Houston preparing for Hurricane Ike

Below is a message we received from one our trade partners concerning the status of the Port of Houston with Ike bearing down on the region:

The Houston Ship Channel has closed to all inbound traffic as of 1200/10th and will close to all outbound traffic as of 1800/11th.

The Port of Houston's Barbours Cut and Bayport Terminals will close the gates today at 1200 and will be closed all day Friday Sept. 12th. It is recommended that all inbound freight which can be picked up by consignees be dispatched today. Gates will remain open until all outbound activity has been cleared. Import containers will be grated 2 additional free days this week.

Mandatory evacuations are in effect for low lying areas in Galveston and southern Harris Counties. This includes the area of Barbours Cut in LaPorte, TX.

Our empty container facilities IMS and RCS will also close today at 1200 in preparation for the storm and will remain closed on Friday Sept.
12th.

There are currently no ships working at Barbours Cut.

10 + 2: It's still coming

We didn’t mention it in this month’s News Alert, but that doesn’t mean it still isn’t something that every importer should be thinking about and developing a checklist to manage.

The formal name is the Importer Security Filing, or ISF for short. It will require that importers (or their designated agents), file ten data elements with Customs 24 hours prior to loading cargo at a foreign port. These data elements are:

• Manufacturer name and address (if unknown, CBP will accept the supplier’s name and address)
• Seller name and address (for “no sale” transactions, CBP will accept the owner’s name and address)
• Container stuffing location (an address is required)
• Consolidator name and address (name of the company responsible for coordinating or packing the container)
• Buyer name and address (for "no sale" transactions, CBP will accept the owner's name and address)
• Ship to name and address
• Importer of record number
• Consignee number
• Commodity’s 6-digit HTS number (per the CBP Web site, CBP will accept the 10-digit HTS code)
• Country of origin

What does this mean for importers? It means that if you are a company who does not get your documents until you pay for them, or the supplier is slow in issuing them, or you’re working through a trading company who shrouds the actual identity of the factory, you are going to have to engage suppliers now in a discussion of providing you this information.

Customs has released the data sets to the trade to begin programming, but they are in draft form only since the final rule has yet to be published. At a recent meeting of COAC (the Commercial Operations Advisory Committee), CBP indicated that they are still targeting a late summer, early fall release of the final rule. It must first clear the Department of Homeland Security’s general counsel and then it moves to the Office of Management and Budget for final approval and publishing in the federal register.

A host of suggestions have been made by the trade over the past several months, from delaying the program, to testing it first with a pilot program, to a recent suggest that there be an online profile that importers can create and CBP can use for screening when data doesn’t change greatly from shipment to shipment. Because the rule is being reviewed, CBP is prohibited from making any comments about it, either public or private.

What is for certain, though, is that companies should start laying the groundwork to obtain this information. CBP envisions a period of informed compliance while people work through the processes and then enforced compliance. Penalties for non-submission can reach as high as the domestic value of the merchandise. Have a plan, start now.

California State Senate Approves $30/TEU fee

An infrastructure and environmental mitigation bill has passed the California Senate and awaits the signature of Governor Schwarzenegger. The $30/TEU fee would apply on containers moving through Los Angeles, Long Beach and Oakland. A similar bill, authored by Sen. Alan Lowenthal, was presented in 2006 and the governor rejected it and suggested several amendments. Over 150 amendments were made to this new iteration and it is expected to be signed into law.

The fees would be charged to the beneficial cargo owners and are eted to generate about $400 million/year in revenue which would be split evenly among intermodal rail projects and environmental mitigation for trade projects. Unsurprisingly, trade associations are opposed for a variety of reasons. Some claim that the issue should be addressed by the federal government and the state doesn’t have the necessary authority. Others claim that it will lead to cargo diversions to other ports because LA/LGB is becoming “too expensive.”

With regards to “too expensive” allegation, the fact of the matter is that there is no other port complex in the United States which has the capacity to handle the volumes that LA/LGB processes. The nation’s largest traders have set up shop in the area and their distribution warehouses are geared to handle cargo which arrives at this port complex. Further, until the Panama Canal widening is completed (which is years down the line) which will accommodate post-Panamax container ships, these ports have a stranglehold on traffic.

This would be just another in a laundry list of fees which shippers would have to pay to do business in Southern California. Already in place is the traffic mitigation fee (Pier Pass) and the Clean Trucks Program will start this fall (pending a court challenge by the American Trucking Association). The Alameda Corridor Charge (ACC) is assessed on containers which move out of the LA basin by rail.

Shippers on the Asia – USWC trade lane, though, have become accustomed to the concept of “all-in” rates. On other lanes, such as Europe to North America, the charges by both the carriers as well as the warehouses which handle the deconsolidation of the cargo, read like a grocery list as long as your arm. There’s a fee for everything, even to recover the additional fuel costs for the propane that forklifts in the warehouse consume.

Typhoon closes Hong Kong

I was advised this evening by Robert Lee of our partners in Hong Kong, Link Force Cargo Ltd., that their offices and much of Hong Kong are closed today due to a typhoon.

It would appear that they're catching the brunt of a Tropical Cyclone and are closed for business today (Wednesday) locally. So please accept our apologies, but it appears that we will have a one day delay in getting information from them.

Hapag Lloyd bids submitted: Hamburg tops NOL

Anyone who has been watching the steamship industry (and it's funny that we still call them 'steamships' even though they haven't been powered that way for more than a century) has seen first-hand the effects of industry consolidation. Brands that have been absorbed, merged and gone away over the past decade or so include Sealand, P&O, US Lines, Lloyd Triestino and most recently CP Ships, just to name a few.

CP Ships was most recently bought and integrated into the Hapag Lloyd, the line owned by the giant German travel operator TUI. TUI is under pressure to spin off Hapag by shareholders. Our firm worked with both CP Ships and Hapag Lloyd and I can say with first-hand experience that the merger was abysmal for their customers and employees. When companies start to try to integrate technologies, ships, port calls, vessel rotations, back office and sales, it is rarely seamless. For some reason where carriers merge it becomes just absolutely atrocious.

Enter Hapag Lloyd's sale. There is a consortium of German investors which includes the city of Hamburg and Kuehne & Nagel chairman Klaus-Michael Kuhne who have allegedly submitted the highest bid to keep the company in German hands. All bids are believed to be between $5.46 and $6.2 billion. Other bidders are a private equity firm and NOL, the parent company of American President Lines. Bid amounts have not been announced and there were estimations that the company could fetch as much as $8 billion.

More pollution controls for Beijing pre-Olympics

As if the security cordon that is falling around Beijing and the other cities where Olympic events are taking place isn't tough enough to work with, the air quality in Beijing is not improving at the rate that the Chinese authorities promised.

The Associated Press has posted a video report of what isn't happening here. So today, the Chinese have announced even more controls. The government has already restricted about 3.3 million vehicles by allowing them to be driven on certain days based on whether the plates end with odd or even numbers. Factories are being closed dozens of miles away. The Financial Times has more.

The odd-and-even system would also be extended to the nearby city of Tianjin and four urban areas in Hebei province, which surrounds Beijing, the statement said.

A total of 105 electronic, chemical, furniture and construction material factories in Beijing would suspend production or the part of the production process that emits pollutants, it said.

In Tianjin, 56 coal-fired power plants and other factories would be affected by the plan. In Hebei the number would be 61 and small steel plants would have to cut production significantly.

Importers who are anticipating orders from factories near Beijing or nearby Tianjin should expect complications in deliveries and delays during the tenure of the games. This is on top of restrictions already in place on the shipping of some types of hazardous materials from key Chinese sea and airports.

ILWU and PMA agree on new contract

And peace returns to the Waterfront...release below.

A joint statement from the International Longshore and Warehouse Union and the Pacific Maritime Association

San Francisco (July 28, 2008) – After a marathon weekend bargaining session, leaders from the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) announced a preliminary agreement on terms for a new six year contract covering more than 25,000 dockworkers at 29 West Coast ports. The leaders shook hands in San Francisco over the proposed agreement on Monday.

The agreement is subject to ratification by the ILWU and PMA membership. The ILWU and PMA have agreed to extend the previous agreement and resume normal port operations.

ILWU President Bob McEllrath and PMA President Jim McKenna said the proposed agreement meets the needs of both workers and the industry. It allows West Coast ports to be competitive and provides the good jobs that workers and communities need.

The parties have agreed not to discuss details of the agreement until the ILWU and PMA leadership teams have communicated with their respective membership.

CBP announces mid-year FY 2008 IPR seizures

While the most public face of CBP is focused on border security and interdiction of drugs and prevention of the introduction of WME's to the United States, the trade side has a sizable agenda, too. Protection of Intellectual Property Rights, or IPR, is a key part of CBP's strategy for two reasons. First, it is to protect the legitimate copyright holders and developers of patented products. Secondly, they believe that when illicitly copied products are imported that the money is funneled to illicit activities such as drugs and terrorism.

In a report released on CBP's website, they show what products they have seized and their relative values and percentages of the overall seizure number.

Some highlights from the report are:

• The value of the seized goods are $113.2 million, only slightly ahead of the $110.2 million from the same point at FY 2007.
• China is the top trading partner for IPR seizures, accounting for a full 85% of the total value. Hong Kong is in second place.
• The top product seized by value was footwear at $40.3 million and 36% of the total value. A whopping 96% of the infringing footwear came from China.
• Wearing apparel was a distant second with $15.7 million and 14%. The list is rounded out, in order, with handbags, consumer electronics, pharmaceuticals, cigarettes, computers, watches, media, sunglasses and then "other".

Seizures related to safety and security featured $9.2 million in value for pharmaceuticals, the largest by value and percentage (37%). Continuing their string of great press, China accounted for almost 90% of IPR seizures that pose safety and security risks.

CBP aggressively pursues action against companies who are circumventing IPR rules. If importers are engaged in legitimate trade of copywrited material, it is of paramount importance that any documentation provided by the trademark or copyright holder be provided to CBP at time of entry to prevent unnecessary delays, holds or detentions of such merchandise.

It only takes a day (or less) to be wrong

While the negotiations may be underway, the work stoppages / slowdowns of the ILWU have become more organized and coordinated. The union which under the terms of their contract would take staggered breaks at the terminals are now taking them at the same time in the morning and afternoon and leading to closures of fifteen minutes or more twice daily.

The PMA is claiming that productivity is down 10 - 15% because of this and other "work to rule" activities. Neither side is commenting on how close the negotiations are to concluding a new contract.

ILWU and PMA close to agreement

The Journal of Commerce is reporting that both sides may finally be close to an agreement which would finalize and put a new contract in place at a time when the shipping public is getting nervous about alleged disruptions by the ILWU on the docks.

__________________

Negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association for a new multi-year waterfront contract are “getting close to the end,” according to a labor spokesman.

“Pensions and other issues are now being discussed, which means we’re getting close to the end," said ILWU spokesman Craig Merrilees.

Merrilees would not specify other issues that been either finalized or remained on the table, except to say that salary levels are still to be decided. He said there had been ongoing comments and ideas about productivity measures sought by the employers' group.

________________

The last thing anyone wants is a repeat of 2002 when the employers locked the union out for ten days and brought out a backlog that took months to clean out and cost the economy billions of dollars. We will have something here when the agreement is formally concluded. It will still require ratification by the rank and file members of the union, but it may be only a formality to the whole negotiation process.

CBP Delays First Sale Rule until at least 2011

Several months ago, CBP proposed to change their so-called "first sale rule" which would have significantly changed the valuation standard for imported cargo which had been sold through several parties on the way to the ultimate importer of record. CBP wanted to change their regulations so that the value on which the duty was based was the final sale price to the importer rather than the first sale price from an overseas company to a US buyer (who may have subsequently sold the goods to another entity).

The outcry from trade associations and the private sector was huge and Customs received a tremendous number of comments counseling them to not make this change. CBP insisted they had to do it to align their regulations with existing interpretations under the framework of the WTO.

In the recently passed Farm Bill, Congress enacted legislation which would put off until at least 2011 any action on the first sale rule. But for a period of one year, importers will be required to declare to CBP whether the transaction value of the merchandise has been based of a first or earlier sale.

US and Canada align cross-border security standards

In a signing ceremony in Brussels, Belgium, Commissioner of U.S. Customs and Border Protection W. Ralph Basham and his counterpart from the Canada Border Services Agency Alain Jolicoeur agreed to a framework whereby the standards of C-TPAT and Canada's Partners in Protection program are recognized by each country.

The arrangement acknowledges that both agencies will apply the same security standards and validation protocols when approving companies for membership in their respective programs.

More fees on tap for California

The California State Assembly voted 45-23 in favor of a $30/TEU charge for containers moving through the ports of Los Angeles, Long Beach and Oakland to pay for infrastructure and air quality improvements.

State Senator Alan Lowenthal has long sought a vehicle through which to raise revenues to pay for needed expansion and repair on local roads and bridges as well as grade separations at rail-highway crossings in different locations.

There has been much push-back against these fees. Shippers are growing fatigued by the myriad of charges they must now pay. The short list includes Pier Pass, the Alameda Corridor Charge, a soon-to-be-imposed Clean Trucks charge and now this. Claims that cargo will find another place to discharge and load really don't hold water because there are no other ports with the infrastructure necessary to support the vessels that call LA/LGB. The post-Panamax ships cannot traverse the Panama Canal and those services are already at capacity and would carry more if the Canal allowed for larger vessels.

We counsel shippers when they start to balk at these types of increases that they should really take these costs and divide them over the value of a typical container of their merchandise and in most cases, this only adds pennies (or less) on the dollar to the landed cost of their merchandise.

July News Alert published

The July edition of our News Alert is now available on our website and has been mailed to our subscribers. Click here to see the articles or download your own copy.

EC to remove carrier antitrust immunity in October, US FMC to follow?

In short, no. The Federal Maritime Commission has jurisdiction over steamship lines, but it would require Congress passing legislation to revoke the immunity that carriers now have. Immunity dates back to when there was a substantial US Merchant Marine and served to allow US carriers to sit together and collectively set strategy and policy against foreign competition.


Fast forward to today and there is no American merchant marine to speak of, nor are any of the remaining carriers engaged in regular liner shipping. So the people for whom immunity was granted to strategize against now enjoy that same protection for themselves. And the World Shipping Council, the lobbying and organizing arm for these carriers, vociferously protects that immunity.

But in Europe, Competition Commissioner Neelie Kroes has made it clear that the block antitrust exemption is gone. Beginning October 17, 2008, carriers based in Europe or elsewhere who take part in conferences moving cargo to and from the European Union will not be allowed to participate in conference activities, most notably price fixing and capacity regulation. Carriers have been cautioned that the EU will be watching their activities very, very closely.

CBP creates online method to submit trade violations

On June 17th, CBP's new system 'e-Allegations' went live as a means to submit suspected illegal import or export activity. Information can be submitted anonymously on a variety of issues ranging from misclassification of merchandise, country of origin markings or IPR violations. Basic data must be submitted and if the submitter provides an e-mail address, they will receive a reply confirmation with a number and an address to mail documentary evidence if they wish. The submission form is available on CBP's website here.

US government resources for exporters

While Customs, Census and BIS are involved in the compliance side of export transactions, there is another part of the government committed to helping US companies market themselves globally. Check out www.export.gov which is the home of the U.S. Commercial Service, the export arm of the Commerce Department. They offer a suite of services to exporters including researching market opportunities, matching buyers and sellers and securing financing. Fees are quite reasonable and are scaled based on the size of the company. Small business of less than five hundred emloyees can find services to promote themselves or do market resarch for only a few hundred dollars.

Camelot enters digital age with current content

Ladies and gentlemen:

With the redesign of our website, we realize that it is important to deliver content that is timely and of use to our clients, vendors and global partners. As we work to integrate a formal blog into our website, we are employing Blogspot as a means to get into the space. We welcome comments and look forward to further employing this medium in the future.