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Lengthy inspection delays cause shipments to miss flights, forcing importers to look for alternate options.
Freight gridlock at Shanghai Pudong International Airport is so bad that some cargo planes are being forced to leave nearly empty and logistics professionals are recommending ocean transportation as a faster option. Airfreight professionals describe an operational meltdown, with trucks stuck in queues for two to three days to drop off shipments and boxes piling up in warehouses unable to get put on aircraft because Chinese customs officials and ground handlers are overwhelmed by the surge in export demand for face masks and other medical supplies.
The volume of hospital gear, resumption of e-commerce and other trade following China’s coronavirus quarantine and new export restrictions are blamed for the massive backlog, which was compounded by factories rushing out extra shipments before closing for the May Day holiday. With factories reopening, there is no sign of these backlog alleviating in a few, even 10 days or more.
An avalanche of medical gear is descending on Chinese airports because the rest of the world desperately needs it to minimize exposure to the COVID-19 virus and air is the fastest delivery method. The onslaught of goods is running into a compliance “wall" and piling up. Last month, Chinese authorities placed export controls on 11 types of medical supplies, including infrared thermometers, after complaints in Europe and the U.S. about low-quality purchases. Chinese-made N95 respirators failed in several tests to meet filtering standards for small particles, while non-medical masks are also being sold as medical-grade ones. In addition to special certification, all the shipments must be individually inspected and verified by customs authorities to make sure they are not defective or fraudulent.
China’s new policy has forced forwarders to cancel many bookings because export shipments are regularly failing customs inspections. It now takes on average, five to six days for shipments to get from the manufacturer’s dock onto a plane due to the increased inspections.
In addition to several cargo terminals temporarily not accepting shipments in an effort to clear backlogs, trucks are sitting in traffic jams on the road at the entrance of the Pudong airport, for days in some cases. “Even after shipments are cleared, they can sit in a warehouse because ground handling companies often don’t have enough labour to consolidate shipments for aircraft loading,” one expert added.
To further deteriorate the situation, airlines that fly to the Pudong airport say the increased tender times have forced multiple carriers on several occasions to depart only partially loaded because of schedule commitments, or fears that pilots will violate duty-hour limits by waiting.
Under normal circumstances, cargo airlines typically change crews in China. Instead, flights are originating in Tokyo or Seoul. Upon arrival, crews stay on the planes to avoid being tested or quarantined by Chinese authorities keen on preventing outsiders from reinfecting the local population. If freighters stay too long in Shanghai, crews will time out their duty clock and violate anti-fatigue rules before reaching a refuelling stop in Anchorage, Alaska, or U.S. destinations.
One airline stated “limiting export deliveries to 48 hours prior to flight departure helps with smoothing the flows through the cargo terminal.” Others added their "aircraft have not had to leave empty because of good planning that enables it to swap out shipments that are not ready for ones that are. Advance planning is key.”
Forwarders are employing a number of tactics to bypass the bottlenecks and importers need to be open to alternate options. Ensuring suppliers are approved and advance planning to adhere to the intricate schedule is key for Shanghai. While alternate airports like Zhengzhou, Guangzhou and Shenzhen are also options, these locations are quickly forming backlogs as well.
Could Ocean Freight Actually be Quicker?
Several ocean carriers are hoping to come to the rescue by offering “fast-boat services.” These fast-boat services, like those offered by Matson Inc. and APL, offer another relief valve for shippers. Matson, for example, sails direct from Shanghai to Long Beach, California, in 10 days. “Utilizing expedited ocean services is just another arsenal for importers to consider for their supply chain to get their goods where they need to be, sometimes quicker than airfreight,” one analyst said.
BRI USA has developed guidance for importers of PPE equipment and medical gear to provide the necessary steps to minimize disruptions in importing these goods from China. Our team can also assist with compliance reviews to ensure your supplier and shipment adhere to China’s regulatory standards.
In addition, BRI USA Global Transport Team has secured information on several ocean carriers offering fast-boat service.
Please reach out to your BRI Representative for more information on your ocean and airfreight options, as well as how we can assist with your PPE/medical shipments.
Chassis Tensions Between Truckers and Ocean Carriers Tempered by Willingness to Talk
A longstanding disagreement between truckers and ocean carriers has boiled over to a potential complaint to the FMC, but both sides also appear willing to see if talks can resolve their differences.
Simmering tensions between ocean carriers and draymen are threatening to escalate into a battle before the Federal Maritime Commission (FMC) after the American Trucking Associations (ATA) sent a letter demanding a resolution to its long-standing complaint over restrictions that make it difficult for truckers to use their own chassis. Still, both sides expressed a willingness to talk in an attempt to reach an agreement before resorting to federal intervention.
In a letter last week to the Ocean Carrier Equipment Management Association (OCEMA), ATA threatened to file a complaint with the FMC unless the groups strike a deal to resolve ATA’s complaint about “truck choice,” which would give its members the freedom to choose their own chassis to haul a container. ATA also alleges the lack of “choice” violates the US Shipping Act of 1987 as an “unreasonable” business practice, causing economic damage totalling $1.8 billion since 2017.
“Merchant haulage prices are three to eight times higher than carrier haulage prices, indicating a dramatic overcharge on merchant haulage movements above the average daily cost of chassis for chassis providers,” the ATA wrote in its letter. “OCEMA members are liable for these overcharges, which could amount to $1.8 billion over the last three years.” Carrier haulage refers to when an ocean carrier handles the entire door-to-door experience for a beneficial cargo owner (BCO), including procuring a chassis. Merchant haulage is when the ocean carrier’s responsibility ends in the marine terminal and the BCO is responsible for the inland transportation to the dock door.
The Economics of ‘Choice’
OCEMA formed Consolidated Chassis Management (CCM), which has operated cooperative pools. However, OCEMA as an association has little power to tell its members to use CCM or the private pools run by chassis providers. Some OCEMA members believe strongly in the CCM model and the right of truckers to use their own equipment. Other OCEMA members prioritize pricing needs instead.
By guaranteeing volume ocean carriers can negotiate lower rates with chassis providers. CCM has been unable to match the rates these other providers, which are privately owned companies, that can offer to high-volume customers. Ocean carriers say they pass through these lower rates to BCOs to provide more attractive freight rates.
ATA members say these agreements are “sweetheart deals,” accusing chassis providers of charging below-cost rates to ocean carriers and higher-than-market costs to daily renters on one-off hauls. Chassis providers deny that they take a loss on high-volume customers and make huge profits on one-off transactions.
A Complicated, Contentious Issue
Disagreement over what a trucker can do in terms of chassis has pitted supply chain stakeholders against each other in a debate over how to best serve customers. OCEMA and chassis providers disagree that overcharging is occurring, or unethical or illegal conduct is taking place.
And it’s not just an economic issue, it’s also operational. Trucking companies prefer to use one chassis all day, rather than switch equipment based on ocean carrier agreements with chassis providers. The switch is called a “chassis split,” which truckers worry waste minutes in a workday now monitored by electronic logging devices. “In a lot of these ports, the driver is told, ‘No, you’ve got to get this chassis, not that one. Get this brand, not that one. You got the wrong brand, go to the end of the line,’ an ATA spokesperson said.
Chassis providers say ATA downplays the issue, since many ocean carriers can be aligned with one chassis provider, it is possible for a trucking company to plan a driver’s day around boxes tied to one chassis provider. If depots where truckers swap chassis are located next to each other and supplied with equipment, then the time involved is minimal, chassis providers argue. The ATA said while this might reduce or eliminate chassis splits, binding trucking companies to equipment based on the name on the container eliminates the option of using a trucking-company owned chassis.
In Memphis, there is an ATA-backed effort to replace proprietary chassis pools with a CCM-operated pool, allowing any chassis to be used for any container. ATA believes this would eliminate chassis splits while providing options for each driver. The opposition in Memphis argues this solution actually eliminates choice, because trucking companies would give up their proprietary, private pools, and CCM would be the only non-trucker option.
Since OCEMA is willing to sit down with ATA, the question becomes whether the two sides form any agreements. If they can make a deal, it would avoid a lengthy — and potentially costly — regulatory battle.
Webinar: Protecting Supply Chains During Coronavirus May 19
The acting Department of Homeland Security (DHS) Secretary Chad Wolf will be the featured speaker for the U.S. Chamber of Commerce's "Global Supply Chain Series: Protecting Supply Chains During Coronavirus" webinar on May 19. This virtual event will bring leaders and experts together to discuss key supply chain challenges during the COVID-19 pandemic.
You can register for the webinar on the U.S. Chamber of Commerce’s website here.
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