Logistically Speaking - Hot Sheet Week 6


Logistically Speaking - Hot Sheet Week 6

Chassis Legislation

The Federal Maritime Commission (FMC) Chief Administrative Law Judge, Erin M. Wirth, has decided that many current chassis provisioning practices are unreasonable and in violation of the Shipping Act of 1984, particularly when shippers or their designated motor carriers are not allowed to utilize the chassis provider of its choice during merchant haulage transportation moves. The ruling means that the named respondents will be required to cease and desist from these practices within 30 days. The decision will help reduce supply chain delays by stopping foreign-owned shipping lines from forcing American drivers and motor carriers to use specific equipment providers. This has been a top objective for the American Center for Shipping and Agriculture (ACSA) and the Intermodal Motor Carriers Conference (IMCC), who have been working towards this outcome for some time. The decision results from collective work from various organizations and individuals, including the Memphis Supply Innovation Team, importers, and exporters.


Dunavant Solution: Dunavant Logistics Leasing Group provides chassis and equipment to its operating divisions throughout the Southeast. Dunavant has a dedicated chassis leasing company with over 500 chassis.


US - Mexico Boom

Investors are betting on a surge in demand for warehouses and distribution centers in Mexico and U.S. border towns due to changes in the global supply chain. American and some foreign companies are relocating from Asia to Mexico to set up manufacturing hubs closer to the U.S. as part of a nearshoring trend. Real estate companies such as Prologis and Morgan Stanley are following this trend and investing in Mexican and U.S. border town industrial properties, respectively. The industrial sector has been a hot commercial property sector, driven by e-commerce demand. Companies are willing to hold more inventory to avoid a loss of sales, and the industrial sector is also benefitting from supply chain modernization aimed at improving efficiency and averting shortages.


As manufacturing shifts to Mexico, demand is rising on the U.S. side for components that need a more skilled labor force for final assembly, such as electronics and medical devices. End users also want warehouses and distribution centers in the U.S. to avoid future shortages caused by political problems or tensions along the Mexican border. Companies considering relocating to Mexico from China prior to the pandemic accelerated their plans due to the pandemic’s impact on the supply chain. Mexico is also becoming an attractive option for global manufacturers due to its proximity to the U.S. and its perceived lower political risks.


Dunavant Solution: Our Cross Border Mexico Team (CBMX) operates at every commercial entry point along the border and intra-Mexico. Please reach out to Johnny Araiza for a tailored solution.



Port Labor Disputes

West Coast port labor talks are ongoing without any signs of progress, creating uncertainty for US retailers who rely on the ports to import goods from Asia. The talks began in May 2022 and are to cover over 22,000 dockworkers at 29 ports stretching from California to Washington state and were expected to conclude last fall. The parties have yet to make progress since the summer on regional issues that are delaying discussion of major contract provisions, including wages and automation, leading to frustration in the maritime industry.


Some importers have started diverting their furniture, clothes, and electronics to East Coast and Gulf Coast ports as a contingency in case the labor talks break down and result in work disruptions or a strike. The current talks are set to last longer than the acrimonious negotiations from 2014 to 2015, which were marked by delays in cargo handling and cost some retailers millions of dollars in lost sales. Retailers usually start planning for the import of goods during the summer and fall peak shipping season, but the uncertainty on the west coast has shifted capacity and sparked earlier negotiations on the East coast.


Union locals that represent dockworkers at 36 ports from Maine to Texas have opened contract talks with employers ahead of the current multiyear agreement's expiration next year. This early start to negotiations signals that both sides are eager to get a new contract amid strained labor-management relations. The International Longshoremen's Association aims to resolve or identify local issues by mid-February so they can move on to negotiating a master agreement with the US Maritime Alliance. The current contract expires on September 30, 2024. The uncertainty over worker-employer relations on the West Coast contributed to double-digit declines in import volumes at the ports of Los Angeles and Long Beach, which historically have been the nation's busiest container ports.


Dunavant Solution: Our Operations Team is tracking the labor disputes to keep our customers’ freight moving. In addition, we will notify all customers whose freight could be affected if a situation arises.


Truck Volume

According to FreightWaves SONAR, there are positive indications that demand is returning to the U.S. trucking market. For example, the Outbound Tender Volume Index (OTVI) shows a 12% increase from the same date in 2020 and 11% increase from the same date in 2019. In addition, the low levels of the Outbound Tender Rejection Index (OTRI), currently at 3.76%, show that truckload carriers are taking loads almost indiscriminately to keep their trucks moving and drivers working.


However, the supply and demand in the market are misaligned. The OTVI measures the demand side of the market, while the OTRI measures the supply side. As indicated by OTVI, the increase in volume could be due to increased restocking or purchases by consumers and businesses. On the other hand, the overcapacity in the market, indicated by the low OTRI, is due to a large number of new drivers and trucks entering the market during the pandemic to meet the increased demand. If OTRI continues to struggle while OTVI continues to increase, it suggests that there is too much capacity in the market, leading to a downward trend in truckload spot rates. Nevertheless, the spring shipping season and increased production volumes are expected to tighten the excess capacity.


Uyghur Forced Labor Prevention Act

The Uyghur Forced Labor Prevention Act (UFLPA) has been signed into law in the United States. This act reinforces the country's policy to strengthen the prohibition against importing goods made with forced labor. In addition, the UFLPA is meant to support the enforcement of the Tariff Act of 1930, which prohibits the importation of all goods produced with forced labor, among other forms of labor exploitation.


On March 18, 2023, CBP will deploy UFLPA Region Alert enhancement to the Automated Commercial Environment (ACE). This enhancement will provide early notification to importers and their representatives of goods that may have been produced in the Xinjiang Uyghur Autonomous Region (Xinjiang or XUAR) and may be excluded from importation into the United States. This enhancement includes electronic data interchange (EDI) impacts.


The new validations within ACE will require a postal code to be filed. There will be two messages that may be received. One would be an error message stating that the postal code is invalid for China. A warning message may also be received when a XUAR region postal code is sent. The impact on a customs clearance will be the Cargo Release and the Manufacturer Identification Code (MID). With these new validations, there will also be an ability to update existing MID with a postal code.


Dunavant Solution:  Our Customs Brokerage Team is working with our clients to make sure that the information we are receiving is compliant with the March 18th deployment and there are no delays with goods coming into the US.

Posted by Katie Elizabeth Carpenter at 09:12