COVID-19 Latest Updates

Defense Production Act Invoked in Light of Formula Shortage, Biden Administration Temporarily Suspends 232 Tariffs on Ukraine Steel, Canadian West Coast Ports Can’t Handle U.S. Cargo Spillover

By May 19, 2022 No Comments

Ocean

Container shipping indexes in Asia-U.S. down around 20%-30% from peaks. Shipping rates are continuing to fall and are now materially lower than they were a few months ago. FreightWaves reports that the Shanghai Containerized Freight Index (SCFI) logged its 15th consecutive weekly loss on Friday. Peak season volumes, the end of China lockdowns and possible port labor unrest have the potential to cause spot rates to spike again, however. Time will tell if that is the case, or if falling import demand due to inflation and unwinding port congestion will continue to lower ocean spot rates.

Shanghai lockdown creating lull in May import volumes. Over the last seven weeks, the Covid lockdown in Shanghai has effectively resulted in a lull in May import volumes through US west coast ports. According to recent statistics from the port of Los Angeles Signal data platform, “cargo expected to arrive on vessels this week is down 5% on the same week of last year, and volumes are predicted to see a 20% lag next week.” The Loadstar reports that the top ten US ports saw April container imports climb 7.1%, compared with the same month of 2021, to 2,189,744 teu, suggesting US consumers’ appetite for spending continues unabated.

Ports

Canadian West Coast ports can not handle U.S. cargo spillover. The ports of Vancouver and Prince Rupert will not be able to handle any cargo diverted from the US West Coast if disruptions are caused by ongoing longshore contract negotiations. Cliff Stewart, vice president of infrastructure at the Port of Vancouver, told JOC.com that “the terminals are full. There’s nowhere to put anything.” The ports are already at capacity with Asian imports bound for US and Canadian markets. 

Customs

Biden Administration temporarily suspends 232 tariffs on Ukraine steel. From the NCBFAA Monday Morning eBriefing: The Biden Administration on May 9 announced that it has suspended 232 tariffs one year for imports of Ukrainian steel. According to White House, Ukraine’s steel industry employs 1 in 13 Ukrainians. Russia has targeted Ukraine’s steel plants during its invasion. This includes one of the largest steel plants in Mariupol. “Many of Ukraine’s steel mills have continued to pay, feed, and even shelter their employees over the course of fighting. Despite nearby fighting, some Ukrainian mills have even started producing again,” the Commerce Department said. “Creating export opportunities for these mills is essential to their ability to continue employing their workers and maintaining one of Ukraine’s most important industries.”

Initiation of 4-Year Review Process of China tariffs. The first step of a statutory review process is underway to determine whether China tariffs issued pursuant to Section 301 of the Trade Act of 1974 should be continued beyond the 4-year mark since their implementation. The US Trade Representative (USTR) has issued a Federal Register notice that includes different comment periods and phases for the USTR to review and decide if the tariffs should be extended. You can read the FAQ for the U.S. Office of Trade Representatives 4-Year Review process here. 

Trucking

Matheson Postal Services Inc. files for Chapter 11 bankruptcy. The Sacramento-based trucking and logistics company, which has a contract with the U.S. Postal Service to haul mail, filed a petition on May 5 in the U.S. Bankruptcy Court for the Eastern District of California. FreightWaves reports that the filing lists its assets and liabilities as between $10 million and $50 million. Matheson has 248 power units and 383 truck drivers, according to the Federal Motor Carrier Safety Administration’s SAFER database.

Radiant Logistics reports record third quarter results. Radiant Logistics reported record results for its fiscal third quarter, with the company saying it’s not seeing any slowdown in the high demand. Founder and CEO Bohn Crain anticipates a “second surge” in freight flows when China lifts COVID lockdowns, which he believes will “reignite supply chain congestion and capacity issues”, reports FreightWaves. Navegate, a recent acquisition of Radiant, was also mentioned in the Company results announcement: “we remain very excited about the opportunities made available to us through our acquisition of Navegate. In addition to solidifying our presence in Shanghai, Navegate also strengthens our international services offering, particularly in the areas of customs brokerage, ocean forwarding and drayage services and brings to us a robust global trade management capability.”

Rail

Unions critical of BNSF’s controversial attendance policy. The Brotherhood of Locomotive Engineers and Trainmen (BLET) AFL-CIO have voiced concerns over BNSF’s attendance policy, saying “recent adjustments aren’t enough to overcome its shortcomings,” according to FreightWaves. Greg Regan, president of the Transportation Trades Department, said “BNSF’s proposed changes to its HiViz attendance policy are unimpressive. These changes do nothing to address the policy’s fundamental flaws.” The Transportation Trades Department is affiliated with the AFL-CIO. BNSF’s“HiViz” policy, which stands for high visibility, was implemented on Feb. 1. They claim that the purpose of the policy is to provide heightened transparency on absences in addition to more predictability for crews’ working hours. Union members shot back in response that the policy “shortchanges rest time and penalizes employees for time off.” BNSF has adjusted the policy several times since implementation in response to feedback, but the unions argue that the adjustments don’t address worker fatigue sufficiently. 

North Carolina awards $10.9 million in grants to freight rail and rail crossing projects. The North Carolina Ports Authority, along with 13 short line railroads through the agency’s freight rail and rail crossing improvement program received grants totaling $10.9 million from the North Carolina Department of Transportation. The grants will help fund upgrades to more than 35 bridges and 12 miles of railroad track in the state, and will benefit fourteen projects. 

Maersk offering an alternative Asia-Europe rail-sea service via Central Asia and the Black Sea. Maersk has been looking to develop rail routes since Russia’s invasion of Ukraine closed the China-Europe rail network going via Russia and Belarus. The war has also led to the closure of the Poland-Belarus border and a cease of operations at key hubs. Maersk’s newly revamped “Middle Corridor” service departs from various locations in China, crosses the China-Kazak border at Khorgos and continues by rail to Aktau, where containers are loaded on a barge to Baku in Azerbaijan, the Load Star reports. The rail route has an annual capacity of 150,000 teu and the transit time from origin to destination is around 40 days.

Air

EgyptAir signs deal with AEI to continue cargo expansion. AirCargoNews reports that EgyptAir has signed a deal with Aeronautical Engineers, Inc. (AEI) for the conversion of an B737-800 aircraft into a freighter configuration. The aircraft (MSN: 35560) is scheduled to be converted this October. Amr Abu El-Enein, chairman and chief executive of EgyptAir Holding Company, said “this order is part of Egyptair’s cargo and passenger fleet modernization plan. We will continue to increase the size of our fleet and open new freighter markets in the coming years to meet the growing needs of the local market in terms of exporting goods abroad, especially crops.” As of now, Egyptair owns three Airbus A330-200 freighters, with a capacity of 60 tons per aircraft.

International

Supply chain issues severely straining Tesla Shanghai factory. Output at Tesla’s Gigafactory 3 in Shanghai is at less than 50% as a result of ongoing supply chain issues. Giga Shanghai is producing 1,200 Model 3 and Model Y vehicles a day after operations resumed on April 19. That output number is only 45 per cent of the factory’s full capacity of 2,600 units a day. According to executives at Tesla’s car component vendors, the automotive maker had expected to fully restore production on May 16.

Other

Thousands of projects underway in U.S. funded by infrastructure package. 4,300 projects are underway with more than $110 billion in funding nearly six months after the signing of President Joe Biden’s $1 trillion infrastructure package. The roads, bridges and other projects are laying “a foundation for tremendous growth into the future,” said White House senior adviser Mitch Landrieu. Transport Topics reports that President Biden and various members of his administration have made more than 125 trips to “highlight the bipartisan investments in infrastructure.” 

Defense Production Act invoked in light of formula shortage. On Wednesday, President Joe Biden invoked the Defense Production Act to increase the manufacturing of baby formula in order to ease a nationwide shortage. The shortage was caused by the closure of a key plant in Michigan, Abbott Nutrition, after a number of babies fell ill due to bacterial infection after drinking formula produced by Abbott. On Monday, the FDA reached an agreement with Abbott to reopen the plant under “conditions subject to enforcement by a federal court,” CNBC reports. Abbott could reopen the plant within two weeks and consumers could see formula back on shelves within eight weeks. Biden is requiring suppliers to prioritize directing ingredients to baby formula manufacturers by invoking the Defense Production Act. The law gives the president authority to require companies to prioritize the manufacture and allocation of goods during crisis and was passed in 1950 during the Korean War.

Navegate now accepting payments through Paycargo. Contact a Navegate expert to learn more.

Recent developments amid Russia-Ukraine crisis:

Canadian government commits assistance to help export Ukrainian wheat stores. The Canadian government has announced that it plans to help Ukraine export stores of wheat to high-demand nations. Because of the Russian invasion, Ukraine’s seaports have been blocked off, effectively trapping dozens of foreign-flagged vessels and about 20 million tonnes of Ukrainian grain, according to the Maritime Executive. The Ukrainian wheat and other agricultural cargo is essential for the Middle East and Africa, who rely on Ukraine for certain food supply imports. Cargo ships will be dispatched from Canada to pick up Ukrainian wheat in the Black Sea states, then deliver the food to nations where it is needed most.