By Jefferson Clay
Director of Global Sales, Cargo Services
Welcome to 2019. During our sales team’s January meeting, we talked about trends for the New Year. There’s plenty to watch, understand and consider. We’re getting notices from partners, reading trade journals and keeping our eye on several topics that will impact customer’s shipments through the year. If you have questions about information in this summary, contact your Cargo Services representative directly.
1. Tariffs: Without a doubt tariffs related to the United States/China trade talks is the number one item we’re watching in the New Year. Three rounds of tariffs were imposed in 2018. The 25 percent tariff increase slated for Jan. 1, 2019 is delayed with discussions continuing through March 1, 2019. Keep up with the latest news on our tariff webpage. How will the outcome impact the freight forwarding industry along with U.S. and Chinese businesses in the long term?
2. Rail ramp congestion and chassis demand: Many companies chose to front-load supply chains to avoid the proposed 25 percent tariff they were expecting Jan. 1. Combine this strategy with Chinese New Year in February when the country shuts down for the holiday, and we get increased shipping demand in the fourth quarter of 2018. The result, cargo containers are all coming into the United States in January leaving ports and rail ramps congested and chassis in high demand. An optimistic view is normal operations will resume in late January, however, with so many factors at play this year it’s best plan accordingly for after Chinese New Year. Read more on this situation here. Will this become a new norm?
3. Sulfur emission regulations: Starting Jan. 1, 2020, the International Maritime Organization will require all fuels used by container ships to contain no more than 0.5 percent sulfur. The cap is a significant reduction from the existing sulfur limit, which is 3.5 percent, and is well below the industry average of 2.7 percent sulfur content. The impact will hit the bottom line in 2019 for businesses that import or export goods as they upgrade to expensive scrubbers, purchase cleaner high-quality fuels or scrap the fleet to rebuild compliant ships. Steamship lines are passing along cost to the customers using a variety of calculations for bunker fuel surcharges. Get the details on the Inside Indiana Business website by reading a January Perspective’s article by Cargo Services Jefferson Clay. Will the calculations norm or will we acclimate to the new and disparate fuel formulas?
4. Brexit: As the Parliament in the United Kingdom makes its final decision how to leave the European Union, we’re watching the impact it on imports and exports. If there’s a hard Brexit, meaning parties fail to ratify the Withdrawal Agreement, there will be no transition period as of 11 p.m. on March 29, 2019. The UK will exit the EU. All benefits and EU laws will cease to apply at ports. Under the current rules, when a business purchases goods or moves its own goods from an EU country into the UK, those goods are already in free circulation, and as such, customs duty is not applicable. In a no-deal environment, goods purchased from EU suppliers will be subject to the same requirements as current third-country imports of goods, including the payment of import VAT and customs duty. What will Parliament decide and how will it impact freight duty rates?
5. Steamship lines capacity management: Steamship lines are doing a better job managing their capacity, so pricing stability is something we expect in 2019. But with the above factors in play this will give the phrase peak season new meaning. As we wait and see how tariffs, Brexit and more plays out having only so many vessels available could take a normal shipping month to peak demand overnight. How are companies creating contingency plans for 2019?
6. Midwest roads and bridges: Our team is located in the Midwest with clients in Indiana, Michigan, Illinois and nearby states. Road and bridge maintenance is important for our trucking partners to make a smooth delivery. In Indiana, Governor Eric Holcomb announced last fall that Indiana Toll Road rates would be going up by 35 percent for trucks. Holcomb touted the plan as a way to raise $1 billion for the “Next Level Connections Program” for road and bridge infrastructure. In January the national Owner-Operator Independent Drivers Association filed a lawsuit against Holcomb, the Indiana Finance Authority, the Indiana Toll Road Concession Company and the commissioner of the Indiana Department of Transportation saying the fees are discriminatory. How will this case affect our future infrastructure?
7. Indy Rail Ramp: On a positive note, the Indianapolis Rail Ramp will continue to be an option for Midwest customers. The ramp opened in 2014. The service reduces transit time bypassing Chicago to improve transportation consistency creating competitive supply chains. For example, Asia service uses the Prince Rupert and Vancouver ports, which are 2.5 days closer than moving freight through southern California. The route also avoids potential drayage costs and congestion in Chicago. How will this service continue to improve for Midwest businesses?