Søren Skou warns of new logistics chaos: “If it ends in strike, then it all shuts down”
A.P. Møller-Maersk watches a looming US labor conflict closely, which may worsen bottlenecks at the country’s key ports and stir up problems in the entire supply chain.
BY NIKLAS KRIGSLUND
(Excerpted from ShippingWatch.com)
Just as the world catches a glimpse of an end to the coronavirus pandemic’s logistical chaos, A.P. Møller-Maersk warns that a new challenge threatens to disrupt supply chains and keep freight rates high.
This summer, dock workers on the US west coast are up for a new labor agreement. If negotiations break down, it may result in new, serious bottlenecks that may exceed the problems which culminated towards the end of 2021.
“There is no doubt that it’s not going to be easy negotiations, and a lot is at stake,” says A.P. Møller-Maersk CEO Søren Skou, furthermore pointing out that the agreement covers all ports on the west coast.
“If it ends in strike, then it all shuts down,” predicts the top exec of the Danish group, which operates the largest terminal in Los Angeles through its port company, APM Terminals.
Bottlenecks at the two key ports Long Beach and Los Angeles are the paramount reason why it’s still very expensive and difficult to buy freight space onboard container vessels.
Therefore, the consequences of a labor conflict and new traffic congestions will quickly spread to the entire supply chain and ultimately affect Danish companies and their customers.
“When ships can’t unload in the US, then they can’t go back to China to be refilled. That will extend the delivery time and increase prices. That goes for Danish companies and customers as well,” says Nordea Group Chief Economist Helge J. Pedersen.
“A continuation of high transportation prices will also increase the pressure from inflation and limit the world economy upswing,” he adds.
Interest group the Confederation of Danish Industry (DI) also keeps an eye on the situation on the US west coast. General manager of DI’s US office Louis Funder assesses that a conflict will first and foremost affect the many Danish companies dependent on bringing goods in and out of the country.
“It will typically be production companies, which gather their goods in the US before sending them out to their US customers. I’ve also spoken to a large Danish wine importer, who has had difficulties bringing wine out of the country. So actually, it goes both ways when there are problems,” says Funder. Right now, 56 ships able to accommodate 450,000 containers are waiting outside Long Beach and Los Angeles.
When congestion was at its worst shortly before Christmas, 85 vessels were queued up, according to figures by analyst firm VesselsValue.
A strike will put even further pressure on the ports, which are already short on dock workers, truck drivers and storage space to handle the significant increase in US purchasing of Chinese goods during the pandemic.
“Therefore, any protracted strike action could conceivably cause queue numbers to spike even higher than the previous peak,” states Vivek Srivastava, senior trade analyst at VesselsValue.
It is dock workers’ union the International Longshore and Warehouse Union (ILWU) and major carriers and port companies’ organization the Pacific Maritime Association (PMA) that are negotiating a deal.
The current labor agreement was extended last year and expires in July. It applies to 29 ports and covers wages and work conditions, among other things. The biggest issue, however, is expected to be the automation of ports, which the workers are fundamentally skeptical towards.
In November 2021, PMA tried to renew the current deal for another year in order to avoid a conflict at a time when supply chains are highly vulnerable, but the attempt was rejected by the workers.
They feel that they ought to be rewarded for their effort during the pandemic during which they have struggled as never before and fought Covid contamination, while carriers such as Maersk have reeled in historic amounts of money.
In an editorial in the latest issue of ILWU’s member magazine, The Dispatcher, fronts are drawn up sharply.
“It’s time to decide which side we’re on: That of the foreign shipping companies that are profiteering from the pandemic, or that of US farmers, manufacturers, dockworkers and truckers who deserve to earn a family wage,” writes ILWU Coast Committeeman Frank Ponce De Leon.
A.P. Møller-Maersk operates the largest container terminal in Los Angeles and has been hit by protests before. In 2012, the administrative staff were unhappy because they felt that their work was being increasingly outsourced.
Previous negotiations also show that it usually has been extremely difficult to reach an agreement, and that political interference is often needed in order to land a deal and avoid ports halting operations.
In 2002, employers started a lockout lasting for ten days. And in 2014-2015, work progressed at a very slow pace for four months, while negotiations took place. Both times, the governments at the time under, respectively, George W. Bush and Barack Obama had to step in for the situation to be solved.
The current negotiations will begin properly in April and will be followed closely this time again by the US president, in this case Joe Biden, who has a major focus on putting the rogue inflation to a halt, which, according to major bank UBS, can be traced back to freight prices to a certain extent.
Correcting poor reliability will take container lines at least eight months
Once carrier reliability starts recovering, it will take up to nine months to return to a normal level, writes Sea-Intelligence. But there are no indications that the situation is about to improve.
BY DANIEL LOGAN (excerpted from shippingwatch.com)
It will take container lines eight to nine months to get their schedule reliability back on track after more than two years with the Covid pandemic and chaotic supply chains.
That’s the assessment of Sea-Intelligence, which posits the situation with major bottlenecks on the US west coast in 2015 as a comparable scenario for examining the industry’s current outlook.
”As the 2015 problem was resolved in 6-7 months, this means an average reduction in excess delay of 1.25-1.46 days per month,” writes Sea-Intelligence.
”If the current port and hinterland system manages the same speed of recovery this time, it means that the current delays will take 8-9 months to resolve.”
In December 2021, 10.1 percent of the ships on the stretch from Asia to the US west coast arrived on time, while the figure for February 2015 came to 12.6 percent. At the same time, the analyst firm estimates that ships in December 2021 on average arrived 11.5 days late compared to a pre-pandemic baseline, while the number for February 2015 is 8.7 days.
If the recovery had begun in December 2021, from where the latest data are gathered, the container sector would in this scenario return to normal in August or September this year, Sea-Intelligence assesses.
Realistically, however, it will take a while longer as there are no signs that carrier reliability has improved going into February. Meanwhile, there’s also the catch that the problems in 2015 exclusively affected the US west coast.
”Now it is a global challenge, and the problem also include inland logistics issues,” writes Sea-Intelligence.
Covid-hit Lufthansa Cargo cancels all transit freight via Frankfurt hub
By Alex Lennane, (excerpted from loadstar.com) 26/01/2022
Lufthansa Cargo is the latest carrier to suffer operationally from an outbreak of Covid and has been forced to cancel all transit traffic through Frankfurt.
It has advised customers to cancel all transit bookings, saying in a note to customers this morning: “We unfortunately see no other option at the moment than to take some measures at the Frankfurt hub. As of now … there will be a transit embargo for Frankfurt.”
It added that customers should cancel shipments which have not been delivered, while freight which has already been accepted will be dispatched “as soon as possible”.
LC added: “We firmly believe these measures will contribute to stabilisation and that we can gradually return to normal operations.”
One European forwarder told The Loadstar: “This is pretty staggering and will be painful.
“Either the cargo is trapped and not moving if in the network, or you have to book elsewhere with alternative carriers, which will then increase demand and undoubtedly mean rate increases on air cargo if Lufty is out of the game for any time.
Lufthansa Bans Freight Through Frankfurt Hub Due to Omicron
Carrier says transit embargo hits North America, Europe routes Frankfurt is a major transport hub for Covid-19 vaccines
By William Wilkes (excerpted from Bloomberg.com) January 26, 2022
11:04 AM EST Updated on January 26, 2022, 11:57 AM EST
Deutsche Lufthansa AG banned cargo from moving through its Frankfurt hub due to surging Covid-19 infections and related staff shortages in the German city.
The move will impact goods arriving from other parts of Germany, the rest of Europe and North America, according to an emailed statement Wednesday. Direct deliveries to Frankfurt — a major transport hub for coronavirus vaccines — are still possible, Lufthansa said.
Did you know:
- Many carriers will not take responsibility for loss or damage if a warehouse signs off clean on a POD, so it is important, before signing off, to note the condition of the cargo. Claims are usually time-barred, unless filed within a few days (standards vary by carrier). So alert your carrier to possible damage immediately. The best way to do this is by signing the delivery receipt notating damage! And be specific, for example, 8 glasses broken, 10 boxes crushed (Make ensure that you have the correct boxes or pallet count).
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.
According to internationally accepted trade terms, referred to as Incoterms, suppliers selling CIF 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 control the selection, and thereby the quality, of insurance coverage.
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.
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
Importers are encouraged to make certain their suppliers use insurers with a favorable financial rating supplied by a respected financial rating service. BOC’s insurance company, underwriters at Lloyd’s of London, has an A.M. Best financial rating of A (Excellent).
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?
|Ever Given, year built 2015, 199,692 dwt Date of Blockage: 3/23/21 Part loaded with 18,000 teu (capacity 20,000 teu.) Egypt alone believes it is owed at least $1 billion in compensation for the six-day shutdown and the cost of the refloat effort.||Yantian Express, year built 2002, 100,003 dwt Date of loss: 1/3/19 Part loaded with 4,000 teu|
(capacity 7,551 teu.) 198 total loss, 462 damaged required survey LOF salvage – security 32.5% GA – security estimate 28%
|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%
There are a number of notable fire cases, with many resulting in General Average!
- Ever Given – April 2021
- Sincerity Ace – January 2019
- Maersk Honam – March 2018
- Maersk Kensington – March 2018
- Hyundai Auto Banner – May 2018
- MOL Prestige – February 2018
- Caribbean Fantasy – June 2018
- 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.
- LCL Freight – 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
- 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
- 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.
- Have a contingency plan or at least an understanding of how the event will unfold.
U.S. to Ban Goods Made In Xinjiang, China
Under a new law, the U.S. will ban imports of all goods made in whole or in part from any good from the Xinjiang Uyghur Autonomous Region in China, effective June 21, 2022. Companies need to use the next 180 days to ensure their supply chains do not include such goods.
Sandler, Travis & Rosenberg, P.A., has developed a program to help companies review their supply chain visibility in response to this new law.
For more information on this program, please contact Elise Shibles (at (415) 490-1403 or via email email@example.com), Amanda Levitt (at (212) 549-0148) or via email firstname.lastname@example.org), or David Olave (at (202) 730-4960 or via email email@example.com).
BOC NOTE: Xinjiang should not be confused with the common coastal port named Xingang (Tianjin). Xinjiang is 2,000 miles inland from Xingang/Tianjin/Yellow Sea.
LA/LB Port Update- New Fee
The details are being finalized but the current plan is for the terminal to bill the ocean carrier. In the end, the ocean carrier will likely bill the cost to the importer directly or increase the ocean freight to cover the fees. Similar to demurrage, detention, excess chassis fees and now these new charges, everything is getting dumped on the importer. It is unfair but it is what is currently happening in the marketplace.
Until the world governments can step up or until the advantage goes back to the importer when the demand is not so strong, the carrier and terminal will continue to be king and put everything back on the importer. We are suggesting for all importers to contact your congressional representatives and voice your concern.
Chart: American Shipper
BOC will continue to monitor this situation and will advise if there are any changes or updates. If you have any questions please feel free to reach out to your BOC representative.
Finally Some Good News for Importers
USTR will start a targeted tariff exclusion process focused on restating previously extended exclusions, most of which expired on December 31, 2020. Per a Federal Register notice inviting public comment attached, USTR will evaluate the reinstatement of each of these exclusions on a case-by-case basis. The 549 exclusions covered by the notice can be found in the link below:
For additional information on 301 tariffs, please visit the below link of Sandler, Travis and Rosenberg, PA, or contact their attorney who specializes in this area, Paula Connelly.
Paula Connelly, Esquire
mobile phone: (781) 897-1771
NOTICE OF CHB DELAYS DUE TO UNCERTAIN BERTHING TIMES/LOCATIONS
All steamship lines are experiencing port and berth congestion. Please see notice below received from Wanhai. This explains the late notice brokers are receiving regarding arrival notices, berthing times and locations. Without an accurate arrival notice, Customs Brokers cannot file Customs entry. Please be patient as we all continue to work through these trying times. Rest assured, our CHB teams want to clear your freight as quickly as possible.
Key Asian locations with upcoming holidays, listed below.
China Schedule for Upcoming holidays.
|Sep 18||Saturday||Special Working Day||Working day on weekend|
|Sep 19||Sunday||Mid-Autumn Festival holiday||National holiday|
|Sep 20||Monday||Mid-Autumn Festival holiday||National holiday|
|Sep 21||Tuesday||Mid-Autumn Festival||National holiday|
|Sep 26||Sunday||Special Working Day||Working day on weekend|
|Oct 1||Friday||National Day||National holiday|
|Oct 2||Saturday||National Day Golden Week holiday||National holiday|
|Oct 3||Sunday||National Day Golden Week holiday||National holiday|
|Oct 4||Monday||National Day Golden Week holiday||National holiday|
|Oct 5||Tuesday||National Day Golden Week holiday||National holiday|
|Oct 6||Wednesday||National Day Golden Week holiday||National holiday|
|Oct 7||Thursday||National Day Golden Week holiday||National holiday|
|Oct 9||Saturday||Special Working Day||Working day on weekend|
Taiwan Schedule for Upcoming holidays
|Sep 20||Monday||Mid-Autumn Festival||National holiday|
|Sep 21||Tuesday||Mid-Autumn Festival||National holiday|
|Oct 10||Sunday||National Day||National holiday|
|Oct 11||Monday||National Day observed||National holiday|
Thailand Schedule for Upcoming holidays
|Sep 24||Friday||Mahidol Day||National holiday|
|Oct 13||Wednesday||Anniversary of the Death of King Bhumibol||National holiday|
Malaysia Schedule for Upcoming holidays
|Oct 2||Saturday||Birthday of the Governor of Sabah||State Holiday||Sabah|
|Oct 9||Saturday||Birthday of the Governor of Sarawak||State Holiday||Sarawak|
Indonesia Schedule for Upcoming holidays
|Oct 7||Thursday||Navaratri||Hindu Holiday|
|Oct 15||Friday||Dussehra||Hindu Holiday|
|Oct 20||Wednesday||Maulid Nabi Muhammad (The Prophet Muhammad’s Birthday)||Public Holiday|
Japan Schedule for Upcoming holidays
India Schedule for Upcoming holidays
|Oct 2||Saturday||Mahatma Gandhi Jayanti||Gazetted Holiday|
|Oct 7||Thursday||First Day of Sharad Navratri||Observance, Hinduism|
|Oct 11||Monday||First Day of Durga Puja Festivities||Observance, Hinduism|
|Oct 12||Tuesday||Maha Saptami||Restricted Holiday|
|Oct 13||Wednesday||Maha Ashtami||Restricted Holiday|
|Oct 14||Thursday||Maha Navami||Restricted Holiday|
|Oct 15||Friday||Dussehra||Gazetted Holiday|
|Oct 19||Tuesday||Milad un-Nabi/Id-e-Milad (Tentative Date)||Gazetted Holiday|
|Oct 20||Wednesday||Maharishi Valmiki Jayanti||Restricted Holiday|
DOT Brake Safety Week
Expect fewer trucks on the road, more delays and increased costs
Brake Safety Week Set for Aug. 22-28
This year’s Brake Safety Week is scheduled for Aug. 22-28. During Brake Safety Week, commercial motor vehicle inspectors emphasize the importance of brake systems by conducting inspections and removing commercial motor vehicles found to have brake-related out-of-service violations from our roadways. At the same time, many motor carriers work to educate their drivers and maintenance service providers on the importance of brake system safety.
Throughout the week, inspectors will conduct North American Standard Inspections of commercial motor vehicles, focusing on the vehicle’s brake systems and components. In addition, inspectors will compile data on brake hoses/tubing, the focus area for this year’s Brake Safety Week, to submit to the Commercial Vehicle Safety Alliance (CVSA). CVSA will report its findings later this year.
Jurisdictions devote a week to conducting commercial motor vehicle inspections, identifying brake violations and removing vehicles with out-of-service brake violations because:
Brake system and brake adjustment violations accounted for more vehicle violations than any other vehicle violation category, accounting for 38.6% of all vehicle out-of-service conditions, during last year’s three-day International Roadcheck inspection and enforcement initiative.
“Brake system” was the third most cited vehicle-related factor in fatal commercial motor vehicle and passenger vehicle crashes, according to the Federal Motor Carrier Safety Administration’s (FMCSA) latest “Large Truck and Bus Crash Facts” report.
Brake-related violations accounted for eight out of the top 20 vehicle violations in 2020, according to FMCSA’s Motor Carrier Management Information System.
During last year’s Brake Safety Week, 12% of the 43,565 commercial motor vehicles inspected were placed out of service for brake-related violations.
The dates for Brake Safety Week are shared in advance to remind motor carriers, drivers and commercial motor vehicle mechanics/technicians to proactively check and service their vehicles to ensure every commercial motor vehicle traveling on our roadways is safe, mechanically fit and compliant. Recent research has shown that announcing enforcement campaigns ahead of time improves overall compliance better than surprise enforcement campaigns and for longer periods after the event.
August, the month of CVSA’s Brake Safety Week, is also Brake Safety Awareness Month. Law enforcement agencies will work to educate commercial motor vehicle drivers, motor carriers, mechanics, owner-operators and others on the importance of proper brake maintenance, operation and performance through outreach, education and awareness campaigns.
New COVID Procedures at Shanghai (PVG) Airport
Please be advised that Shanghai Pudong International Airport (PVG) has implemented new COVID-19 measures, as below:
Under the new 7+7+7 or 14+7+7 measures, terminal workers at PVG are required to:
- work 7 or 14 days in the terminal
- complete a 7-day quarantine in a hotel
- complete another 7-day quarantine at home
This arrangement is expected to cause a shortage in manpower that may result in the following:
- Frequent short- or off-loading
- Shortage of staffing
- Longer terminal handling time
- More flight cancellations and shortage of import and export capacity
- Increase in airfreight rates
- Some suspension of trucking, causing major backlogs
- Embargoes for seafood and perishable items
- Screening and disinfecting of some freight
BOC will continue to monitor and advise, as these requirements and restrictions change.