COVID-19 Latest Updates

Port Pile-Ups, Plummeting Volumes, and Force Majeure

By March 31, 2020 No Comments

U.S. Customs

The United States Trade Representative (USTR) has opened a docket to field public requests for tariff modifications regarding essential products and medical supplies. According to the USTR, life-saving devices like ventilators and oxygen masks have never been subject to Section 301 tariffs, but if you feel certain currently-taxed products may be essential, you can submit comments hereThe USTR will take comments until June 25.  

Global Ports

Global ports have seen extensive pile-ups of containers as the effects of the pandemic spread across North America. Shippers with plummeting demand are increasingly cancelling orders, delaying the departure of shipments, or seeking storage at ports in an effort to slow down their supply chains. As importers delay pickups, ports are struggling to find room to store containers full of non-essential cargo. Some of the largest ports on the U.S. East Coast have been seen sourcing available land both on and off of terminal grounds to increase storage capacity for containers.

As a result, the Federal Maritime Commission (FMC) has brought renewed focus to the effectiveness of detention and demurrage fees in incentivizing the pickup and return of cargo and containers. Many expect a new interpretive rule to be announced in the near future. In the meantime, many carriers have been extending free time for beneficial cargo owners to reduce fees in association with current supply chain disruptions.

Ports across the U.S. are employing various strategies to keep workers safe and cargo moving during the crisis. Notably, the Port of Baltimore closed Seagirt Marine Terminal Monday, March 30th through today, March 31st, due to lagging volumes from China. New Orleans’ and Houston’s ports have taken less severe measures, closing accessory services and buildings while remaining fully operational. 

Air

The International Air Transport Association (IATA) predicts that air cargo volume will be approximately 20% lower in 2020 than in 2019 due, in large part, to the COVID-19 pandemic. According to the IATA, airlines are busy transporting food and medical supplies, and large-scale economic shutdowns have left a smaller appetite for typical air cargo like apparel and automotive parts. 

Ocean

Ocean freight volume projections are growing increasingly grim, anticipating a more than 17% decrease in total volume from March to May. As U.S.-based businesses cancel import purchases at large scale in response to decreased economic activity, container lines are forced to increase blanked sailings from Asia. Carriers have been announcing blank sailings rapidly, adding volatility to international freight routes. Make sure you’re constantly monitoring the status of your shipments in order to make alternate plans, if necessary.

As a result of the uncertainty in the freight market, experts also warn of a nosedive in spot rates, with declines of as much as 36% in certain lanes.  

Domestic Trucking

The Federal Motor Carrier Safety Administration (FMCSA) has issued an updated emergency declaration that exempts carriers transporting certain medically or economically necessary goods from Hours of Service (HOS) restrictions. In addition to the declaration, the FMCSA has also provided a FAQ page to help determine what types of cargo qualify for the exemption and the modified rest requirements for exempted drivers. 

The uncertain supply chain environment created by COVID-19 is making it difficult for truck brokers to make an accurate 14- or 21-day forecast for rates. This is causing brokers to price uncertainty into the equation, and truckload rates across the nation are significantly higher now than they were a month ago. As all parties grapple with this unprecedented disruption, brokers have also stated that alterations to long-term contracts may be appropriate. 

Force Majeure

Finally, watch out for two important words right now: Force Majeure. Major carriers are declaring this, citing that the effects of the COVID-19 pandemic on shipments are beyond the given carrier’s control. This declaration temporarily releases carriers from their contractual obligations, should they feel that they are impossible or impractical due to COVID-19’s effects. So far, CEVA and DHL are the biggest names to declare this, but don’t be surprised if this trend continues.