Certain China Duties to Increase Friday May 10, 2019
 
Although nothing official has been issued by the government, President Trump announced yesterday that effective Friday, May 10, the tariffs for products covered by List 3 of the Section 301 program will increase from 10% to 25%.  This is a result of what appears to be stalled negotiation talks with China, although it appears that the Chinese delegation will come to Washington for continued talks this week.
 
In addition, he has threatened to impose the 25% tariffs on all products from China.
 
As many may recall, these duties were to be implemented in March.  However, President Trump issued an executive order stating that implementation was delayed until further notice.  The two countries have been working on a trade agreement to address China’s unfair trade practices.
 
Additionally, last Friday US Trade Representative Lighthizer announced that his office is in the process of establishing an exclusion process for goods on List 3.  According to his statement, the office hopes to have the process in place by the end of May. It appears at this time the process will be allowed for the products whether or not the tariffs increase to 25%.
 
Potential options for avoiding or reducing the increased tariff, include the following:

1. Tariff Classification – although many companies have reviewed this with the previous two lists, verifying the classification should still be considered as a potential option.
2. Country of origin – companies should look closely at the supply chain. It may be time to consider sourcing products elsewhere.  However, careful consideration should be given to making moves to a third country, particularly if your China supplier is involved and/or there would be China content included in the product.  Companies need to ensure that the product is being substantially transformed in the third party country.
3. Use of Chapter 98 provisions, duty drawback, bonded warehouses and Foreign Trade Zones also provide options in certain situations, particularly if products will be later exported from the U.S.
4. Value strategies – companies can consider legitimate means of lowering the transaction value. Options include potential discounts, and use of the “first sale” rule if there is a multi-tiered transaction involving a middleman.
5. Exclusion Requests – Exclusion requests may be granted when a company can substantiate to the government that the product in question cannot be sourced in the U.S. or third party countries, there would be severe economic hardship to the requestor or other US interests and the product is not part of the “Made in China 2025” or other industrial programs.

 
It appears that talks between the two countries scheduled for this Wednesday will continue and hopefully the announced increase will not take place.
If you have questions, please contact your BOC Representative, or Paula Connelly, Esq.
 
Information for this BOC Blast provided by The Law Offices of Paula M. Connelly

Proposed List of EU Products – Retaliatory Duties
 
As you may know, the U.S. has issued a list of proposed EU products that may be subject to retaliatory duties as a result of a World Trade Organization decision in which it was determined that the U.S. was harmed by subsidies granted by the EU and certain member States to the EU large civil aircraft domestic industry, on the basis that the subsidies appeared to be inconsistent with their obligations under the General Agreement on Tariffs and Trade 1994 (GATT 1994) and the Agreement on Subsidies and Countervailing Measures
(SCM Agreement).
 
In order to enforce U.S. WTO rights in connection with the Large Civil Aircraft dispute, the Trade Representative is initiating a section 301 investigation of the subsidies provided by the EU and certain member States on the manufacture of large civil aircraft.
 
According to the Federal Register Notice, “upon determining that U.S. rights under a trade agreement are being denied, section 301(a) provides that the Trade Representative shall take all appropriate and feasible action authorized under section 301(c), subject to the specific direction, if any, of the President regarding such action, and all other appropriate and feasible action within the power of the President that the President may direct the Trade Representative to take to enforce such rights. Pursuant to sections 301(a), 301(c), 304(a)(1)(B), and 306(b)(2), the Trade Representative proposes that appropriate action would include the imposition of additional ad valorem duties of up to 100 percent on products of the EU or certain member States, to be drawn from the preliminary list of HTS numbers in the attached Annex.”
 
As you may know, the China tariffs currently in affect, were also initiated as a result of a Section 301 investigation by the U.S. Trade Representative’s office.
 
Please note that the U.S. government may impose additional duties of up to 100% on the final list of products.
 
This is the not the first time the U.S. government has initiated retaliatory duties against EU products.  The U.S. and EU were involved in a long-standing dispute over the EU’s ban of U.S. beef from cattle treated with hormones.  In 1999, retaliatory duties of 100% were assessed on a substantial number of EU products.  These duties were in place until May 2009 when the U.S. and EU signed a Memorandum of Agreement.
 
However, it appears that the U.S. and EU may be entering into negotiations for a potential trade agreement.   It remains to be seen how this may affect the current proposal for retaliatory duties.
 
There will be a public hearing in Washington D.C. on May 15 to discuss the proposal and comments may be submitted to the USTR’s office through May 28.
 
I will keep you posted of any developments.
 
Sincerely,
Paula Connelly
Enc.

Panama Canal Reduced Draft Restrictions

  
Delays Expected ex-Qingdao Port in April
 
Due to the celebration of the 70th Anniversary of the People’s Liberation Army of Navy in China, a large-scale naval battleship event will be held on April 23^rd, in Qingdao, China.

Controls will be implemented over inland and ocean transportation from April 20th – 23^rd. There also will be a suspension of DG (Dangerous Goods) cargo operations for DG classes 1 – 7, from April 15^th to April 30^th.

Please expect delays to cargo delivery and vessel departure from Qingdao port.

Chinese navy’s 70th birthday parade set to showcase country’s rising sea power
Nautical spectacle will allow country to show off its most advanced warships to an international audience.
More than a dozen foreign navies are expected to join in, including the United States.
(Excerpted from South China Morning Post)

2019 BOC’S ANNUAL INNOVATIVE ST. PATRICK’S DAY SUMMIT

We want to thank all that were able to attend our 4th Annual St. Patrick’s Day Innovation Supply Chain Summit and share some information with those of you that unfortunately were unable to attend. This year we had several informative speakers that drove discussion and interaction from everyone in attendance. Following the speaker sessions that we had in the morning, and some entertainment at lunch, we closed the day with a roundtable discussion with several industry experts. We are fortunate that the presenters have allowed us to share their presentation. Please use the link below to access the presentation.
Click here to access presentation
http://www.bocintl.com/en/wp-content/uploads/2019/04/31519-Master-Presentation.v3.pdf

We are looking forward to holding next year’s event on March 13th, 2020. In addition to our annual St. Patrick’s Day Innovation Supply Chain Summit we hold several other events throughout the year in Boston Innovation Seaport District at our Global Headquarters. These events include Port Tours, Trade Day with US Customs and several other training sessions to help inform our clients. If you have any interest in attending these events or gaining more information, please reach out to your BOC representative or BOCEvents@bocintl.com

  
A Challenge to Shippers Who Would Never Dream of Controlling the Insurance
 
Shippers who rely on suppliers to furnish cargo insurance or who rely on their carriers to take responsibility for losses may be in for a big surprise. Protecting your investments by insuring your goods provides peace of mind.

Buying CIF: Who’s really responsible if your product is lost or damaged in transit? According to internationally accepted trade terms, referred to as Incoterms, suppliers selling “CIF” (Cost, Insurance, Freight) are responsible for arranging cargo insurance. But just because your supplier has the obligation to arrange insurance under CIF terms, it doesn’t mean that they are ultimately responsible if your product is lost or damaged during transit. The ultimate burden of loss falls upon you, the buyer. This is why many experts recommend importers change their buying terms to EXW, FOB, FCA, CFR or similar terms in order to control the selection, and thereby the quality, of insurance coverage.

How much is that insurance really costing you? Foreign suppliers and their forwarding agents often tack on placement fees to the insurance costs. Those added fees often inflate the cost of insurance well beyond market pricing for the same coverage purchased in the United States. Find out how much you’re really paying and then compare quotes received from BOC International.

Is the coverage your supplier purchased for you adequate? Importers relying on their suppliers to arrange insurance run the risk of having inadequate insurance coverage. Cargo insurance policies can vary widely in levels of coverage, deductibles and special restrictions. Ask your supplier for a complete copy of the insurance policy or for a certificate of insurance detailing all the policy terms and conditions

What’s the financial health of your supplier’s insurance company? Recent financial and catastrophic events have exposed the vulnerability of insurance companies to sudden economic devastation. Importers are encouraged to make certain their suppliers use insurers with a favorable financial rating supplied by a respected financial rating service. A.M. Best, Standard & Poor’s and Moody’s are among some of the world’s most respected. BOC’s insurance company, underwriters at Lloyd’s of London, has an A.M. Best financial rating of A (Excellent).

How will your claim be handled? If insurance is arranged overseas, will you be forced to  deal with an inexperienced, sub-contracted independent adjuster unfamiliar with the assessment of transportation related losses? Ask your supplier for a list of insurance claims adjusters contracted by the insurance company. Adjuster and surveyor networks approved by Lloyd’s of London and AIMA are among the most credible. BOC has a vested interest in your insurance needs and will directly handle cargo claim documentation requirements to ensure prompt processing and timely settlement.

Every Shipper Needs Cargo Insurance

Global trading involves risk; however, broad insurance coverage minimizes your financial risk. Don’t leave your livelihood up to chance! Statistics show that one ship sinks each day and you will experience a General Average loss every eight years. If you are depending on the carrier to cover losses, their responsibility is limited by law as follows:

Ocean Carriers           $500 per shipping unit
A shipping unit may be defined as one ocean container.
Air Carriers                  $9.07 per pound
Truckers                      $.50 per pound

The insurance we offer is competitively priced and insures approved merchandise against physical loss or damage from external causes. By purchasing cargo insurance, you can avoid inconvenience and frustration. Contact your BOC Representative at 617-345-0050 for your free quote.
 
Are you familiar with GENERAL AVERAGE?
2019, year to date, there are a number of notable fire cases, with many resulting in General Average!

• Sincerity Ace – January 2019
• Maersk Honam – March 2018
• Maersk Kensington – March 2018
• Barcelona Ferry Excellent – October 2018
• Hyundai Auto Banner – May 2018
• MOL Prestige – February 2018
• Caribbean Fantasy – June 2018

APL Vancouver Year built 2013, 115,060 dwt Date of loss: 1/31/19 Part loaded with (capacity  9,200 teu.) 947 containers affected LOF salvage – security 15-20% GA – security

ER KOBE Year built 2001, 68,196 dwt Date of loss: 2/24/19 GA declaration on March 12, 2019 NO SEPARATE SALVAGE CLAIM GA – security estimate 10%

General Average – The Concept
 
 

• Formulated by the Ancient Greeks to deal with situations where cargo has been jettisoned.

• Basic principle – that which has been sacrificed for the benefit of all shall be made good by the contribution of all.

• Applies to maritime claims only.

• Is declared by the captain when there is imminent danger to the vessel, voyage or crew.

• You are contractually obligated, via the Bill of Lading, for unknown and undetermined costs.

 
 
How does it work?
 
 

• Value of the voyage is determined (vessel value plus value of all cargo on the vessel.)

• Participation is determined by the percentage that the value of your cargo bears to the overall value of the voyage.

• The loss amount is determined, and participation percentage is applied to the loss amount to determine security deposit.

• Shipper or their cargo insurer pay twice – first for the initial contribution, then for a bond covering future adjustments to that estimate.

 
Hidden Costs

• The great unknown (is my cargo OK?); delays – finding a port, unloading & sorting; has my shipment missed deadlines?

• LCL Freight – has everyone in my container paid? Freight is not released until all payments received.

 
Difficulties of preventing and extinguishing fires on the open sea, include:
 
 

• Ships are larger with more varied cargo.

• Crew are ill equipped to deal with these fires.

• Fire-fighting tugs are often days or weeks away.

• Prevention is difficult, with rising problems with mis-declared cargo.

• IMDG Code is evolving to impose stricter rules on dangerous goods (DG.)

Problems Facing the Industry

• Stricter rules on DG will lead to higher costs and more incentive on the part of shippers to avoid proper declarations

• Ship owners and shipbuilders need to improve fire-fighting capabilities with CO² systems being shown to be inadequate – cost benefit analysis – are potential losses greater than the prevention costs?

• National Cargo Bureau in NY found in 2017 that of 1,721 stowage plans inspected, 20% showed errors with DG

General Average will never go away, so how do we make that less painful?
 

• Awareness across all business units that losses & delays are part of any supply chain. Mission-critical shipments need more risk analysis to determine transport mode.

• Understanding of what to do when General Average occurs. This is best led by your cargo insurance provider meeting with your ‘team,’ not just the risk manager or CFO.

When was the last time your insurance provider did this for you?

Do they know how to handle a GA claim?

• Have a contingency plan or at least an understanding of how the event will unfold.

 
Britain granted short Brexit delay, won’t leave European Union next week
March 21, 2019, 6:22 PM GMT-5 / Updated March 22, 2019, 1:25 AM GMT-5 By Doha Madani
(Excerpted from nbcnews.com)
 
The U.K. has been granted a bit more time in figuring out the terms of its departure from the European trading bloc.
 
British Prime Minister Theresa May on Thursday won approval of her request for an extension to the deadline for the U.K. to exit the European Union, delaying the departure until either early April or late May.
 
Donald Tusk, president of the European Council, announced his consent to the extension on Twitter after a summit in Brussels. Tusk said he would push the deadline to May 22, but only if the U.K. Parliament approves a withdrawal agreement next week.
 
If British lawmakers fail to approve the Brexit deal — which they have already defeated twice — the deadline for departure will be on April 12.
 
After the second defeat of the withdrawal agreement she negotiated with the E.U., May asked European leaders for a short delay to the March 29 exit date.
 
The decision to grant the delay came a day after May delivered a televised speech to the public blaming Parliament for the Brexit impasse. It was met with anger from across the political spectrum.
 
Opposition Labour Party lawmaker Lisa Nandy, who indicated Wednesday that she might vote in favor of the prime minister’s deal when it next came before Parliament, on Thursday described May’s comments as “disgraceful.”
 
“Pitting Parliament against the people in the current environment is dangerous and reckless,” Nandy said in a tweet. “It will have cost her support.”
 
Dissatisfaction from within the Palace of Westminster — as the Houses of Parliament are known — echoes the feelings of many across the country. Nine in 10 Britons believe the United Kingdom’s handling of negotiations to leave the E.U. is a “national humiliation,” according to a poll conducted by Sky News and released Wednesday. One in three believe the primary responsibility lies with the U.K. government.
 
Because of the deep divisions that separate lawmakers, the prime minister’s settlement with the European Union has been crushed twice in the House of Commons — suffering the heaviest and fourth heaviest losses in parliamentary history.
 
Different factions believe that their preferred way out of the chaos — from a second referendum on Brexit to a general election, to a so-called soft Brexit or even no Brexit at all — has a chance of coming to pass.
 
Lawmakers voted last week to reject the notion of leaving without a deal on March 29 but part of Tusk’s conditions include they continue no-deal preparations.
 
If the country is forced to leave the E.U without a Brexit deal, most experts predict that it would be an unprecedented act of economic self-harm for the country.
 
May said in a statement shortly after Tusk announced his conditions that she would be returning to the United Kingdom on Friday to continue working toward passage of a withdrawal agreement.
 
“What the decision today underlines is the importance of the House of Commons passing a Brexit deal next week so that we can bring an end to the uncertainty and leave in a smooth and orderly manner,” May said.
 
The prime minister also acknowledged the tensions among lawmakers and said she respected the passionate view of members of Parliament that have incurred debate.
 
“I know MPs on all sides of the debate have passionate views, and I respect those different positions,” she said.
 
“Last night I expressed my frustration. I know that MPs are frustrated too. They have difficult jobs to do,” she added.
 
But May also refused to change course, calling on lawmakers to back her agreement and refusing to rule out crashing out of Europe without a deal if they did not back her.
 
 
 

 
 
Record Floods in Midwest
 
Record Midwest Floods Force Embargoes
Announcement Number: CN2019-16
3-17-2019
To Our Customers,
As you are probably aware from numerous news reports, the Midwest has been hit hard by severe weather and record floods. Unfortunately, this series of weather events has caused significant damage to our rail network, which has made it necessary to issue embargoes for traffic originating, destined or moving through our network.
 
Network Conditions
Numerous Union Pacific subdivisions and corridors continue to be out of service due to flooding and track washouts. The immediate effects of these storms include the following subdivisions:

• Omaha Subdivision (Missouri Valley, Iowa, to Fremont, Nebraska)
• Blair Subdivision (Fremont, Nebraska, to Missouri Valley, Iowa)
• Columbus Subdivision (Fremont, Nebraska, to Grand Island, Nebraska)
• Lincoln Subdivision (Valley, Nebraska, to Lincoln, Nebraska)
• Falls City Subdivision (Council Bluffs, Iowa, to Kansas City, Kansas)

Due to widespread flooding across our network, we have very limited reroute capability. As a result, Union Pacific is issuing embargoes. Because of the large number of impacted stations, please refer to the published embargo notices for the specific parameters.
 
Additional operational impacts may include delayed movement of manifest, bulk and intermodal trains through the impacted areas, including trains holding at strategic locations until service can be restored.
We appreciate your understanding and cooperation as we work through the vast impact of these weather and flooding events. We will continue to post updates on changing conditions as information is available.
 
To view the latest map of the flooding impact to our network and the best practices to follow during flooding events, please visit our Flood Planning and Recovery web page.
 
Tucumcari Subdivision Reopens
Union Pacific has reopened service over the Tucumcari Subdivision where we previously had an outage associated with weather and a derailment. Customers should expect continued delays over the next 48 hours as we begin to move traffic over the previously impacted area.
 
Midwest flooding grinds rail service to a halt
(excerpted from www.freightwaves.com)
March 18, 2019 Nick Austin, Director of Weather Analytics and Senior Meteorologist
 
Historic, catastrophic flooding continues in the Midwest after major snow melt and heavy rain last week. Some of the worst conditions are in eastern Nebraska and western Iowa, including Omaha. People and animals have been trapped by high water; bridges, roads and rails have been washed away. With neighborhoods practically underwater; homes, farms and ranches ruined; and lives at risk, the National Guard has come to the rescue. As recovery continues, transportation and freight movement – especially by rail – are suffering major disruptions.
 
Off the Rails
 
The flooding has caused significant damage to the Union Pacific (NYSE: UNP) rail network, which has led to embargoes for traffic originating, destined or moving through its network. On March 17, 2019 the company announced that the following subdivisions and corridors will continue to be out of service:
 

• Omaha Subdivision (Missouri Valley, Iowa to Fremont, Nebraska)
• Blair Subdivision (Fremont, Nebraska to Missouri Valley, Iowa)
• Columbus Subdivision (Fremont, Nebraska to Grand Island, Nebraska)
• Lincoln Subdivision (Valley, Nebraska to Lincoln, Nebraska)
• Falls City Subdivision (Council Bluffs, Iowa to Kansas City, Kansas)

 
Because the flooding across Union Pacific’s network is widespread, affecting a large number of stations, there is very limited rerouting capability. Specific parameters for embargo notices can be found here. Additional operational impacts may include delayed movement of manifest, bulk and intermodal trains through the impacted areas, as well as trains holding at strategic locations until service can be restored. To view the latest map of the flooding impact to the network, in addition to the best practices to follow during flooding events, visit Union Pacific’s Flood Planning and Recovery website.
 
BNSF Railroad, owned by Berkshire Hathaway (NYSE: BRK), also has several subdivisions currently out of service in many of the same areas as Union Pacific. BNSF’s North Region includes Nebraska and western Iowa, as well as other states devastated by a blizzard the day before the flooding began last week. Since March 15, BNSF crews have been assessing main line locations impacted by the flooding, and are making necessary repairs where possible in order to restore service. With the current extent of the flooding, service outages may continue in some locations for an extended period.
 
According to the company’s latest customer letter, the number of total trains held increased significantly late last week. While key performance indicators were positive versus the previous week, velocity and terminal dwell remain below average levels from March of last year.