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“Temporary” Fuel Surcharges?

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US Businesses have been paying Fuel Surcharges to their carriers and logistics service providers for decades now, will that ever change?

 For those who have been involved in shipping for some time, you may recall that initially these Fuel Surcharges were implemented as a “temporary” surcharge to compensate the shipping industry for large spikes in fuel costs.  The theory was that when fuel costs would moderate the surcharges would disappear.  Well as we all know that never happened and will not happen now and in the future.  The word “temporary” is no longer used in conjunction with the words Fuel Surcharges.

In those early days when Fuel Surcharges were first introduced, many shippers balked at paying them because they felt that freight carriers and logistics service providers had obviously calculated fuel costs in their pricing before their rates were ever published.  So the Traffic Manager, as they were referred to in those days, felt that this was a double dipping approach by the carriers just to enhance their bottom lines.  That same argument might even be made today, but with the proliferation of Fuel Surcharges for all modes of transportation, the assessment of Fuel Surcharges is just part of the rate making process for all transportation and logistics service providers for the long term.

Some shippers are still balking at the implementation of fuel surcharges being assessed on accessorial services as some carriers have published in their operating rules, stating that Fuel Surcharges can be assessed on these accessorial services, such as Residential Deliveries, Inside Deliveries, etc.  To some, the assessment of Fuel Surcharges for services that do not involve fuel related costs, are just another way for carriers and logistics service providers to double dip.

The current inflationary pressures on US businesses, as well as the tragic events in Ukraine, have further exacerbated the increase in fuel costs with absolutely no end in sight.  This is a global crisis now and will be for the foreseeable future.

To think that these Fuel Surcharges have been totally absorbed by US Businesses over these many years is certainly not plausible.  Certainly, these businesses have adjusted their prices to their customers to absorb at least some of these increasing fuel costs.  But now we are starting to see businesses looking to implement a pass through Fuel Surcharge as a separate line item on their merchandise invoices to their customers.  Some business are even considering either an increase in the product cost to the customer, or for those businesses that charge a line item freight charge, increasing those costs to offset the current drastic increase in fuel related costs.  The danger here is that should fuel charges moderate, will these businesses reduce or even eliminate these increased fees.

The bottom line is that these continually rising fuel and transportation related costs for that matter, can no longer be absorbed entirely by US businesses and that ultimately the consumer will be paying these higher costs out of their own pockets.  It behooves every business to closely monitor their costs to find ways to control these skyrocketing costs so they do not end up behind the eightball.

We’d love to hear your thoughts on this subject.

USPS

Postal Service Reform Act to Become Law Soon

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According to an article in American Shipper, legislation aimed at providing a long-sought lifeline to the struggling U.S. Postal Service passed the Senate on Tuesday and now moves to President Joe Biden for his expected signature.

The Postal Service Reform Act of 2022, which passed the House in February with overwhelming bipartisan support, eliminates an onerous health care pre-funding requirement for postal workers that the agency has stated would have been the biggest driver of an estimated $160 billion loss over the next decade.

But by abolishing that requirement and including a provision that integrates postal worker retiree health care with Medicare, the legislation creates more than $49 billion in savings over the same period, substantially closing that deficit and bringing the agency closer to financial sustainability.

Operationally, the legislation requires the Postal Service to maintain its standard of delivering at least six days a week.

“We look forward to President Biden’s signature on this common sense legislation to support the Postal Service and codify the requirement to deliver mail and packages together through an integrated network at least six days a week everywhere in the United States,” commented John McHugh, Chairman of the Package Coalition, which represents an alliance of retail, e-commerce and logistics companies.

Postmaster General Louis DeJoy has supported financial reform legislation, particularly provisions “addressing our unfair and unaffordable employee retirement health benefit costs that will give us a fighting chance.”

The agency recently reported an adjusted loss of $1.3 billion in the quarter, compared with a $288 million adjusted loss in the prior period. Operating revenue of $21.3 billion was down less than 1% year-over-year.

Volume for the Postal Service’s fiscal 2022 first quarter, which covers the last three months of the calendar year, came in at 1.96 billion pieces, down from 2.17 billion pieces in the 2021 fiscal quarter. Revenue from shipping and packages services was $8.6 billion, down from $9.3 billion in the prior quarter.

The Q1 results were much higher than in the same period two years ago, however, before the COVID-19 pandemic profoundly changed buying behavior and delivery activity. In the fiscal 2020 first quarter, which covered the 2019 holiday season, the Postal Service handled 1.73 billion parcels and other non-mail items, with revenue of $6.6 billion.

Upcoming ILWU Negotiations to Begin Soon

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As if there weren’t enough business disruptions for US Supply Chains, contract negotiations for the International Longshore & Warehouse Union (ILWU), the labor union responsible for West Coast port operations, are slated to begin this spring in the hopes of reaching an agreement in time for the July 1, 2022 current contract deadline.

As someone who has followed these labor negotiations for generations, this year’s negotiation is sure to be a contentious one with all of the issues that are on table from both sides of the fence.

Many experts anticipate that this year’s ILWU negotiations will result in either a labor strike or slowdowns at the Southern California ports as well as other US and Canadian West Coast ports. We also believe that there could be “sympathy” slowdowns and work stoppages at other US and Canadian ports if negotiations become hostile.  The whole labor negotiation outlook, coupled with ongoing port congestion issues, vessel backlogs, equipment and labor shortages, as well as the newly added global trade uncertainty as a result of Russia’s invasion of Ukraine, will ultimately result in highly significant delays to global shipments, increased disruptions for supply chains around the world, and certainly much higher shipping and logistics costs.

To minimize the potential impact of these global supply chain disruptions and to safeguard supply chains, we highly recommend that US businesses immediately begin working with their logistics consultants and service providers to plan whatever alternative solutions may be available, just in case. And, as we have been speaking about for quite some time, is now the time for real serious discussions about Reshoring and Near Shoring alternatives.  Well, if not now, then when!

US Imposes Export Restrictions Against Russia

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The following has been reported by our friends at the Law Firm of GRUNFELD, DESIDERIO, LEBOWITZ, SILVERMAN & KLESTADT LLP.  Should you require any additional information on this very critical and timely subject, please contact us and we will immediately put you I touch with the key personnel at GDLSK who can help you.

In response to Russia’s invasion of Ukraine, the United States has imposed significant restrictions on exports to Russia.  Effective February 24, 2022, goods covered by Categories 3-9 of the Commerce Control List (CCL) are subject to license requirements and licensing is under a “policy to deny.”  The involved CCL categories cover:  Electronics; Computers; Telecommunications; Information Security; Sensors and Lasers; Navigation and Avionics; Marine; and Aerospace and Propulsion.  These restrictions apply to exports, re-exports, and in-country transfers.  The new measures follow an Executive Order issued on February 21, 2022, which barred any transactions relating to two eastern regions of Ukraine (the so-called DNR and LNR regions).

The announced sanctions also restrict the export of nearly all goods to “military end users” or for “military end uses.”  Several dozen entities and individuals (both in Russia and in Belarus) have also been added to U.S. sanction lists.  Additionally, the U.S. Treasury Department is acting to prohibit Russia’s two largest banks, Sberbank and VTB Bank from processing payments through the U.S. financial system.

The situation is quite fluid at the moment and it is possible that the scope of these sanctions will evolve.

Additionally, it should be noted that, as the current situation in Ukraine continues to unfold, ocean carriers in the region are taking all necessary measures to ensure the safety of their employees, while also doing their best to keep the supply chain functioning.

As of now, virtually all ocean carriers in the region are suspending all services to Ukraine until further notice.  Additionally, some carriers are also suspending services to many surrounding Black Sea ports as media outlets have reported that neutral vessels are being fired upon. Finally, in some cases, carriers are unloading cargo in nearby countries where there are safer port conditions, such as Romania, Greece and Lebanon.

parcel and freight contract audit service

Expeditors International forced to shut down most of its OS

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As if Supply Chain Disruptions weren’t enough, a fresh new disruption has hit Expeditors  International after they were targeted in a ransomware attack, the company said.  This information has been reported by American Shipper.

And, the effects on the Seattle-based logistics company’s operations have been widespread.

“While our systems are shut down we will have limited ability to conduct operations, including but not limited to arranging for shipments of freight or managing customs and distribution activities for our customers’ shipments,” Expeditors said in a statement Sunday.

The company said it was investigating the attack as it worked to restore its systems. It did not give an estimate when normal operations might resume.

Expeditors has more than 18,000 employees across 100 countries, providing logistics and customs services for airfreight and ocean shipping. The company brought in $4.3 billion in revenue during the fourth quarter.

The company warned that the cyberattack “could have a material adverse impact on our business, revenues, results of operations and reputation.”

The incident represents one of the significant cyberattacks on a U.S. logistics provider in recent memory. Expeditors did not say whether the incident was the result of ransomware.

Intel 471, a cybercrime intelligence firm, warned in a November report that cybercriminals had been trying to sell network access of multiple transportation, logistics and shipping companies. Cybercriminals could use network access to stage ransomware attacks that could disrupt the global supply chain.

In December, Germany-based Hellman Worldwide was hit in a ransomware attack. The company subsequently warned its partners and customers that they could be targeted by scammers.

USPS’ Upcoming Price Change

US Postal Service Announces New Service for Commercial Businesses

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It’s called “USPS Connect”, the Postal Service’s new approach to commercial package delivery will have its official launch on a nationwide basis starting February, 22nd.

“USPS Connect Local” will provide businesses of all sizes with local-to-local same-day and next-day mail and package delivery at what the Postal Service claims will be affordable rates. The service features a broader range of service offerings, new pricing schedules, and a reconfigured network designed to increase the number of next-day deliveries for business customers.  This could be a huge advantage, especially to small and medium size businesses struggling to meet their customers same day and next day delivery requirements.

“USPS Connect” will provide smaller businesses access to big business rates, and it includes a no-minimum Parcel Select package option and USPS Connect Local Mail option for companies seeking affordable flat-rate delivery of First-Class Mail flats within a local area.

The USPS Connect offerings include USPS Connect Local, USPS Connect Regional, USPS Connect National and USPS Connect Returns.

The Postal Service is helping employees get ready for the nationwide launch of USPS Connect, beginning Feb. 22nd.

Last year, the Postal Service began testing USPS Connect Local in Texas as part of Delivering for America, the organization’s 10-year plan to achieve financial sustainability.

USPS Connect Local will now roll out to additional sites in 46 districts by Oct. 1st, bringing the total to 3,400 sites nationwide, including the original Texas sites. The first districts added will be New York 1 and New York 2 during the week of Feb. 22nd.

“We did the operational briefings by groups and had subject matter experts assigned to us. We briefed the subject matter experts, and they cascaded the briefings into their respective offices,” said Post Office Operations Director Leslie Johnson-Frick. “There were some lessons learned when we rolled out in Texas. Now we are ready to take it national.”

If you are looking for more guidance on USPS connect or other USPS services, please contact our parcel experts today!