Category: Freight Forwarding

European aircraft manufacturer Airbus (OTCMKTS: EADSY) received four orders in July compared to 33 last year as airlines downsize and rein in capital expenses to survive the travel fallout from the coronavirus pandemic.

Year-to-date through July, orders at Airbus are down by half. The airframer said it received 302 net orders after customers canceled orders for 67 aircraft. In 2019, the aircraft manufacturer had 768 net orders. 

Most of the airplanes ordered were mid-range, single-aisle planes such as the A320/321 (neo).

In July, the Leiden, Netherlands-based company delivered two A220-300 to Air Canada and Egypt Air and 47 A320neo aircraft including a first A321neo to Middle East Airlines and Vistara through Air Lease Corp.

Airbus’ total backlog of aircraft for delivery as of July 31 stood at 7,539.

In 2019, Airbus delivered 863 new planes to 99 customers, with the majority (786) part of the A320neo series. Last year marked the 17^th consecutive year of production increases. 

Airbus competitor Boeing (NYSE: BA) also reported steep declines in new aircraft deliveries for the first half of 2020. The Chicago-based company delivered 70 planes during the first half of the year, compared to 239 for the same six-month period last year.

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Click for more FreightWaves/American Shipper articles by Chris Gillis.

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

The U.S. agriculture industry has faced numerous headwinds during the COVID-19 pandemic, and with harvests just around the corner, there is a trend developing that could impact the availability of the industry’s desired 20-foot containers.

Containership lines’ blank sailings over the past few months sparked a strategy for importers to favor 40-foot containers instead of 20-foot boxes. This was an effort to import as much product as possible given the limited shipping space available. As result, the supply of 20-foot containers has been constrained. Therefore, this has increased the price of 20-foot equipment, making it even less desirable to use. As a result, there is fear of an impending 20-foot container shortage.

“Over the past 90 days we have noticed importers moving to the use of 40-foot equipment versus 20-foot equipment,” explained Alan Baer, CEO of OL-USA. “This has helped manage freight costs and the reduced capacity due to blank sailings.”  

Before COVID-19 and the historic blank sailings which followed, OL-USA was moving a mix of three 20-foot containers for every five 40-foot containers.  Now the company is moving two 20-foot containers for every five and one-half 40-foot containers.  

This trend can be tracked starting at the ports.

Historically, the imbalance of 40-foot containers compared with 20-foot containers is not new to the agriculture industry. Retail imports, which are lighter, higher value, and higher margin, can be fully loaded onto 40-foot and 45-foot containers and the importer can afford to pay higher freight rates.

Agriculture products like soybeans on the other hand, are heavier, of lower value, and have tighter margins. They also require blocking structures to secure the load from shifting during transit. These structures are heavy and add to a load’s overall weight. With weight limits applied to trucks, using a 40-foot container might not make financial sense for the agricultural exporter. It all depends on the shipping rate.

“Consider our exports – hay, cotton, soybeans, lumber, meat and frozen chicken – we are unable to pay those high freight rates,” explained Peter Friedmann, executive chairman of the Agriculture Transportation Coalition. “Right now, rates across the Pacific are three times higher for the imports than they are for most agricultural exports, including soybeans. So which direction (imports or exports) do the ocean carriers prefer? Obviously, the imports – they make three times the revenue.”

While the spread of 40-foot containers compared with 20-foot containers has always leaned toward the larger boxes, according to SONAR, that spread has increased with the pandemic – translating into more 40-foot containers leaving the ports by the rails.

“Importers that are more aware of pricing are combining orders into one 40-foot every other week rather than one 20-foot container each week,” explained Robert Castelo, President of Marine Transport. “This cuts out one trucking route and saves on costs. Importers are then paying a $3,000 rate for one container rather than $2,200 for two pieces of equipment. This is why we are moving more 40-foot containers than 20-foot containers.”

Marine Transport has 12 terminals in Chicago, Savannah and along the East Coast. About 75% of the containers it is seeing are 40-footers, while 25% are 20-footers.

“We are anticipating an uptick in activity in Savannah in the upcoming weeks,” said Castello.

Savannah is one of the fastest growing ports in the U.S. and is the nation’s top exporter of containerized agricultural goods.

Clarkson Grain company, whose primary export customers are in Southeast Asia and Japan, packages its product in 30 kilogram bags or 1 metric ton totes, and ships them in containers. 

“We utilize both 20-foot and 40-foot containers, depending upon the requirements of our customers,” explained Ken Dallmier, Clarkson Grain President and Chief Operating Officer. “While we have heard reports of container supply shortages in certain regions and at certain middle-U.S. ports, our business has not been significantly affected. We do not rely upon spot market availability and typically contract prior to planting. We are also fortunate to be located close to the Chicago-area container ports.”

But not everyone is as fortunate to be close to metropolitan-area terminals that have 20-foot containers. For those in the agriculture industry in North Dakota and northern Minnesota for example, those agricultural producers need to pay carriers for the relocation of 20-foot boxes.  But because of the shift in 20-foot supply, Friedman stated that the distance to locate and obtain these coveted containers has increased.

“Our meat exporters can generally get reefer containers from Kansas City, Houston or Chicago, but over the past few months sometimes they have to get them from as far away as the Port of Los Angeles/Long Beach, or even the Port of New York/New Jersey,” said Friedmann. “This adds significant cost, and sometimes delays. The blank sailings mean fewer containers (40-foot and 20-foot) in circulation. So yes, when there is reduced demand for imports as we see with the current pandemic, the disruption gets worse.”

Over the past decade, the share of connected vehicles in the automobile market has steadily increased. Electrification trends, autonomous driving development and rising consumer interest in shared mobility ensure that connected vehicles will dominate the auto market in the future. 

That said, connected vehicles present a host of vulnerabilities, including risks to data privacy, driver safety and uninterrupted services. Cybersecurity is a crucial talking point within this ambit, as cyberattacks are becoming more frequent among connected vehicles. 

Between 2010 and 2019, the number of cybersecurity events climbed by over 700%, with the industry witnessing 99% growth in the number of incidents since 2018. Though about 38% of these recent-year attacks were white hat attempts, 57% were malicious black hat attacks, meant to disrupt processes and damage property.

“Most of the attacks happen on connected vehicles when they connect to the internet through a telematics unit. From an attacker’s perspective, a connected vehicle is a complex machine with a lot of internal electronics along with being connected to a back-end set of applications that sit on the ground,” said Dan Sahar, vice president of product at Upstream Security, an auto cybersecurity firm for connected and autonomous vehicle fleets. 

Malicious actors can leverage this constant interaction between internal systems on board the vehicle and cloud-based applications as attack vectors. Several such attack vectors have been repetitively used across the world. Among these are hacking of telematics servers, targeted attacks on the software processes, and attempts on internal components like electronic control units (ECUs) in vehicles.

In some cases, attackers can target multiple vehicles simultaneously, which Sahar called a fleetwide cyberattack. “There’s a lot of complexities within these vehicles and multiple ways via which it connects, enabling malicious actors to attack them in a lot of ways,” he said. 

The reasons for cyberattacks could be as varied as the means of attack. Sahar explained that most cyberattacks today are financially driven, such as ransomware. These attacks are primarily about disrupting the services of fleets and can include acts such as remotely starting or shutting off engines and unlocking doors in the morning. 

That apart, such attacks can still lead to repercussions such as data theft. For instance, bad actors could extract routes of a trucking fleet and use it to penetrate the corporation that owns or employs the fleet. This could lead to major data breaches within enterprise corporations. 

“But there’s a larger risk that’s on the mind of law enforcement agencies around the world, which is state actors and criminal organizations trying to create larger disruptions that are not necessarily financially driven,” said Sahar. “We haven’t seen many of those yet, but they definitely have occurred on the enterprise corporation side. There have also been multiple alerts by the FBI of state actors targeting connected vehicles.”

Regulations have cropped up in an attempt to tackle the growing menace of cyberattacks. The European Union and the U.S. have created rules that task suppliers, such as electronics manufacturers, as well as automakers with taking on a higher level of responsibility for their vehicles. 

“Apart from having to incorporate processes in the vehicle development cycle, automakers will have to continuously monitor how their vehicles regularly behave, whether there are breaches, detecting and tackling breaches while still small, and creating solutions to remediate such breaches,” said Sahar. 

Deutsche Post DHL Group (OTCMKTS: DPSGY) said its diversity of services allowed it to pick up the pieces of a pandemic-shattered international supply chain and generate a healthy second-quarter profit.

The company’s pretax profit for the quarter increased 18.6% to 912 million euros (US$1.08 billion), compared to 769 million euros ($913 million) for the same period last year and a 2% increase over initial Q2 projected results in early July.

“We have never been in better shape and I am confident that our company will emerge stronger from the crisis,” said DP DHL CEO Frank Appel in a statement on Wednesday.

With fewer people transacting business in person due to COVID-19 travel restrictions and retail store closures during the first half of the year, DP DHL saw a significant rise in e-commerce activity, which transited through its global express, air and ocean freight forwarding, warehousing and supply chain, e-commerce, and German postal services.

Earlier in the quarter, DP DHL warned that its Q2 profits might suffer due to the ongoing pandemic in North America and Europe. However, the company began realizing increased demand for time-definite international express services since late March, which fueled its bottom line.

The company said all five of its divisions generated operating profit during the second quarter.

The Express division’s profit increased to 565 million euros ($670 million) compared to 521 million euros ($618 million) for the same period last year, while its operating income from post and parcel services in Germany rose 49.2% to 264 million euros ($313 million) compared to 177 million euros ($210 million) last year.

DP DHL’s global forwarding unit saw Q2 operating income increase more than 50% year-on-year to 190 million euros ($225 million) compared to 124 million euros ($147 million) during the same period last year.

Despite the pandemic and restructuring of its electric cargo bikes unit, the company’s supply chain division was still able to generate operating income of 35 million euros ($41 million) compared to the 87 million euros ($103 million) the division earned in operating income in the second quarter of last year.

“Overall, the contract logistics business is more dependent on individual customer activities, as transport and warehousing solutions are often developed and operated specifically for one customer,” DP DHL explained.

“The division saw very different developments depending on the sector,” the company said. “While parts of the retail sector and the life science and health care sector developed positively, business in the automotive sector weakened visibly.”

DP DHL’s eCommerce Solutions division generated operating income of 1 million euros ($1.18 million) despite nonrecurring impairments of 30 million euros ($35 million).

“In addition to successfully optimizing its portfolio as part of its repositioning the international parcel activities, the division made significant progress in its efforts to manage costs and boost efficiency,” the company said. “The key driving forces behind these gains were B2C activities in Europe and America that benefited from rising shipment volumes.”

DP DHL also continued investing in its operations during the second quarter, spending 482 million euros ($572 million) across all divisions.

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

Both the United States and the European Union (EU) have been looking into novel ways to stabilize their supply chains amid the COVID-19 pandemic. Since their economies are highly dependent on international trade it makes sense to dig deeper into trade facilitation. The EU government has already put policies in place that stabilize the insurance side of the process. Currently, the U.S. is lagging at the stage of industry lobbying.

Transportation facilitates trade. But if it is too expensive for the consignor, then trade does not take place. Likewise, trade does not take place if importers at the manufacturer or wholesaler level feel that their retail customers downstream along the supply chain will not pay them. Many retailers are now building up stocks of fall merchandise. COVID-19 cannot change the weather. Fall and winter will be colder than summer – but how cold will in-person and online shopping be for seasonal clothing, food, etc. for the rest of 2020? There is no way to know for sure. But one thing is certain – a unit not in stock is a unit that cannot earn revenue.

Importers take on the risk of holding excess inventory. They also take on risk when selling items on credit (typically, with one to three-month terms). This, in effect, offers interest-free loans to the buyers. Their customers can earn revenue and pay down their cost of goods sold retroactively. Doing more with other people’s money always looks attractive. Of course, importers can mitigate the risk of holding past-due accounts receivable by also holding trade credit insurance. About $600 billion of annual U.S. sales are protected in this way.

Just like transportation facilitates trade – due, in part, to for-hire carriers holding cargo insurance – trade credit insurance takes some of the worry out of the import process. Of course, even those not trained in actuarial science can see that the insurers themselves are facing increased uncertainty due to the COVID-19 pandemic and the global recession it precipitated. The likelihood of defaults and bankruptcies are surely higher than they were a year ago. This would lead to more trade credit insurance claims. Thus, insurers have become leery about issuing more coverage. If there is less insurance offered there will be less liquidity along supply chains and, therefore, less trade.

Atradius, Coface and Euler Hermes, three of the largest trade credit insurers, called for the U.S. government to assist the industry in the face of a higher likelihood of claims. Their jointly commissioned report proposed variants of risk-sharing models (known as reinsurance) between the private insurers and the U.S. government. The intent is to implement one of these models on a temporary basis to ride-out the pandemic.

The report, released on July 9, 2020 by Econ One, a consultancy, noted that about 60% of trade credit insurance is issued to small and medium-sized enterprises (SMEs). The report also finds that year-over-year coverage has already been cut back by 14%. Fear of a second wave of COVID-19 could prompt insurers to cut back even further. In any case, less insurance coverage raises importers’ risks, which permeates the supply chain. The alternative is to require downstream partners to pay in advance or upon delivery. Given the economic stakes involved, the National Retail Association stated its support for a government-backed reinsurance program.

On July 29, 2020 the EU’s legislative body – known as the European Commission – adopted a program put forward by the United Kingdom (U.K.) that guarantees present levels of trade credit insurance. Technically, the EU has earmarked 11 billion euros to back any claims made against non-payment of accounts receivable through the rest of 2020. Despite Brexit, the U.K. and the EU are still trading partners willing to share good ideas.

Uncertainty in the insurance market is shared by all parties. On the supply side, how liquid are the insurance companies and the banks? Likely more so than just after the 2008 financial crisis. But the current problem is not a credit crunch, it is a government-mandated spending crunch. On the demand side, what are the importers doing to raise their insurability? Hopefully, they are upping their supply chain management skills. Building better relationships with their foreign sources, for-hire carriers and downstream customers are a must. Basically, it is about trying to make things steady and predictable, which insurers prefer, as opposed to erratic and uncertain. Time and money must be invested in good relationship-building.

Another worthy investment is in digitization. Often talked about in the context of transparency and logistical efficiency, getting the paper out of transactions between exporters and importers (including the intermediaries they rely on) speeds trade flows, avoids errors and offers a degree of standardization which is not the norm in paper-based international trade. It would likely also speed up the processing of insurance claims. It is certainly a good signal to send to any insurer in these uncertain times.

Click here to see other commentaries by Darren Prokop on American Shipper and FreightWaves.

DHL Global Forwarding (OTCMKTS: DPSGY) has opened a 20,000-square-foot, temperature-controlled facility in Indianapolis that will cater to pharmaceutical and medical product shippers.

The $1.6 million facility has variable temperature capabilities to process all types of pharmaceutical, biotech or medical products that require strict temperature control, the company said.

The Indianapolis facility is one of eight “Certified Life Sciences Stations” that support DHL’s Thermonet service for temperature-controlled airfreight transport. Thermonet uses shipment sensors and an IT platform to provide customers with in-transit temperature visibility.

The site is ideal because many large pharmaceutical companies are located in Indianapolis and it is next to the airport, David Goldberg, CEO of DHL Global Forwarding USA, told American Shipper.

DHL Global Forwarding is exploring the development of a dedicated life science freighter service linking Indianapolis with Europe, the Middle East and Africa, Goldberg said.

He said the ongoing investments by DHL Global Forwarding into its North American life sciences and health care logistics network is timely, since the coronavirus pandemic will likely result in more reshoring of pharmaceutical production to the region.

DHL and other larger third-party logistics companies have invested heavily in logistics services that cater to shippers in the life science and pharmaceutical fields.

Its contract logistics unit, DHL Supply Chain, in mid-July announced a 10-year service agreement with Siemens Healthineers (OTCMKTS: SMMNY) to oversee its product distribution in North America.

Siemens Healthineers will occupy about 260,000 square feet of a 422,000-square-foot, DHL Supply Chain-owned facility in Memphis, Tennessee.

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Aircraft manufacturer Boeing (NYSE: BA) is experiencing an uplift in business to convert former passenger planes for all-cargo operations.

“Strong demand is driven by customers transitioning to newer-generation freighters and choosing a Boeing converted freighter (BCF) as a cost-efficient alternative that can be modified with approximately a 90-day turnaround time, regardless of the conversion facility,” spokeswoman Laura Fenton told American Shipper.

Sustained e-commerce growth and an abundance of affordable aircraft to convert to freighters is driving this demand, she added.

German courier DHL Express (OTCMKTS: DPSGY) recently contracted with Boeing to convert four 767-300 passenger planes to freighter operations. The express carrier said conversions are part of an effort to modernize its long-haul intercontinental aircraft fleet.

“We have operated the 767-300F model across our global fleet for many years and look forward to continue investing in the platform by adding more 767-300BCFs,” said Geoff Kehr, DHL’s senior vice president of global air fleet management, in a statement.

The website Plane Spotter says DHL Express currently operates a fleet of 34 767-300 freighters.

According to Boeing, the 767-300BCF has the same cargo capacity as the purpose-built 767-300 freighter, with about a 50-ton payload and a 3,000-nautical-mile flight range.

In another recent announcement, Boeing said it will convert two 737-800 passenger planes to cargo operations for Aircraft Finance Germany (AFG), an aircraft brokerage firm.

The 737-800 cargo plane can carry up to 24 tons of freight per payload and with a 2,000-nautical-mile flight range is best suited for regional express services, Boeing said.

Boeing delivered its first 737-800BCF in 2018 and now has 10 airline customers that utilize the cargo aircraft. The company said it has ramped up production of 737-800BCFs with 132 aircraft orders. So far, Boeing has delivered 34 of the converted planes.

Boeing did not disclose financial terms of the aircraft conversions for DHL and AGF.

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A huge flow of all-cargo aircraft flown by independent operators combined with heightened activity from integrated logistics providers UPS and DHL, pushed Brussels Airport’s cargo volume into positive territory in June after three months of steep declines caused by the coronavirus pandemic.

It’s a positive sign for a hub airport that normally depends on passenger traffic.

Brussels Airport Co., which operates the airport, reported Wednesday that cargo volume increased 4.8% in June, year-over-year, despite a 91% drop in cargo volume carried on passenger aircraft. Most large passenger airports that also serve as international cargo hubs have been deluged by freighter traffic, but it has not been enough to offset the loss of shipments carried in the bellies of passenger aircraft grounded by COVID travel restrictions.

Freighter volume in June jumped 71.5% above the June 2019 level, while volumes from express carriers/integrators grew 29.5%, according to figures from the airport. It handled 1,738 cargo flights, a 46% increase, while passenger moves fell 94% from 18,107 to 1,146.

First half results showed a 4.6% drop in cargo volume to 235,729 tons, with belly cargo tonnage down 50.7%, freighter tonnage up 27% and integrator volume up 9.7%.

Airport officials said heavy demand for personal protective equipment and other coronavirus supplies led to a huge surge in freighter operations, including from airlines that never before flew there and passenger planes temporarily converted to fly dedicated cargo services. 

New airlines that have called at Brussels Airport since the start of the pandemic include Miami-based all-cargo carrier Amerijet, Silk Way Airlines and Virgin Atlantic.

Express carriers UPS and DHL are integrated logistics companies that run their own airlines and control the shipments that ride on board. 

Amsterdam Schiphol Airport earlier reported a 13% decline in June cargo tonnage despite a 124% increase in full freighter flights (2,473), with volume down 14.5% to 656,000 tons for the first half of 2020. The Hong Kong Airport Authority said cargo throughput decreased 7.7% to 357,000 tons in June versus 2019 primarily due to the decline in transshipments from reduced belly capacity on passenger flights. 

“One of the strengths at Brussels Airport was the sense to tackle the rapid capacity reduction from a community standpoint. Different parties worked together reaching out to their network to get the traffic flows moving. This coordination and active facilitation between shippers, forwarders, handlers, customs and airlines truly made a difference and was already part of our earlier success. In these times of crisis, we could even leverage this with these volumes as a result” said Steven Polmans, director cargo and logistics at Brussels Airport Co., in a statement.

Polmans this month announced he will resign his position at the end of 2020 after 10 years with the airport operator.

Officials said the highest import growth came from Africa and Asia,  with export volumes mainly growing towards Asia and North America. Export to Africa is still below pre-Covid levels due to the grounding of home carrier Brussels Airlines, but is slowly recovering as more and more carriers resume flying.

The airport said it has continued to work on infrastructure upgrades and is currently working on a runway renovation. Construction will have a marginal impact on freighter movements during the six-week project, it said.

Click here for more FreightWaves/American Shipper stories from Eric Kulisch.

@ericreports / LinkedIn: Eric Kulisch / ekulisch@freightwaves.com

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The coronavirus pandemic has made the schedule-driven ocean container carriers seasick. To counter decreased U.S. import volumes and maximize vessel operations, these companies have resorted to the use of “blank,” or canceled, sailings.

Shippers and non-vessel-operating common carriers have struggled to manage their own fragile supply chains against hundreds of skipped-sailings announcements in recent months.

While blank sailings offer ocean container carriers a means to economize their capital-intensive vessel operations, the U.S. Federal Maritime Commission (FMC) said it will continue to closely monitor this activity for anticompetitive behavior.

Under the Shipping Act, ocean container carriers may use blank sailings to reduce capacity in response to low demand. The FMC, however, has an obligation to ensure that the capacity reductions are not unreasonable and do not cause unreasonable increases in transportation costs for shippers.

The FMC generally requires notice from the alliances before blank sailings are implemented and no later than 15 days after any such changes are agreed upon. Alliances may request a waiver from the FMC if they are unable to make a timely filing.

“The unusual circumstances and challenges created by the COVID-19 pandemic, together with trade agreement changes, have heightened the FMC’s scrutiny of capacity reductions by global alliances,” FMC Chairman Michael Khouri said in a statement.

The FMC monitors this activity through the ocean carrier alliance agreements filed with the agency.

“The FMC receives exhaustive information from regulated entities, in this case, parties to an ocean carrier alliance agreement,” Khouri explained. “That information is carefully analyzed, along with other information that permits FMC staff to determine trends in the marketplace and the potential for illegal behavior.”

To monitor ocean carrier agreements, the agency uses a “red-yellow-green scale,” with red signifying higher-profile agreements.

“All global carrier alliances are categorized as red agreements,” Khouri said. “These agreements have the highest potential to cause or facilitate adverse market effects based on the agreement’s authority and scope in combination with underlying market conditions.”

Specifically, Khouri said the FMC staff monitors key economic indicators and changes in market conditions for all global alliance agreements “to detect any joint activity by agreement members that might raise and maintain freight rates above competitive levels.”

The FMC follows these analyses with detailed quarterly reviews, which are periodically presented to the commission with recommendations.

Under the FMC’s “four-tier” approach to monitoring alliance agreements, blank sailings are closely analyzed:

• The first tier involves an immediate review of advance notifications of canceled alliance sailings or changes in vessel capacity that affect the supply of vessels of any individual alliance service by more than 5% of average weekly vessel capacity.
• The second tier includes a deep-dive review of minutes submitted by the carrier management in charge of making vessel deployment decisions in the alliance. This information helps the FMC assess medium- and long-term outlook for capacity levels and how that impacts freight rates.
• The third tier of review covers service changes in individual alliance members’ vessel capacity, capacity projections and how that relates to changes in freight rates.
• The fourth and final tier consists of reviewing and analyzing confidentially filed carrier data submitted by the alliances for completeness and accuracy and to spot “potential red flags.”

If the agency detects carrier behavior that violates the Shipping Act, it seeks to address these concerns with the carriers first and, if necessary, can go to federal court to seek an injunction to enjoin further operation of the alliance agreement, Khouri said.

Khouri said, however, the FMC is receiving notice from ocean containers in both the trans-Pacific and trans-Atlantic trades that some blank sailings will be withdrawn.

The FMC is also monitoring the impacts of the COVID-19 pandemic on the U.S. container shipping industry through its Fact Finding 29 investigation, which is being led by Commissioner Rebecca Dye, and making recommendations to ease marine terminal inefficiencies.

The agency on April 27 issued an order to 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 Dec. 31, the FMC said.

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Click for more FreightWaves/American Shipper articles by Chris Gillis.

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

On a tonnage basis about 70% of U.S. exports and imports travel by ocean vessel. Volume-wise it is the most important mode of international trade. When merchandise trade is focused on Canada and Mexico, as members of the United States-Mexico-Canada Agreement (USMCA), the motor carrier sector dominates in U.S. export flows. Since March 21, 2020 border crossings among the three USMCA nations have been restricted to essential workers due to concerns over the spread of COVID-19. This restriction has been reviewed on a month-by-month basis. As of today, it will remain in place at least until August 21.

There is also fear of further spread of COVID-19 by disembarked crews from the world’s ocean vessels and cruise ships. This has kept about 200,000 crew members in limbo since March. While these crews are still being paid for their work, they have been stuck aboard vessels with little to do other than work or sleep. Contracts for crews are under one year in duration in order to comply with the 2006 Maritime Labor Convention. Vessel companies pick their crew members up and drop them off at major ports of call. Beyond that, crew members typically fly to and from their home countries. The International Maritime Organization (IMO), which regulates international waters on behalf of the United Nations, estimates that only 20% of crews scheduled to stop work and leave their vessels during March have been able to do so. On any given day there are about 60,000 cargo vessels involved in commercial activity around the world. They are crewed by about 1 million people.

The nature of the ocean vessel sector has exacerbated the current problem. About half of the world’s commercial vessels engaging in international trade fly so-called flags of convenience (e.g., those of Panama, Vanuatu, etc.). This serves to keep operating costs and taxes down. Also, crews can be made up of citizens of practically any country. In contrast, U.S.-flagged vessels require the crew to be only U.S. citizens – and, therefore, subject to U.S. employment laws (see 46 U.S.C. §8103 (a) and (b)).

Under these circumstances it is easy for a country to deny entry to a crew member who has finished out his contract because he is already on a conveyance capable of taking him elsewhere. However, other ports of call can act in the same way. The number of commercial flights to the crew member’s home country may be reduced and may not depart from an airport near a vessel’s scheduled port of call. Putting all these possibilities together creates a dicey situation for all those who have been working well beyond the official close of their contracts. On the other side of the coin, the drop in flights due to travel bans has left those crew members who were scheduled to work stuck at home since March.

Why not designate these crews as essential workers as was done for others in the transportation industry? Well, these were government pronouncements applying to their domestic workers and to foreign workers entering their countries on a temporary basis in order to make export or import deliveries. By contrast, ocean vessel crews can remain confined to their vessels while cranes and drayage vehicles do all the loading and unloading. 

Certainly, boredom and fatigue can take their toll on crews and their vessel captains. Mistakes at sea and at port can be costly. Therefore, it makes sense for the international community to come together to work out a solution. In that regard the IMO has been urging its 174 member states to allow crew members ashore who simply wish to return home. So far 13 nations have signed the IMO’s pledge. These are Denmark, France, Germany, Greece, Indonesia, Netherlands, Norway, Philippines, Saudi Arabia, Singapore, United Arab Emirates, United Kingdom and the United States.

The importance of the ocean vessel sector to international trade cannot be overstated. It is a global industry requiring global solutions whenever problems arise. The maritime sector is also a reminder that supply chain management is just as much about the efficient movement of people as it is of raw materials, sub-assemblies and final goods. Transportation makes or breaks international trade. Well-rested crews contribute to the quality of transportation.

Click here to see other commentaries by Darren Prokop on American Shipper and FreightWaves.