Welcome to the fourth edition of the Silq Scoop, where we bring you the latest from the intricate world of global shipping and supply chains.
In this edition of the newsletter, we see two frenemies at it again. The Chinese are taking advantage of the United States’ de minimis threshold, and while that is fair game, they might be overplaying their hand. In other news, tariffs on Chinese goods might actually be helping American businesses. Who would have thought, eh?
Let's dive right in.
The CBP Struggles To Police The De Minimis Threshold
It's been a roller coaster year for the Chinese and American trade relations, and you bet there have been a lot of eye rolls.
Well, you can expect that to continue for a while. The de minimis threshold, allowing import of goods worth up to $800 without duties and formal customs declaration, has seen a surge in e-commerce imports, mainly from China. Say what you want; they are persistent. Companies, especially e-commerce platforms, have found it is a good strategy for avoiding tariffs, which, if you have been following the news lately, has been a losing war for the Chinese. Other nefarious players are exploiting the system to smuggle illegal goods and drugs. Yes, there is always that party that just does too much. To control the quickly escalating mess, the CBP has suspended several customs brokers from the Entry Type 86 program.
However, experts think that might be too much and create an uneven playing field for compliant brokers. The question here is, whose fault is that?
Tariffs on Chinese Goods Have Resuscitated Flailing US Apparel Makers
In a move that may encourage the U.S. House and the current administration, apparel manufacturing businesses credits tariffs on Chinese goods with revitalizing their business.
The past two decades have seen several businesses within the industry struggling against low-cost Chinese competition. Some might say they are surprised they lasted so long and even broke through. Especially considering the amount of businesses that went belly up during that time. The tariffs initiated by former President Trump in 2018 allowed businesses like Ferrara Manufacturing to regain competitiveness by reducing price disparities. The Biden administration has continued to impose tariffs on Chinese goods, including a 25% levy on textile inputs like yarn and leather and a 7.5% tax on finished textile products.
While trade groups argue that these tariffs increase supply chain costs and consumer prices, U.S. textile manufacturers believe they help make their products more competitive globally. The market will eventually let us know who is right.
Los Angeles and Long Beach Ports Secure Record Funding
The Ports of Los Angeles and Long Beach were awarded a combined $112 million from the U.S. Army Corps of Engineers.
The move is a significant step towards fairer funding distribution for critical port infrastructure. $108 million was allocated for maintenance and repairs at both ports. Considering the backlog of maintenance needs amounting to over $6 billion, some might say it's a drop in the bucket, but it will come in handy. Nearly $4 million was designated for a public health and environmental project at the Salton Sea. Funding will be critical for upgrading the quickly deteriorating ports, especially the wharves, piers, and other infrastructure.
Experts also expect the funding to bolster global supply chains and improve the ports' competitiveness.
Mixed Cargo Performance at Gulf Coast Ports in April
Although consumers are spending more despite inflation, leading to more imports, unfortunately, not all the Gulf Coast ports are feeling it.
For starters, the Port of Houston saw container volumes increase by 5% year-over-year, reaching 324,177 TEUs. Both imports and exports rose, with loaded container exports experiencing an 8% increase. Of course, this is hardly surprising considering the Port's strategic location. Other ports like New Orleans were not so lucky, though. The port saw a 6.5% year-over-year decline in container traffic for April. Corpus Christi wasn't exempted from the decline, too, as total shipments fell slightly in April. Petroleum shipments also saw a 6% decline, while dry bulk cargo dropped 13%. Even crude oil exports, a major driver for the port, decreased by 3% year-over-year.
Could the trends reflect broader economic factors and potentially shifting trade patterns?
India-US East Coast Shipping Rates Continue to Fall Due To Oversupply
Ocean freight rates from India to the US East Coast are declining due to excess capacity.
The thing is, it worked out well for the carriers until the introduction of a new service by Ocean Network Express (ONE) intensified competition. Now, shippers get to sit back and enjoy the struggle between the carriers. Mainly because it is yielding results like the spot rates, which have dropped by $200-$400 per TEU and $300-$400 per FEU compared to May. Average spot rates now hover around $1,600 per TEU and $1,800 per FEU, close to pre-crisis levels. In contrast, shippers going to the West Coast from the same location don't have it as nice because of disruption in Asian ports.
Hapag-Lloyd, CMA CGM, MSC, and Maersk plan to implement PSS fees of $500-$750 per container, but whether it will work or fail remains to be seen.
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