First quarter arrived with many questions surrounding what potential effects the new Trump Administration might have on international trade. MIQ’s Global Trade Compliance experts examined these questions and released supply chain alerts to our customers to provide further insight. In 2017, the most clicked on supply chain alerts were those focused on the potential impacts to international trade, here were the questions getting the most attention:
Would the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP) survive?
During his Presidential election, Trump had vowed to pursue bilateral trade agreements instead of multilateral ones like the TPP; which he called a disaster. Those watching and waiting to see what the outcome for TPP would be, didn’t have to wait for very long. On January 23, President Trump signed an executive order withdrawing the United States from the Trans-Pacific Partnership (TPP). This trade deal would have included 11 Pacific Rim countries that according to the World Bank make up 40% of the global GDP and 20% of global trade. Click here to read about what comes after the Trans-Pacific Partnership.
Would President Trump impose a tax on U.S. imports?
During the Presidential election Trump routinely mentioned the unfair advantage enjoyed by nearly all of America’s trading partners who employ consumption-based value-added taxes (VAT) as a revenue source. The “unfair” advantage results from zero-rating exports and fully taxing imports. Click here to read more.
Could the Trump Administration impose new tariffs?
Congress is constitutionally charged with imposing tariffs, although Congress has delegated some authority to the President to take trade-related action if he makes a specified threshold determination before taking a trade-related action. Would President Trump argue that these existing laws give him sufficient authority to impose tariffs by executive action without seeking new legislation. Click here to read more.
Aside from international trade, the only other significant supply chain news in first quarter was that of winter weather. In March a major nor’easter named “Stella” brought blizzard conditions consisting of heavy snowfall and high winds to Pennsylvania, Washington D.C., New York, New Jersey and most of New England. Numerous ports and terminals closed for a few days in March due to impacted operations.
In second quarter MIQ’s staff would find themselves answering questions related to cyber security, major ocean alliances, steel import investigations and the continuing focus on NAFTA.
On April 1st, four of the existing ocean carrier alliances consolidated to just three. The new alliance structure was an attempt by ocean carriers to reduce operating costs; thereby achieving improved revenue. During the month of April there were many questions pertaining the possibility of fewer choices on routes, rate volatility, slot-sharing arrangements and impacts to marine terminal operations. Our MIQ logistics staff created a page on our site dedicated to this topic.
Just three weeks after the alliances, Shanghai International Port Group (SIPG) attributed port congestion at Shanghai’s Yangshan deep water port to “imbalance business volumes from major container shipping routes following the regroup of the major shipping alliances”. Delays reported from both bad weather and traffic reorganization resulted in congestion at the Guandong container terminal and the Shengdong container terminal at the Yangshan Port.
In late April discussion around NAFTA began to make headlines again, as the President was prepared to end the North American Free Trade Agreement deal, which had governed trade relations for the past 23 years. However, after speaking with leaders from Canada and Mexico, the President announced he would not cancel NAFTA, but instead work to renegotiate it with our two neighboring countries. The administration wants to change “rules of origin” governing what counts as an automobile or other unfinished good produced within the free trade area. Click here to read an example that illustrates.
The topic of the President having legal authority to impose tariffs on imports without Congressional approval came up again on April 20th with a Presidential Memorandum.
The memorandum was directing the Secretary of commerce to initiate an investigation under Section 232 (b) of Trade Expansion Act of 1962 to determine the impact of steel imports on national security.
Unlike a more targeted antidumping and countervailing duty investigation, the Section 232 investigation could give the President the legal authority to place broad restriction on steel imports into the United States. Click here to read more.
One of the biggest supply chain disruptions for 2017 occurred on June 25th, when the ‘Petya’ ransomware cyberattack began hitting companies throughout Russia, Ukraine, France, Denmark and ultimately the U.S. The attack impacted companies ranging from food processors to crude oil producers to European government agencies as well as A.P. Moller-Maersk, the world’s largest shipping company.
‘Petya’ disrupted terminal operations globally; even shutting down the largest cargo terminal at the Port of Los Angeles for a short time. It was reported that Maersk suffered a loss of over $200 million from the attack. In addition to the financial losses numerous supply chain decision makers now had the new concern of cyber security; a threat that was no longer just being aimed at corporate security or financial institutions
Mother nature had a lot to say in August and September of this year; from two massive hurricanes hitting the U.S., to flooding in Mumbai and a major earthquake in Mexico.
The Texas gulf began preparing for Hurricane Harvey during the third week of August.
The massive Category 4 storm made landfall in Rockport and inundated the Houston and southeast area of Texas with heavy flooding. MIQ temporarily closed our global Houston operations and activated a business continuity plan to ensure that our customer’s needs were met while Southeast Texas worked to recover. The Port of Houston and its terminals would ultimately be closed for six days. When the port did reopen there would be an influx of container traffic to both the Bayport and Barbours Cut terminals. Additionally, warehouses became backlogged and chassis needed to be inspected. These rippling effects from the hurricane resulted in an intermodal chassis shortage for the Houston area long after the storm was over.
On September 1st it was reported that Mumbai India had been hit by some of the heaviest flooding in more than a decade due to significant rainfall from the monsoon. Supply chains were disrupted for both the airport as well as port terminals.
On September 7th, port closures occurred throughout Florida and Georgia as Hurricane Irma approached the state of Florida. MIQ Logistics activated our business continuity plan for our Miami global operations for five days while the Port of Miami gradually worked to reopen.
On September 19th, a major earthquake registering a magnitude of 7.1 struck central Mexico. The Mexico City International Airport was shut down temporarily. Our own global operations in Mexico City was shut down for a few days while structural inspections and the restoration of telecommunications occurred.
Setting nature aside, a new disruption was relayed to our customers on September 22nd after our MIQ operations throughout China began hearing of interrupted factory operations. Manufacturers throughout China cut back on production or closed down factories temporarily due to environmental protection measures taken by the Chinese government. According to multiple sources, the Chinese Ministry of Environmental Protection (MEP) has been increasing enforcement of clean air and water laws in an effort to reduce pollution. The impacts areas where reduced export volumes were most noticeable were Shandong, Jilin Province, Zhejiang Province, Chongqing and Chengdu. Estimates are that 18,000 factories between Northern China and Shanghai shuttered their factories temporarily while they reviewed new ways to meet compliance and reopen.
U.S. Customs and Border Protection issued a couple of trade alerts as we moved into fourth quarter of this year. MIQ worked to notify our customers first of a trade notice pertaining to wood packaging. CSMS#17-000612 went into effect on November 1st and pertained to potential penalties that wood packaging material (WPM) importers may face should their wpm be found in violation.
Another announcement from CBP was released in November concerning an increase to merchandise processing fees (MFP). Published within the Federal Register a general notice [CBP Dec. 17-17] announced the specific fees and corresponding limitations to be adjusted for inflation effective January 1, 2018. The MPF rate for both formal and informal entries can be found here.
As we begin to speculate what is on the horizon for supply chain in 2018 there are a few key dates within the new year that MIQ will be watching very closely.
First, there is already an expectation that Chinese New Year (Feb 2nd – Mar 2nd) will bring with it a 10% bump in U.S. imports in the month of February. With holiday says forecasted to be slightly higher in 2017, there is speculation on what inventory replenishment will look like in the first two months of the year.
Another key date that MIQ will be watching will be the months leading up to Sept 30th; this is the date that the contact between the International Longshoremen’s Association and the United States Maritime Alliance. There is speculation that early discussions will begin this Spring ahead of the contract expiration.