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September 2020

News and Views for the clients of Universal Logistics

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Brexit – Impact on trade with Canada

With Brexit taking place December 31, 2020, the UK will no longer qualify for CETA preferential trade benefits as of January 1, 2021.  Goods currently imported duty-free due to CETA will become subject to Most-Favoured-Nation (MFN) rates of duty at that time.

Unless a bilateral trade deal is implemented between Canada and the UK, importers should ensure to cost MFN duty rates into their products for 2021.

The UK started talking about joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreement back in 2018.  It started making headlines again in June 2020, but nothing was heard about it until September 9th, when the UK published an article advising they were interested in joining CPTPP and have taken the next step of opening discussions with the 11 member countries of CPTPP.

To date the UK have not formally applied for membership, however, once they apply and are accepted into the agreement, the provision for duty-free status under CPTPP will apply to imports to Canada.

For more information, contact Brian Rowe, Director – Customs Compliance & Regulatory Affairs.

Surging ocean freight rates

Container ship

As if the COVID-19 global pandemic hasn’t given North American businesses enough to deal with already, we are now facing a dramatic upswing in ocean freight rates on Asian import shipments.

The current market is extremely volatile.  40’ container spot rates to the west coast jumped a staggering 129% over the beginning of the year, and are 140% higher than 12 months ago.  Not to be left out, 40’ container rates to the east coast are 72% higher than a year ago.

The situation is being compounded by space becoming a big challenge, as companies rush to ship prior to China’s National Holiday, Golden Week, from Thursday, October 1st until Wednesday, October 7th.  Ocean carriers are also driving costs higher by introducing “premium fees,” ranging from $500 to $2,000 USD per container for guaranteed equipment and space priority.

To understand how we arrived at this unique, unprecedented and effectively unpredictable situation where ocean rates are sharply increasing on a weekly basis, we need to go back to the start of the global pandemic and resulting economic downturn.

Carriers responded to this dramatic and sudden decline in shipping volumes with months of canceled vessel sailings which resulted in a dramatic drop in available capacity.

The recovery in container shipping seen in April came much more quickly than expected, and was driven by a faster recovery in consumption of goods than services, the growth of e-commerce and usual seasonality.

With the reduced capacity shippers now struggle to find space as demand swells due to three streams of combined volume meeting at the same time.

  1. Peak season shipping
  2. Personal Protective Equipment shipments coming from Asia
  3. Shippers restocking inventory after slowing procurement during shutdowns

Some industry experts have concluded that poor demand visibility by carriers kept capacity tight for too long.  However, it is hard to fault the carriers when no one really saw or expected demand to rebound so abruptly.

While carriers have now started to reinstate capacity, currently there’s simply no room.  August was extemely challenging and September is going to be worse, with ships completely booked through September and fairly full through October.  The shortage of equipment remains a major issue and is most severe for 40’ containers, in particular 40’ High Cubes.  Shippers who are able to convert their cargo to 20’ containers will have a bit of an easier time finding space.

Freight rates are always determined by supply and demand.  The big surge in demand, coupled with a severe shortage in capacity, has driven freight rates to their historic highs.  Carriers expect this situation will continue during the third quarter of 2020, as it appears demand will remain very strong into November.  Some are thinking that this situation might last through to the traditional Chinese New Year rush in January.

However, perhaps there is some relief on the horizon as record high rates and equipment shortfalls have not gone unnoticed by both the Chinese and American authorities, who are beginning to ask questions about the situation.

China’s Ministry of Transport has reportedly requested that carriers not increase China to U.S. spot rates again, and the US government’s Federal Maritime Commission (FMC) has threatened to take carriers to court if they discover evidence of collusion in the container shipping industry’s highly profitable response to the global pandemic.

Despite guidance by the Chinese Ministry of Transport and the warning by the U.S. FMC, several carriers still pushed ahead with their September 15 General Rate Increases (GRIs), however, some chose to cancel them.

It remains to be seen if any of these interventions will help to cool the current rise of rates when ocean carriers are looking at the prospect of a US$15 billion pandemic windfall, with their industry on the verge of posting its most profitable year on record.

For more information, contact Cathy Fong, Manager – Freight Pricing.

Cross border truck freight returns to normal

Truck on highway

Cross-border truck traffic flow between Canada and the United States can be classified as a strong and reliable economic indicator and, after months of substantial decline in the number of commercial vehicles coming through Canadian border entry points, we are finally returning to near normal levels.

Even though restrictions were never placed on commercial shipments, data from the Canada Border Services Agency indicted that during the first week of April, at the onset of the pandemic, truck traffic dropped nearly 37% when compared to the previous year.

Factors such as a drop in demand of goods, stoppages in production and general travel uncertainty were listed as the principal reasons for the decrease.

Fast forward 6 months and we are finally meeting and at times surpassing the previous year’s weekly totals, as the last reported 7-day cycle from August 31st to September 6th saw a 7% increase over the same period in 2019.

As we enter the pre-holiday shipping season (September, October and November), the expectations are that we will continue to see year to year increases in the number of cross border truck crossings, a great signal for the continued economic recovery.

For more information, contact William Sanchez, Manager – Truck Services.

U.S. drops Canadian aluminum tariffs

Trade War

On September 15, 2020, the U.S. Trade Representative’s office announced that it will not proceed with the 10% tariff on Canadian origin aluminum, for which Canada was ready to implement retaliatory countermeasure tariffs effective September 16, 2020.

A statement from the USTR said after “consultations with the Canadian government, the United States has determined that trade in non-alloyed, unwrought aluminum is likely to normalize in the last four months of 2020, with imports declining sharply from the surges experienced earlier in the year.”  The announcement also stated, “Six weeks after the end of any month during this period, the United States will determine whether actual shipments met expectations.  If actual shipments exceeded 105 percent of the expected volume for any month during the four-month period, then the United States will impose the 10 percent tariff retroactively on all shipments made in that month.”  Expected monthly volumes are laid out in the statement.

Based on this announcement, the corresponding Canadian retaliatory countermeasure tariffs will not be imposed at this time.

For more information, contact Brian Rowe, Director – Customs Compliance & Regulatory Affairs.

Canadian trade recovers to within 5% of pre-pandemic levels

Canadian trade, with the rest of the world, continued its recovery to more normal levels as the global economy rebounded from Coronavirus (COVID-19) lockdowns.

As per Statistics Canada, merchandise exports rose 11.1 per cent in July, adding to a 20.5 per cent gain in June.  Imports increased 12.7 per cent in July, after gaining 20.3 per cent in June.  Combined, exports and imports have increased 35 per cent since falling to a decade-low in April, leaving them 5 per cent shy of pre-pandemic levels.

The figures will bolster confidence in Canada’s rebound, though economists caution a full recovery is far from assured.  While global trade has been robust in some sectors like automotive, other industries are still languishing, including travel.

The quicker rebound in imports caused the country’s merchandise trade deficit to widen to $2.45 billion in July, from a revised $1.59 billion in June.  Economists had expected a deficit of $2.5 billion.

For more information, contact David Lychek, Manager – Ocean & Air Services.

Global Spotlight Quiz
Global Spotlight
This annual 10-day festival is considered
“The Greatest Outdoor Show on Earth”

Global Spotlight Quiz

Name the city that hosted
the 1988 Winter Olympics

  • Referred to as Cowtown by some, it still has the Wild West image.
  • Became a city in 1894.
  • Sits at 1,048 metres above sea level.
  • It was named the 4th most livable city in the world in 2018
  • It’s a youthful city and full of energy.  The average age is 36.4 years.
  • The sun shines an average of 2,300 hours a year – its country’s sunniest major city.
  • You can walk 18 km (11 miles) without having to go outside.  The Plus 15 Network is an inside walkway that connects 100 buildings with 60 suspended bridges 15 feet above the ground.

See the answer

For more information about shipping freight to or from this city, contact Debbie McGuire, Manager – Freight Solutions.

Quick Tip

Quick Tip

Three ways to prevent cargo loss

Did you know that just over 80% of all cargo losses are preventable?  Cut your losses by following these three simple tips:

  • employ safe stowage methods
  • never exceed maximum load capacity
  • purchase adequate insurance
Kim Maurice, Customs Operations – Windsor
Kim Maurice, Customs Operations – Windsor

At Your Service:  Kim Maurice, Customs Operations – Windsor

In December 2018, Kim Maurice joined Universal’s Customs Operations team, working at our Windsor office location.  Kim is currently involved in all aspects of our Windsor operation, handling both High Value and Courier Low Value clearances.

Kim can be reached by phone (519) 972-8050 or by email.

September 2020
Professional business people team meeting and working in corporate office concept

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