Join the Canadian Apparel Federation and Borden Ladner Gervais LLP for a presentation on forced labour and modern slavery in global supply chains – with a focus on proposed Modern Slavery legislation in Canada. Given recent customs enforcement in the US and growing concerns expressed by the Canadian government there will be increasing calls for apparel firms to address this issue in their supply chains.
The agenda will include:
What is forced labour?
New CUSMA/USMCA and Customs Tariff provisions (what are they; risks and consequences of import control; getting stopped at the border; follow on complaints; risks re the US)
Enforcements trends of similar measures in the US
Avoiding customs entanglements: doing human rights due diligence
Related Canadian and global legislation (Modern Slavery Acts)
Delays, congestion and container availability problems are increasing at ports and terminals in southern China, including Yantian, Shekou and Nansha, as operations have slowed in an effort to contain outbreaks of COVID-19.
Container dwell times at Yantian rose to eight days the week of May 30, with median dwell times of 18 to 21 days by June 7. Container availability dropped at the three ports, skipping the ports of call, and resulting in empty boxes not being dropped off at ports.
Below are some key updates relating to ports in southern China —
Port Updates
Port of Yantian: Only accepting ETA 3 days with advanced appointment, not accepting any truck operators who have been to Nansha/Guangzhou area. Mandatory 14 day quarantine required.
Port of Shekou: Only accepting ETA 3 days with advanced appointment. Truck operators require negative COVID-19 test.
Da Chan Bay: Only accepting ETA 7 days with license plate from Shenzen area. Trucker operators require negative COVID-19 test.
Port of Nansha: Only accepting ETA 7 days, with certain areas still closed. Those from high risk areas (such as Guangzhou or Shenzhen) require a mandatory 14-day quarantine and negative COVID-19 test.
Bounded warehouse: Truck operators require negative COVID-19 test and not have visited any high risk areas.
In this scenario, shippers can expect goods to be delayed to well into the end of June, if not July.
Strain on Global Supply Chains
These challenges in southern China are the latest in a saga of global container shipping issues that have plagued shippers, forwarders and carriers for more than a year — from port congestion, to equipment shortages, to blank sailing, to skyrocketing freight rates.
Many importers have pivoted to airfreight given ongoing capacity and timeliness issues in ocean freight, although air cargo space is also limited.
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The container shipping industry and global supply chains throughout China are facing renewed challenges due to disruptions at Yantian and the neighbouring Shekou ports in southern China near Hong Kong. The province is facing increased restrictions, which are impacting port operations at one of China’s busiest export terminals, due to newly reported cases on COVID-19.
The increased measures began in late May after cases of the COVID-19 virus were diagnosed among workers within the port. Chinese and port officials implemented stringent restrictions and disinfection routines and this week it appeared that the situation might be improving. Port officials said export would resume from the terminals, although with continuing restrictions.
All the major container shipping companies in recent days have warned customers of disruptions to the flow of containers through the port. Estimates are that there are more than 20,000 TEU now backlogged in the port, with some sources saying as many as 50 or 60 ships are now anchored out. It is sparking scenes of the congestion that built up in southern California in January and February and which the ports of Los Angeles and Long Beach are just now catching up.
As of today, the situation continues to deteriorate, as further cases of COVID-19 have been confirmed in Shenzhen, where the ports of Yantian and Shekou are located. Delays of upwards of 14 days are anticipated in the coming week.
The eastern portion of Yantian, which handles the largest containerships, is open but operating at approximately 30% of normal capacity. The western terminal remains closed entirely. To manage traffic and volumes in the port, officials are also limiting the number of days containers can arrive before their scheduled departure.
Faced with the prospects of continuing backlogs and delays, all the major shipping companies have begun to warn customers to expect delays which if not controlled could reverberate further across the supply chain.
Chinese officials are seeking to reassure the shipping industry, saying they are stepping up testing in the region. They are saying that most of the cases are not in Yantian but instead in the surrounding areas, and they hope to use quarantine programs to isolate the outbreaks. However, the ongoing restrictions and backlogs are likely to have an increasing impact on container volumes on both the European and U.S. routes as Yantian is an export hub for China.
United States Trade Representative Katherine Tai has announced the conclusion of the one-year Section 301 investigations of Digital Service Taxes (DSTs) adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom. The final determination in those investigations is to impose additional tariffs on certain goods from these countries, while suspending the tariffs for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and in the G20 process.
“The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes. The United States remains committed to reaching a consensus on international tax issues through the OECD and G20 processes. Today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future.”
– United States Trade Representative Katherine Tai
On June 2, 2020, USTR initiated investigations into DSTs adopted or under consideration in ten jurisdictions: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.
In January 2021, following comprehensive investigations USTR determined that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom discriminated against U.S. digital companies, were inconsistent with principles of international taxation, and burdened U.S. companies.
In March 2021, USTR announced proposed trade actions in these six investigations, and undertook a public notice and comment process, during which it collected hundreds of public comments and held seven public hearings. USTR also terminated the remaining four investigations (of Brazil, the Czech Republic, the European Union, and Indonesia) because those jurisdictions had not implemented the DSTs under consideration.
An OOCL-operated boxship has initiated a massive container crane collapse at the Taiwanese port of Kaohsiung.
The 8,540-teu neo-panamax OOCL Durban initially collided with the 2,940-teu YM Constancy before its accommodation unit hit a crane causing it to collapse and topple another nearby crane.
One shore worker was injured in the incident and two crane operators were trapped in the debris. The crane operators were freed after an hour and are understood to be safe.
The incident is likely to add to significant delays to the container trades. The world’s container ports are already experiencing congestion caused by high cargo volumes and, previously, the grounding of the 20,388-teu Ever Given in the Suez Canal on 23 March.
A number of comparatively lower-value commodities such as furniture and large electrical and electronic appliances are becoming priced out of major intercontinental ocean freight markets because of the elevated freight rates facing importers currently, new analysis by Sea-Intelligence has revealed.
In its latest Sunday Spotlight briefing, the Copenhagen-based container shipping consultant looked at the impact on importers of a variety of different consumer goods of the current elevated freight spot rates on the Asia to U.S. West Coast and North Europe trade lanes.
Its analysis took the average values of consumer goods held within a 40’ container based on data from OECD, compared to an average of four of the more well‑known spot rate indices for spot rates. It then placed these freight rates in the context of the retail value of the cargo, followed by adding in the carriers’ newer surcharges related to equipment availability and space priority.
These surcharges were estimated to amount to US$1,000-2,000 for Asia-NEUR and $2,000-5,000 for Asia-USWC.
Using these add-ons, together with the average spot rates, “means a de-facto spot rate of approximately $11,300-12,300/FFE on Asia-NEUR and of $7,000-10,000/FFE on Asia-USWC”, Sea-Intelligence noted.
Among the worst impacted cargo commodity category in the analysis is assembled furniture, where the freight rate now accounts for up to 62% of the retail value of the goods, and appliances, where the freight spot rate now accounts for up to 41% of the retail value for large appliances and up to 27% of the retail value for small appliances.
A move by the U.S. Commerce Department to increase preliminary tariffs on softwood lumber imports from Canada, if finalized, will raise producer costs and cut into their profits but is unlikely to affect prices to consumers of wood products, analysts say.
The department’s recommendation to more than double the “all others” preliminary countervailing and anti-dumping rate to 18.32% from 8.99% has drawn criticism from the Canadian government and industry, and applause from the lumber industry south of the border.
The increase is unlikely to result in higher lumber prices because they’ve more than doubled in the past year to all-time record highs, said Kevin Mason, managing director of ERA Forest Products Research.
“Prices are supply-and-demand driven,” he said. “(Tariffs) drive the cost up for producers but it’s not going to affect prices.”
Because it’s a preliminary tariff rate, current cash deposit rates will continue to apply until the finalized rates are published, likely in November.
“U.S. duties on Canadian softwood lumber products are a tax on the American people,” said Mary Ng, minister of Small Business, Export Promotion and International Trade, in a statement.
“We will keep challenging these unwarranted and damaging duties through all available avenues. We remain confident that a negotiated solution to this long-standing trade issue is not only possible, but in the best interest of both our countries.”
Former president Donald Trump’s administration imposed a 20% “all others” tariff on Canadian softwood in 2018, before the onset of the COVID-19 pandemic, but lowered it to about 9% late last year after a decision favouring Canada by the World Trade Organization.
Unfair Subsidy Allegations
The increased tariffs will hurt American consumers who are faced with a market where supply can’t keep up with demand, said Susan Yurkovich, president of the BC Lumber Trade Council.
“We find the significant increase in today’s preliminary rates troubling,” she said in a news release.
“It is particularly egregious given lumber prices are at a record high and demand is skyrocketing in the U.S. as families across the country look to repair, remodel and build new homes.
“As U.S. producers remain unable to meet domestic demand, the ongoing actions of the industry, resulting in these unwarranted tariffs, will ultimately further hurt American consumers by adding to their costs.”
She called on the U.S. industry to end its decades-long campaign alleging Canadian lumber is unfairly subsidized and instead work with Canada to meet demand for “low-carbon wood products” the world wants.
In a separate news release, Jason Brochu, U.S. Lumber Coalition co-chair, applauded the Commerce Department’s commitment to enforce trade laws against “subsidized and unfairly traded” Canadian lumber imports.
The coalition says the U.S. industry remains open to a new U.S.-Canada softwood lumber trade agreement “if and when” Canada demonstrates it is serious about negotiations.
The Food and Drug Administration (FDA) opened a new portal for food importers to submit their Food Supply Verification Program (FSVP) documents. The FSVP requires importers who are designated as FSVP importers to conduct activities to verify that their foreign suppliers are producing food in accordance with U.S. food safety standards. When requested in writing by the FDA, FSVP importers must provide FSVP records to the agency electronically. The new portal is meant to facilitate this process.
To access the portal, FSVP importers with an active FDA Account ID and password should go to FDA Industry Systems and scroll down to the FSVP Importer Portal. An account can also be created at this same link.
FDA also reminded the trade that they will close the Dun & Bradstreet (D&B) lookup portal on the FDA website on May 24, 2021. The FDA has had an arrangement with D&B whereby industry partners could request a DUNS number through a dedicated portal on the FDA website. D&B is a private registrar company that provides DUNS numbers-a unique nine-digit identifier used by businesses throughout the world, including many FDA applications.
D&B will continue to provide DUNS numbers and users will be able to perform queries directly via the existing D&B web platform. D&B will provide firms a DUNS number free of charge, but this may take 45 business days or longer. D&B also provides an expedited service for a nominal fee.
Carson International is pleased to partner with Miller Thomson LLP for another instalment in our webinar series addressing Canada/U.S. cross-border trade developments and updates.
The Canada Border Services Agency (CBSA) will conduct verifications on a periodic basis. This webinar will discuss relevant risk elements and the methodology used by customs authorities to undertake a customs verification. CBSA customs verifications are designed to measure compliance rates and revenue loss. The three most common types of verifications are:
Valuation verifications
Tariff classification verifications
Origin verifications
Join the conversation regarding CBSA’s verification methodologies and the steps that should be taken by importers to mitigate the impact of the CBSA’s verification.
Panelists:
Dave Pentland, Carson International Dan Kiselbach, Miller Thomson LLP
Spot ocean container rates are up triple digits year on year, therefore, they must be near their peak. They’re so high they don’t have much more room to run. So goes a common belief in the container market, despite the fact that this premise has already been proven wrong, and that container rates could theoretically have a lot more room to run if the upper limit is defined the same way it is in non-containerized shipping.
Retail inventories-to-sales ratios are still at historic lows, stimulus checks are still supporting spending, and the traditional peak season is right around the corner. Meanwhile, U.S. households accumulated an enormous amount of excess savings during the pandemic (equivalent to 12% of GDP, according to Moody’s) that may now be unleashed.
The current rate spike is unprecedented in the history of container shipping. The sector is in completely unchartered territory (one reason why rate predictions over the past nine months have been repeatedly wrong). However, there is an extensive history of precedents in non-containerized shipping — in crude tanker, gas carrier and dry bulk markets — that shed light on how high the maximum spot rate can go.
The freight rate of a spot cargo in bulk commodity shipping is elastic all the way up to the point where it erases the profit margin of the shipper. Rates for very large crude carriers (VLCCs, tankers that carry 2 million barrels of oil) topped $200,000 per day in October 2019 and March-April 2020. A liquefied natural gas carrier was booked at $350,000 per day in January.
Stifel analyst Ben Nolan explained the max-rate calculation for Capesizes (dry bulk ships with a capacity of around 180,000 deadweight tons) in a research note titled “How High Can You Go?” published last week.
“Turns out, at current commodity prices … the dry bulk market is nowhere close to its theoretical ceiling,” he wrote. “If demand exceeds supply, the primary upward constraint of ship freight cost is the point at which it absorbs the profit of the producer or shipper.”
He noted that the landed price of thermal coal in China last week was about $125 per ton and the producer breakeven was $60 per ton, meaning the transport costs could be as much as $65 per ton. Capesize rates were then around $13 per ton (the equivalent of $40,000 per day), meaning “freight rates would need to rise seven times or to around $300,000 per day before the economics are completely destroyed by freight costs.”
