Logistics Alert: International Shipping in the Current Time of Tariffs
July 30, 2018 Transplace

Logistics Alert: International Shipping in the Current Time of Tariffs

By: Mollie Bailey, Director, International, Transplace

As headlines surrounding new tariffs may have shippers concerned about their potential impact, it’s important to keep ahead of the headlines. The industry is already well into the traditional peak season import period (which is July through November annually), and importers are ramping up for the upcoming holidays. However, the uncertainty of current tariffs and the potential impact of any future regulations appears to be adding to the overall container volume loadings out of China, causing a few key concerns.

In order to avoid any new tariffs coming into effect on September 1st, imported goods must be customs-cleared by August 31 at 23:59. This applies even if the goods are sitting at a U.S. port – if the customs entry has not been submitted by that deadline, the new tariffs will be in effect.

  • For ocean freight moving to the west coast from Asia, this means that the product should be shipping by Week 32 (August 6) to allow 14 to 21 days transit.
  • For transit to the USEC, goods need to ship by Week 30 (July 23) to allow approximately 35 days transit to arrive at east coast ports.

Potential Challenges for International Shippers

This might pose some challenges for international shippers – for example, if a shipper does not already have bookings in place for sailings between Week 30 and Week 32, it may be difficult for them to find the necessary space. Current ocean carrier feedback indicates that vessels are full, and ocean freight spot rates have subsequently risen week over week over the past three to four weeks.

On the U.S. side of the supply chain, this translates into a scramble for drayage capacity as the imports arrive. Currently, most port and inland ramp markets are requiring 7-to-10-days advance notice to procure drayage capacity, which may continue to grow worse over the next two months. Warehouse space for cross-docks is also tight, meaning that truckload side rates from ocean entry ports may also be rising.

What Commodities are Impacted?

There are currently two active lists of commodities that are subject to tariffs that have already come into effect. The first list comprises 818 products with a total import value of $34 billion. A large percentage of these goods include:

  • Engines and motors
  • Construction
  • Drilling and agricultural machinery
  • Machines for working minerals, glass, rubber or plastic
  • Rail locomotives and rolling stock
  • Motor vehicles and motorcycles
  • Helicopters and airplanes
  • Testing, measuring, and diagnostic instruments and devices

The second list includes 284 tariff lines with a total import value of approximately $16 billion. Affected goods include:

  • Plastics/plastic products
  • Industrial machinery
  • Machinery for working stone, ceramics, concrete, wood, hard rubber or plastic and glass
  • Cargo containers
  • Tractors
  • Optical fibers

What Can Shippers Do?

The condensed timeline in August will be challenging for shippers, and we are currently seeing containers start to roll due to overbookings on vessels. Additionally, there have been several major carrier announcements within the past week from Maersk and Evergreen that they are changing their vessel services, schedules and rotations; meaning they may be seeing an opportunity for higher rates. Lastly, COSCO Shipping Lines recently confirmed that is was hit by a cyberattack impacting its operations in the Americas.

It’s important to know that, in regard to the latest round of tariffs announced on July 10, although the above lists of tariff classification numbers have been announced as subject to the September 1 increase, they are not finalized until the review process is complete. It’s critical for all importers that may be impacted by these actions to work with legal counsel to provide comments and seek exclusions if possible.

Have your supply chain operations recently been impacted by tariffs?

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