BRi USA NEWS - Chassis Equipment Issues Re-emerge at LA–LB Port Complex
Dear all Valued Customers
Truckers and marine terminals said a shortage of chassis has re-emerged in Los Angeles–Long Beach (LA-LB) owing to a recent cargo surge and not enough equipment in the right locations.
All parties point to excessive dwell times at warehouses in the region as the primary cause of the equipment dislocations, and an issue the entire supply chain must address.
The shortages, caused by a spike in imports coupled with extended equipment dwell times at warehouses in the region, should work themselves out in the next month if the import surge wanes. It should be noted that equipment imbalances always seem to surface when cargo volumes spike owing to seasonal factors, or when retailers rush shipments to get ahead of import tariffs, as they did last year.
Drayage operators said they are struggling each day to secure sufficient chassis to move containers to and from the 12 container terminals in the ports of LA-LB, and marine terminals do not have enough chassis available for the delivery of import containers to truckers.
Whenever the demand for chassis varies from what would be considered the average needs of the transportation community throughout the year, chassis shortages occur. However, it seems now that the issue is a chassis dislocation problem rather than an actual shortage of equipment in the region.
Chassis dwell times at warehouses and manufacturing plants have ticked up in recent weeks, which keeps the equipment out of circulation. According to the Pool of Pools, chassis dwell times at warehouses and manufacturing plants have ticked up in recent weeks, averaging more than five days, with four days or less considered to be necessary to meet equipment needs in Southern California. The three large IEPs — DCLI, TRAC Intermodal, and Flexi-Van Leasing — operate the Pool of Pools in Southern California.
The chassis dislocation problem is also magnified when terminals place restrictions on the return of empty containers, or when truckers are unable to secure appointments needed to book dual transactions, both of which are occurring today.
Yet another issue contributing to the chassis problem is the number of idled chassis needing repair. The IEPs are repairing chassis as quickly as possible, and they are also bringing chassis into the region from elsewhere.
LA-LB experienced similar issues in late 2018 and early 2019 at the beginning of the US–China trade war when retailers fast-forwarded shipments to get ahead of import tariffs.
Outbound Airfreight Market Tightens from China, Hong Kong
Airfreight rates out of China are beginning to creep up again and there are signs the cost to ship goods to North America and Europe could quickly escalate again as shippers flock to air transport while the supply of aircraft falls.
A variety of factors associated with a resurgent coronavirus, ocean freight dynamics, Hong Kong health safety rules and operational issues at all-cargo operators is causing the Chinese airfreight market to tighten.
Export rates from China to the U.S. ticked up 3.4%, with the price from Shanghai up 4%. Outbound rates from Hong Kong to the U.S. increased 3%, and rates from Taiwan are running $2 to $3 per kilo higher than from mainland China because of very tight capacity.
Outbound rates from China had fallen more than 70% from their mid-May peak, but the market is very fluid right now for several reasons.
Demand for personal protective equipment and lab supplies to combat the coronavirus is surging again. Shipment volume tapered off in June when healthcare distributors and retailers built buffer stocks to the point they could opt for slower, cheaper ocean transport to maintain inventories. Suggestions that the airfreight market had normalized, because some international passenger flights had resumed and there were fewer emergency air shipments, proved premature.
Ocean rates on the trans-Pacific spot market are at record levels as U.S. companies aggressively restock inventories while container lines carefully manage capacity with blank sailings, pushing some shippers back to air transport.
Hong Kong retreat
Meanwhile, United Airlines, American Airlines and Air Canada pulled out of Hong Kong when authorities there imposed strict health screening measures on arriving pilots and flight attendants, reducing freight capacity. Crews object to the invasive tests and airlines worry entire crews could be quarantined for 14 days if one person tests positive, which could disrupt flights.
The Hong Kong Airport Authority reported that cargo throughput decreased 7.7% in June versus 2019 primarily due to the decline in transhipments from reduced belly capacity on passenger flights, the result of strict entry restrictions for non-Hong Kong residents.
Another reason capacity out of Asia is down for the first time since late April, and versus last year, is that many passenger freighters have exited the trans-Pacific market as those very-long routes become uneconomical given the drop in yields and increase in fuel prices.
Section 301 Investigation of France's Digital Services Tax Yields New EU Tariffs
On December 6, 2019, the U.S. Trade Representative announced a determination that France's Digital Services Tax (DST) is unreasonable or discriminatory and burdens or restricts U.S. commerce.
The US recently announced that starting next year, it would impose a 25 percent tariff on $1.3 billion worth of imports from France, including cosmetics, soap, and handbags. US importers of French wine dodged the new tariffs, which were a retaliatory move against a French tax on US technologies companies.
The new additional tariffs on France will be in effect on January 6, 2021, at the end of 180-day suspension period. The reporting number for this new additional tariff on France is 9903.90.01.
USTR Announces List 4 Exclusions and Amendments
The United States Trade Representative (USTR) has announced the latest round of exclusions and amendments on products included in List 4 of the Section 301 additional tariffs from China. Included in the exclusions are products such as exterior doors, moulded plastic, foam products, certain clothing, athletic gear, steel parts and valves, etc. See the full list of included products in the USTR Announcement here. The exclusion for these products is extended to September 1, 2020 under subheading 9903.88.53.
The USTR also made a technical correction to previously published exclusions (subheading 9903.88.51). Each note is being modified to change the statistical reporting number 6307.90.9889 prior to July 1, 2020 to be described in statistical reporting number 6307.90.9891 effective July 1, 2020.
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BRi Customer Solutions Team
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