Month: March 2020

U.S. Customs and Border Protection (CBP) officers at Philadelphia airport recently intercepted and removed an express shipment of counterfeit electric toothbrush heads from Turkey before they could end up in the hands of unwitting American consumers.

The 1,440 counterfeit Oral-B electric toothbrush heads, which were destined for an address in Joliet, Illinois, had a manufacturer’s suggested retail price of $12,274, if genuine. The shipment consisted of 260 four-packs and 200 two-packs, according to the agency.

CBP officers suspected the toothbrush heads were counterfeit based on the “poor packaging and questionable quality” of the product, the agency said.

The officers contacted the agency’s Consumer Products and Mass Merchandising Centers of Excellence and Expertise in Atlanta, where trade specialists worked with the Oral-B trademark holder to determine that the toothbrush heads were counterfeit. CBP seized the shipment on February 24.

“Customs and Border Protection will continue to work with our trade and consumer safety partners to identify and seize counterfeit consumer goods that threaten American shoppers, such as these potentially dangerous toothbrush heads,” said Anne Maricich, acting director of field operations in the agency’s Baltimore field office, in a statement on March 6. “CBP urges consumers to protect themselves and their families by purchasing authentic health and hygiene products from reputable vendors.”

CBP warned that counterfeit toothbrush heads pose a health threat to consumers, since they are likely “manufactured in unsanitary facilities with substandard materials that may sicken users or cause bleeding to a user’s gums or mouth, and structural defects may cause the brush head to detach and potentially choke users.”

The agency suspects that counterfeit Oral-B toothbrush heads are sold online from garage-based businesses or at flea markets.

“You think you’re getting a good value from the seller, and the next thing you know you’re hurting yourself,” CBP spokesman Stephen Sapp told American Shipper.

This is not the first time that CBP officers at Philadelphia airport have encountered counterfeit toothbrushes in express consignments from overseas. In October 2019, the officers seized a shipment from China containing 20,400 counterfeit Oral-B toothbrush heads. The shipment, if genuine, had a manufacturer’s suggested retail price of $95,600, the agency said.

In recent years, CBP has stepped up its enforcement against imports containing counterfeit products. On a typical day last year, the agency seized $4.3 million of these illicit goods at U.S. ports of entry.

According to CBP, China continues to be the primary source for counterfeit and pirated goods. It’s estimated that 66% of all U.S. intellectual property rights seizures, with a value of more than $1 billion if the products had been genuine, originated in China during fiscal year 2019.  

“Trademark holders share sensitive product information with us,” Sapp said. “From this information, our officers and trade specialists become even better at identifying the telltale signs of counterfeit goods.”

While I was writing this commentary on March 3, 2020, the United States Federal Reserve took the emergency step of cutting its benchmark rate by 0.5% as it attempted to head off risks to the economy. You can read about the action in these statements issued on the Fed’s website:

Some media outlets described the rate cut as the steepest since the financial crisis.

On March 2, the Wall Street Journal published Apple Bet Everything on China. Then Coronavirus Hit. While the article focuses on Apple, it highlights the issues that senior executives of other large multinational companies must grapple with as the world awakes to the reality of COVID-19, and the impact that such exogenous variables have on supply chains.

Before that, on February 18, 2020, Professor Yossi Sheffi of MIT penned an op-ed in the Journal’s Logistics Report; Commentary: Supply-Chain Risks From the Coronavirus Demand Immediate Action, in which he argues that companies must act quickly to mitigate the risks presented by the outbreak of COVID-19.

Moreover, it is nearly impossible to avoid mention of supply chain risk if you follow the news. In fact, supply chain risk featured prominently in the press conference, and the news reports, immediately following the emergency action by the Fed, with Fed Chairman Jerome Powell stating, “We do recognize a rate cut will not reduce the rate of infection, it won’t fix a broken supply chain.”

Defining the problem – what is supply chain risk?

Companies build supply chain networks in order to enable them to make and distribute the products or services that they sell to their customers. Supply chain risks are any risks that make it impossible for companies to satisfy demand from their customers. This means that supply chain risk is a form of operational risk, except that while we think of operational risk as being within the confines of a specific company, we typically think of supply chain risk as existing outside the walls of a specific company, but within its network of suppliers and business partners. The article about Apple highlights how much manufacturing has become concentrated in China, not just for Apple but for many other large multinational corporations, and even for entire industries.

We can think of supply chain risks in three categories –  global, systemic and unique. A global risk represents the probability of an event that knocks out supply chains across industries and geographical boundaries around the world. A systemic risk is much more limited, affecting the entire supply chain of just one company or affecting supply chain operations in just one country, or just one region of the world. A unique supply chain risk is even more limited than a systemic risk, because a unique supply chain risk is limited to just one node or just one participant, or just one small cluster of nodes in a company’s supply chain.

As you might guess, part of the apprehension surrounding COVID-19 is that, for most people alive today, this is the first time that they are experiencing an event that has the potential to impair the smooth operation of supply chains all over the world. It is the first time that people who ordinarily do not have to worry about supply chains have been forced to think about what they will do if the daily necessities they have come to rely on are no longer available because of a supply chain disruption. COVID-19 has made supply chains everyone’s business.

What type of supply chain network is your company building?

In their book The Starfish and The Spider, Ori Brafman and Rob Beckstrom describe two types of networks. The spider describes a highly centralized network, one that collapses and dies if its head is cut off. The starfish describes a decentralized network, one that is capable of regeneration and restrengthening when any one of its nodes is destroyed. In a world that is likely to become more volatile, uncertain, complex and ambiguous, the ability to build supply chain networks that continue to improve in the face of internal and external shocks is going to become a source of competitive advantage.

As recently as a decade ago, executives would be forgiven for arguing that they had no alternatives to highly centralized supply chain networks. Given the advances in digital technologies, that excuse is no longer valid. Moreover, 2020 marks a watershed moment in how we all think about supply chain risk and how corporate executives think about managing the risks inherent in their supply chain.

If you are a team working on software products to help companies manage supply chain risk, we’d love to tell your story in FreightWaves. I am easy to reach on LinkedIn and Twitter. Alternatively, you can reach out to any member of the editorial team at FreightWaves at media@freightwaves.com. 

On March 3 President Trump signed legislation that will help increase the ranks of U.S. Customs and Border Protection’s (CBP) agriculture specialists and technicians to step up protection for America’s farming and forestry industries against the introduction of destructive pests and diseases.

The legislation, 2019 Protecting America’s Food and Agriculture Act (S. 2107), authorizes CBP to hire and train 240 new agriculture specialists annually for the next three fiscal years.

The agency is also authorized to hire 200 new agriculture technicians, as well as 20 agriculture canine teams, each fiscal year over the same period.

Specifically, the legislation provides $29.9 million for fiscal year 2020 to hire the first 240 CBP agriculture specialists, followed by $36.1 million and $40.5 million, respectively, for fiscal years 2021 and 2022. For CBP’s new agriculture technician hires, the legislation provides $11 million, $25 million, and $38 million, respectively, over the next three fiscal years. 

The agriculture canine team budget includes $3.5 million, $7.4 million and $12.2 million, respectively, for fiscal years 2020, 2021 and 2022.

In addition, the legislation includes $6 million annually for training of these new CBP agriculture specialists, technicians and canine teams.

In January, a group of more than 80 trade associations representing the agricultural products industry lobbied the Senate and House of Representatives to pass the Protecting America’s Food and Agriculture Act to boost the presence of CBP’s agriculture specialist at the nation’s ports of entry.

According to CBP’s Agriculture Specialist Resource Allocation Model (AgRAM), the agency requires an additional 721 agriculture specialists to efficiently oversee the agricultural trade entering and exiting the U.S.

The Trump administration is pushing back against the UN Human Rights Council for its recent publication of a database of companies that currently provide goods and services to Israelis living in the Palestinian West Bank area.

The administration called the UN database a “blacklist,” which could effectively facilitate international boycotts against the listed enterprises.

“The UN ‘blacklist’ is anti-business, seeks to isolate Israel, has no factual basis or legal force whatsoever, and should not be adhered to in any respect,” said Commerce Secretary Wilbur Ross in a March 3 statement.

He added the U.S. “fully supports the U.S. companies identified on the list and encourages all U.S. businesses to continue to work with and invest in Israeli as well as Palestinian communities.”

The UN published its report on the database Feb. 12 in advance of the Human Rights Council’s 43rd Session, Feb. 24-March 20. Work on the report began in March 2016.

Of the 112 companies on the list, 94 are Israeli and the rest are international companies. Six U.S. companies were placed on the list, including TripAdvisor (NASDAQ: TRIP), Airbnb, Booking Holdings (NASDAQ: BKNG), Expedia (NASDAQ: EXPE), General Mills (NYSE: GIS) and Motorola Solutions (NYSE: MSI).

The other non-Israeli companies on the UN list are Alstom (OTCMKTS: ALSMY) of France; eDreams ODIGEO (BME: EDR) of Luxembourg; Indorama Ventures (OTCMKTS: INDOY) of Thailand; Altice Europe (OTCMKTS: ALLVF), Kardan (TLV: KRNV) and Tahal Group International of the Netherlands; and JC Bamford Excavators, Greenkote and Opodo Ltd. of the U.K.

“The report makes clear that the reference to these business entities is not, and does not purport to be, a judicial or quasi-judicial process,” the Office of the UN High Commissioner for Human Rights said. “While the settlements as such are regarded as illegal under international law, this report does not provide a legal characterization of the activities in question, or of business enterprises’ involvement in them.”

The U.S. has antiboycott regulations on the books which prohibit U.S. persons from complying with certain requirements of unsanctioned boycotts. In addition, the regulations require that persons report the receipt of these boycott requests to the Commerce Department’s Bureau of Industry and Security.

The antiboycott regulations date back more than 40 years ago — namely to Congress’ 1977 amendments to the Export Administration Act (EAA) and the Ribicoff Amendment to the 1976 Tax Reform Act — and were aimed primarily at precluding U.S. participation in the Arab League’s boycott of Israel. However, they also apply to all boycotts imposed by foreign governments against countries that are friendly to the United States.

Israeli military forces captured the West Bank territory from the Palestinians during the 1967 Six Day War. The occupation and recent spread of Israeli settlements have been widely viewed as illegal by the international community, while Israel and the U.S. argue against it.

Good
day,

Deutsche Post DHL Group said it
will no longer be seeking a buyer for its StreetScooter business and will
instead wind down production of the vehicles.

StreetScooter, acquired by DHL in
2014, makes electric delivery vehicles. DHL was initially attracted to the
startup because it couldn’t find an electric vehicle it felt met its delivery
requirements. In May 2019, DHL announced it would seek a buyer for the unit, but
in its earnings release on Feb. 28, the company said it would no longer pursue
that path.

“Thanks to our StreetScooter we
have one of the biggest electric delivery fleets in the world and have made a
significant contribution to the development of e-mobility,” said Frank Appel,
CEO of Deutshe Post DHL. “We have always said that we do not want to be a car
manufacturer. A further scaling of the business without the right partner does
not fit our long-term strategic goals. Independent from the decision today, we
will further foster the transition of our fleet towards e-mobility. We are
committed to our Mission 2050, which means zero-emission logistics by 2050.”

The release said that StreetScooter
would “concentrate on the operation of the current fleet of e-vehicles.”

In November 2019, it was announced
that StreetScooter vehicles would travel U.S. roadways in 2020. The company also struck a deal with Amazon to deploy electric
vehicles in Germany.

Rueben Scriven, lead analyst for
electric trucks at market research firm Interact Analysis, said DHL found it difficult to grow share in a crowded space.

“A number of factors have
contributed to the demise of StreetScooter,” he said. “Firstly, there was a
significant decline in the growth of the European light-duty electric truck
market which only grew by just over 15% in 2019 compared to more than 40% in
2018. Secondly, StreetScooter was looking to tap into the Chinese market;
however, the Chinese light-duty electric truck market has contracted
significantly due to fears that the Chinese government will phase out subsidies
after 2020.”

Competition from ARRIVAL and Rivian
also impacted sales of StreetScooter vehicles in Europe.

“While StreetScooter was the
European market leader for electric light-duty trucks in 2018 with a market
share of more than 30%, ARRIVAL and Rivian, two of StreetScooter’s major
competitors, have disrupted the market using innovative manufacturing processes
and heavy investment in modular skateboard architectures. This has led to the
two companies winning recent large orders of more than 110,000 units in total,”
Scriven said.

There are reportedly more than
10,000 StreetScooters on roadways today with the company producing three
models: the WORK, the WORK L and the WORK XL. The XL is based on a Ford Transit
chassis and has been built by Ford (NYSE: F) in
Cologne, Germany, since October 2018.

Did you know?

The Dow Jones Transportation
Average fell 13.94% last week, just slightly worse than the overall Dow Jones
Industrial Average, which fell 12.36%.

Quotable:

“If the virus spreads into U.S.
communities, consumers are likely to limit their exposure to stores, theaters,
restaurants, sporting events, air travel, and the like. There is no reason to
anticipate that consumers will engage in such extreme measures at this time.”

– Richard Curtin, University of Michigan researcher, on the potential impact of coronavirus on retail sales

In other news:

Household income rises in January

Household income rose 0.6% in
January, the largest gain in 11 months, according to a survey by the University
of Michigan. (Wall Street Journal)

Missouri aluminum plant faces closure

An aluminum smelter in Missouri
that reopened in 2018 following the introduction of aluminum tariffs, is losing
money so fast it will likely close within 60 days, executives said. (Reuters)

Kodiak Robotics founders: The world will love self-driving trucks

The founders of Kodiak Robotics
wrote that people have not fallen in love with self-driving trucks yet, but
they soon will. (World Economic Forum)

Air Cargo Global denies closure

Air Cargo Global said it is not
closing, despite reports, but it is restricting its business, as it seeks
profitability. (STAT Trade Times)

Etihad Cargo hopes to expand service in U.S.

Etihad Cargo is expanding its sales
teams, including in the U.S., as it looks to grab a larger share of the global
air cargo business.(Arabian Industry)

Final thoughts

The coronavirus continues to have
widespread impact on global markets. Last week’s selloff in stocks is sure to
have an impact on decisions companies make in the near-term, and that could
mean cutting costs. Transportation is one of the largest costs, and with supply
chains being impacted, it might be very tempting for companies to reach into
the bucket of tricks and slice their transportation budgets in an effort to
push down rates, if even just a little bit.

Hammer down, everyone!