Coronavirus hits come fast for aviation sector – FreightWaves

The airline industry is becoming a leading indicator of the global economic contraction now projected for the first quarter, and possibly for the full year, as the new coronavirus escapes containment efforts in China.

German companies seem particularly aggressive in trying to cut expenses in line with declining revenue trends as passenger demand dries up. On Friday, Fraport AG, which operates the large European hub in Frankfurt, Germany, and has activities in 30 airports around the world, followed German flagship carrier Deutsche Lufthansa AG in announcing a series of cost containment measures.

The airport operator said it is freezing all new hiring except for exceptional circumstances, and offering administrative and operational employees voluntary unpaid leave or temporary reduced working hours to align resources a massive slump in passenger and cargo traffic at Frankfurt Airport.

Fraport has about 20,000 employees and the entire airport supports more than 80,000 jobs. 

The company said it is evaluating other steps to reduce costs and will issue guidance for the current fiscal year when it releases financial results on March 13. 

Lufthansa Group this week announced it will park 23 aircraft, reduce short- and long-haul operations, freeze new hiring and training, and encourage workers to take reduced work hours. In the past two weeks, the company’s stock has dropped 23%.

The coronavirus is hitting the German aviation sector just as it prepares for an April increase in Germany’s aviation tax. 

British Airways is also implementing a hiring freeze and cutting flights. 

The coronavirus is now in 60 countries. On Friday, Italy, Iran and South Korea announced 3,500 new cases, more than 10 times the number of new cases in China and double the number of cases announced Thursday. Preliminary indications are that for every person infected the disease gets passed on to two more people, on average, according to health authorities.

Travel demand is falling fast as people look to reduce their chances of exposure to the coronavirus, and airlines are reacting with reduced schedules. Some countries are banning travel to certain destinations and the U.S. government has raised its warning level for travel to Italy and Iran.

Tokyo Disneyland is now closed. The Swiss government ordered all events with more than 1,000 people canceled, ending a popular ski marathon, next week’s Geneva International Motor Show and a big watch convention. Amazon said it is even restricting non-essential domestic travel within the US.

After previously shutting down operations in China, where the new coronavirus originated and where there are about 80,000 confirmed cases, airlines are reducing flights to other parts of Asia, including South Korea, Japan and Singapore. 

Fewer passenger aircraft in the air means fewer options for companies to ship cargo. Dedicated all-cargo carriers could benefit by the new market dynamic, but that assumes that the disease doesn’t force manufacturers to halt production as part of quarantine efforts to control the outbreak.  

Earlier this month, the International Air Transport Association estimated airlines would generate almost $30 billion less revenue this year. That amount is certain to increase as the coronavirus reaches pandemic proportions.

Meanwhile, investment bank JP Morgan forecast the global economy will shrink in the first quarter because of the crisis. And Goldman Sachs on Thursday said S&P 500 companies, on average,  won’t generate any earnings growth this year as the impact of the coronavirus spreads.  

Buckle up.

Senators urge trade sanctions for Russian election interference – FreightWaves

Democratic Senate Leader Charles Schumer, along with Sens. Sharrod Brown and Robert Menendez, urged the White House to proceed with imposing sanctions against Russian government agencies and officials, and even President Vladimir Putin himself, based on recent U.S. intelligence reports that Russia is already interfering with the upcoming 2020 U.S. presidential election.

“There is virtually no national security threat more serious than that posed by those who would systematically undermine confidence in, and the effective operation of, our democratic elections,” the senators wrote in a letter to U.S. Secretary of State Michael Pompeo and U.S. Treasury Secretary Steven Mnuchin on Feb. 24.

The lawmakers, who also denounced President Trump’s dismissal of the U.S. intelligence reports against Russia, asked Pompeo and Mnuchin to use their authorities under the 2017 Countering America’s Adversaries Through Sanctions Act (CAATSA) to identify the perpetrators and immediately impose sanctions against them.

“It is long time past for the administration to send a direct, powerful and unmistakable message to President Putin: the U.S. will respond immediately and forcefully to continuing election interference by the government of the Russian Federation and its surrogates, to punish, deter and substantially increase the economic and political costs of such interference,” the senators wrote.

Brown, D-Ohio, serves as ranking member of the Senate Banking Committee, while Menendez, D-New Jersey, is the ranking member of the Senate Foreign Relations Committee.

The Russians were also alleged to have actively interfered in the 2016 presidential election by disseminating false information about candidates on Facebook to shape opinions of American voters.

U.S. intelligence has indicated that these cyberattacks originated with Russian intelligence agencies such as the Main Intelligence Directorate (GRU) and Federal Security Service (FSB) (formerly the KGB) and its Special Technology Center in St. Petersburg.

In recent years, the Treasury Department’s Office of Foreign Assets Control (OFAC) has blacklisted numerous Russian entities and individuals for violating U.S. sanctions. Often, they are placed on the on the Specially Designated Nationals and Blocked Persons (SDN) List.

U.S. individuals and companies are generally prohibited from conducting business with individuals or entities on the SDN List. Additionally, any entities owned 50% or more in the aggregate by these listed individuals or entities are blocked.

Descartes acquires Peoplevox to strengthen ecommerce capabilities – FreightWaves

Canadian on-demand logistics SaaS solution provider Descartes has announced the acquisition of Peoplevox, a major player in the cloud-based ecommerce warehouse management solutions (eWMS) space, in a deal worth $25.2 million. Based in the U.K., Peoplevox provides web-based eWMS and ecommerce fulfillment solutions to direct-to-consumer (DTC) customers around the world. 

Peoplevox solutions are designed to work seamlessly in automated warehouses that cater to the ecommerce market. The solution connects to webshop front ends, translates order information into a mobile-driven pick-and-pack process within the warehouse, and then feeds parcel delivery systems for shipment execution. 

Descartes has had a good run in the market lately; it enjoyed a 27% rise in its net income and revenue growth of 19% in the fourth quarter of 2019. Descartes has been resolute about acquisitions in recent years, having acquired Visual Compliance, CORE Transport Technologies, and Best Transport – all in under a year. 

The acquisition of Peoplevox will help Descartes expand its customer base, as it can now target DTC brands, ecommerce and traditional storefront retailers that look to enhance their online presence and improve their omnichannel capabilities. 

“Successful ecommerce supply chains require flexible fulfillment systems that can scale up and down during peak periods, while maintaining connections with a complex ecosystem of sales and delivery channels,” said Jonathan Bellwood, founder of Peoplevox and now the vice president of industry solutions at Descartes.

The Peoplevox eWMS platform was built on that idea, helping customers turn fulfillment into a competitive advantage. Bellwood mentioned that by partnering with Descartes, the company sees an opportunity to extend its market reach and integrate with complementary technologies that help manage the full lifecycle of domestic and cross-border ecommerce shipments. 

“Like our investments in Oz, pixi and ShipRush, Peoplevox adds density and domain expertise to what is an increasingly important area of our business – ecommerce,” said Edward Ryan, Descartes’ CEO. “We’re thrilled that Peoplevox is joining Descartes to help us better serve businesses looking to enhance their direct-to-consumer fulfillment performance. We welcome Peoplevox employees, customers and partners to the Descartes community.”

State Department bans exports to 13 weapons proliferators – FreightWaves

The U.S. State Department’s Bureau of International Security and Nonproliferation has banned all federal government and private sector export activity to 13 foreign enterprises and individuals, which the agency said have engaged in the production of weapons of mass destruction.

The bulk of the enterprises and individuals are located in China, including Baoding Shimaotong Enterprises Services Co. Ltd., Dandong Zhensheng Trade Co. Ltd., Gaobeidian Kaituo Precise Instrument Co. Ltd., Luo Dingwen, Shenzhen Tojoin Communications Technology Co. Ltd., Shenzhen Xiangu High-Tech Co. Ltd., Wong Myong Son, and Wuhan Snajiang Import and Export Co. Ltd.

Russian companies Kumertau Aviation Production Enterprise, Instrument Building Design Bureau, and Scientific Production Association Mashinostroyeniya, in addition to Kata’ib Sayyid al-Shuhada of Iraq and Eren Carbon Graphite Industrial Trading Co. Ltd. of Turkey, were also added to the export ban.

Specifically, these entities and individuals violated the Iran, North Korea and Syria Nonproliferation Act. The export ban, which was published by the State Department agency in the Feb. 14 Federal Register, took effect on Feb. 3.

The agency also said that no new Commerce Department export licenses will be issued to these listed entities or individuals and any existing licenses are suspended.

Commentary: This Arctic party needs some good icebreakers – FreightWaves

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates. 

There is this party starting in a very cool place and everyone who showed up is a little uncomfortable. Things are heating up – and not necessarily in a good way. This is the state of affairs in the Circumpolar North and its Arctic waters. Melting polar ice is opening up new navigational opportunities and offering access to previously inaccessible resources under the vast ocean floor. Metaphorically speaking, it is a nice place to hold a party. Yet the question is: who else is likely to show up and will they all get along? Basically, trans-Arctic commercial shipping requires access to icebreakers. 

The eight Arctic nations include Canada, Denmark (via Greenland), Finland, Iceland (via Grimsey Island), Norway, Russia, Sweden and the United States (via Alaska). Technically, Finland does not have direct access to the Arctic Ocean but part of it is within the Arctic Circle. All of these nations are members of an intergovernmental organization called the Arctic Council. It was established in 1996 to foster regional cooperation for the socio-economic welfare of the nearly four million people who live in the Arctic. To date there are 13 other nations with observer status, most notably China (2013).

(Photo credit: Flickr/Gennady Alexandrov)

The seven nations facing the Arctic Ocean have control over their domestic waters up to 200 nautical miles (nm) off shore and the resources underneath. Things can get dicey when one nation claims rights beyond 200 nm. Typically, it would have to show that its continental shelf extended beyond its domestic waters. Things also get dicey when issues of access to the Arctic Ocean and its navigable straits arise. Canada, Denmark, Norway and Russia view their territorial straits as sovereign. However, the U.S. and the European Union (EU) view them as open to innocent passage because they connect different bodies of international waters. The most contentious example of this is the status of Canada’s Northwest Passage (NWP). The NWP curls around Canada’s sovereign Arctic islands but it connects Baffin Bay off Greenland with the Beaufort Sea off Alaska. As nations look to the Arctic as a new frontier for commercial shipping, resource extraction and tourism, these unresolved issues will become heated.

The U.S-Canada dispute over the NWP started in 1970 but lay dormant for decades. A major oil field was discovered at Prudhoe Bay, Alaska in 1967. This was a joint venture by Standard Oil (renamed Exxon in 1973) and Atlantic Richfield Company (ARCO). The question was how the oil would be transported to the East Coast. While the Trans-Alaska Pipeline System (TAPS) was the final decision, some consideration at the time was given to transporting it by ocean vessel. The Humble Oil & Refining Company (a subsidiary of Standard Oil) would take up the issue and stake $36 million to finance an oil transport expedition through the NWP. Standard Oil had a lot at stake. Since it dominated East Coast refining, naturally it wanted Alaska’s oil to be transported to its refineries. If the oil were routed to the West Coast then ARCO would have a larger benefit.

(Photo in public domain)

In 1969, the oil tanker S.S. Manhattan was used to see if the route was feasible. The Sun Shipyard and Dry Dock Company of Chester, Pennsylvania retrofitted the oil tanker with an icebreaking bow, thereby making it the largest icebreaker in the world. If successful, there would be a great deal more traffic in the NWP to move the 25 billion barrels deemed available at the time. The vessel reached Barrow, Alaska on September 21 and delivered a token barrel of oil to New York City on November 12. However, on the trip to Alaska the Manhattan did get stuck in the NWP at M’Clure Strait. An escort icebreaker (U.S. Coast Guard cutter Northwind) was not able to free it, while the Canadian Coast Guard’s John A. Macdonald did the job. Canada supported this trip as well as a second one in 1970 but noted that future support was not guaranteed. At any rate, U.S. interests determined that a pipeline was more economical. Ironically, the U.S. would experience Canada’s concerns over the environmental risk to the NWP when the Exxon Valdez spilled 11 million gallons of oil into Prince William Sound in 1989. Of course, even that part of Alaska is not as harsh and remote as the Arctic.

Things are not all heat regarding the Arctic. In fact, a few prominent ocean container carriers have stated publicly that they will avoid Arctic shipping. The Northern Sea Route (NSR) along Russia from the Bering Strait to the Barents Sea is about 30% shorter than the Asia-Europe route via the Suez Canal. Depending on how much ice is in the region, the saving on transit time can be as much as 10 days off of the standard 35-day voyage via the Suez Canal. Melting polar ice is likely to increase the duration of the navigable season and yet the MSC, CMA-CGM and Hapag-Lloyd shipping lines have expressed concern over the environmental impact of using this route on a regular basis. In addition, Maersk has expressed some doubt. Certainly, as with the NWP, any accident in that part of the world is more costly to deal with when just considering accessibility of clean up vessels and equipment in the midst of spotty communications infrastructure. 

The Suez Canal.
(Photo credit: Flickr/Vyacheslav Argenbergl)

The United States is coming to this geo-political party with conspicuously fewer icebreakers than Russia. Depending on how one counts, Russia has up to 40 of them. In particular, the nuclear-powered Arktika is the world’s most powerful. Canada has 19 in its Coast Guard fleet. Even China has been traversing the Arctic Ocean in search of new resources. It has partnered with Russia on projects off its northern coast and has been assisted by Russian icebreakers. On a commercial basis China’s Cosco has made several voyages since 2013 under icebreaker escort, though mostly to supply Russian outposts.

China has even announced a “Polar Silk Road” initiative. It deployed its second domestically built research vessel/icebreaker, the Xue Long 2 (or Snow Dragon), in early 2019. The first one went into service in 1994. More are on the drawing board. With two, China equals the U.S. in terms of fully operational icebreakers. In the meantime, China’s exploration alliances with Russia and a free trade agreement with Iceland in 2013 mean that its presence in the Arctic is sure to grow.

The USCGC Healy, commissioned in 1999, is only a medium-class icebreaker. The 44-year old USCGC Polar Star is the only remaining heavy-class icebreaker in operation. Its sister vessel, USCGC Polar Sea, has been out of service since 2010. After years of expensive maintenance and upgrades to the existing fleet, the U.S. Coast Guard awarded a $746 million contract to VT Halter Marine to build the first of a series of modern heavy icebreakers. Its arrival in 2024 is projected to be the first of six (depending on future budget realities).

(Photo credit: Flickr/Greenpeace UK)

Icebreakers do not just cut a channel in the ice that stays open for days on end. This is not like cutting a channel  through a snowy mountain to manage run-off. The problem is that the ice is floating. Soon after the channel is cut the giant plates of ice will crash back into each other with a tangle of upended cleaves that make the channel even more difficult to traverse. Also, the steadily melting polar ice means that there are more ice floes around, which adds to unpredictability. The transition from a permanent ice cap to ice-free waters has been underway for decades and it will continue for decades more. Icebreakers need to escort commercial vessels. Do we need enough escorts to handle individual vessels on a come as you go basis or should the vessels be scheduled into convoys?

The United States is an Arctic nation thanks to Alaska. China is playing the long game. Will the U.S. think like the Arctic nation it is? If so, the American people need to think of the Arctic as its own backyard. A Monroe Doctrine for the Circumpolar North is perhaps too strong. But the nation’s elected leaders need to think about how to strengthen alliances with its other neighbors in the region.

There is no shortage of imaginative ideas for the Arctic. The reality is that the region is fragile, unpredictable and has a distinct shortage of support infrastructure along the NWP and NSR. Russia has signaled that it wants to make the NSR commercially viable and is investing in the icebreakers to make this happen. Prominent carriers are prepared to take a pass on the basis of environmental concerns. The debate continues.

Volvo continues focus on driver comfort and vehicle uptime in U.S. and Europe – FreightWaves

As Volvo Trucks continues
to innovate, a focus is on building value for trucking fleets and driving
efficiency and productivity for drivers.

That is evident in the new
line of trucks the company’s global operation announced in Europe on Feb. 27,
and it was evident in a conversation FreightWaves had in Atlanta this week with
Volvo Trucks North America (VTNA) representatives Allison Athey, product
marketing manager for VTNA’s VNL on-highway tractor, and Ash Makki, product
marketing manager with a focus on connectivity solutions.

“Fuel efficiency is a
topic that is always on the forefront of our customers’ minds,” Athey told
FreightWaves.

To that end, VTNA will be
making FlowBelow’s Tractor AeroKit aerodynamic system a factory option. The
AeroKit, which includes wheel covers and drive wheel fairings, has been shown
to deliver up to 2.23% in fuel saving based on third-party SAE J1321 fuel
economy testing using EPA SmartWay guidelines, FlowBelow has said. The product
has been an aftermarket option since 2017.

Athey noted more fleets
are looking to close trailer gaps and the use of sliding fifth wheels for this
remain popular. Add in Volvo’s Turbo Compounding engine and its Xceed fuel
efficiency package, which was made available on trucks for the first time in
January 2019, and fleets have plenty of options to boost performance.

Volvo said its Xceed fuel
efficiency package, available for Volvo VNL 760 and VNL 860 models, improves
fuel efficiency by up to 11% when compared with Volvo’s Fuel Efficiency Plus
specification. Xceed is 3.5% more efficient than the Fuel Efficiency Advanced
specification, the company has said.

Truck drivers remain key

Drivers, though, are
critical to the equation, and work done inside the cab is equally important.

“Keeping good drivers is
always a challenge,” Athey said. “So, we continue to see [fleets request] more
driver comfort features.”

This includes spec’ing of
Volvo’s iShift automated transmission, which is included on 90% of VNL orders
today. Athey said the inclusion of automated transmissions is one part of the
extensive driver comfort features that fleets are interested in.

“It’s not just how easy it
is to drive [the truck], we’ve made the driving experience [more enjoyable],”
she said.

Athey pointed to the
automotive-style steering wheel with controls at the driver’s fingertips, the
ability to adjust the steering wheel column for more comfort, and the
introduction of Volvo Dynamic Steering (VDS) last year. Announced first in
September 2019, VDS came to the U.S. from Europe. The system analyzes inputs
from sensors throughout the vehicle to continuously monitor drivers’ actions,
environmental factors and road conditions, and provide assistive steering when
needed.

Among Athey’s favorite driver comforts, though, is the
reclining bunk that changes position so drivers no longer have to strain to
watch television or read when on a break.

Other driver-focused features Volvo has introduced in the
last year include:

  • A new workstation, optional on the VNL 70-inch sleeper cab and VNX models, with a more comfortable sitting area and folding table that lowers to provide a base for the mattress cushions which can be unfolded to make a bed.
  • 23-inch wide-width seats
  • A Pre-Trip Assistant upgrade that features an exterior light inspection switch, located to the left of the ignition, to make it easier for drivers to perform an exterior light check during their pre-trip inspection.

Vehicle uptime impacts driver productivity

On the connectivity side
of the equation, driver productivity is also a big part of the equation, Makki
said, and the uptime factor of the vehicle impacts this.

“Our goal is always to
minimize downtime,” he said.

That is evident in the new
over-the-air (OTA) remote diagnostics change VTNA announced last week. Driver
Display Activation gives drivers the ability to complete OTA updates at a more
convenient time for them. According to Makki, once a customer – referred to as
the ‘decision maker’ by Volvo – requests an update, the Volvo Certified Uptime
Center will send that update to the requested vehicle or vehicles and an icon
will flash on the instrument cluster screen. The driver can activate the update via the
truck’s instrument cluster at their next planned stop or at a convenient time – such as during a mandated break.

“We cut the process down
with this next generation by about 50% because we took out the conversation,”
Makki said, noting that time was spent communicating the download to the
driver, and the driver then stopping to allow the download to happen at a time
that may have been as inconvenient for the driver.

If a driver does not
complete the download within a set period of time, the decision maker is
notified and can handle it through the proper fleet protocol for such a
situation. At all times, Makki said, the decision maker is in charge of the
process. Makki compared it to a phone update where the final download occurs
when the phone holder presses the button.

Europe takes the lead

In the case of a global
company like Volvo Trucks, innovations can come from many places. That was true
with VDS, and it could be true again with driver comfort features. Volvo
introduced four new trucks in Europe today with a large focus on driver comfort
and features.

“Drivers who handle their
truck safely and efficiently are an invaluable asset to any transport company.
Responsible driving behavior can help reduce CO2 emissions
and fuel costs, as well as helping reduce the risk of accidents, injury and
unplanned downtime,” Roger Alm, president of Volvo Trucks, said. “Our new
trucks will help drivers work even more safely and productively and give our
customers stronger arguments when competing to attract the best drivers.”

Volvo introduced new versions of its Volvo FH, FH16, FM and FMX European models, which represent
about two-thirds of its deliveries in Europe. In long-haul trucks, the cab is
often the driver’s second home. In regional transport trucks it often serves as
a mobile office, the company said. Therefore, visibility, comfort, ergonomics,
noise level, maneuverability and safety were focal points when developing the
new trucks.

On the driver comfort
side, Volvo has introduced new cab designs for the FM and FMX models with
improved ergonomics and displays. Their interior volume has been increased by
up to one cubic meter for more working room, and larger windows improve
visibility. The steering wheel is equipped with a neck tilt function, allowing
the driving position to be individually adjusted and the lower bed has been
raised, increasing under-bunk storage. The day cab has a new 40-liter storage
compartment with interior lighting on the back wall. Cab comfort is further
enhanced through reinforced insulation that helps shut out cold, heat and
noise, while a sensor-controlled climate unit with a carbon filter promotes
good air quality in all conditions.

The new driver interface
includes a fully digital 12-inch screen, a supplemental 9-inch side display
available for infotainment, navigation, information and camera monitoring. The
functions can be controlled via buttons on the steering wheel, by voice
control, or via the touchscreen and display control panel.

Whether it is in Europe or
the U.S., Volvo continues to design not just for fleets, but for their drivers.

Descartes acquires Peoplevox to strengthen ecommerce capabilities – FreightWaves

Canadian on-demand logistics SaaS solution provider Descartes has announced the acquisition of Peoplevox, a major player in the cloud-based ecommerce warehouse management solutions (eWMS) space, in a deal worth $25.2 million. Based in the U.K., Peoplevox provides web-based eWMS and ecommerce fulfillment solutions to direct-to-consumer (DTC) customers around the world. 

Peoplevox solutions are designed to work seamlessly in automated warehouses that cater to the ecommerce market. The solution connects to webshop front ends, translates order information into a mobile-driven pick-and-pack process within the warehouse, and then feeds parcel delivery systems for shipment execution. 

Descartes has had a good run in the market lately; it enjoyed a 27% rise in its net income and revenue growth of 19% in the fourth quarter of 2019. Descartes has been resolute about acquisitions in recent years, having acquired Visual Compliance, CORE Transport Technologies, and Best Transport – all in under a year. 

The acquisition of Peoplevox will help Descartes expand its customer base, as it can now target DTC brands, ecommerce and traditional storefront retailers that look to enhance their online presence and improve their omnichannel capabilities. 

“Successful ecommerce supply chains require flexible fulfillment systems that can scale up and down during peak periods, while maintaining connections with a complex ecosystem of sales and delivery channels,” said Jonathan Bellwood, founder of Peoplevox and now the vice president of industry solutions at Descartes.

The Peoplevox eWMS platform was built on that idea, helping customers turn fulfillment into a competitive advantage. Bellwood mentioned that by partnering with Descartes, the company sees an opportunity to extend its market reach and integrate with complementary technologies that help manage the full lifecycle of domestic and cross-border ecommerce shipments. 

“Like our investments in Oz, pixi and ShipRush, Peoplevox adds density and domain expertise to what is an increasingly important area of our business – ecommerce,” said Edward Ryan, Descartes’ CEO. “We’re thrilled that Peoplevox is joining Descartes to help us better serve businesses looking to enhance their direct-to-consumer fulfillment performance. We welcome Peoplevox employees, customers and partners to the Descartes community.”

State Department bans exports to 13 weapons proliferators – FreightWaves

The U.S. State Department’s Bureau of International Security and Nonproliferation has banned all federal government and private sector export activity to 13 foreign enterprises and individuals, which the agency said have engaged in the production of weapons of mass destruction.

The bulk of the enterprises and individuals are located in China, including Baoding Shimaotong Enterprises Services Co. Ltd., Dandong Zhensheng Trade Co. Ltd., Gaobeidian Kaituo Precise Instrument Co. Ltd., Luo Dingwen, Shenzhen Tojoin Communications Technology Co. Ltd., Shenzhen Xiangu High-Tech Co. Ltd., Wong Myong Son, and Wuhan Snajiang Import and Export Co. Ltd.

Russian companies Kumertau Aviation Production Enterprise, Instrument Building Design Bureau, and Scientific Production Association Mashinostroyeniya, in addition to Kata’ib Sayyid al-Shuhada of Iraq and Eren Carbon Graphite Industrial Trading Co. Ltd. of Turkey, were also added to the export ban.

Specifically, these entities and individuals violated the Iran, North Korea and Syria Nonproliferation Act. The export ban, which was published by the State Department agency in the Feb. 14 Federal Register, took effect on Feb. 3.

The agency also said that no new Commerce Department export licenses will be issued to these listed entities or individuals and any existing licenses are suspended.

Commentary: This Arctic party needs some good icebreakers – FreightWaves

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates. 

There is this party starting in a very cool place and everyone who showed up is a little uncomfortable. Things are heating up – and not necessarily in a good way. This is the state of affairs in the Circumpolar North and its Arctic waters. Melting polar ice is opening up new navigational opportunities and offering access to previously inaccessible resources under the vast ocean floor. Metaphorically speaking, it is a nice place to hold a party. Yet the question is: who else is likely to show up and will they all get along? Basically, trans-Arctic commercial shipping requires access to icebreakers. 

The eight Arctic nations include Canada, Denmark (via Greenland), Finland, Iceland (via Grimsey Island), Norway, Russia, Sweden and the United States (via Alaska). Technically, Finland does not have direct access to the Arctic Ocean but part of it is within the Arctic Circle. All of these nations are members of an intergovernmental organization called the Arctic Council. It was established in 1996 to foster regional cooperation for the socio-economic welfare of the nearly four million people who live in the Arctic. To date there are 13 other nations with observer status, most notably China (2013).

(Photo credit: Flickr/Gennady Alexandrov)

The seven nations facing the Arctic Ocean have control over their domestic waters up to 200 nautical miles (nm) off shore and the resources underneath. Things can get dicey when one nation claims rights beyond 200 nm. Typically, it would have to show that its continental shelf extended beyond its domestic waters. Things also get dicey when issues of access to the Arctic Ocean and its navigable straits arise. Canada, Denmark, Norway and Russia view their territorial straits as sovereign. However, the U.S. and the European Union (EU) view them as open to innocent passage because they connect different bodies of international waters. The most contentious example of this is the status of Canada’s Northwest Passage (NWP). The NWP curls around Canada’s sovereign Arctic islands but it connects Baffin Bay off Greenland with the Beaufort Sea off Alaska. As nations look to the Arctic as a new frontier for commercial shipping, resource extraction and tourism, these unresolved issues will become heated.

The U.S-Canada dispute over the NWP started in 1970 but lay dormant for decades. A major oil field was discovered at Prudhoe Bay, Alaska in 1967. This was a joint venture by Standard Oil (renamed Exxon in 1973) and Atlantic Richfield Company (ARCO). The question was how the oil would be transported to the East Coast. While the Trans-Alaska Pipeline System (TAPS) was the final decision, some consideration at the time was given to transporting it by ocean vessel. The Humble Oil & Refining Company (a subsidiary of Standard Oil) would take up the issue and stake $36 million to finance an oil transport expedition through the NWP. Standard Oil had a lot at stake. Since it dominated East Coast refining, naturally it wanted Alaska’s oil to be transported to its refineries. If the oil were routed to the West Coast then ARCO would have a larger benefit.

(Photo in public domain)

In 1969, the oil tanker S.S. Manhattan was used to see if the route was feasible. The Sun Shipyard and Dry Dock Company of Chester, Pennsylvania retrofitted the oil tanker with an icebreaking bow, thereby making it the largest icebreaker in the world. If successful, there would be a great deal more traffic in the NWP to move the 25 billion barrels deemed available at the time. The vessel reached Barrow, Alaska on September 21 and delivered a token barrel of oil to New York City on November 12. However, on the trip to Alaska the Manhattan did get stuck in the NWP at M’Clure Strait. An escort icebreaker (U.S. Coast Guard cutter Northwind) was not able to free it, while the Canadian Coast Guard’s John A. Macdonald did the job. Canada supported this trip as well as a second one in 1970 but noted that future support was not guaranteed. At any rate, U.S. interests determined that a pipeline was more economical. Ironically, the U.S. would experience Canada’s concerns over the environmental risk to the NWP when the Exxon Valdez spilled 11 million gallons of oil into Prince William Sound in 1989. Of course, even that part of Alaska is not as harsh and remote as the Arctic.

Things are not all heat regarding the Arctic. In fact, a few prominent ocean container carriers have stated publicly that they will avoid Arctic shipping. The Northern Sea Route (NSR) along Russia from the Bering Strait to the Barents Sea is about 30% shorter than the Asia-Europe route via the Suez Canal. Depending on how much ice is in the region, the saving on transit time can be as much as 10 days off of the standard 35-day voyage via the Suez Canal. Melting polar ice is likely to increase the duration of the navigable season and yet the MSC, CMA-CGM and Hapag-Lloyd shipping lines have expressed concern over the environmental impact of using this route on a regular basis. In addition, Maersk has expressed some doubt. Certainly, as with the NWP, any accident in that part of the world is more costly to deal with when just considering accessibility of clean up vessels and equipment in the midst of spotty communications infrastructure. 

The Suez Canal.
(Photo credit: Flickr/Vyacheslav Argenbergl)

The United States is coming to this geo-political party with conspicuously fewer icebreakers than Russia. Depending on how one counts, Russia has up to 40 of them. In particular, the nuclear-powered Arktika is the world’s most powerful. Canada has 19 in its Coast Guard fleet. Even China has been traversing the Arctic Ocean in search of new resources. It has partnered with Russia on projects off its northern coast and has been assisted by Russian icebreakers. On a commercial basis China’s Cosco has made several voyages since 2013 under icebreaker escort, though mostly to supply Russian outposts.

China has even announced a “Polar Silk Road” initiative. It deployed its second domestically built research vessel/icebreaker, the Xue Long 2 (or Snow Dragon), in early 2019. The first one went into service in 1994. More are on the drawing board. With two, China equals the U.S. in terms of fully operational icebreakers. In the meantime, China’s exploration alliances with Russia and a free trade agreement with Iceland in 2013 mean that its presence in the Arctic is sure to grow.

The USCGC Healy, commissioned in 1999, is only a medium-class icebreaker. The 44-year old USCGC Polar Star is the only remaining heavy-class icebreaker in operation. Its sister vessel, USCGC Polar Sea, has been out of service since 2010. After years of expensive maintenance and upgrades to the existing fleet, the U.S. Coast Guard awarded a $746 million contract to VT Halter Marine to build the first of a series of modern heavy icebreakers. Its arrival in 2024 is projected to be the first of six (depending on future budget realities).

(Photo credit: Flickr/Greenpeace UK)

Icebreakers do not just cut a channel in the ice that stays open for days on end. This is not like cutting a channel  through a snowy mountain to manage run-off. The problem is that the ice is floating. Soon after the channel is cut the giant plates of ice will crash back into each other with a tangle of upended cleaves that make the channel even more difficult to traverse. Also, the steadily melting polar ice means that there are more ice floes around, which adds to unpredictability. The transition from a permanent ice cap to ice-free waters has been underway for decades and it will continue for decades more. Icebreakers need to escort commercial vessels. Do we need enough escorts to handle individual vessels on a come as you go basis or should the vessels be scheduled into convoys?

The United States is an Arctic nation thanks to Alaska. China is playing the long game. Will the U.S. think like the Arctic nation it is? If so, the American people need to think of the Arctic as its own backyard. A Monroe Doctrine for the Circumpolar North is perhaps too strong. But the nation’s elected leaders need to think about how to strengthen alliances with its other neighbors in the region.

There is no shortage of imaginative ideas for the Arctic. The reality is that the region is fragile, unpredictable and has a distinct shortage of support infrastructure along the NWP and NSR. Russia has signaled that it wants to make the NSR commercially viable and is investing in the icebreakers to make this happen. Prominent carriers are prepared to take a pass on the basis of environmental concerns. The debate continues.

US will raise import tariffs on EU aircraft in March – FreightWaves

In response to a recent World Trade Organization (WTO) decision that allowed the U.S. to impose retaliatory import tariffs on $7.5 billion of EU goods, the Office of the U.S. Trade Representative (USTR) will raise the duty on imported EU aircraft from 10% to 15%, effective March 18.

The WTO first authorized the U.S. tariffs in an Oct. 2 decision involving a dispute over subsidies that various European countries provide to commercial aircraft manufacturer Airbus. The U.S. responded on Oct. 18 by implementing tariffs across a range of EU products, including alcoholic beverages, cheeses and kitchen cutlery. The tariffs range from 10% to 25%, depending on the product.

“The United States remains open to a negotiated settlement that addresses current and future subsidies to Airbus provided by the EU and certain current and former member states,” USTR said in a Federal Register notice expected to be published this week.

Airbus (OTCMKTS: EADSY) said in a statement on Saturday that it “deeply regrets USTR’s decision to raise tariffs on aircraft imported from the EU,” adding the action “further escalates trade tensions between the US and the EU, thereby creating more instability for U.S. airlines that are already suffering from a shortage of aircraft.”

Airbus warned that the EU is expected to receive authorization from the WTO to impose tariffs against imports of Boeing planes, such as the 737Max, 787 and 777 series, in May or June, further escalating the U.S.-EU trade war. Boeing (NYSE: BA) is struggling to recover from widespread safety issues involving its new 737Max aircraft.

The Distilled Spirits Council of the United States (DISCUS) urged the U.S. and EU to “de-escalate this trade dispute by simultaneously removing the U.S. tariffs on EU beverage alcohol products and the EU’s tariff on American whiskey.”

The U.S. imposed a 25% tariff on various European whiskeys on Oct. 18. However, since June 22, 2018, the EU has had a 25% retaliatory tariff on imports of American whiskey in response to U.S. tariffs on aluminum and steel. The EU is scheduled to increase its tariff on American whiskey imports to 50% in spring 2021.

“It has become abundantly clear that tariffs on distilled spirits products are causing rough seas on both sides of the Atlantic,” the council said.