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Shap Talk

Featured Headlines:

TSA Is Locked, Loaded, and Fired Up!

E5 Partners ‘Russian’ to High-Five Exporters

But Wait…There’s More EXPORT-ant Information!

Estes Ataque Cibernetico

Mexicali Blues

UP Is Going Down South

Death to CBER

Canceled Flights

Air Rising

West Coast Best Coast?

Exporters an After Thought

TSA Is Locked, Loaded, and Fired Up!

  • Did you know that the US Transportation Security Administration (TSA) stopped over 1,800 firearms at airport checkpoints nationwide during the third quarter of 2023?! And if that doesn’t blow your mind…more than 94% of them were loaded!
  • Firearms are only permitted in checked baggage—and must be unloaded and locked in a hard-sided case. They also need to be declared to the airline when checking the bag at the ticket counter.
  • If a passenger brings a firearm to the TSA checkpoint, TSA will contact local law enforcement to safely unload and take possession of the firearm.
  • Depending on local laws, the officer may arrest or cite the passenger; and TSA may also impose a civil penalty of up to $15,000.
  • Passengers who present a firearm at a security checkpoint will lose TSA PreCheck® eligibility for five years.  What?! Does that sound like a slap on the wrist or what?!

E5 Partners ‘Russian’ to High-Five Exporters

  • The governments of Australia, Canada, New Zealand, the United Kingdom (UK), and the United States (US) issued joint guidance to the trade community identifying high-priority items critical to Russian weapons systems and urging specific actions to prevent the diversion of these items to Russia through third countries.
  • The “Export Enforcement Five” partnership, also known as E5, was established by the aforementioned countries to increase the effectiveness of each country’s export control regimes, foster joint investigations and coordinated enforcement actions, and to minimize enforcement gaps.
  • The guidance provides a list of 45 prioritized Harmonized System (HS) codes containing items Russia needs for its weapons systems—nine of which are considered the highest priority. We recommend that exporters review the HTS codes to help identify and ensure end-user legitimacy; and to mitigate attempts to evade the E5’s respective export controls and/or sanctions.
  • The US Department of Commerce’s Bureau of Industry and Security (BIS) has also released Best Practices to Prevent Diversion to Russia of Highest Priority Items to assist exporters with navigating these changes.
  • Finally, the E5 has provided an additional select list of potential red flag indicators of export control and/or sanctions evasion that may be relevant to exporters. These new transactional and behavioral red flags include the following:
    • Transactions related to payments for defense or dual-use products—items that can be used for both civilian and military purposes—from a company incorporated after February 24, 2022, and based in a non-Global Export Control Coalition (GECC) country;
    • A new customer whose line of business is in trade of products associated with the tier one or two HS codes, is based in a non-GECC country, and was incorporated after February 24, 2022;
    • An existing customer who did not receive exports associated with the tier one or two HS codes prior to February 24, 2022, and is now exporting or re-exporting such items to known transshipment points;
    • An existing customer, based outside the E5, received exports associated with one or more of the tier one and two HS codes prior to February 24, 2022, and requested or received a significant increase in exports with those same codes thereafter;
    • A customer who lacks or refuses to provide details on banks, shippers, or third parties, including details on end-users, intended end-use, or company ownership;
    • Transactions involving smaller-volume payments, all from the same end-user’s foreign bank account, to multiple, similar suppliers of dual-use products;
    • Parties to transactions listed as ultimate consignees or listed in the “consign to” field who do not typically engage in business consistent with consuming or otherwise using the subject commodities (e.g., other financial institutions, mail centers, or logistics companies);
    • A customer that significantly overpays for a commodity, as determined by known market prices; and
    • A customer or address thereof that is similar to one of the parties on a proscribed party or sanctions list of one or all of the E5.
  • Failure to comply with these recommendations can result in reputational harm, future business relationship challenges, fines, and/or criminal charges. So, make sure you know the laws and your obligations!
  • Any questions? Feel free to reach out to our compliance experts!

But Wait…There’s More EXPORT-ant Information!

  • We promise, this one is much shorter (but not much sweeter) than the previous article!
  • In addition to the E5 partnership actions listed above, exporters must also be careful of the diversion and transshipment risk with non-GECC countries to Russia and Belarus.
  • The Global Export Control Coalition (GECC) is made up of 39 countries that have partnered to implement export controls and sanctions in solidarity with Ukraine against the Russian invasion. The GECC countries are Australia, Canada, Iceland, Japan, Liechtenstein, New Zealand, Norway, South Korea, Taiwan, the US, the UK, and the 27 EU member states.
  • Currently, several countries are implementing restrictions and requirements on various products to combat Russia’s illegal war. For example, the EU now prohibits the import or purchase of products processed in a third country using iron and steel inputs originating in Russia.

Estes Ataque Cibernetico

  • Thank goodness for cognates making this headline easy for us. If you’ve ever asked for the origin of a word in the spelling bee you may be able to surmise that “ataque cibernetico” translates to “cyber attack” in Spanish.
  • You read that right, Estes lost access to all of their electronics on October 2—minus their fax machine…maybe.
  • It took until Sunday, October 8th to have terminal phones restored and their electronic data interchange (EDI) back online. Just in the nick of time, as the IT team was starting to pitch carrier pigeons to the executive team.
  • Light-hearted IT banter aside, they successfully set up an alternate web portal to service some 14,000 inquiries a day as they worked back towards “normal” operations.
  • This incident is just one of many in the last few years as similar incidents have begun to pop up at an alarming rate amongst carriers and shippers to the point where big wigs are starting to make it the first talking point at safety meetings.

Mexicali Blues

  • The value of a peso may not stretch as far as it once did during the era when the Grateful Dead brought Mexicali Blues to life, as revealed by recent data from the U.S. Bureau of Transportation Statistics (BTS).
  • There has been a notable shift in US demand for manufacturing from Asia to Mexicowith BTS data showing that trucks crossing the Laredo border are up 10.3% since 2021. 
  • While growing demand may be music to the ears of manufacturers, it’s also placing added pressure on the cost of goods, attributed to congestion and fuel inflation among other factors.
  • At the time of writing, there are an estimated 19,000 trucks carrying $1.9 billion USD worth of goods stuck waiting in Mexico for a border inspection, with lines stretching 14 miles. 
  • Factors contributing to costs, aside from the inspections, are diesel, theft, toll roads, insurance, and the declining peso-to-dollar conversion.

UP Is Going Down South

  • Not to be outdone by the buzz surrounding trucking, Union Pacific (UP) is making waves, or should we say tracks, by proudly declaring their partnership with Ferromex.
  • This move is somewhat expected after Canadian Pacific Kansas City announced a joint service with CSX in the same corridor, a few weeks back. All aboard the partnership express!
  • Down in Mexico, it seems manufacturers are having a grand ol’ time, with almost everyone raising their hands (or maybe just shouting really loudly) for access to the Southern part of the U.S. auto manufacturers’ supply chains.
  • Ferromex will be the chief conductor, guiding the containers to Eagle Pass, Texas where UP will then take control of the cargo to Memphis. From there, it’s all about private lines and a little trucking magic to reach final destinations.
  • As for delivery timelines, UP isn’t ready to set their watch just yet, but they’re estimating a ten-day journey from origin to most destinations.

Death to CBER

  • Let’s take a trip down memory lane to 2009 when the Consortia Block Exemption Regulation (CBER) made its debut, courtesy of the European Commission (EC).
  • This regulation gave carriers the green light to keep those vessel-sharing agreements and pooling capacity schemes running.
  • Here’s where it gets interesting: rumors were afloat that the regulation was about to call it quits, just before COVID decided to steal the show in 2020.
  • Fast forward to today and we have a new announcement on our hands. Going forward, liner shipping alliances will now fall under the EC’s general competition rules. This change is welcomed by many shippers and is deemed a normalization of competition rules for liners.
  • Is this the death of the alliance system for the EU trade?!
  • As for the U.S. and China, we’re still waiting to see if they’ll follow suit by announcing similar alliance procedures in the future.

Canceled Flights

  • Don’t worry, this is not a Southwest Airlines “technology” disaster. If the event has already slipped from your mind, over 16,000 flights were canceled earlier this year. 
  • Lufthansa Cargo canceled freighter flights to and from Israel (TLV) through Thursday, October 12th. The affected flights were LH8290 and LH8344. Check out Lufthansa’s Flight Schedule for October 13-26, 2023 to see which flights will be affected in the next two weeks. 
  • American Airlines has also announced temporary suspensions, effective immediately and until further notice, at Guatemala City (GUA) and Tel Aviv (TLV). This notice impacts all inbound and outbound freight, including PPS and mail. 

Air Rising

  • We called it in our last issue of ShapTalk, but air prices are finally on the rise! The iPhone effect is real and has helped contribute to a 1.5% rise in air cargo demand in September. 
  • The latest in the Baltic Air Freight Index (BAI00) rose 4.1% last week, bringing the four-week total to +11.0%.  
  • Shippers seem to be confident that the air market has stabilized a bit as there has been a marked increase in longer-term rate contracts being signed. 
  • Follow Shapiro on LinkedIn to view our monthly Supply Chain Reaction posts, which include ocean, air, and drayage rate updates! 

West Coast Best Coast?

  • For steamship profits maybe, but more about that in a minute…
  • Here in the US, we secretly love to stereotype people by region, especially those bitter rivals—The East Coast and the West Coast!
  • You very well know that the left-leaning left side of the country has millions of green tea-drinking, redwood-hugging hippies jamming in drum circles!  And the equally left-leaning right side of the nation is full of randomly enraged, conservatively dressed people obsessed with “slices” and other hazardously delicious foods!
  • Well, the rivalry can now officially be extended to the cost of transpacific ocean freight.  Back when there were “norms” and normal rate patterns, the cost to the US East Coast (USEC) from Asia was roughly twice the US West Coast (USWC) levels. And today…?  Let’s just say that in the next two weeks, we expect USWC rates to hit about 85% of the rates those pizza fanatics will enjoy.  Pass the parm, please!
  • What’s going on?  First, we may forget that traditional peaks are longer to the land of meditation and giant trees because of those quick transit times.  Any last-minute holiday goods are headed West, young man (or woman).
  • Second, with the water woes in Panama, the trade has witnessed free-for-all price battles for lightweight cargo headed East. Lighter cargo is more prevalent than heavy.
  • Third, the resolution of the ILWU negotiations has allowed discretionary cargo to go back home while flowing through Western ports (and stopping off for some sprouts and quinoa).
  • Finally, while it’s very hard to precisely track capacity alterations and management, it stands to reason that steamship lines added more capacity to USEC lanes and have winnowed that capacity less aggressively this year, though we won’t be surprised to see that change (and soon!).
  • While it’s hard to say who is actually winning this coastal freight contest, you already know that the Westerners will base the contest on impressive freight levels, while the Easterners will be bragging endlessly about the “bahgains!”

Exporters an After Thought

  • While shipping rates for importers have merrily strolled back to those good old pre-pandemic days, our friends the exporters, feel like they may have gotten coal in their stocking.
  • That coal may come with a rock-hard fruit cake (no judgment if you’re a fan) as according to Peter Friedmann, an executive of the Agriculture Transportation Coalition, increased rates are not the only cost that exporters are facing.
  • Mr. Friedmann revealed that sailing schedules are now more of a headscratcher than how Santa manages to deliver toys to every house in just one right. He surmises this is caused “by the carriers’ inability or unwillingness to provide timely and accurate data on things like earliest return date, when the ship is coming in, and which terminal exporters should go to.”
  • Ultimately, what drives the carriers’ placement of ships and services is inbound cargo. Whenever import levels drop, it causes erratic schedules and planning for exporters since they are treated as an afterthought.
  • Hopefully, we will see some meaningful changes in the future and exporters get to have their Rudolph moment.
  • Have any EXPORT-ant questions? Feel free to reach out to our freight experts!