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April 2003 - Issue #13

In This Issue:

Ocean and Air Carriers Invoking War-Risk Surcharges
Transportation Update - Rate Increases
24-Hour Advanced Manifest Rule Update
Air Cargo Screening In Hong Kong
Department of Commerce Launches TECI Initiative
FDA Increases Number of Shipments Subject to Review
Foreign Trade Zone Manual Available On-line
Harmonized Tariff Schedule TSUSA Available On-line
Harmonized Tariff Schedule B Available On-line
Did You Know...? New FDA Food Security Guidelines

Trade Industry News
Ocean and Air Carriers Invoking War-Risk Surcharges

Hapag-Lloyd Container Lines (H/L) has announced that it is monitoring the current conditions in the Middle East and has set April 15, 2003 as the deadline for its decision on whether a war-risk surcharge will be invoked. If the situation deteriorates and H/L operational costs are dramatically increased, Hapag has indicated that they will implement a commensurate war-risk surcharge. The surcharge will be applied with an immediate effective date of April 15, 2003. Hapag also says that once the surcharge is invoked, it will continue to monitor, and perhaps increase, the surcharge if its costs continue to escalate. For additional information regarding Hapag-Lloyd surcharges, please contact your local Hapag-Lloyd sales representative or contact Hapag's headquarters located in New Jersey at 732-562-1800.

Several airline carriers have also announced plans to impose war-risk surcharges to cover the increased costs of operation as a result of the conflict in Iraq.

Singapore Airlines Cargo announced a surcharge of 25 cents per kilo. Lufthansa Cargo and Cargolux International Airlines announced their surcharges to just over 10 cents per kilo. Lufthansa has scheduled March 25, 2003 as the effective date, while Cargolux has scheduled its increase to take effect March 27, 2003. “The surcharges are based on actual weight and will apply worldwide.”

Although other carriers are expected to follow suit, at this time they continue to monitor and assess the ever-changing condition; as yet, they have not made decisions to implement additional charges.

Sources: “War Risk Surcharge” from Hapag-Lloyd Container Lines Customer Advisory issued week of March 17, 2003; “Singapore Airlines, Lufthansa, Cargolux Impose Ware-Risk Surcharges” by William Armbruster from The Journal of Commerce Online dated March 21, 2003.

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Transportation Update - Rate Increases

Fuel Surcharge

The increased cost of  fuel has wreaked havoc in all phases of transportation. Both full container load (FCL) and less than full container load (LCL) ocean carriers have increased their fuel surcharge as the fuel index has increased substantially since January 2003.  Some fuel surcharges are as high as 12%; the average seems to be between 8-10%.

By the end of March, air carriers will have raised their fuel surcharges to and from all destinations. From the euro currency zone in Europe, the increase is up to .20 euros per kilo.  From England, the fuel surcharge is up to .12 GBP per kilo. From Asia, the Taiwanese fuel surcharge is up to 21 cents per kilo; Hong Kong will be going up to 21 cents per kilo on March 27,2003; the fuel surcharge for some Japanese carriers will increase on April 1, 2003 from 12 JPY per kilo to 18 JPY per kilo; and most air export carriers from the United States will charge 20 cents per kilo.

Ocean Carriers have raised their bunker fuel surcharge to and from various destinations. On March 16, 2003, carriers from Northern Europe raised the bunker fuel surcharge to East Coast and Gulf ports from $137.00 per TEU (Twenty-foot Equivalent Units) up to $216.00 per TEU.  The increase from Northern Europe to West Coast ports rose from $206.00 to $312.00 per TEU.  As it stands, a 40’ container from Northern Europe to the East Coast is now $432.00, and $614.00 to the West Coast.   Carriers are reviewing the bunker fuel surcharge on a monthly basis.

Effective March 1, 2003, Mediterranean carriers raised their bunker surcharges from $130.00 per TEU up to $170.00 per TEU. Asian carriers are increasing their bunker fuel surcharges as well: as of April 1, 2003, the bunker fuel surcharge moves from $140.00/$185.00/$210.00 to $175.00/$230.00/$260.00 per 20’/40’/40 HC.

Most export rates have fuel surcharges built into the rate; however, more carriers are now adding an additional charge to recoup some of the increases in the fuel index, or as an alternative, breaking out the bunker fuel surcharge from the all-inclusive rate.

Ocean Transportation Rates

Expect major ocean rate increases on April 1, 2003 from carriers ferrying the European trade lanes.  Senator Lines' withdrawal from the North Atlantic trade on January 1, 2003 caused a weekly loss of approximately 3800 TEU’s (Twenty-foot Equivalent Units).  In addition, Maersk Lines has replaced larger vessels with smaller vessels, thereby reducing capacity by over 2000 TEU’s.    This combination has given carriers the power to implement rate increases.  Importers should expect increases of up to $150.00 per 20’ container and up to $300.00 per 40’ container. Samuel Shapiro & Company, Inc. is currently negotiating rates in conjunction with our overseas agents.

As of April 1, 2003, importers of goods from Italy and Spain can expect increases of up to $200.00 per 20’ container and $300.00 per 40’ container.   Additionally, as of a result of a weakened U.S. dollar, Italian carriers are initiating a Currency Adjustment charge of $60.00 per container. A rate increase of $10.00 per weight/measure has also been announced for LCL shipments from Germany effective April 1, 2003.

Rates from Asia are expected to rise sharply on May 1, 2003. Carriers have announced increases of $500.00 per 20’ container and $700.00 per 40’ container. It is unclear whether these amounts are firm; usually they are not.  Nonetheless, importers of goods from Asia should expect to pay more for their shipments beginning in May.   Peak Season Surcharges will also begin to appear again in June.

All carriers worldwide have added a $30.00 per bill of lading security/manifest fee resulting from the U.S. 24-Hour Advance Manifest Rule, which has been in effect since December 2002 and has been enforced since February 2, 2003.

Export rates to Europe and Asia are still depressed. Carriers are considering, however, rate increases for cargo destined for Europe in April.  Carriers to the Far East raised rates on January 1, 2003.  Carriers are stating that their vessels are beginning to show full manifests.  The weakening of the U.S. dollar has stimulated exports from the United States.

Air Cargo Dimensional Weight Formula Change

IATA carriers will be changing the dimensional weight formula in October 2003 from a 1:6 ratio to a 1:5 ratio, thereby increasing the cost of volumetric shipments by 20%.   Shippers and forwarders worldwide have protested this, but it appears that the carriers will follow through this year.  A previous attempt by carriers to implement the change in October 2002 was unsuccessful.

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    24-Hour Advanced Manifest Rule Update

    It has been reported that carriers worldwide are leaving containers behind due to insufficient information from overseas suppliers prior to the 24-hour cut-off time mandated by the 24-Hour Advance Manifest Rule.  Carriers require cut-off dates for cargo three days prior to vessel sailing on FCL shipments, and four to five days prior to vessel sailing for LCL shipments.  Shippers and forwarders are required to provide complete information to the carrier in order for them to properly supply U.S. Customs with the manifest information 24 hours prior to vessel departure. If this information is not supplied to the carrier completely and timely, they will not load the container on the vessel. The key to the successful implementation of this program is for the overseas suppliers to provide the proper information in a timely manner to the carrier or the forwarder handling the shipment.

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    Air Cargo Screening in Hong Kong

    Singapore Airlines Cargo has announced that all shipments to the United States must be held at its terminal for 24 hours and x-rayed prior to departure.   We anticipate that this will be a worldwide mandate. It is unknown at this time if there will be a cost associated with this procedure.

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    Department of Commerce Launches TECI Initiative

    The Department of Commerce (DOC) has launched the Transshipment Country Export Control Initiative (TECI) to combat the illegal transshipment, re-exportation, and diversion of goods and technologies in international commerce.  The objective is to enhance security and increase confidence in international trade flows.

    The Commerce Department has advised that TECI is a multi-faceted cooperative.  There are two principal parts to TECI:

    The first part is a government-to-government approach in which the Department of Commerce (DOC) works with its counterpart trade and export control agencies in key transshipment countries to:

    • Assist them in the adoption of export and transshipment control regimens tailored to their economies;
    • Exchange data to facilitate more effective administration of U.S. and transshipment country trade controls; and
    • Encourage them to adopt certain other measures to facilitate better enforcement  of U.S. trade and export control laws.

    The second portion covers a government-to-private sector approach, wherein the DOC works with industry, with emphasis on companies involved in the transportation of goods through transshipment country hubs, and major consignees and end-users of goods located in those hubs. Their goal is to enlist the support of these companies in preventing unlawful shipments.

    The Bureau of Industry and Security (BIS) will coordinate TECI, and will work with other agencies within the Department of Commerce, and other integral U.S. Government Agencies including U.S. Customs, the Department of State, and the Department of Energy. TECI will build on, support, and coordinate with other relevant existing and proposed initiatives such as the Customs-Trade Partnership Against Terrorism (C-TPAT), Container Security Initiative (CSI), and Operation Shield America, just to name a few.

    For a complete list of all the programs involved, as well as a list of the National Best Practices for Effective Export, Re-export, Transit, and Transshipment Controls discussed by a group of experts from thirteen countries and economies, please refer to the BIS website at http://www.bxa.doc.gov/NECTIC/ExecutiveSummary.html.

    Sources: Bureau of Industry and Security, U.S. Department of Commerce.

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    FDA Increases Number of Shipments Subject to Review

    The Food and Drug Administration (FDA) has announced that they are increasing the number of shipments subject to FDA review. The announcement comes as the FDA steps up surveillance activities in an effort to enhance oversight and increase security. The measures include increased inspections as well as an increase in sample collections.

    Source: U.S. Customs Administrative Message Number 03-1047 dated March 21, 2003.

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    Foreign Trade Zone Manual Available On-line

    U.S. Customs has posted a new Foreign Trade Zone (FTZ) Manual to its website. The FTZ Manual is to be used as a guide only. "Many of the laws and regulations are paraphrased for the sake of simplicity and easy reading." The intention was to gather the various laws, regulations, policies, and procedures "scattered among numerous documents" and store in one place for easy reference. The intended audience includes:  FTZ operators, users, Customs personnel, custom house brokers, freight forwarders, bonded and international carriers, and other members of the import-export community. All parties are encouraged to review the "actual text of the cited laws and regulations before making costly investment decisions initially based on information in the manual."

    For an explanation regarding the FTZ manual please see the U.S. Customs website at http://www.customs.gov/xp/cgov/toolbox/publications/manuals_handbooks/

    Source: "Customs Makes Available New Foreign Trade Zones Manual" from International Trade Today dated February 25, 2003.

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    Harmonized Tariff Schedule TSUSA Available On-line

    Attention Importers! You can now view the entire Harmonized Tariff Schedule of the United States on-line.  The United States International Trade Commission gives you the option of searching by chapters, searching the entire HTS, or downloading the entire HTS in Adobe PDF format or Word Perfect. This is your opportunity to ensure that your classifications are correct as entered, and/or look up new products to see where they may be classified.  You can view the HTS at: http://www.usitc.gov/taffairs.htm.  Samuel Shapiro & Company, Inc. offers consulting services for more complex classifications issues. Please contact consulting@shapiro.com for additional information.

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    Harmonized Tariff Schedule B Available On-line

    Exporters can view the 10-digit Schedule B code on-line to verify the classification of their products.  Proper classification is essential in recent focus in securing our environment. The U.S. Census Bureau has provided a web page to view, browse, or download the schedule B export codes. There is also an option to view the obsolete Schedule B export codes.

    Please refer to link for the Schedule B code: http://www.census.gov/foreign-trade/schedules/b/index.html.

    Sources: U. S. Census Bureau, Foreign Trade Statistics, Department of Commerce.

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