Further China Tariff Increases Likely

https://www.strtrade.com/trade-news-resources/str-trade-report/advisories/further-tariff-increases-other-changes-proposed-for-imports-from-china

A mandatory review of the Section 301 tariffs on imports from China concluded May 14 with recommendations to increase some tariffs on $18 billion worth of Chinese goods, establish an exclusion process for a limited number of products, and make other changes.
A Federal Register notice soliciting comments on the proposed changes is expected next week.

The recommendations are included in the Office of the U.S. Trade Representative’s report on its review of the tariffs, which were first imposed in 2018 in an effort to persuade China to modify its “harmful technology transfer-related acts, policies, and practices.”
USTR Katherine Tai said that while the tariffs have been somewhat successful in that regard, “further action is required.”

USTR also downplayed the impact of the tariffs on U.S. businesses, saying they have had small negative effects on U.S. economic welfare, prices, and employment and that these impacts are “particularly associated” with China’s retaliatory tariffs on U.S. exports.
In fact, USTR asserted, the tariffs have helped to increase U.S. production in the most-affected industrial sectors, reduce imports from China, and increase imports from alternate sources, “thereby potentially supporting U.S. supply chain diversification and resilience.”

USTR is therefore proposing to maintain all existing Section 301 tariffs on Chinese goods and to add or increase tariffs on the following products.

– Battery parts (non-lithium-ion batteries) – from 7.5 percent to 25 percent in 202
– Electric vehicles – from 25 percent to 100 percent in 2024
– Lithium-ion electrical vehicle batteries – from 7.5 percent to 25 percent in 2024
– Lithium-ion non-electrical vehicle batteries – from 7.5 percent to 25 percent in 2026
– Medical gloves – from 7.5 percent to 25 percent in 2026
– Natural graphite – from 0 to 25 percent in 2026
– Other critical minerals – from 0 to 25 percent in 2024
– Permanent magnets – from 0 to 25 percent in 2026
– Personal protective equipment – from 0-7.5 percent to 25 percent in 2024
– Semiconductors – from 25 percent to 50 percent by 2025
– Ship-to-shore cranes – from 0 to 25 percent in 2024
– Solar cells (whether or not assembled into modules) – from 25 percent to 50 percent in 2024
– Steel and aluminum products – from 0-7.5 percent to 25 percent in 2024
– Syringes and needles – from 0 to 50 percent in 2024

USTR is also recommending (1) an exclusion process limited to machinery used in domestic manufacturing provided for under specified eight-digit HTSUS numbers (see appendix K in the USTR report), (2) temporary exclusions for certain solar manufacturing equipment (see appendix L), (3) allocating additional funds to U.S. Customs and Border Protection for greater enforcement of Section 301 tariffs, (4) greater collaboration and cooperation between private companies and government authorities to combat state-sponsored technology theft, and (5) continuing to assess approaches to support diversification of supply chains to enhance supply chain resilience.

USTR’s announcement did not include any information on the May 31 expiration of hundreds of tariff exclusions.

Importers of goods subject to the proposed tariff increases should contact ST&R to discuss options for avoiding or ameliorating those higher costs. ST&R can also help importers of machinery that may be eligible for new tariff exclusions to navigate that process. For more information on these or other topics related to the Section 301 tariffs, please contact your ST&R professional or via this email.

Tremendous Demand USWC / Proposed May 15 GRI

There is tremendous demand for the following reasons:

1. Carriers and importers are stopping to ship to North America via Canada due to the pending Canadian Rail and Port strikes. Most of the cargo that previously moved over Canadian Ports has been diverted to move over the US West Coast Ports. Now there is more than a 2 week back up for fresh bookings to USWC,
Below is a quick synopsis.

A) Rail Strike. The Teamsters of the Canadian Rail voted yes to go on strike. The cooling off period ends May 21st so they are expected to not report to work on May 22nd at both the CN and CP so Canadian rail service is expected to stop.

B) Canadian East Coast Port Strike. The longshore workers of Montreal have been working without a contract since January 1st and have been threatening to strike. It is anticipated that they will support the Teamsters of the Canadian rail and go on strike with them.

C) Canadian West Coast Port Strike. The ILWU longshore workers of the Canadian West Coast have been negotiating a contract for an extended period of time. The last three days they have had mediation managed by the Canadian Government. If an agreement is not reached today, management can lock them out and the longshore workers can go on strike. We are awaiting the outcome of today’s final day of meetings.

2. Replenishment of depleted inventories is happening. Many companies ran down their stock of goods and are feverishly trying to bring in more goods. Q1 2024 Transpac container shipments are up 33% over Q1 2023. Q2 2024 vs Q2 2023 is trending the same way.

3. Ocean carriers canceled 20% of all sailing for the first two weeks of May to drive up demand and selling costs.

With this tremendous demand we have seen climbing high spot rates including a likely upcoming $1,000 GRI on May 15th. The carriers are doing everything possible to make more profit including delaying implementation of fixed rates and starting to apply early peak season surcharges on fixed rates.
If you have any questions about this information, please contact your local BOC representative.

Canadian National & Canadian Pacific Kansas City Workers Vote to Strike

The largest railways in Canada have seen a vote by their employees to go on strike, which may cause a devastating labor disruption and halt the movement of freight shipments nationwide.

While both parties in the labor negotiations remain far apart, the Teamsters Canada Rail Conference (TCRC) union reports that its members who work at Canadian National (CN) and Canadian Pacific Kansas City (CPKC) voted decisively in favor of a strike mandate.

As early as May 22nd, the Teamsters could now demand a nationwide rail strike. If a strike mandate is enacted, approximately 9,900 train conductors, locomotive engineers, and other employees would be impacted.

According to the union, of the 92% of voters that turned up to cast ballots, 98% of said voters supported a strike mandate. All four negotiating groups returned different percentages; however, none was less than 95% in favor of a strike.

The 60-day conciliation period between the railroads and the unions ends with the strike mandate vote. There is now a 21-day cooling-off period for both parties. Until the cooling-off period is over, no lockout or strike is permitted.

Customers of CN were notified yesterday (May 1st) that CN had met on April 29th and 30th to negotiate a contract with TCRC union representatives, with assistance from government conciliators.

According to CN, the union will be unable to get together again until May 13th.

With May 22nd as the possible date that a labor disruption could be initiated, CN’s perspective remains cautious that a deal can be finalized by this date.

If you have any questions please feel free to contact your local BOC representative. 

Port of Baltimore – Ocean Carrier Notices

Please find below carrier notices regarding the ongoing situation in Baltimore. If you have any questions, please feel free to reach out to your local BOC Representative.

COSCO:

Notice of Force Majeure Baltimore Shipments Contingency Plan

2024-03-27

Dear Valued Customer,

We hereby notify you that, based on the information currently accessible to us, the Port of Baltimore will be indefinitely closed following the collision of the 948-foot container vessel ‘DALI’ with the Francis Scott Key Bridge on March 26th.

Based on the circumstances mentioned above, we will declare force majeure in accordance with Clause 20 of our Bill of Lading Terms and Conditions, and we wish to communicate our contingency plan regarding shipments to/from Baltimore as outlined below, until further notice:

1. For Shipments from Baltimore:

Shipments currently at the terminal will remain there till the port reopens, unless otherwise directed by the shipper.

For shipments in transit: Given the temporary suspension of export operations at the terminal, please liaise with COSCO SHIPPING North America customer service for alternative port of loading options.

We regret to inform you that no new export bookings will be accepted from Baltimore until further notice.

2. For Shipments to Baltimore:

Shipments currently in transit will be redirected to an alternate port, where they will be made available for pick-up, and COSCO SHIPPING’s bill of lading will be concluded.

For booked cargoes not yet loaded at the origin, please coordinate with the origin booking party.

We extend our sincere appreciation for your ongoing trust and support during this challenging time. Should you have any questions or require additional assistance, please do not hesitate to reach out to your local sales representatives.

Warm regards,

COSCO SHIPPING Lines

Maersk:

Cargo to and from Port of Baltimore: TA2, TA5, TP12, Amex, AGAS

26 March 2024

In the early hours of 26 March 2024, a vessel collided with the Francis Scott Key bridge, resulting in damage to the structure. Information on the situation remains pending and we remain in close contact with officials in the area.

We can confirm that the container vessel “DALI”,  is owned by Grace Ocean, and operated by Synergy Group. It is time chartered by Maersk and is carrying Maersk customers’ cargo. No Maersk crew and personnel were onboard the vessel.

Due to the damage to the bridge and resulting debris, it will not be possible to reach the Helen Delich Bentley port of Baltimore for the time being. In line with this, we are omitting Baltimore on all our services for the foreseeable future, until it is deemed safe for passage through this area.

For cargo already on water, we will omit the port, and will discharge cargo set for Baltimore, in nearby ports. From these ports, it will be possible to utilise landside transportation to reach final destination instead. Your local Maersk representative can assist in booking this.

Please note that for cargo set to discharge in Baltimore, delays may occur, as they will need to discharge in other ports. We are keeping a close eye on the safety situation in the area and continuing to assess the viability of transportation through the area. We will inform you of any changes that may impact your cargo.

We are deeply concerned by this incident and are closely monitoring the situation. We understand the potential impact this may have on your logistics operation, and will communicate to our customers once we have more details from authorities. Our teams are on hand to support with your planning, should you need any assistance.

For more information on your cargo, please reach out to your local Maersk representative.

Our teams are on hand to support with your planning, should you need any assistance.

Disaster in Baltimore: Containership Dali collides with Francis Scott Key Bridge

www.marinetraffic.com

At approximately 1:37 AM today March 26th, 2024 the containership Dali collided with the Francis Scott Key Bridge in Baltimore. The collision caused the bridge to collapse leaving several people missing. Search and rescue operations resumed this morning. The collapse has shut down all operations in and out of the Port of Baltimore.

The containership Dali was departing the Port of Baltimore when the collision occurred. The vessel was part of Maersk’s TP12 service and was departing Baltimore and was sailing for Colombo Sri Lanka. Additional information regarding the collision can be found on the “What is Going on With Shipping” YouTube channel. Follow the link below for the latest information.

https://youtu.be/qZbUXewlQDk?si=Z-Y1L_MIJORsZ0tP

BOC will continue to monitor the situation and will provide additional details once they become available. If you have any questions, please reach out to your local BOC representative.

Ocean Carrier Diversions: Suez & Panama

YML/CMA/Hapag/HMM/Maersk/MSC/ONE/Evergreen: Vessels currently or potentially sailing through high-risk maritime area, will initiate an immediate diversion around the Cape of Good Hope, or vessels will hold and wait in a safe location.

Not only are eastbound vessels to the United States impacted, but westbound vessels back to Asia have been temporary re-routed. These changes in routing will cause schedules to extend out 4-6 weeks. Space throughout the end of this year and into January will remain tight. BOC suggests that our clients place bookings as far in advance as possible or provide a forecast as far out as possible. Compounding this space crunch is the coming Chinese New Year (February 10^th, 2024) shipping surge as most factories will shut down by February 5^th.

www.MarineTraffic.com (12/19/23)

Below are the latest carrier announcements regarding their plans to handle the ongoing shipping crisis. If you have any questions please feel free to contact your local BOC representative.

Yang Ming

CMA-CGM

HAPAG-LLOYD

Hyundai Merchant Marine

MAERSK

MSC

ONE

EVERGREEN

Importers Could Face Higher Tariffs Jan. 1

December 11, 2023 // Advisories

Importers of numerous goods from China could face higher tariffs starting Jan. 1, 2024, if hundreds of Section 301 tariff exclusions expire as scheduled Dec. 31. These include more than 300 exclusions of various products (click here for full list) as well as exclusions for 77 medical care products needed to address the COVID-pandemic. These exclusions are currently available for any product that meets the specified HTSUS numbers and product descriptions, regardless of whether the importer filed an exclusion request.

Any reimposed tariffs would join those that remain in effect on hundreds of billions of dollars’ worth of imports from China, which are expected to remain in effect regardless of the results of a review of those tariffs the Biden administration expects to conclude by the end of this year. However, U.S. Trade Representative Katherine Tai has said some changes are possible, including removals and/or additions, as well as a new exclusion process.

In the meantime, efforts to ameliorate the impact of the China Section 301 tariffs are continuing.

– ST&R is advocating for the renewal of all previously approved exclusions and the creation of a process allowing for new exclusion requests (for more information, please contact strdc@strtrade.com).

– There are a number of proven and legitimate ways to effectively avoid the tariffs or limit their impact (click here for more information).

Suez Canal Attacks & Updated Trans Pacific Sailing Schedules

Viewpoint: What Red Sea attacks mean for shipping

Weekend assault on commercial vessels could have impact on global trade.

Lori Ann LaRocco. Monday, December 04, 2023 – FreightWaves.com

The guided missile destroyers USS Carney, left, and USS Ramage sail together in the eastern Mediterranean Sea on Oct. 16. (Photo: Navy Petty Officer 2nd Class Aaron Lau/U.S. Navy)

Geopolitical tensions and attacks in the Red Sea have increased since the commencement of the Israel-Hamas conflict. Iran-backed Houthi rebels have focused their attacks in the Red Sea and Gulf of Aden on any merchant shipping that they believe is affiliated with Israel. Following this weekend’s four attacks on three civilian ships near Yemen, the U.S. Navy destroyer USS Carney responded, thrusting the security of trade into the spotlight.

The Red Sea is the superhighway to the Suez Canal. Judah Levine, Freightos’ head of research, said the Suez Canal sees 50-60 vessels transiting each day for about 19,000 each year, including about 30% of global container traffic.

The Suez has seen an increase in U.S. energy and grain exports as well as U.S. eastbound container imports as the Panama Canal drought restrictions are constricting the flow of trade.

The biggest source of worry is the timeliness of the Houthis vessel data. A Houthi military spokesperson confirmed it targeted a container ship with a drone and another bulk grain vessel because it claimed both vessels were linked to Israel. One, however, was not. Houthis reportedly had outdated information, according to maritime security firm Ambrey.

According to the U.S. Central Command (Centcom), the bulk vessel — Number 9 — that was attacked Sunday is owned by U.K.-based Castle Harbour and operated by U.K.-based Bernhard Schulte Shipmanagement (BSM) and not connected to Israel. The operator appeared to change from Zim in November 2021, according to Ambrey. MarineTraffic shows the vessel left Singapore on Nov. 22 and was slated to go through the Suez Canal this Wednesday.

Ambrey has advised company security officers to assess whether their vessels were owned or managed by an Israel-affiliated company within the last year. But the Israel connection seems to go to the individual level.

Centcom reported that another one of the four vessels attacked was the Bahamas-flagged Unity Explorer. While owned and operated in the U.K., the Israel connection is among its management. Unity Maritime is controlled by Danny Ungar, the son of Israeli shipping businessman Abraham “Rami” Ungar. In November, Ungar’s shipping company, Ray Car Carriers, had its 5,100-unit car carrier Galaxy Leader hijacked by the Houthis.

Unity Explorer is a dry bulk ship that was loaded with grain from the U.S. Cargill grain elevator and transported from the Gulf of Mexico. The vessel left Nov. 2 bound for Singapore and traveled through the Suez Canal approximately six days ago, according to MarineTraffic.

In a statement following the attacks, Centcom said, “These attacks represent a direct threat to international commerce and maritime security. They have jeopardized the lives of international crews representing multiple countries around the world. We also have every reason to believe that these attacks, while launched by the Houthis in Yemen, are fully enabled by Iran. The United States will consider all appropriate responses in full coordination with its international allies and partners.”

But given the misidentification by Houthis of the Number 9, should any ocean carrier that was once linked to Israel consider itself a target because the militants may be working with old information? Does this also mean we could be looking at a war risk premium for vessels traversing the Red Sea and Gulf of Aden if we see more of these attacks?

What this means for trade

War stokes inflation and these attacks can only add to the threat of more war risk premiums. There is currently a war risk premium for vessels going to Israel. In light of the latest attacks and the misidentification of a vessel by Houthis, we may see the war risk premium expanded throughout the Red Sea and Gulf of Aden. This will only add to the inflationary pressures of using this trade route.

The Suez Canal Authority recently announced an increase of 5%-15% in transit fees, taking advantage of the increase in vessel traffic as more ocean carriers avoid the Panama Canal.

“As we saw in the Black Sea, continued attacks on maritime vessels may lead insurance companies to initiate a ‘war risk’ premium for vessels transiting the Red Sea and the shipping lanes south of Yemen,” said Alan Baer, CEO of OL USA. “If initiated, carriers may have no choice but to pass this additional cost onto exporters and importers the world over.”

When it comes to trade, it has to flow regardless of the situation. Operators will have vessels change course for safety.

Levine said there have been a handful of examples of Israeli-owned vessels diverting from passage through the Suez Canal and instead sailing around Africa’s west coast and Cape of Good Hope.

“This includes two car carriers, two container vessels operated by Danish carrier Maersk and at least one container vessel by Israel’s Zim Lines,” he explained. “For ships heading to Israel from Asia, the route around Africa is significantly longer — about 7,000 nautical miles and 10-14 days — than via the Suez Canal. This route also incurs higher fuel costs but avoids Suez Canal fees, which are between $400,000-$700,000 per transit and are set to increase by 15% in January 2024.”

Freightos data shows rates from some Chinese origins to Israel have climbed between 16% and 36%.

“This is suggesting that the war is leading to higher costs for carriers and higher prices for their customers,” Levine said.

To mitigate risks, some Israeli ports are closed because of missiles being launched in the area. For those carriers that cannot find war risk insurance, the Israeli government is offering supplemental insurance. This is nothing new, Israel has offered it for years. The Ukrainian government has also offered war risk insurance for vessels that may not be able to secure the extra coverage.

Levine said Zim is alone among the carriers in introducing a war risk insurance premium of between $20 and $100 per container since the start of the war.

ZIM ZXB: add 2 sailing changes rotation from Panama to Cape of Good Hope (or Suez)

Ocean Alliance: add 2 sailing via Suez, ETA is 3-5 days later, not too bad

The Alliance: all Dec vessel changes to Suez routing