Hello and welcome to the 4th installment of “Consolidated Regulatory and Supply Chain News”
As the world continues to turn and change, so does the world of Supply Chain.
This update brought to us on a quarterly basis by RAF Solutions offers members of the EACC high level information on news that could affect the trans-ocean business of import and export to / from the U.S. This will mostly be organized by type of information (i.e. ocean freight, air freight, regulations on either side, etc) but there may be some crossover in sections since one new regulation could impact many areas.
ILA vs USMX
After winning a three-month reprieve in mid-October with dockworkers, the International Longshoremen’s Association (ILA) operating under the now expired previous six-year contract, a January deadline quickly approaches, with the possibility of a strike back again on the table.
The issue of port and terminal automation has been said to be a key topic, even as wage and benefit hikes in a new six-year contract seem to have been agreed upon. But this week the US Maritime Alliance (USMX), representing port and terminal operators, says it won’t negotiate with the International Longshoremen’s Association on a new six-year contract if it means giving up members’ rights to adopt semi-automated cargo handling equipment as the USMX says, “Modernization and investment in new technology are core priorities required to successfully bargain a new master contract”.
To date, the two sides have no formal talks scheduled.
With 43% of U.S. imports moving through these ports, the economic impacts will deepen the longer the strike continues
IBT vs Amazon
The International Brother of Teamsters has given Amazon until December 15 to agree to bargaining dates for a union contract with delivery drivers and warehouse workers, or “face the consequences of its inaction.”
“The Teamsters are done asking nicely for Amazon to stop breaking the law,” Teamsters general president Sean O’Brien said in a December 6 release. “We will protect our members at all costs, and we are prepared to come after Amazon with the full force of the Teamsters Union if and when necessary to get the contract workers have earned.”
The Teamsters have partnerships with workers at Amazon facilities across the U.S., including an air hub in Kentucky, a distribution center in California, and Staten Island’s JFK8 warehouse.
Amazon has frequently been accused of illegal union busting, although Amazon has refused to formally recognize or bargain with the nascent union.
Teamsters associated with 7 Amazon facilities have agreed to go on strike in time for the final holiday push. The strikes in December took place at one Amazon warehouse in San Francisco, California, and six delivery stations in southern California, New York City; Atlanta, Georgia, and Skokie, Illinois.
Tariff and Trade Negotiation Talk:
President-elect Trump talked on the campaign trail about imposing a 10% to 20% tariff on all imports coming into the U.S. — with the exception of those from China, which would be subject to tariffs of 50% to 60%.
This has created a bipartisan sentiment in Congress on the need for getting tougher with China on trade. Bills have been introduced to eliminate the “de minimis” cap that allows individual packages with a value of $800 or less to enter the U.S. duty-free. China has taken full advantage of that privilege, flooding the U.S. with millions of small parcels, many of which aren’t intended for direct shipment to purchasers. Congress is more likely to eliminate the de minimis exemption rather than lower the amount of money that permits duty-free entry.
Such legislative and executive actions can be seen as part of a larger effort to disrupt the U.S.-China trading relationship. Whether the proposals are meant to strengthen our hand in negotiating with China or encourage an expansion of domestic manufacturing in the U.S, what’s clear is that opening the U.S. market to China imports without getting any reciprocity to their market is coming to an end.
Also uncertain under the second Trump Administration is the fate of the United States-Mexico-Canada Agreement (USMCA) , which is up for review in 2026.
Mexico could find itself cut out entirely from the next trade deal with the U.S. and Canada, over concerns that it is being used as a backdoor for Chinese manufacturers looking to get around tariffs on Chinese imports and their lack of willingness to address their role in illegal immigration. In fact, at this time, Canada has publicly stated they believe the USMCA should be scrapped and re-negotiated between just the US and Canada.
Recently elected Mexican President Claudia Sheinbaum threatened that Mexico will retaliate against proposed tariffs targeting U.S. imports with tariffs of its own. Sheinbaum warned that the president-elect’s proposal for 25% import tariffs on all goods entering the U.S. would result in mutually assured economic destruction for both countries. The U.S. conducts more trade with Mexico than any other country, importing $475 billion in goods from Mexico in 2023, and exporting almost $323 billion.
The U.S.-Mexico-Canada Agreement (USMCA) is up for a review in 2026, when all three countries will decide on whether to continue with the existing deal, or draft new terms.
China Implements Export Ban:
On December 3, China banned exports of critical minerals gallium, germanium and antimony to the U.S. This strengthens enforcement of existing limits on critical minerals exports that China enacted last year, but apply only to the U.S. market. The move came a day after the US Commerce Department expanded existing export controls on chip-making equipment produced by American companies at foreign facilities.
Gallium and Germanium are used in semiconductors, while Germanium is also used in infrared technology, fibre optic cables and solar cells. Antimony is used in bullets and other weaponry, while graphite is the largest component by volume of electric vehicle batteries.
China produces 98% of the world’s gallium and 60% of its germanium as well as holds an estimated 77% of all the natural graphite supply on the planet as of 2023, according to a US Geological Survey. China accounted for 54% of US imports of germanium and 53% of gallium, according to a March 2024 report by the US International Trade Commission.
When Beijing announced the curbs last year, gallium prices surged by 27%. Since then, gallium prices increased by 80%and Germanium by 50%.
The US is 100% and 50% reliant on imports for gallium and Germanium respectively. For graphite, the US is also 100% on imports.
‘Limited’ Tariff Impact?
Many business leaders have stated even with threats of higher U.S. tariffs, a stronger dollar accompanying those warnings means the global economic situation should still be manageable and hopefully will only have a limited impact on global trade.
According to the United Nations (UN) Trade and Development (UNCTAD) report released on December 5, global goods and services trade is on pace to reach a record $33 trillion this year, $1 trillion more than last year’s level. Trade in services is projected to rise 7%, while goods trade will advance 2% but stay below a 2022 peak, UNCTAD said.
China is not the only target for President-elect Donald Trump. He is threatening to impose 100% tariffs against BRICS countries, if the group moves forward with a proposal to spin up a new common currency to rival the U.S. dollar.
In a post to Trump’s Truth Social platform on November 30, the president-elect said that “the idea that the BRICS countries are trying to move away from the dollar while we stand by and watch is OVER. We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty U.S. dollar or, they will face 100% tariffs, and should expect to say goodbye to selling into the wonderful U.S. economy”
Shipping News:
Small Package Shipper Increases
New rate and surcharge increases soon from both FedEx and UPS, will cause businesses that need bulkier products delivered are to feel the sting. This includes furniture, home goods and sports equipment shippers.
The delivery rivals have defended their pricing changes through the years, saying the increases are necessary to maintain reliable services while strengthening their networks for the future. The companies also have further incentive to hike bulky delivery pricing more aggressively than other shipment types, according to experts.
This increase is on top of their normal, annual price increase. DHL just announced they would be increasing prices by 5.6%. This is normally matched by all the other carriers, once again raising cries of “collusion” between the shippers.
Increase in Freight Thefts:
For Manufacturers using Ocean Freight, the rising tide of cargo thefts continues on with theft incidents in the US and Canada up 14% versus previous periods. This increase was driven in part by the growing involvement of organized crime in cargo theft, driving new tactics that are being used by freight thieves.
Once again just three states – California, Texas and Illinois – represented an unproportional 52% of all the theft.
Following history, warehouses were the top type of facility targeted by thieves, followed by truck stops.
The primary cargo theft drivers continue to be organized crime groups specializing in strategic forms of cargo theft that typically involve some form of document fraud and identity theft. Organized crime groups have intensified efforts to gain unauthorized access to motor carriers’ official email accounts. These compromised accounts are then used to bid on shipments and bypass compliance checks. This method has grown in popularity in response to much of the industry in instituting policies that documents should only be sent to official emails.
Panama Canal:
A new booking systems at the Panama Canal has led to a bump in container traffic through the critical shipping lane, as daily transits have continued to steadily rise, and drought conditions in the canal’s water system have eased.
The Panama Canal Authority (PCA) has moved to a long-term booking system for shipping slots, making it easier to forecast transit demand months in advance, while reducing wait times and saving water. The PCA says that the new system has led to an increase in average vessel sizes as well, making it so more containers are moving through the canal on fewer vessels.
PCA Administration is optimistic about the water forecast in the coming year, after drought conditions in late-2023 and early-2024 slowed traffic through the waterway for months.
Longer term, the PCA expects to make an announcement regarding its proposed Indio River dam project in the first quarter of 2025. The $1.6 billion project would involve adding a dam to the Indio River, creating a new reservoir to supplement the existing network of lakes that feed water into the locks that allow ships to move through the canal.
Mississippi River Level Impacts Shipping
The Mississippi River is suffering from low waters for the third straight autumn, a crucial time of year when American farmers rely on the route to deliver their crops to the world.
Months of limited rainfall, and few chances for more during the rest of the season, have left the vital waterway so shallow that barges are starting to run aground, even after shippers started running lighter loads to prevent boats from hitting the river bottom.
While the situation isn’t as chaotic as in years past, the lack of water is again creating headaches for shippers and farmers. The drying of the Mississippi over the past three years is raising shipping costs and hindering farmers’ ability to compete for markets overseas. During the best of times, nearly two-thirds of U.S. crop exports are shipped on the Mississippi to the Gulf of Mexico.
Red Sea / Middle East Shipping
The Biden White House is being pushed by manufacturers to significantly expand efforts to guard Red Sea shipping lanes from ongoing Houthi rebel attacks.
November 19 marked a year since Houthi rebels attacked a British-owned cargo ship in the Red Sea, seizing its crew members, who remain hostages to this day. Since then, Houthis have targeted more than 90 vessels moving through the crucial shipping channel, sinking two and killing four people. That’s forced ocean carriers to reroute vessels around South Africa’s Cape of Good Hope, delaying shipments and increasing shipping and fuel costs to account for the longer journey.
U.S. businesses, workers, and consumers are also bearing the brunt of the consequences. The rising costs associated with rerouting vessels and the impact on American industries has been severe.
The impacts of the conflict in Israel between Hamas, Hezbollah, the Houthi, and Iran and now the new conflict in Syria, accompanied with Turkey and the Kurds add new dimensions to this volatile region of the world.
Foreign-Trade Zone (FTZ) News:
Foreign-Trade Zones (FTZs) act as secured places for receiving cargo into the U.S. without incurring tariffs, yet. Then, there are multiple ways those tariffs can be reduced. Yet many companies fail to make the most of FTZs to reduce costs because of the perception of legal and organizational hurdles.
Using an FTZ allows importers to insulate themselves against volatility of trade policy. In any FTZ, materials can be kept indefinitely, but the tariff rate can also be locked in at the time goods enter the FTZ, or be assessed at the time they’re withdrawn, whichever is lower. For example, if raw materials or parts are manufactured into finished goods within the FTZ, it achieves a beneficial tariff shift, because finished products often attract a lower rate. This is known as “inverted tariff relief”.
Another advantage using a FTZ is it can be used in the same way as a bonded warehouse, where no duty becomes payable if those goods are exported to another country. With the added benefit that there is no time limit on deciding to do so, as there are bonded warehouses. The absence of time limits also means that safety stock can be kept, and no duty paid on it until it’s optimum to be deployed (duty deferral). Also, any scrap or unusable materials can be counted in order to mitigate the duties on those materials. When it comes to high-tariff raw materials such as steel, that can deliver significant savings.
Other benefits include streamlined customs operations, and a generally more efficient supply chain, because operating an FTZ means companies need to be exactly on top of where everything came from and where it’s going.
End of Year Global Trade Analysis:
Global trade is showing resilience in spite of the challenges including attacks on cargo ships in the Red Sea and threats of additional tariff barriers next year by President-elect Trump. Besides Tariff talk, the biggest challenge to predicting 2025 will be the resolution to conflicts in the Middle East. Depending on the direction that turns, it could be toward further growth or it could drag the world economy down with it.
The World Trade Organization’s merchandise barometer was little changed at 102.7 in the latest reading, compared with 103 in September, the Geneva-based organization said on December 9. The measure’s baseline is 100, which would indicate growth over the next quarter that’s in line with medium-term trends.
The new figure suggests “trade will continue to expand at a moderate pace through the fourth quarter,” the report said. “However, the outlook is clouded by rising economic uncertainty, including possible shifts in trade policy.”
All of the barometer’s components except electronics remain at or above trend, the WTO said.
The organization’s most recent trade forecast, released in October, saw trade volume growth for this year at 2.7%, with 3% for 2025. That outlook aligns with the view expressed by the major German container carrier Hapag-Lloyd AG.
Based on their analysis of existing conditions and then-President Trump’s previous administration, they state President-elect Donald Trump’s threat of higher import taxes on all U.S. trading partners won’t necessarily derail seaborne commerce. They state that reflecting on what happened during the first term for President Trump, they saw the impact on volumes was actually quite limited. This leads them to be cautiously optimistic that over the upcoming couple of years that in the end, the impact on volumes will be limited.
Container volumes are expected to increase 5.5% this year and increase 3% next year.
Looking to 2025 and beyond for supply chain management (SCM)
Building more resilient, adaptable operations to handle Supply Chain disruptions is becoming a top priority for supply chain leaders. A survey among industry leaders listed key elements needed are: investing in risk management strategies, advanced technologies, and external partnerships to stabilize operation.
Supply chain leaders indicate that they plan to make substantial adjustments within the next two years to boost their operations to respond to supply chain disruptions. Their priorities include:
- Forming options with alternative suppliers (69%).
- Increasing reliance on onshore domestic suppliers (67%).
- Frequently reviewing risk assessments to adapt quicker (50%).
- Using AI for supply forecasting (59%).
- Using AI for visibility and operations (56%).
- Adopting advanced order management systems for agile fulfillment (60%).
Sustainability is also part of this strategy with top priorities including sustainable logistics and sourcing with 63% of companies expect to increase outsourcing over the next two years, primarily for speed and scalability.
The challenges of today, such as geopolitical tensions, supply chain disruptions, environmental disasters, and regulatory complexities, will all continue and require proactive strategies for companies to stay effective and profitable.
The major industry transitions in global trade include increased digitalization, enhanced connectivity through advanced logistics and infrastructure, and greater integration of emerging markets into the global trade marketplace. When it comes to working within the supply chain, change is a constant. Businesses and trade organizations must work to proactively address these challenges through robust risk management frameworks and analysis of timely market intelligence to maintain a global edge.
Professional trade sector association participation can help individual businesses, particularly small- and medium-sized enterprises, stay ahead of emerging industry issues and upheavals by strengthening international ties.
Some examples of the proactive approaches to tackling these emerging challenges that companies can implement include:
- Maintaining and growing a robust network of industry professionals outside your company sphere.
- Actively seeking out ongoing training and education through professional associations, local departments of commerce, or even national online educational content.
- Putting politics aside and preparing for geopolitical shifts. It is essential for the resilience of supply chain businesses they prepare for and adjust to all possible outcomes.
- Embracing cultural nuances: Proactively establishing cross-cultural understanding is fundamental in international trade as it facilitates communication, builds trust, and fosters productive relationships.
The final industry change that warrants rapid preparation is to evaluate and integrate artificial intelligence (AI) if the company needs it. Adaptability to sustainable technological advancements will be crucial for businesses navigating this future landscape.
AI, technology, and cybersecurity are transforming the global trade landscape at a rapid pace. Embracing AI and sophisticated cybersecurity ensures the global trade sector can remain competitive and relevant in an increasingly fragile digital economy.
However, in spite of the positive views of many, there are several factors that we cannot lose sight of that can impact all forecasts. The increased stresses on the global economy and its logistical networks include a growing geopolitical instability that further complicates investment and policy decisions for business leaders and governments. These conditions include (but are not limited to):
- An intensification of military conflict, with the Red Sea / Middle East Crisis greatly impacting companies shipping from Asia to Europe or to the eastern part of North America;
- Continued fragmentation of global trade, as evidenced by the deepening rift between China and the United States;
- Severe weather events, such as the drought in Panama and the two massive hurricanes that ripped through the Southeastern United States;
- Labor disputes, such as the current strike by Amazon and the potential port strike in January.
- Persistent inflation (despite some recent improvement in the United States) and muted global economic growth.
How do we address these concerns given these uncertain times? A fresh look at Manufacturers networks and overall supply chains is probably in order. This may mean reassessment of distribution networks and operations to make sure that they are optimized. Network optimization should not just focus on eliminating unnecessary costs. It should also ensure that the network has the right amount of capacity to response with agility and flexibility to any future disruptions.
Global trade is projected to reach an all-time high of $33 trillion in 2024, a $1 trillion increase from 2023. This 3.3% annual growth is driven by a 7% rise in trade services, which contributed $500 billion to the expansion. According to the UN Conference on Trade and Development’s
The 10 Most Important SCM Trends for 2025
- Cyber security will be vital for survival.
- Resilience and risk management will come more into focus.
- Transparency and collaboration will become a top priority.
- Regional and global value chains will be reorganized.
- Shortage of skilled workers requires new measures.
- Fourth party logistics is gaining in importance.
- Artificial intelligence is becoming a game changer.
- ERP systems are being standardized.
- Innovative technologies and automation are becoming decisive for competition.
- Laws for green supply chains are forcing action
Compliments
