TEL: (516) 822-1183

U.S. ANNOUNCES DEAL WITH JAPAN ON TARIFFS

/in , /by

Our friends at the Law Firm of Grunfeld, Desiderio, Lebowitz, Silverman and Klestadt have advised us that on February 7, 2022, the US Trade Representative announced a deal to partially rollback the Section 232 tariffs on steel from Japan through the use of a tariff rate quota (“TRQ”).  The TRQ will be set to allow for the importation of historically-based volumes of Japan steel products without the assessment of Section 232 tariffs.  Highlights of the agreement, which  takes effect on April 1, 2022, include the following:

TRQ Amount: The aggregate annual TRQ is set at 1.25 MMT for 54 specified product categories, allocated in line with the 2018-2019 historical period. Steel imports in excess of the TRQ will remain subject to the 25% Section 232 tariff (unless covered by an exclusion).

Derivative Products: Imports from Japan of derivative articles of steel, as referenced in Presidential Proclamation 9980 will not be subject to Section 232 duties. These include certain nails, tacks (other than thumb tacks), drawing pins, corrugated nails, staples (other than those of heading 8305) and similar articles, bumper stampings and body stampings.

Eligible products: In order to be qualify under the TRQ, steel imports must be “melted and poured” in Japan according to current U.S. requirements and rules (which must be supported by substantiating documentation).

Exclusions: The exclusion process will remain available.

Administration, Adjustment & Review: The TRQ will be administered on a quarterly basis. Special rules allow for the limited rollover of unused TRQ volume from a given quarter. A public website will provide data as to quarterly utilization of the TRQ, including allocations for rollover.  Adjustments may be made, subject to specified rules, based on annual reviews. The U.S. will evaluate utilization and administration of the TRQ every three months and, at the request of Japan, enter into consultations to address any substantial TRQ under-use.

Aluminum – The February 7th announcement makes no changes to the Section 232 tariffs applicable to aluminum from Japan.

Should you have an interest in learning more about these recent tariff changes, please reach out to us and we will immediately put you in touch with our contacts at the GDLSK Law Firm.

UPS Blows Away Analysts Expectations

/in , , /by

It should come as no surprise to anyone that UPS’ Fourth Quarter Earnings report was better than analysts expected.

As reported by Transport Topics, UPS on February 1st announced record fourth-quarter and full-year financial results, as online holiday shopping which boosted home parcel deliveries along with an increase in medical shipments, including delivery of hundreds of millions of COVID-19 vaccines obviously kept the company’s drivers, package handlers and trucks busy.

Fourth Quarter revenues rose 11.5% to $27.8 billion compared with $24.9 billion in 2020, while net income came in at $3.09 billion or $3.53 cents per share, compared with a loss of $3.34 billion, negative $3.84, during Q4 2020. Year-ago results were affected by $5.6 billion in charges related to the company’s pension plan as well as after-tax impairment charges related to its sale of UPS Freight.  Wall Street analysts had expected Q4 EPS of $3.10 on revenue of $27.1 billion.

For the full year, Atlanta-based UPS said revenue increased 15% to nearly $97.3 billion compared with $84.6 billion in 2020, while net income was $12.9 billion compared with $1.4 billion in 2020.

Lifted by its strong results, UPS announced a 48% increase in its quarterly dividend, to $1.52 per share, payable on March 10, 2022 to shareholders of record as of February 22, 2022.

“I want to thank all UPSers for their outstanding efforts throughout the holiday season and for once again delivering industry-leading service to our customers,” CEO Carol Tomé said in a news release. “The execution of our strategy is delivering positive financial results and driving strong momentum as we move into 2022.”

In mid-December, 2021, UPS announced it had delivered more than 1 billion COVID-19 vaccines to health care customers and global organizations around the world. UPS is one of several freight companies that is active in COVID-19 distribution. Tomé said the company’s health care division continues to generate strong profitability and is lifting the company’s profile. Now 18 months into her leadership tenure, Tomé has prioritized more profitable deliveries and contracts over boosting volume, as the company has pursued more contracts with health care companies and medium- to large-sized businesses.

Based on this relatively new company philosophy, we wonder how small to midsize UPS shippers will be treated as they try to stop out-of-control shipping costs that have plagued these shippers for the past few years.

However, shipments by one key, large customer — Amazon.com Inc.— declined 1.6% compared with 2020. Amazon represented 11.7% of UPS’ business in 2021, compared with 13.3% a year ago.  We certainly expect this trend to continue and perhaps move at an even faster pace in 2022 and beyond.  On a February, 1 conference call with analysts and reporters, Tomé said Amazon and UPS have a strong relationship, even as Amazon continues to build its own delivery network.  “We have mutually agreed about the volume that we should take and the volume that they should keep that works best for both companies,” she said.

During the fourth quarter of 2021, UPS’ average daily shipping volume fell 0.6%, driven by a 4.8% drop in international shipments that was offset by a fractional uptick in domestic package volume.

When the numbers are broken down by operating divisions, fourth quarter revenue in UPS’ domestic unit rose 12.4% to $17.7 billion compared with $15.7 billion a year ago. The increase was led in part by the strong holiday shopping season as well as a 10.5% increase in revenue per piece.

The company’s international segment reported a 13.1% gain in Q4 revenue to $5.39 billion compared with $4.77 billion in 2020. International revenue per piece increased 16.4%, UPS said.

And remember, UPS has for the past several years not only increased their base rates by approximately 6% per year, but they have also instituted a number of additional surcharges that have obviously had a very positive effect on their financial results.  Parcel shippers can expect more of the same in the years to come.

 

importers

Port Congestion is Spreading Across the Country

/in , , , /by

According to a report in the Wall Street Journal this week, it’s not just LA and Long Beach ports that are backlogged, it’s also some East Coast and Gulf Coast ports as well, threatening to extend shipping delays and drive up costs for importers seeking to get around the bottlenecks at Southern California’s big gateway complex.

Container ships are backing up off coastlines from Oakland, Calif., to Charleston, S.C., because of a record flow of boxes into and out of the country combined with worker shortages triggered by Covid-19’s fast-spreading Omicron variant.

“It’s supremely frustrating to be an importer right now,” said Nathan Strang, director of ocean trade lane management at Flexport Inc., a San Francisco-based freight forwarder. “Everybody wants to find a relief valve and all of the relief valves have been plugged.”

Ship backups that plagued U.S. ports throughout the pandemic have been mainly concentrated along the West Coast. Niels Madsen, a vice president of operations at Denmark-based Sea-Intelligence ApS, said a rise in backups at East Coast ports suggests congestion is worsening there.

The average wait time for a berth at the busiest East Coast gateway, the Port of New York and New Jersey, extended to 4.2 days last week, according to the port’s data, up from 1.6 days last January. At the Port of Charleston on Thursday, a backup of 19 container ships was waiting offshore for a berth.

New Jersey port officials say its congestion is being caused, in part, by Covid-19-related worker absences. Charleston officials say their backup is mainly due to a surge of imports that has clogged terminals, leaving limited space to unload inbound containers.

The number of containers waiting more than 15 days for pickup at Charleston, the country’s eighth-largest gateway for container imports, exceeded 7,000 boxes last week, an increase of 40% compared with one month earlier, according to supply-chain analytics firm project44. Charleston officials say it could take six weeks to clear the backlog.

Georgia’s Port of Savannah said this month it has cleared a backlog that had grown to more than 20 vessels late last year. The port opened new container storage sites, including temporary “pop-up” facilities, to make room at terminals for handling boxes, said Griff Lynch, executive director of the Georgia Ports Authority, which operates the Savannah port.

Ports on the West Coast are also struggling. At the Port of Oakland on Thursday, 15 ships waited for a berth. Port officials there attribute the backup to thousands of empty containers that have filled terminals as they await return to Asia.

The ports of Los Angeles and Long Beach, which make up the nation’s busiest container port complex, have struggled to handle record container flows for more than a year. The queue of ships waiting to enter the port has remained at about 100 vessels for almost two months despite port and Biden administration attempts to clear the backlog. Authorities there said some 800 dockworkers, or about 10% of the handling crews, were unavailable for Covid-related reasons at one point earlier this month.

Combined import volumes at the Southern California ports last month slumped to the lowest level in 18 months as port terminals, truckers and warehouses struggled to move boxes inland.

Peter Sand, chief analyst at Xeneta, a Norway-based transportation data firm, said the bottlenecks tie up shipping capacity and contribute to rising ocean rates. Base spot rates to ship a 40-foot container from the Far East to U.S. ports reached their highest levels of the pandemic this month, according to Xeneta.

The average rate to the East Coast is about $12,000, up from $3,000 two years ago. The rate to the West Coast is about $8,500, an increase of about 467% from January 2020.

Need help navigating this “new normal?”  Contact us today to learn how we can help.

Supply Chain Disruptions Are About to Get Even More Interesting!

/in , , /by

As the annual Lunar New Year celebrations in China began today, it would seem that the weeks-long celebration and expected factory slowdowns would be cheered around the industry because it is the perfect time to clear all of the backlogs in the U.S.

However, many experts are only viewing this reprieve as the calm before a perfect storm. There are many reasons why industry leaders believe the post-Lunar New Year landscape is set to be very difficult. While factory shutdowns around this time of year are expected, many in the industry believe that massive amounts of travel could also lead to more Covid-19 related pauses and slowdowns.

“What many people in the industry fear is a scenario similar to the beginning of the pandemic, where factory shutdowns were extended and then manufacturing operations were ramped-up to make up for lost time and meet consumer demand,” said Peter Hsieh, OEC Group Regional Vice President of Sales and Marketing. “This likely scenario will create more backlogs at U.S. ports and make delays even longer than those currently being experienced – especially at West coast ports.”

In addition, the ILWU contract negotiations which are looming in late spring are compounding experts’ fear. This year, negotiations could become contentious, even shut down operations, and dramatically add to the long line of vessels waiting to berth and unload goods at West Coast ports already reeling. While it may seem that potential labor issues will only affect West Coast ports, importers must realize that a potential work stoppage may be supported by sympathetic East Coast port workers and other groups of longshoremen around the country.  This is nothing new and has been done many times in past decades.

This could mean ports on the West Coast that currently handle nearly two-thirds of all imports into the U.S. could be, at best, slowing down operations and making the import of goods into the U.S. even more difficult. While there are other ports in the U.S. that may not have the same bottlenecks, shippers need to remember that they also do not have the capacity to handle the same amount of volume as L.A. and Long Beach and competition for space of these vessels will be fierce further stressing the East and Gulf Coast ports.

“The ILWU is in a very strong position and right now they do not seem to be budging on any of their demands,” said Frank Costa, Vice President of Sales for OEC Group’s Northeast Region. “As a result of their current standing and the fact that no known conversations are taking place, it is possible that these complex negotiations will be drawn out, meaning that operations at L.A.-Long Beach could be severely interrupted for the foreseeable future. Therefore, it is critical for all importers to begin thinking about ways to bypass West Coast Ports and move their deliveries to either East Coast or Gulf Coast ports.  In the end, this could be the impetus for these East Coast and Gulf Ports to increase their ability to handle additional cargo for the foreseeable future.  And, one other critical point….Is it FINALLY time for US Importers to SERIOUSLY consider Near-Shoring and Re-Shoring capabilities so as to finally have options available to them they have not really considered in the past.  We’d love to hear your thoughts on this. 

Task Force Seeks Public Comments on China

/in , , /by

FEDERAL TASK FORCE SEEKS PUBLIC COMMENTS ON METHODS TO PREVENT THE IMPORTATION OF CHINA FORCED LABOR GOODS

It appears that the Federal Government may finally be putting some teeth into seeking ways to prevent labor force transgressions that have been suspected by the Chinese government for some time now.  Whether or not actual action is taken, (assuming these suspensions are actually happening) remains to be seen.  Our friends at the Law Firm of GDLSK have provided the following information which we believe is critical and so we wanted to immediately share this with you.

On December 23, 2021, the President signed into law the Uyghur Forced Labor Prevention Act (“the Act”). GDLSK’s summary can be accessed here.

One provision requires that the Forced Labor Enforcement Task Force (“Task Force”) (a multi-agency body created to enforce the forced labor import prohibition) solicit public comments “on how best to ensure that goods mined, produced, or manufactured wholly or in part with forced labor in the People’s Republic of China, including by Uyghurs, Kazakhs, Kyrgyz, Tibetans, and members of other persecuted groups in the People’s Republic of China, and especially in the Xinjiang Uyghur Autonomous Region, are not imported into the United States.”

In a notice scheduled for Federal Register publication on January 24, 2022, the Task Force is seeking public comments on the above.  Comments, which must be submitted in a specified format through the Federal e-Rulemaking Portal, must be received by March 10, 2022.

No later than 45 days after the close of the comment period, the Task Force must conduct a public hearing inviting witnesses to testify with respect to the use of forced labor in China and potential measures to prevent the importation of goods produced, wholly or in part with China forced labor.

Within 180 days after the enactment of the Act (i.e., by June 21, 2022), the Task Force (in consultation with the Secretary of Commerce and the Director of National Intelligence) must submit to specified congressional committees an initial report detailing the strategy to be pursued for preventing the importation of goods produced, wholly or in part, with China forced labor.  Strategy updates are to be submitted annually.

While comments may address any aspects of forced labor import compliance, the Task Force has provided a list of 18 questions (see below) that the public may wish to consider.  The submission of comments provides members of the public with an opportunity to potentially shape future enforcement policy.

GDLSK is available to assist your company in the drafting of public comments.  In addition, our firm has extensive experience in the area of forced labor import enforcement, including challenging Customs detentions of goods under Withhold Release Orders and counseling on the development of compliance programs.

List of Questions the Task Force Recommends Considering:

  • What are the risks of importing goods, wares, articles and merchandise mined, produced, or manufactured wholly or in part with forced labor in China, including from the Xinjiang Uyghur Autonomous Region (“XUAR) or made by Uyghurs, Kazakhs, Kyrgyz, Tibetans, or members of other persecuted groups in any other part of China? To the extent feasible, as part of the assessment of risks, what mechanisms, including the potential involvement in supply chains of entities that may use forced labor, could lead to the importation into the United States from China, including through third countries, of goods, wares, articles and merchandise mined, produced, or manufactured wholly or in part with forced labor?
  • What procedures can be implemented or improved to reduce the threats identified in Question 2?
  • What forms does the use of forced labor take in China and the XUAR? For example, what “pairing assistance” and “poverty alleviation” or other government labor schemes exist in China that include the forced labor of Uyghurs, Kazakhs, Kyrgyz, Tibetans, or members of other persecuted groups outside of the XUAR? What similar programs exist in which work or services are extracted from Uyghurs, Kazakhs, Kyrgyz, Tibetans, or members of other persecuted groups under the threat of penalty or for which they have not offered themselves voluntarily?
  • What goods are mined, produced, or manufactured wholly or in part with forced labor in the XUAR or by entities that work with the government of the XUAR to recruit, transport, transfer, harbor, or receive forced labor?In addition to cotton, tomatoes, and polysilicon, are there any other sectors which should be high-priority for enforcement? What unique characteristics of such high-priority sector supply chains, including cotton, tomato, and/or the polysilicon supply chains, need to be considered in developing measures to prevent the importation of goods mined, produced, or manufactured wholly or in part with forced labor in China?
  • How can the United States identify additional entities that export products that are mined, produced, or manufactured wholly or in part with forced labor in the XUAR or by entities that work with the government of the XUAR to recruit, transport, transfer, harbor, or receive forced labor?
  • How can the United States most effectively enforce the Act against entities whose goods, wares, articles, or merchandise are made wholly or in part with forced labor in China and imported into the United States?
  • What efforts, initiatives, and tools and technologies should be adopted to ensure that U.S. Customs and Border Protection can accurately identify and trace goods entered at any U.S. ports in violation of section 307 of the Tariff Act of 1930, as amended (the forced labor statute)?
  • What due diligence, effective supply chain tracing, and supply chain management measures can importers leverage to ensure that they do not import any goods mined, produced, or manufactured wholly or in part with forced labor from China, especially from the XUAR?
  • What type, nature, and extent of evidence can companies provide to reasonably demonstrate that goods originating in China were not mined, produced, or manufactured wholly or in part with forced labor in the XUAR?
  • What tools could provide greater clarity to companies on how to ensure upcoming importations from China were not mined, produced, or manufactured wholly or in part with forced labor in the XUAR? To what extent is there a need for a common set of supply chain traceability and verification standards, through a widely endorsed protocol, and what current government or private sector infrastructure exists to support such a protocol?
  • What type, nature, and extent of evidence can demonstrate that goods originating in China, including goods detained or seized were not mined, produced, or manufactured wholly or in part with forced labor?
  • What measures can be taken to trace the origin of goods, offer greater supply chain transparency, and identify third-country supply chain routes for goods mined, produced, or manufactured wholly or in part with forced labor in China?
  • How can the U. S. Government coordinate and collaborate on an ongoing basis with appropriate nongovernmental organizations and private sector entities to implement and update the strategy that the FLETF will produce pursuant to the Act?
  • How can the U.S. Government improve coordination with nongovernmental organizations and the private sector to combat forced labor in supply chains, and how can these serve as a model to support implementation of the Act?
  • Is there any additional information the Task Force should consider related to how best to implement the Act, including other measures for ensuring that goods mined, produced, or manufactured wholly or in part with forced labor do not enter the United States?

Should you have any questions or need any additional information, please do not hesitate to contact Arthur Bodek, Heather Litman or any of the attorneys at GDLSK for assistance in this area.  They can be reached at 212 557-4000.

Shockwaves Hit LTL Industry!

/in , , , /by

As reported by FreightWaves, Waco, Texas-based Central Freight Lines has notified drivers, employees and customers that the less-than-truckload carrier plans to wind down operations on Monday after 96 years.

A source close to CFL told FreightWaves that CFL had “too much debt and too many unpaid bills” to continue operating, despite exploring all available options to keep its doors open. “It’s just horrible,” said CFL President Bruce Kalem.

“Years of operating losses and struggles for many years sapped our liquidity and we had no other place to go at this point,” Kalem told FreightWaves. “Nobody is going to make money on this closing, nobody.”

Central Freight will cease picking up new shipments effective Monday and expects to deliver substantially all freight in its system by Dec. 20, according to a company statement.

A source familiar with the company said he is unsure whether CFL will file Chapter 7 or “liquidate outside of bankruptcy,” but that the LTL carrier has no plans to reorganize.

The company reshuffled its executive team nearly a year ago in an effort to stay afloat, including adding the company’s owner, Jerry Moyes, as CFL’s interim president and chief executive officer. Moyes remained CEO after Kalem was elevated to president in July.

“I think it was surprising that there wasn’t a buyer for the entire company, but buyers were interested in certain pieces but not in the whole thing,” the source, who didn’t want to be identified, told FreightWaves. “Part of it could have been that just the network was so expansive that there was too much overlap with some of the buyers that they didn’t need locations or employees in the places where they already had strong operations.”

CFL, which has over 2,100 employees, including 1,325 drivers, and 1,600 power units, is in discussions with “key customers and vendors and expects sufficient liquidity to complete deliveries over the next week in an orderly manner,” a CFL spokesperson said. Approximately 820 employees are based at the company headquarters in Waco.

Despite diligent efforts, CFL “was unable to gain commitments to fund ongoing operations, find a buyer of the entire business or fund a Chapter 11 reorganization,” another source familiar with the company told FreightWaves.

Kalem said the company had 65 terminals prior to its decision to shutter operations.

“Jerry [Moyes] pumped a lot of money into the company, but it just wasn’t enough,” Kalem said.  Kalem went on to say he’s aware that a large carrier is interested in hiring many of CFL’s drivers but isn’t able to name names at this point.

“Central Freight is in negotiations to sell a substantial portion of its equipment,” the company said in a statement. “Additionally, Central Freight is coordinating with other regional LTL carriers to afford its employees opportunities to apply for other LTL jobs in their area.”

As of late Saturday night, Kalem said fuel cards are working and drivers will be paid for freight they’ve hauled for the LTL carrier until all freight is delivered by the Dec. 20 target date.

“I’m going to work feverishly with the time I have left to get these good people jobs — I owe it to them,” Kalem told FreightWaves. “We are going to pay our drivers — that’s why we had to close it like we’re doing now. We are going to deliver all of the freight that’s in our system by next week and we believe we can do that.”

During the outset of the pandemic, Central Freight Lines was one of four trucking-related companies that received the maximum award of $10 million through the U.S. Small Business Administration’s Paycheck Protection Program (PPP). This occurred around the time that CFL drivers and employees were forced to take pay cuts, a move that didn’t go down well with drivers.

“It all went to payroll,” Kalem said about the PPP funds. “Yes, our employees and drivers did take a pay cut over the past few years, and we gave most of it back, even raised pay over the past several months but it just wasn’t enough to attract drivers.”

While this is sad news for the Central Freight Lines family, we’re sure that many of the employees will in fact find job opportunities with other trucking entities, especially their driver pool.