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Editor’s Note: First, let us say that the humanitarian impacts and terrifying possibilities of a raging geopolitical storm leading to a global conflict are what really matter when eyeing Gaza. That is a concern well beyond this blog! We write this in the spirit of the annual budgets we are preparing (or will soon be preparing), and our businesses.

What the heck are we international shippers all going to do when the Suez Canal is blocked or compromised by the current and broadening conflicts in Gaza, Israel, and beyond?

Let’s start this tirade in Panama—the slightly more famous canal among the proud Americans who financed that impressive project back in 1914. Yikes! First, the Panama Canal Authority (PCA) lowered the maximum (max) draft levels from 50 to 44 feet, which limits max vessel sizes. Since then, the PCA has already reduced the number of vessel transits per day from 36 to 32 (in July) to 24 (in November), followed by an announcement that the daily max will drop to 18 by February 2024!

Hey, no problem, we’ll just pay a few dollars more to wait a few days longer for Suez routings, right? …Right? …Maybe wrong.

Here are a few fun facts to help put things into perspective for us:

Philadelphia is farther from Washington DC than the Gaza Strip is from the Suez Canal.
130 slender miles separate the infamous Refah border crossing in Egypt’s Sinai and the busiest and eldest major canal on planet Earth.
Al-Arish Airport, the primary hub for humanitarian shipments for Gaza is 28 miles from the Refah border, separating the Gaza Strip from Egypt.
The Suez is not only 45 years older, but also 244% busier than our darling Panama Canal!
Remember, both sides of the noble Suez sit on Egyptian soil.

So, we are all in trouble obviously! Have you considered a world where Iran, Egypt, and Saudi Arabia gang up on Israel, and the Suez is closed indefinitely?

…Not so fast, reactionary readers. You don’t want to be “Egypted” off when seeking your supply chain information!

Enter Egypt

Before we delve into the current situation, let’s briefly review a few of the region’s defining moments over the past century that helped shape the present political context at hand:

Analysis of the Hamas-Egypt Relationship

Today, it is said that the official position of Egypt is negative toward Hamas because they are literally the offspring of the Muslim Brotherhood. This organization has done much harm to Egypt in the eyes of many after what’s amounted to nine years of military rule under Abdel Fattah el-Sisi. That said, there is tremendous popular support for Hamas among the people—and most Egyptians would not like to see Palestinians, perhaps even members of Hamas, suffer.

Egypt is also closely allied with both the United States and Israel, and these connections run deep and wide, as they pertain to financial aid and developmental support for Egypt. A telling example of this cooperation is the ongoing blockade of vessels to and from the Gaza Strip. And, frankly speaking, the Suez Canal is a huge economic contributor for Egypt. It is very hard to imagine Egypt attacking Israel any time soon. They now have many ties that bind, and Hamas is hardly seen as saintly in the eyes of Egypt.

Wild Card: Freight Rates

What happens if Iran or her many “seedlings” like Hezbollah take aim at the Suez?

The short-term consequence—especially if Panama is as dry as a desert—is that we all get to know (and love) the Cape of Good Hope around South Africa. Our freight prices will increase by 100% and our transits will extend by as much as 50%, but we’ll still be in business. As of today, that seems like the worst-case shipping scenario; though, if we get there, the world is in CONTAINERLOADS of trouble.

Suez Blockade Tirade Conclusions

What’s Shapiro’s outlook on the matter?

We feel that it’s likely that some Panama Canal business would start to move by rail from Cristobal to Balboa if the Suez is blocked and rendered useless. Our bet is it is a 1% chance. However, if it comes to that reality, just know that Panama’s rail connections from the Pacific to the Atlantic have never been faster, more reliable, or more affordable than today. By hook and by crook, even if we must use western Mexico, we’ll be routing freight to every single boy and girl in the US.

Again, our point is not to diminish the anguish occurring in the Middle East. An unprovoked attack followed by even more human suffering: it is impossible to label this anything but a tragedy. But it would be foolish not to consider potential dire developments. Shifting our focus to commerce, we’re betting on a resourceful global supply chain in 2024!

Itching to weigh in on our little tirade and/or rant about your current escapades? Contact Shapiro today!

Helpful Links/Related Topics:

Shipping Line News

The Alliance has suspended its EC4 service, which covers Kaohsiung, Xiamen, Hong Kong, Yantian, Cai Mep, Singapore, Norfolk, Savannah, Charleston, Newark-New York, and Singapore.
“Green” ships (methanol-powered and/or dual fuel) continue to be produced in keeping with the large orders placed in 2022 and the beginning of 2023. These orders total 187 ships and represent a total capacity of 1.75 mTEU.
The total number of idled carrier vessels is now 315, totaling over 1.18m TEU.

Blank Sailings Up Dramatically

Blank sailings continue to increase on the eastbound trans-Pacific in an attempt to establish control over spot rates.
This has effectively reduced capacity by an estimated 22%, compared to just an 11.5% reduction in September.
Delays of up to 14 days have been reported due to rolled cargo.
Amid this persistent and widespread rate pressure for US shipments, intra-Asia import trades to India are up a whopping 40% in the last three months.
This uptick is causing liners to increase their port calls along with sending bigger vessels on the route.

Container Volume Asia to US East Coast Ports (2023)

Container Volume Asia to US West Coast Ports (2023)

In a world already fraught with frightening freight challenges, shippers are now grappling with a bone-chilling new threat that haunts their every waking moment—a rising number of cargo thefts. Statistics reveal a total of 566 incidents documented this year, marking a spine-tingling 56% year-over-year increase. These thieves, driven by an insatiable appetite for cash, target a wide array of commodities, ranging from high-end electronics to essential construction materials and coveted sneakers, akin to a wicked assortment of Halloween candy. The startling reality is that these robberies have amassed a staggering total value of over $40 million, at an average of $260,000 per theft.

But these spectral criminals aren’t content with lurking in the shadows; they’ve established their ghoulish dominion near bustling hubs and cities. Among these locales, California and Georgia have emerged as the principal settings for this spooky saga. In an audacious display, some of these larcenists are causing entire truckloads to vanish. They are orchestrating fake pick-ups with unsuspecting drivers, leaving only a ghost behind in their wake.

Most of the purloined goods find their way to the darkest corners of the black market, fetching a mere 15-20% of their actual value. However, certain items, such as electronics and high-demand shoes, are stealthily maneuvered onto online platforms like eBay and Facebook Marketplace, often fetching prices that equal or even exceed their MSRP.

The Environmental Skeletons in the Global Closet

We guess you may have read about global warming or watched a docile tropical storm rage into a Class 5 hurricane in a day, or maybe you have floated into your own backyard on your sofa. Call it what your political party insists, but there should be a skull-and-crossbones warning label on much of our planet.

Your cargo has never been haunted by so many potential ghouls along the treacherous path of your supply chain. Forty percent of global ports (those that handle 60% of the world’s cargo) are already in potential jeopardy from rising water levels. Vessels and aircraft have never faced choppier seas or more violent turbulence. Floods, typhoons, droughts, hurricanes, fires, and witches all lurk, and many companies just aren’t even close to ready.

Like a giant Jack-o-Lantern, complete with a crooked grinning jaw, the Earth is laughing at your vulnerable cargo and your skimpy property policy. Yes, the one that “claims” to cover cargo claims!

Ward Away the Shadows with Cargo Insurance

Fear not, for there’s a solution to ward off the impacts of these sinister spirits: cargo insurance. There are many benefits to cargo insurance. Here are a few examples:

Financial Safeguard: Cargo insurance serves as a safeguard for your investments, creating a protective barrier that shields you from potential financial issues in the event of theft or damage during transit.
Risk Mitigation: Insurance can give you peace of mind in moving expensive or large shipments. If something does happen to the cargo, the risk is mitigated in terms of realized losses.
Operational Continuity: Having cargo insurance in place for a shipment expedites the claims process, ensuring that losses are recovered swiftly. This reduced processing time helps to minimize operational disruptions since new goods can be on their way more quickly.
Competitive Advantage: It is more than just protection; it is a statement of professionalism in the world of international trade. Your clients and partners will view your business as responsible and reliable.

What Goes in this Perfect Potion?

Things to consider when choosing cargo insurance:

Coverage Scope: When selecting cargo insurance, it’s imperative to ascertain that the policy is tailored to your unique risks. For example, if you’re importing delicate porcelain china, your policy should explicitly cover damage due to handling or breaking during transit.
Policy Limits: Review the limits of coverage to ensure they align with the value of your cargo. The coverage should reflect the true value of your shipments.
Deductibles: Be aware of the deductibles you’d be responsible for in case a claim is made. Knowing the deductible amount is crucial, as it directly impacts the out-of-pocket expense in case of a claim.
Claims Process: Investigate the ease and efficiency of the claims process with your chosen insurance provider. If you’re importing perishable goods, a swift and straightforward claims process is vital, as delays could result in significant losses.
Customization: Look for cargo insurance policies that can be customized to suit your specific requirements around handling, transportation, etc.

To safeguard your imports and ensure the continuity of your operations, cargo insurance is an indispensable tool, especially with thefts on the rise. By choosing the right policy, you can protect your investments, mitigate risks, and gain peace of mind. If you’d like assistance in obtaining cargo insurance, book an appointment with our logistics experts today!

It’s no secret that the decline of cable television has given rise to a new entertainment behemoth: streaming platforms. The resulting power struggle forced network executives to rethink the wheel to attract more viewers than their competitors, and in turn, more advertising revenue. One of the tactics that’s taken centerstage is based upon the age-old adage, “give the people what they want.” Well, it turns out that people want more true crime documentary series.

Why is this relevant, you may ask? Because much like this genre, regulatory compliance is riddled with dynamic complexities, unexpected twists, minute details, and probing questions—especially when it comes to classifying your products. Classification doesn’t have to be an unsolvable puzzle or a “bored” game. So, watch out Colonel Mustard—Shapiro is here to decipher the clues and crack the classification code!

HS v. HTS codes: What’s the Difference?

The easiest place to start is with HS codes. Harmonized System (HS) codes help declare the identity of goods to the various importing countries’ customs offices. They were developed by the World Customs Organization (WCO) to standardize global trade and have since become a well-established practice worldwide. HS codes consist of six digits and are updated every five years.

On the flip side, the Harmonized Tariff Schedule (HTS) is a numerical code that helps customs officials, shippers, and traders alike decipher the complex language of cross-border goods. HTS codes expand the six-digit HS code to ten digits and are managed by the US International Trade Commission (ITC). When importing a product, a shipment will be assigned an HTS code, and the shipper must ensure that it corresponds with the country codes of importation. Much like an airport, HTS codes act as international passports that guide your product through different tariffs, duties, and regulations; and Customs officials are the terminal security agents who ensure passenger compliance with standard regulations.

Hacking and Cracking the HTS Code

If you’ve been keeping up with the news lately, you may have heard about the recent wave of password crackdowns that streaming services have implemented in an effort to combat shared accounts. But how do companies like Netflix and Disney+ know when multiple people are using a shared account? Easy—by monitoring Internet Protocol (IP) addresses, which are the numerical labels that uniquely identify network interfaces and specific locations. Just as your internet modem has a unique numerical address, so do your products.

As we discussed above, HTS codes have ten digits; with the first six digits corresponding to the HS code. Here’s a breakdown of the code and what each portion represents:

Chapter: There are 21 distinct sections split into 96 chapters. Although the HTS technically includes Chapters 1-99, there are three exception chapters omitted from the total count:
- Chapter 77 (Reserved for Future Use) is blank.
- Chapter 98 (Special Classification provisions) is limited to national use.
- Chapter 99 (Temporary Legislation; Temporary Modifications; Additional Import Restrictions) is a specific code limited to temporary modifications and national use.
Heading: Dictates the specific category within any chapter.
Subheading (HS code): The last two digits are more specific and define the subcategories of products.
Subheading: For the US, the seventh and eighth digits represent the country specific sub-heading.
Statistical Suffix:The last two digits identify country-specific categorization.

To help keep track of rulings and classifications, U.S. Customs and Border Protection (CBP) has a database—known as the Customs Rulings Online Search System (CROSS)—which can be used to search for US HTS codes and rulings dating back to 1989. If you’re interested in reading a few fast (and fun) facts about the latest and greatest US HTS edition (2023) from the ITC, click here.

Hacking and Cracking the HTS Code

If the HTS process wasn’t complicated enough, the US also uses a separate ten-digit code to denote exports, known as the Schedule B number. The US Foreign Trade Division is responsible for assigning a Schedule B number for every product exported out of the country. As with the HTS codes, the first six digits are the global HS number. For help pinpointing your products, check out the Schedule B Search Engine, or contact us directly!

Get a Clue on Tariff Engineering

Tariff engineering can often feel like a game of Clue. It’s all about taking stock of what’s in front of you, asking the right questions, and finding the right nooks and crannies in the tariff schedule. By adjusting the design of your product, you can legally optimize your import duties and avoid paying the proverbial troll under the bridge trying to eat into your profits.

As a great example, a popular shoe company includes layers of felt on the sole. They ensure that the felt covers 50% of the sole, which allows them to classify their imports as slippers instead of shoes. Tariffs for slippers range between 7.5% to 12.5%, while regular footwear with rubber soles can have duties of 37.5% or higher. The pennies of felt and labor to change the code certainly seem worth the tradeoff.

Spilling the Penal-Teas on Apparel

Textile imports can be classified under roughly 5,500 different HTS codes in the U.S. With each item falling under a specific ten-digit heading subject to change every five years, you may find yourself in an exponentially more complicated situation than you signed up for. To give you an idea of just how much HTS codes can cause duties to vary, there is a 27% difference between declaring apparel as “silk” (0.9% tariff) and “other” (28% tariff). These codes can make a huge difference to the bottom line of an importer and should be evaluated by an expert. When it comes to classifying, there’s no room for ex-SKU-ses. Even the smallest of errors can quickly spool out of control, causing your whole supply chain to unravel. If you don’t believe us, then try this one on for size…

You might be thinking, “it’s just a tiny piece of fabric, what’s the big hang-up?” Well, the moral of our tale of two retail shirts is simple: don’t let negligent knit-wits take you to the cleaners. If Customs officials end up flagging the misclassification or FTA needle in the entry haystack, then Shirt B could cost Twead-ledum (the retailer) penalties amounting to 20% of the dutiable value, double the loss of lawful duties, taxes and fees, or much worse!

Shapiro’s best practices are outfitted in reasonable care. With over 100 years in the business, we’ve discovered that one size doesn’t always fit all; and we’ve learned to expertly stitch together solutions that are tailored to your needs.

How Shapiro “CAM” Help You!

Classification questions can be daunting; which is exactly why CBP recommends against do-it-yourself use of the HTS classification system and also why robo-classifications (classifications performed by computers, programs, and software systems) tend to be accurate less than 50% of the time! Incomplete descriptions or classification errors are costly mistakes that can result in additional duties, delayed cargo release, and penalties.

Shapiro offers an excellent tool to help importers streamline their classification process. Our Classification Advisory Module, or “CAM,” is a one-stop resource for classification. Our skilled compliance detectives use their 250 years of combined experience to research, analyze, and classify each request. Pre-classification is a great way to forecast landed costs and reduce unnecessary research. To get in touch with a member of our classification crew, contact Shapiro today!

Don’t Get Caught!

Regulatory Compliance: There are two simple steps to avoiding trouble: First, know the rules. Second, don’t break them. The potential penalties, both financial and commercial, can be extremely damaging for your business and, in some cases, for you personally. Let’s agree that regulatory compliance isn’t a flexible issue but Shapiro can straighten you out!
Visit Regulatory Compliance Services»

PICTURE THIS…It’s 1973. You’ve just arrived at your health-conscious Uncle Larry’s house for the weekend—and are less than enthused when you hear all about the new superfood blender that your uncle won in a raffle at his gym. He then proceeds to offer up one of his “World Famous Larry-aids,” which is loaded with fruits and veggies, and is guaranteed to make you a “lean, mean, fighting machine.” What do you do?

Let’s be real—back in ‘73, most people would have had to fight off a look of sheer horror at the prospect of having to drink something that tasted like feet—and then proceeded to politely decline. But fast forward to today, and the response would probably be much different.

Just as the food pyramid has evolved to promote a healthier lifestyle over the last 50 years, so too has the importance of sustainability in bettering the planet.

Take the shipping industry, for example, which has long relied upon massive steamships to traverse the world’s oceans, thereby producing significant carbon and sulfur emissions. The resulting environmental decay has contributed toward the relatively recent emergence of green organizations—such as the Global Reporting Initiative (GRI), the International Maritime Organization (IMO), and the Sustainability Accounting Standards Board (SASB)—thereby enabling us to navigate the treacherous and uncharted (and filthy!) waters with our global partners.

If you haven’t heard about some of the latest and greatest green global initiatives yet, then sit back and enjoy the “smoothie” sailing, as we set the course on “clean, green, pollution-fighting marine machines.”

It’s a Bird, It’s a Plane…No, It’s Ocean Sustainability!

As the saying goes, “birds of the [Exxon Valdez Oil Spill] feather flock together.” (Okay, yes, we might have taken a few liberties there, but we thought we would try to be “slick” and lighten the mood before we “spill.”) Has a little birdie from a flock of “sea”-gulls—ever told you about the 11 million gallons of oil that leaked from a tanker that had run aground in Alaska back in 1989? If not, then you are likely unaware of the environmental devastation that the Exxon Valdez Oil Spill caused.

The resulting public outcry was so sweeping that it led to the establishment of the Global Reporting Initiative (GRI). Although the GRI is completely independent, it acts as a compass, providing a sustainability reporting framework for companies, allowing them to disclose certain environmental, social, and governance impacts. In a nutshell, the GRI provides shippers with the ability to constructively compare apples-to-apples when it comes to core sustainability progressions.

Click to View GRI Sustainability Standards

It wasn’t until the 1990s that “sustainability” became a buzzword. CEOs went unchecked for years as they shouted it from the rooftops in the name of soaring stock prices.

In those days, there was little to no oversight or ability to compare the effectiveness of sustainable initiatives from company to company. It wasn’t until the Sustainability Accounting Standards Board’s (SASB) debut in 2011 that companies were able to measure, manage, and communicate the most relevant and impactful factors to their industry, also known as Environment Social Governance (ESG) factors. Here’s a birds’-eye-view of a few ESGs:

View Environment Social Governance Chart

Topic	Metric	Category	Unit of Measure
Greenhouse Gas Emissions	Gross global Scope 1 emissions	Quantitative	Metric tons (t) CO2-e
	Discussion of long and short-term strategy or plan to manage Scope 1 emissions, emissions reduction targets, and an analysis of performance against those targets	Discussion & Analysis	N/A
	Total energy consumed percentage heavy fuel oil percentage renewable	Quantitative	Gigajoules (GJ), Percentage (%)
	Average Energy Efficiency Design Index (EEDI) for new ships	Quantitative	Grammes of CO per ton- ₂ nautical mile
Air Quality	Air emissions of the following pollutants: NOx (excluding N2O) SOx particulate matter(PM10)	Quantitative	Metric tons (t)
Ecological Impacts	Shipping duration in marine protected areas or areas of protected conservation status	Quantitative	Number of travel days
	Percentage of fleet implementing ballast water: exchange treatment	Quantitative	Percentage (%)
	Number aggregate volume of spills and releases to the environment	Quantitative	Number – Cubic meters (m³)
Employee Health & Safety	Lost time incident rate (LTIR)	Quantitative	Rate
Business Ethics	Number of calls at ports in countries that have the 20 lowest rankings in Transparency International’s Corruption Perception Index	Quantitative	Number
Business Ethics	Total amount of monetary losses as a result of legal proceedings associated with bribery or corruption	Quantitative	Presentation currency
Accident & Safety Management	Number of marine casualties, percentage classified as very serious	Quantitative	Number – Percentage (%)
	Number of Conditions of Class or Recommendations	Quantitative	Number
	Number of port state control: deficiencies detentions	Quantitative	Number

The above ESG standards emphasize materiality; this means they tend to focus on issues most likely to affect a company’s financials and shareholders. When you tie non-financial factors and incentives to performance, companies are more likely to take sustainability seriously—which ultimately trickles down and benefits society.

Synchronized Diving with the GRI and SASB

There are some things in life that are simply better together—such as peanut butter + jelly; bacon + eggs; or Beyonce + Jay-Z. When it comes to the ocean, there are few matches as “nauti”-cool as the compass and map. You can have one without the other, but both are more useful when paired together.

With this in mind, let’s imagine that the SASB standards function as the Sustainability Compass—which acts as a tool to help navigate the GRI Framework Map.

Realizing the incredible power of their complementary nature, in July 2020, both organizations teamed up to announce a collaborative work plan. Together, they aim to:

Clarify the application of their reporting standards;
Provide insight into how the performance data is used; and
Help consumers of the data understand the similarities and differences in the information generated.

Over 96% of the world’s largest companies report on sustainability performance. It’s clear that the ripple effect from both organizations is starting to make an impact on a global scale.

The Ins- and Out-Comes of Sustainable Shipping

Peter Drucker took a page out of Patrick Henry’s book when he said, “Innovate or die.” While we don’t want to necessarily over-dramatize the situation, there have been many notable advancements in the industry over the last few decades—including hybrid engines, alternative fueling, slow-steaming coupled with route optimization, and utilizing sustainable packaging and materials.

Oftentimes, hybrid engine technology is a somewhat controversial table topic, especially if Uncle Larry still has his prized ‘76 Nova parked in the garage. Politically charged commentary aside, these engines offer a promising solution to minimize the carbon footprint of ocean vessels.

Did you know that ocean shipping alone is responsible for 15% of carbon emissions across the planet? Or that in its lifetime, a single ship contributes almost as much pollution as 50 million cars would? Taking advantage of hybrid technology is an easy double-win for companies. Not only does this reduce carbon emissions by up to 40%, but it also increases fuel efficiency by as much as 30%, resulting in a boatload of savings across the board… which results in another boatload of savings.

In quite the juxtaposition, the slow steaming of vessels has been quick to pick up speed in the shipping world. As its name suggests, slow steaming occurs when a vessel intentionally reduces its speed during transit to optimize fuel expenditure and reduce greenhouse emissions. Some experts estimate that this strategy can reduce fuel consumption by an average of 30% per trip. Much like the hybrid alternative, slow steaming can lower environmental impacts and cut fuel costs relatively effectively and quickly. Additionally, it puts less stress on the ship’s engine, which can extend its lifetime.

The Wrap-Up: Life in Plastic Ain’t Fantastic

Before we wrap-up on this topic, (or start rapping the rest of Aqua’s “Barbie Girl”), let’s quickly touch on packaging materials and methods that have entered the sustainability scene. It comes as no surprise that traditional packing approaches—like bubble wrap or polystyrene—have faced increased criticism in recent years due to the potential wildlife hazards they present, as well as their limited recyclability. Many companies have opted to use more environmentally friendly packaging materials, such as air pillows or recycled paper and plastics, when shipping their products.

As we head deeper into the twenty-first century, the days of massive steamships belching out noxious fumes grow fewer and fewer; however, the lasting trail of global emissions and pollutants remains firmly in their wake. Just like your Uncle Larry’s pursuit of health, the shipping industry is undergoing a transformative journey towards a more sustainable future on the vitamin “sea”— one that’s loaded with clean, green, pollution-fighting marine machine juices.

In today’s interconnected world, where goods are sourced globally, a dark and omnipresent shadow looms in the background: forced labor. Forced labor generates an estimated $150 billion (USD) in profits and affects over 27 million laborers (about the population of Texas). To avoid this treacherous and complicated pitfall, it is crucial for the logistics, transportation, and shipping industries to be aware of and actively combat the issue of forced labor.

In this post, we will unravel the supply chain to shed light on this pressing issue and delve into the concept of forced labor, explore the significance of Section 307 of the Tariff Act of 1930, highlight indicators to identify potential violations, and outline strategies to avoid purchasing products or materials manufactured by forced labor.

What in the Labor World is Going On?

Forced labor refers to the exploitation of individuals who are coerced or deceived into working under harsh conditions, often involving physical or psychological abuse. Under the weight of such precarious environments, a worker’s basic human rights are violated—causing shockwaves to trickle down into the ethical and sustainable fabric from which these supply chains are made. Therefore, it is incredibly important to recognize that forced labor can exist across different industries and supply chains, including apparel, electronics, agriculture, and manufacturing. To better understand its implications, let’s explore some specific examples.

Getting Snippy with it: Forced Labor in the Textile Industry & Apparel Manufacturing Sector

Picture bustling factories in countries like Bangladesh and China, where the threads of forced labor intertwine with the fabrics we wear. Behind the scenes, vulnerable workers—often driven by poverty or the quest for a better life through migration—find themselves ensnared in a sinister lifecycle. These workers often endure grueling hours of labor, toiling under unsafe working conditions that pose risks to their health and well-being. The very garments we purchase may carry the invisible stitching of a system that denies workers’ basic human rights.

Something Smells Fishy: Forced Labor in Seafood Processing

Now, let’s deep dive into the dark abyss of the fishing and seafood industry, where the waters run murky with tales of forced labor. Aboard fishing vessels across Southeast Asia, unsuspecting workers are trapped in a world of debt bondage, their bodies weary from physical and mental abuse and their spirits confined by the unforgiving chains of exploitation. To make matters worse, these workers are often isolated on vessels from the outside world, leaving them at the mercy of their employers. As their catch makes its way to global markets, the unwitting involvement of companies perpetuates this systemic abuse.

These examples serve as poignant reminders that forced labor knows no bounds, infiltrating various industries and supply chains. From electronics to agriculture, manufacturing to mining, its insidious reach tarnishes the very essence of fair and ethical business practices. It is our collective responsibility to expose these grave injustices and work tirelessly towards eradicating forced labor from its roots.

Under the Microscope: Section 307 of the Tariff Act of 1930

Our forefathers (and foremothers) had the insightful ability to begin combating forced labor as early as the 1930s, when the Tariff Act of 1930 was created. The world of logistics has evolved significantly since the days of yesteryear, but one crucial provision of the Tariff Act of 1930 continues to hold immense significance in today’s globalized business landscape: Section 307.

Section 307, also known as the “Withhold Release Order” (WRO), grants U.S. Customs and Border Protection (CBP) the authority to detain goods that are suspected of being produced using forced labor. And, if the evidence suggests that the merchandise was made, even in part, by forced labor, CBP can issue a WRO, which prevents the goods’ entry into the US. This has served as a critical legal mechanism, allowing the CBP to take a proactive approach against forced labor by holding companies accountable for their sourcing practices. This has sent a clear message that goods tainted by the exploitation of vulnerable workers will not be tolerated; the hope is to foster a more ethical and responsible global trade environment.

The message is so loud that Congress is now considering addressing a loophole—one that has existed for some time—to better control imports made with forced labor. The loophole involves “de minimis” imports—shipments that are valued under $800 a shipment that enter the country with minimal evaluation or reporting. In 2021, an estimated 446 million packages entered the US without formal entry, mainly from the Xinjiang province in China. Likely because of these statistics, President Biden signed the Uyghur Forced Labor Prevention Act (UFLPA), which covers four main sectors: apparel, cotton and cotton products, silica-based products, and tomatoes and downstream products. Enforcement began on June 21, 2022; it prohibits the importation of goods produced wholly or in part in the Xinjiang Uyghur Autonomous Region of China.  However, unlike products subject to IPR, it contained NO exception for de minimis exports.

Indispensable Insights & Forced Labor Indicators

Identifying potential forced labor violations is crucial for supply chain professionals. Recognizing key indicators can help flag high-risk situations and enable proactive interventions.

Here are some common signs to watch out for:

High-Risk Countries and Industries: Certain countries and industries have a higher prevalence of forced labor. These include regions with weak labor laws, limited enforcement, and inadequate protection mechanisms. For example: Countries with documented cases of forced labor in specific sectors, such as apparel manufacturing or agriculture, should be scrutinized more closely.

Recruitment Practices: Unscrupulous recruitment practices are often associated with forced labor. This includes exorbitant recruitment fees, confiscation of identification documents, and deceptive recruitment procedures, where workers are promised decent wages and conditions that never come to fruition.

Working and Living Conditions: Poor working conditions, such as excessively long hours, unsafe environments, and substandard living facilities, can be indicative of forced labor. Unexplained deductions from wages or limited freedom of movement are also red flags that require attention.

Payment and Debt Bondage: Workers that receive pay significantly below minimum wage or experience wage deductions due to fabricated debts are often victims of forced labor. Debt bondage occurs when workers are trapped in a cycle of debt, making it nearly impossible to escape these exploitative working conditions.

How to Be-Laboring for Justice & Avoid Violations

Preventing forced labor requires proactive measures and a commitment to ethical sourcing practices. Let’s take a gander at some of the key implementation strategies:

Supply Chain Mapping & Risk Assessment	Develop a comprehensive understanding of your supply chain, identifying high-risk areas and mapping out the various tiers of suppliers. Document in detail. This assessment can help identify potential vulnerabilities and prioritize efforts to ensure due diligence, which will prove to be useful in the event you need to argue a case with CBP.
Robust Supplier Due Diligence	Thoroughly evaluate suppliers and conduct risk assessments. Document and implement a comprehensive supplier code of conduct that explicitly prohibits forced labor and adheres to international labor standards. Regular audits and site visits can help assess compliance and identify any signs of forced labor. If willing, collaborate with suppliers to address issues and provide support for remediation.
Code of Conduct & Contracts	Implement a robust code of conduct that explicitly prohibits forced labor and includes provisions for suppliers’ adherence. Contracts should stipulate compliance with labor laws and enable termination in the event of violations.
Engage & Collaborate with Industry Initiatives	Join industry associations and initiatives dedicated to eradicating forced labor, such as the Responsible Business Alliance (RBA) or the Ethical Trading Initiative (ETI). They can provide access to best practices, resources, and collaborative opportunities with like-minded organizations. Consider certifications like the Marine Stewardship Council and Fair Trade to help break these chains of exploitation.
Strengthen Supply Chain Transparency	Engage in traceability measures, promoting visibility throughout the supply chain; transparency is a powerful tool to combat forced labor. Encourage suppliers to disclose their own supply chain networks, enabling better risk assessment and identification of potential red flags.
Worker Empowerment & Grievance Mechanisms	Establish mechanisms that empower workers to raise concerns and grievances without fear of retaliation. Encourage worker participation, ensure fair wages, and provide safe and healthy working conditions. Promote ethical recruitment practices and support the welfare of vulnerable groups.

Although we only skimmed the surface of forced labor in this post, we hope that it is abundantly clear that this issue poses significant challenges to the logistics, transportation, and shipping industries at large. Combating forced labor is not only imperative but also crucial for the long-term success and reputation of businesses.

By understanding the concept of forced labor, recognizing indicators, and implementing proactive strategies, companies can help contribute to the eradication of this heinous practice. And, by championing fair labor practices and prioritizing supply chain transparency, we can work towards a future where every worker is treated with dignity and respect, together. Check out our guide on how to avoid forced labor violations on your imports.

Supply Chain Reactions

A Condensed Update For American Shippers

Issue Date: January 19, 2022

Quote of the Issue:

“We may have all come on different ships, but we’re in the same boat now.”

– Martin Luther King, Jr.

Adios Coming for the USMCA?

ShapLight Focus: Congress is pressuring the Biden Administration to bolster US-Mexico-Canada Agreement (USMCA) enforcement efforts— especially with Mexico— on labor, agriculture, telecom, energy, environmental initiatives, and services; while these ambitious and wide-ranging efforts could greatly open markets for US companies, they could also easily result in trade retaliation measures

On January 6^th, Lisa Wang began her new position as Assistant Secretary of Commerce for Enforcement and Compliance (E&C); the Department of Commerce commented that the E&C “leverages its expertise in compliance by holding US trading partners accountable to their obligations under existing multilateral, regional, and bilateral trade agreements”
Many industry insiders see the Wang appointment as a move to improve the US’s effectiveness in the World Trade Organization (WTO), especially as future disputes relate to US-China trade
The Bureau of Industry and Security (BIS) has suggested new controls on cybersecurity items that impact national security and anti-terrorism efforts including a new license exception; after reading comments submitted from the trade last month, officials have decided to delay the interim final rule until March 7, 2022, to allow the industry sufficient time to comply with the changes
After a recent White House proclamation, the new World Customs Organization’s (WCO) Harmonized System tariff nomenclature will go into effect on January 27^th

Ocean Freight Rates Will Not Abate

ShapLight Focus: After eclipsing an $11,000 per container average for the first time in history, the Freightos Global Container Global Index sits at $9,500 and 170% higher than one year ago

Though FAK rates have improved, the problem for American importers is that less than 50% of the transpacific ocean market is moving on FAK rates
When considering premium and co-load options, the average 40’ rate to the USEC is just under $17,000— which is over 200% above last January
By the same token, USWC rates (per 40’) average a staggering $14,500 and 235% higher
January’s planned operational blank sailings on the transpacific total just under 120,000 TEUs (20% of nominal total capacity) after December’s 160,000 TEUs (30%); January’s blanks also taper down as the month progresses, ending the month near 10%
For an industry desperate for good news, the diminishing blanks will only exacerbate US port congestion as dockworkers battle Omicron
The $4B of merchandise traveling through Ningbo each week seems to be flowing much better than feared, but Omicron outbreaks in Tianjin and New York will certainly hinder efficiencies in those critical operations; after averaging just 1.6 for all of 2021, New York vessel wait times are above 5 days, with as many as 25% of dockworkers calling in sick
While we read about landside efficiency improvements in Los Angeles/Long Beach (LA/LB), the average vessel wait time has reached an unbelievable 23.4 days, with over 100 vessels at anchor or at drift in their harbor

International Air Cargo Transits Taking Off

ShapLight Focus: The average transit time for international air cargo is almost 50% longer than pre-pandemic levels due to congestion-related inefficiencies; the industry is suffering from Covid labor shortages, crew quarantines, trucking congestion, insufficient airport storage space, and cargo backlogs from ocean to air conversions

Though still at the highest volume levels in history, November cargo ton kilometers (CTKs) grew only 3.7% over November 2019; this is the lowest growth rate since January 2021
The top three airlines for air cargo CTKs in 2021 were (in order): Federal Express, United Parcel Service and Qatar Airways
The top three airlines for passenger kilometers in 2021 were (in order): American Airlines, China Southern Airlines and Delta Airlines
Passenger belly space—typically 50% of global cargo capacity—fell to 18% in 2021; total available capacity in the industry was down 13.4%
Airline load factors for international cargo improved 12.3% for 2021 vs. pre-pandemic standards and eclipsed 64% overall; the Asia Pacific led the pack with 74% efficiency

Please note our ‘Orange Crush’ Map of US Drayage Backlogs:

Import Freight Rate Trend Charts

Ocean Import FAK Rates to US West Coast (per 40’):

Ocean Import FAK Rates to US East Coast (per 40’):

Air Rate Trends

Our Expert Shapinion

‘Twas one more surprising year

It started with anguish and fear.

Vaccines came around

Some freedom re-found

With hope we were then in the clear.

But outbreaks were still to appear

It seemed the end was not quite near.

And ports were locked down

And labor not found

The challenges became severe.

The freight market, a thing to watch

Each day, the rates moved up a notch.

Contracts were worthless

Customers, mirthless

Was tempting to just turn to scotch.

This translates to challenges with freight

Congestion and problems too great.

We fight with the lines

‘Bout the remarkable fines

And we help get customers straight.

Dear ol’ drayage was a nightmare

Confirmed slots do provoke fanfare.

Truckers in a jam

Port turns just a sham

No wheels, no chassis, is this game fair?

Oh, Long Beach, oh, Los Angeles,

New government evangelists.

Boats anchored at bay

Shippers feel dismay

The trade asks, “can’t you handle this?”

Ocean rates more than a new car

Profits flow beyond the cookie jar.

Carriers wealthy

Blank sailings stealthy

Pushing three year deals is too far.

Here’s to a better Twenty-Two

To the madness last year, say “Shoo!”

Demand simmers down

High rates make us frown

The way we were treated pure doo doo.

Shap Fact of the Issue:

In 2020, Americans set a record by giving $471B to many diverse charities. While full data will not be available until April, many financial observers expect the US to shatter this record once all data is collected for 2021.

The leadership and staff of Shapiro understand the personal and business anxiety each of you is experiencing. We want nothing but safety and a return to normalcy for you and your families. Please reach out to us if you have any questions—or if we can assist you in any way.