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USPTI Market Update Aug 21, 2019

Trans-pacific Import trading conditions are being impacted by uncertainty in duties and in general a concern over general economic conditions.

Although volume is not anticipated to peak as substantially as in the past, carriers are voiding sailing which impacts supply and demand on a weekly base. Although void sailing could be considered an artificial mechanism to impact short term capacity one should note that the new emission standards for ships will be implemented Jan 1,2020. The need to retrofit vessels to meet these standard will dictate that vessels be taken out of service for the needed maintenance. Each carrier will establish individual plans to deal with the new regulations.

Albeit trading conditions are not as strong as we would like due to above noted reason space maybe an issue from/to certain location on certain weeks, thus please allow as much lead time as possible for booking to insure we can secure the services that meets or exceeds  your individual requirements

Since the concern over duties seems to be driving many purchasing decisions please note the below update on import tariffs.

According to the official notice from The US Trade Representative (USTR), they posed an explanation of the effective date below;

 

DATES: Additional duties at a rate of 10 percent ad valorem on the tariff subheadings set out in Annex A to this notice are applicable with respect to products that are entered for consumption, or withdrawn from warehouse for consumption, on or after September 1, 2019. Additional duties at a rate of 10 percent ad valorem on the tariff subheadings set out in Annex C to this notice are applicable with respect to products that are entered for consumption, or withdrawn from warehouse for consumption, on or after December 15, 2019.  

https://ustr.gov/sites/default/files/enforcement/301Investigations/Notice_of_Modification_%28List_4A_and_List_4B%29.pdf

The date should be the fully released date when the imported goods must be actually arrived at the port AND customs are also released without further hold. So the goods are legitimately entered into the US Territories for consumption.

 

Example 1.

If goods actually arrived on 08/31/2019, customs entry filed on 08/27/2019 and customs released on 08/29/2019. No additional 10% duty in this case.

 

Example 2.

If goods actually arrived on 08/31/2019, customs filed on 08/27/2019 but customs put on hold for review or exam until 09/04/2019. It still have an additional 10% duty.

 

Making Customs entry before 9/1/2019 will not avoid the chance of getting the additional 10% duty.

Please review the below links for specific information.

https://ustr.gov/sites/default/files/enforcement/301Investigations/List_4A_%28Effective_September_1%2C_2019%29.pdf

 

https://ustr.gov/sites/default/files/enforcement/301Investigations/List_4B_%28Effective_December_15%2C_2019%29.pdf

Requirements for First Sale Valuation

The First Sale rule could offer significant tariff savings for US importers.

However, few companies have adopted this rule in practice, as the legal requirements, documentation headaches, and practical problems involved can be daunting at the beginning.

Firstly, the multi-tier transaction generally must meet the following requirements by CBP:

  • Bona Fide Sale: The transaction – which is the first sale – between the manufacturer and the intermediary must be a bona fide sale, complete with a transfer of title.
  • Arm’s Length: The Chinese manufacturer and the intermediary must be unrelated or, if related, conduct their transactions at “arm’s length”.
  • Clearly Destined for Export: At the time of the “first sale”, the merchandise must be clearly destined for export to the US. For example, the goods are shipped directly from the supplier to the US, or the goods are specially designed or labeled according to the standards of the US market or according to the requirements by the US importer.

Secondly, to prove that the initial “first sale” price is accurate, the manufacturer, the intermediary, and the US buyer have to be prepared to submit the following documents:

  • Purchase orders with copies of terms between all parties;
  • Confirmations;
  • Invoices;
  • Written contracts or sales agreements;
  • Bills of lading for final products and materials;
  • Proof of payment (e.g. letters of credit);
  • Production orders and/or manufacturing instructions and other unique specifications of the merchandise to conform to the buyer’s standards;
  • Examples of labels, logos, stock numbers, bar codes, and other unique merchandise or carton marks; and
  • Examples of country of origin marking on finished goods, hang tags, etc.

Why don’t more companies take advantage of the First Sale rule?

There are various reasons why more companies haven’t employed the First Sale rule, but the main reason is that businesses need to expend a considerable amount of time and resources to ensure a given transaction meets compliance and internal control requirements.

Since the information as mentioned above is often kept by different partners in the supply chain, cooperative relationships and responsibilities need to be developed between the manufacturer, the intermediary, and the importer.

Importers need to persuade other partners to disclose the “first sale” price and ensure only the right people see the sensitive documentation and data, which requires tight control over the process.

In addition, there are risks of errors and non-compliance, and failure to comply with the requirements of the First Sale rule could be construed as a lack of reasonable care and may result in a fine.

What are the experts saying?

A growing number of foreign firms are studying the applicability of the First Sale rule, as they look to offset rising costs stemming from the trade war.

Our CHB  explained, “In the case of a Chinese good sold through a wholesaler in Hong Kong to a US buyer, the good would still be subject to US import tariffs set for China but the value of the Chinese good, on which taxes are calculated, would be lower.”

While this strategy has clear benefits, experts caution that not all businesses qualify to use it.  Our CHB warned, “The First Sale rule is subject to a strict assessment by US Customs, so it is not possible for all firms to use this strategy.”

“Firms that are seriously considering using the First Sale rule should closely study whether they are eligible,” Our CHB said, “or else they risk being overturned by US Customs at a time they are likely paying closer attention to the rule.”

Besides legal eligibility, Our CHB also said that the rule is not suited to all types of businesses. “The ability of companies to leverage the First Sale rule in the context of the US-China trade war will depend on the presence and markup of wholesalers between a Chinese manufacturer and US buyer.”

 

Our CHB continued, “If wholesalers are not present in the supply chain or the First Sale rule is already being applied, there will be little benefit in exploring this option as a trade war mitigation instrument.”

Although it is not a universal solution for all companies hit by the trade war, it can still be an effective tool for those whose business model and legal status fit. “If wholesalers are present and the First Sale rule is not being applied, larger wholesaler markups will provide greater room for maneuverability,” .

With businesses on both sides of the Pacific feeling the impact of eight months of US-China tariffs, affected businesses are eager to explore any solution to minimize their costs.

In this regard, the First Sale rule could be an effective option for businesses to lower costs without sacrificing operational inputs or significantly altering pre-existing supply chains.

Booking Forecast Request Update April 24, 2019

Dear Valued Client,

USPTI senior management is in Asia for the routine yearly travel schedule and preparing for the spaces allotment and protection for our clients during the upcoming peak season.

During all the meeting and discussion with various ocean carriers we anticipate available container spaces could be the major issue this year.  The overall space capacity is only slightly increasing in 2019. However, carriers continue to void (cancel) sailing thus artificially adjusting supply and demand with blank sailings.

In addition, the potential low sulfur fuel oil requirement and/or installation of scrubbers required  by International Maritime Organization 2020 mandate which will be implemented for the fourth quarter of 2019  may create additional restraints on available capacity as carriers struggle to meet the environmental mandates.

USPTI is seeking your cooperation , and request all vendors to send a booking forecast as least 14 days prior to departure.  Any late booking request may be subject to space availability  and potentially additional cost in space is at a premium.

USPTI appreciates your support and will continue to keep you up to date on any issues which potentially will impact your logistic supply chain.

Best Regards

Market and Service Update March 19, 2019

As we move toward the historical Trans Pacific Eastbound contracting renewal season (May 1 ) we draw your attention to numerous blank (cancelled) during March, April and May. As carrier struggle with supply and demand, many carriers are opting to cancel sailings in an effort to artificially address the imbalance between existing demand for container space and container capacity.
Additionally carriers typically use the void sailing as time to do routine maintenance and repairs.
The void sailing may create a shortage of space and thus would request clients to forward their booking requirements as far in advance as possible (hopefully 21 days in advance of scheduled sailing) thus allowing USPTI to continue offering quality, dependable and reliable service at market driven rates.
Please contact your USPTI representative for details of void sailing and available options to insure your import requirements are satisfied.
U. S. Pacific Transport appreciates your continued supports and look forward to maintaining a long term strategic relationship.

Trans-Pacific Inbound Market Update September 26, 2018

Trading conditions in the Trans-Pacific continue to remain volatile.

USPTI anticipates a strong market in late October, November and early December as
clients push to have goods received and entered into US commerce prior to the proposed
additional increases in tariffs (import duty) to 25%. The anticipated increase will impact the vast
majority of import items and potentially create strong volume demand for receipt in the USA prior to December 31,2018.

USPTI will continue to monitor trading conditions, as well as. maintain a vigilant watch on the ongoing trade negotiations between the United
States and China on the increased tariff levels.

Peak season pricing will most like continue for the time frames noted above. We anticipate rate for the peak season to remain
consistent with pricing in mid-September. Please contact your USPTI representative for a complete cost/rate analysis and market update.

Additionally please insure you are providing USPTI with your forecasted needs and so that we can reserve and protect your required space.

USPTI is committed to providing quality reliable international transport services at market driven rates.

At USPTI, we appreciate your support and look forward to long term relationship of services.

Trans-Pacific Import Trade Update August 20, 2018

Dear Valued Client;

Please be advised that the Shanghai and Ningbo areas are being negatively impact by inclement weather.

The area is under typhoon warning/alerts for several potential storms.

Due to weather related condition carrier will typically adjust their schedules. We anticipate potential disruption to ETD and impacting the actual ETA.

We anticipate the disruption to be short term and directly relates to safety and weather condition. The major impact will be from now (August 20, 2018) thru the first week of September.

We apologize for any inconveniences created by this uncontrollable situation and will make every effort to minimize any impact to your supply chain.

Please contact your USPTI representative with any questions or concerns.

Thank you for your continued support and we look forward to serving as your preferred transportation provider.

Trans-Pacific Import Trade Update August 16, 2018

Dear Valued Client;

The Trans-Pacific Import market remains robust. In addition to the historical surge of import volume during this time of year we opine that the ongoing dialogue between the world’s two largest GNP’s on tariffs is creating a rush to get goods entered into the USA prior to scheduled potential tariff increases. Although no final date has been confirmed for pending tariff increases, we anticipate the issue will not be concluded until late September or October thus continuing the volume surge through September and potentially October in an effort to potentially avoid duty increases.

Container carriers are fully booked for the foreseeable future. Rates have adjusted to reflect current trading conditions.

The historical additional pitfalls of a peak season will also most likely impact your supply chains. Lack of truck availability, terminal congestion and equipment shortage at origin will potentially raise their ugly heads in the near future.

Challenges will continue. USPTI is prepared to assist in your effort to minimize your expose to these external forces by continuing to offer quality reliable service at market driven rates.

Our dedicated staffs in both the USA and China are committed to assisting in your efforts to minimize any potential disruptions to your import program.

Thank you for your support.

Please contact your USPTI representative with any concerns or comments.

USPTI Market Update August 14, 2018

The Trans-Pacific import market continues to be robust.
Current demand for container space is exceeding available space. With cargo volume exceeding supply rates are increasing rapidly.
We request our clients to book a minimum of 14 days prior to sailing and would recommend 21 days prior to sailing whenever possible.
Although container space is at a premium, USPTI is prepared to meet the needs of our clients on all shipments. We remain committed to offering quality reliable services at market driven rates.
Please contact your USPTI representative for updated trading conditions and current rate
Thank you for your support and we look forward to a continuing relationship of service.

Trans-Pacific Market Update July 31, 2018

Dear Valued Client;

The Trans-Pacific inbound market is extremely robust.

All carriers are currently booked at 100% capacity through August 14. USPTI anticipates container space to be at a premium
In the short term. Due to current relationship between supply and demand rate have increases substantially and are non-negotiable

In our efforts to protect your interest, please book your cargo at minimum 21 days prior to sailing. Any additional lead time would be
appreciated and would greatly assist in our effort to secure the space you require.

Thank you for your support.

Please contact your USPTI representative with any question.

Trans-Pacific Market Update July 25, 2018

Dear Valued Client;

The Trans-Pacific inbound markets continues to be volatile. Demand for container space is currently greater than supply.

We anticipate demand to exceed supply for the next 45 to 60 days at minimum. Please plan accordingly.

We request each to send your booking request as early as possible so that USPTI can work with you and our carriers to reserve your required space in order
to insure that your cargo moves consistent with your required ETD and ETA.

USPTI will continue to provide you with quality and reliable service.

The uncertainty of trading conditions is expected to continue in the short term. We remain committed to servicing your individual requirement.

Thank you for your continued support as we build a long term relationship together.

Please contact your USPTI representative with any questions or concerns.