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Hurricane Laura Makes Landfall, Airlines Move Toward Freight, Hong Kong Origin Deadline Extended

By August 27, 2020 No Comments

Hurricane Laura

Just as Tropical Storm Marco made landfall in U.S. Gulf states, Hurricane Laura was been upgraded to Category 4, which is already responsible for at least 9 deaths in the Caribbean. As the hurricane made landfall Texas and Louisiana this morning, many port facilities are closed, and carriers are expecting major delays. Brace for capacity crunches as ports become difficult to access and as truckers help move relief supplies to those impacted. As the storm develops, we hope our friends in southern states stay safe. 

Air  

As the passenger air travel slump continues, major airlines are redirecting their resources. American Airlines recently reported intentions to cut 19,000 jobs, and Delta and others have announced similar layoffs and furloughs. American Airlines has also recently announced plans to stop service to numerous small cities across the U.S. Simultaneously, many airlines are announcing plans to increase air freight capacity, signaling a shift in focus toward the struggling cargo market. Impacts of the increasing capacity remain unclear as airlines struggle to protect revenue as federal aid runs out. 

New Transportation Security Administration (TSA) rules elevating the security burden on businesses exporting by air are set to be enacted in July 21. The rules place a significant security burden on warehouses, 3PLs, and forwarders, as TSA seeks to apply the same stringent guidelines that exist for passengers to cargo, too. 

The Port of New York and New Jersey has started to see cargo backlogs of 3 – 5 days, leaving shippers waiting to get their goods on rail or in a truck. The increased volume is likely due to shippers trying to avoid sky high rates to the U.S. west coast in favor of relatively normal rates to the U.S. east coast. 

Customs 

The deadline for U.S. importers to comply with the recent executive order and denote Chinese origin for goods manufactured in Hong Kong has been extended. Originally slated to go into effect on September 25th, the executive order will be effective on November 9th 

As the U.S. and China struggle through phases of their collective trade deal, import volumes from China are skyrocketing alongside Americans’ demand for manufactured goods. Experts attribute the seemingly counterintuitive trend to heightened demand for home furnishings as work-from-home arrangements persist and spending habits veering toward physical goods and away from travel. The demand has also launched rates to the U.S. west coast well above usual levels. 

The U.S. and the EU are also making headway in normalizing trade relations, as the two parties agreed to roll back tariffs on a variety of goods in a joint statement. American lobsters were the main concession granted by the EU, and the U.S. agreed to ease up on a variety of European products in return. 

The Consumer Product Safety Commission (CPSC) is beginning to implement new protocols as the agency inserts itself into the importation process. Importers are now able to report registered products as part of their entry, and CPSC will have a hand in inspections and examinations of products the agency deems “of interest”. 

Ocean 

Likely boosted by increased volume from China, trans-Pacific rates to the U.S. west coast are high and only expected to get higher. An expected General Rate Increase (GRI) on September 1st may push rates above $4,000 per FEU – over double the costs reported just a few months ago. The U.S. east coast is already seeing increased traffic as shippers get creative to avoid the congestion and cost of the west coast, and this will likely continue if the GRI is implemented as expected. 

Ports 

The strike at the Port of Montreal is seemingly moving towards a resolution, as longshore workers agreed to move containers carrying critical goods. While a final resolution has not been reached, cargo will start to move, but the backlog built up during the strike could impact the flow of goods for weeks to come. 

Union Pacific Railroad will start charging $500 on all excess contract cargo out of Seattle on September 6th. This surcharge has been implemented at other UP-serviced ports on the west coast as the company adjusts to increased volumes after a major slump earlier in the year. 

Trucking 

The Intermodal Motor Carriers Conference (IMCC) has filed a complaint with the Ocean Carrier Equipment Management Association (OCEMA) that alleges ocean carriers are distorting the cost of chassis usage. This complaint comes at a time when the industry is struggling to meet chassis demands at several ports, truckers are seeking $1.8B in damages related to overcharges for chassis.  

Capacity constraints on truckers aren’t easing up anytime soon, as inland ports are feeling the demand for trucks and the east coast continues to have high demand. With Hurricane Laura approaching the Gulf of Mexico, expect to see major capacity constraints as trucks are tapped to aid in relief and rebuilding efforts.