11/5/2020

Dear all Valued Customers

 

The plunge in low-sulphur fuel prices, down about 70 percent since January, has sparked questions among analysts and cargo owners on whether the bunker adjustment factor (BAF) mechanism truly captures abrupt changes in fuel costs or just muddies the freight-buying process. Carriers announced revised BAFs last year as shipping prepared for the imposition of the International Maritime Organization’s low-sulphur fuel mandate on Jan. 1. The formulas were complex and based on a range of factors, including trade routes, ship sizes, head haul or backhaul trades, and load factors, quickly incurring the wrath of shippers who complained of a lack of transparency.

 

But as IMO 2020 kicked in, very-low sulphur fuel oil (VLSFO) soared past $700 per ton, and carriers felt the high cost of fuel was justifiably reflected in the surcharges. Prices began to slide within weeks of the IMO mandate once early supply issues were sorted. The declines accelerated in early March after crude prices plummeted when demand vanished amid the global COVID-19 lockdown. VLSFO fell to $211 per ton in early May.

 

Yet most carriers have decided to retain their low-sulphur surcharges despite the collapse of fuel prices.

 

CMA CGM and Maersk Line are so far the only carriers to suspend low-sulphur fuel surcharges (LSS). CMA CGM, which suspended its LSS from May 1, has since updated a notice from June 1 that the LSS “is no longer applicable and may come back later.” The BAF, however, applicable on long-term contracts and including an LSS, was not affected and would be revised quarterly.

 

Maersk will set its Environmental Fuel Fee (EFF) at zero from May 1 until further notice on the Maersk Spot product and all contracts with validity up to three months.

 

The carrier said it expects the fuel price to remain volatile and has in place a “monthly special adjustment” that will be triggered if the bunker price changes by $50 per ton, either up or down.

 

The carrier said the trigger has been activated twice so far this year, first on March 1 following the early increase in bunker prices, and then on May 1 after the dramatic decline in prices.

 

Other carriers have retained their low-sulphur surcharges.

 

Hapag-Lloyd last adjusted its Marine Fuel Recovery (MFR) mechanism on April 1 based on the price of low-sulphur fuel oil (LSFO) that was $200 per ton.

 

The carrier has no plans to cancel the MFR, and the next quarterly adjustment is planned for July 1.

 

Lag in price hikes hitting bottom line

 

One carrier stated that because of the way the fuel price is accounted for, it typically took three to four months before it was reflected on the P&L. “In reality, BAF adjustments are being made every quarter to reflect fuel prices, which typically means that if costs go up it takes a little while before that is reflected in the rates, and the same if costs go down.”

 

A maritime consultant stated “it was hard to see how the BAF could survive in the current low-fuel cost environment. A well-defined BAF should be tied to the fuel cost changes, and thus if the BAF had been formulated in a way to pass through costs effectively, then it would not have been necessary to come up with a completely new formula.” The insistence of carriers in maintaining fuel surcharges despite plunging prices, and the frustrations this causes shippers, all stemmed from a lack of contract adherence and enforceability in liner shipping, a problem for both parties.

 

USTR Announces Additional Section 301 Exclusions, Accepting Comments for Expiring Ones

 

The United States Trade Representative (USTR) has announced additional exclusions from the Section 301 additional 25 percent tariff on List 3 goods from China. Included in this list are household/kitchen items, furniture, auto parts and bags, to name a few. See the full list in the USTR announcement here. 

 

The exclusions are reflected in two 10-digit HTSUS subheadings (4819.50.4060 – other packing containers, and 6902.20.5020 – other refractory bricks, blocks, and tiles), which cover 15 separate exclusion requests, and 144 specially prepared product descriptions covering 170 separate exclusion requests. These exclusions, which must be claimed using new HTSUS subheading 9903.88.46, will be retroactive to Sept. 24, 2018, and remain in place until Aug. 7, 2020.

 

For assistance in applying for duty refunds, please respond back to me on this email so we can assist you moving forward

 

USTR Accepting Public Comments on Exclusion Extensions

 

The USTR will consider a possible extension for up to 12 months on goods included in the initial 11 product exclusion notices under the $200 billion action. The products which are granted for the Section 301 List 3 exclusions are scheduled to expire August 7, 2020 unless an exclusion is granted.

 

Importers are encouraged to submit comments to the USTR on the possible extension of particular exclusions no later than June 8, 2020

 

•          84 FR 38717 (August 7, 2019)

•          84 FR 49591 (September 20, 2019)

•          84 FR 57803 (October 29, 2019)

•          84 FR 61674 (November 13, 2019)

•          84 FR 65882 (November 29, 2019)

•          84 FR 69012 (December 17, 2019)

•          85 FR 549 (January 6, 2020)

•          85 FR 6674 (February 5, 2020)

•          84 FR 9921 (February 20, 2020)

•          85 FR 15015 (March 16, 2020)

•          85 FR 17158 (March 26, 2020)

 

As a reminder, List 1 and List 2 exclusions are also expiring soon and the portal for comments on these lists closes on June 1, 2020.

 

•          List 1 ($34 Billion) – Exclusion granted effective date 7/9/2019 will expire as of 7/9/2020

•          List 2 ($16 Billion) – Exclusion granted effective date 7/31/2019 will expire as of 7/31/2020 

 

Certain Goods From Thailand Now Excluded From GSP

 

U.S. Customs and Border Patrol (CBP) has issued a Cargo Systems Messaging Service (CSMS) to provide the list of HTS codes for goods from Thailand that are now excluded from eligibility of a Generalized System of Preferences (GSP) claim.

 

Under the modification, certain goods of Thailand that are entered for consumption or withdrawn from warehouse for consumption on or after April 25, 2020, are no longer eligible for GSP claims.

 

Included in the list of nearly 600 goods are many food items including fish, vegetables and food additives; as well as building materials, clothing and shoes, and household items, amongst many more.

 

DDTC Announces Reduced Fees Due to Pandemic

 

The Directorate of Defence Trade Control (DDTC) has announced it will be reducing registration fees for new registrants and registration renewals. As published on the DDTC website – “Given the extraordinary impact of the COVID-19 pandemic on the national economy and Defence Industrial Base, the Directorate of Defence Trade Controls (DDTC) is temporarily reducing registration fees for DDTC registrants in Tier I and Tier II to $500 for registrations whose original expiration date is between May 31, 2020 and April 30, 2021.

 

Also, DDTC is reducing registration fees to $500 for new applicants who submit their registration application between May 1, 2020 and April 30, 2021. This will allow new registrants and existing registrants in Tiers I and II, many of which are small and medium-sized enterprises, to receive a reduced registration fee over the course of the coming year. The fee structure for Tier III entities remains unchanged at this time.

 

We anticipate that this temporary reduction in fees for Tier I, Tier II, and new registrants will save regulated industry over $20 million over the course of the coming year. This temporary reduction in fees shall apply only through April 30, 2021, at which time fees for entities in Tiers I and II will return to the rates that were in effect on April 1, 2020 unless otherwise extended by a subsequent notice in the Federal Register.”

 

The Arms Export Control Act requires that all manufacturers, exporters, temporary importers, and brokers of defence articles (including technical data) as defined on the United States Munitions List (ITAR part 121) and furnishers of defence services are required to register with DDTC.

 

It is primarily a means to provide the U.S. Government with necessary information on who is involved in certain ITAR controlled activities and does not confer any export or temporary import rights or privileges.

 

Registration is generally a precondition for the issuance of any license or other approval and use of certain exemption.

 

BRi ERP and Order Management Program

 

To ensure you maintain visibility to your shipments as they move through the supply chain, please take advantage of BRi PATHWAY.

 

The information in PATHWAY is real-time and available 24/7.

 

To obtain a login for your account, please respond to this email so we can get you started!

 

As a valued customer, we hope that you will continue to trust us to source the best options for your supply chain needs now and into the future. Should you have any questions or queries regarding USA News, please fee free to contact your Customer Solutions Representative.

 

Keeping you updated,

BRi Customer Solutions Team 

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