pleaded.

“Such designation will ensure that the trade in essential goods, including medical supplies and food, is not hampered by the pandemic and the associated containment measures,” read their joint statement. “We emphasize that, for trade to continue during these critical times, there is a need to keep ships moving, ports open and cross-border trade flowing, while at the same time ensuring that border agencies can safely undertake all necessary controls. International collaboration, coordination and solidarity among all is going to be key to overcoming the unprecedented global challenge posed by the pandemic and its longer-term repercussions.”

global

Latest and Greatest Global Traders on the Move

Per our usual update, below is a list of the latest global trade movers and shakers impacting operations and creating higher standards in leadership. This is a comprehensive list for now, but we will continue to track ongoing recognitions for the next “Global Traders” spotlight. For now, let’s dive into major players across multiple sectors…

James I. Newsome III, the president and CEO of South Carolina Ports Authority, is among five global shipping leaders to be inducted into the 2020 International Maritime Hall of Fame, the Maritime Association of the Port of New York and New Jersey announced.

Joining Newsome in being honored May 13 at the Grand Hyatt Hotel in New York City are: Lisa Lutoff-Perlo, president and CEO, Celebrity Cruises Inc., Miami, Florida; James R. Mara, president emeritus, Metropolitan Marine Maintenance Contractors’ Association, Rutherford, New Jersey; Dr. Nikolas P. Tsakos, president and CEO, Tsakos Energy Navigation Corp., Athens, Greece; and Lois K. Zabrocky, president and CEO, International Seaways Inc., New York.

Sergio Sabatini was recently named president and Gord Anutooshkin was promoted to chief operating officer (COO) at Denver, Colorado-based OmniTRAX,  the fastest-growing railroad in North America. Sabatini reports to OmniTRAX CEO Kevin Shuba. Anutooshkin, who had been senior vice president of Operations, reports to Sabatini, who had been COO.

Rob Russell, previously of Progressive Rail and Union Pacific Railroad, recently joined OmniTRAX as SVP of Marketing and Commercial Strategy.

Atlanta, Georgia-based Nolan Transportation Group, one of the largest and fastest-growing non-asset truckload freight brokerages and 3PLs in North America, recently named Geoff Kelley as its president. Kelley had most recently served as chief operating officer at Coyote Logistics, a subsidiary of UPS.

Consolidated Chassis Management (CCM) promoted Michael Mitchell to senior vice president and chief operating officer. Mitchell, who has been with CCM since its 2005 launch, had been serving as interim COO. Speaking of CCM, a leading cooperative chassis pool manager in intermodal freight transport, its CEO Michael Wilson was recently elected to a three-year term on the Containerization & Intermodal Institute’s Board of Directors. So have Dr. Noel Hacegaba, deputy executive director of Administration and Operations at the Port of Long Beach, and Gregory Tuthill, chief commercial officer at SeaCube Container Leasing.

Katherine Harper has been named chief financial officer (CFO) at BDP International. Harper comes to the Philadelphia, Pennsylvania-based global logistics and transportation solutions company from AgroFresh, a produce freshness solutions company.

Jeffrey M. Barlow was appointed CFO at Paxxal Inc., shipping platforms provider based in Noblesville, Indiana.

Rich Kurtz is the new director of National Accounts for BOLT Systems. He comes to the Nashville, Tennessee-based fleet management and freight tracking software company from Trimble Transportation.

The Oxnard Harbor District Board of Commissioners, which oversees California’s Port of Hueneme, recently voted unanimously for Jess Ramirez to serve as its president. First elected to the board in 1992, Ramirez has served as president five times before, and he worked as a longshoreman at the port for 51 years, prior to retiring last year.

Meanwhile, Celina Zacarias has been appointed to the commission. The senior director of Community and Government Relations for the California State University, Channel Islands and chairwoman of the Oxnard Chamber of Commerce was appointed to fill the vacancy that came with Oxnard Harbor District Commissioner Dr. Manuel Lopez’s passing.

port

PORT CITY REVIEW: THESE 20 SEAPORT COMMUNITIES HELP DRIVE THE U.S. ECONOMY

Ports are “crucial to the economy,” Texas economist Ray Perryman wrote in 2017. “Ports generate substantial business activity through their operations, but those benefits are dwarfed by the huge importance of water transportation to other industries.” In this survey of 20 U.S. port cities, we look at various engines of economic development and see how they tie into the seaport.

TAMPA, FLORIDA

Since 2009, the Tampa Bay Economic Development Council (EDC) has acted as the is the lead designated economic development agency for Hillsborough County as well as the cities of Tampa, Plant City and Temple Terrace. The EDC offers a variety of incentives (infrastructure, workforce training, targeted industry and special opportunities) and tax breaks for companies that create high-wage jobs in high-value industries. Companies can also apply for workforce training grants and tax exemption programs. In addition, the Tampa Bay EDC also aids those wishing to take advantage of real estate opportunities at Port Tampa Bay (the largest deepwater port in the state), Port Redwing and Port Ybor.

BALTIMORE, MARYLAND

The Baltimore Development Corporation (BDC) serves as the administrator of that city’s Foreign Trade Zone (FTZ). The FTZ offers duty-free treatment for companies importing and exporting goods, and it saw nearly $20 billion worth of shipments in 2017. Much of that passed through the Port of Baltimore, which is one of the 10 busiest in the nation. According to the BDC, “With merchandise such as cars, paper and steel, 2017 saw the total FTZ international revenue rise from $44 million in 2016, to more than $396 million in 2017.” The BDC also provides a number of programs for entrepreneurs, small businesses and tax credits for supermarkets willing to open or renovate in targeted areas of the city.

MATAGORDA COUNTY, TEXAS

Matagorda County’s two shallow draft ports—Port of Bay City and Port of Balacios—are part of what makes the area’s location so desirable, according to the Matagorda County Economic Development Corp. (EDC). Both ports have nearby parcels available for long-term lease and development. Those wishing to do so may qualify for a host of incentives offered by the Matagorda County EDC, including tax abatements, an industrial revenue bond program, the Texas Enterprise fund for job creation, permit assistance, special discretionary loans, sales and use tax exemptions and various other training and capital funds.

VENTURA COUNTY, CALIFORNIA

Starting in 2019, the Port of Hueneme began a partnership with the Ventura County Economic Development Collaborative (EDC), Matter Labs and Naval Base Ventura County known as MAST (Maritime Advanced Systems & Technology). MAST is a laboratory at the port to incubate new technology and attract venture capital. “By leveraging the unique geographic, operational and environmental assets located at the Port of Hueneme, MAST invites entrepreneurs with an optimized solution a surrounding for sustained research, experimentation and test programs,” port officials say. This fits in perfectly with the EDC’s mission of promoting job growth through start-up assistance, special financing packages and workforce training programs.

SAVANNAH, GEORGIA

The Savannah Economic Development Authority (SEDA) provides a dizzying array of tax incentives to companies wishing to locate or expand in Savannah. The organization’s Business Retention Action Team (BRAT) also offers workforce training, assistance on decreasing energy use, logistics and engineering information and even free pre-OSHA audits. Because the need for warehousing space to accommodate the ever-growing Port of Savannah was consuming so much land, in 2019 SEDA developed the 719-acre Savannah Manufacturing Center. To attract tech firms, the project includes a host of county and city tax exemptions, according to an Oct. 23, 2019, story in Worth.

MEMPHIS, TENNESSEE

Created in 2011, the Economic and Development Growth Engine (EDGE) for Memphis and Shelby County coordinates public resources and incentives for economic growth in those municipalities. EDGE manages Foreign Trade Zone 77, provides special business loans and tax incentives and also manages the Memphis Port Commission, which oversees the Port of Memphis. In November 2017, EDGE approved a $327,500 contract to develop a master plan for the port. Produced nearly a year later, that plan calls far a variety of infrastructure upgrades to ensure that the port will still be in use 20 to 50 years from now.

FORT LAUDERDALE, FLORIDA

The Greater Fort Lauderdale Alliance has long sought to strengthen and diversify that city’s economy through services and incentives aimed at helping companies expand or relocate there. The organization helps with business location, market research and workforce training. GFLA also supports various international trade initiatives, in hopes of increasing imports and exports in Fort Lauderdale. Port Everglades, which plays a key role in global trade initiatives and is the preeminent seaport in Florida in terms of revenue, was responsible for $34 billion in economic activity in 2018, according to the port authority.

NEW YORK CITY, NEW YORK

“We are New Yorkers, working for New Yorkers,” say the officials who run the New York City Economic Development Corp. (NYCEDC). The NYCEDC prides itself on helping to grow and help companies become more sustainable. In 2015, the NYCEDC took a big step in doing this by signing a lease agreement with the City of New York to develop the old South Brooklyn Marine Terminal at Port NYC. Three years later, in May 2018, NYCEDC announced that their new Sustainable South Brooklyn Marine Terminal would serve as a new and major shipping hub that would create 250 near-term jobs, expand future growth and job creation and eliminate the need for 11,000 truck trips every year.

LOS ANGELES, CALIFORNIA

The Port of Los Angeles is the busiest seaport in the western hemisphere. As such, the Los Angeles Economic Development Corp. (LAEDC) provides a number of services to ensure that the port—and those companies and workers who rely on it—continues to grow. It publishes a variety of reports each year on the city’s international trade outlook, assists companies in finding international trade opportunities, brings international investment into LA through its World Trade Center Los Angeles affiliate and helps ensure low-interest financing is available for projects.

WILMINGTON, NORTH CAROLINA

Since 1956, Wilmington Business Development (WBD) has worked to bring more companies to the region. It does this through market research, partnership development and technical assistance. There’s no better example of this than WBD’s recent partnership with Chesterfield LLC and the Port of Wilmington to construct a 425,000-square-foot, build-to-suit facility at the port, which will handle both imports and exports. As a marketing partner in the venture, WBD will promote the project and attract tenants.

PROVIDENCE, RHODE ISLAND

Through a partnership with the U.S. Department of Commerce and the John H. Chafee Center for International Business, the Rhode Island Commerce Corp. (RICC) assists Providence companies in entering export markets. This allows companies to join trade missions, learn how to market themselves internationally and get specialized training. Though the Port of Providence (ProvPort) is relatively small, it has been a commercial seaport since the 1600s, which is why RICC partnered with the port in 2017 to implement a bond measure that would expand the port’s size and influence.

MOBILE, ALABAMA

For the past three decades, the Economic Development Partnership of Alabama (EDPA) has worked to help companies grow in the state, and compete throughout the world. It offers assistance for start-ups on obtaining special credits, help with the various free trade zones around the state and information on the AlabamaSAVES loan program to make it easy to get energy efficient. EDPA also provides help for those companies wishing to compete globally—which is made vastly easier by the Port of Mobile, which is responsible for more than 134,000 jobs and more than $22 billion in economic impact.

NEW ORLEANS, LOUISIANA

The Port of New Orleans plays an outsized role in that region’s economic growth. It supports nearly 120,000 jobs and almost $30 billion in revenue, according to an April 15, 2019, article in Biz New Orleans. Greater New Orleans, Inc. (GNO), which has long assisted companies in the region that wish to grow or compete internationally, recognizes that New Orleans’ growth simply couldn’t happen without the port. “In recent years, the Port of New Orleans has emerged as not only a record-breaking cargo and cruise facility, but remains an economic development powerhouse,” said GNO President Michael Hecht in the Biz New Orleans article. “Thanks to the Port’s leadership and partnership, New Orleans is well on its way to reclaiming its economic and maritime preeminence.”

OAKLAND, CALIFORNIA

The East Bay Economic Development Alliance (EDA) has been assisting the Port of Oakland (which today handles 99 percent of the containerized goods that move through Northern California) to grow for the past three decades. The EDA supported the port’s need to dredge the harbor in 1991 and again in 2009, meeting with conservationists, shipping interests and others to build a consensus. In 2003, the EDA also met with stakeholders to resolve the transportation impacts created by the port’s growth. The result was a recommendation to move the transportation and distribution facilities that support the port.

NORFOLK, VIRGINIA

The Hampton Roads Economic Development Alliance (EDA) has long assisted both domestic and international firms wishing to invest in the Norfolk area. The EDA provides all manner of services and assistance in finding a location, banking, obtaining permits, staffing and auditing. The EDA can also provide help for those companies wishing to take advantage of the three lucrative tax incentives offered by the State of Virginia to firms that use the Port of Norfolk: the Port Volume Increase Tax Credit, Barge and Rail Use Tax Credit and International Trade Facility Tax Credit.

BROWNSVILLE, TEXAS

Since 1992, companies wishing to locate or expand in Brownsville have been able to call upon the services of the Brownsville Economic Development Corp. (BEDC). The BEDC offers qualifying firms job creation incentives that range from $2,000 to $10,000 per each job created. Bringing together business leaders, location consulting and permit assistance are some of the other services the BEDC offers to companies in Brownsville. Critical to the city is the Port of Brownsville, the only deepwater port on the U.S./Mexico border, which the port authority said was responsible for $3 billion in economic activity in 2018.

MIAMI, FLORIDA

The Economic Development Council (EDC) of South Miami-Dade formed in 1993, following the destruction wrought by Hurricane Andrew. In addition to assisting companies in moving to Miami or expanding their current location, the EDC provides firms with market information as well as assistance in qualifying for tax incentives. Another key role of the EDC is focusing on “the betterment of any deficiency in the regional infrastructure which is a hindrance to economic vitality.” PortMiami, one of the most important elements in the Miami economy, impacts more than 334,000 jobs and supports about $43 billion in overall economic activity.

CLEVELAND, OHIO

Job creation in Northeast Ohio has been at the forefront of the Greater Cleveland Partnership (GCP) since its founding in 2004. The organization advocates for Cleveland businesses, while also providing them with vital assistance in getting access to capital, securing tax incentives and finding and retaining staff. In 2018, the GCP helped local companies create nearly 2,000 jobs, while retaining more than 12,000. The Port of Cleveland, which is the hub of about $3.5 billion in economic activity for the region, supports nearly 20,000 jobs.

PHILADELPHIA, PENNSYLVANIA

The Philadelphia Industrial Development Corp. (PIDC) has leveraged more than $25 billion in investment and helped create hundreds of thousands of jobs since its founding in 1958. It manages commercial and industrial real estate, delivers grant funding for development projects, provides resources for companies located in underserved, low-income parts of the city and sponsors investment opportunities in projects that qualify for the U.S. Immigration Investor Program. PhilaPort has been central to the growth of Philadelphia, returning more than $70 million in revenue to the city and providing more than 10,000 jobs.

ST. LOUIS, MISSOURI

It’s remarkable just how much the STL Partnership accomplishes in the name of economic development. The organization manages opportunity zones to encourage urban investment, provides workforce development, helps companies engage on the global market, provides tax incentives and loan assistance, runs innovation centers for startups and assists companies with site selection. The STL Partnership and the St. Louis County Port Authority have been partners since the Mississippi River flood of 1993. Then, they joined to develop the Lemay Comprehensive Plan, which helped redevelop the old National Lead site and establish a community reinvestment fund.

coronavirus

Coronavirus and Global Trade

Global trade is affected by myriad factors. The latest event to affect the international supply chain is the recent coronavirus that causes COVID-19. This novel virus has infected more than 80,000 people and killed more than 2,700.1 More cases are expected as the virus moves beyond its point of origin in China’s Hubei province to the rest of the world.

Resulting labor deficits and quarantine procedures could have major effects on production and shipping worldwide. Events like this one reinforce the need for companies to have detailed logistical plans in place to compensate for the shortages and delays that are likely to result.

Serious impacts expected

Worldwide health crises and other disasters have had significant effects on the global supply chain in the past. The comparatively minor outbreak of sudden acute respiratory syndrome (SARS) identified in 2003, also originating in China, cost the global economy about $40 billion dollars.2

In the wake of such catastrophes as SARS; the attacks of Sept. 11, 2001; Hurricane Katrina in 2005; and the meltdown at the Fukushima Dai-ichi nuclear power plant in 2011, it is reasonable to expect that the coronavirus could have similarly long-reaching effects. Several factors are likely to exacerbate its impacts on global supply chain economics.

First, the outbreak occurred during the Chinese Lunar New Year holiday, which took place between Jan. 25 and Feb. 4. Annually, this holiday precipitates what is considered the largest human migration on Earth over a period of about 40 days.3 Between early January and mid-February each year, hundreds of millions of Chinese people travel to visit relatives, much as Americans do during the Christmas holiday.

In an effort to slow the spread of the virus, many Lunar New Year celebrations were canceled, and the government issued travel bans4 and instituted a quarantine of millions of people, which prevents laborers from returning to work.5 The quarantine has had major effects on the labor force responsible for producing goods as well as loading and piloting the ships and planes used to transport goods all over the world.

The effects of the coronavirus outbreak might also affect the detente in the trade war between the United States and China signified by the signing of the “phase one” trade deal on Jan. 15. The new deal orchestrated by the administration of President Donald Trump promises $200 billion in sales to China.6 The coronavirus outbreak has the potential to impede these sales by creating a drag on the supply chain.

Identifying alternatives

Companies increasingly have attempted to anticipate the consequences of unexpected events on their suppliers and shippers. Disaster recovery plans have become an essential defense against the ramifications of these events.

While the production of these plans has become an industry in and of itself, all plans are not created equal. Some do not factor in delays in production and transport. A comprehensive disaster recovery plan needs to account for both. Merely hoping that problems will not rear their heads is no longer an adequate strategy.

In the case of the coronavirus outbreak, if a vendor relies on goods produced in China, it needs to have an alternative source of production. With a labor supply held up by quarantine procedures, it might be a while before production capabilities reach normal levels. The trade war has opened competitive production markets in Mexico, India, Malaysia, and Indonesia, among other places. Thus, there is little if any excuse not to have identified other production centers that can make up the shortfall in the event of a disaster.

Furthermore, it is imperative to assess whether transport services will have the capacity to ship existing inventory in the case of a crisis. If there is a backlog and a resulting lack of transport space, shipping costs might increase substantially. Delays in the wake of the Chinese Lunar New Year take place every year regardless, and in a time of crisis, delays will be even more marked. Establishing a plan with shipping partners for such events might not totally offset the cost increase. However, it can create space in the budget for it. Additionally, locating alternative routes and carriers ahead of time can allow companies to circumvent delays entirely.

While certainly expensive and complicated at the outset, disaster planning can pay dividends in the inevitable case of a major global crisis. Even if anticipated delays never manifest, planning for them might open new routes of production and shipping that ultimately can be used to increase efficiency during times of normal business operation.

Thinking ahead

Ample precedent exists for the alternative of no plan, which leads to an inability to meet demand and the financial consequences that result. Investors take note of such deficiencies and allocate funds accordingly. Developing an agile approach to anticipated problems will increase in importance as the global economy becomes more complex.

While the coronavirus outbreak continues, another disaster is already looming. The implementation of Brexit over the next year will have massive consequences in terms of customs and duty, taxation, and supply chain strategy. Getting ahead of this incipient crisis by anticipating its effects on the production and movement of goods can increase your company’s resilience.

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 Learn more

Pete Mento, Managing Director at Crowe LLP

+1 202 779 9907 or pete.mento@crowe.com

Endnotes

1. Helen Regan, Adam Renton, Meg Wagner, Mike Hayes, and Veronica Rocha, “February 25 Coronavirus News,” CNN, Feb. 25, 2020, https://www.cnn.com/asia/live-news/coronavirus-outbreak-02-25-20-hnk-intl/index.html

2. World Health Organization, “SARS (Severe Acute Respiratory Syndrome),” https://www.who.int/ith/diseases/sars/en/; William Feuer, “Coronavirus: The Hit to the Global Economy Will Be Worse Than SARS,” cnbc.com, Feb. 6, 2020, https://www.cnbc.com/2020/02/06/coronavirus-the-hit-to-the-global-economy-will-be-worse-than-sars.html

3. Karla Cripps and Serenitie Wang, “World’s Largest Annual Human Migration Now Underway in China,” CNN, Jan. 23, 2019 https://www.cnn.com/travel/article/lunar-new-year-travel-rush-2019/index.html

4. “China Coronavirus Spread Is Accelerating, Xi Jinping Warns,” Jan. 26, 2020, BBC https://www.bbc.com/news/world-asia-china-51249208

5. Emily Feng, “45 Million Chinese Now Under Quarantine as Officials Try to Halt Coronavirus Spread,” NPR, Jan. 27, 2020, https://www.npr.org/2020/01/27/800158025/45-million-chinese-now-under-quarantine-as-officials-try-to-halt-coronavirus-spr

6. James Palmer, “The ‘Phase One’ Trade Deal Is Still Hypothetical,” Foreign Policy, Jan. 15, 2020, https://foreignpolicy.com/2020/01/15/phase-one-us-china-trade-deal-hypothetical-trump-liu-he/

U.S.-China

U.S.-China Trade War of 2019 Spills into 2020 for Ports, Shippers and Manufacturers

The Jan. 15 signing of a U.S.-China Phase One agreement did spawn a sigh of relief among those troubled by the trade tensions between the two nations. But six days later, a warning came from a couple experts closely watching the unfolding events on behalf of ports, shipping lines and manufacturers. The crux of that warning? Stay tuned.

“This is a truce,” said Phil Levy, chief economist at Flexport, a San Francisco-based freight forwarding and custom brokerage company. “This is not the end of the trade war.”

Levy shared that opinion as he joined his company’s CEO Ryan Peterson in leading a webinar on Jan. 21 that was listened in on electronically by some of their 10,000 clients in more than 200 countries. Those who rely on the company’s expertise in ocean, air, truck and rail freight, drayage & cartage, warehousing, customs brokerage, financing and insurance–all informed and powered by Flexport’s unique software platform—heard Levy say of the U.S.-China trade war: “We haven’t seen a retaliatory escalation of this magnitude in the post-World War II era. … This really was a 2019 story that worsened throughout the year.”

He pointed to a graphic that showed trade between the world’s two biggest economies fell markedly last year, and that no one overseeing trans-Pacific supply chains were immune from economic harm. Many webinar participants could relate as 64 percent of Flexport’s customers rely on the trans-Pacific trade routes, according to Peterson.

Yes, the Phase One deal was a positive first step, but Levy pointed to some examples of lasting victims from the trade war. It exposed the continued “decay,” as the economist put it, of the World Trade Organization (WTO), which is supposed to prevent the escalation of trade disputes. The “keeper of peace” amid trade tensions was largely frozen out of U.S.-China talks and, therefore, silent as events transpired.

A second heavy blow came in December 2019, when the WTO’s appellate body ceased to function, according to Levy, who noted that the formation of the “WTO system was one of core achievements since World War II.”

Peterson found equally worrisome the first-ever disappearance of peak season when it comes to shipping. As many known, imports grow during the fall and really heat up by November’s holiday shopping season. That not happening in 2019, couple with a steady decline is U.S. imports from China after years of solid growth, is a reason for concern, according to the CEO, who maintained, “global trade is down due to tariffs.”

For one thing, not having a peak season to rely on, coupled with steadily declining trade, “from our perspective makes life very hard to plan for,” Peterson said.

He did see on the horizon what many may view as a green lining: lower freight fees and consumer prices. “Lower prices do sound good,” Peterson conceded, “until someone goes bankrupt. We want stability, predictability. Things getting too cheap is unpredictable. You are playing with fire.”

Feel the burn? Peterson called our current “degree of uncertainty relatively unprecedented. We learn about things in a tweet. Was that really implemented or not?” As an example, he cited France proposing a digital tax and President Donald Trump striking back with threats of tariffs on cheese and wine. “Is that policy or not?” Peterson asked rhetorically. “Right now it’s a tweet. It makes it very hard to plan for.”

Levy warned “there is no safe play.” You can withstand the brunt of the tariffs and see what that does to your bottom line, or you can figure out a way to work around them and then have a trade deal come along with no way to return to normal operations quickly enough.

As Peterson pointed out, it’s not just the sting of the tariffs but the amount of paperwork and other adjustments one must handle while trying to remain agile. That time takes away from other things you need to be doing with your business.

Speaking of time away, Levy believes there will be no further movement in deescalating trade tensions between the U.S. and China until after America’s November presidential election. He suspects that China agreed to the Phase One conditions, which were much more weighted against that country than the U.S., “to buy a year of peace.” He added that China could be playing it coy in the weeks ahead as Beijing awaits the outcome that determines whether they will continue to deal with Trump or a new White House occupant. “If Trump loses, it’s likely the trade agreement will change anyway,” Levy said.

In the meantime … uncertainty. Peterson noted that one Flexport client had to close a manufacturing plant due to the tariffs. Levy held onto the hope that an eventual U.S.-China trade deal will be beneficial economically, pointing to markets that opened up with the U.S.-Mexico-Canada Agreement replacing the North American Free Trade Agreement. But you never know, as evidenced by USMCA having also resulted in some restricted trade, particularly in the automobile sector. “That was disappointing,” he admitted.

Don’t be surprised if the pain ultimately spreads, as Levy predicted what will happen after the U.S.-China trade war comes to a head. “There are a lot of signs the president will turn his trade policy focus away from China and toward Europe,” said Levy, who later noted Trump has also begun accusing Vietnam of cheating when it comes to trade.

So what to do about all this?

“My stance is there is nothing more important than agility, the ability to adapt,” Peterson said of dealing with tariffs, real or threatened. “It can mean restructuring a supply chain or seeking exemptions.” Companies that foster a culture with an ability to adapt can look at these challenges, Peterson says, and respond: “Bring it on, bring on the change.”

trends

Global Shipping Trends: What to Expect in 2020

Now that the fireworks are over and New Year’s resolutions are set, it’s time to prepare for global shipping in 2020. And that means looking at ongoing trends and changing regulations. One thing’s for sure, freight forwarding never has a dull moment.

Recapping 2019’s top global shipping disruptors

Before we jump into expectations for this year, let’s set the stage by looking at some of the top events in 2019 that may have affected global shipping strategies around the world.

Geopolitical uncertainties

From the ongoing Brexit discussion to the China-U.S. trade war and the trade conflict between Japan and Korea, these and other disruptions caused serious challenges to the transportation industry.

Preparation for International Maritime Organization (IMO) 2020

While the latest revisions didn’t go into effect until January 1, 2020, preparation for the changing IMO requirements was well underway in 2019. The requirement to reduce sulphur oxide emissions from 3.5% to 0.5% was a drastic change that will likely continue to affect shipping costs and capacity availability.

E-commerce expectations

With the growth of e-commerce and high-tech products flooding our markets, air freight is a go-to mode of transportation for many shippers—any time of year.

To best understand how these and other mode-specific changes will affect your 2020 shipping year, let’s break them down by service.

Ocean service in 2020

In the past, ocean shipping followed the basic law of supply and demand. When demand increased, rates went up. When demand decreased, rates dropped. This often occurred regardless of carrier profitability. But that is changing, which could reshape expectations for 2020.

Carriers controlling capacity

Today’s ocean carriers are quick to withdraw capacity when demand changes. By adjusting the amount of equipment available, ocean carriers are better able to ensure demand remains tight enough to protect their profits. This is a successful technique because there are fewer ocean carriers than in the past, allowing for a quicker reaction when supply and demand shifts.

Increasing carrier costs

While ocean carriers can control capacity to help ensure rates remain compensatory, we can still expect some level of imbalance due to the IMO 2020 mandate, which increases carrier costs.

Driver and drayage capacity shortages

California Assembly Bill 5 (AB-5) went in effect on January 1, 2020, which limits the use of classifying workers as independent contractors rather than employees by companies in the state. This may affect the availability of the number of dray carriers in the busiest ports. This, in turn, can drive drayage costs up.

Air service in 2020

Last July, we posted about ongoing uncertainty in the air freight market. The good news is that air freight service has stabilized a bit since then. While we’re predicting a somewhat stable air freight market for the year, this could obviously change if there is some catalyst that changes the speed products need to come to market.

Stable demand expectations

We expect demand for air freight to remain stable for the time being. Many organizations continue to focus on managing expenses and are looking for cost-effective, efficient options for delivering on short timelines without breaking the budget.

Capacity to hold steady

Capacity will also likely remain stable. Most new capacity is coming in the form of lower deck. Pure freighter capacity will continue to move based on market yields that make sense from a carrier standpoint. There may be some capacity growth in off-market locations, based on passenger demand.

Customs compliance in 2020

It’s always smart to have a customs compliance program that aligns with your business goals, which is especially true this year. Customs and Border Patrol (CBP) has several customs changes slated to take place in 2020, and now’s the time to prepare. If you haven’t reviewed your customs program recently, our customs compliance checklist may help.

CBP moving away from ITRAC data

According to CBP, they will be eliminating Importer Trade Activity (ITRAC) reports in favor of the Automated Commercial Environment (ACE) system. If you don’t already have an ACE portal account, now is the time to get one to ensure all your customs data is available to you when you need it most.

CBP’s continued focus on compliance and enforcement

CBP will continue to scrutinize tariff classification and valuation in an increasing post-summary environment. As the United States Trade Representative (USTR) continues to provide exclusions, many importers will depend on brokers to submit refund requests via post summary corrections (PSCs) or protests. CBP often requires additional data and/or documentation to ensure that tariff classifications and valuations are correct. It is imperative that you maintain a high degree of confidence in your compliance program and can substantiate any post summary claims with CBP.

Increasing Importer Security Filing (ISF) penalties

Throughout 2019 we saw CBP issuing more ISF penalties for inaccurate and/or untimely submissions. This will likely continue and could become a growing issue in 2020.

Disruptors affecting the industry in 2020

While certain trends and regulations only directly affect a single mode or service, there are still plenty that affect freight forwarding in general. Looking at 2020, it’s probably safe to say that the following disruptors will continue to affect the year ahead.

Broadening of sourcing locations

While there may be an end in sight to some of the trade war uncertainties, the initiative to broaden sourcing locations beyond China will likely continue. Southeast Asia has already seen clear benefits of this and will likely continue to see manufacturing growth in 2020.

Switching sourcing strategies can also bring risks, including capacity availability, infrastructure support, and geopolitical stability. While China will continue to be the largest exporter into the United States, we simply cannot deny the trends that continue to show volume shrinkage from China.

Accelerated evolution of technology

Significant investment in technology and transportation platforms continues to accelerate across the industry. Beyond private equity groups, well-respected and established providers like C.H. Robinson are making investments that will reshape logistics. These growing technological investments will continue to create value across the supply chain.

While this opens new options for shippers and carriers alike, you may likely need to spend more time researching which technology option is the best fit for your own organization. After all, the right technology offers tailored, market-leading solutions that work for supply chain professionals and drive supply chain outcomes.

Prepare for the year ahead

Overall, 2020 will be a great year for strategizing. Continuous improvement efforts—including a close look at service levels and mode choices—will help reach your short- and long-term supply chain goals.

Looking for a provider that can help in the coming year? C.H. Robinson has a global suite of services backed by technology and people you can rely on that will make 2020 preparations smooth and effective. Connect with an expert today.

blume

Blume Global & Hapag-Lloyd Kick-off 2020 Partner Connectivity

This month marked the beginning of Blume Global’s support of Hapag-Lloyd’s global network of carrier partners. Hapag-Lloyd’s selection was confirmed earlier in December with a start date in January starting in North America to ensure that high-quality, door-to-door service capabilities were provided for its partners.

Known for being a global leader for shipping companies, Hapag-Lloyd boasts a fleet of 231 container ships, of which include competitively modern reefer containers that require expert handling and a level of visibility and partner connectivity that goes beyond the basics.

“Blume Logistics will help improve the quality of our door service for our customers including first and last-mile visibility while enhancing the efficiencies of our motor carrier partners”, said Uffe Ostergaard, President of Hapag-Lloyd North America Region. “Our North American customers are asking for enhanced end-to-end shipment visibility to better manage their supply chains and by implementing this integrated cloud-based solution we will be able to offer that value-added service.”

Blume Global will manage a streamlined connection for Hapag-Lloyd’s motor carrier partners, enabling digital and hassle-free capabilities for dispatch work orders, drayage rates, appointment scheduling, accessorial charges, live tracking, proof of delivery, invoicing and robust reporting.

“Blume Logistics helps companies successfully manage logistics execution across the supply chain network, and around the world, with first and last-mile shipment visibility and control over transportation spending. It also improves customer service quality and enhanced vendor relations,” said Pervinder Johar, CEO, Blume Global.