Getting crews on and off ships and airplanes – FreightWaves

The three largest global organizations representing the workforces of the maritime and air transport industries have asked their government members to ensure the continued cross-border movement of these “key workers” to and from their jobs.

The coronavirus pandemic has resulted in a flurry of government bans on international travel, which has obstructed necessary crew changes to keep the world’s maritime and aircraft fleet, as well as at ports and logistics hubs, in operation and goods flowing.

The International Maritime Organization (IMO), one of the signatories to the May 26 statement, highlighted that more than 80% of global trade moves by ocean transport, which is managed by about two million seafarers.

The IMO said starting in mid-June an estimated 150,000 seafarers a month will require international flights either to their home countries or to sign onto ships.

Government travel restrictions have delayed or grounded shipboard crew changes in recent months.

“For humanitarian reasons – and the need to comply with international safety and employment regulations – crew changes cannot be postponed indefinitely,” the groups’ statement said.

The International Civil Aviation Organization (ICAO) and International Labor Organization (ILO), which also signed the letter, said 887,000 aviation industry workers face similar travel and workplace restrictions due to the COVID-19 pandemic.

The three organizations asked governments worldwide to designate maritime and aviation personnel as “key workers” providing an “essential service,” regardless of their nationality when in jurisdiction.

This action would also include accepting official industry worker documentation and “appropriate exemptions from national travel-related, health-related or movement restrictions in order to facilitate their joining or leaving ships, aircraft, airports and cargo facilities.”

In addition, the organizations recommended that governments provide information to ships and aircraft, and their crews, on protective measures against the spread of COVID-19.

“The Joint IMO, ILO, ICAO statement is an important reminder of the need to keep all parts of the international transportation system functioning. It also points to the critical work that national governments must do in order to allow vessel crew changes,” John Butler, president and CEO of the Washington, D.C.-based World Shipping Council told American Shipper.

“We have seafarers that have been on ships for too long, and we have seafarers at home that are eager to work,” he said. “There are safe ways to get crew from their homes to ships and vice versa, and we call on all national governments to put processes in place immediately to make that happen.”

Commentary: Who holds the wild card at every supply chain’s end? – FreightWaves

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

In order not to hold everyone in suspense – all of us hold the wild card at the end of a supply chain when we are in our role as retail consumers. We vote with our wallets and sometimes emotion and psychology can enter into the mix. Whims, fears, conspicuous consumption, keeping up with the Joneses, etc. all have a role to play in the retail sector.

Of course, some may feel that cold rationality governs their own purchasing decisions. This means spending one’s disposable income on a bundle of final goods and services that maximizes total satisfaction relative to the purchase cost. Furthermore, the marginal increase in satisfaction per dollar spent is equalized across every good and service in that bundle. Of course, this is economics jargon and it is hard to imagine typical shoppers replacing the fun of impulse buying with the fun of making calculations in order to optimize consumption at the margin. Perhaps casual shopping combined with differential calculus is just too much fun for one day?

(Photo: Jim Allen/FreightWaves)

In the new normal that is a world economy suffering through the COVID-19 pandemic, nothing screams non-essential production and consumption like retail fashion. This niche is not to be confused with haute couture; rather, a lot of it involves affordable, yet trendy, apparel stocked by market leaders such as Zara and H&M. These mainstays in downtown shopping districts and suburban malls are the retail face of the fast-fashion industry. The fast-fashion supply chain operates with high volume and quick deliveries across a global market while trying to survive on low profit margins. GlobalData Plc, a business intelligence provider, noted that apparel sales fell by 89% over March-April 2020 as the retail sector ground to a halt. To be sure, online sales rose, but only by about 20% and from a lower base in comparison to brick-and-mortar. McKinsey & Company forecasts a decline in revenues of 27-30% over 2019-20 across the fashion industry’s $2.5 trillion global marketplace.

Mandated sheltering-in-place and social distancing certainly eliminated any need to be in-style regarding one’s apparel. Those still wishing to look picture-perfect for their Zoom and Skype meetings have 50% less to worry about as long as the camera remains above their waists. All of this has been particularly tough for the fashion supply chain. Unlike backlogged foods and beverages, apparel cannot be so easily disposed of. What was in-style this season may take several cycles, if ever, to become marketable. Also, the abrupt cutbacks on fabric orders left upstream vendors (most of which are in Asia) holding their own excess inventories. With storefronts now beginning to re-open, the only means to move the backlog is through discount sales. 

(Photo: Jim Allen/FreightWaves)

Typically, the U.S. apparel and footwear industries face high tariffs on their imports (i.e., the equivalent of sales taxes reaching as high as 30% per unit). The Trump Administration instituted a temporary duty deferral program on April 18, 2020. While this was designed to provide relief for importers facing demonstrated hardships due to the pandemic, there is no indication that this program will be extended through May and into June 2020. Lobby groups are certainly asking for an extension. Of course, as a mere deferral program, any duties not paid after April 18 will have to be paid within 90 days of import entry. Retailers certainly need to hope that their stores will be open before the 90-day grace period ends.

It should also be kept in mind that the program only applied to normal trade duties – meaning those listed in the Harmonized Tariff Schedule of the United States (HTSUS). Other trade devices like anti-dumping and countervailing duties (i.e., special duties accessed as retaliation for specific trade offenses in the eyes of the United States) are not deferred. Also not deferred are any duties assessed under the auspices of Section 232 of the Trade Expansion Act of 1962 and Sections 201 and 301 of the Trade Act of 1974. Simply put, this means that most tariffs on Chinese imports, as part of the U.S.-China trade dispute, are payable by importers without relief. In fact, about 40% of apparel and 60% of footwear imports to the U.S. are from China.

It will probably take a while before the consumer market shifts some of its limited disposable income from groceries and cleaning supplies to fast-fashion. Compared to other retail sectors, apparel depends on some of the most fickle consumers. Cautious consumers holding all their wild cards means that retailers and their upstream vendors will need to be at the top of their game.

National Shipper Advisory Committee for FMC gets Senate push – FreightWaves

The U.S. Senate Commerce Committee has approved a bill that would allow the formation of a committee of American shippers to advise the Federal Maritime Commission on policies related to competitiveness, reliability, integrity and fairness in ocean shipping.

FMC Commissioner Rebecca Dye proposed the FMC National Shipper Advisory Committee two years ago when the agency was analyzing persistent ocean shipping bottlenecks due to systemic port congestion throughout the U.S.

Under the 2019 FMC Commission Shipper Advisory Committee Act (S. 2894), the commission will appoint a committee of 24 industry members, split evenly between importers and exporters. Those individuals will be presented to the FMC via nomination.

Committee members’ terms would expire Dec. 31 of the third year after the date of appointment.

The advisory committee would elect a chairman and vice chairman, with the chairman authorized to establish subcommittees and working groups.

The Senate legislation calls for the FMC National Shipper Advisory Committee to remain in effect until Sept. 30, 2029.

“I am pleased that my legislation to establish a National Shipper Advisory Committee at the FMC is headed to the full Senate for consideration,” said Senate Commerce Committee Chairman Roger Wicker, R-Mississippi, in a statement on Wednesday.

It is not uncommon for federal government agencies involved in trade to have industry advisory committees. Customs and Border Protection has long relied on trade enforcement and facilitation input from the Commercial Customs Operations Advisory Committee (COAC).

FedEx named as suitor for German parcel company – FreightWaves

According to a report in German newspaper Handelsblatt Today, FedEx Corp. (NYSE: FDX) is pursuing an ownership stake in German parcel company Hermes.

The article identified the Memphis-based transportation and logistics giant as the likely suitor to partner with Hermes to expand the company’s parcel distribution service, but listed Amazon.com (NASDAQ: AMZN) and the logistics arm of Alibaba Group (NYSE: BABA) as interested parties.

Hermes competes in major European markets in Germany, France and the United Kingdom and presents a growth opportunity for FedEx to increase market share and gain scale in comparison to DHL’s (Deutsche Post CXE: DPW.D.IX) dominance in the region.

In its Wednesday financial report for the fiscal year ended Feb. 29, Hermes’ parent, Hamburg-based online retailer Otto Group, said it was planning to bring on a “strategic partner for European parcel deliveries” within the financial year. The company noted the parcel unit has been successful acquiring new corporate customers and experienced peak season-like parcel deliveries during April. Hermes reported adjusted external revenue growth of 10.9% for the recent fiscal year and management expects smaller but “still significant” external growth in the current fiscal year.

Hermes is investing “heavily” in logistics infrastructure by expanding its European network of parcel collection hubs in efforts to build out its international, cross-border parcel business. Further, the unit has e-mobility initiatives in place as it pursues zero-emission delivery throughout Germany by 2025. Hermes is on better operating footing given improved growth trends but still faces cost obstacles like wage increases for delivery agents, which they describe as being in “increasing shortage.”

FedEx finds itself in a transformation to improve sagging earnings and adapt to the ever-evolving supply chain, which favors online sales and e-commerce. Acquiring an interest in a European parcel carrier would advance the company’s e-commerce pursuits and provide it with another growth avenue.

The recent reshaping of FedEx has included further efforts to minimize its reliance on the U.S. Postal Service as a delivery option, seeking new partnerships with online retailers (firing Amazon as a customer) and the start of combining its long-siloed air and ground offerings.

In April, FedEx announced plans to further reduce expenses and preserve liquidity, which included a full drawdown of its $1.5 billion credit facility. The surge in online purchasing has created an unfavorable shift in mix to smaller residential shipments as larger B2B shipments have been negatively impacted by shutdown ordinances. The recent balance sheet and cost-cutting efforts are designed to help navigate COVID-19-related headwinds that have negatively impacted the company’s operations.

The deal may be a smoother path to profitability in the region as FedEx continues to incur significant expenses integrating and restructuring the 2016 acquisition of Netherlands-based TNT Express. Through its fiscal third quarter of 2020, FedEx reported $168 million in integration expenses related to the acquisition after recording $325 million in similar expenses during the 2019 fiscal year.

Otto Group’s management described negotiations to sell a portion of Hermes as at an “advanced stage.”

More air cargo finds its sea legs during COVID-19 – FreightWaves

Escalating airfreight transportation rates and capacity shortages out of China in recent months due to the coronavirus pandemic have led many shippers to try hybrid services that combine sea and air modes.

So-called “sea-air” services offered by some global freight forwarders and non-vessel-operating common carriers (NVOCCs) have been around for decades, but they tend to come and go depending on airfreight market conditions.

Mortan Bach, global chief commercial officer, Shipco Trasport (Courtesy photo)

The pandemic has spawned increased interest in moving freight from Asia by fast boat to Los Angeles where it is put on a plane to Europe. The new option has become more popular than the traditional routing through the Middle East, which involved an ocean leg to the United Arab Emirates’ Jebel Ali seaport, stripping the container and delivering the cargo to an airliner at the Dubai airport for transport to the destination city, according to logistics professionals.

“Sea-air is a reaction to lack of capacity and high rates,” said Morten Bach, global chief commercial officer for Shipco, a non-vessel carrier in Hoboken, New Jersey. “When air rates go up, sea-air becomes a viable alternative for cargo that cannot pay high airfreight rates, nor accept all-ocean transit times.”

Experts caution that not all freight is suited for the sea-air mix because of tight delivery windows and more touch points that increase the risk of delays, such as extra customs inspections.

L.A. sea-air service throughput

The COVID-19 pandemic has turned Los Angeles into a center for sea-air logistics services.

Ocean consolidator ECU Worldwide earlier this year established a sea-air service from China to Europe via Los Angeles, called XLERATE. Less-than-containerload (LCL) shipments booked by forwarders are moved via ocean carrier from six Chinese ports to Los Angeles,  for devanning and placement onto airplanes bound for Europe.

Tim Tudor, CEO, ECU Worldwide (Courtesy photo)

“We are targeting airfreight users and really not trying to convert our standard LCL clients to XLERATE per se. The commercial benefits are allowing our freight forwarding customers to give their “clients a third or middle service option both in price and transit between pure air cargo out of China and the standard ocean LCL service,” Tim Tudor, ECU Worldwide’s Miami-based CEO said.

Transit times are between 14 to 23 days, depending on the Chinese origin port and the destination European airport, while the cost is about one-fourth that of pure airfreight.

After devanning containers and reloading the cargo onto airline pallets at its facility in Los Angeles, Shipco turns the freight over to all-cargo operator Cargolux for air transport to Europe.

Both ocean wholesalers credit the success of their L.A. sea-air service to trans-Pacific, U.S.-flag ocean carriers Matson Navigation (NYSE: MATX) and APL, a subsidiary of French line CMA CGM, which operate scheduled container service from China and North Asia to the Port of Los Angeles. 

While other trans-Pacific liner carriers have announced numerous blank sailings during the COVID-19 pandemic, Matson has even added chartered vessels to increase its capacity to two sailings per week, according to Tudor. For Asia origins that are not served by Matson, ECU Worldwide uses APL’s “Gate Out” service.

“We are most certainly focused on knowing when these blank sailings will occur and adjust our schedule accordingly,” Tudor said.

Central and South America

Both ECU Worldwide and Shipco said they also have expanded their sea-air services via Los Angeles to include destinations across Central and South America. They perform this by trucking the cargo to Miami International Airport for outbound flights to those regions.

Shipco operates team trucks seven days a week to Miami.

“It is an advantage for us that we are a truck broker in the U.S. and can control the trucking leg into Miami ourselves via our in-house domestic department to ensure we can deliver on the competitive transit times,” Bach said.

Hospital Gear

The ocean consolidators are also providing sea-air services for large container shipments of personal protective equipment for hospitals, which initially relied on express air to cover immediate supply shortages.

“We have moved several sea-air shipments well over 80 cubic meters from Shanghai  to . . .  Munich and Madrid recently,” said Spencer Strader, ECU Worldwide’s director of U.S. imports. “We have been moving weekly shipments in the 40- to 50-cubic meter range of PPE from Shanghai and Shenzhen to Buenos Aires, Argentina, and Bogota, Colombia, via Miami.”

Personal protective equipment, or PPE, is worn to minimize exposure to hazards such as viruses.

Minneapolis-based forwarder C.H. Robinson Worldwide (NASDAQ: CHRW) has also helped Asian shippers turn to sea-air transport for their U.S.-bound shipments.

Matt Castle, vice president of global forwarding products and services, C.H. Robinson Worlwide (Courtesy photo)

“We’re working closely with them to understand their current inventory levels and determine if expedited ocean services to the U.S. and domestic air to various U.S. states will work with their timeline,” said Matt Castle, C.H. Robinson’s vice president of global forwarding products and services. “With the right planning, global shippers can accommodate the longer lead time and take advantage of the cost savings.”

Extraordinary measures

DSV Panalpina (OTCMKTS: DSDVY), based in Germany, has experienced greater interest in its sea-air service to Europe via Singapore and Dubai.

“At the beginning of the year – before Chinese New Year – we experienced an increase in demand for this service from markets such as Bangladesh, Myanmar and Cambodia due to a surge in textile volumes,” DSV Panalpina spokesman Christian Krogslund told American Shipper.

“As the COVID-19 pandemic unfolded late in the first quarter, demand shifted towards mainly PPE,” he said. “In order to keep supply chains flowing with vital PPE for the fight against COVID-19, we have used transshipment points such as South Korea, Taiwan and even Vietnam to meet the huge demand for capacity out of China.”

Kim Ekstroem, global chief operating officer, Shipco Transport (Courtesy photo)

Shipco COO Kim Ekstroem said experienced logistics providers can establish new sea-air routes on demand.

When airfreight capacity to China suddenly tightened at the start of the pandemic, Shipco established a sea-air solution through Inchon, South Korea. Cargo arrived via aircraft at Inchon and was reloaded into ocean containers for transport to Shanghai.

“We got down to a transit time of roughly seven days,” Ekstroem said. However, he added, the service only lasted until the outbreak subsided in China.

Sustaining sea-air services post-COVID-19

ECU Worldwide said it plans to expand XLERATE for Europe with truck service to nine more inland U.S. locations in the next several weeks.

“Our XLERATE service, however, must first have access to premium port-to-port and express terminal gate-out services in Los Angeles for us to put it under the XLERATE rate,” Strader said.

Since sea-air services thrive on supply chain emergencies, C.H. Robinson’s Castle said the number of shipper requests will likely decrease once the COVID-19 virus subsides.

But Shipco’s Ekstroem believes sea-air services will stick around once the COVID-19 pandemic subsides.

“I think the need for cargo capacity will increase faster than our appetite for traveling, and without us traveling, there will be limited belly capacity and airfreight rates will stay high,” he said.

National Shipper Advisory Committee for FMC gets Senate push – FreightWaves

The U.S. Senate Commerce Committee has approved a bill that would allow the formation of a committee of American shippers to advise the Federal Maritime Commission on policies related to competitiveness, reliability, integrity and fairness in ocean shipping.

FMC Commissioner Rebecca Dye proposed the FMC National Shipper Advisory Committee two years ago when the agency was analyzing persistent ocean shipping bottlenecks due to systemic port congestion throughout the U.S.

Under the 2019 FMC Commission Shipper Advisory Committee Act (S. 2894), the commission will appoint a committee of 24 industry members, split evenly between importers and exporters. Those individuals will be presented to the FMC via nomination.

Committee members’ terms would expire Dec. 31 of the third year after the date of appointment.

The advisory committee would elect a chairman and vice chairman, with the chairman authorized to establish subcommittees and working groups.

The Senate legislation calls for the FMC National Shipper Advisory Committee to remain in effect until Sept. 30, 2029.

“I am pleased that my legislation to establish a National Shipper Advisory Committee at the FMC is headed to the full Senate for consideration,” said Senate Commerce Committee Chairman Roger Wicker, R-Mississippi, in a statement on Wednesday.

It is not uncommon for federal government agencies involved in trade to have industry advisory committees. Customs and Border Protection has long relied on trade enforcement and facilitation input from the Commercial Customs Operations Advisory Committee (COAC).

FMC’s Dye keeps eye on COVID-19-challenged US supply chains – FreightWaves

The U.S. Federal Maritime Commission (FMC) official in charge of monitoring the current U.S. supply chain impacts related to the COVID-19 pandemic said she has brought together myriad industry stakeholders to find immediate remedies to these problems and prepare for the reopening of the economy.

“We need to be ready in our seaports for the increased cargo that we know is coming soon,” FMC Commissioner Rebecca Dye told attendees of the virtual annual Agriculture Transportation Coalition conference on Wednesday, May 20.

“I believe that if we prepare now, we will be in a position to support the American economy when it comes roaring back very soon,” she said.

Scores of blank sailings by the ocean container carriers, temporary marine terminal closures and slowdowns, and upheaval in the intermodal transportation system started in March. Because of the pandemic’s rapid spread and imposition of government social distancing measures, the FMC mobilized to address the COVID-19 supply chain impacts.

The FMC’s March 31 order, known as Fact Finding 29 International Ocean Transportation Supply Chain Engagement, highlighted the commission’s statutory mandate to “ensure efficient and economic transportation system for ocean commerce.”

The order also stated that “the commission has determined there is a compelling need to convene new Supply Chain Innovation Teams to address these challenges.”

Dye, who was placed in charge of the fact finding, quickly established nine supply chain innovation teams which consist of representatives from the nation’s public port authorities, marine terminal operators, shippers, ocean transportation intermediaries, liner shipping companies, drayage trucking companies, longshore labor representatives, rail officials, and chassis providers.

The teams have, so far, identified four “urgent” problems, Dye said. They include difficulties with container returns to the terminals and carriers, confusion with export receiving dates from the ocean carriers, lack of reasonable notice of terminal closures, and need for wider distribution of information on blank sailings and East Coast skipped ports from the ocean carriers.

“The challenge that I find is that nobody ‘owns’ many of our problems,” Dye said. “So, I have enlisted the major carrier CEOs in the USA/North America to use their influence to lead on these improvements.”

She has also urged the country’s marine terminal operators and port authorities involved with the supply chain innovation teams to do the same.

Last year, she successfully concluded Fact Finding 28, spending the past two years with shipping industry representatives to develop the demurrage and detention fees imposition guidelines.

Dye said the purpose of the commission’s work is to find “forward leaning improvements to the [freight transportation] system.”

She said, “The freight delivery system is the very backbone of the American economy. Improving the performance of the freight delivery system in the United States boosts the vibrant export and import trades in our country.”

As a result of the Fact Finding 29’s supply chain innovation teams’ early work, the FMC announced on April 27 order that it would temporarily allow service contracts to be filed up to 30 days after they take effect to provide relief to shippers and ocean container carriers impacted by the coronavirus pandemic. This relief will remain in place through December 31, 2020, the FMC said.

The FMC has authority under the Shipping Act to make certain regulatory adjustments when necessary.

Dye told the Agriculture Transportation Coalition members, who honored her for steadfast work to improve the U.S. ocean shipping industry, that Fact Finding 29’s work is moving quickly. “I will update on our progress with regular press releases rather than a final report,” she said.

project44 adds air, ocean freight visibility to platform – FreightWaves

Supply chain management solutions provider project44 on Tuesday, May 19, said shippers will now have visibility to their global airfreight, groupage, and ocean container activities no matter where in the world.

The additional visibility into air and ocean freight transport modes complements project44’s truckload and less-than-truckload solutions and makes its platform global in scope for shippers and logistics services providers.

“Businesses need a unified view of their end-to-end visibility data for a flexible and agile global supply chain,” said Jett McCandless, project44’s CEO, in a statement.

The Chicago-based company, which started six years ago, first tackled the trucking market and has since expanded across the spectrum of global freight transportation modes. “We realized a single mode or regional coverage cannot provide the full picture,” McCandless said.

“The unified multimodal solution has been project44’s vision since the beginning and the recent COVID-19 events just accelerated the market’s need,” Raji Bedi, the company’s senior vice president of product, told FreightWaves. 

For example, Bedi said one of project44’s pharmaceutical customers recently experienced difficulty securing air cargo capacity to ship its healthcare products worldwide.

“They traditionally use commercial airlines for air cargo needs, but as commercial airlines have reduced flights with global travel restrictions, this company had to look to charter flights or use ocean where they have not previously,” Bedi said.

“With project44’s unified multimodal visibility solution, they were able to switch airline providers and maintain the real-time visibility that is essential to their business,” he added. “They were also able to gain visibility into their newly deployed ocean shipments, all through a single application.”

project44 has built an extensive multimodal network that now reaches across more than 48 countries and operates in 16 languages. In addition to North America, the company has continued to expand its presence in Europe.

“To build a supply chain that can withstand today’s unexpected challenges and prepare our business for the future, we need to derive intelligent insights across our logistics network,” said Gregory Pritchard, head of global logistics at Chicago-based biopharmaceutical company AbbVie (NYSE: ABBV) and a user of project44’s platform. “This means one unified view into our shipments regardless of where it is or how it’s getting there.”

project44 pulls together and unifies various freight transport data through its application programming interface (API) tool. For example, the company said it has established connections to more than 100 airlines, allowing shippers to track their airfreight “from take-off to landing.”

According to the company, more than 300 global companies representing $57 billion in freight use project44’s platform to efficiently move their goods globally.

Vishnu Rajamanickam, FreightWaves’s technology reporter, contributed to this article.

Getting crews on and off ships and airplanes – FreightWaves

The three largest global organizations representing the workforces of the maritime and air transport industries have asked their government members to ensure the continued cross-border movement of these “key workers” to and from their jobs.

The coronavirus pandemic has resulted in a flurry of government bans on international travel, which has obstructed necessary crew changes to keep the world’s maritime and aircraft fleet, as well as at ports and logistics hubs, in operation and goods flowing.

The International Maritime Organization (IMO), one of the signatories to the May 26 statement, highlighted that more than 80% of global trade moves by ocean transport, which is managed by about two million seafarers.

The IMO said starting in mid-June an estimated 150,000 seafarers a month will require international flights either to their home countries or to sign onto ships.

Government travel restrictions have delayed or grounded shipboard crew changes in recent months.

“For humanitarian reasons – and the need to comply with international safety and employment regulations – crew changes cannot be postponed indefinitely,” the groups’ statement said.

The International Civil Aviation Organization (ICAO) and International Labor Organization (ILO), which also signed the letter, said 887,000 aviation industry workers face similar travel and workplace restrictions due to the COVID-19 pandemic.

The three organizations asked governments worldwide to designate maritime and aviation personnel as “key workers” providing an “essential service,” regardless of their nationality when in jurisdiction.

This action would also include accepting official industry worker documentation and “appropriate exemptions from national travel-related, health-related or movement restrictions in order to facilitate their joining or leaving ships, aircraft, airports and cargo facilities.”

In addition, the organizations recommended that governments provide information to ships and aircraft, and their crews, on protective measures against the spread of COVID-19.

“The Joint IMO, ILO, ICAO statement is an important reminder of the need to keep all parts of the international transportation system functioning. It also points to the critical work that national governments must do in order to allow vessel crew changes,” John Butler, president and CEO of the Washington, D.C.-based World Shipping Council told American Shipper.

“We have seafarers that have been on ships for too long, and we have seafarers at home that are eager to work,” he said. “There are safe ways to get crew from their homes to ships and vice versa, and we call on all national governments to put processes in place immediately to make that happen.”

Commentary: Who holds the wild card at every supply chain’s end? – FreightWaves

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

In order not to hold everyone in suspense – all of us hold the wild card at the end of a supply chain when we are in our role as retail consumers. We vote with our wallets and sometimes emotion and psychology can enter into the mix. Whims, fears, conspicuous consumption, keeping up with the Joneses, etc. all have a role to play in the retail sector.

Of course, some may feel that cold rationality governs their own purchasing decisions. This means spending one’s disposable income on a bundle of final goods and services that maximizes total satisfaction relative to the purchase cost. Furthermore, the marginal increase in satisfaction per dollar spent is equalized across every good and service in that bundle. Of course, this is economics jargon and it is hard to imagine typical shoppers replacing the fun of impulse buying with the fun of making calculations in order to optimize consumption at the margin. Perhaps casual shopping combined with differential calculus is just too much fun for one day?

(Photo: Jim Allen/FreightWaves)

In the new normal that is a world economy suffering through the COVID-19 pandemic, nothing screams non-essential production and consumption like retail fashion. This niche is not to be confused with haute couture; rather, a lot of it involves affordable, yet trendy, apparel stocked by market leaders such as Zara and H&M. These mainstays in downtown shopping districts and suburban malls are the retail face of the fast-fashion industry. The fast-fashion supply chain operates with high volume and quick deliveries across a global market while trying to survive on low profit margins. GlobalData Plc, a business intelligence provider, noted that apparel sales fell by 89% over March-April 2020 as the retail sector ground to a halt. To be sure, online sales rose, but only by about 20% and from a lower base in comparison to brick-and-mortar. McKinsey & Company forecasts a decline in revenues of 27-30% over 2019-20 across the fashion industry’s $2.5 trillion global marketplace.

Mandated sheltering-in-place and social distancing certainly eliminated any need to be in-style regarding one’s apparel. Those still wishing to look picture-perfect for their Zoom and Skype meetings have 50% less to worry about as long as the camera remains above their waists. All of this has been particularly tough for the fashion supply chain. Unlike backlogged foods and beverages, apparel cannot be so easily disposed of. What was in-style this season may take several cycles, if ever, to become marketable. Also, the abrupt cutbacks on fabric orders left upstream vendors (most of which are in Asia) holding their own excess inventories. With storefronts now beginning to re-open, the only means to move the backlog is through discount sales. 

(Photo: Jim Allen/FreightWaves)

Typically, the U.S. apparel and footwear industries face high tariffs on their imports (i.e., the equivalent of sales taxes reaching as high as 30% per unit). The Trump Administration instituted a temporary duty deferral program on April 18, 2020. While this was designed to provide relief for importers facing demonstrated hardships due to the pandemic, there is no indication that this program will be extended through May and into June 2020. Lobby groups are certainly asking for an extension. Of course, as a mere deferral program, any duties not paid after April 18 will have to be paid within 90 days of import entry. Retailers certainly need to hope that their stores will be open before the 90-day grace period ends.

It should also be kept in mind that the program only applied to normal trade duties – meaning those listed in the Harmonized Tariff Schedule of the United States (HTSUS). Other trade devices like anti-dumping and countervailing duties (i.e., special duties accessed as retaliation for specific trade offenses in the eyes of the United States) are not deferred. Also not deferred are any duties assessed under the auspices of Section 232 of the Trade Expansion Act of 1962 and Sections 201 and 301 of the Trade Act of 1974. Simply put, this means that most tariffs on Chinese imports, as part of the U.S.-China trade dispute, are payable by importers without relief. In fact, about 40% of apparel and 60% of footwear imports to the U.S. are from China.

It will probably take a while before the consumer market shifts some of its limited disposable income from groceries and cleaning supplies to fast-fashion. Compared to other retail sectors, apparel depends on some of the most fickle consumers. Cautious consumers holding all their wild cards means that retailers and their upstream vendors will need to be at the top of their game.