Highlights from BOC’s Port Tour and Logistics Seminar on Friday, October 19, focusing on Industry Updates and 301 Tariffs
(see previous BOC Blasts for additional details – visit www.bocintl.com to access previous BOC Blasts)
Tariff List 3 – currently at 10%; scheduled to rise to 25% on 1/1/19 (see previous BOC Blasts for additional details) – there is no intermediate tariffs at this point, until/unless something changes, ie, all products on List 3 are an additional 10% now, 25% January 1.
Tariff List 2 – the final date for filing a request for exclusion from List 2 is December 21, 2018. It is strongly recommended, if you make an exclusion request, to NOT just complete the request form, but to really make a case for why an exclusion should apply – make sure your reason fits into one of the reasons provided.
From the Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2018-09-18/pdf/2018-20246.pdf
“each request specifically must identify a particular product, and provide supporting data and the rationale for the requested exclusion. USTR will evaluate each request on a case-by-case basis, taking into account whether the exclusion would undermine the objective of the Section 301 investigation. Any exclusion will be effective starting from the August 23, 2018 effective date of the additional duties, and extending for one year after the publication of the exclusion determination in the Federal Register. In other words, an exclusion, if granted, will apply retroactively to the August 23 date of the imposition of the additional duties.”
Reasons include (in summary):
- Whether the particular product is available ONLY from China
- Whether the imposition of additional duties on the particular product would cause severe economic harm to the requestor
- Whether the particular product is strategically important or related to “made in China 2025” or other Chinese industrial programs
Tariff List 1 – the exclusionary period has closed, no more requests are being taken.
Changing country of origin to avoid additional tariffs – It is permissible to move production to another country, not China. However, if you are looking to make a country of origin change, you cannot simply move the product through another country. That is not sufficient to change the country of origin. CBP looks at where a “substantial transformation” takes place, ie, did the product change sufficiently in the other country to now make it country of origin Taiwan, instead of China.
Apply for a binding ruling if you are not sure. CBP is NOT going to look at these types of issues in the favor of the Importer making a change and avoiding the tariffs, without it being clear that another country really is the country of origin (not China).
From US CBP Information Center:
The term “substantially transformed” means, with respect to a good(s) or a material(s), changed as the result of a manufacturing or processing operation so that:
- The good(s) or material(s) is converted from a good that has multiple uses into a good or material that has a limited uses
- The physical properties of the good or material are changed to a significant extent
- The operation underdone by the good(s) or material(s) is complex by reason of the number of processes and material involved and the time and level skill required to perform those processes
- The good(s) or material(s) loses its separate identity in the manufacturing or processing operation
For further information on what constitutes a substantial transformation or to ensure your goods are eligible for the provision, contact an Import Specialist at the port through which the goods will be imported.
Time of Entry – 19 CFR § 141.68 – this is the area where there still seems to be a lot of confusion, even within CBP and among different ports; we are seeing the law being interpreted differently, with regards to the increased tariffs. Importers want their goods to have been entered prior to the September date for the new tariffs. However, some ports have used date of entry filing, but others have used actual arrival date into the first US port. BOC has seen, first-hand, entries being handled both ways. BOC will do everything we can to help clarify the situation for you, but we are not attorneys. If you have legal questions, you may want to consult your attorney.
19 CFR § 141.68 defines “Time of entry” as the following:
- When entry documentation is filed without entry summary.When the entry documentation is filed in proper form without an entry summary, the “time of entry” will be:
- The time the appropriate CBP officer authorizes the release of the merchandise or any part of the merchandise covered by the entry documentation, or
- The time the entry documentation is filed, if requested by the importer on the entry documentation at the time of filing, and the merchandise already has arrived within the port limits; or
- The time the merchandise arrives within the port limits, if the entry documentation is submitted before arrival, and if requested by the importer on the entry documentation at the time of submission.
- When entry summary serves as entry and entry summary.When an entry summary serves as both the entry documentation and entry summary, in accordance with 142.3(b) of this chapter, the time of entry will be the time the entry summary is filed in proper form with estimated duties attached except as provided in § 142.13(b).
- When merchandise is released under the immediate delivery procedure.The time of entry of merchandise released under the immediate delivery procedure will be the time the entry summary is filed in proper form, with estimated duties
- Quota-class merchandise.The time of entry for quota-class merchandise will be the time of presentation of the entry summary or withdrawal for consumption in proper form, with estimated duties attached, or if the entry/entry summary information and a valid scheduled statement date (pursuant to 24.25 of this chapter) have been successfully received by CBP via the Automated Broker Interface, without the estimated duties attached, as provided in § 132.11a of this chapter.
- When merchandise has not arrived.Merchandise will not be authorized for release, nor will an entry or an entry summary which serves as both the entry and entry summary be considered filed or presented, until the merchandise has arrived within the port limits with the intent to unlade.
BOC NOTE: “within the port limits” is where the argument/disagreement seems to be happening, and Ports are not applying this standard consistently.
President Signs Miscellaneous Tariff Bill (MTB) Act of 2018 – Cuts or Eliminates Tariffs on 1,660 Items
By John Brew, Frances Hadfield, Aaron Marx & Edward Goetz on September 14, 2018
On September 13, 2018, President Trump signed the Miscellaneous Tariff Bill (MTB) Act of 2018 (MTB), which temporarily reduces or eliminates import duties on specified raw materials and intermediate products used in manufacturing that are not produced or available domestically. It is intended to ensure that U.S. manufacturers are not at a disadvantage to their foreign competitors when sourcing manufacturing components.
The American Manufacturing Competitiveness Act of 2016 (AMCA) directed the International Trade Commission (ITC) to establish a process for the submission and consideration of MTB petitions for duty suspensions and reductions. It required the ITC to submit preliminary and final reports on the petitions to the House Committee on Ways and Means and the Senate Committee on Finance (Committees). The ITC’s preliminary report was submitted on June 9, 2017 and the final report was submitted on August 8, 2017. On September 4, 2018, the House agreed to Senate amendments, moving the legislation to the president for signature. The current MTB petition cycle is now complete. The next MTB petition cycle, for 2021 through 2023, will begin not later that October 15, 2019.
The duty suspensions and reductions are effective for goods entered or withdrawn from a warehouse for consumption on or after October 13, 2018, which is 30 days after the date of the enactment. The suspensions and reductions will last until December 31, 2020. All of the MTB provisions are in subchapter II to chapter 99 of the Harmonized Tariff Schedule of the United States (HTSUS). This language was added in a Federal Register Notice on August 16, 2018 (83 Fed Reg 40,823 at page 40,825). The notice also created a new U.S. Note 20(c) to Subchapter II of Chapter 99, HTSUS.
Of the 1,660 items are covered by the new law, roughly half are produced in China. Therefore, overlap between the MTB list and the Section 301 tariffs in effect, and those being considered exists. Goods originating in China are still subject to relevant Section 301 tariffs. On August 21, 2018, U.S. Customs and Border Protection (CBP) issued a message stating, “Products of China that are covered by the Section 301 remedy and that are eligible for special tariff treatment…or that are eligible for temporary duty exemptions or reductions under subchapter II to chapter 99, shall be subject to the additional 25 percent ad valorem rate of duty imposed by headings 9903.88.01 and 9903.88.02.
Hurricane Michael Update
Rail Advisory – CSX Taking Precautions Ahead of Hurricane Michael
CSX continues to take measures to protect employees, rail traffic and infrastructure as Hurricane Michael approaches the U.S. mainland as a major hurricane. The storm is projected to make landfall Wednesday as a Category 3 hurricane, bringing the potential of storm surge along low lying areas. At this time, we do not know the extent to which the storm will impact CSX operations, but we are closely monitoring its path and intensity and taking steps to prepare for any potential effects on our network.
Please be advised that, until further notice, CSX is curtailing operations along the Florida Panhandle and into southeastern Georgia. All shipments traveling between Pensacola, Fla. and Baldwin, Fla., and between Dothan, Ala. and Valdosta, Ga. will experience delays.
We will continue to provide updates as we monitor the storm. Intermodal customers should refer to Real-Time Service Advisories for intermodal-specific operational actions, though there are no intermodal impacts at this time.
US Gulf Coast ports close ahead of Hurricane Michael
Janet Nodar | Oct 09, 2018 1:27PM EDT
Wednesday, Oct. 10, 2018
8:30 a.m. EDT UPDATE:
Hurricane Michael strengthened to a Category 4 hurricane overnight, with winds of 145 miles per hour. The storm is now 90 miles SW of Panama City and expected to make landfall by Wednesday afternoon, with hurricane-force winds reaching the Florida panhandle coast by noon. Storm surge could reach 11 to 14 feet in some areas.
Tuesday, Oct. 9, 2018
2:15 p.m. EDT UPDATE:
According to the Florida Ports Council, the ports of Pensacola and Panama City are now under port status Zulu, closed to all inbound and outbound traffic, as hurricane force winds of 73 miles per hour or higher could arrive within 12 hours.
For port status updates, check the US Coast Guard port directory. Pensacola and Panama City are in the Mobile district.
|Storm surges from Hurricane Michael could reach 12 feet. While a few beach communities are densely populated, much of the region is rural and sparsely populated.|
The National Hurricane Center estimated that as of 10 a.m. EDT Tuesday, Hurricane Michael was likely to make landfall in the Florida panhandle Tuesday night/Wednesday morning, possibly as a Category 3 storm with winds as high as 120 miles per hour.
Storm surges could reach 12 feet. While a few beach communities are densely populated, much of the region is rural and sparsely populated.
As of Tuesday at midday, Michael was located 360 miles south of Panama City, Florida, and moving north at 12 miles per hour with winds up to 110 miles per hour.
Up to 12 inches of rain expected
The northeastern US Gulf Coast could see up to 12 inches of rain. As the storm moves inland across the Florida panhandle and Georgia on Wednesday and early Thursday, six to 10 inches of rain is expected during that period.
The US Coast Guard has declared Condition Yankee for the eastern US Gulf of Mexico ports including Panama City, Pensacola, Mobile, Pascagoula, and Gulfport. Under Yankee, gale force winds are expected within 24 hours, ports are closed to inbound and outbound traffic, and vessel movements within ports are subject to traffic control measures.
More Vessels Divert from Felixstowe and Southampton
By Mike Wackett 01/10/2018 TheLoadstar.co.uk
Chronic congestion at the UK’s two largest container ports is forcing ocean carrier planners to make further last-minute ship diversions, causing chaos to the country’s supply chain. Landside congestion at Felixstowe and Southampton has added to the woes of the UK haulage industry, which is already suffering from an acute shortage of HGV drivers. Even before the botched implementation of a new terminal operating system at Felixstowe in June, which was the catalyst for the current congestion, the UK haulage industry was running on empty and reckoned to be short of more than 75,000 drivers.
Indeed, one hauler told The Loadstar, before the Felixstowe IT melts down, that he was “very worried” about his firm’s ability to cover all the contracted work during the busy peak season this year. “We just can’t get the drivers,” he said at the time, “even though we are paying over the odds, and to add to it all we are seeing a couple of our existing guys retire every month.”
Container lines serving the UK are trying to push shippers to use merchant haulage but if they are contracted to cover the delivery of containers they are hitting importers with a variety of extra charges. MSC, for example, has told some of its customers that it will charge them an additional £20 per Teu for line haulage, which it said was “to cover the cost of putting on extra haulage units”. An eleventh-hour diversion of a ship that results in thousands of boxes being landed at another port can cause weeks of delays to the arrival of goods, due to the fact that deliveries were programmed from the intended hub.
Due to the worsening congestion at Southampton, the Ocean Network Express (ONE) advised its customers late last week that the 20,180 Teu MOL Truth would no longer be making an import call at the south coast port on 4 October but would instead discharge its cargo at London Gateway. In a statement to The Loadstar today DP World Southampton confirmed that the MOL Truth would discharge its imports at London Gateway, but that the vessel would still load exports at Southampton at a later date.
It said: “DP World is uniquely positioned in the UK to offer shipping lines and cargo owners a two-port strategy, with both ports able to support one another, ensuring greater certainty and resilience to UK supply chains.” The terminal operator issued a ‘terminal alert’ on 27 September advising that its ship and landside productivity was being impacted by “very high stack levels”.
DPWS gave the reasons for its congested terminals as: too many empty containers; the pre-Christmas peak; vessels cutting and running and a lack of haulage. It appealed to its shipping line customers to ship out their empties; stop using the port for transshipping empty equipment and not to discharge containers for other ports without consultation. In fact, according to today’s DPWS stack report over one third of its some 18,000 teu on the quay for export consists of empty equipment.
One local source said that carriers had been regularly shutting out planned shipments of empty containers after the boxes had been transferred to export stacks, thus causing productivity to “fall off a cliff”. Meanwhile, the problems mount up for UK importers: The Ocean Alliance carriers advised cargo owners today that the 20,388 teu Ever Goods, scheduled to arrive at Felixstowe on 6 October will instead be diverted to Rotterdam.
APL, in a customer advisory said that UK imports would be transshipped to the CSCL Mars scheduled to arrive at Felixstowe on 13 October. For UK exporters who have booked for the Ever Goods there was no substitute vessel nomination and thus there could be a lengthy delay before shipment. APL said that “exports will remain on quay for the next sailing”.
Felixstowe box congestion spreads to Southampton, just in time for Xmas rush
© Peter Titmuss | Dreamstime.com
The UK’s two biggest container ports appear to have hit crisis level. UK retailers potentially face weeks of delays in getting their Christmas stock onto the shelves in time for the peak consumer spending rush. Moreover, UK exporters to Asia can virtually forget about getting containers shipped in November, due to carriers blanking a huge 11 eastbound voyages next month. Many of those sailings that survive will be ‘cut & run’, without loading, due to the congestion at Felixstowe and Southampton.
The traditional peak season influx of holiday goods often stretches container terminals to their limits, but this year the supply chain is at breaking point – despite one source’s assertion that overall numbers are actually down this year. The congestion problems that began at Felixstowe now appear to have spread to Southampton – partly due to the south coast port’s decision to accept extra business diverted from the Suffolk port. Moreover, it is said, the UK’s acute haulage shortage and the indiscipline of the carriers in their schedule integrity and container control have put “impossible pressure” on the Southampton terminal.
One local port source told The Loadstar today that “hardly any” ships were arriving in their berthing windows, and when they do get alongside, a large amount of time is consumed in transshipping containers, information often not advised to the planners until just before arrival. “The carriers just seem to have given up,” said the source. “I know there have been bad weather delays, but they have no interest in trying to regain schedules, plus they are taking last-minute decisions on what is to come off and what is to be loaded.” As landside and ship working productivity at Southampton has deteriorated, operator DP World has been obliged to issue several ‘terminal alert’ messages to customers. One large forwarder customer who visited Southampton yesterday told The Loadstar this morning the situation was “absolute carnage”.
In its latest alert today, DP World said that, from Monday it would reduce its export receiving window from the normal 10 days to seven days. It said it had also asked container lines to “ship as many empties as possible”, to “stop using Southampton to transship empties from the US to Asia” and “not to discharge cargo for other ports without prior consultation”. This ‘perfect storm’ began brewing at the UK’s largest container gateway, Felixstowe, in June when the Hutchison-owned port embarked on what proved a disastrous implementation of its in-house-developed NextGen terminal operating system (TOS).
A source told The Loadstar at the time the initial impact “was like a cyber-attack had hit the port”, with everything grinding to a halt. “At one stage we were reduced to pen and paper for stowage plans,” he said. Felixstowe put on brave face, suggesting the problems with working the ships was temporary and began issuing weekly status updates painting an improving picture. But sources at Felixstowe told The Loadstar recently “there was still no light at the end of the tunnel”, describing the situation as “complete chaos”.
Recently the port hired 30 tractor units from a major local hauler just to shunt boxes to their correct stacks. The port has been ‘silent’ since its last customer update on 24 August, and port users The Loadstar has spoken to, including carriers, forwarders and service providers, are not optimistic of any improvement anytime soon. As a result, several carriers have diverted Felixstowe-bound ships to other ports, or in certain cases pulled services altogether, with some opting to service the UK via feeders.