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Yusen, We Have a Problem!: In The News Round-up

Posted By Administration, Thursday, November 17, 2016
Updated: Wednesday, November 16, 2016



by Mark Kopp, Yusen Logistics (Americas) Inc.


Finally a Good Cigar…
On October 14th the Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Commerce Department's Bureau of Industry and Security (BIS) amended their Cuban Assets Control Regulations and Export Administration Regulations. OFAC is removing the monetary value limitations on what travelers may import from Cuba as part of their personal baggage; this includes alcohol and tobacco products. These changes are designed to further normalize trade and commerce between the United States and Cuba and support the foreign policy changes toward Cuba as outlined by the Obama administration in December of 2014.

Restrictions were also eased on exports, cargo transportation, pharmaceuticals, infrastructure contracts, and civil aviation. Further information can be found on the Treasury Department website and the Commerce Department website. Details were also published in the Federal Register of October 17th.

Neo-Panamax Follow-up
As discussed last month, East Coast ports need some major improvements in order to handle the bigger ships that will be arriving through the canal. The Port Authority of New York & New Jersey announced that construction of a new Bayonne Bridge and demolition of the old one should be completed by the end of 2017.

As reported in the October issue of American Shipper, Canadian ports of Montreal, Halifax, Saint John, New Brunswick as well as Melford and Sydney, Nova Scotia are working rapidly to expand their facilities.

The American Shipper also contains an extensive article on improvements made by the Port of Virginia. Improvements are underway to give the port the ability to handle 10,000 to 14,000 TEU vessels. Officials plan to make and estimated $2 billion investment in the port over the next ten years. The investment includes $31 million investment to increase the number of truck gates, half funded by the U.S. Department of Transportation. Also, the Army Corps of Engineers is working to deepen the channel from 50 to 55 feet. Significantly, the Virginia legislature recognizes the importance of the port expansion to the Virginia economy. The legislature has approved issuing a $350 million project to help pay for the improvements. The Port Authority is also looking to modernize an existing marine terminal inland on the James River near Richmond. Richmond has available warehouses, is served by two railroads, and is on the I-95 corridor which will make delivery of cargo faster and reduce traffic on I-64.1

The Need for Government Cooperation
The above highlights the need for government to understand the importance of international trade. How many Americans will be employed in making these improvements? Clearly the Virginia legislature recognizes what the improvement of the Virginia ports can mean to the Virginia economy.

We've just had an election. Both parties claimed they would not support the Trans-Pacific Partnership (TPP). The President-elect wants to renegotiate NAFTA. Recent political rhetoric has been that international trade costs American jobs. But think about your supply chain. How many of your companies employ ex-patriots overseas in product development and quality control? How many Americans work for your freight forwarders and steam ship companies? How many Americans work for your customs brokers and Customs and Border Protection? How many Americans work for the railroads and trucking companies that deliver imported goods to your distribution centers? Finally, how many people work in your retail outlets? Many Americans have jobs today because of international trade. Make sure your elected representatives know that. Now is the time to write and call your legislators and let them know the positive effects of international trade.

[1] http://digital.americanshipper.com/i/731319-oct-2016/40 


Mark Kopp is currently the Senior Manager for Import Compliance for Yusen Logistics (Americas) Inc. Mark has over 30 years experience in all aspects of supply chain management and compliance - from product development and buying, cargo management and shipping, customs brokerage, to warehousing, distribution and retail sales. He has managed/directed imports for Kinney Shoe Corporation, Woolworth Corporation, Russ Berrie & Co. and DHL. He has also served on the Footwear Distributors & Retailers of America government customs council, been a member of the Board of Directors for the Toy Shippers Association, and been an instructor at The World Trade Institute in New York. Currently, he is a member of the NY/NJ Freight Forwarders & Brokers Association and serves on the American Apparel & Footwear Association Government Relations Committee. Mark graduated from Franklin & Marshall College in Lancaster, PA with a B.A. in Political Science.

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Tags:  Cuba  Neo-Panamax  Ports 

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Yusen, We Have a Problem!: In The News Round-up

Posted By Administration, Thursday, September 8, 2016
Updated: Wednesday, September 7, 2016



by Mark Kopp, Yusen Logistics (Americas) Inc.


Hanjin
Have you heard the one about the Korean steam ship company that filed for receivership? Of course you have. So what does it all mean? According to The Wall Street Journal there are about 25,000 containers crossing the Pacific each day on Hanjin vessels. Hanjin represents 3.1% of global shipping.1

Various ports across the globe are refusing to allow Hanjin vessels to dock for fears that Hanjin will not be able to pay port fees. Even if the fees can be paid, the vessels could be subject to complicated legal claims. Allowing the vessels to dock will only add to port congestion.

The first impact will be increased costs. In a September 1st article, The Los Angeles Times reported that spot shipping rates have increased by 15% as shippers look for alternatives, including air freight.2 The Guardian is reporting freight increases of as much as 50% with rates from China to the U.S. West Coast increasing from $1,100 to $1,700.3 The price increases are also a result of other carriers operating at high capacity due to peak season as retailers are looking to stock shelves for the upcoming Christmas season.

For retailers a price increase for containers still sitting in China may be the easy part. Those orders can still be rerouted with other carriers and arrive on time for the holiday season. A more complicated problem will be for retailers with cargo already on a Hanjin vessel. Ships are currently anchored off shore without being able to unload as stated above. What will happen to that cargo? Some ports, notably in China, have seized Hanjin vessels. Will shippers be able to obtain their cargo on these vessels? The situation remains unclear and will be subject to various legal claims not only from retailers, but possibly many international government entities.

Another question that remains open is what will be the impact on the supply chain downstream? What will be the impact on the railroads and trucking companies that have contracts with Hanjin? Will trucking companies with outstanding invoices to Hanjin be able to collect? Will truckers with exclusive contracts with Hanjin be able to stay in business? How much of the added costs will be passed on to shippers? How is this going to impact manufacturing companies that have been relying on Hanjin for just in time delivery of critical production materials? Will they be forced to lay off employees or shut down? What will be the impact to the consumer when anticipated holiday items are simply not available? It may take weeks if not months to learn the answers to these questions.

FMC Report on Cargo Diversion
In a report issued June 30, the Federal Maritime Commission released a report which states that for the second year in a row, more U.S. bound cargo is being diverted to Mexican and Canadian ports.4 The report cites port congestion as a result of new vessel alliances and labor unrest as the major factors in shippers looking for alternatives to West Coast ports. The report also cites continued chassis shortages, PierPASS fees, and the new VGM requirements as other factors leading to cargo diversion.

The report goes on to point out that strength of the Canadian rail system with on-dock service for seamless transfer of cargo is a major asset for Canadian ports while Lazaro Cadenas is Mexico will be opening a fully automated terminal this year.

The impact of improvements in the Panama Canal, remain to be seen. This could change the trend as West Coast cargo could be diverted to the East Coast instead of foreign ports.

Informed Compliance
According to The Sandler, Travis & Rosenberg Trade Report of August 9th, Customs and Border Protection has been issuing letters to some importers titled "Distribution of Informed Compliance Publications and Other Informative Documents."5

The letters include a list of informed compliance materials available to importers. The implication seems to be that CBP has identified recipients of these letters as possible candidates for audit. The purpose of the letters seem to be to encourage prior disclosures.

Should you receive one of these letters you may want to review your compliance procedures in the event that you may be on CBP's future audit list.

[1] http://www.wsj.com/articles/hanjin-shipping-upsets-global-trade-after-seeking-protection-from-creditors-1472683164
[2] http://www.latimes.com/business/la-fi-hanjin-bankruptcy-20160901-snap-story.html
[3] https://www.theguardian.com/business/2016/sep/02/hanjin-shipping-bankruptcy-causes-turmoil-in-global-sea-freight
[4] http://www.fmc.gov/assets/1/Page/4thAnnualUpdateStudyUSInlandContainerizedCargo.pdf
[5] http://www.strtrade.com/news-publications-informed-compliance-letters-audit-customs-080916.html


Mark Kopp is currently the Senior Manager for Import Compliance for Yusen Logistics (Americas) Inc. Mark has over 30 years experience in all aspects of supply chain management and compliance - from product development and buying, cargo management and shipping, customs brokerage, to warehousing, distribution and retail sales. He has managed/directed imports for Kinney Shoe Corporation, Woolworth Corporation, Russ Berrie & Co. and DHL. He has also served on the Footwear Distributors & Retailers of America government customs council, been a member of the Board of Directors for the Toy Shippers Association, and been an instructor at The World Trade Institute in New York. Currently, he is a member of the NY/NJ Freight Forwarders & Brokers Association and serves on the American Apparel & Footwear Association Government Relations Committee. Mark graduated from Franklin & Marshall College in Lancaster, PA with a B.A. in Political Science.

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Tags:  Cargo Diversion  CBP  Hanjin  Ports 

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West Coast Port Strike Averted, But Problems Remain

Posted By Administration, Thursday, March 12, 2015
Updated: Tuesday, March 10, 2015

by RVCF


Retailers and merchandise suppliers breathed a short-lived sigh of relief on February 20 as the dockworkers union and the owners of 29 shipping terminals across all major West Coast container ports reached a tentative deal on a new contract. The labor agreement between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) is the culmination of nine months of tense negotiations and enables normal operations to be resumed.

Even with a return to "normal" operations, it will take a long time to move the cargo backlog created by the dispute and relieve the traffic congestion of ships waiting to dock. Industry analysts estimate this process could take anywhere from six weeks to three months. Although the ILWU and PMA said they expected cargo to keep moving during negotiations, work slowdowns, lockouts and other forms of disruption snarled operations at the West Coast ports.

As for the potentially grave consequences of a full-blown shutdown, consider the numbers:

  • Goods that pass through these ports represent 12.5 percent of the U.S. economy.1
  • A study from the National Retail Federation and the National Association of Manufacturers estimated that a work stoppage would have cost $1.9 billion per day for the first five days and $2.5 billion per day it the stalemate reached 20 days.2
  • Consulting firm Kurt Salmon estimates retailer losses to reach $3.8 billion as a result of port delays.3

All ports negotiate together to prevent small strikes, but this practice increases the risk of a complete shutdown should negotiations break down. After the ports were at a virtual standstill during President's Day weekend, Labor Secretary Thomas Perez and Commerce Secretary Penny Pritzker were dispatched by President Obama to mediate the dispute. Members of the ILWU and the PMA now need to ratify the agreement.

Although most retailers were proactive in minimizing the effect of the strike on the 2014 holiday season, the workarounds put in place are not sustainable for the long-term. Rerouting ships to Gulf and East Coast ports or switching to airplane transport are expensive alternatives and the negative effect on the economy and retail industry has already reared its ugly head. The time required to process shipping containers rose from an average of four days to two weeks.4 Merchandise is stuck at the ports. Revenues are down for many major brands. Shipments from meat, dairy and agriculture exporters have spoiled. Truckers hauled fewer loads and lost money. Jobs have been cut.

The volatility and uncertainty surrounding negotiations has made it difficult to manage and plan retail business strategies. In the apparel sector, inventory management has become a nightmare. There is a growing concern that merchandise will be out of season by the time it arrives in stores. This means retailers have little opportunity to sell many products at full price, while floor designs, window displays and special promotions focused on certain merchandise may be wasted. Carrying costs and out-of-stocks are up.

Although an agreement has been reached, many of the problems causing the worst congestion in a decade at the ports of Los Angeles and Long Beach still need to be solved. There has been a shortage of truck trailers to haul goods. Port terminals designed many years ago are struggling to support today's massive vessels and keep up with the high volume of goods. A lack of consistency in container sorting from multiple shipping lines is making it difficult to quickly move containers out of port.

As a result of these challenges and the near-disaster caused by a prolonged labor dispute, retailers and suppliers are reviewing their strategies for moving products into the hands of customers. They're looking for ways to adapt their supply chain and become less reliant on West Coast ports. Although Gulf and East Coast ports could make shipping longer and more expensive, these alternatives need to be thoroughly explored. Near-shoring and moving manufacturing operations to the U.S. are options that may be more feasible now that the cost savings of overseas manufacturing have dropped significantly. Sourcing strategies need to be reviewed to assess the ability to mitigate risk and improve advance scenario planning.

Although a strike has been averted, the retail industry shouldn't get too excited. The effects of the nine-month battle remain and it will take a long time to recover. In the meantime, retailers, suppliers, shippers and all stakeholders must come together to rethink shipping and supply chain strategies.

[1] http://www.cnbc.com/id/102434185#.
[2] https://nrf.com/resources/retail-library/the-national-impact-of-west-coast-port-stoppage  
[3] http://www.zerohedge.com/news/2015-02-18/track-massive-congestion-port-long-beach-real-time  
[4] http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/17/why-a-major-backup-at-west-coast-ports-could-cost-the-retail-industry-billions/


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Tags:  Inventory Management  Labor Stoppage  Long Beach Port  Los Angeles Port  Ports  West Coast Strike 

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Vendor Compliance from a 3PL Perspective: 7 Key Issues Effecting Port Drayage Efficiency

Posted By Administration, Thursday, September 18, 2014
Updated: Tuesday, September 16, 2014

by Scott Weiss, Port Logistics Group


Timely pick-up of your imported product at the Ports can sometimes be the difference between meeting your customer's designated arrival date or receiving a deduction from your invoice for a late shipment.

Now more than ever, a range of new pressures and forces have been at work at ports, so here are seven existing issues that you need to really know about:

1) Contract Negotiations – Nearly 20,000 dockworkers at 29 West Coast ports are now loading and unloading cargo containers from Asia and elsewhere without a contract. A six-year agreement with employers expired on July 1, 2014. Negotiations are still ongoing for a new deal. Fearful that a breakdown in talks could shut down West Coast ports, retailers rushed goods into the country before the contract expired, not wanting to be left empty-handed during the busy back-to-school and holiday seasons.

2) Mega Alliance Agreements – For decades, big ocean carriers have shared ships through vessel-sharing agreements. It's all about lowering costs by sharing the space on huge ships that none of the lines could fill on their own. These agreements are similar to the arrangements some airlines have with one another, enabling them to share seats and keep their planes full. Historically, these agreements were small, affecting fewer than 100 slots on vessels that carry thousands of containers. Today, the agreements are huge as these giant alliances provide carriers a way to afford the costs of operating mega ships.

3) Mega Ships – "Mega Alliances" formed by the largest ocean carriers are lead them to put mega ships into service on the busiest trade lanes. These vessels are big enough to carry 18,000 20-foot equivalent unit containers (TEU's) – that's three times the capacity of the biggest ships only two decades ago. It's been 25 years since the biggest became too wide for the Panama Canal. These first "post-Panamax" ships, carrying 4,300 TEU, had roughly a quarter of the capacity of the current record holder, the 16,020 TEU Marco Polo. When a single mega ship calls at a terminal and generates the same volume that used to be carried by two vessels half that size calling at two different terminals, the mega-ship creates such a surge in cargo volume in a short period of time that the container yard and gates become congested.

4) Chassis Shortage – Shipping lines provided a chassis with every container ever since the first containers arrived into U.S. Ports in the 1960's. Within the past few years though, shipping lines in the U.S. have sold most of their chassis to equipment leasing companies and chassis pool operators. Now that the lines have sold most of their chassis, they no longer control the equipment. Truckers must go where the chassis were dropped off, which could be a completely different terminal from where the trucker just called. Therefore, a huge chassis dislocation issue has emerged, where one terminal may have few chassis on a particular day and another terminal may have thousands of chassis. Drivers must wait in line for a container to be "flipped" from one conveyance to another, resulting in long turn times. In fact, the biggest complaint by port truckers today is not the long truck lines at the terminal gates, but rather the conditions within the container yards due to heavy flip congestion.

5) Hours of Operation/Turn Times – In July 2013, a new Hours of Service rule went into effect. Key revisions included:

  • Limiting the maximum work week for truck drivers to an 11 hour daily driving limit and 14 hour work day limit.
  • Limiting the maximum work week for truck drivers to 70 hours, a decrease from the previous maximum of 82 hours.
  • Requiring truck drivers to take a 30 minute break during the first eight hours of a shift.

An internal trucking report in Los Angeles/Long Beach revealed that some drivers were experiencing turn-times of 3.5 to 5 hours at seven of the terminals in the harbor, with the remaining terminals having turn-times of 2.5 hours or less. At least 50% of imported product arriving into ports is moved by truck to distribution centers within 100 miles of the ports. In general, port drivers get paid by the load so the new Hours of Service rules combined with increased waiting time at the terminals means lower productivity.

6) Clean Trucks – Several years ago, the Ports of Los Angeles/Long Beach mandated that all trucks picking up containers at the port be retrofitted in order to reduce carbon emissions and pollution. Investing in a new clean truck costs upward of $130,000 and led thousands of drayage carriers to exit the industry thereby severely decreasing port drayage capacity.

7) Rail Capacity – Almost every terminal in Los Angeles/Long Beach now has on-dock rail capability and the use of on-dock rail continues to increase. Containers that can't leave the terminals by rail on schedule are backing up, contributing further to congestion in the terminal yards.

Merchandise suppliers should be aware of these issues and put action plans in place to ensure their shipments arrive at their appointed destinations timely.


As Vice President, Business Development, Scott Weiss works closely with apparel, footwear, and housewares manufacturers of all sizes to ensure compliance with retailer routing guide requirements.  Port Logistics Group is a market leader in gateway port logistics services, operating over 5 million square feet of warehouse space.  Services include port drayage, import deconsolidation, warehousing and distribution, retail compliance, local transportation, and store delivery in key port locations of Los Angeles/Long Beach, New York/New Jersey, Seattle, and Savannah.  Scott may be reached at sweiss@portlogisticsgroup.com or (562) 977-7620.

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Tags:  Ports 

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No Strike Necessary: Just the Threat of Labor Stoppage at Ports Causes Supply Chain Headaches for Retailers

Posted By Administration, Thursday, July 10, 2014
Updated: Tuesday, July 8, 2014

by Leela Rao, GT Nexus


On July 1st, the fate of many retailers remained in the balance, pending labor negotiations affecting the 20,000 workers at West Coast ports. Remember in 2002, when a breakdown in negotiations resulted in a 10 day lock-out at the West Coast ports? That stoppage was estimated to "have cost the U.S. economy $1 billion a day, and disrupted supply chains for six months" according to Jonathon Gold, Vice President of NRF's Supply Chain and Customs Policy. Reuters published a great article on this very topic "Retailers nervous as West Coast port labor talks running out of time" and the impact it would have if another strike was to occur. The National Retail Federation estimates another 10-day stoppage would result in a loss of 169,000 jobs and cost the U.S. economy $2.1 billion dollars a day. Not only would retailers have to face out-of-stock during crucial summer inventory assortments, but they would also lose out on back to school sales where major retailers like Target and Wal-Mart will account for a large portion of their annual revenues.1

Forced to Sacrifice the Bottom Line

Most retailers took measures in the past few months to prepare for any disruptions due to the strike. While this eased some of the strain, it may have backfired. Rerouting measures have actually created congestion problems at non-West Coast union ports like Vancouver, Mexico, Gulf and East Coast due to their lack of capacity to easily handle the West Coast volume. LA and Long Beach ports are #1 and #2 in terms of capacity. In the retailer's race to continue product delivery, it only takes the threat of a strike to create a bottleneck due to alternate ports' inability to handle volume. Contingency plans involving increased air ship caused retailers to sacrifice profits in order to make goods available. Drewry's Air Freight index of spot rates in April was $3.38 per kilogram, its highest level so far in 2014. Brandon Fried, Executive Director of the Airforwarders Association says, "The amount of time and the opportunity costs associated with maritime shipping to other ports or locals can almost equal out to the extra money it takes to transport cargo via air."2

Solution Needed to a Bigger Problem

Retailers are finding that options to reroute through other ports or air ship are extremely expensive. Many seek answers to avoid disruption without sacrificing profit. But the risk of a port strike is perpetual. How are retailers expected to make effective decisions in an unpredictable environment? Supply chain experts suggest the answer is not controlling the environment, but being able to react to circumstances quickly and having an agile supply chain that allows them to make adjustments seamlessly. Real time visibility in a networked supply chain can allow retailers to make quick real time inventory decisions and manipulations that are instantly communicated across the supply chain. In other examples, when disaster does strike,3 retailers with networked supply chains are the ones that are able to move forward without skipping a beat or sacrifice their bottom line.

Planning for a port strike isn't a one-time challenge. And there's no quick fix answer. The solution lies in the way retailers connect their networks for trading partners. Traditional solutions with hard-wired connections are built more for the inner structure of the business – inside the four walls. The supply chains of the future will be built as networks, similar to social media models, where all parties are connected and everyone in the network has visibility to the data, orders and inventory that they need. This opens the door to a more resilient, agile and fluid supply chain built to handle port strikes and other supply chain hiccups that occur each week.

[1]  http://www.reuters.com/article/2014/06/27/us-usa-ports-labor-idUSKBN0F22FG20140627
[2]  http://www.oecgroup.ca/en/industry_news.php 13 June 2014
[3]  http://mktforms.gtnexus.com/WPWhenDisasterStrikes_Reg.html


Leela Rao is Retail Marketing Manager for GT Nexus. She has more than 10 years of experience working with fashion brands/labels including Levi Strauss & Co., Sephora, Estee Lauder, and L'Oreal Companies focusing on global product development, international channel execution and luxury products. Leela helped integrate Sephora's loyalty program, Beauty Insider, into Sephora in JCPenney stores. She later joined Levi Strauss and Co. where she partnered with wholesale and retail partners such as Dillard's, Macy's, and Kohl's to deliver heritage programs to Levi's enthusiasts. She has also developed marketing strategies for new market entrants Yellow Brick Coffee and Amyris. Leela received an MBA in Marketing and Finance from New York University's Stern School of Business.

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Tags:  Customs  Inventory Management  Labor Stoppage  Ports 

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